CPREX Enters Industrial Outdoor Storage (IOS) Sector with Financing for Well-Leased Multi-Market Portfolio

Rhea-AI Summary

Clarion Partners Real Estate Income Fund (NASDAQ: CPREX) has announced its entry into the industrial outdoor storage (IOS) sector through two strategic moves: a first mortgage loan for an eight-property portfolio and the acquisition of an IOS property in Houston.

The mortgage loan supports a joint venture between Outour Storage Investments and Cerberus Capital Management, covering eight IOS properties spanning 2.3 million square feet (50+ acres) across seven major markets including Chicago, Phoenix, Las Vegas, Houston, Inland Empire, Dallas/Fort Worth, and Atlanta.

Additionally, CPREX acquired a 7.59-acre IOS site in Houston featuring a 23,294 square foot building, which is fully leased to a leading North American waste services company for approximately seven years. The property, located at 15550 Export Plaza Drive, underwent complete renovation in 2024 with Class A yard improvements and various facility upgrades.

Positive

• Portfolio diversification into high-demand IOS subsector across seven major markets
• 100% occupancy of Houston property with 7-year lease to established tenant
• Recently renovated Houston facility with Class A improvements
• Strategic location near George Bush Intercontinental Airport
• Dual revenue potential through both debt and equity investments

Negative

• None.

Insights

Real Estate Investment Analyst

CPREX's strategic entry into the industrial outdoor storage (IOS) sector represents a well-timed diversification move targeting a highly specialized industrial real estate subsector with strong fundamentals. The fund's dual-pronged approach—providing a first mortgage loan for a multi-property portfolio while directly acquiring a fully-leased Houston property—demonstrates a sophisticated capital deployment strategy.

The debt investment in the eight-property portfolio spanning 50+ acres across seven major metropolitan areas (Chicago, Phoenix, Las Vegas, Houston, Inland Empire, Dallas/Fort Worth, and Atlanta) offers exposure to multiple high-growth logistics markets while maintaining the downside protection inherent in first-lien debt positions. This geographic diversification across key industrial hubs reduces market-specific risks.

The direct acquisition in Houston showcases CPREX's selective equity investment approach. The property features several attractive attributes: 100% occupancy with approximately seven years of lease duration to a leading waste services company, strategic location near George Bush Intercontinental Airport, and recent comprehensive renovations (new roof, insulation, LED lighting, and Class A yard improvements). These qualities suggest minimal near-term capital expenditure requirements and stable cash flow generation.

This mixed debt-equity approach to gaining IOS exposure demonstrates portfolio management sophistication—capturing potential interest income from the debt position while positioning for both rental income and capital appreciation through the equity investment. The strategy aligns perfectly with CPREX's core investment thesis of providing access to institutional-quality private real estate with stable, cash-flowing characteristics.

Portfolio Allocation Strategist

This transaction represents a strategically significant expansion for CPREX, introducing a specialized industrial subsector to its investment portfolio through a balanced risk approach. The industrial outdoor storage (IOS) segment is particularly compelling within the broader industrial category due to its high barriers to entry, availability in prime locations, and typically higher yield profile compared to traditional warehouse assets.

What's particularly noteworthy is CPREX's dual implementation strategy—deploying capital through both a first mortgage loan position (providing downside protection and current income) and direct property ownership (offering potential upside through rental escalations and capital appreciation). This balanced approach provides CPREX investors with diversified exposure to this specialty subsector.

The portfolio composition deserves attention: seven distinct metropolitan markets provide geographic diversification, reducing concentration risk, while the tenant roster description as "national and regional credit tenants" suggests income reliability. For the Houston acquisition, the approximately seven-year lease term to a leading waste services company provides visibility into cash flows through multiple market cycles.

The transaction aligns with broader institutional capital market trends showing increased allocation to alternative industrial assets that offer potential yield premiums. For CPREX shareholders, this expansion introduces another segment of institutional-quality real estate that may enhance portfolio diversification while maintaining the fund's focus on stable, income-producing assets with potential value appreciation. The investment also demonstrates management's flexibility in execution across the capital stack.

Fund to provide a first mortgage loan to a joint venture between Outour Storage Investments and Cerberus Institutional Real Estate Partners V, LP

NEW YORK--(BUSINESS WIRE)-- Franklin Templeton and its specialist investment manager, Clarion Partners, are today announcing Clarion Partners Real Estate Income Fund Inc.’s (NASDAQ: CPREX) entry into the industrial outdoor storage (IOS) subsector via a debt investment in an eight-property multi-city portfolio and the purchase of an IOS property in Houston.

Clarion Partners Real Estate Income Fund is providing a first mortgage loan to a joint venture between Outour Storage Investments and affiliates of Cerberus Capital Management for a portfolio of eight industrial outdoor storage (IOS) properties spanning 50+ acres across seven MSAs.

CPREX is a closed-end tender offer fund that provides individual investors with access to institutional-quality private real estate through stable, well-leased, cash flow-producing properties across multiple U.S. markets.¹

Clarion is providing a first mortgage loan to a joint venture between Outour Storage Investments and affiliates of Cerberus Capital Management for a portfolio of eight IOS properties spanning 2.3 million square feet (50+ acres) across seven MSAs including Chicago, Phoenix, Las Vegas, Houston, Inland Empire, Dallas / Fort Worth and Atlanta. Eastdil Secured served as the advisor on the transaction.

