New $600M Partnership to Target E-Commerce Assets

January 27, 2021

ElmTree Funds has joined forces with Guggenheim Investments to acquire industrial properties across the U.S., with a focus on last-mile and logistics facilities.

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ElmTree Funds has completed a transaction with Guggenheim Investments that paves the way for a new partnership between the two companies. Under the terms of the agreement, Guggenheim made a $600 million equity commitment on behalf of its clients to fund the partnership, which will focus on the acquisition of industrial e-commerce properties across the U.S.

ElmTree’s role in the partnership will entail utilizing its expertise in acquiring net-leased, build-to-suit properties to invest in industrial real estate assets connected to the e-commerce, last-mile and logistics sectors. The partners contend that these assets are in high demand as more corporations attempt to build out supply chains to accommodate customers’ increasingly loud cry for faster delivery times. It’s in fact a long-brewing trend that came to a boil with the pandemic.

“An array of evidence supports the consensus that the [COVID-19-induced] lockdown was an accelerant that gave several trends in commercial real estate a push. Despite damage to the labor market, national and world economies, companies positioned for e-commerce have won a dramatically increased share of total sales. Consequently, skyrocketing online sales have intensified already-strong demand in key markets for big-box and last-mile distribution facilities,” according to a fourth quarter report by Lee & Associates. Net absorption in the national industrial sector totaled 99.2 million square feet in the fourth quarter of 2020, the strongest quarter on record, according to the report, and the 203.7 million square feet of net absorption in 2020 marked a 27 percent increase over 2019.

Industrial-fund bandwagon

Many investors are eager to put their money into the booming industrial sector, and new funds are popping up to accommodate them. In December 2020, CBRE announced it had been chosen to provide fund and property accounting services for a new U.S.-based industrial fund managed by GLP Capital Partners. Also in December, Stockbridge, acting on behalf of its investors, announced it had formed a joint venture with the National Pension Service of Korea to acquire industrial assets in the U.S. In partnership with Stockbridge’s open-end core fund and an additional institutional investor, the joint venture committed to purchasing a 14.3-million-square-foot portfolio of Class A logistics facilities—the largest transaction by value of industrial properties since the onset of the pandemic—occupied predominantly by e-commerce tenants.