[NEW YORK] Carlyle Group’s global credit unit agreed to buy iStar’s net leasing business for approximately US$3B in enterprise value in part of its expansion in real estate.
According to a media launch, the system provides equity, and Carlyle will make a minor balance sheet investment.
Net leases refer to rental agreements in which the tenants agree to pay all costs related to the property other than the rental amount.
The acquisition includes iStar’s portfolio of triple net leases. It also provides entertainment industrial and office properties throughout the US. Tenants are responsible for property taxes and insurance fees.
“Acquiring iStar’s net lease business jumpstarts our real estate credit strategy. We quickly have the scale to accelerate deployment,” Mark Jenkins from Carlyle’s global credit state. “We expect this net lease strategy to become a US$10 million business, with a strong focus on making the product accessible to the retail channel.”
Barclay Jones, the iStar’s senior vice-president for net lease strategy, and Catherine Tenney, senior vice president, will join Carlyle’s real estate credit team. Carlyle will expand its global credit business by entering real estate.
Last year, the unit made its first net lease investment by agreeing to fund as much as US$300,000,000 capital to Four Springs Capital Trust in New Jersey.
Investors are increasingly interested in real-estate credit due to the high premium provided by illiquid assets and a hedge against inflation.
David Schonbrunn, formerly chief investment officer at SL Green Realty in New York, was recently appointed by Carlyle to lead its US real estate credit arm. According to the press release, Carlyle’s worldwide Credit arm has been its fastest-growing business over the past three years and has US$66 million in assets under management. The transaction is expected to close in the first quarter of this year. BLOOMBERG