“This portfolio is a relatively rare assembly of IOS properties with best-in-class specifications, terrific market locations and a strong roster of national and regional credit tenants,” said Clarion Partners Portfolio Manager Brent Jenkins. “This financing provides an ideal opportunity to expose our investors to this high-demand subsector within the larger industrial and logistics sector.”

Additionally, CPREX acquired a 7.59-acre IOS site improved with a 23,294 square foot building that is 100% leased to a leading North American waste services company for approximately seven years. The asset, 15550 Export Plaza Drive in the Houston MSA, was fully renovated in 2024 with Class A yard improvements, refreshed office space, a new roof, new warehouse roof insulation and LED lighting. It is strategically located in the World Houston Business Center directly off Beltway 8, just three miles from George Bush Intercontinental Airport and 23 miles from the tenant’s national headquarters.

“CPREX’s investment in these assets takes advantage of the fund’s ability to invest in both debt and equity deals on behalf of its investors, potentially capturing interest income, rental income and capital appreciation opportunities,” said Clarion Partners Portfolio Manager Rick Schaupp.

About Clarion Partners

Clarion Partners, an SEC registered investment adviser with FCA-authorized and FINRA member affiliates, has been a leading U.S. real estate investment manager for more than 40 years. Headquartered in New York, the firm maintains strategically located offices across the United States and Europe. With over $72 billion in total real estate and debt assets under management, Clarion Partners offers a broad range of real estate strategies across the risk/return spectrum to 500 institutional investors across the globe. Clarion is scaled in all major property types and was an early entrant into the Industrial sector. The Firm’s global industrial team manages a 1000+ property portfolio in the U.S. and Europe consisting of more than 255 million square feet. For more information visit www.clarionpartners.com.

About Franklin Templeton

Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,500 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and $1.58 trillion in assets under management as of February 28, 2025. For more information, please visit franklintempleton.com and follow us on LinkedIn, X and Facebook.

¹ An institutional-grade or institutional-quality property generally refers to a property of sufficient size and stature to merit attention from large national or international investors.

BEFORE INVESTING, CAREFULLY CONSIDER A FUND’S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. YOU CAN FIND THIS AND OTHER INFORMATION IN EACH PROSPECTUS, AND SUMMARY PROSPECTUS, IF AVAILABLE, AT WWW.FRANKLINTEMPLETON.COM OR CONTACT YOUR FRANKLIN TEMPLETON REPRESENTATIVE. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.

Investment Risks:

This information should not be construed as a recommendation to purchase or sell any security. There can be no assurance that any unrealized investment described herein will prove to be profitable. Past performance is no guarantee of future results. All investments involve risk, including loss of principal. Diversification does not ensure against loss. An investment should be considered long-term within a multi-asset portfolio and should not be viewed individually as a complete investment program. The Fund is subject to a high degree of risk; additional risk considerations are listed below:

Liquidity Risks:

The Fund should be viewed as a long-term investment, as it is inherently illiquid and suitable only for investors who can bear the risks associated with the limited liquidity of the Fund. Limited liquidity is provided to shareholders only through the Fund’s quarterly repurchase offers for no more than 5% of the Fund’s shares outstanding at net asset value. There is no guarantee these repurchases will occur as scheduled, or at all. Shareholders may not be able to sell their shares in the Fund at all or at a favorable price.

Real Estate Investment Risks:

The Fund’s investments are highly concentrated in real estate investments and therefore will be subject to the risks typically associated with real estate, including but not limited to fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by local, state, national or international economic conditions. Such conditions may be impacted by the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, and environmental laws.

Furthermore, investments in real estate are also impacted by market disruptions caused by regional concerns, political upheaval, sovereign debt crises, and uninsured losses (generally from catastrophic events such as earthquakes, floods and wars). Investments in real estate related securities, such as asset-backed or mortgage-backed securities are subject to prepayment and extension risks.

Private Market Investments Risks:

An investment in the Fund is suitable only for investors who can bear the risks associated with private market investments (such as private credit and private equity) with potential limited liquidity. Shares will not be listed on a public exchange, and no secondary market is expected to develop.

Franklin Distributors, LLC. Member FINRA, SIPC. All entities mentioned are Franklin Templeton affiliates companies Investment Products: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE.

©2025 Franklin Templeton. All rights reserved.

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Franklin Templeton Corporate Communications:

Lisa Tibbitts, +1 (904) 942-4451, lisa.tibbitts@franklintempleton.com

Source: Clarion Partners

FAQ

What is the size and scope of CPREX's new IOS portfolio investment?

The portfolio spans 2.3 million square feet (50+ acres) across seven major metropolitan areas, including Chicago, Phoenix, Las Vegas, Houston, Inland Empire, Dallas/Fort Worth, and Atlanta.

What improvements were made to CPREX's newly acquired Houston IOS property in 2024?

The property received Class A yard improvements, refreshed office space, a new roof, new warehouse roof insulation, and LED lighting.

How long is the lease term for CPREX's Houston IOS property?

The property is 100% leased to a leading North American waste services company for approximately seven years.

What type of investment structure did CPREX use for the eight-property IOS portfolio?

CPREX provided a first mortgage loan to a joint venture between Outour Storage Investments and Cerberus Capital Management affiliates.