LogiCor, the European logistics platform of US giant Blackstone, might only be two years old but an IPO of the unit is already a strong possibility, according to its CEO Mo Barzegar.

LogiCor, the European logistics platform of US giant Blackstone, might only be two years old but an IPO of the unit is already a strong possibility, according to its CEO Mo Barzegar.

‘There is strong demand for listed companies in our sector, so listing would be one very viable option somewhere down the line,’ he told PropertyEU. ‘Blackstone’s goal is to create an enduring business, a leading pan-European logistics platform that offers the best quality service and value to its customers. Blackstone will eventually decide how and when to harvest its investment in LogiCor, so listing is one option, as is a sale to a strategic investor,’ Barzegar added.

LogiCor has already invested more than €1 bn in six European logistics deals in the first half of the year and over €3 bn since its inception in early 2012. According to Barzegar, LogiCor is looking for logistics opportunities that are attractive from a functionality, location and diversification point of view.

‘We are likely to acquire more assets in our existing markets – including Spain, Italy, Netherlands, Poland, Czech Republic, the UK, Germany and France. It’s also conceivable that if and when we buy another larger pan-European portfolio, we will end up with an asset or two in ‘new’ European markets as part of the overall deal. Pan-European portfolios are more efficient in terms of deploying capital but we will also start investing in small-to-medium deals of around €30 mln to €40 mln,’ he added.

Earlier this month, LogiCor acquired six properties from Pramerica Real Estate Investors in the CEE region for around £120 mln (€150 mln). The 200,000 m2 portfolio – in Poland and the Czech Republic - includes Panattoni Parks at Prague Airport, as well as in CzeladŸ, Krakow, and Gliwice. The deal came just days after LogiCor’s acquisition of SEB Asset Management’s entire logistics portfolio, comprising 18 assets, for €275 mln. The ‘Curve’ portfolio, as it is known, totals 434,300 m2 across eight countries, including Spain, Germany, the UK, France and the Netherlands.

LogiCor is especially interested in opportunities whereby it can add value in the short-to-medium-term, such as by leasing vacancies, re-gearing leases or repositioning assets, according to Barzegar. Historically, logistics has produced above average returns and has been less volatile than many other property classes, which makes it an attractive asset class to investors. In addition, logistics assets tend to be simple boxes which are very easy to reconfigure to suit a client’s needs.

‘There are also economies of scale and we often have the same customer base across different European markets, which we like. Take-up growth on an annual basis in Europe has been in the low-teens during the past 10 years (far outpacing GDP growth rate of 1%-2%). This is mainly driven by the continued reconfiguration of the supply chain and also because we’re undersupplied in logistics per
capita in Europe compared to in the US,’ Barzegar said.

US LEADS WITH MODERN STOCK
In Europe, there is 15 sq ft (1.3 m2) of logistics space per capita compared to 40 sq ft (3.7 m2) in the US. Around 30% of US stock is modern and functional, compared to just 15% in Europe. As demand for stock in Europe increases, more space will need to be built to cater to that demand, Barzegar added. ‘We haven’t developed yet but as the market grows and as we build our platform, that is certainly something that we will consider,’ he said.

Logistics yields vary widely, depending on the market and the level of risk investors are prepared to take on. Typical prime logistics in the UK are around 5.5%, compared to around 6.5% in Germany and France, according to Colliers. However, the returns can be significantly higher for investors willing to dip their toes into riskier waters. ‘Then you could be looking at a risk premium of between 25 bps and 100 bps. Subsequently, you could get a yield of 9% - or even higher – in Spain or Italy but you have to have the stomach to reposition the asset,’ Barzegar warned.

The landscape has also shifted in the past 12 to 18 months with more capital coming into the sector. ‘There is now a lot of capital chasing limited opportunities,’ Barzegar said. ‘Our customers are also more confident than they were at the beginning of 2013. A lot of the clouds hanging over Europe have dispersed and decision making has become more swift. E-commerce is also driving incremental demand.’

Subsequently, LogiCor is thinking big, although Barzegar said he doesn’t have a set investment target. ‘It’s hard to say how big our portfolio will be in five years’ time but it has grown rapidly. We manage 51 million sq ft of logistics properties across Europe, which I expect to grow to 60 million sq ft by early-September. In September 2012, we had just 17 million sq ft, which we almost doubled a year later to 31 million sq ft. As you grow, there are efficiencies of scale, so there is no particular upper limit!’

Sara Seddon Kilbinger
Senior Editor/Correspondent