Brennan Investment Group has cut another big real estate deal, agreeing this time to sell a batch of industrial buildings, most in the Chicago area, for nearly $102 million.
Chicago-based Brennan and partner Goldman Sachs are selling the 15-building, 3 million-square-foot portfolio to Plymouth Industrial REIT, according to a statement from Boston-based Plymouth. They are cashing out of the properties almost three years after buying them in a 23-property, $170 million portfolio deal.
Plymouth is buying the bulk of those buildings, including five in Bedford Park, two in Alsip and two in Lake Forest, according to the statement. The sale also includes two buildings in the Milwaukee area.
Brennan has been one of the most active industrial investors in the Chicago area lately, rolling out plans in July for an 85-acre business park near O’Hare International Airport and paying $84 million in September for a big national industrial portfolio, including five Chicago-area properties. That month, Brennan and a partner also bought 11 buildings totaling 2.5 million square feet in eight states including Illinois.
Brennan Chairman and Managing Principal Michael Brennan did not return calls. Since Brennan, who formerly was president and CEO of First Industry Realty Trust, founded Brennan Investment in 2009, the firm has amassed an industrial portfolio that covers 25 states and more than 33 million square feet.
Industrial developers and investors have made out well the past several years as demand for warehouse space has grown, fueled by the growing economy and rise of e-commerce. They’ve profited from rising rents and property values, though some parts of the Chicago market have softened recently as a development boom has outpaced the demand for space. The Chicago-area industrial vacancy rate rose to 6.9 percent in the third quarter, up from 6.8 percent a year earlier and its second quarterly rise in a row, according to Colliers International.
Plymouth is high on the Chicago market and the properties it is acquiring, which will generate an initial yield of 8.1 percent, according to its statement.
“We are excited about our ability to scale up in Chicago, adding to the six properties we already own within one of the strongest industrial markets in the country—and to do so at substantially below replacement cost,” Pendleton White Jr., Plymouth’s president and chief investment officer, said in the statement.
The portfolio Plymouth is acquiring is 96 percent leased to tenants in manufacturing and distribution, the statement said. Plymouth is paying $101.5 million, financing the acquisition with an $80.2 million loan from an affiliate of the seller, according to the statement. The deal is expected to close within two weeks.
Plymouth executives declined to comment.
Given the rise in industrial property values over the past three years, the sale is likely to generate a gain for Brennan and New York-based Goldman. Yet it’s difficult to evaluate the investment because the transaction does not include several properties the firms acquired in the $170 million deal in 2014. An analysis of data from New York-based research firm Real Capital Analytics shows that the properties Plymouth is buying were valued at about $94 million in or after the 2014 acquisition.
The sale to Plymouth includes a 395,466-square-foot building at 13040 S. Pulaski Road in Alsip, a 306,552-square-foot building at 6510 W. 73rd St. in Bedford Park and a 98,879-square-foot building at 1796 Sherwin Ave. in Des Plaines.
-Alby Gallun, Crain’s Chicago Business
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