(Bloomberg) – Carlyle Group Inc. The U.S. global credit arm has agreed to acquire iStar Inc.’s net lease business for approximately $3 billion in enterprise value as part of Carlyle’s expansion into real estate.
According to a press release, the unit will provide equity for the purchase, with Carlyle itself adding a minority balance sheet investment. Net-leases are rental contracts where the tenant agrees to pay the costs associated with the property in addition to the rental amount.
The acquisition includes iStar’s portfolio of triple-net leases, where tenants are responsible for property taxes, insurance fees and maintenance costs, which includes industrial, office and entertainment properties in the US.
“The growth in iStar’s net leasing business kicks off our real estate credit strategy, giving us the scale to accelerate deployment,” Mark Jenkins, Head of Global Credit at Carlyle, said in the statement. “We expect to grow this pure leasing strategy into a $10 billion business with a focus on making the product available to the retail channel over time.”
Barkley Jones, who has led iStar’s net lease strategy for more than 20 years, will join senior vice president Katherine Tenney and others on the unit to join Carlyle’s real estate credit team.
Carlyle is pushing into real estate as part of building out its global credit business. The unit made its first fund investment in the net lease area last year, agreeing to provide up to $300 million in capital to New Jersey-based Four Springs Capital Trust.
Real estate credit has become a growing area of interest for investors as a hedge against inflation and premiums offered by real estate. Carlyle recently hired David Schonbraun, former chief investment officer of New York-based SL Green Realty Corp., to head its US real-estate credit arm.
According to the press release, Carlyle’s global credit arm, its fastest-growing business in the past three years, has $66 billion in assets under management. The transaction is expected to close in the first quarter of this year.
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