Box Equities answers the call
Box Equities takes an unusual approach to warehouse ownership as the industry evolves in response to the health crisis. The company is capitalizing on the growing need for warehouse and industrial space and the post-pandemic reality of the rise of e-commerce and the decline of brick and mortar.
“The Covid-19 pandemic has irrevocably changed the retail landscape with a digital flight like we’ve never seen before,” said Haim Dabah, co-founder of Box Equities. “The Covid-19 pandemic is estimated to have accelerated online sales by four to six years. “
CBRE recently reported that for every billion dollars in online sales, an additional 1.25 million square feet of distribution space is needed to support growth.
Cash-poor physical retailers are looking to improve their cash flow by leasing unused or lightly used warehouse space, Dabah said. At the same time, e-commerce retailers are facing disruption in logistics, which includes everything from supply chain challenges to space and labor shortages.
“We focus on industrial real estate in secondary and tertiary markets which are often overlooked by large investment funds,” said Dabah. “We have found that these markets have a more loyal and reliable workforce, unlike the chronic labor shortage issues in primary markets.
“Our close ties through our commercial real estate network allow us to work with economic development authorities whose mandate is to create jobs,” Dabah added. “Our close relationship with retail gives us an advantage that more traditional real estate investment firms lack. We have an innate understanding of the businesses of retailers, potential tenants and logistics operations.
Dabah co-founded Box Equities eight months ago to address these issues, and has closed a few significant deals in the short time the company operates. Box Equities manages 1.8 million square feet of industrial space at the time of writing.
Dabah attributed the success of Box Equities to his understanding of the needs of retailers and his close relationships with industry leaders, including Doug McMillon, CEO of Walmart Inc.
As a co-founder and managing partner of HDS Capital, Dabah has invested in early to mid-stage technology start-ups including KidBox, Stylitics and Talk Space.
“Most people focus on industrial sites in primary markets such as Edison, NJ and the West Coast,” Dabah said. “We are focusing on secondary markets, large buildings with good locations next to highways. ”
Demand for industrial space increased before the health crisis, led by Amazon
Average asking rents for industrial premises have risen from 6% to 8% for several years and increased by 6.4% in 2019, two percentage points above the average annual growth rate since 2012, according to a report. of CBRE at the time. The industry was poised to grow and the Covid-19 pandemic only accelerated the popularity of e-commerce.
Box Equities targets retail decision makers who use warehouse space or wish to monetize the excess space they have; real estate brokers and professionals aware of the opportunities; private investors and economic development authorities who need to create jobs and wish to optimize, update and rent unused or obsolete storage sites.
Dabah started Box Equities in partnership with his son Mac, who led the brand’s acquisition for HDS. Another son, Mike, a lawyer specializing in real estate transactions, is also on the team. “Working with my brother Mike’s firm has become a great strength for us with brokers,” said Mac Dabah. “It’s like having a legal team at your fingertips. People want to know if you are the real deal.
“Mike started his own law firm,” Dabah said. “Mike’s partners, Mac and I said, ‘Why don’t we start investing in this space.’ What is happening is that we are investing family money and private equity money. Private equity has compartments dedicated to retail.
Dabah said Box invests 20% to 25% of its own capital in each transaction. In addition to private equity, the company has partnered with high net worth investors and family offices.
Mac Dabah has worked with local development authorities to help workers access the buildings they own. For example, in April, an economic development authority in Georgia had a difficult choice to make, a building occupied by tenants in 2019 fell into disrepair, and the authority was unable to maintain the building’s maintenance. .
“The economic development authority could have invested in upgrading the building or investing in a new industrial park. We said, “Let us leave this building in your hands so that you can focus on the industrial park and job growth,” Mac Dabah said.
Box Equities is not afraid of areas of opportunity. “Job creation is part of our overall goal, especially in secondary and tertiary markets in underserved areas,” Dabah said. “Two months ago, we launched an opportunity zone fund to acquire the building in Georgia and are working closely with the development authority to help create jobs.
“Our primary goal is to unlock value for retailers, including users and sellers, to help them maximize their bottom line,” said Dabah. “That said, we are still open to investing in vacant and distressed properties. In fact, Box Equities was the bidder for a Pier 1 distribution center in the Dallas Fort Worth area.
Dabah believes the shift to e-commerce will continue to strain logistics systems in the United States, which will continue to create investment opportunities. “All indicators point to rigidity in the adoption of e-commerce,” he said. “National industry vacancy rates are below 5%, with net absorption reaching record levels in recent quarters. “