Deutsche Finance International (DFI) and Argo Real Estate have launched a UK urban logistics joint venture that aims to build a platform worth around £400m over the next few years.
The partners have kicked off the platform with the £177m acquisition of two portfolios in separate transactions. The portfolios consist of circa 1m sq ft of space across 11 assets located in “supply constrained” urban logistics hubs in Manchester, London and the South East.
The assets are all occupied except a single vacant asset where a comprehensive repositioning will be undertaken. The portfolio’s current market rent is more than 80% above the average passing rent, with a WAULT of 5.7 years. The units are let to a broad range of tenants including Amazon, Royal Mail, Greencore, GXO Logistics and Aldi.
The JV partners said they would “continue to source investment opportunities, focusing on supply constrained urban logistics markets in and around the UK’s largest cities” and they are “currently progressing a short to medium term investment pipeline of attractive opportunities to build the platform further”.
Jonni Glick, vice president at DFI, said: “We have been monitoring the European logistics sector for some time and the recent rerating has provided us with an opportune moment to enter the market via the acquisition of two UK portfolios, capitalising on the geography and sector where values have repriced fastest.
“We believe there is a strong opportunity to create further value in our portfolio through considered asset management to both capture substantial rental reversion potential and by investing capex to improve the environmental performance of the properties. We are excited to work with the exceptional team at Argo, who have a strong track record assembling, managing and exiting logistics portfolios, and we look forward to building out the platform further together.”
Gavin Neilan, co-managing partner and CIO at DFI, added: “Building scalable platforms in supply constrained fragmented sectors has always been integral to DFI’s investment thesis. Our multi-disciplinary team has significant experience creating additional value through active management to create high quality portfolios that appeal to institutional investors, as demonstrated by the successful exit from our Blækhus Danish student platform last year. With this latest strategy we are able to capitalise on the challenging macroeconomic backdrop to make an investment in the UK urban logistics sector that benefits from attractive market fundamentals.”
Crispin Gandy, CEO at Argo Real Estate, said: “We are excited to buy these two portfolios, offering quality core plus assets underpinned by strong fundamentals, in supply constrained markets with structural tailwinds and at sub replacement cost. We look forward to driving performance through our asset management strategies”
Gavin Rabinowitz, founding director of Argo Real Estate, added: “We are looking forward to building our joint venture with DFI. With the repricing of the sector the fundamentals look compelling. With further quality pipeline on the horizon, we are excited by the prospect of scaling the platform.”
