Oxford Seals $1.4B CMBS Financing for KKR Industrial Portfolio Buy

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Oxford Properties has closed a $1.43 billion commercial mortgage-backed securities (CMBS) financing for its purchase of a $2.2 billion industrial portfolio from KKR, Commercial Observer has learned. 

The transaction closed on Friday, with Morgan Stanley, Citigroup, Deutsche Bank and Goldman Sachs providing the hefty debt. The five-year floating-rate loan will be securitized in a Single-Asset, Single-Borrower transaction (SASB) deal, which is currently being marketed and expected to price next week, sources said. 

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CBRE’s James Millon, Tom Traynor and Mark Finan negotiated the financing. 

The companies announced in August that they’d struck a deal in which Oxford would purchase the 14.5 million-square-foot portfolio, which consists of 149 infill warehouses and distribution centers near large cities, from KKR. The assets span 12 markets, including California’s Inland Empire, Dallas, San Diego, the Baltimore-Washington corridor, Tampa and Orlando.

KKR assembled the portfolio over a three-year period, through 50 separate transactions. 

The buzzed-about deal gives Canada-based Oxford a huge leg-up in growing its industrial footprint in the United States, and also provides it with its first infill properties in the country.

“High-quality, infill, consumption-driven industrial portfolios of scale trade infrequently, so this transaction is an important next step for Oxford to build a large-scale industrial business in the U.S.,” Ankit Bhatt, vice president of investments at Oxford, said in a statement at the time of the announcement. “Growing our U.S. industrial business is one of Oxford’s highest conviction global investment strategies as we continue to build, buy and invest in the physical infrastructure that serves the digital economy.”

CBRE National Partners advised KKR in the sale, while JLL Industrial Capital Markets acted as advisor to Oxford.

The sale closing hasn’t put too much of a dent in KKR’s significant industrial portfolio. The investment firm still owns more than 20 million square feet of industrial property in the U.S, having grown its real estate assets under management to roughly $32 billion since launching its dedicated platform in 2011.  

“Four years ago, we set out to create a large stabilized portfolio that would benefit from secular changes in the logistics sector largely driven by e-commerce and consumer preference changes,” Roger Morales, head of real estate for KKR, said in a statement at the time the acquisition was announced. “Given the highly fragmented asset class, the strategy included the creation of a best-in-class operating platform and a targeted investment effort focused on growing cities and key distribution nodes in the U.S.”

The behemoth transaction is a big step forward in what has already been a robust industrial investment spree for Oxford. In 2019, it acquired IDI Logistics — with partner Ivanhoé Cambridge for $3.5 billion; in 2020, it invested in cold storage logistics provider Lineage Logistics; and in January, it announced the acquisition of M7 Real Estate, a pan-European logistics investment firm. 

Officials at Citi and CBRE declined to comment. Officials at Oxford Properties, Deutsche Bank, Morgan Stanley and Goldman Sachs could not immediately be reached for comment on Friday afternoon.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.