Peakstone Makes IOS Debut With $490M Portfolio Acquisition
Chicago-based REIT Peakstone Realty Trust has entered the industrial outdoor storage sector with the acquisition of a 51-property portfolio valued at $490M, the company announced Tuesday.
The infill portfolio consists of 45 operating assets spanning 440 acres across 14 states and six redevelopment sites totaling 82 acres in four states. Peakstone purchased the portfolio from a JV between Alterra IOS and JPMorgan.
Peakstone said there is a potential 70% mark-to-market opportunity on the operating sites. The company is anticipating the redevelopment sites taking 12-36 months to build out and said they should offer up a 5-7% yield.
The acquisition establishes the REIT's presence in what CEO Mike Escalante called an "emerging, high-growth" sector, which is "characterized by fragmented ownership, significant supply constraints, compelling operating fundamentals and minimal capex requirements."
Industrial outdoor storage properties are meant for trucks and other storage needs. The sector’s light management and upkeep requirements contribute to its outsized return rate.
2024 was marked by big deals within the space as postpandemic demand and low supply defined the market. Two of the biggest: Alterra raised almost $1B for IOS acquisitions in April, and Fortress refinanced IOS portfolios totaling $708M in June.
Experts predicted growing investor interest would grow IOS into a $200B sector this year.
Peakstone’s off-market transaction was financed with funds from its credit security and money on hand. To acquire the portfolio, the company increased its leverage by closing on three refinancings of existing industrial properties, totaling $110M.
"In doing so, we have diversified their sources of capital and maintained limiting exposure to floating-rate debt while continuing to have flexibility to pay down our revolver with asset sales," Escalante said on a call to investors.
Peakstone also closed on $285M of additional financing from line lenders, which added $175M in an unsecured term loan to Peakstone's credit facility.
Peakstone now owns 71 industrial properties in 19 states and 38 markets. Nearly 60% of those are concentrated in the coastal and Sun Belt regions.
Peakstone’s main goal is growing its industrial segment, Escalante said on an earnings call. In the third quarter, the REIT fully exited its office JV and sold off other assets.
The REIT made $55M in revenue in Q3, a drop from $61.7M during the same time last year. The company attributes the loss to making strategic business moves.
