27-Property Texas Industrial Portfolio Changes Hands

A private fund saw strong upside growth potential in the 27-building industrial portfolio it picked up.
Mayfield Dallas-Houston Industrial Portfolio

A private fund advised by Dallas-based Crow Holdings Capital – Real Estate has purchased a 27-building, 2.35 million-square-foot industrial portfolio spread between the Dallas-Fort Worth and Houston areas for an undisclosed amount.

Holliday Fenoglio Fowler, L.P., which marketed the portfolio on behalf of the sellers – Mayfield Properties, L.P. and AB Real Estate Group, said the overall portfolio was 95.6 percent leased.

The HFF investment sales team representing the sellers was led by senior managing directors Randy Baird and Rusty Tamlyn; managing director Jud Clements; directors Trent Agnew and Robby Rieke and real estate analysts Stephen Bailey and John Rogers.

The eight Dallas-Fort Worth properties, which consist of 11 buildings totaling about 1 million square feet, are 98.1 percent leased and located in the DFW Airport North, Great Southwest, Valwood and West Brookhollow industrial markets.

The eight Houston properties have a total of 16 buildings with about 1.3 million square feet. Located in the Northwest and Southwest industrial markets, they are 93.6 percent leased.

Ben Doherty, head of industrial investment at CHC-RE, said the firm, an asset manager of private equity real estate funds, was attracted to the portfolio because “this class of property is often trading below replacement costs.”

Doherty told Commercial Property Executive, “Generally speaking, class B light industrial saw a sharp decline in fundamentals during the recession. Class A space is broadly recovered today and in some cases beyond peak fundamentals.”

He further explained, “The Class B space today continues to see positive occupancy gains while driving increased rents – we believe that there is strong upside growth potential relative to peak rents and beyond.”

Both Houston and the Dallas-Fort Worth industrial markets have seen strong user demand and net absorption in recent quarters. During the first quarter of this year, “3.8 million square feet of Houston’s industrial inventory was absorbed, significantly more than the 2.1 million square feet absorbed in the same quarter one year earlier,” according to Colliers International’s Q1 2015 Houston Industrial Market Report. The report added that leasing activity, including renewals, reached 3.9 million square feet in the first quarter. Meanwhile, 4 million square feet of new product hit the market in Q1 and another 6.4 million square feet of industrial space is under construction.

In its Real Estate Outlook Dallas-Fort Worth Industrial Market Q4 2014 report, Transwestern also noted net absorption of industrial space had been up, totaling more than 2.8 million square feet in the fourth quarter of 2014, compared to 2.1 million square feet in the third quarter. The report cited several submarkets that were expected to outperform in the period ahead with declining vacancy and rising rates and they included at least two of the submarkets where Crow Holdings made purchases – DFW Airport and Great Southwest.

“Even if interest rates increase slightly, investor appetite for industrial properties in the DFW Metroplex is expected to remain steady,” the Transwestern report stated. “There is strong capital demand for core and value-add products which is attributed to the decrease in vacancy rates, continued escalation in rents and steady economic growth across the region despite decreases in oil prices.”