On Tuesday, Canada’s Oxford Properties, the Toronto-headquartered institutional real estate investor that manages $70 billion in client assets globally, said it is buying a portfolio of 149 industrial warehouse buildings from private equity giant KKR for $2.2 billion. The portfolio, which spans 14.5 million square feet and is located in 12 strategic industrial U.S. markets, including California’s Inland Empire, 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 Oxford Properties VP of Investments Ankit Bhatt, who leads the firm’s U.S. industrial investment strategy.
“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,” he added.
Oxford has mounted an aggressive drive into industrial real estate in recent years. In January 2019, the company acquired IDI Logistics alongside Ivanhoe Cambridge for $3.5 billion. In 2020, it became a significant investor in the world’s biggest cold storage logistics provider, U.S.-based Lineage Logistics. 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, it announced plans to acquire M7 Real Estate, a pan European logistics investment and asset manager, supporting its plan to deploy more than $4 billion into European industrial real estate by 2025.
“Across the globe, we are building, buying and growing world class industrial business in service of our global capital allocation priorities,” Oxford Properties EVP Chad Remis said. “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. 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.”
KKR began strategically aggregating and scaling the transacted portfolio in 2018, with the company characterizing the properties as “well located, high barrier to entry infill warehouses with a focus on high-growth markets with diverse multi-faceted demand drivers, near major supply chain hubs and transportation corridors.” Roger Morales, Partner and Head of Real Estate Acquisitions, and Ben Brudney, Director on KKR’s real estate team leading its logistics efforts, architected the strategy and assembled the portfolio though more than 50 individual property transactions together with KKR’s industrial operating platform, Alpha Industrial Properties.
“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. 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.,” said Morales. “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.”
Following the completion of the sale of the portfolio, KKR will continue to own over 20 million square feet of industrial property across major metropolitan areas in the U.S.