Brennan Launches $300M Industrial Fund

CHICAGO—The industrial economy in the US has begun to really hum, and investors increasingly see the sector as a reliable source of solid returns. And Brennan Investment Group has just become the latest investor to take advantage of the revival. The Chicago-based company has joined a client of Arch Street Capital Advisors, LLC and formed a new $300 million joint venture that plans to buy a portfolio of industrial properties in the country's top metro areas.

The partners will focus their attention on facilities critical to the tenants' mission. This is their fourth venture, but the previous three were substantially smaller, each less than $200 million, and Brennan officials tell GlobeSt.com that the boost in funding reflects their growing confidence in the US economy.

“What we see is a resurgence of American industry,” says Michael Brennan, chairman and managing principal of the Brennan group, “because many of the forces that drive industrial absorption have come back.” These include the resurrection of the auto industry, the tremendous expansion of American oil and natural gas production, the continuing revival of the multifamily and single-family home markets and the growing confidence of lenders in mid-sized companies.

Brennan's new venture has also just acquired its first asset, a three-building 174,170-square-foot industrial complex in Hamilton, OH, leased to Matandy Steel and Metal Products LLC. The company is “very reliant on a skilled labor force that is nearby,” Brennan says, making the suburban Cincinnati facility, which also functions as a corporate headquarters, a perfect example of the type of mission critical property the venture will purchase. The price was not disclosed.

Brennan and Arch Street started the three other ventures in 2012 and 2013. Together the parties have acquired 64 properties with a total of 9.7-million-square feet in 40 metro areas across the US. PNC Bank, N.A. provided this new venture with a line of credit to help close both portfolio and individual asset purchases.

The fact that the new venture's first acquisition was in suburban Cincinnati, rather than a core market, may also reflect a confidence in the geographic breadth of the economic expansion. “Location is always important in everything we do; that is something that you can't compromise on,” says Brennan. However, he points out that all of the top 100 metro areas in the US recorded positive absorption for industrial properties over the past year, illustrating that the recovery has touched every product type and region.

The venture will seek out properties in which tenants have made substantial investments and signed long-term leases, Brennan adds. “That is an extra level of prudence that we look for,” and will ensure that even if conditions in a market where the venture has a property deteriorate, the tenant will have other reasons to stay.

But Brennan remains extremely optimistic that the long-term outlook is bright. “We see a retooled American industrial economy and strengthened demand." The spread of fracking and its promise of cheaper domestic energy, for example, and the recent increase in Chinese labor costs will both increase American competiveness and encourage more businesses to create jobs in the US. "We think this business cycle, particularly industrial, has long legs to it.”