In late 2022, Matthews™ guided a client through the acquisition of three industrial properties as part of a 1031 exchange, including 110 Venture Drive and 935 Bailey Court in San Marcos, both sourced off-market, as well as 1061 La Mirada in Vista. By early 2025, Matthews™ successfully executed high-watermark sales of both La Mirada and Venture to separate owner-users, triggering two concurrent exchanges. During this period, 935 Bailey Court had been fully stabilized since acquisition, creating an opportunity to refinance the asset and extract equity to further support the client’s next acquisition phase.

 

Challenge

The client faced the complexity of coordinating multiple exchange timelines while maximizing total purchasing power. Executing two down-leg dispositions simultaneously, determining the optimal role of the remaining stabilized asset, and ensuring sufficient equity for a larger replacement acquisition, required precise timing and structuring. In addition, identifying a suitable replacement opportunity with meaningful value advantages, while accommodating exchange proceeds and potential refinance capital, presented a narrow margin for error.

 

Strategy

Matthews™ identified a unique off-market industrial portfolio in Otay that had been tracked for several years. A recent shift in the seller’s personal circumstances created a limited opportunity to acquire the portfolio at a significant discount to market, driven by its atypical mix of asset types. Matthews™ coordinated the closing timelines of the two exchanges while structuring a refinance of 935 Bailey Court to supplement available equity. A cost-basis allocation strategy was implemented, assigning a lower basis to the multi-tenant assets intended for long-term ownership while isolating shorter-term assets for a different exit strategy.

 

Result

The client acquired a 12-property industrial portfolio in Otay for $13.2 million, consisting of two multi-tenant industrial parks and ten industrial condominium units. The portfolio was purchased at a meaningful discount to market due to its non-institutional asset composition. Exchange proceeds were allocated to the multi-tenant properties designated for long-term hold, while refinance equity was used to acquire the condominium units. Those condos were positioned for resale shortly after acquisition, with proceeds intended to reduce the overall portfolio basis. This structure lowered long-term cost basis, enhanced portfolio efficiency, and demonstrated Matthews™’ ability to integrate sales, refinancing, and off-market acquisitions into a cohesive, value-driven investment strategy.