The £1bn logistics love-in

28 February 2017 – by David Hatcher

Prologis and CBRE Global Investment Partners have formed a joint venture that will own and develop £1bn of UK logistics property.

DIRFT in Daventry

The venture will be seeded with 3.9m sq ft of existing properties, a pipeline of developments in progress and land that will total a further 3.7m sq ft from Prologis’s balance sheet.

The undeveloped elements of the portfolio are expected to be built out over the next four to five years.

Prologis will retain a 15% stake in the Prologis UK Logistics Venture as well as undertake the development and management of the assets, with CBRE GIP taking on the remaining 85% ownership.

CBRE GIP has made an upfront payment to buy the stake. The price for the completed assets is understood to reflect a yield of around 5.5%. The deal is due to close at the end of the month.

The entire portfolio is made up of 16 separate parks across the UK’s strongest logistics markets in the Midlands, the South East and London including DIRFT in Daventry and Grange Park, both in Northamptonshire; Midpoint in Minworth, Warwickshire and Prologis Park in Hayes, Middlesex. The deal makes up around a quarter of Prologis’s UK portfolio.

“This pure parks portfolio, which includes several prime sites, will be the finest quality logistics portfolio in the UK – there’ll be nothing to compete with it,” said Jeremy Plummer, CBRE GI’s head of EMEA.

Assuming the vehicle achieves the returns anticipated by both investors, it is expected that UKLV will be grown further and acquire other development opportunities.

The tie-up is the latest in a series of European logistics mega-deals and portfolios that have been compiled in the last few years, fuelled by the growth of e-commerce, the relatively high returns they provide and the fundamental maturity and modernisation of the sector.

CBRE GIP is CBRE GI’s $15.2bn (£12bn) arm which partners with local asset and operational managers to back particular, often sector specific, investment strategies. It is funding the deal in part using equity from its $840m European Co-Investment Fund that it closed last February, and from a handful of further North American and European separate account mandates.

The UKLV vehicle is Prologis’s first dedicated solely to the UK. Its other pan-European investment vehicles already have high UK exposure, so the company needed to bring in further capital to build out the portfolio and grow its UK presence.

“The UK has been the best performing logistics market in the world over the past few years, except perhaps the US,” said Gary Anderson, chief executive of Prologis in Europe and Asia. “[Occupier] demand continues unabated since the Brexit vote and we are seeing more opportunities here than we have for a long time.

“This deal allows us to take advantage of them.”

CBRE advised CBRE GIP.

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