New ElmTree, Guggenheim Partnership Targets Last Mile Assets

Real estate private equity manager ElmTree Funds has closed another transaction with Guggenheim Investments.

Following ElmTree Funds’ sale of its majority position in an 18-property net lease portfolio to Guggenheim Investments last year, the companies are now teaming up to invest in industrial e-commerce assets throughout the US.

Guggenheim has provided a $600 million equity commitment to fund the partnership with ElmTree, which specializes in acquiring build-to-suit properties net leased to investment-grade tenants.

“Guggenheim Investments is pleased to partner with ElmTree on another transaction that benefits our clients and the stakeholders of the real estate projects,” Senior Managing Director and Head of Real Estate at Guggenheim Investments Jennifer Marler said in a prepared statement.

As part of the transaction, ElmTree will invest in industrial real estate assets tied to the e-commerce, last-mile and logistics sectors. As online shopping during the pandemic, these assets are in high demand.

“E-commerce leasing is dominating the industrial market, with a total of 71.3 million square feet year to date,” Peter Kroner, Investor Research, Industrial at JLL, said in a statement last year. “COVID has completely catalyzed tenant expansion, specifically in the latter half of the second quarter, and throughout the third quarter as retailers scrambled to bridge direct-to-consumer gaps in their supply chain.” 

Many corporations are focused on building out supply chains to incorporate faster delivery times due to consumer demand.

“This strategic partnership provides fresh capital to continue investing in mission-critical assets that are in high demand across the country, while generating steady, long-term cash flow,” James Koman, CEO and Founder of ElmTree said in prepared a statement. 

In January 2020, ElmTree recapitalized an 18-property net lease portfolio, selling its majority position to Guggenheim Investments. The deal valued the industrial-and-office portfolio at $900 million.

As part of the transaction, ElmTree managed the assets for Guggenheim and maintained a small equity portion.

ElmTree first began acquiring and developing these build-to-suit net lease properties in 2016.

ElmTree CEO and founder James Koman told GlobeSt.com in an earlier interview that the company has been focusing on acquiring industrial assets, largely because of its stellar business case. “When you look at e-commerce, logistics and the demand by consumers for same-day delivery service, we believe you will continue to see growth in this sector for at least the next couple of years,” he said.