Gramercy Property (GPT) To Buy $331M Industrial Portfolio

Gramercy Property Trust (NYSE:GPT) has been making diligent efforts to enhance its portfolio in desired markets through opportunistic acquisitions. Recently, the company announced that it has agreed to buy a portfolio of nine Class-A industrial buildings, spanning across two million square feet of space. The company will shell out $331 million for this buyout. This acquisition is expected to close in third-quarter 2017.

The portfolio, which has a weighted average lease term of 10.4 years remaining, is currently 100% leased. The properties are located at eight important industrial hubs throughout the United States (Charlotte, Atlanta, Boston, the Inland Empire, Chicago, Minneapolis, Reno and Spartanburg), with 80% of the NOI concentrated in four markets.

This portfolio consists of several logistics facilities, many of which are pivotal for the distribution system of a leading logistic and delivery company. Moreover, 90% of its rent comes from a single market-leading tenant.

The company will raise funds by issuing $133 million in operating partnership units to pursue the above mentioned acquisition. Gramercy will also assume in-place debt to the tune of $137 million. The portfolio carries a cash capitalization rate of 6.3%.

This buyout comes as part of the previously announced acquisition of $386 million that is either awarded or under contract. In fact, Gramercy has been focused on portfolio repositioning for the past few years to enhance its overall portfolio mix. As part of such efforts, the company recently announced a deal to acquire a core logistics portfolio worth $479 million. This portfolio includes 41 properties and comprises 7.8 million square feet of space. The transaction is likely to close in third-quarter 2017 (read more: Gramercy to Buy Core Logistics Portfolio Worth $479M).

Gramercy has a total investment volume of $1.3 billion, which includes the aforementioned deal and other acquisitions that are either under contract or completed. Such strategic efforts to enhance the company’s industrial portfolio augur well for near-term growth.

As a matter of fact, the industrial real estate has been displaying robust fundamentals, of late. 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 contracting 10 basis points to 7.8%.

This not only marked the industrial availability rate’s 27th decline over the past 28 quarters, but also the lowest level since first-quarter 2001. Though a recovering economy and job market gains aided this improvement, e-commerce boom and a healthy manufacturing environment remained key growth drivers. Also, lesser-than-expected completions of construction have kept a check on supply figures. This has been stoking the industrial real estate market’s growth, providing scope for REITs like Gramercy, Prologis Inc. (NYSE:PLD) and Liberty Property Trust (NYSE:LPT) to make strategic investments and boosting their growth curve as well.

Currently, Gramercy carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of the company have gained 6.6% year to date, outperforming 4.7% growth recorded by the industry.



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