European private equity real estate platform Deutsche Finance International (DFI) has launched a UK urban logistics venture with Argo Real Estate, with a plan to amass a portfolio worth around £400m (€467.5m) over the next few years.
DFI said the newly created platform has acquired two portfolios in separate transactions worth £177m as its seed assets.
The portfolios comprise 1m sqft of space across 11 assets located in prime, supply-constrained urban logistics hubs including London, the South East and Manchester, the manager said, adding that the partners intend to invest £30m as part of an asset management programme to enhance the seed assets.
DFI said the joint venture is currently ”progressing through a short to medium-term investment pipeline of opportunities” to build the platform to around £400m in value.
Jonni Glick, VP 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.”
Gavin Neilan, co-managing partner and CIO at DFI, said: “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.”
In January last year, DFI sold the Danish student accommodation platform to Patrizia for €314m.
Neilan added: ”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.”
Gavin Rabinowitz, founding director of Argo Real Estate, said: “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.”
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