CRG, the real estate investment and development arm of Chicago-based Clayco – one of the nation’s most prolific design-build construction firms – today announced the launch of U.S. Logistics Fund II (USLF II), a fund that will develop a projected $1.5 billion of new state-of-the-art e-commerce and distribution facilities across key logistics markets throughout the United States over the next three years.
The new fund is open to high-net-worth individuals, family offices, wealth management advisers and other accredited investors, offering them the rare opportunity to invest in logistics properties – alongside institutional investors – during the strongest industrial real estate market in history.
In addition, CRG is setting a target of 10% investment from diverse investors. CRG will strategically target a pool of qualified investors that includes women and persons of color. CRG President Shawn Clark said he and the firm are fully committed to creating an inclusive process to facilitate improved access for traditionally underrepresented groups.
“We are bullish on the growth of e-commerce logistics and excited to expand access to these types of investments through USLF II,” said Clark. “We believe this fund is first of its kind. It’s a natural step in our firm’s evolution and strengthens our position as the most vertically integrated development and building delivery firm in the country.”
The pandemic has fueled demand for industrial space and created new challenges for major retailers and warehouse users, including the need for modern logistics facilities to replace existing stock, which is quickly becoming obsolete due to requirements associated with today’s evolving supply chain strategies. In 2020, e-commerce sales in the United States grew by 32% or $598 billion of new online sales, according to the U.S. Department of Commerce. According to a CBRE research study, each $1 billion in additional e-commerce sales requires 1.25 million square feet of distribution space to meet supply chain requirements.
The U.S. logistics market saw a net absorption of 223.6 million square feet in 2020 — with a record 116 million square feet of positive absorption in the fourth quarter — followed by 100 million square feet of absorption in the first quarter of 2021, bringing national vacancy rates down to 4.4 percent. This extended a record of 44 consecutive quarters of net positive absorption for the industrial sector. Rental rates for industrial buildings have risen 6.8% annually for the past five years, and asking rents increased 8.3% year-over-year at the end of 2020, according to CBRE.
Clayco, CRG’s integrated construction firm, is currently delivering more than $3.8 billion of new industrial projects for Fortune 500 clients across 21 states and opened its first West Coast regional office in Los Angeles in May. CRG opened its first Southwest regional office in Phoenix in April to support the surge in industrial growth.
“Our tenants are demanding modern warehouses with taller clear heights for racking, more parking for workers, and more stalls for trailer storage as they adapt their supply chains to meet the demands of consumers shopping online,” said Clark. “CRG leverages our experience and integrated platform to deliver these assets turnkey for our clients. And USLF II will allow us to deliver meaningful solutions for our clients while creating value for our investors.”
USLF II is the successor fund of U.S. Logistics Fund I (USLF I), which was launched in 2018. Through USLF I, CRG developed $421 million of modern logistics facilities, delivering — with the pending sale of the fund’s final asset — a projected 23% Net IRR to the limited partners of the fund. Those developments included six industrial assets under the firm’s proprietary industrial brand, The Cubes, located in Atlanta; Lehigh Valley, Penn.; Portland, Ore.; and Seattle.
In December 2020, CRG sold The Cubes at DuPont, a three-building industrial portfolio in the Seattle area, to Duke Realty for $221 million, a record price for that submarket. Other assets from USLF I have been sold to Duke, KKR and other well-known asset managers. The Cubes projects under USLF I featured high-profile tenants such as Amazon, Kimberly-Clark and C&S Wholesale Grocers, the largest wholesale grocery supplier in the United States.
“We had tremendous success with USLF I and have an incredible pipeline of opportunities ready to launch,” said Ben Harris, senior vice president of investor relations for CRG. “Now is the time to include qualified individual investors who deserve the same access to investments which have typically been reserved for large institutions. It is a priority for us to expand access to these types of investments while working towards greater inclusion for diverse investors.”
According to Harris, many accredited investors want to tap into the fast-moving industrial market, but historically there has been limited access for quality investment opportunities. These opportunities have been particularly difficult for underrepresented investors. According to a 2020 survey, 7 of 10 Black investors felt that race affected their ability to access real estate investments and 65 percent of respondents said that real estate investing is lacking or severely lacking in diversity.
Clayco, which launched Clayco Rising in December 2020, has one of the most comprehensive diversity and inclusion programs in the commercial real estate industry. CRG and Clayco are working to increase diversity within every aspect of their business, from employee recruitment to expansion of its partnerships with minority- and women-owned subcontractors and suppliers, which already includes over 300 diverse firms as part of the enterprise’s bidding process.
“Each company in the Clayco platform prioritizes diversity across every phase of our projects, so naturally, that should extend to how our deals are funded,” said Clark. “We already have diverse workforce mandates on our project sites and requirements to subcontract with minority- and women-owned firms. With USLF II, we have an exciting opportunity to expand access to our investments in a thoughtful way to remedy historic inequities and lack of access, and to work toward greater inclusion.”
No representations are made as to any targets, estimates, approximates or projections and no assurance can be given that objectives will be achieved or that investors will receive a return of capital. A private offering of interests in USLF II will only be made pursuant to USLF II’s offering materials, which will be furnished to qualified investors on a confidential basis at their request for their consideration in connection with such offering.