Ivanhoé Cambridge and LOGOS Acquire Broadmeadows

CDPQ's real estate subsidiary, Ivanhoé Cambridge, put out a statement stating along with LOGOS, it acquired a strategic development site in Broadmeadows, Melbourne:

Ivanhoé Cambridge and LOGOS are pleased to announce they have entered into an agreement to acquire a strategic development site in Broadmeadows, one of Melbourne’s key infill northern industrial suburbs. Ivanhoé Cambridge plans to develop the site into a $230 million logistics estate with LOGOS to act as the manager and developer.

Located at 120 Northcorp Boulevard in Broadmeadows, the property offers excellent access to Melbourne’s key transport network including the Western Ring Road, Tullamarine Freeway and the Hume Highway interchange, as well as the Victorian Government’s planned North East Link. Leveraging this premier location, LOGOS will transform the former Woolworths distribution centre to deliver over 120,000sqm of modern, high-quality logistics assets within the renamed LOGOS Broadmeadows Logistics Estate.

Ivanhoé Cambridge’s Senior Vice President for Asia Pacific, George Agethen, said: “This transaction continues our strategy for logistics in the APAC region and our partnership with LOGOS. We remain focused on assembling a sizeable portfolio in Sydney and Melbourne, which has shown remarkable resilience through the COVID-19 pandemic. We are confident that we will deliver an environmentally leading Estate that will meet the demands of our users for the long-term.”

LOGOS’ Head of Australia and New Zealand, Darren Searle, said: “This is a strategic acquisition for our business as a number of our existing customers have been looking to expand into the north of Melbourne, an area which has long experienced limited supply of prime grade logistics assets, for some time.”

The Estate, which is targeting to commence construction in early 2021, will be focused on supporting the core logistics sectors of e-commerce, distribution, food and cold storage. Warehouses within the Estate, ranging from 15,000sqm to 50,000sqm, are now available for lease.

“We look forward to bringing our global design and development expertise to develop this state-of-the-art property. The Estate is targeted to achieve a 5 Star Green Star rating in line with our commitment to our customers and capital partners in delivering on our obligations towards creating a sustainable future,” Mr Searle added.

The transaction was brokered by CBRE’s Chris O’Brien and Daniel Eramo with the site acquired by a LOGOS venture on behalf of Ivanhoé Cambridge.

This acquisition aligns with Ivanhoé Cambridge’s portfolio repositioning with a strong accent on industrial and logistics assets on the five continents where the company has investment platforms.

LOGOS’ Asia Pacific portfolio comprises 100 logistics estates across nine countries with AUM of approximately $13.8 billion. LOGOS counts some of the world’s largest fund managers as its shareholders, including ARA Asset Management and Ivanhoé Cambridge.

In terms of portfolio repositioning, the key passage in this statement is at the end:

This acquisition aligns with Ivanhoé Cambridge’s portfolio repositioning with a strong accent on industrial and logistics assets on the five continents where the company has investment platforms.

Recall, last month I discussed how CDPQ appointed a new Head of Liquid Markets, Vincent Delisle, and mentioned this:

[...] Ivanhoé Cambridge, CDPQ's massive real estate subsidiary, recently hired New York based Raider Hill Advisors to help it with its troubled Retail portfolio (La Presse discussed this here and I wish them a lot of luck restructuring these assets).

I've already gone through Ivanhoé Cambridge's "99 problems" and won't go over them again here.

Suffice to say that for legacy reasons, there was way too much exposure to Retail in their portfolio and Nathalie Palladitcheff', Ivanhoé Cambridge's President and CEO, took the difficult decision to cut down the staffing in the Retail portfolio, reduce their exposure there, and take some major writedowns there which they can hopefully write up when the health crisis subsides and the cycle turns back up.

On top of this, there has been a concerted effort to focus more on logistics properties in North America, Europe, Asia and emerging markets to play the secular trend of the rise of e-commerce.

In this respect, Ivanhoé Cambridge is playing catch-up to CPP Investments and other large peers which are more exposed to Industrial properties.

For example, in December 2017, CPP Investments (CPPIB) invested HK$1.94 billion (C$320 million) to acquire an interest in Goodman Hong Kong Logistics Partnership (GHKLP or Partnership):

GHKLP is one of Goodman’s flagship logistics partnerships, with the largest portfolio of high quality, modern logistics properties in Hong Kong.  

he Partnership has seen strong performance since its inception in 2006, with positive economic and market fundamentals such as limited supply of quality industrial real estate in Hong Kong combined with growing demand from international retailers and distribution companies, supporting consistent market outperformance. 

“There is tremendous opportunity for growth across the logistics sector in Hong Kong, which benefits from growing domestic consumption and the city’s strategic position as a gateway into China,” said Jimmy Phua, Managing Director and Head of Real Estate Investments Asia, CPPIB. “We are pleased to deepen our excellent global relationship with Goodman through this investment in GHKLP, while at the same time increasing our exposure to the fast growing logistics sector,” he added.

At 30 September 2017, GHKLP had total assets of HK$28.7 billion invested across 13 assets, including a 50% interest in Goodman Interlink that is co-owned with CPPIB under a 50/50 JV.

“E-commerce will be one of the major drivers of growth in the logistics sector in Asia and Hong Kong is in a prime geographic position to benefit as more players enter the market,” Mr. Phua added. 

That was 2017, fast forward to 2020 in the midst of a global pandemic and logistics properties all over the world are more in demand than ever.

Now, to my surprise, I went over CPP Investments' results in detail and couldn't find a detailed breakdown of sector exposure for Real Estate and Infrastructure assets. 

I'm sure they are available somewhere but I know for a fact that logistics properties have been an important part of their thematic investments for years.

