London Buyer's $470M Claims Nearly 11M SF

SAN ANTONIO-Strategic Real Estate Advisors has laid roughly $470 million on the table to win a 10.6-million-sf portfolio of industrial space from USAA Real Estate Co. The London-based adviser's coup has produced class A properties in Columbus, Memphis, Nashville and Sacramento.

"It was a very rare opportunity," Pierre N. Rolin, founder, chairman and chief executive of StratREAL, tells GlobeSt.com, citing USAA's strategic assembly of the US Supply Chain portfolio. StratREAL, looking to get $10 billion of US properties under management, is a pool of private investors from Ireland, Germany, Spain and the Gulf States. "We are not a fund so we don't come with any pre-timing pressures like an opportunity fund," Rolin says. "It's about wealth preservation for the next generation."

The US Supply Chain portfolio, developed since 1996, represents USAA's concerted push to assemble properties to "follow the flow of goods," says Jack Fraker, CB Richard Ellis' vice chairman, who teamed with executive vice president Randy Baird and senior vice president John Robinson to market the specialized industrial package. StratREAL's chief dealmaker was John Carter with Carter & Associates in Tampa, who will co-asset manage the package.

The Columbus component consists of 11 buildings, slightly more than 4.4 million sf and 96% occupancy. In Memphis, it's eight buildings with nearly 4.2 million sf of 89%-filled space while Nashville's footprint is a fully leased, 770,000-sf office/warehouse. The balance is a trio of 98%-leased structures with roughly 1.23 million sf in Sacramento.

Rolin says StratREAL secured a $376-million loan with its exclusive lender, Eurohypo AG of Germany. The vehicle has a five-year term and fixed rate.

In 2005, StratREAL bought Duke Energy Corp.'s Brookdale portfolio, with assets in many of the same markets as the USAA package. "We're very excited about the growth in these markets," Rolin says. "There are some properties with expansion potential and added value."

Fraker says USAA acquired the assets through a fund, buying existing product from other institutional owners and developers. "They felt like they had added value to the properties through lease-up, with tenants that have longer leases and market rental rates," he says.

Fraker says the average lease has about five years left on its term. "That's perfect for industrial," he explains. "It's a stabilized rent roll so they have minimal rollover exposure, that's key."

Fraker says the portfolio was widely marketed to top industrial investors in the US. "It's come down to quantitative and qualitative issues. Pierre and his team distinguished themselves with a streamlined timeline to close it," he says.

The USAA portfolio purchase was StratREAL's third industrial pickup in about two weeks. Nine days ago, StratREAL paid $37.1 million for 1.14 million sf in nine warehouse and distribution buildings in an unrelated deal in Memphis. And a yearend deal for $48.5 million reeled in a quartet of 93.5%-leased industrial properties, totaling 788,292 sf in Strongsville and Solon near Cleveland.

"While we traditionally invest in coast locations, we found this to be the perfect opportunity to enter into the enormous growth happening within the United States' distribution hubs," Jeremy Gates, StratREAL's managing director.

Until recently, StratREAL's US appetite has been primarily class A office in the Southeast and Southwest. The industrial push targets secondary and primary supply chain markets, with national or regional distribution hubs and solid business climates.

Rolin says the strategy shift is being done to purely diversify the portfolio. As before, the target markets are "sunrise states," predominately the Southeast and Southwest due to their high growth projections.

With $3 billion of real estate in hand, StratREAL's 2007 placement goal is at least $1 billion. "There are others we're working on," Rolin says. "We are continuing to look at more industrial. And, we're also looking at building spec industrial with US blue-chip local partners."