Plymouth Industrial REIT and Sixth Street Form $250M Partnership

Plymouth Industrial REIT and Sixth Street have formed a strategic partnership that will provide the real estate investment trust (REIT) with approximately $500 million in new capital to pursue new acquisitions. 

Plymouth announced on Tuesday that Sixth Street, a CRE investment firm with $75 billion in assets under management, has agreed to invest $250 million and purchase a 65 percent joint venture ownership stake in Plymouth’s massive industrial portfolio in Chicago, a deal that will allow Plymouth to remove $67 million in debt from its balance sheet and secure $212 million in deployable proceeds after the mortgages are assumed by Sixth Street. 

Plymouth’s Chicago portfolio includes 34 industrial properties totalling 5.9 million square feet. The deal values this portfolio at a 6.2 percent cap rate based on net operating income totals of $22 million, which is equivalent to $356 million in asset value, according to Sixth Street.  

Jeff Witherell, co-founder, chairman and CEO of Plymouth, said in a statement that the deal allows Plymouth to gain fresh capital and continue its growth strategy while staying within leverage limits the firm set for 2024. 

“We are excited to enter into this partnership with Sixth Street and grow the platform for the benefit of all shareholders,” said Witherell. “With this investment, we are well positioned for the balance of 2024 and 2025 as we face an evolving market with increasingly interesting opportunities.

Witherell added that the complex structure of the transaction — which includes $61 million in preferred equity that can be redeemed by Sixth Street at any point following the closing and an additional $79 million to be paid out to Sixth Street within nine months of the deal — will allow his firm to move legacy assets off its balance sheet while simultaneously generating incremental fee income to pay down debt from its recent $100.5 million portfolio acquisition of a 14-building industrial portfolio in Memphis. 

Marcos Alvarado, partner and head of U.S. real estate at Sixth Street, spoke to the attributes of the Chicago portfolio in prepared remarks. He noted there is “limited supply” in the marketplace for industrial buildings holding less than 250,000 square feet, and that Plymouth’s portfolio currently benefits from both “low vacancy and strong rent growth.”

“By making this strategic investment, we believe we will open the door to further opportunities for growth and partnership within the industrial real estate sector as it continues to benefit from strong underlying secular trends,” said Alvarado. “We look forward to working closely with the Plymouth team to accelerate their growth plans.”

Moreover, the deal provides Sixth Street the ability to purchase 11.76 million of operating partnership common shares in the REIT, which pay 7 percent per year until that increases in year five of the joint venture partnership. 

Plymouth Industrial REIT was trading at $24.97 per share Tuesday afternoon. The REIT traded at a five-year high of $32 per share in December 2021. 

Brian Pascus can be reached at bpascus@commercialobserver.com