Oxford Properties Group is continuing its industrial asset class expansion with an agreement to purchase a 14.5-million-square foot U.S. portfolio from another global investment giant, KKR, for almost $2.8 billion (all figures Cdn).
The portfolio includes 149 infill and light industrial properties spread across a dozen major American markets including the Inland Empire (Riverside and San Bernardino counties in California), Dallas, Atlanta, Phoenix, Chicago, Houston, Tampa, Orlando, San Diego and the Baltimore-Washington corridor.
”High quality, infill, consumption-driven industrial portfolios of scale trade infrequently, so this transaction is an important next step for Oxford to build a large-scale industrial business in the U.S.,” said Ankit Bhatt, VP of investments at Oxford Properties and leader of its U.S. industrial investment strategy, in Tuesday’s announcement. “Growing our U.S. industrial business is one of Oxford’s highest-conviction global investment strategies as we continue to build, buy and invest in the physical infrastructure that serves the digital economy.
“The acquisition serves as a launchpad for Oxford’s light industrial business which perfectly complements our big-box development platform, IDI Logistics. We believe scale will become an important differentiator for industrial real estate operators, and we continue to pursue opportunities in the U.S. light industrial sector.”
It’s the second major cross-border industrial acquisition announced in the past couple of weeks. Blackstone REIT announced on Aug, 9 it will acquire WPT Industrial REIT, a Toronto-based investor in U.S. industrial properties, in a deal valued at about $3.9 billion.
Oxford a lender for portfolio acquisitions
The portfolio has been “strategically aggregated and scaled” by KKR since 2018, Oxford says in the announcement. It is also a portfolio with which Oxford is familiar.
“Having previously been a mezzanine lender on the portfolio acquired from KKR, we have a high degree of conviction on the growth potential of these assets,” said Chad Remis, EVP of North America at Oxford Properties, in the release.
“It also demonstrates the power of Oxford’s fully integrated credit business to help drive future investment synergies while generating attractive returns.”
The properties are focused in high-growth markets with diverse multi-faceted demand drivers, near major supply chain hubs and transportation corridors. The architects of KKR’s strategy for the portfolio have been Roger Morales, partner and head of real estate acquisitions, and Ben Brudney, the director on KKR’s real estate team leading its logistics efforts.
“Across the globe, we are building, buying and growing world-class industrial business in service of our global capital allocation priorities,” Remis added. “As a result of this transaction, and recent activity in the sector, we are rapidly closing in our stated goal to have one-third of our global equity deployed into the industrial asset class.”
Oxford’s expansion in industrial sector
This is the latest in a string of major acquisitions in the sector for Oxford, which holds about $70 billion in investments and assets, comprising 150 million square feet of space across a variety of sectors around the world.
In January 2019, it partnered with Ivanhoé Cambridge to acquire IDI Logistics for $4.4 billion. In 2020, it became a significant investor in the U.S.-based Lineage Logistics, the world’s leading cold-storage logistics provider.
Oxford was a cornerstone investor in the IPO of ESR Cayman, the leading logistics real estate platform in Asia, and follow-on investments have made it one of the largest institutional investors in the company.
In January 2021, Oxford announced it had agreed to acquire M7 Real Estate, a major pan-European logistics investment and asset manager. The acquisition accelerates Oxford’s ability to deploy over $5 billion into European industrial real estate by 2025.
KKR retains 20 million square feet of industrial
For its part, KKR will remain a substantial holder of industrial properties following the sale. Its portfolio will include over 20 million square feet of industrial property across major metropolitan areas in the U.S.
“Four years ago, we set out to create a large stabilized portfolio that would benefit from secular changes in the logistics sector largely driven by e-commerce and consumer preference changes,” Morales said in the announcement.
“Given the highly fragmented asset class, the strategy included the creation of a best-in-class operating platform and a targeted investment effort focused on growing cities and key distribution nodes in the U.S.
“Today’s transaction not only demonstrates how this strategy is performing for our investors, but also reflects the tremendous market opportunity we continue to see in industrial real estate.”
Since launching a dedicated real estate platform in 2011, KKR has grown real estate assets under management to approximately $40 billion across the U.S., Europe and Asia as of June 30, 2021. KKR’s operations span both the equity and credit business, across 11 offices and eight countries.
CBRE National Partners acted as real estate advisor for KKR. JLL Industrial Capital Markets acted as advisor for Oxford.