TPG buys stake in Canadian warehouses from Oxford for US$750 million
US PRIVATE equity firm TPG has acquired a majority stake in a portfolio of warehouse properties around Toronto for US$750 million.
TPG will get 75 per cent ownership of two industrial parks in the suburban cities of Brampton and Vaughan, according to a statement on Monday (Dec 18), confirming an earlier report by Bloomberg News. The seller, Oxford Properties Group, will retain a 25 per cent interest and continue to manage the assets.
The Greater Toronto Area is “one of the most attractive industrial markets globally,” Jacob Muller, a partner at TPG, said in the statement. “This joint venture provides a unique opportunity to enter the market at scale through the acquisition of some of the highest-quality industrial assets in all of Toronto.”
The transaction is a rare sign of life in a commercial real estate market that’s been ground to a near-halt by interest rates stuck at multi-decade highs.
But investors have still been bullish about the outlook for warehouse and logistics properties, one of the best-performing segments, even as the surge in e-commerce activity has cooled since the end of the pandemic.
Vacancy rates for warehouses in many Canadian cities are some of the lowest in North America, and supply remains constrained by difficulties in getting new ones built.
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That has made Canada’s industrial real estate a target for foreign investors. In February, GIC, Singapore’s sovereign wealth fund, completed its C$5.9 billion (S$5.86 billion) buyout of Summit Industrial Income Reit in partnership with a local player, Dream Industrial Reit. And Blackstone has been building its portfolio of Canadian industrial real estate for years.
Meanwhile, Oxford – the property arm for the pension plan representing Ontario’s municipal employees – has been following many of its peers in selling off some of its real estate holdings in Canada, where pension funds are already some of the biggest landlords.
Instead, those funds have started to focus on building new properties as an avenue to generating bigger returns. In Ontario, Oxford has sought to develop new industrial properties.
The TPG transaction values the 5.1 million-square-foot portfolio at C$1.3 billion.
“Oxford is a long-time believer in Canadian industrial,” Jeff Miller, Oxford’s head of North American industrial properties, said in the statement. “We continue to see strong underlying fundamentals within this asset class.” BLOOMBERG
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