02/16/2011

UBS Fund to Shop Giant Industrial Portfolio

Seeking to exploit rising demand for large industrial portfolios, a UBS fund plans to offer 15 net-leased warehouses valued at upward of $450 million.

The 6.6 million-square-foot portfolio, which is 97% leased, is spread out over nine states. The buzz is that CB Richard Ellis has the inside track on the listing.

The properties are owned by UBS Wealth Management-North American Property Fund, which is capitalized by clients of the Swiss bank. The fund's advisor is AEW Capital Management of Boston.

The portfolio represents about one-third of the fund's holdings and all of its industrial properties, according to market players. The fund has separate investment buckets for retail and multi-family properties. UBS launched the fund's industrial-property investment program in 2006. At the time, it formed a joint venture with First Industrial Realty of Chicago. UBS allocated $255 million of equity, and First Industrial planned to invest up to $45 million, for an 85-15 ownership split.

The joint venture was set up to buy single-tenant industrial properties with long-term net leases, often via sale-leaseback transactions, and to hold the properties for 7-10 years. The duo planned to use 60-70% leverage to boost its buying power to as much as $1 billion. But First Industrial subsequently left the partnership, and the acquisition goal evidently wasn't fully achieved.

The properties being offered are in Atlanta, Baltimore, Los Angeles, Minneapolis, Salt Lake City and San Diego, as well as Arkansas, New Jersey, Texas and a Chicago suburb in Wisconsin.

The word is that UBS mulled breaking the portfolio into smaller pieces, but is now determined to sell the giant package intact, apparently encouraged by the revival of big industrial sales. Last year, 10 trades in the sector exceeded $100 million, up from just one in 2009, and four surpassed $500 million, according to Real Estate Alert's Deal Database.

Blackstone, the biggest industrial buyer last year, was behind three of the $100 million-plus purchases. The New York fund operator made the largest acquisition of the year, paying $901.5 million to ProLogis of Denver for a multi-state portfolio encompassing 23 million sf.

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