IRG Raises $335M Through Goldman Sachs to Tap Into Rampant Industrial Growth
The funding will help the firm acquire and develop logistics and manufacturing assets around the country
Private real estate owner and developer Industrial Realty Group (IRG) announced that it raised $335 million in private funds through Goldman Sachs (GS). The capital will be used to acquire and develop logistics and manufacturing assets around the country, as well as reduce secured debt and increase capital investments on existing assets.
The Los Angeles-based firm is active around the country, with about 100 million square feet of rentable space for current tenants that include Amazon (AMZN), International Paper, Weyerhaeuser, and the U.S. Army. John Mase, CEO at IRG, told Commercial Observer that the impetus for the new funding plan is to take advantage of current low interest rates and continue the company’s growth pattern.
“We have a lot of assets throughout the country that we’ve been working on, and this allows us to do it in a very capital-efficient manner,” he said. “But we have a pretty long pipeline of assets that we’ve been pursuing.”
He pointed to a collection of properties in Tacoma, Wash., just outside of Seattle, as well as development projects in Reno, Nev., and acquisitions in the Bay Area and Palm Springs.
Demand is soaring for industrial assets that support quick “same-day” supply chains, as well as supply chains that can move single items rather than containers. Amazon has been adding more shipping and sorting centers, or “last-mile distribution” sites, as consumer activity and online shopping are at record highs. For example, the firm just signed a 1 million-square-foot distribution center in Central California, joining a massive logistics park with other distribution tenants like Walmart and Target.
Mase said that IRG is driven by the same trends. The firm pointed to a report by the Urban Land Institute and PricewaterhouseCoopers that explained how overall real estate prices are expected to fall 5 to 10 percent this year, but “industrial properties, data centers and single-family homes are expected to rise in value.”
“Some markets are tighter than others,” Mase said. “Some are starting to have a lot of supply come on board, but overall, a lot of the effects of COVID increased our niche marketplaces where there is more demand than there is supply.”
The U.S. saw a record number of industrial leases of at least 1 million square feet in 2020, according to CBRE. The pronounced demand translates into higher rents in most major markets. Mase said, generally, rents are up 6 percent to 10 percent in IRG’s portfolio, but rents in some of its Midwest properties are up as much as 20 percent.
The Allen Matkins/UCLA Anderson 2021 winter forecast, which polled real estate professionals in California, showed that sentiment for industrial properties came “roaring back” to levels of optimism not seen in many years. Lease rate increases are expected to continue to exceed the rate of inflation around the state.
Moving forward, Mase said IRG is likely going back to the bond market at the end of this year for additional unsecured bonds, and will “continue to pursue these assets that we’ve been working on.”