Peakstone Seals $490M Portfolio Acquisition

November 5, 2024

Industrial Featured Investment NationalMoreNews

The transaction marks the company’s first foray into the industrial outdoor storage sector.

Exterior shot of Triten Real Estate Partners and TPG Angelo Gordon's facility in Philadelphia — Also bullish on the IOS sector, the joint venture between Triten Real Estate Partners and TPG Angelo Gordon invested more than $500 million in IOS acquisitions since 2020. The JV paid $12.3 million for a Philadelphia freight facility in 2023. *Image courtesy of Triten Real Estate Partners*

Peakstone Realty Trust has acquired a 51-asset industrial outdoor storage portfolio across 14 states in an off-market transaction valued at $490 million. Alterra IOS and institutional investors advised by J.P. Morgan Asset Management sold the portfolio.

The REIT funded the purchase through a mix of proceeds from its credit facility and cash on hand. BofA Securities served as Peakstone’s financial advisor while O’Melveny & Myers LLP, Latham & Watkins LLP and DLA Piper provided legal counsel.

Peakstone’s newly purchased portfolio spans a total of 440 usable acres. Of these, 82 acres are slated for redevelopment. The adaptive reuse project targets six properties across Washington, Georgia, Pennsylvania and New Jersey. A wrap-up for the redevelopment is expected in 12 to 36 months.

The operating assets are in Sun Belt and Coastal markets such as Philadelphia and Atlanta—8 properties each—as well as Houston (four properties), Nashville, Tenn., (three properties) and Dallas-Fort Worth (two properties).

The portfolio is approximately 100 percent leased to 36 tenants in the transportation, logistics, equipment rental and building material businesses such as FedEx, Amazon, United Rentals, Sunstate Equipment Co., Beacon and Builders First Source. The annual rental escalation averages 2.6 percent.

Driven by the IOS sector’s compelling fundamentals, Peakstone’s acquisition marked the REIT’s first foray into the industrial outdoor storage sector, according to a company statement.

Moreover, with the deal’s closing, Peakstone’s share of the industrial sector’s contribution to its annualized base rent spiked from 30 to 40 percent. Outside of the newly acquired 440 IOS acres, the REIT’s portfolio also includes 9 million square feet of industrial space.

A fragmented sector ripe for institutional investment

GreenPoint Partners CEO Chris Green pointed out that the IOS market’s profitability is expected to increase due to a shortage of supply, driven by the shrinkage of available stock and zoning-related challenges for new development, as well as growing demand.

One pitfall Green identified is the IOS market’s fragmentation, which may stir up issues stemming from inefficient operations. The REIT’s acquisition advances the sector’s institutionalization, according to prepared remarks by Leo Addimando, CEO & managing partner of Alterra, which could alleviate some of the issues.

Peakstone Realty Trust isn’t the only institutional player making major moves on the IOS scene. In 2020, Triten Real Estate Partners and TPG Angelo Gordon created a joint venture to acquire IOS assets, investing more than $500 million across 16 markets. On average, the joint venture has closed 18 new yearly acquisitions since inception.

What’s more, the partners have double downed on their commitment in June, when they laid out plans to invest more than $1 billion in IOS acquisitions over the next five years.