Triten, TPG Angelo Gordon Launch $1B Addition to IOS Platform
Boosted by an imbalance between supply and demand, the performance of this ‘once sleepy’ asset class has transformed into a sensation.
Triten Real Estate Partners and TPG Angelo Gordon announced a significant upsize in their initial joint venture, positioning to acquire more than $1 billion in additional industrial outdoor storage assets over the next five years.
Triten and TPG Angelo Gordon originally teamed up in 2020 to develop an IOS portfolio with geographic and tenant diversification and has since acquired more than $500 million of IOS assets across 16 markets, averaging 18 new acquisitions yearly since 2020.
TPG Angelo Gordon said Triten has taken a thoughtful approach to grow the portfolio from three properties in Atlanta to over 60 properties in 16 markets over the past four years.
Triten manages over 3 million square feet of space through acquisitions and development, supporting over 350 tenants across all properties nationwide.
Infill IOS assets outperform
Ryan Meehan, senior vice president at Stonemont Financial Group, told Commercial Property Executive that fully improved and entitled IOS assets in infill locations have outperformed other asset classes due to shrinking inventory.
What makes them attractive is that “These large tracts are redeveloped, combined with growing demand for mission-critical infrastructure, logistics and construction,” Meehan said. “These sites serve as a critical link in the supply chain supporting the broader effort to expand domestic manufacturing and onshore a larger segment of the production process for a wide range of industries.”
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“While the product type benefits from strong secular tailwinds, the municipal obstacles to executing a value-add thesis are high, and without deep experience in the specific geography investors can find themselves saddled with higher than underwritten capital expenses,” Meehan added.
IOS as ‘illustrious’ as retail
Lisa Flicker, senior managing partner, head of Real Estate at Jackson Lucas, told CPE that IOS’ pivotal role in today’s supply chain has transformed the “once sleepy” asset class into a sensation.
“Our embrace of online shopping has made IOS almost as illustrious as retail,” Flicker said. “As logistics and infrastructure demands morph and grow, IOS properties will remain a glittering jewel in the industrial CRE crown, coveted and highly valuable.”
The rising popularity of IOS with investors comes down to supply and demand, according to Matt Pfeiffer, managing partner at Alterra IOS, which has acquired over 270+ assets across 30 states during the past seven years.
He told CPE there’s a near-permanent imbalance between demand for IOS properties and supply, which is naturally limited because of factors like zoning constraints and land availability.
“We’ve seen much more cannibalization of existing IOS parcels into dense industrial developments than we’ve seen the creation of new IOS sites, further contributing to the sector’s favorable supply/demand dynamics, and ultimately giving landlords more pricing power,” Pfeiffer said.
“Beyond supply and demand, IOS properties have very low carry costs, which is appealing to investors. Insurance and tax expenses are low, as are the costs of maintaining a vacant property. IOS properties also have lower vacancy rates and capital expenditures compared to traditional industrial properties, which have been somewhat of an investment darling in recent years, so it’s no surprise that this asset class is gaining prominence among larger investors.”
Ben Atkins, co-founder & CEO of Zenith IOS, told CPE this deal is another strong signal of the continuing growth of institutional investment in the IOS sector across the U.S.
“Sophisticated real estate investors recognize the numerous benefits which the asset class provides, including strong in-place income, low capital investment requirements, minimal development risk and a deep and diversified tenant base,” Atkins said. “We will continue to see similar announcements on both equity and debt transactions as the IOS sector matures into a distinct national industrial subsector.”
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