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REIT Colony Capital Expands Industrial Portfolio In $1.1 Billion Deal


A Colony Capital property in Orlando (Photo: Colony Capital)

A Colony Capital property in Orlando (Photo: Colony Capital)

Real estate investment trust (REIT) Colony Capital, Inc. (NYSE: CLNY) announced today that it has acquired a portfolio of 54 light and bulk industrial buildings from an unidentified seller for $1.1 billion.

Of the properties, 48 are "light industrial" buildings, which range from as small as 50,000 square feet to as big as 250,000 square feet. The facilities are designed to process last-mile deliveries to the end customer. The remaining six are the larger bulk industrial facilities which operate as traditional warehouses and distribution centers, Colony Capital said.

The total transaction involves just under 12 million square feet in 10 markets. Of that, the light industrial units comprise 7.7 million square feet and the bulk units 4.2 million. The average light facility in the portfolio is 165,000 square feet, with the average bulk location coming in at 700,000 square feet, according to Colony Capital.

The light industrial properties were acquired through Dallas-based Colony Capital's existing light industrial platform. The six bulk facilities, which represent the REIT's first foray into the bigger industrial segment, were acquired through a newly formed joint venture of which Colony Capital has a 51 percent controlling interest and an unnamed institutional investor holds the remaining 49 percent.

Nearly three-quarters of the light industrial portfolio, and two-thirds of the bulk properties, are currently leased, the REIT disclosed. The seller was represented by CBRE National Partners, a unit of CBRE Services, Inc., the industrial real estate and logistics services giant. The properties are in California, Illinois, Kentucky, Nevada, Oregon and Pennsylvania.

The transaction expands Colony Capital's total portfolio size by about 25 percent, said Lew Friedland, head of the REIT's industrial unit. As of the end of 2018, it owned and operated 48.5 million square feet in 20 U.S. markets.

Light industrial properties account for more than half of all institutional investments in industrial real estate, Colony said. For all the publicity surrounding big-box property transactions, properties of 75,000 square feet or less account for 95 percent of all national industrial lease transactions, Colony explained.

The surge in e-commerce fulfillment, combined with a tight supply of last-mile properties, has put extreme pressure on light industrial rents, according to the REIT. From 2000 through the third quarter of 2018, the rent growth of light industrial has been more than twice the rate of rent growth of bulk units. In addition, new light industrial development represents just 1.3 percent of inventory, compared with 5.4 percent for bulk industrial.

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