Exclusive: Exeter buys industrial property portfolio

By Ilaina Jonas

NEW YORK (Reuters) - Exeter Property Group, a real estate private equity firm, has bought a portfolio of 19 industrial buildings, primarily in Indiana and Tennessee, for about $240 million, reflecting investor demand for U.S. warehouse and distribution centers, the deal's broker, Jones Lang LaSalle Inc <JLL.N>, said on Wednesday.

A partnership of privately held Houston-based real estate investor Pinchal & Co and insurance company American National Insurance Co sold the 6 million square-foot property portfolio to Exeter. The Plymouth Meeting, Pennsylvania-based private equity firm has been an active buyer this year.

The sector, whose demand depends on trade and the consumer appetite for buying goods, was hard hit by the recession and is poised to make a comeback as the economy strengthens.

Buyers, such as private equity firm Blackstone Group LP <BX.N> and non-traded real estate investment trusts Industrial Income Trust Inc and Cole Real Estate Investments, have been flocking to industrial real estate. Many of the properties, such as the portfolio acquired by Exeter, offer stabile income in a sector where rents and occupancies are on the upturn.

"Right now there's just so much equity chasing every deal that's out there," Huguenard said. "The equity would be the who's who of institutional owners. What they're partnering up with are operators that can operate the product that they buy."

The portfolio bought by Exeter is more than 98 percent occupied and involves 27 tenants, mostly publicly traded or credit-rated companies. The average remaining lease term is 5.8 years.

The price represents an initial yield on cash flow in the low 8 percent range, Huguenard said. The deal closed on June 24.

"We're close to where we would have been in the height of the market," he said. "In some markets we're already past that."

A big attraction to investors was the size of the portfolio, which provided an opportunity to place a lot of investment dollars while giving the owner exposure to various geographic markets, Huguenard said.

Demand for industrial space rose 1.1 percent in the first quarter, according to the National Association of Industrial and Office Properties, an industry trade group. It was the third straight quarter of growth after seven quarters of contracting demand.

In its most recent report in May, the association projected second-quarter demand would grow 1.5 percent, in line with historical averages, and increase by the end of the year, barring any economic shocks.

Five of the properties are located in Indianapolis, Indiana. Three are located in Nashville, Tennessee, with two more located in other parts of Tennessee. Three others are located in North Carolina and three in Kentucky. The other three are in Ohio, South Carolina and Illinois.

The portfolio attracted interest from more than 150 investors, Huguenard said.

However, as with many commercial properties that are marketed widely, a number of those investors were interested only in information to get a sense of the overall market. Fifteen investors submitted offers, Huguenard said.

(Reporting by Ilaina Jonas, editing by Gerald E. McCormick)