Brookfield With $5.2B REIT Acquisition Expands Industrial in Midwest and Sun Belt
Brookfield Asset Management has partnered with Canada Pension Plan Investment Board (CPPIB) to acquire LXP Industrial Trust, which values the REIT at roughly $5.2 billion. The deal, which includes properties in the Sun Belt and Midwest, will expand Brookfield's global industrial platform.
It's unclear how much of a stake CPPIB will hold in the 107 LXP properties.
The move marks the completion of the all-cash acquisition, which gives LXP shareholders $61.20 per share.
Betting on Industrial's Fundamentals
For Brookfield, the purchase reinstates its belief in the long-term fundamentals of industrial. Currently, the sector is already in a strong position, with a CBRE report revealing that net absorption in the third quarter reached its highest level since late 2022. Demand continues to outpace supply in the sector.
Additionally, the properties Brookfield is adding offer favorable dynamics.
"We are acquiring a portfolio of modern logistics assets at an attractive basis in markets benefiting from strong demand for large-scale distribution facilities with limited supply," Lowell Baron, CEO of Brookfield Real Estate, said in a statement.
"Combined with durable in-place cash flows, embedded rental growth and our operating expertise, these dynamics create a compelling opportunity to drive value for our investors."
LXP Focused On Favorable Policies and Efficiency
An investor report in June by LXP revealed that 77 percent of its properties were located in the Sun Belt, with major concentrations in Phoenix, Houston, Dallas-Fort Worth, as well as the states of Georgia and South Carolina. In the Midwest, the single-tenant industrial and warehouse manager operated in Ohio and Indiana.
According to LXP, when evaluating markets, it concentrated on existing strong population and job growth, business-friendly policies and investment for advanced manufacturing onshoring. From a strategic standpoint, LXP aimed to lower risk profile for investments, prioritize operational efficiencies, adapt to tenants' changing needs and expand industry relationships from occupiers to brokers.
As of June, the 52.7 million square foot portfolio was 96.6 percent leased, with rents coming in at $5.28 per square foot on average. WALT across the properties came in at 4.7 years.
Currently, Brookfield's global logistics platform includes 850 properties in 20 countries, representing more than 255 million square feet.
The acquisition is not just a bet for Brookfield on the industrial market in general — but the performance on LXP's portfolio as well. Brookfield projects the properties' high quality and modern appeal will continue to attract demand in the future.
As a result of the completed purchase, the REIT is no longer trading on the New York Stock Exchange and has transitioned into a privately held company.
Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC were the lead financial advisors on the deal.
Source: GlobeSt/ALM