Brookfield and CPP Investments closed their $5.2 billion buyout of LXP Industrial

Brookfield Asset Management and CPP Investments completed their all-cash purchase of LXP Industrial Trust on Nov. 2, paying $61.20 a share in a deal valued at about $5.2 billion including net debt and preferred equity ^[1]. LXP's shares no longer trade on the New York Stock Exchange ^[1].

Lowell Baron, CEO of Brookfield Real Estate, said the purchase reflects “our conviction in the long-term fundamentals of the U.S. industrial sector” ^[1]. Sophie van Oosterom, head of real estate at CPP Investments, said in July that the partnership aims to “generate sustainable investment returns for the CPP Fund” ^[2].

The buyers paid about $100 a square foot for 52 million square feet

The portfolio covers 107 properties and about 52 million square feet, mostly newer bulk distribution buildings in states including Arizona, Texas, Ohio and Georgia ^[1][4]. Bisnow reported it was 96.6% leased at average in-place rents of $5.28 a square foot, with Amazon as the largest tenant at 6.7% ^[4].

By our math, the price works out to about $100 a square foot. We also calculate annual rent of roughly $265 million from 96.6% of 52 million square feet at $5.28, about 5.1% of the $5.2 billion price before expenses ^[1][4].

LXP shareholders got a premium of up to 19.8%

When the deal was announced on July 20, the price was 12.3% above LXP's 30-day volume-weighted average and 19.8% above its 90-day average ^[2]. LXP had 40 days to look for a better offer, and the deal closed at the same $61.20 ^[1][2].

In its last quarter as a public company, LXP signed 2.3 million square feet of second-generation leases with cash base rent up 26.2%, excluding two fixed-rate renewals ^[3]. The stabilized portfolio was 97.4% leased on June 30 ^[3]. Prologis reported large renewal gains as well, covered in our industrial earnings story.

Brookfield has its next real estate flagship planned for 2027

Brookfield raised $4.3 billion for real estate in the second quarter and invested $5.2 billion in the sector ^[5]. CEO Connor Teskey told analysts in August that he expects the next real estate flagship to be in the market in 2027, and Bisnow reported that the prior flagship, BSREP V, raised $16 billion ^[6].

How to use this

For owners and developers of industrial buildings

1. Benchmark a bulk warehouse sale against about $100 a square foot, which we calculate from the LXP price and its 52 million square feet ^[1]. Adjust for your building's age and location, since LXP's portfolio is mostly newer bulk distribution space ^[4].
2. Check your expiring leases against market rent before you renew. LXP's second-generation leases reset cash rent 26.2% higher ^[3], so on a 200,000-square-foot lease at $5.28 we calculate that a 26.2% increase adds about $277,000 a year.

For REIT shareholders

1. Compare any offer for a REIT you own with its 30- and 90-day average prices. LXP's buyers paid 12.3% and 19.8% premiums on those measures ^[2].
2. Read the go-shop terms in the merger filing. LXP had 40 days to find a higher bid ^[2], and the deal closed at the original $61.20 ^[1].

For institutional investors and allocators

1. Plan commitment budgets around a 2027 Brookfield flagship. Teskey said he expects it to be in the market that year ^[6], and its predecessor raised $16 billion ^[6].