Overseas Investors Establish Industrial Beachhead

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Forget glittering office towers. The new trophy properties for overseas investors flush with cash are decidedly unsexy industrial buildings.

Singapore’s Global Logistic Properties, one of the largest owners of industrial property in Asia, has partnered with Singapore’s GIC sovereign wealth fund to acquire an $8.1 billion industrial portfolio from New York’s Blackstone Group. The portfolio includes 45 properties totaling 2.7 million square feet in Los Angeles County, accounting for a $402 million slice of the deal.

“It’s really only been in the past year that we’ve seen foreign capital interested in industrial, so this is a shift,” said Barbara Emmons, an investment broker at CBRE Group Inc. and who has specialized in the industrial market for 26 years.

Foreign investors have traditionally been interested in high-rise trophy office buildings and marquee hotels, she said. “This is a high-profile transaction and it indicates that there is a tremendous amount of interest and desire to pursue industrial.”

GIC has a 45 percent stake in the portfolio, which was held by Blackstone subsidiary IndCor Properties Inc. Global Logistic has a 55 percent stake, and said in an emailed statement that it plans to offer all but a 10 percent interest in the portfolio to limited partners.

“The fund syndication is already oversubscribed, with several investors in advanced stages of due diligence,” the statement said.

The offering is expected to be completed by August, and Global Logistic will manage the properties. The company plans to hold on to them, increasing rents and occupancy.

A representative from Blackstone declined to comment on the transaction. A representative from GIC did not respond to requests for comment.

Blackstone was advised by Eastdil Secured, Citigroup Inc., Barclays and RBC Capital Markets in the sale, and those firms did not respond to requests for comment.

Tight market

The L.A. properties are in strong infill markets scattered throughout the county, from Montebello to Cerritos to North Hollywood, all part of an industrial real estate market that has been hot and is getting hotter.

Proximity to the ports of Los Angeles and Long Beach, combined with a lack of new construction, strong net absorption and a dearth of available land have led to extremely low vacancy rates. The countywide industrial vacancy rate is hovering around 3 percent and is projected to get even tighter.

Jeff Rinkov, president of Lee & Associates’ Commerce office, said industrial vacancy in the county has dropped consistently over the years and is expected to continue to decrease. Much of the vacancy that is in the market is in sub-100,000-square-foot spaces that are too little for larger warehousers and logistics businesses.

Industrial land values and rents have risen nearly 10 percent in the last year.

As a result, said John Hollingsworth, executive managing director for the greater L.A. area at Colliers International, “developers are trying to get creative and are looking at infill properties, which are getting to be more and more expensive.”

Luke McDaniel and Cameron Driscoll, senior vice presidents at Jones Lang LaSalle Inc., are leasing brokers for four of the properties GLP acquired in the deal, which amount to 1.8 million square feet in Cerritos, Downey and Montebello.

McDaniel said he expects lease rates in the market to rise by almost 10 percent this year.

“It is definitely a landlord’s market,” he said.

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