As the industrial real estate sector booms, Sam Zell’s Equity Commonwealth is expanding into the field.
The billionaire’s company, which focuses on office real estate, is acquiring the big industrial firm Monmouth Real Estate Investment in a $3.4 billion, all-stock deal, according to Crain’s Chicago Business. Based in Holmdel, New Jersey, Monmouth owns 120 properties totaling 24.5 million square feet.
“The transaction provides Equity Commonwealth with a high-quality, net-leased industrial business with stable cash flows while preserving EQC’s balance sheet capacity for future acquisitions,” Zell said in a statement.
Equity Commonwealth is expected to have $2.5 billion in cash on hand following the acquisition.
The deal itself works out to $19.40 per share. Under the acquisition, Equity Commonwealth shareholders will own about 65 percent of the company and Monmouth shareholders 35 percent.
Zell might have been expected to invest in a distressed portfolio or company, given his history. Instead he bought into a sector that was hot even before the pandemic boosted e-commerce further and accelerated an industrial leasing spree by Amazon.
The office sector has struggled during the past year as tenants began working from home. However, Monmouth is not without risk. The REIT relies largely on one tenant, FedEx, which accounts for 55 percent of the company’s annual rent. Equity says it plans to diversify its tenant mix.
[Crain’s] — Sasha Jones