Sachem Capital, Industrial Realty Group to Form $3.4B Public REIT
The new entity will include roughly half of IRG’s current industrial assets.
Sachem Capital Corp. and Industrial Realty Group have agreed to form IRG Realty Trust Inc., a top-10 U.S. public industrial REIT with an implied combined enterprise value of about $3.4 billion. The combined company will operate as IRG Realty Trust Inc.
IRG will contribute 98 of its 200 industrial assets to the REIT, while Sachem will contribute about $470 million of total assets in direct and indirect mortgage loans, investments in developmental and owned real estate, and other assets. IRG’s remaining industrial assets will remain with it.
After closing, IRG will own about 94.1 percent of the combined company via operating partnership units, and Sachem’s existing shareholders will own about 5.9 percent.
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In a prepared statement, Sachem CEO John Villano remarked that the strategic combination is expected to improve Sachem’s cost of capital, resulting in improved cash flow generation over time.
Stuart Lichter, founder and chairman of IRG, added that the combined portfolio will have “scale, diversification and a clear operating strategy.”
In addition, the announcement noted that a substantial percentage of leases within the 98 properties being contributed to the new REIT are below market rates.
It’s anticipated that the combined company’s leadership will consist of Sachem executives and key additions with extensive industrial real estate experience. The combined company’s board will be composed of seven members, including at least four independent directors. The board is expected to be led by Lichter as chairman, with Villano serving as well.
Property management of the combined portfolio will be handled by IRG Realty Advisors, IRG’s wholly owned asset management, property management and real estate operating company.
The transaction has been approved unanimously by the Sachem board of directors and is expected to close by the end of this year, subject to customary conditions, including approval by Sachem’s shareholders.
Big deals, big plans
In April, IRG executed a long-term lease with Hyundai Translead, a subsidiary of Hyundai Motor Co. The tenant leased the entirety of a 1.4 million-square-foot manufacturing facility in Joliet, Ill., outside Chicago, which had previously been the main manufacturing plant for Caterpillar Inc.
And last summer, a joint venture of IRG and Provider Real Estate Partners acquired a vacant 650,000-square-foot shopping mall in Wichita, Kan. The JV’s $35 million plan is to redevelop Towne West Square into the multi-tenant Wichita Business Park, combining office, R&D, light industrial, advanced manufacturing and flex space.
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