ElmTree Funds Sells $900M Net Lease Portfolio

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Private equity manager ElmTree Funds has sold its majority stake in an 18-property portfolio of industrial and office assets to Guggenheim Investments for $900 million. The build-to-suit net lease properties are located in markets across the U.S., including Dallas, Texas, St. Louis, Mo., and Valley, Ala.

ElmTree began acquiring and developing the properties in 2016 and, as part of the deal, will manage the assets for Guggenheim, while also maintaining a small equity portion. The recapitalization by Guggenheim marks the third of its kind with ElmTree over the past decade.

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Among the properties in the portfolio, notable assets include a 1.5 million-square-foot industrial facility in Dallas that is triple-net-leased for 11 years to a major U.S.-based confectionary manufacturer; a 500,000-square-foot industrial facility in St. Louis that is triple-net-leased for 14 years to a multinational courier delivery services company; and a 375,000-square-foot industrial facility in Valley, Ala., that is triple-net-leased for 11 years to a corrugated packaging company.

St. Louis-based ElmTree, which has had a focus on the net lease sector since the company’s founding in 2011, is bullish on the real estate segment. James Koman, CEO & founder of ElmTree, said in prepared remarks that in the midst of an uncertain rate environment, pensions and other institutional investors have a strong appetite for stable and predictable income streams.

Koman spoke to Commercial Property Executive in 2018 about his company’s investment focus, the secondary markets drawing the most investors and his predictions for the industrial sector. Last January, ElmTree acquired a 220,825-square-foot Pepsi bottling distribution center in Richmond, Va., for $25.8 million from Armada Hoffler Properties.