Pan-European private equity real estate platform Deutsche Finance International (DFI) has launched a UK urban logistics platform in joint venture with Argo Real Estate.
The partnership has kicked off with the £177 mln (€207 mln) traacquisition of two portfolios in separate transactions.
The portfolios seed the platform with around 1 million ft2 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 mln 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 mln 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.
Logistics is a conviction asset class for DFI, being underpinned by strong occupier fundamentals, record low vacancy rates, as well as a limited pipeline of new development and in many areas a reduction in existing supply.
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.
