Industrial Realty Group (IRG) has agreed to combine nearly half of its 200-property US industrial portfolio with mortgage real estate investment trust (REIT) Sachem Capital to create a $3.4bn (€2.9bn) listed industrial REIT.
IRG is contributing 98 industrial assets worth $2.9bn from its own and its partners’ portfolios to Sachem’s approximately $470m of total assets to establish IRG Realty Trust (IRGT).
Sachem’s total assets comprise direct and indirect mortgage loans, investments in developmental and owned real estate and other assets.
Under the deal, IRG will take a 94.1% stake in the newly formed entity, while existing Sachem shareholders will retain 5.9%.
The transaction values Sachem’s shares at $2 each, representing a 90% premium to its 30-day volume-weighted average price.
The board of the combined group is expected to be led by Stuart Lichter, IRG’s president and founder, as chairman, with John Villano, Sachem’s existing CEO, remaining on the board. There will be five additional members with institutional and committee experience to be named at a later date.
Villano said: “This accretive transaction provides a clear step forward for Sachem shareholders and IRG stakeholders creating a powerful industrial platform with greater scale and a strategy built for sustained growth. In addition to becoming one of the largest owners of industrial assets in the country with sizable mark-to-market opportunity, Sachem’s direct and indirect mortgage capabilities will also continue to provide creative capital solutions to real estate developers and investors.
“We expect the combination to improve our cost of capital, which should result in improved cash flow generation over time. We believe this transaction will enable us to compete for the best lending opportunities and will deliver significantly improved risk-adjusted returns to shareholders.”
Lichter said: “We are excited that this transaction will bring a high quality industrial real estate portfolio to the public market with scale, diversification, and a clear operating strategy.
“With a dynamic portfolio grown over five decades, IRG has deep experience owning and operating industrial properties, and we expect that upon the close of the transaction, it will be one of the largest publicly listed industrial REITs in the country.”
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