Could this deal mark “peak warehouse” for private equity real estate investment? On Wednesday, EQT Exeter, the global real estate investment behemoth spawned by the union of EQT Real Estate and Exeter Property Group, announced that it has closed one of the largest U.S. industrial real estate transactions of all time, selling 328 high-quality supply chain and e-commerce facilities spanning 70.5 million square feet for $6.8 billion.
The portfolio is comprised primarily of logistics properties serving the supply chains of major corporations, including facilities for “big box” regional distribution, e-commerce fulfillment, and last mile distribution. The portfolio spans the five largest U.S. distribution hubs of New York, Dallas, Atlanta, Chicago, and Los Angeles and the key e-commerce and air cargo hubs of Memphis, Indianapolis, Columbus, and Louisville.
EQT Exeter credited its “deep local market knowledge and expansive industry relationships” across more than 20 U.S. offices to assemble the portfolio through more than 100 transactions executed over three years. These investments were made on behalf of industrial value fund investors who, according to EQT Exeter, sought value growth through development and leasing activities.
During its ownership period, EQT Exeter developed 15 million square feet of the portfolio, with an additional 7 million square feet under construction; leased 45 million square feet of vacancy; and signed 28 million square feet in renewals during the funds’ period of ownership. This vertical integration allowed EQT Exeter to add significant value, raising occupancy from 55 percent initially to 95 percent at sale, thus increasing the un-leveraged yield on cost from 4.8 percent initially to 6.9 percent at sale.
In line with EQT Exeter’s commitment to sustainability, EQT Exeter says it has taken a number of steps to reduce environmental impact across the portfolio’s 22 million square feet of new construction, including installing LED lighting, reflective roof materials, and clerestory natural light features, and introducing pervious parking and trailer areas and onsite stormwater retention.
While the specific buyer was not publicly named, EQT Exeter said the portfolio was marketed for sale to global institutional buyers who have “grown accustomed to EQT Exeter providing the marketplace with the most modern, sustainable, diversified, and high-quality portfolios that provide stable cash flow from a strong credit tenant base.” The ultimate buyer is identified only as “a newly formed global partnership, which has engaged EQT Exeter to continue operating and managing the properties.”
“We are grateful to have the opportunity to deliver this transformational deal for our investors in the US industrial value funds, which have the #1 performance among all private real estate funds invested during the same time periods,” said Ward Fitzgerald, Partner and Head EQT Exeter. “We are humbled to serve the teachers, firefighters, public workers, and so many others whose retirements depend on EQT Exeter’s commitment to success. I am extremely proud of the entire US EQT Exeter team for their tireless, gritty efforts in acquiring, developing, leasing, and stabilizing this high-quality portfolio, enabling us to continue our track record as one of the highest-performing real estate investment managers in the world.
“Furthermore, we are excited to continue collaborating with the buyers, our partners in a new venture as we operate the assets moving forward. Today’s transaction is the fourth multi-billion-dollar portfolio sale for EQT Exeter. Throughout our team’s long history, we have been laying the bricks of design excellence, leasing execution, and strong corporate tenant relationships to serve such partners with large-scale portfolios of the highest quality and the active management expertise to produce steady income and asset appreciation,” Fitzgerald said.
