- What The portfolio comprises 128 properties across 20 markets
- Why The purchase would be the second-largest property purchase by Brookfield ever
- What’s next Brookfield plans to close on the purchase without financing
Brookfield has agreed to purchase a 14.6m sq ft industrial portfolio in the U.S. from DRA Advisors, setting the stage for the largest warehouse trade in the country in nearly a year.
The investment titan’s winning bid came in close to the whisper price of US$1.3bn, or US$89/sq ft, which would produce an initial annual yield of about 6%, as first reported by sister publication Real Estate Alert. EQT Exeter, which has been an aggressive industrial buyer of late, also chased the deal.
Eastdil Secured marketed the portfolio, which has a concentration in the Sun Belt and smaller footprints in the Midwest and Northeast.
Brookfield plans to close on the purchase without financing, market pros said. That makes the transaction less sensitive to debt-market turmoil amid the recent runup in Treasury yields.
The portfolio, encompassing 128 properties across 20 markets, was 97.9% leased when the listing launched in February. Part of the pitch was the package’s upside potential, with the opportunity to lift rents 35% upon rollover. The warehouses are 33 years old on average and have 24-foot ceilings and truck-court depths of 137 feet.
New York-based DRA shopped the portfolio last fall to a handful of investors, but the effort was tripped up by debt-market volatility. The call for offers coincided with a runup in Treasury yields, sending the cost of debt soaring. Bids came in well below expectations, and DRA pulled the offering.
Amid improvement in the debt market around the start of the year, particularly for single-borrower CMBS deals, DRA refloated the package, betting it would attract a larger pool of bidders. It also entertained bids on pieces of the package in case that strategy produced better pricing, but ultimately it hit its target with a single buyer.
The pending deal would be the largest industrial trade in the U.S. since last June, when Prologis purchased a 13.9m sq ft portfolio from Blackstone for US$3.1bn, according to Green Street’s Sales Comps Database.
To be sure, blockbuster industrial trades have been a rarity in recent years, with just three transactions worth at least US$1bn in each of the last two years. So far this year, just one deal has hit that mark: Rexford Industrial Realty’s US$1bn purchase of a 3m sq ft Southern California portfolio from Blackstone in March.
The pending transaction also would be among the largest for Brookfield and DRA, according to the Sales Comps Database. The purchase would be the second-largest property purchase by Brookfield ever, exceeded only by a US$1.7bn office acquisition in 2006. And it would be the second-largest property sale by DRA, topped only by a US$1.8bn apartment portfolio disposition in 2014.
Some 8.1m sq ft of the package is scattered across 83 properties in a dozen Sun Belt markets, including Atlanta, Dallas, Houston and Memphis. Another 36 properties, totaling 5.7m sq ft, are in the Midwest markets of Chicago, Cincinnati, Indianapolis and Columbus, Ohio. The remaining nine properties, encompassing 841,000 sq ft, are in Boston, New Jersey and Pennsylvania.
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