A Connecticut-based mortgage lender is betting on warehouses, manufacturing space and one of the country’s largest private industrial landlords.
Sachem Capital struck a deal with Los Angeles-based Industrial Realty Group to create a publicly traded industrial REIT valued at roughly $3.4 billion, the companies announced Monday. The combined entity, to be renamed IRG Realty Trust, would vault into the ranks of the country’s 10 largest public industrial REITs by enterprise value.
The transaction marks Sachem’s pivot from a niche real estate lender into an industrial property owner with nearly 100 assets across the country. IRG plans to contribute 98 industrial properties from its broader 200-building portfolio, while Sachem brings about $470 million in loans and real estate investments to the tie-up.
The portfolio is heavily geared toward “mission-critical” manufacturing and distribution facilities, a segment landlords have leaned into as industrial demand stabilizes after the pandemic-era warehouse boom. IRG executives said many leases across the portfolio are below market, giving the company room to push rents higher as tenants roll over.
IRG and its partners will control about 94 percent of the combined company through operating partnership units, while existing Sachem shareholders will hold just under 6 percent on a fully diluted basis. Sachem shares are being valued at $2 apiece in the transaction, a 90 percent premium to the stock’s 30-day volume-weighted average price.
IRG Realty Trust is expected to execute a 20-to-1 reverse stock split at closing, implying a post-split share price of $40. The company also plans to line up a credit facility arranged by Scotiabank.
Industrial Realty Group founder Stuart Lichter is expected to chair the new company, while Sachem CEO John Villano will remain on the board. IRG’s in-house management arm, IRG Realty Advisors, will oversee day-to-day operations for the portfolio.
The transaction still requires approval from Sachem shareholders.
The deal arrives at a complicated time for industrial real estate, after a breakneck leasing surge in recent years. Vacancy has ticked up in several logistics markets and rent growth has cooled, but institutional investors continue chasing scaled industrial portfolios with long-duration cash flow.
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