Artis REIT Sells Twin Cities Industrial Portfolio for $249M

Capital Partners and Bahrain-based Investcorp have partnered to buy a portfolio of 17 industrial properties in Minnesota for $249M from the Artis REIT, one of the largest diversified REITs in Canada.

The assets, which are spread across the Twin Cities, encompass about 2.5M, according to a report in the Minneapolis/St. Paul Business Journal. The industrial properties are 95% occupied and located in submarkets with little available land for development.

The largest properties in the portfolio include the 406K SF Pilot Knob Distribution Center in Mendota Heights, MN; the 250K SF Energy Park Distribution Center in St. Paul; the 217K SF Penn-James Commerce Center in Bloomington, MN: and Berkshire Lane I and II, encompassing 209K SF in Plymouth, MN.

In addition to closing the deal with Capital and Investcorp, Winnipeg, Manitoba-based Artis also announced that it has entered into agreements to sell a second Minnesota industrial portfolio of six properties encompassing about 700K SF for $74.8M and a 123K SF office campus, Hartford Corporate Plaza, for $13.7M to undisclosed buyers.

In March 2021, Artis announced a strategy for the REIT it called a Business Transformation Plan: to build a best-in-class asset management and investment platform focused on growing net asset value per unit and distributions for investors through debt repayment, return of capital and value investing in real estate.

As part of this strategy, Artis said it would monetize part of its portfolio to strengthen its balance sheet to provide the REIT with the liquidity and flexibility to execute on this strategy.

Since March 2021—including the deal it closed on the Minnesota industrial portfolio—Artis has sold 64 assets, including 48 industrial, 10 office and six retail properties. The REIT’s real estate portfolio now comprises 135 properties totaling about 15.6M SF of leasable space in select markets in Canada and the US.

“The sale of the two Minnesota industrial portfolios and Hartford Corporate Plaza mark another significant milestone in the implementation of our Business Transformation Plan,” said Samir Manji, Artis CEO and president, in a statement.

“Unlocking value for our unitholders through the monetization of these assets will enhance our overall financial flexibility and will reduce leverage and improve our overall liquidity,” Manji said.

“In the current economic environment, strengthening our balance sheet and liquidity will allow us to consider a range of capital allocation options, including buying back units and investing in other opportunities that we believe can generate above average risk-adjusted returns. Ultimately, our goal is to grow net asset value per unit for our unitholders, the most important metric tied to our long-term strategy,” the REIT CEO said.

After subtracting its mortgage debt of $97M from the Twin Cities industrial portfolio, Artis said it netted $148M from the transaction, which was the second-largest real estate deal in the Twin Cities this year.