Carlyle Group to Drop $3B on iStar’s Net-Lease Portfolio
By Nicholas Rizzi February 2, 2022 4:04 pm
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Private equity firm The Carlyle Group plans to acquire iStar’s national net-lease portfolio for $3.07 billion, the companies announced Wednesday.
The deal, expected to close in the first quarter of this year, will give Carlyle 18.3 million square feet of net-leased office, entertainment and industrial properties and is part of Carlyle’s global credit platforms’ push into real estate, according to the release.
“Acquiring iStar’s net lease business jump-starts our real estate credit strategy, quickly giving us scale to accelerate deployment,” Mark Jenkins, the head of global credit at Carlyle, said in a statement. “We expect to grow this net-lease strategy into a $10 billion business with a focus on making the product available to the retail channel over time.”
Net-leased properties — a lease structure where the tenant pays at least a portion of all the taxes, insurance and maintenance costs on a property along with the rent — have boomed in demand throughout the coronavirus pandemic.
Thanks to their relative stability — credit tenants typically sign 15- to 20-year leases — investment in net-leased properties increased 3.1 percent year-over-year in the second quarter of 2021, the last data available, according to a CBRE report. And investment in these types of assets represented 14.4 percent of all commercial real estate investment volume, higher than the five-year, pre-pandemic average of 11.7 percent, the report found.
And CBRE expects net-lease investment to continue to grow in 2022 as investors flock to these assets to reduce their risk, GlobeSt reported.
Jay Sugarman, the CEO of iStar, said in a statement that the sale of the portfolio was “the culmination of a highly successful investment strategy” to focus on net-lease properties and pitched it is part of its “corporate strategy of simplifying our portfolio and focusing on the ground lease business, which we view as the next evolutionary wave in commercial real estate.”
The acquisition comes after Carlyle’s global credit platform got into the real estate business in May 2021 when it agreed to provide up to $300 million in growth capital to New Jersey-based Four Springs, which focuses on industrial, medical, retail and office assets.
Nicholas Rizzi can be reached at nrizzi@commercialobserver.com.
