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Blackstone is Back with Big Industrial Property Deal

Pending Deal for LBA Realty Portfolio, Listing of USAA Portfolio Highlight Continued Investor Appetite for Logistics Buildings
September 22, 2016
Barely a week after Global Logistic Properties, Ltd. (GLP) pulled off its latest billion-dollar-plus purchase, two high-value examples of companies seeking to trade industrial assets provide more evidence of the seemingly limitless appetite for US warehouse and logistics properties.

This week came news that Blackstone Group was jumping back into the industrial property space with an agreement to buy 46 logistics properties totaling over 26 million square feet from LBA Realty for a reported $1.5 billion. The pending deal marks the return of the private-equity company to the US warehouse sector following its 2015 sale of its IndCor portfolio to Global Logistic Properties, Ltd. (GLP) for a staggering $8 billion.

The agreement, which was first reported by Bloomberg News and the Wall Street Journal, includes almost half of LBA's total portfolio of industrial properties and encompasses mostly major West Coast markets ranging from port and airport area locations around Los Angeles, Oakland, San Francisco, San Diego and Seattle to regional hub locations in Dallas, Denver, Phoenix and Las Vegas.

Blackstone's re-entry into logistics eclipses the latest $1 billion-plus deal by Global Logistic Properties, Ltd. (GLP), which earlier this month agreed to acquire a 15 million-square-foot-portfolio Hillwood Development Co., which shored up the Singapore-based company's position as the second-largest owner of industrial property real estate in the US.

Also this week, San Antonio-based USAA Real Estate is reported to be shopping a 12 million-square-foot portfolio consisting of 19 warehouse and distribution properties. The portfolio includes logisitics properties in Memphis, Atlanta, Indianapolis, Cincinnati, Northern Pennsylvania and Northern California, could fetch $675 million, according to Real Estate Alert.

All of the recent deals have involved portfolios with occupancies exceeding 95%, supporting a recent analysis by CoStar Portfolio Strategy that the premium buyers are willing to pay for high-vacancy buildings is now nearly double its historical average.

With the pace of new industrial space entering the market expected to escalate in coming years, investors are snapping up low-vacancy properties while they can, CoStar analysts say.

Industrial fundamentals are expected to continue to surprise investors and look attractive relative to other property sectors, REIT analyst John W. Guinee of Stifel Nicolaus & Co., added, noting the impact of increased ecommerce activity despite rising supply of logistics space.

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