AEW completes €750m capital raise for Logistis, taking total net equity to €2.3bn

AEW has raised an additional €750m for its pan-European logistics fund, Logistis, bringing the fund’s total net equity to €2.3b, it announced this month.

The new equity has been raised entirely from existing investors in a strong endorsement of the fund’s track record, according to AEW, thereby facilitating the platform’s further expansion in Continental Europe.

It will continue to diversify and intensify its footprint across the main European logistics hubs, deploying a develop-to-core strategy focused on creating strategic assets, from large multi-modal logistics parks to urban logistics platforms. It is active in eight European markets, including France, Germany, the Netherlands, Italy, the Czech Republic and Poland.

‘Logistics in Germany is very dynamic,’ Rémy Vertupier, Logistis’ fund manager told REFIRE.‘Of the €750m we just raised, I expect around 25% to be invested in Germany, which currently accounts for 22% of our €3.3b portfolio. We want to buy land and set up partnerships with developers. We already have such partnerships in Munich, Frankfurt, Hamburg, Berlin and Düsseldorf. We like to develop large and flexible assets, including logistics parks, i.e. the types of assets that are not available on the market.’

Six months ago, Logistis acquired a soft beverage factory near the harbour in Hamburg. It is in the process of demolishing the existing factory and will replace it with a 125,000 sqm multi-storey logistics park in partnership with developer Four Parx.

‘The building will be 25m high and have two storeys, with truck access and maneuvering areas on each floor – this is the first time such an asset is being developed in Germany,’ Vertupier said. ‘Construction will start after the summer, with completion expected in around two years, and we are investing around €150m in it. We’re really excited to launch such a project. It will probably be multi-tenanted as we have the capacity to divide it into more than 10 units. I think the Hamburg project will become a trophy asset with robust value supported by strong rental dynamics.’

As a long-term player, Logistis favours the development route. ‘That’s not to say that we won’t buy existing assets but not at the 4% rate you typically get today,’ Vertupiersaid. ‘We’d rather create the assets because we can’t find the type of products that we’re looking for on the market.’

AEW would like to have the €750m allocated within the next two years and invested within three-to-four years. ‘Logistis isn’t structured as an evergreen fund, however, the platform was launched in 1999 following a long-term strategy,’ Vertupiersaid. ‘Still guided by the same philosophy today, we agreed last week at the capital raise to extend the duration of the fund until 2026, at which point it will be discussed again.’

According to Rob Wilkinson, CEO of AEW in Europe,‘fast-changing consumption trends, the growing penetration of e-commerce and new technologies are all reshaping supply chains and underpin the strong yet growing demand for well-located flexible logistics space’. ‘We are well-positioned to leverage both AEW’s experience and our build-to-core strategy to grow the fund and sustainably take advantage of these market tailwinds,’ he said.

Logistis is one of the oldest dedicated logistics funds in Europe and will celebrate its twentieth anniversary this year. Since the platform was launched, it has built up a portfolio of 131 Grade A logistics assets across 52 sites in Germany, France, Belgium, the Netherlands, Poland, the Czech Republic, Italy and Spain, with a total value of around €3.3b. The additional equity raised will allow Logistis to grow to around €4b of AUM, largely through speculative developments.

The logistics and industrial asset class recorded its second-best year ever in Germany last year with a transaction volume of almost €7.5b, according to JLL. Mid-cap transactions grew significantly, and proved to be an extremely dynamic segment with 140 deals recorded, totaling €810m. ‘Big 7’ locations in established logistics hubs and close to established ports will continue to dominate this year, although fierce competition has started to drive investors into B and C locations as well.

Despite the higher overall number of transactions last year (230, +13% compared to the previous year), the investment volume was below the record level of 2017 (-14%). This is because in 2017, the five largest deals amounted to €4.57b, including the Logicor portfolio (€1.9 b), accounting for 53% overall. In 2018, the top five deals totalled €2.46b, corresponding to a third of the overall logistics volume, according to JLL.

Prime yields are expected to fall again this year in the ‘Big 7’, according to JLL. In the 12 months to end-2018, yields fell 40 bps to 4.1%. The gap between logistics and office yields (3.11%) is now only one percentage point, compared to two percentage points in 2011 (4.9% compared to 6.9%). (ssk)