Partners Group Strikes $1B Industrial Deal

Partners Group, Equus Capital Partners portfolio. Image courtesy of Equus Capital

Acting on behalf of its clients, Switzerland’s Partners Group has sold an 8.6 million-square-foot portfolio of U.S. industrial assets for a total consideration of more than $1 billion.

Partners Group had acquired the collection of assets in a joint venture with Equus Capital Partners Ltd. over the last few years, and now the properties belong to a newly created partnership between Equus and a large U.S.-based insurance company.

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While neither Partners Group nor Equus has publicly identified the entity behind the purchase/recapitalization, IPE Real Assets reports that AIG’s real estate investment arm acquired the portfolio.

Totaling 88 facilities, the portfolio spans five key industrial markets in the Mid-Atlantic and the Southeast, and was 98 percent occupied at the time of the transaction. The Mid-Atlantic portion of the group is located in Virginia and consists of six buildings totaling 2.5 million square feet in Hampton Roads, and an additional three facilities accounting for roughly 1 million square feet in Frederick County in the Shenandoah Valley.

104 Challenger Drive, Portland, Tenn. Image via Google Street View

The Southeast segment of the group includes a 2.6 million-square-foot collection of 52 buildings at six business parks in Raleigh-Durham, N.C., and a 19-building industrial park totaling 1.2 million square feet in Roswell, Ga., just outside Atlanta. An additional four buildings encompassing an aggregate 1.3 million square feet near Nashville in Portland, Tenn., complete the Southeast segment. Equus and Partners Group had acquired the Nashville-area facilities—located at 1115 and 1125 Vaughn Drive, 1042 Fred White Blvd. and 104 Challenger Drive—in early 2018 at a basis below replacement cost.

Sellers’ market

The industrial sector is thriving, but Partners Group had its reasons for selling the highly profitable, premier industrial portfolio. The global private markets investment manager notes in a press release that at the time of the sale, it had completed its full transformational value creation plan for the portfolio, which included increasing the occupancy level to near full capacity, arranging lease renewals of key tenants, maintaining high average lease terms to a diversified, long-term tenant base, and enriching the quality of the portfolio.

1042 Fred White Blvd., Portland, Tenn. Image via Google Street View

Partners Group adds that the investment community took great interest in the portfolio, with potential buyers having been attracted to the property collection’s geographic positioning, durable operating fundamentals, as well as the diversified and long-term tenancy. Ultimately, Partners Group’s clients saw the sale generate a return of more than double the investment. The timing is right for profitmaking in the industrial sector, where rents are rising, and sales prices are soaring. In January and February of this year, the sector saw the average per-square-foot sales price increase 10 percent from the fourth quarter of 2020, according to CommercialEdge’s March industrial report.