Friday, December 22, 2017

Blackstone REIT Buying 22 Million-SF Industrial Portfolio for $1.8 Billion

In what would amount to its largest purchase since its formation in the summer of 2016, The Blackstone Group's non-traded REIT, Blackstone Real Estate Income Trust Inc., has struck a deal to acquire a 22 million-square-foot industrial portfolio from Cabot Industrial Value Fund IV for $1.8 billion.

The portfolio consists of 146 industrial properties primarily concentrated in Chicago and comprising 18% of the portfolio's base rent). Other holdings are located in Dallas (12%), Baltimore/Washington DC (12%), Los Angeles/Inland Empire (7%), South/Central Florida (7%), New Jersey (7%) and Denver (6%).

The REIT said it industrial vacancy across the portfolio's markets has continued to decline over the past seven years and is currently just 4.6%, while rents across the portfolio's markets have increased 5.7% year-over-year, according to a Blackstone REIT filing.

The continued rent growth in the portfolio's markets resulted in rents on new leases exceeding rents on expiring leases by 9% in the portfolio during the third quarter of 2017. The company believes the portfolio will see further rent increases as the portfolio is currently 90% leased versus average occupancy in the portfolio's markets of 95%.

The portfolio is leased to 377 tenants including e-commerce and logistics companies such as Amazon, FedEx, and DHL as well as Coca-Cola, Fiat Chrysler and the U.S. government.

Blackstone REIT said it expects to fund the acquisition through a combination of cash on hand, property-level debt and borrowings under the company's line of credit. The property-level debt is still being negotiated with potential lenders and detailed terms have not yet been agreed upon. Closing is expected in March or April of 2018.

Cabot Industrial Value Fund IV was formed in the spring of 2013 with an investment strategy of acquiring value-add properties that tend to be smaller in size. Cabot's average deal size up to that time was about $13 million.

Blackstone REIT since it began acquiring properties this year has shown a preference for industrial properties. In April, the REIT acquired a 6 million-square-foot portfolio of predominantly infill industrial assets from High Street Realty Co. for $402 million.

With the Cabot purchase, the REIT's holdings will include industrial properties with an acquisition value of $2.31 billion - making industrial properties, its largest sector holding followed by $1.4 billion of multifamily.

Blackstone REIT's parent company also has shown a renewed interest in the sector. In September 2016, Blackstone Group jumped back into the industrial property space buying 46 logistics properties totaling over 26 million square feet from LBA Realty for a reported $1.5 billion. Previous to that deal, the private-equity company had sold off industrial properties, notably dealing its IndCor portfolio to Global Logistic Properties Ltd. for a staggering $8 billion.

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