“Big Box” real estate deals don’t get much bigger.
EQT Exeter has closed a $6.8 billion, 70.5 million square foot portfolio sale on behalf of its private real estate funds, EQT Exeter Industrial Value Fund IV and related investment vehicles.
The deal is among the largest in US history. The portfolio consists primarily of logistics properties that serve the supply chains of major corporations, including facilities for “big box” regional distribution, e-commerce fulfilment, and last mile distribution.
The properties span the top five US 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 assembled the portfolio through more than 100 transactions executed over three years.
These investments were made on behalf of industrial value fund investors who sought value growth through development and leasing activities. All told, 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.
EQT Exeter raised occupancy from 55% initially to 95% at sale, thus increasing the unleveraged yield on cost from 4.8% to 6.9%.
Industrial Assets Remain ‘Critical’
Maggie Holmes, Director in Stan Johnson Company’s Atlanta office, calls the deal a monster transaction that illustrates perfectly how critical industrial assets have become to tenants and investors alike.
“During the past decade especially, with the rise in e-commerce, industrial distribution and warehouse facilities have become more sophisticated,” she tells GlobeSt. “These assets are often tailored to specific tenant requirements for picking, sorting and other fulfillment needs.
“These specifications are influencing the value of these assets, with location continuing to be a driver of value as well. I can’t say whether we’ll see additional deals of this size, but I am confident that the industrial sector will continue to see strong demand from investors, as we’re projecting the net lease industrial sector to have its best year on record.”
The transaction is yet another example of the strong demand for high-quality industrial assets in major metropolitan areas, David Lari, partner, Cox, Castle & Nicholson, tells GlobeSt. “In a highly competitive market, a portfolio of quality assets is even more desirable than single assets. This sale will have an impact on the marketplace. However, every industrial transaction is different, and it is still very much dependent on the quality of the asset and its geographic location.”
Even outside of the major hubs, the industrial market is, by all accounts, expected to continue to thrive. One of the main drivers behind this activity will continue to be e-commerce, says Scott Harrell, Principal and Co-owner of Mancini, a tech-driven design firm in New York City, who notes that major brands like Peloton and Volkswagen are signing significant leases across the US at close to a million-plus square feet each.”
“The shift from buying at retail stores to online has become so big that you can even buy your next automobile online.”
“This price point demonstrates that these companies are willing to pay almost anything to acquire space to expand and grow their businesses.”
A Commitment to Sustainability
In line with EQT Exeter’s commitment to sustainability, the 22 million square feet of newly constructed properties are equipped with the newest renewable design features in the industry.
As part of the reletting of existing space, EQT Exeter has taken a number of steps to reduce environmental impact, including installing LED lighting, reflective roof materials, and clerestory natural light features, and introducing pervious parking and trailer areas and onsite stormwater retention.