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SREIT Snaps Up 4.1M SF Of Midwest Industrial For $320M

Starwood Real Estate Income Trust, a non-traded REIT managed by an affiliate of Starwood Capital Group, has acquired a 95% stake in a 33-property industrial portfolio totaling about 4.1M SF for about $320M.

The deal marks the company's first foray into the industrial sector. All of the properties are in major Midwestern metros: Chicago, Indianapolis, Milwaukee and Columbus, Ohio.


The seller was Becknell Industrial, which specializes in industrial property development, Commercial Property Executive reports. SREIT declined to confirm the seller of the properties and Becknell did not answer a query from Bisnow on the matter. 

SREIT also said that it is forming a partnership with Becknell, but didn't specify the exact nature of the agreement.

The properties are 98% leased, according to the buyer, and their average occupancy has been a little less than 95% over the last 10 years. Most of the properties are in the Chicago and Indianapolis markets, with 43% and 33% of total space, respectively.

Most of the properties are light industrial buildings smaller than 250K SF. They average about 14 years old.

"Industrial is a great asset class and operating fundamentals point to continued strength in the coming years," Starwood Capital Vice President of Acquisitions Garret Overlock said in a statement. "These are major industrial markets that service not only local but regional and national distribution needs."

Nationwide, industrial property vacancies were near a record low in the third quarter of 2019, at about 5%, Colliers International reports (Colliers did not participate in the SREIT deal), down from 5.2% during the same quarter last year. 

Nationally, industrial absorption was 167.4M SF during Q3 2019, Colliers reports, down 18% from the same period a year earlier. Metro Chicago is a strong market, however, coming in as the top market for net industrial absorption for the first three quarters of the year, at 17.6M SF.

Before the acquisition, SREIT had a portfolio of about 70 properties of various kinds, and has been an aggressive buyer recently. In November, the company acquired the 265-unit Exchange on Erwin apartment building in Durham, North Carolina, for $111M. In October, it acquired five apartment buildings in Columbus, Ohio, for $275M.