As the environment for making attractive yields betting on traditional property types gets tougher, more innovative asset classes are getting increased attention. Case in point—global real estate asset manager CBRE Investment Management (CBRE IM) and Texas-based Accelerate Investment Partners (AIP) recently launched Accelerate Infrastructure Opportunities (AIO), a new entity that will invest in digital and renewable real property interests across North America.
AIO acquires, owns and manages investments in land ground leases under under cellular infrastructure, billboards and renewable energy assets, such as wind, solar, energy storage and electric vehicle (EV) charging projects.
Under their joint venture agreement, CBRE IM is investing long-term capital in AIO assets, while the AIP team manages the assets and cultivates long-term relationships with the property owners, tenants, developers, operators and brokers involved, with a goal to maximize the value of the properties.
WMRE recently spoke with Robert Shaw, managing director with CBRE IM, and Brennan Potts, founder and chief executive officer of AIP, to discuss the new entity’s investment strategy, the terms of the partnership, the types of properties AIO is focusing on and the types of returns it aims to generate.
This Q&A has been edited for length, style and clarity.
WMRE: How does the two firms’ partnership work financially? Is CBRE IM taking an equity stake in AIP? Are assets that AIP already owned going into the new venture or is it scaling up from scratch?
Robert Shaw: CBRE IM is co-owner of Accelerate Infrastructure Opportunities, along with the management team at Accelerate. CBRE IM and Accelerate established the joint venture to acquire real property interests under infrastructure assets. Accelerate did not contribute assets into the joint venture, but Accelerate Infrastructure Opportunities acquired a seed portfolio of real property interests shortly after its establishment. CBRE IM is investing long-term capital into the joint venture on behalf of its private infrastructure strategies. CBRE IM sits on the board and helps to set strategy for the joint venture. Accelerate is the management team responsible for day-to-day operations.
WMRE: CBRE IM has a couple of different funds that invest in infrastructure. Is this part of a larger CBRE IM fund? If so, which one, and who are the fund investors?
Robert Shaw: Accelerate Infrastructure Opportunities’ investment was completed by certain infrastructure funds managed by CBRE IM. The investors are predominantly institutional investors, like pension plans and insurance companies.
We believe there is a large and growing total addressable market as infrastructure is built out to transition to 5G technology and renewable power generation and that these assets will produce strong, long-term cash flows for our investors.
WMRE: How is this venture being financed overall? If with debt, how much and from what lending source(s)?
Brennan Potts: Accelerate Infrastructure Opportunities is funded with a capital commitment from CBRE Investment Management, which provides Accelerate with competitive, long-term capital that helps us better serve our customers.
WMRE: What are the most attractive infrastructure investments right now and why? What types of returns do investors anticipate and within what period of time?
Brennan Potts: Infrastructure investments are attractive to investors because they can provide long-term, predictable and inflation-linked cashflow. We see a large, growing investment opportunity in the digital and sustainable infrastructure spaces, such as cell towers, fiber, data centers, billboards, wind, solar, storage and EV charging projects. These asset classes are attractive because of their mission critical nature and macroeconomic tailwinds, and because they are supporting the buildout of the new digital and green economy.
The one thing all of these assets have in common is they all sit on real estate, and the majority of that real estate is rented via ground leases, right of ways and easements. Accelerate partners with property owners and developers to acquire these real property interests in order to advance and support the buildout of infrastructure that is so critical to the economy. Our ultimate goal is to aggregate a large, diversified portfolio of these assets across North America.
WMRE: Can you share some examples of properties that the AIO partnership has invested in recently—type and location of property, cost of the investment and type of development planned?
Brennan Potts: To date, we have acquired assets in more than 15 states in the U.S. across our target markets. In terms of examples, we worked with a commercial landlord in Southern California who owned multiple mixed-use properties with rooftop wireless to execute a buyout of his leases for a lump sum, which the owner then used to expand his portfolio of properties and restructure debt. In another example, we purchased the lease associated with a billboard property that was owned by an estate, which helped the owners to liquidate that estate.
WMRE: Today’s investment environment is obviously more uncertain than it was a year or two ago. What challenges are this venture encountering, and how is the partnership overcoming them. Can you share a couple examples to illustrate?
Brennan Potts: Inflation and rising interest rates have created a challenge for every business in this environment. But Accelerate sees these challenges as an opportunity to advance capital to property owners and developers who can use the funds to pay down debts, make other investments or help grow their businesses.
An example of this is how we work with renewable energy developers to advance capital to purchase land they are looking to develop. Accelerate enters into sale-leaseback transactions, which serve a real property interest for creating off-balance sheet liquidity to fund the project by separating the land cost. They can also reduce risks by consolidating lease payments and extending leases to secure long-term rights to the property where their assets are located.
WMRE: Is there anything else you want to mention?
Brennan Potts: For us, success for our investment strategy goes beyond the returns: it rests with our ability to create trusted, long-term relationships with our tenants. As a buyer of real property interests, we become the landlord over the term of 20, 30, 40 or more years. Our goal is to create enduring, mutually beneficial partnerships. It’s through creating win-win outcomes that our company will continue to grow.