Cabot to exit Fund III with sale to REIT

The Boston-based private real estate firm has agreed to sell the entire portfolio of its third property fund to Liberty Property Trust for $1.475 billion.

Cabot Properties plans to sell the operating partnership that holds all of the assets in its third real estate fund, Cabot Industrial Value Fund III, to Liberty Property Trust for $1.475 billion, according to a statement from Liberty. The transaction is expected to close in October.

Under the transaction, Liberty Property Trust will assume approximately $230 million of outstanding mortgage debt with an average weighted maturity of seven years and has received a commitment for a $1.27 billion senior unsecured bridge loan. The Malvern, Pennsylvania-based office and industrial real estate investment trust intends to permanently finance the transaction with a combination of debt and equity financing.

Cabot closed Fund III, which focused on value-added industrial investments in North America and Europe, on $680 million of commitments in November 2008. The fund’s portfolio encompasses 177 properties totaling approximately 23 million square feet in 24 markets in the US and the UK. The portfolio was 93.3 percent leased to 436 tenants as of May 31. Cabot currently is raising a successor fund, Cabot Industrial Value Fund IV, which has a $650 million target and will pursue a similar investment strategy to Fund III.

This isn’t the first time that Cabot has liquidated a fund through a sale to a REIT. In July 2005, the firm sold the holdings in its first private equity real estate fund, Cabot Industrial Value Fund I, to Denver-based Dividend Capital Trust for $695 million. That vehicle’s portfolio included 105 industrial properties totaling approximately 11.7 million square feet in 12 US markets.