(To read more on the industrial market, click here.)

DALLAS-Cobalt Capital Partners has closed a $227-million equity fund seeded by its long-time partner and lead sponsor, USAA Real Estate Co. In all, seven institutional investors have taken a stake in the Cobalt Industrial REIT, a fixed fund designed to acquire $700 million of market-value, US-only properties in core markets.

The REIT has been launched with a six-million-sf portfolio of multi-tenant properties, valued at $250 million, in Atlanta, Austin, Chicago, Dallas, Houston, Southern New Jersey, Philadelphia and Tampa. Lewis D. Friedland, managing partner of the Irving-based Cobalt Capital Partners, estimates about 40% of the equity has been used to date, paired with debt from various lenders and, in some cases, loan assumptions for the portfolio-building push.

Friedland tells GlobeSt.com that the equity fund, which can’t be expanded, will be spent over the next two years. It has the buying power to close a deal in roughly 45 days or less. “We anticipate closing on another several million sf in the next couple of months,” he adds, citing stops in Atlanta, Chicago, Dallas and Tampa to pick up more deeds.

Friedland says the properties, tagged as five- to seven-year holds, were assembled in one-off purchases and portfolio buys. The buildings, averaging 75,000 sf, are situated in infill locations and leased to distributors of basic commodities, of which 50% are national firms. Tenants, on average, occupy 30,000 sf, with 20% or less office finish-out. The existing package has leases ranging from three to 15 years, he says.

Effectively, Cobalt has created a niche that, for now, is “below the radar screen of the largest institutional players,” Friedland explains. “Not everyone can come out of a one-million-sf warehouse in Los Angeles, Chicago or New Jersey.”

Friedland says the spotlight is pointed on metros with populations exceeding two million sf and a light-industrial base of more than 25 million sf. “Demand for this type of space is driven by population growth so we are focused on markets with new household formations,” he stresses, adding wholesalers and retailers fill a large part of the tenant rosters. Leasing will be funneled to third-party providers; Cobalt will manage the assets, but outsource an assignment if necessary.

“We see very strong deal flow because we’re looking in a lot of different markets,” Friedland says. “Part of our competitive advantage is we have really strong broker relationships all over the country and we have a good track record of doing what we say we’re going to do. Sellers are very comfortable in dealing with us.”

Cobalt Partners venturing with the San Antonio-based USAA is the adviser to the industrial REIT. The fund’s backers, assembled in a yearlong capital campaign, include domestic pension funds, a global insurance company and other fund investors. The USAA-Cobalt track record includes the American Industrial Properties REIT, which was sold in 2001 after amassing $700 million of flex assets.

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