AREA Property Partners has purchased a 4.5 million-square-foot portfolio of industrial warehouses for $170 million. The properties were acquired from Pattillo Investment Partners in an off-market transaction via its $759 million commingled fund, AREA Value Enhancement Fund 7.
The portfolio consists of 12 Class A industrial buildings in South Carolina, Georgia, Florida, Indiana, Texas and California. According to the New York-based real estate fund manager, the properties are 87 percent occupied with average remaining lease terms of five years and little near-term rollover.
“With limited near-term lease expiration in the portfolio, AREA is well-positioned to take advantage of rebounding fundamentals in the industrial sector,” said AREA partner Steve Wolf. “Given the favorable financing available in the current market and the investment-grade quality of the assets, we secured very competitive rates and terms that will provide extremely strong returns for our investors.”
Cushman & Wakefield Sonnenblick Goldman arranged a $100 million loan, secured by 10 buildings within the portfolio, to finance the acquisition. Market sources said close to 100 percent of the equity was provided by AREA. Management of the properties will be run by DW Management, which now has a minority stake in the portfolio.
The acquisition follows new signs of life in the industrial sector. Indeed, the industrial sector showed positive absorption in the fourth quarter 2010, indicating the start of a rebound from peak vacancies and cyclically low rental rates.
In addition, AREA anticipates the market to rebound strongly due to a combination of the recovering US economy and an industrial market expected to experience historically low levels of new development. As a result, the firm expects returns for the portfolio to be in the high teens.