Fontana Industrial Property Sold to Morgan Stanley

Morgan Stanley Real Estate Investing is doubling down on the high-performing industrial outdoor storage submarket.

The real estate investment arm of the banking giant bought a 26-acre industrial outdoor storage parcel at 10650 Hemlock Avenue in Fontana for $92 million, Commercial Observer reported. The price works out to $3.5 million per acre.

The seller of the parcel, one of the largest designated for industrial outdoor storage uses in the region, was Oldcastle Infrastructure, a subsidiary of CRH, the world’s largest building materials provider.

Oldcastle will lease the property, where it has been operating for more than 30 years. As part of its lease agreement, Oldcastle will cover the costs of insurance, taxes and maintenance in exchange for lower rent payments. Net-lease structures like this “mitigate real estate owners’ exposure to volatility and unexpected costs,” making those cash flows “among the most predictable in real estate,” Lauren Hochfelder, co-CEO of Morgan Stanley Real Estate Investing, said in a statement.

Morgan Stanley Real Estate Investing is placing its bets on the U.S. industrial market to “benefit from the continued supply chain realignment, including increased onshoring of manufacturing.”

IOS assets are among the best-performing industrial subclasses, as the market faces a lack of supply in crucial areas. IOS rents have jumped an average of 123 percent since 2020 — more than twice the rate of bulk warehouses, according to Newmark.

Industrial property owners are taking advantage of demand. Last month, Alterra IOS closed a $150 million loan facility from Blue Owl Capital to pay for future purchases. Late last year, Alterra IOS, the industrial investment arm of Philadelphia-based Alterra Property Group, bought a 15-acre IOS yard in Jurupa Valley for $51 million. That deal followed Alterra’s purchase of 51 IOS properties in 14 states from Peakstone Realty Trust for $490 million.

Elsewhere in the country, Outpost bought a 17-acre IOS site near Miami International Airport last month for $52.1 million. Over the summer, Jadian Capital committed to the IOS sector with a $231 million loan from Blackstone for 43 IOS properties across 13 states.

— Chris Malone Méndez