AXA IM Alts, acting on behalf of clients and in partnership with US logistics real estate developer Dermody Properties, has acquired a 23-asset portfolio from Dermody Properties Industrial Fund II (DPIF II) for c. $1.2 billion.
The venture is under contract to acquire nine additional assets totalling c. $850 million upon completion of construction in 2022 and 2023.
Dermody Properties will serve as the operating manager for the venture.
On completion of both acquisitions, the portfolio will total c. 8.47 million sq ft (c. 785,000 sq m) and comprise 32 high-quality assets, 65% of which were constructed within the last three years.
All assets occupy strategic locations in primary logistics hubs across 11 primary U.S. industrial markets, including Inland Empire, Northern California, Seattle, Portland, Las Vegas, Chicago, Louisville, Atlanta, Eastern Pennsylvania, Northern New Jersey and Wilmington.
With an average age of eight years and average building size of 208,000 sq ft, the total portfolio offers modern facilities to suit a variety of potential occupiers. The majority of assets sit within the 150,000 – 400,000 sq ft size range which is currently experiencing the strongest leasing activity in the U.S. The initial 23-asset portfolio is 77% leased, with strong leasing prospects for the vacant space. The entire portfolio includes a majority of investment-grade tenants. US industrial vacancy stands today at a near-record low of 3.6%. A scarcity of land, increasing construction costs, as well as labor and supply chain shortages, are constraining the pipeline of future stock, driving rents and investment values.
The newly acquired and to-be-acquired assets complement AXA IM Alts’ existing exposure to the U.S. industrial sector which, upon completion of both transactions with Dermody Properties, will comprise c. $3.4 billion (€3.02 billion) of assets under management across approximately 20 key US markets.
Steve McCarthy, Head of North America at AXA IM Alts, commented: “The quality and scale of the Dermody Properties portfolio, together with its resilient income profile and attractive geographical diversification, made it stand out as a particularly compelling investment opportunity. Logistics remains one of AXA IM Alts’ long-term conviction calls as demand for prime space shows no sign of abating thanks to structural shifts driven by the rapid growth of e-commerce and evolving changes to worldwide supply chains. We are delighted to partner with Dermody Properties to maximize the value of the portfolio for the benefit of our clients in the years to come.”
Douglas A. Kiersey, Jr., President of Dermody Properties, added: “We are very pleased to welcome AXA IM Alts as our partner as they expand their US portfolio. Dermody Properties’ strategic investments in infill industrial land in select US markets has allowed us to develop assets which enhance the distribution networks of our customers and in turn, optimize delivery times to the end consumer. On behalf of U.S. Core Logistics Partners II, LP, we look forward to continuing to serve the needs of our customers.”
CBRE National Partners facilitated the sale of the DPIF II portfolio.