Blackstone Snags Industrial Portfolio for $1.8B

With the closing of the transaction, Blackstone Real Estate Income Trust has added 22 million square feet of last-mile infill warehouse and distribution facilities to its holdings.

Industrial Building exteriorBlackstone Real Estate Income Trust Inc.’s collection of industrial properties just grew by 22 million square feet. The commercial property REIT recently completed the acquisition of the 146-building Canyon Industrial Portfolio from Cabot Industrial Value Fund IV LP and Cabot Industrial Value Fund IV Manager LP in a $1.8 billion deal.

Consisting of last-mile infill warehouse and distribution facilities, the Canyon Portfolio covers a lot of ground—literally. Consisting of high-quality properties, the group has major concentrations in several markets including Chicago, Dallas and Baltimore/Washington D.C., which account for 4.1 million, 3.2 million and 1.9 million square feet, respectively. The portfolio also has a substantial footprint in Los Angeles/Inland Empire and South/Central Florida.

“The Canyon transaction exemplifies BREIT’s focus on real estate asset classes and geographic markets with attractive fundamentals,” A.J. Agarwal, president of BREIT, said in a prepared statement. BREIT is externally managed by BX REIT Advisors LLC, a subsidiary of leading global investment firm Blackstone.

The Canyon Portfolio’s attractive qualities extend beyond prime locations. It also boasts a strong lineup of creditworthy tenants; it’s a roster that features the likes of Amazon, FedEx, Coca-Cola, Fiat Chrysler and the U.S. Government. Additionally, the portfolio’s lease level of 90 percent translates to strong cash flow and the opportunity to lease-up the facilities at the increasingly high market rates that characterize most of the country’s leading industrial markets.

To finance the acquisition of the Canyon Portfolio, BREIT relied on a $1.1 billion mortgage, a $200 million mezzanine loan and available cash. The transaction leaves BREIT with approximately 33 million square feet of industrial assets.

Portfolio power

Investors have been keen on buying in bulk in the industrial sector of late. In 2017, portfolio sales increased at a 44 percent year-over-year pace, according to a report by commercial real estate services firm Colliers International.

2018 is looking promising for another busy year of portfolio trades. Since January, CBRE Strategic Partners U.S. Value 8 purchased a six-building, 1.4 million-square-foot collection of warehouse and manufacturing buildings in metropolitan Chicago, and Lowe Enterprises Investors and a joint venture partner acquired the NL Ventures IX Portfolio, a 2.3 million-square-foot group of industrial and office facilities. Brennan Investment Group and Arch Street Capital Advisors snapped up a 2.3 million-square-foot portfolio in a sale-leaseback deal with BlueLinx Corp., and Killam Development purchased the 1.6 million-square-foot Sharyland Business Park Portfolio, which encompasses 10 buildings and 111 acres of developable land. And the list goes on.

If 2017 is any indication, industrial investment sales—portfolio and one-off trades alike—are likely to be brisk in 2018. Last year, industrial was the only major property sector to post an annual gain, beating out all other leading sectors, including investor favorite, retail.  “The industrial sector outselling the retail sector is not just a story of the decline in retail; it also reflects the opportunities that investors see in industrial properties,” per the Colliers report.  With more than $72 billion in sales transactions volume, 2017 industrial sale activity reached near-record levels.