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Ivanhoé Cambridge makes industrial real estate play with deal for 150 U.S. properties

Ivanhoé Cambridge is buying a portfolio of more than 150 U.S. properties, pushing into the industrial real estate sector after many months of circling the space.

The real estate investment arm of the Caisse de dépôt et placement du Québec said on Thursday that it had completed a deal for Evergreen Industrial Properties, a business that builds up warehouses and other industrial hubs within urban areas. No deal value was announced, but the sale price rung up at about $1-billion (U.S.), according to a person familiar with the transaction.

Ivanhoé Cambridge's new portfolio represents 16 million square feet of space in major cities such as Seattle, Atlanta and Chicago. Customers are typically in need of room for e-commerce and distribution activities, storage of goods and machinery and light manufacturing. The idea is to serve local customers with these sites, which focus on the end part of the supply chain that moves items the final step between where they're being stored or transported to and their final destination.

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"We started looking at companies in the industrial real estate sector over two years ago with the intention of making a strategic investment in this asset class," said Arthur Lloyd, president of North American office properties at Ivanhoé Cambridge, in a statement. The pension fund's primary areas of real estate investment focus have been shopping centres, office buildings and multiresidential buildings.

This deal comes as Canadian markets have seen a surge in demand for industrial real estate space, driven in large part by expanding distribution needs related to growth of online product sales.

At the end of June, national availability rates for industrial space were at their lowest point since 2003, according to data from CBRE Group, Inc. Toronto's availability rate of 2.7 per cent is among the lowest of all of North American cities, the data shows.

Institutional investors typically look to industrial real estate for its steady and even cash flows, but lately the lack of available space has begun to push up rents across the asset class.

"Industrial real estate offers an attractive current return and good diversification for our office portfolio in terms of underlying economic drivers," Mr. Lloyd said, adding that Ivanhoé would look to add to its industrial-property portfolio in the future.

Evergreen was created in 2014 by the real estate division of San Francisco-based private equity investment fund TPG Capital, and has primarily taken the approach of acquiring buildings, although the business also seeks to develop properties.

"In creating Evergreen, we saw an opportunity to build a platform that was positioned to benefit from a dynamic sector shift to 'last mile' and infill locations by light industrial and e-commerce users," said Avi Banyasz, co-head of TPG Real Estate, in a statement.

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