Oxford Properties to buy $2.2 billion in industrial properties from KKR

Canadian real-estate-investment giant Oxford Properties Group has agreed to buy a 14.5 million-square-foot portfolio of industrial property from KKR & Co. for $2.2 billion, a deal that indicates that the online-shopping boom continues to whet investor appetite for warehouses and distribution facilities.

Oxford, a subsidiary of the Ontario Municipal Employees Retirement System, is buying the 149 buildings close to population centers—mostly in high-growth Sunbelt states—as part of its four-year-old effort to muscle into the U.S. market. Oxford also has made big investments in cold-storage facilities and U.S. regional distribution centers as large as one million square feet.

The KKR deal is Oxford’s first purchase of U.S. industrial real estate in “infill" locations close to population centers. These properties typically are used by online retailers as the last distribution points before goods are delivered to homes.

“It all comes down to being close to the population," said Ankit Bhatt, vice president at Oxford.

Industrial property was one of the hottest commercial-property types in the years leading up to the pandemic, thanks to the growing appeal of online shopping. Demand has only intensified since Covid-19 hit, keeping consumers away from stores. Currently about 15% of shopping is done online, compared with 10% in 2018, according to market participants.

Many consumers are returning to stores, but demand for industrial space is expected to stay strong because of changes in the supply chain, partly due to the pandemic.

“Business owners are increasing the amount of inventory they’re keeping in the U.S.," said Roger Morales, KKR’s head of real estate acquisitions.

Prices of industrial property have been steadily rising. In 2017, buyers typically got a yield from purchases in the low 5% range, according to brokers and analysts. Yields have fallen to about 4%, a sign of rising prices, analysts say.

KKR assembled the portfolio in more than 50 transactions over the past three years. The firm still owns over 20 million square feet of industrial property.

Oxford, which has 70 billion Canadian dollars, equivalent to US$55.7 billion, under management, has been purchasing industrial property in Canada for over a decade. It also owns industrial property in Asia and Europe.

This story has been published from a wire agency feed without modifications to the text