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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.

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

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.