Gramercy (GPT) To Buy Core Logistics Portfolio Worth $479M

Gramercy Property Trust (NYSE:GPT) has been fortifying its portfolio strength on the back of strategic buyouts. The company recently announced a deal to acquire core logistics portfolio worth $479 million. This portfolio includes 41 properties and comprises 7.8 million square feet of space. The acquisition is expected to close in third-quarter 2017.

This portfolio, which consists of modern warehouse industrial buildings, is currently 93% leased. It is located in six key logistic markets throughout the United States, including Atlanta, Chicago, Columbus, Dallas, Houston and Memphis.

With an average age of 12 years, the portfolio has “competitive in-place rents” and “potential leasing upside”, per Nicholas Pell, chief investment officer of Gramercy. The portfolio has weighted average remaining lease term of 4.1 years and near-term lease roll is concentrated in assets, having contract rents that are either at or below market rent levels.

In fact, in recent years, Gramercy has been focused on portfolio repositioning to enhance its overall portfolio mix. As part of such efforts, the company has been making diligent buyouts. It has already closed $519 million of acquisitions year to date and the above-mentioned deal will likely result in the company’s investment volume in 2017 to reach $998 million. Additionally, Gramercy is either awarded or under contract for another $386 million worth of acquisitions.

Such concerted efforts to enhance the company’s industrial portfolio augur well for growth. Recently, it unveiled a joint venture for acquisitions, ownership and management of newly constructed Class A, e-commerce distribution facilities throughout the United States. The initial acquisition of the venture is a $642-million portfolio, being acquired on a forward basis. This comprises seven newly constructed Class A bulk distribution properties, aggregating 6.0 million square feet of space. (Read more: Gramercy Unveils E-Commerce Distribution Facilities JV)

As a matter of fact, fundamentals of the industrial real estate remain robust. Going by the numbers, per a study by the commercial real estate services’ firm — CBRE Group Inc. (NYSE:CBG) — the overall U.S. industrial real estate market remained upbeat in the second quarter, with industrial availability rate dropping 10 basis points to 7.8%.

This not only marked the market’s 27th decline in the past 28 quarters, but also the lowest level since first-quarter 2001. Obviously, recovering economy and job market gains aided this improvement, but specifically, e-commerce boom and a healthy manufacturing environment were the chief drivers. Also, lesser-than-expected completions of construction have kept a check on the supply numbers. This is helping the industrial real estate market grow, as well as providing scope for REITs like Gramercy, Prologis Inc. (NYSE:PLD) and Liberty Property Trust (NYSE:LPT) to make strategic investments and ride the growth curve.

Currently, Gramercy carries a Zacks Rank #3 (Hold). In addition, shares of the company have gained 7.0% year to date, outperforming 3.6% growth recorded by the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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