Partnership with Sagard should help Caisse strategy to add a more diverse mix of assets to its $43-billion real estate portfolio.Christinne Muschi/The Canadian Press
The Caisse de dépôt et placement du Québec and the real estate arm of alternative asset manager Sagard Holdings Inc. are teaming up to buy $490-million of industrial outdoor storage properties located near major U.S. ports.
A new partnership between the two Montreal-based investors is a bet on strong demand for land that is designated for storing equipment, vehicles and containers near some of the largest shipping hubs and cities in the United States.
With supply chains under strain, tariffs reshaping global trade flows and e-commerce expanding, there is an acute need for land with the right zoning for storage spaces to support trucking and equipment companies that serve busy transportation corridors.
It is a niche part of the industrial real estate sector that is still fragmented among smaller private owners, rather than large institutional investors, with high occupancy rates and tenants that don’t turn over very often, said Karen Horstmann, the Caisse’s managing director of real estate for the U.S.
“We’re early in the game, and we feel that that’ll serve our stakeholders well,” she said in an interview.
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Sagard’s real estate team has been investing in this type of property for years, and has built expertise in finding potential acquisitions. Outdoor storage properties often still trade off-market through introductions from leasing brokers.
“To get real deal flow, you have to be plugged in to all the off-market channels, which we are,” Sagard Real Estate president Mark Bigarel said in an interview.
The properties are attractive to investors in part because they do not require large, upfront infusions of capital. Once fencing, lighting and paving are done, there are minimal upkeep costs.
There is also a persistent supply crunch, as some properties are rezoned for other uses such as warehouses and they disappear from the market, while new sites in prime locations are rare.
“You want proximity and access to transportation nodes. It’s all about an efficient supply chain,” Ms. Horstmann said.
The vacancy rate for industrial outdoor storage properties in the U.S. is less than 5 per cent, and investment returns from the sector have been about two percentage points better on average than traditional industrial real estate over the past 20 years, she said.
The initial pool of funding could support about 15 deals, and there is an option to add more investment to the partnership if it is successful.
The Caisse and Sagard are targeting assets in southern California and the Bay Area around San Francisco, New York and northern New Jersey, as well as Baltimore, Md., and Washington.
The joint venture has closed its first deal, acquiring a fully leased property in the Meadowlands area of New Jersey, which serves nearby ports in the state and in New York. “That’s almost the poster child for what we’re talking about here,” Mr. Bigarel said.
For the Caisse, which manages $517-billion, the partnership helps with a strategy to add a more diverse mix of assets to its $43-billion real estate portfolio. And because of the “sticky” tenants in industrial storage, “it also enhances the predictability and durability of our cash flows,” Ms. Horstmann said.
Sagard’s US$6-billion real estate arm is a Denver-based subsidiary of the US$33-billion asset manager, which also invests in private equity, private credit and venture capital.
Sagard has been bulking up with acquisitions, including three deals last year. The company bought Swiss boutique asset manager Unigestion’s private-equity business, and Sagard expects to be a buyer again this year as it aims to reach US$100-billion in assets by 2029.