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New fund aims to raise $200M for small industrial properties, distribution centers

BY Sunday, April 11, 2021 06:20pm

EAST LANSING — An East Lansing real estate investment firm looks to raise $200 million to invest in industrial logistics facilities in the Midwest and southeastern U.S.

Riverstone Capital Partners’ Riverstone Investment Fund LP would target investments for acquiring smaller warehouses and distribution centers. The fund would hold the portfolio of properties for up to eight years before selling, said Riverstone Capital Partners Managing Partner Cutler Martin.

Martin Commercial Properties — a commercial real estate firm in East Lansing led by Martin’s father, Van Martin — will manage the properties in which the Riverstone Investment Fund invests. The fund will deploy a substantial amount of the capital over the next year, depending on market opportunities, Cutler Martin said.

The Martins pursued forming the new investment fund “to work with the clients that we’ve built relationships (with) to offer essentially another service to them with what we have been doing for so many years” in property acquisitions, sales, management and leasing, Martin said.

“We understand the true nature of real estate and how to add value to it, and we thought it was something that we should offer,” Martin said. “We are in the process of looking at a number of different opportunities. I would say in the next few months we would be looking to acquire our first properties.”

Riverstone Investment Fund began raising capital a few months ago. The investment fund in November filed a document with the U.S. Securities and Exchange Commission indicating plans to raise $200 million from investors.

Martin declined to say how much the fund has secured to date from investors, other than “it’s going well.” The fund has connected with high net worth individuals, institutional investors and family offices across the state, he said.

Strong, growing market

In forming Riverstone Investment Fund, the Martins and partner Frank Freund at Riverstone Capital Partners look to tap into a strong and growing industrial real estate market for logistics centers.

Outlooks forecast a need for 1 billion to 1.5 billion more square feet of logistics space over the next five years. The U.S. presently has about 10 billion square feet of logistics space, he said.

“So, that’s just a huge increase in demand for this type of product and we feel that aligning with those tailwinds is a strategic advantage for us. With our expertise, we think we also have an advantage of being able to source this product,” Martin said.

A CBRE Group Inc. outlook in November projected that the U.S. industrial real estate market would “flourish” in 2021 “with low vacancy rates, record-high rental rates, and robust development and a return to pre-COVID levels of absorption gains.”

“CBRE anticipates nearly 250 million square feet of industrial and logistics space to be absorbed in 2021, more than the previous five-year annual average of 211 million square feet,” according to the outlook . The firm expects construction completions to grow by 29 percent this year from 2020, “and rents will continue to increase.

In a February report, Chicago-based Jones Lang LaSalle IP Inc. (JLL) said industrial commercial real estate “looks bright” in 2021, especially in the sub-category for multi-use logistics facilities. Rents for multi-use logistics have grown more than 54 percent in the last decade and nearly 21 percent since 2017, “outpacing the national average for the broader industrial market,” according to John Huguenard, senior managing director and co-head of JLL’s Industrial Capital Markets group.

“This sub-class has huge potential upside on rent growth driven by low vacancy and limited new supply,” Huguenard said in a February news release.

The surge in e-commerce during the COVID-19 pandemic is among the expected growth drivers and has increased demand for smaller, industrial logistics facilities in population centers.

“We’re taking advantage of the proliferation of a regional distribution or model for the supply chain that is really going to focus on the delivery of products to consumers on a timely basis,” Martin said. “As we’ve seen through COVID, a number of peoples’ habits have changed. More people are looking to order online than they are to walk down to the store and buy their household items.”

CBRE’s 2021 outlook noted that the surge in online sales in the last year “has put pressure on retailers, wholesalers and third-party logistics companies to reach consumers while lowering transportation costs.” That could drive an acceleration to convert retail buildings into logistics facilities, according to CBRE. 

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