SoCal Industrial Veteran Benjamin Miller Launches IOS Firm

After more than a decade of investment management in Southern California’s industrial real estate, Benjamin Miller recognized what he describes as the growing but underappreciated subsector of “low-coverage locations.”

About a month ago, Miller launched a new company, Negresco Property Group, with the goal of building a $100 million-plus portfolio of industrial outdoor storage (IOS) properties. And the new firm has closed on a $20.4 million acquisition of a 3.15-acre IOS site near Los Angeles International Airport, Miller told Commercial Observer.

The property is fully leased to Avis, and it includes a 32,500-square-foot building and 100,000-square-foot of outdoor storage space at 5721 West 96th Street.

Miller said Negresco is targeting opportunities ranging from $3 million to $50 million across sites up to 20 acres in Southern California, taking advantage of the nation’s largest industrial real estate market, as well as the busiest port in the Western Hemisphere.

Negresco will be Miller’s second nine-figure IOS fund. He previously founded 5-Ronin, a real estate development firm with investments in life sciences and IOS assets, and sold a $100 million IOS portfolio.

Miller also said he oversaw industrial acquisitions for First Industrial Realty Trust, and was a vice president with Hackman Capital Partners, where he worked on more than $2 billion of acquisitions and refinancings across its industrial and IOS, studio and office transactions, including for the Manhattan Beach Studios and Culver Studios.

CO recently caught up with Miller to discuss his new firm, the deal for the Avis site, and plans for buying more assets in the transportation, logistics and product fulfillment sectors.

This conversation has been edited for length and clarity.

Commercial Observer: What led you to launch this new firm? Did you see a gap in the IOS market?

Benjamin Miller: I worked for Hackman Capital Partners, as well as First Industrial Realty Trust, both of which allowed me to focus on the L.A. markets all the way from the ports to the Inland Empire.

About 10 years ago, when I was working at Hackman, I started seeing this trend of low-coverage locations that not a lot of people had a lot of interest in. There wasn’t a lot of debt in the market.

Over the last 10 years, it’s been institutionalized, but I kind of saw it early. But it took a little bit of conviction and convincing from both the equity side and internally at certain companies to focus more on low-coverage assets, opposed to building max-coverage warehouses.

Can you talk about the first acquisition near LAX, and why you picked that asset or that submarket for your opening move?

I had actually acquired an asset around the corner when I was working at Hackman, and had covered this pocket for a long time, so I was very familiar with the asset and the location on a block-by-block basis, but also from an IOS perspective.

Thematically, everything that I acquire and that I’m looking to acquire is 30 percent coverage or less. Not all sites have those sorts of configurations. So, once you canvass certain areas and locations, it narrows down the amount of properties that actually have the right zoning, the right coverage, and have the correct market fundamentals from the leasing perspective.

You expect to scale to a $100 million portfolio over the next year or two?

I have a strategic co‑GP relationship with a large national IOS player called Open Industrial. If you look them up, they’re based out of Bethesda, Md., but their CEO, Michael Rabin, sits in Los Angeles. We’re definitely looking to exceed the $100 million number.

Are you focusing just on Southern California?

Yes. I am based in Orange County. I believe that’s a very strategic location — even though I’ve lived in L.A. prior — just based on the fact that I’m 90 minutes from four of the most active industrial markets on the West Coast: L.A., Inland Empire, Orange County and San Diego. And it’s a lot to cover.

Those are the markets that are near and dear to me, just based on my experience. And, also, we live in the fourth-largest economy in the world, and the No. 1 active set of ports in the country. So, that’s what I’m betting on.

Are you focused on traditional IOS users, or are you also leaning more into the new demand for electrification, EV, that type of thing?

All options are on the table. It’s a site‑by‑site basis and also a tenant‑by‑tenant basis.

We will buy sites and look for sites that can pull the most amount of power for the electrification, but it’s not our primary focus. And quite honestly, it’s hit or miss based on how many electric‑related uses can be utilized on a variety of sites.

So, I’ll go into the site looking to electrify it, but we’ll dig into the power after the fact. What’s most important is the zoning, the coverage, and all the details related to tenant demand.

As you said, this niche sector has really institutionalized pretty quickly with companies like Blackstone and the likes of them buying in. Are you seeing an era where the mom‑and‑pop IOS owners are leaving or are on the way out, or is there still a long way to go for that?

I think there’s still some time. Not all IOS is created equal.

Perhaps the mom‑and‑pops operate some of the 1‑ to 2‑acre locations that maybe just don’t require much upkeep. But, if you have a 20‑acre site that’s $100 million, there’s not that many groups that can take that down.

But that’s strategically why I partnered with Open Industrial, so that we could buy anything from the $3 million location to the $100 million‑plus location, based on their strengths and knowledge in the market, and their ability to close on a bunch of properties as well.

It’s definitely a unique asset class. And I think what kind of makes us well positioned is that we have a multitude of buckets of capital for a variety of different assets within the space. There’s core capital, core‑plus capital, value‑add capital, and, so long as the zoning and the fundamentals work, we can kind of find a home within our variety of buckets.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.