Colony Capital is targeting a first close this month for its new open-ended industrial fund, Colony Industrial Fund, with an equity haul of approximately $300 million, PERE has learned.
The Los Angeles-based real estate investment firm began marketing the fund over the summer, and the commitments will come primarily from two investors that previously backed Colony’s $1.6 billion acquisition of Irving, Texas-based industrial real estate firm Cobalt Capital Partners in 2015, according to two people familiar with the matter. Colony declined to comment.
The firm, which is led by chairman Tom Barrack (pictured), is in the process of converting an existing closed-ended industrial vehicle, ColFin Cobalt Partnership, to the new open-ended fund. Colony formed the vehicle last year to purchase light industrial assets in the US, including a seed portfolio consisting of Cobalt’s 256 primarily light industrial assets totaling 30 million square feet of space.
Colony is understood to have raised $600 million through the closed-ended vehicle before beginning the process of converting the fund to an open-ended investment structure several months ago. The private evergreen fund will help to finance future investments for the firm’s light industrial real estate business, Colony Light Industrial Partners (CLIP).
“This is increasingly becoming the poster-child for how we will strategically develop and fortify permanent verticals in our go-forward business,” Richard Saltzman, Colony’s chief executive, said of CLIP during the firm’s second-quarter earnings call last month. “First, it has an increasingly favorable fundamental tenant demand demographic, as one of the few real estate assets classes that is benefiting from technology, rather than being disrupted or dislocated.”
Saltzman added during the call that the firm had termed out the business’ floating rate acquisition debt with long-term fixed-rate debt as part of the process of establishing a permanent capital structure.
CLIP’s portfolio comprised 328 industrial buildings totaling 35.4 million square feet of space in 16 major US markets as of June 30, according to Colony’s second-quarter earnings results. The platform’s largest geographical concentrations were in Atlanta, with 8.3 million square feet; Dallas, with 4 million square feet; Denver, with 6.1 million square feet; and South Jersey/Philadelphia, with 3.3 million square feet. The properties had an average lease rate of 94 percent.
Colony’s investment in CLIP currently represents a 62 percent interest in the industrial portfolio and a 100 percent interest in the related operating platform. CLIP’s investment focus is primarily on light industrial properties in major US metropolitan markets, targeting multi-tenant buildings of up to 500,000 square feet and single-tenant buildings of up to 250,000 square feet, with an office component of less than 20 percent.
CLIP has continued to acquire new properties in recent months. In April, for example, the platform bought a portfolio of four light industrial buildings encompassing approximately 669,000 square feet in Orlando, Florida for $56 million, and subsequently purchased a light industrial building of approximately 60,000 square feet in Phoenix for $4.3 million in July.