Madison Capital Buys Four REI Warehouses for $230M

Madison Capital has bought four distribution warehouses in four states from REI Co-op for $230 million, including a 410,400-square-foot building outside Phoenix.

The New York-based investor purchased the warehouses in Washington, Tennessee, Pennsylvania and in Goodyear, nearly 20 miles west of Phoenix, the Phoenix Business Journal reported.

Recreational Equipment, an outdoor apparel and equipment co-op based outside Seattle, sold the portfolio after naming a new CEO and losing a combined $475 million in 2022 and 2023. It was expected to break even last year.

Madison bought the Goodyear warehouse at 4877 North Cotton Lane for $46.4 million in cash, or $113 per square foot, in a sale-leaseback deal.

REI signed a lease for 15 years with two additional 10-year renewal options, with the right of first offer to buy back the warehouse. Financial terms of the lease were not disclosed.

REI was represented by Heartland, along with local brokers in several markets, including JLL in Arizona, BRK Real Estate Advisors in Pennsylvania and Foundry Commercial in Tennessee.

Bryan Lisser, a director at Madison Capital, said in an email to the Business Journal that “we believe in [REI’s] ongoing growth and success” and “are bullish on the continued growth of Phoenix’s West Valley.”

Kelley Hall, chief financial officer of REI, said the sale-leaseback model was a “great option” for the company’s overall financial and real estate portfolio management based on the success of its long-term leases with its headquarters and a majority of its stores.

As part of the four warehouse sale/leaseback deals, the firm sold Madison its 521,700-square-foot distribution warehouse in Sumner, Washington, for $101.3 million, or $187 per square foot, according to the Business Journal.

REI distribution warehouses serve the company’s online customers and nearly 200 REI stores across the U.S. Its Goodyear warehouse, built in 2016, was the first in the country to achieve LEED Platinum certification and Net Zero Energy, according to the company.

Sales of industrial properties have surged across greater Phoenix, hitting a three-year high late last year, according to Colliers. Industrial sales reached $1.88 billion in the fourth quarter, bringing the year total to $4.27 billion.

Madison Capital owns and manages $3.2 billion in commercial real estate assets, according to its website.

— Dana Bartholomew