Pan-European logistics portfolios are flying off the shelves now the weight of international capital hovering over the sector has landed.

Pan-European logistics portfolios are flying off the shelves now the weight of international capital hovering over the sector has landed.

PropertyEU Research recorded five large multi-country portfolios changing hands for a total of €1.5 bn during the first half of 2014. Logicor, Blackstone's European logistics vehicle headed by Mo Barzegar, led the investor charge by deploying over €1 bn in H1 across nine European countries. Another large acquisition in Spain followed in early August.

Institutional investors' willingness to back such big-ticket deals illustrates the strength of confidence in the market. Post-financial crisis, logistics investors had initially favoured defensive investments: large single-asset logistics or distribution centres, often leased to a single, low-risk retailer, or better still an e-tailer like Amazon. Portfolio deals - when they occurred - were usually located in one country, and often featured distressed sellers.

But in a climate of increasing tenant demand and the prospect of rental growth in many markets, specialist investors - led by Logicor and the top rank of developer-investors such as Prologis and Segro -have moved to consolidate their leadership positions. They have done this by acquiring complex, big-ticket portfolios spread across two or more jurisdictions - and not necessarily restricted to the 'Big Three' (UK, Germany and France). Dutch logistics, for instance, continued to build on its rising popularity of recent years, while Hungary and Norway also made it on to the list of sale locations in H1.

Our list of deals shows that investor interest is also expanding in the UK beyond the most obvious logistics hubs such as Gatwick and around London. The phenomenon relates, however, to single assets rather than large portfolios. Notable deals during H1 took place in Northamptonshire, Stafford, Sheffield, Wolverhampton and Wakefield.

BLACKSTONE BONANZA
Logicor carried out the largest transaction in the European logistics sector so far this year. In March the company signed an agreement to acquire nearly 60% of the logistics assets owned by French REIT group Foncière des Régions, with completion in June. The portfolio comprises 17 logistics platforms, representing a total surface area of nearly 750,000 m2, located in France and Germany. The price tag comes to €473 mln.

The deal is in line with FdR's strategy to divest non-core assets representing around 15% of its total portfolio. The Paris-listed group plans to sell roughly €1.8 bn of non-strategic real estate in the near future, according to head of investor relations Philippe Le Trung, to focus on offices in France and in Italy, as well as residential in Germany and hotels in France.

In contrast, Blackstone's Logicor has worked rapidly since it was founded in 2012 to establish itself as one of the main providers of logistics space across the continent. CEE is a key part of the jigsaw puzzle and in early July Logicor announced it had acquired a 200,000 m2 portfolio of six assets in the Czech Republic and Poland for €150 mln.

This was followed by a disclosure in July by SEB Asset Management that it had signed an agreement to sell Logicor assets totalling 434,300 m2 in eight countries held in the Curve portfolio. The transaction was valued at €275 mln in total, slightly less than the most recently appraised market values.

Geographically, the assets sold to Logicor are spread across Spain (4 assets), Germany (3), France (3), Austria (3), the Netherlands (2), and one each in Norway, the UK and Hungary. SEB sold the final Curve asset, located in Doncaster in the UK, to investment fund management house Tritax for €74 mln.

Commenting on the deal, James Markby, head of EMEA industrial and logistics Investment, CBRE said: 'The Curve Portfolio is the most geographically diverse logistics portfolio to ever be sold in Europe. The interest we received is testament to the high level of investor demand for quality logistics assets across the continent. We timed the sales to coincide with the uplift in economic sentiment throughout the region, and the return of investor focus on logistics assets in markets previously considered peripheral, including Austria, Hungary, Norway and Spain.'

The complete acquisition, from the start of marketing to exchange of contracts was completed in less than 12 weeks.

SPECIALISTS
Logistics developer-investors like UK REIT Segro and US-based Prologis - which operates a development and fund business - are also actively writing big equity tickets to add to their European platforms.

On 1 July Segro said it had completed on the remaining €185 mln of the €472 mln acquisition of a European portfolio on behalf of its joint venture with Canadian pension investor, PSP Investments. The joint venture, Segro European Logistics Partnership, in which both parties hold 50%, announced in February that it was acquiring a portfolio of prime logistics assets and development land in Germany, Poland and France for €472 mln. The vendors were two funds: CCPIII, managed by Tristan Capital Partners, and EPISO, co-managed by Tristan and AEW Europe.

Meanwhile Prologis has given the resurgent Dutch investment market a further boost through the acquisition of the Pelican portfolio from Schroder Property Investment Management for €168 mln. The portfolio comprises seven assets in the Netherlands, as well as one each in Belgium and France.

Italy will likely be another destination for investors in logistics properties. During PropertyEU’s European Logistics Briefing in June, Jeroen Smit, Logicor’s managing director of Benelux, Spain & Italy was asked how he would spend a fictional €500 mln. ‘I would put part of the money in speculative development in certain markets and go on holiday for the rest of my life,' he quipped. 'Alternatively I would invest the money in markets such as Italy where I can still acquire assets at below replacement cost.’