J.P. Morgan Global Alternatives and Zenith IOS have recently rolled out a new $700 million business together to build a nationwide industrial outdoor storage platform. Within the following two years, the partners hope to create a portfolio of IOS properties worth $1 billion.
The Commercial Observer, which reported the collaboration, said that Brooklyn-based Zenith frequently targets low-coverage industrial sites. The group, which also owns Zenith IOS, intends to build assets in high-growth markets.
Industrial outdoor storage is “rapidly emerging as a new separate subgroup of the industrial asset class,” according to Ben Atkins, co-founder CEO of Zenith. Abingdon Square Partners, which Atkins founded and leads, is a real estate investment firm.
Observers in the sector should not be surprised by the new cooperation. J.P. Morgan Global Alternatives is J.P. Morgan Asset Management’s alternative investing arm, and the business stated in its 2022 Global Alternatives Outlook report that it “will be focusing on an array of industries in the United States that are benefiting from high consumer demand.” “Industrial outdoor storage facilities, including truck terminals, parking, and equipment storage in critical metropolitan sites,” according to the report’s list of industries.
Zenith and J.P. Morgan plan to focus on real estate options in up-front areas in major metros and high-growth areas across the United States. By the end of February 2022, the joint venture expects to have concluded $125 million in purchases.
The joint venture’s portfolio currently includes four properties in Dallas: 2601 Sea Harbor Road, 4801 W. Ledbetter Drive, 6410 Singleton Blvd., and 2118 California Crossing, approximately 27 acres. 2118 California is an enclosed site located 1 mile from Interstate 35 and 10 miles from Dallas Fort Worth Airport. With the help of a loan from FirstCapital Bank of Texas, the joint venture purchased the asset from an Anani Pumping business.
Industrial’s rising star
Outdoor storage is becoming valued among consumers and those seeking a safe and attractive resting spot for their cash in the industrial real estate sector. For starters, as detailed in a Fall 2021 research by real estate firm Stan Johnson Co., industrial outdoor storage sites, also known as industrial service facilities, are commonly found in infill locations and are in short supply, resulting in higher residual values than conventional industrial assets. There’s a lot more to the specialty to pique an investor’s interest.
“The tenant renewal rate in this category is also quite high, owing in part to the limited supply of similar buildings and higher-than-average replacement prices.” According to the Stan Johnson research, “many of these facilities are poised for future alternate uses, but most landlords find that re-tenanting is just not an issue.” “Supply is scarce, and tenants in this sector benefit from the e-commerce and building booms, which show no signs of slowing down.” That produces stickiness that more typical industrial facilities don’t always have, which helps tenants stay put.”
Imperium Capital, which said in September 2021 that it spends more than $250 million in industrial outdoor storage assets over the next year, is another company targeting the IOS sub-sector. In three transactions in the third quarter of 2021, Rexford Industrial Realty acquired around 110 acres of income-producing, low-coverage industrial outdoor storage sites.
Conclusion
The leading JP Morgan and prominent Zenith IOS have formed a new venture to develop a national industrial outdoor storage (IOS) platform. The platform will build an institutional portfolio of IOS assets to suit expanding user demand across supply chain networks. By the end of February, the joint venture should have completed approximately $125 million in acquisitions.
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