Fresh off of closing its third and largest real estate debt fund, Colony Capital now is said to be pursuing a new real estate equity initiative. The Los Angeles-based real estate investment firm is planning to launch a dedicated industrial property business, with an ambitious expansion plan for the sector over the next several years, according to a source familiar with the matter.
Colony took the first step in building the new platform by becoming the winning bidder last month of a massive US industrial portfolio owned by Dallas-based private equity firm Cobalt Capital Partners. The transaction, in which Colony agreed to pay $1.6 billion for 29.5 million square feet of assets across the US, is expected to close within the next 30 days. The anticipated sale is the largest pure industrial deal this year and the tenth largest-ever in the property sector in the US, according to data provider Real Capital Analytics.
Colony, which is led by chairman Thomas Barrack, is said to be bullish on industrial real estate because of the sector’s growth potential and highly fragmented ownership. In fact, if buying conditions for industrial properties remain favorable, the new platform could potentially triple in size within the next three years, the source said. Colony declined to comment.
Building large-scale real estate platforms within a short timeframe is nothing new for Colony. For example, the firm launched Colony American Homes, an owner and manager of single-family residential homes in the US, just two years ago, and already has amassed $20 billion of assets under management.
Colony is one of several newcomers in the industrial space. Two of the firm’s competitors for the Cobalt portfolio were TPG and the Abu Dhabi Investment Authority, both of which are said to have struck their first major industrial deals in the US this year.
Meanwhile, industrial real estate ranked as the most favored commercial property sector, both in terms of investment and development prospects, in the Emerging Trends in Real Estate 2015 report released by the Urban Land Institute and PwC last month. “There is a rare confluence of trends favoring industrial properties,” the report said. The two groups cited factors such as the return of manufacturing to the US; the pickup in homebuilding activity; and changing retail business models as demand drivers for new industrial space in dozens of US markets.