Sealy Garners $909M on US Industrial Portfolio Sale

As part of a long-term strategy, the investment fund sold a collection of assets totaling 16.3 million square feet.
Creekside IX. Image courtesy of Sealy Strategic Equity Partners LP

Sealy Strategic Equity Partners LP has sold a 16.3 million-square-foot segment of its 18.1 million-square-foot industrial portfolio to DRA Advisors. SSEP, an investment fund sponsored by Sealy & Co., walked away from the transaction with $908.5 million.

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The group of properties consists of 106 industrial warehouses spanning 16 key markets in the Southeast, Southwest and Midwest. SSEP had amassed the collection through various transactions between November 2012 and December 2018. Among the properties is Creekside IX, an approximately 652,200-square-foot distribution facility located in the 500-acre Creekside Industrial Center in Columbus, Ohio. SSEP had purchased Creekside IX for $40 million in 2017.

SSEP relied on CBRE National Partners to act as its real estate advisor on the deal with DRA. The fund expects to sell the remaining 1.8 million square feet of its portfolio during the first half of 2020.

Exit strategy

Sealy launched SSEP in 2012 as an industrial real estate fund focused on acquiring stable-cashflow assets at or below replacement cost to capture additional gains via value appreciation. The endgame for the investment vehicle called for the disposition of either part or all of the portfolio in 2020 or 2021. Notable transactions that allowed SSEP to grow its holdings by leaps and bounds over the years include the fund’s purchase of a 1.5 million-square-foot group of 18 industrial buildings in metropolitan Dallas in 2016, and a 2.2-million-square-foot portfolio consisting of 149 facilities in Dallas, El Paso, Texas, and New Orleans in 2015.

Portfolios for the picking

Sealy is part of a notable group of industrial-portfolio peddlers this year. The industrial sector, characterized by seemingly endless robust fundamentals, is a big magnet for investors. “E-commerce tenants continue to drive demand for warehouse and distribution space, vacancy rates are at cycle-lows and rents are increasing. Investor demand for these assets has grown, and some large investment funds, which generally have the lowest cost of capital, will pay more for a large, multi-tenant, geographically diverse portfolio of similar vintage,” according to a fourth quarter 2019 report by Transwestern. In one of the largest deals of 2019, Singapore-based investment manager GLP inked an agreement to sell a group of U.S. logistics assets totaling 179 million square feet to Blackstone for $18.7 billion.