USAA to Recapitalize 14 MSF Industrial Portfolio

By Keith Loria, Contributing Editor

USAA Real Estate Co. has recapitalized an industrial portfolio consisting of 25 bulk assets, totaling 14,175,572 square feet, located across 11 states, allowing for new investors of interest.

The acquisition price, which was not disclosed, was established by a competitive bidding process. An affiliate of RealCo will retain an approximately 10 percent ownership stake in the recapitalized portfolio while RealCo itself will serve in an advisory capacity.

“This is an exemplary transaction for RealCo—one of the most important and successful in our history—as it encapsulates our dedication to and excellence in creating value for our investors,” Len O’Donnell, USAA RealCo’s president & CEO, said in a company release. “With its collection of young, state of the art, well-balanced, assets, this is one of the country’s largest and highest quality industrial portfolios.”

The portfolio comprises core and value add bulk industrial real estate as well as two excess land parcels comprising 73.8 acres. The properties have a median age of 9 years, and are located in California, Florida, Georgia, Illinois, Indiana, Kentucky, Missouri, New Jersey, Pennsylvania, Tennessee, and Texas.

As part of the recapitalization, $185 million in new debt financing was arranged through Prudential and will be secured by 10 unencumbered assets, which together comprise 5.9 million square feet.

Among the portfolio’s most prominent properties are the 789,291-square-foot Summit Distribution Center II located in Memphis, Tenn.; the 832,000-square-foot Zappos warehouse outside of Louisville, Ky.; and the 1.6 million-square-foot SouthPort Logistics Center located outside of Atlanta, Ga.

According to O’Donnell, by adhering to the company’s disciplined investment approach, it has delivered extraordinary results for its investors while satisfying the market’s strong demand for high caliber industrial assets.

USAA Real Estate Co. was advised by CBRE National Partners on the recapitalization of the portfolio.

According to CBRE’s first quarter industrial report, in the first quarter of 2015, national industrial availability dropped 20 bps from the fourth quarter, to 10.1 percent—a full percentage point below the year before, and the industrial real estate recovery has now continued for 19 straight quarters.

The report shows that the U.S. consumer consumption is stimulating industrial demand. In the first few months of 2015, the vast majority of markets continued to show improvement, as 41 reported declines in availability, four remained unchanged and 12 recorded increases.

Lower availability rates were widespread across markets of all sizes and in all regions and the recovery has been rolling long enough that fewer markets are now reporting dramatic drops in availability; in fact, the vast majority of the first quarter of 2015’s declines were less than 50 basis points.