Carlyle expects to scale its net lease strategy into a $10 billion business with scope for a future retail platform.
Accelerating its growth in real estate credit, Carlyle announced that its Global Credit platform has agreed to acquire iStar Inc.’s net lease business for an enterprise value of approximately $3 billion. Equity will come from a combination of Carlyle’s Global Credit platform and a minority balance sheet investment from Carlyle.
The acquisition is expected to close in Q1 2022.
Through the transaction, Global Credit will gain a diversified portfolio of triple-net leases spanning industrial, office and entertainment properties across 18.3 million square feet located throughout the United States.
Additionally, iStar’s net lease investment team overseeing the portfolio, including Barclay Jones who has led iStar’s net lease strategy for more than 20 years and Senior Vice President Catherine Tenney, will join Carlyle’s Real Estate Credit team.
Global Credit Expanding into Scalable Areas
Acquiring iStar’s net lease business will jump start Carlyle’s real estate credit strategy, Mark Jenkins, Head of Global Credit at Carlyle said in prepared remarks. “We expect to grow this net lease strategy into a $10 billion business with a focus on making the product available to the retail channel over time.”
Roger Cozzi, Carlyle’s Head of Real Estate Credit, served as iStar’s CIO and co-head of its investment committee from 1995 to 2007 and played a key role in the acquisition of a significant portion of its net lease portfolio.
Global Credit Carlyle’s Fastest Growing Segment
Last year, Global Credit made its first fund investment in the net lease arena by agreeing to provide up to $300 million in growth capital to New Jersey-based Four Springs Capital Trust.
Carlyle’s Global Credit platform grew to a record $66 billion in AUM as of Q3 2021, more than two times larger than it was less than four years ago. It has been Carlyle’s fastest-growing segment over the past three years.
New Players Entering Net Lease Business
Scott Merkle, managing partner for SLB Capital Advisors, calls the transaction huge. “We’ve witnessed a number of new players enter or bulk up their net lease business during the pandemic. Carlyle now joins other large buyout funds such as Ares, KKR and Cerberus ramping up in the sector and leveraging the combination of their credit and real estate expertise.”
Among other attributes, the transaction provides a new, well-capitalized buyer in the sale leaseback market, he said. “2021 is looking like a record sale leaseback year, and we see strong momentum at the outset of 2022.”
Daniel Herrold, Partner in Stan Johnson Company’s Tulsa office, tells GlobeSt.com that deals like this one represents a common trend over the past several years, with institutional and private equity capital being deployed into the net lease sector.
“So, this is no surprise to see another entry into the space,” Herrold said. “iStar has a 25+ year history in the net lease industry and offers a very strong reputation in the marketplace, so leveraging their strong reputation and brand to expand their net lease portfolio is a solid strategy.”