BGO Industrial REIT Buys Stake in Midwestern Portfolio for $130M

BGO Industrial REIT believes that most of the industrial space that was built pre-2000 is increasingly obsolete and, therefore, intends to primarily focus on the acquisition, and to a lesser extent, the development of new construction.

“We anticipate that industrial tenants will desire to relocate from older, outdated properties to more efficient, modern facilities to improve their profit margins,” its CEO Michael Glimcher, said in prepared remarks.

To that end, BGO IREIT announced this week its acquisition of an indirect 34.2% ownership interest in a portfolio of Midwestern industrial assets valued at approximately $948 million (as of March 31) for $130 million in exchange for 13 million units of its operating partnership.

The acquisition was completed on July 7 and includes 29 separate industrial buildings totaling over 9.4 million square feet located in Cincinnati, Kansas City, St. Louis, and Kenosha, Wis. It was developed between 2012 and 2023 and is currently 90% leased to multiple tenants with a weighted average remaining lease term of approximately five years.

Moreover, the properties house a dynamic and diverse tenant roster, featuring nationally recognized leaders in the distribution, logistics, and manufacturing sectors. The company could not disclose its tenants.

Jeff Janda, SIOR, Principal, Lee & Associates of Illinois, tells GlobeSt.com that with interest rates where they are, and the capital markets nearly shut down over the last few years, a transaction of this size is welcomed news for industrial.

“Investment in core industrial in the historically stable Midwest is a safe hedge in economically uncertain times – especially with skyrocketing demand for consumer goods and a general desire to bring supply chains closer to home,” Janda said.

“While industrial market fundamentals have slowed a bit from the absolutely staggering demand in 2021 and 2022, the modern industrial warehousing sector continues to see tremendous growth.”

For the handful of large players that control most of the institutional-grade industrial investment in the Midwest, “a transaction like this marks an excellent opportunity to free up cash and satiate a general desire for more liquidity,” Janda said.

The portfolio, Glimcher added, “is the keystone in what we believe will be a premier portfolio of income-producing U.S. industrial properties.

“We anticipate that industrial tenants will desire to relocate from older, outdated properties to more efficient, modern facilities to improve their profit margins.”

Glimcher said that new, modern buildings with sufficient height and power will enable tenants to deliver more volume effectively, resulting in meaningfully greater profitability for the tenant’s business.

“Furthermore, we believe that this formula allows tenants the flexibility to pay higher rents for modern buildings, in a strong labor market with ample transportation connectivity, without sacrificing the tenant’s profitability, he said.

Per the REIT’s public filings and prospectus, it is currently seeking to raise up to $5 billion from investors to acquire a diversified portfolio of primarily stabilized, income oriented industrial warehouse and logistics properties primarily located in the US.