Investcorp ties up with two wealth funds for $526m venture to invest in US real estate

The fund will focus on industrial property in America

An Investcorp warehouse in the US. Its industrial holdings in the country currently comprise $5.1 billion across 43 million square feet. Photo: Investcorp

Bahrain-based asset manager Investcorp has teamed up with two sovereign wealth funds to form a $526 million fund that will invest in industrial real estate in the US, where the company sees “attractive” opportunities to grow its footprint.

The new fund builds on an initial venture established in November 2021 by Investcorp and the two wealth funds. Across both ventures, they have collectively committed more than $1 billion of equity over the past two and a half years to acquire industrial property, the company said in a statement on Wednesday.

"We remain strategically focused on maximising value in the US market," said Mohammed Alardhi, executive chairman of Investcorp.

"We're set to expand our presence in this high-potential sector and look forward to additional avenues for growth."

The US industrial property market recorded "white-hot" and "unprecedented" demand in 2021 and 2022, prompting industrial developers to complete a record 607 million square feet of new supply last year, real estate firm Colliers said in a report in January.

However, this new supply was nearly triple the demand as measured by net absorption of 231 million sq ft. As a result, vacancy rates increased in each quarter of last year in every region of the US, the report said.

The gap between new supply and demand will narrow this year, as construction completions fall off and demand holds steady or builds slowly as the year progresses, Colliers said in its outlook for the year.

As a result, the US industrial vacancy rate is forecast to increase by another 110 basis points during 2024, eventually stabilising at about 6.6 per cent towards the end of the year.

Investcorp’s industrial property holdings in the US currently comprise $5.1 billion across 43 million sq ft, it said.

The new investment venture will allow Investcorp to "meaningfully increase" its growing footprint in the segment.

“The US industrial sector continues to exhibit strong fundamentals and we continue to see attractive opportunities to expand our investments in the last-mile subset of this asset class,” said Yusef Al Yusef, head of distribution at Investcorp.

E-commerce, the rapid growth of nearshoring trends, US fiscal policy and government spending continue to drive record demand for last-mile facilities near large and growing population centres.

"The assets we will be targeting for this venture remain largely insulated from the supply issues impacting big-box industrial warehouses," he said.

Since 1996, Investcorp has acquired more than 1,300 properties for a total value of about $25 billion.

Investcorp’s strategy for US real estate is to invest mainly in the industrial and residential sectors and currently 98 per cent of the company's $9.2 billion portfolio in the country consists of these types of property.

The company is among the top-five largest cross-border buyers of US real estate and industrial property over the past five years, it said, citing data by research firm Real Capital Analytics.

Investcorp currently manages $52 billion in assets, including assets managed by third party managers. Established in 1982, it has 14 offices in the US, Europe, GCC and Asia.