Savills IM launches European Logistics Fund 3

Savills Investment Management has launched Savills IM European Logistics Fund 3 (ELF 3), an open-end special alternative investment fund with a target investment volume of at least €600m.

The fund will invest in high-quality distribution centres and cross-docks that can be used by third parties in Europe's core liquid logistics markets. With a maximum debt ratio of 50%, the fund is targeting an income return of at least 5% annually. The fund has already received capital commitments of €122m from two German institutional investors at the first close. The investment remit is the greatest possible diversification in terms of both geography and different user segments, including industry, trade and services.

‘Yesterday (23rd September), we signed the first acquisition for the fund, a distribution centre in Wrocław , Poland, with an investment volume of around €35m,’ Daniel Hohenthanner, director of investment at Savills IM, told REFIRE. ‘For ELF 3, we can invest up to 30% each in Germany, France and Benelux countries, as well as up to 20% each in Southern Europe, CEE and the UK and up to 15% in the Nordics,’ he said. ‘We’re also looking at a deal in the Ile de France area of Paris for more than €50m. We like it due to the location in one of the largest metropolitan areas in Europe, the quality of the building and because there’s more than one tenant. In addition, we’re looking at a portfolio in the Netherlands and some opportunities in Germany.’

Hohenthanner expects the first €122mln raised for ELF 3 to be invested by the end of the first quarter next year: ‘We are confident of raising another €20m to €30m of commitments for the fund within the next 4-5 weeks,’ he said.

Savills IM already manages around €3.3bn of logistics assets globally, of which around 17% is located in Germany (as of 30 June 2019). Its predecessor flagship fund, European Logistics Fund 2 (ELF 2), was closed to new investors at the beginning of 2019 and raised €560m of capital, more than double the initial target of €250m.  Savills IM has already invested €645m in ELF 2 and together with transactions in exclusivity the fund will grow to a volume of €900m over the next few months, according to Hohenthanner. ‘So we have another €70m to invest in ELF 2 by around mid-2020,’ he said,

With a total return of around 7.9% per annum since its launch in July 2015, ELF 2 has also exceeded its return targets. ELF 2 currently holds 22 logistics properties in six countries with an investment volume of around €645m. Since the beginning of the year, eight purchases have been made for the fund and a purchase agreement has been signed for a logistics complex under construction in the Nuremberg metropolitan region, which will be transferred to the portfolio after completion next spring.

‘The fundamentals in Europe’s logistics sector remain buoyant,’ Hohenthanner said. ‘E-commerce is currently forecast to grow by €220bn by 2022. This is reflected in continued strong demand for logistics properties and a very low vacancy rate leading to rising rents.’

And, for investors with deep pockets, there are some sizeable assets up for grabs. US investor Apollo Global Management is reportedly seeking bids for a €1bn pan-European logistics portfolio, with assets located in countries such as Germany, Poland and Benelux countries. Apollo could not be reached for comment.