KKR Buys 1.8M SF Houston Industrial Park

Artis, a Canadian REIT based in Winnipeg which last year considered selling its entire portfolio, now is offloading some of its prime U.S. industrial assets to improve its balance sheet.

Artis has sold the 1.8M SF Park 8Ninety, an industrial park the REIT developed in Southwest Houston, to KKR for $234M, making the transaction the second-largest industrial trade ever in the Houston area, according to a Green Street alert.

JLL brokered the off-market deal for Artis. The transaction works out to about $130 per SF.

Artis developed the 127-acre Park 8Ninety complex, located at 9021 South Sam Houston Parkway, in five phases from 2017 to 2022. Trammell Crow, which helped develop the complex, had a small stake in the property that was bought out by Artis last year.

The park is fully leased, with major tenants including Comcast, Rexel, Texas AirSystems and VWR International.

In the midst of rising interest rates and a sinking market capitalization, Artis initiated a strategic review last summer to consider options including the potential sale of the REIT. In an earnings call last month, CEO Samir Manji said the company does not expect to find a suitable buyer for the entire REIT and therefore will continue to selectively sell off assets.

“Given the current market conditions, we do not believe that there is a buyer prepared to acquire the REIT at a reasonable value relative to our NAV,” Manji said, during the call with investors. “However, there remains healthy interest from potential buyers of high quality retail and industrial assets.”

From August of last year through February 2024, Artis offloaded more than $384M in properties, primarily in office and retail properties.

Moving forward, Manji said Artis plans to focus on selling warehouses as part of its ongoing effort “to further deleverage, strengthen the balance sheet, grow NAV [net asset value] per unit and enhance liquidity.”

Artis owns nearly 14M SF of office, retail and industrial properties in the U.S. and Canada, with the largest share of the portfolio—4.4M SF—in offices. The REIT, which owns 16 U.S. industrial properties encompassing 3.2M SF, says its industrial portfolio was 99.2% leased at the end of 2023.

Only one industrial trade in Greater Houston eclipses KKR’s pending deal for Park 8Ninety, the sale 14 years ago of a 66% stake in the 3M SF Greens Port Industrial Park for $262M.

Elevated leasing momentum coupled with a decline in new construction activity is strengthening fundamentals in the Houston market, which ended 2023 with an average occupancy of 92% after a record 36M SF of new industrial space was delivered last year.