Pan-European private equity real estate platform Deutsche Finance International (DFI) has launched a UK urban logistics platform in a joint venture with Argo Real Estate, with the £177 million acquisition of two portfolios in separate transactions.
”Having been unable to align market pricing with its return requirements over the past few years, the recent rerating of the asset class in the UK, provided a window to allow DFI to enter the sector at a level where it believes it can deliver opportunistic returns for its clients while taking core+ risk,” said DFI in a press releaese.
The portfolios seed DFI’s U.K. urban logistics platform with c. 1 million sq ft of space across 11 assets located in prime, supply constrained urban logistics hubs including London, the South East and Manchester.
The assets are 90% occupied, with a single vacant asset where a comprehensive repositioning will be undertaken. The platform will aim to build a portfolio of around £400 million of value over the next few years.
The assets range from institutional quality urban warehouses, such as the 147,000 sq ft facility in Theale, which is let on a long lease to Amazon, through to those on shorter leases that offer opportunities to capture rental reversion. The overall portfolio’s current market rent is over 80% above the average passing rent, with a WAULT of 5.7 years and a broad range of high-quality tenants including Royal Mail, Greencore, GXO Logistics and Aldi.
DFI and Argo have committed over £30 million of capital expenditure investment to create further value and ensure optimum investment liquidity. The upgrades are focused on enhancing the occupier experience and improving ESG performance, targeting EPC A rating on each asset, as well as net zero carbon in operation.
Jonni Glick, Vice President at DFI, commented: “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 U.K. 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.”
Crispin Gandy, CEO at Argo Real Estate, added: “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”
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