Pan-European real estate investment manager Europa Capital has launched the third in the series of its country specific European industrial and logistics investment platforms with the formation of the Dutch Distribution Platform (DDP) in partnership with Amsterdam’s ARC Real Estate Partners.
With a target GAV of €150 mln, DDP follows the launch of two industrial and logistics platforms focused on the UK and Germany respectively.
All three country focused platforms have been launched on behalf of Europa Capital’s latest value add fund, Europa Fund VI, which, with close to €600 mln of capital commitments, is predominantly focused on the light industrial, logistics and living sectors, and is approaching 50% committed to investments.
Said Jason Oram, partner, fund manager at Europa Capital: ‘The Netherlands is a key investment market for us. We’ve launched DDP with the acquisition of a €65 mln seed portfolio, bringing our industrial and logistics acquisitions in Europe to €511 mln since 2018. That equates to close to €1 bn in transactions.’
A previous Netherlands focused platform, the Dutch Urban Light Industrial Platform, which was launched in 2019, on behalf of Europa Fund V, in partnership with ARC, established a €144 mln portfolio and was divested in July as part of the sale of a package of Dutch and German urban logistics and warehouse assets for €270 mln, representing one of the largest disposals in the business’ history.
Notable dynamics
‘The dynamics that are supportive of our Dutch investment strategy do exist in other markets as well,’ Oram noted. ‘The UK, France and Germany are always central to our value-add fund strategy. We always liked the dynamics in the UK, but we’re gaining traction in France as well. Our German platform builds on our experience and divestments from previous funds.
‘For us industrial has two main strands – big box and last mile logistics. We’re looking to try and build platforms in both those sectors across a number of territories. We now have last mile platforms in Germany, the Netherlands and the UK, and are looking at opportunities in France. We are also progressing big box assets in France and Germany to add our investments in UK and Poland and also have pipeline in other territories such as the Czech Republic.
‘We work with local partners in all investments that we make. We are pan-European, but we recognise the nuances not only of geography but also sector. In the Netherlands, we already have a really strong relationship with ARC and we work shoulder to shoulder.’
Valid investment thesis
Oram added: ‘Despite the pressures on yields and prices we still see logistics and industrial as a really valid investment thesis.
‘Our core fund EDIF has a logistics weighting above the ODCE index and our latest value add fund, Europa Fund VI, currently has the majority of its investments in the logistics sector at the mid-point of its investment programme.
‘I think you have to look at the real estate fundamentals and they are really strong at the moment.
‘It’s those fundamentals that determine market pricing and the sector is also seeing rental growth. I think there can be a risk in looking at the long-term averages and not really applying the different set of dynamics that apply today. The age of risk is dead: it’s all about the age of uncertainty, so looking at the past doesn’t really tell you about the future.’
Cyclical and structural
Added Vanessa Muscarà, Europa Capital’s head of research & strategy: 'There are two sides to every sector – cyclical and structural. My job is less about cycles as, as Jason mentions, it’s really challenging to take historical data and extrapolate the future. My job is looking at structural shifts impacting all sectors.
'As opposed to the headwinds around offices and retail, our new research shows that logistics is benefitting despite certain economic indicators. While GDP was an influencing factor in the past, now the strength of e-commerce is driving the sector’s growth.’
Muscarà’s latest report for Europa Capital, The Opportunity in European Logistics, captures a snapshot of a sector in robust health.
‘The logistics sector outperformed All Property last quarter over longer periods – i.e. five years - in addition to one year and quarter-on-quarter.
‘Since logistics is now emerging as the most defensive sector, more so than residential, it pays off to be an active manager and deliver a comprehensive solution to logistics operators including automation, ESG and wellbeing specifications, in order to improve the ‘stickiness’ of occupiers,’ she noted.
As to considerations around a potential ‘black swan’ event in logistics or divining its weak points, Muscarà said: ‘Of all the commercial sectors, logistics is the one where you can turn the supply pipeline on and off more quickly. Currently, that’s not an issue as there’s such a lack of supply while online sales keep climbing. If e-commerce was to level off, that could become a factor. We are also keeping an eye on interest rates in certain markets.’
