Funds controlled by Goldman Sachs Group, Inc. (NYSE:GS) have invested an unspecified amount in a portfolio controlled by real estate investment firm Elion Partners that contains more than 3 million square feet of urban land to be tansformed into facilities to support last-mile deliveries of online orders, Elion said.
Goldman, one of the world’s largest investment banks, will invest through its “Vintage Funds” vehicle, Elion said in a recent statement. Miami-based Elion built its last-mile portfolio of “infill” space — open-space urban land being repurposed for new construction — in part by acquiring six “distribution buildings” during the first half of the year, it said.
Elion expanded to the West Coast earlier this year, and hired James Lambert, an executive at Amazon Logistics, the transportation unit of Amazon.com, Inc. (NASDAQ:AMZN), as senior managing director.
“The impact of the [COVID-19] crisis has resulted in increased demand for an already active logistics real estate market,” said Elion Managing Partner Juan DeAngulo in the statement announcing the Goldman investment. “E-commerce adaptation and the need for supply chain onshoring are both pre-crisis trends that have been accelerated, which have combined with the emergence of increased inventory levels as companies look to mitigate future volatility risk.”
Elion owns and operates logistics assets in closed-end fund structures and permanent capital vehicles. The firm is a minority-owned registered investment adviser.
A month prior to its Elion investment, Goldman’s merchant banking unit acquired an unspecified stake in a 6.3 million square foot industrial portfolio owned by Dalfen Industrial, a Dallas-based investment firm. The portfolio, which has assets in multiple metropolitan areas nationwide, is valued at $500 million, according to a published report.
In May, Goldman launched its second dedicated real estate secondaries fund, Vintage Real Estate Partners II, with approximately $2.75 billion in capital commitments. The Vintage Funds invest in both traditional real estate limited partnership interests, and structured and non-traditional secondary transactions which provide liquidity to investors owning illiquid real estate assets.
Goldman quietly entered the U.S. logistics warehousing segment in 2016. It made a splash in January 2018 when its Goldman Sachs Asset Management’s (GSAM) private real estate arm became the equity investor in a joint venture to develop a three-story distribution center in the Red Hook section of Brooklyn, the East Coast’s first multi-level facility.
The project, known as “640 Columbia Street” after the property’s location, received $155 million in construction financing from J.P. Morgan Chase and Square Mile Capital Management, it was reported in late July by New York-based publication Commercial Observer. GSAM declined comment Monday on the status of the project.
Goldman has focused its industrial property investment strategy on the e-commerce fueled, urban last-mile segment instead of the traditional fulfillment and distribution hubs located outside high-density cities. The interest in last-mile from Goldman and other giants like The Blackstone Group (NYSE:BX) will likely result in the development of more high-rise distribution facilities in expensive and space-constrained urban centers.