Canadian REIT Buys Midwest Logistics Portfolio for $179M
A recent vacancy of approximately 300,000 square feet in a Louisville facility brought down the cap rate a bit but Dream Industrial says that once it is leased up, it expects to cap rate to increase to 6.5%.
TORONTO, CANADA—Locally-based Dream Industrial REIT will be acquiring a portfolio of 21 logistics facilities across the US Midwest for $179.1 million, or $51 per square foot, which is below the estimated replacement cost of $71 per square foot. The purchase price represents a going-in cap rate of 6%. A recent vacancy of approximately 300,000 square feet in a Louisville facility brought down the cap rate a bit but Dream Industrial says that once it is leased up, it expects to cap rate to increase to 6.5%.
The portfolio, located in Chicago, Cincinnati, Columbus, Indianapolis, and Louisville, totals 3.5 million square feet. It consists of a mix of single-tenant assets and multi-tenant facilities that range from small bay to large distribution facilities.
The portfolio is currently 91% occupied; excluding the 300,000 square feet recently vacated in the Louisville property occupancy is 99.6%. The REIT notes that Louisville just recorded its second strongest quarter in market history, with 2 million square feet of net absorption, and it views the recent vacancy as an opportunity for an aggressive lease up.
The transaction is expected to close by the end of Q1.
Breaking Down the Portfolio
- In Chicago, the portfolio has four assets totaling 1.3 million square feet, located primarily in the O’Hare and Lake County sub-markets.
- In Columbus, Ohio the portfolio includes 12 buildings totaling 1.2 million square feet. The majority, or 11 assets, are located in the West submarket, which has a vacancy rate of 1.7%. The remaining building is located in the Northeast submarket.
- In Indianapolis, the portfolio includes two large-bay single tenant buildings that total 632,000 square feet.
- In Cincinnati, Ohio the portfolio consists of two multi-tenant buildings totalling 140,000 square feet located next to the Cincinnati Airport.
- In Louisville, KY, there is one 303,000 square foot property in the portfolio. It is a 28 foot clear distribution and warehousing facility and is the newest property in the portfolio.
US Expansion
Dream Industrial began expanding into the US some two years ago. Since then it has acquired 7 million square feet of product, with the US now representing 20% of its gross asset value. “With a total GLA of 3.5 million square feet, the acquisition portfolio enables us to establish a meaningful footprint in attractive logistics markets in the US and also add scale in our existing markets,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT.