A long-held industrial portfolio located at 8701–8711, 8732, and 8828 Park Street in Bellflower, California had generated substantial equity growth for the owner over time and was maintained at a low leverage position. Despite strong appreciation, the income profile had become less attractive due to an anchor tenant on a long-term lease with 2% annual increases that lagged inflation. Matthews™ identified an active 1031 exchange buyer whose acquisition requirements aligned precisely with the asset profile and negotiated a market premium sale of $9.2 million. The transaction positioned the client in an equity-heavy exchange seeking higher-quality, stabilized replacement properties with durable credit tenancy.

 

Challenge

The client faced declining real income growth from a well-performing but structurally constrained asset. Long-term lease terms limited upside, while the client’s additional stream of income introduced volatility that was no longer aligned with their investment objectives. Following the sale, the client needed to redeploy exchange proceeds into assets that could restore leverage efficiency, improve cash f low durability, and provide stronger inflation protection, all within the strict timing constraints of a 1031 exchange.

 

Strategy

Matthews™ leveraged its deal pipeline to identify and underwrite ten potential replacement assets, the majority of which were sourced off-market. Multiple opportunities were pursued simultaneously, allowing offers to be structured across several properties to create negotiating leverage. This approach enabled favorable pricing discussions, flexible escrow timelines, and the ability to shop financing during diligence. The focus centered on truly single-tenant assets in high-barrier-to-entry markets with strong credit tenants and contractual rent growth that exceeded inflationary trends.

 

Result

The client ultimately acquired two properties with a combined value of $14.9 million, rebalancing this portion of the portfolio to approximately 50% leverage while significantly upgrading asset quality.

 

The first acquisition was a fully off-market, direct-to-principal transaction at 8315 Buckhorn Street in San Diego’s Kearny Mesa submarket, purchased for $7.5 million. The property featured the same tenant as the relinquished Park Street asset but was structured as a true single-tenant investment with 3% annual rent increases, located in one of San Diego’s most supply-constrained industrial markets.

 

The second acquisition was 1360 North Magnolia Avenue in El Cajon, secured for $7.4 million. Through established relationships, Matthews™ was alerted that the property was likely to fall out of escrow, allowing the client to preempt a broader remarketing process. The asset is fully leased to Sunstate Equipment Rentals on a long-term lease with 4% annual increases.

 

Together, these acquisitions replaced lower-growth, less durable income with stabilized cash flow backed by strong credit tenancy, improved annual rent escalations, and superior market fundamentals, marking a clear upgrade in both portfolio quality and long-term performance.