NEW YORK CITY—Three years after reaching a deal to sell its IndCor platform to a partnership of GLP and GIC Pte. Ltd., the Blackstone Group is ramping up again in the US industrial sector. Its non-traded Blackstone Real Estate Income Trust has signed an agreement to buy a 21.7-million-square-foot industrial portfolio from a Cabot Properties fund for approximately $1.8 billion.
When completed, the transaction will represent Blackstone's biggest deal for US industrial since closing on the $8-billion sale of the IndCor platform in early 2015. In September of 2016, the asset management giant agreed to pay $1.5 billion to acquire a portfolio of 46 West Coast logistics centers from LBA Realty. Earlier this year, BREIT bought six million square feet of mainly infill industrial properties from High Street Realty, paying $402 million.
In an SEC filing, BREIT says the 146-property Cabot portfolio, which it's acquiring from Cabot Industrial Value Fund IV LP and Cabot Industrial Value Fund IV Manager LP, benefits from “attractive fundamentals.” Specifically, 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 by 5.7% year-over-year.
Accordingly, BREIT says in its SEC filing, the continued market rent growth in the portfolio's markets resulted in rents on new leases exceeding rents on expiring leases by 9% during the third quarter. 'The company believes the portfolio will further benefit from these attractive fundamentals as the portfolio is currently only 90% leased versus average occupancy in the portfolio's markets of 95%,” according to the SEC filing.
The Cabot portfolio, which was acquired between 2013 and 2017 and represents substantially all of Value Fund IV's holdings, consists of 146 industrial properties primarily concentrated in Chicago, which represented 18% of November 2017 base rent and 4.1 million square feet; Dallas (12%, 3.2 million square feet); Baltimore/Washington, DC (12%, 1.9 million square feet); Los Angeles/Inland Empire (7%, 1.1 million square feet); South/Central Florida (7%, 1.1 million square feet); New Jersey (7%, 845,000 square feet); and Denver (6%, 1.1 million square feet). It's 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 federal government.
As of Nov. 30, the portfolio had a four-year weighted average lease life with no more than 16% of square footage expiring in a single year and no single tenant occupying 5% or more of its aggregate square footage. BREIT notes that the properties in the portfolio face competition from similarly situated properties in and around their respective submarkets, which include some of the nation's leading industrial corridors.
BREIT expects to fund the Cabot portfolio acquisition through a combination of cash on hand—consisting primarily of proceeds from its ongoing public offering—property-level debt and borrowings under its line of credit. The property-level debt is still being negotiated with potential lenders and detailed terms haven't been agreed upon, says BREIT. The deal is expected to close in March or April of 2018; when it does, BREIT's industrial portfolio will run to about $2.3 billion in acquisition value, making the sector its largest by value, CoStar reported earlier this week.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