Are logistic properties overvalued now that we are in a pandemic? No doubt but it's important to note that we aren't in a logistics bubble, at least not yet, and large pensions investing in these properties are doing so with experienced partners like LOGOS, Goodman and others. 

They're also investing for the long run, not looking to flip these investments like a real estate speculator high on crack, so over the long run, these properties will benefit from the rise in e-commerce.

And Ivanhoé Cambridge and LOGOS didn't pay an obscene amount for developing the site in Broadmeadows. Marc Pallisco of Real Estate Source Australia reported on the deal with the numbers:

Growthpoint Properties Australia has decided against redeveloping a 25 hectare Broadmeadows distribution centre vacated in February by Woolworths – instead selling it to a joint venture partnership which will.

LOGOS and Ivanhoe Cambridge are paying $50.2 million for 120 Northcorp Boulevard, in a deal scheduled to settle in 10 days.

The asset includes multi-connected warehouses, truck parking and several undeveloped tracts including a corner abutting the train line between Gowrie and Upfield stations.

The incoming owners have earmarked the holding, 17 kilometres north of Melbourne, for a $230m business park.

Branded LOGOS Broadmeadows Logistics Estate, it will comprise 120,000 sqm of warehousing available for food and cold storage, ecommerce and distribution.

LOGOS will be the developer and manager.

CBRE’s Daniel Eramao, Chris O'Brien, Rorry Hilton and Ben Hegerty represented Growthpoint.

Pandemic made us review options, including divestment: Growthpoint

The vendor will use sale proceeds to repay debt.

“Prior to the outbreak of the COVID-19 virus, [we] had been progressing development plans for this asset,” a company statement said.

The ex-Woolworths distribution centre contains several interconnected warehouses.

“However, as part of its response to the pandemic, Growthpoint delayed all non-essential capital projects and decided to review its options for this site, including divestment”.

Managing director Timothy Collyer added “after reviewing our options…we decided to sell this asset as undertaking a lengthy development project was outside of our risk and return appetite in the current operating environment”.

The new LOGOS Broadmeadows Logistics Estate

The Broadmeadows property is a risk and return match, however, for LOGOS – which just last week, with MaxCap, acquired a c$70m distribution centre under construction in Epping, adding it had been looking for opportunities in the city’s north “for years”.

That asset, branded LOGOS Epping Logistics Estate, is 10 kms east of 120 Northcorp Blvd.

Ivanhoe Cambridge’s senior vice president, Asia Pacific, George Agethen, said its investment “continues our strategy for logistics in the APAC region and our partnership with LOGOS” .

“We remain focused on assembling a sizeable portfolio in Sydney and Melbourne, which have shown remarkable resilience through the COVID-19 pandemic,” the executive added.

“We are confident that we will deliver an environmentally leading estate that will meet the demands of our users for the long-term.”

Broadmeadows property to get makeover for 21^st

The Broadmeadows property was purpose built for Woolworths in 1999.

It contains 60,044 sqm of area within several interconnecting warehouses, accessed by 21 B-double finger docks and 40 recessed loading ones.

A two level office also forms part of the design as does 344 car parks.

There are several undeveloped tracts including a high-profile corner abutting the train line between Gowrie and Upfield stations.

In 2017, Growthpoint banked $90.75m selling a Woolworths-leased distribution centre and Victorian head office, in Mulgrave, to local private investor Harry Stamoulis.

Our customers have been looking north with us: LOGOS

LOGOS’ head of Australia and New Zealand, Darren Searle, said the Broadmeadows acquisition is strategic “as a number of our existing customers have been looking to expand into the north of Melbourne, an area which has long experienced limited supply of prime grade logistics assets, for some time.”

The Northcorp Blvd estate, construction of which is expected to begin next year, is already seeking tenants, the landlord penning configurations between 15,000-50,000 sqm.

“We look forward to bringing our global design and development expertise to develop this state-of-the-art property,” the executive added.

LOGOS Asia Pacific’s portfolio, some 100 logistics assets in nine countries, is estimated to be worth about $13.8 billion.

ARA Asset Management, like Ivanhoe Cambridge, is a major shareholder.

The property is about 17 kilometres north of Melbourne.

The site is near the Metropolitan Ring Road which will hook into the proposed North East link.

LOGOS intends to re-purpose much of the existing automation.

As you can see, there is a lot of thought going into the development of this site and LOGOS is going to be an excellent partner to develop and manage it.

Why did Growthpoint Properties sell? Simply put:

Managing director Timothy Collyer added “after reviewing our options…we decided to sell this asset as undertaking a lengthy development project was outside of our risk and return appetite in the current operating environment”.

It wasn't in their  plans but is in the risk and return appetite of a large global pension with deep pockets and a much longer investment horizon.

It also warms my heart to read about a successful Greek-Australian property investor like Harry Stamoulis:

Harry Stamoulis is the Head of Stamoulis Property Group, founded by his father, and together with his sister Melina he currently runs the company. Stamoulis Property Group owns land and property in Australia and Greece. The Stamoulis family ranks among the wealthiest Greek families in Australia and during the latest years they have also achieved an important ranking among the top wealthiest Australians.

Harry’s father Spyros Stamoulis had origins in Epirus and relocated to Australia at the age of 12 to later build a financial empire. He’s also the founder of the Melbourne’s Hellenic Museum.

The Stamoulis family’s worth is estimated at $540 million and derives from the refreshment company Gold Metal, founded by the ever memorable Spyros Stamoulis. He sold the company in 2004 and later created a real estate and investment business. Harry took control of the business after his father decease in 2007.

Recently, he sold his luxury loft at the Royal Domain Tower for $13.3 million. The group has also developed the Vogue offices and stores compound of 30.000 square meters in the suburb of South Yarra in Melbourne. The company’s near future agenda also involves the development of a large residence compound on a total budget of $750 million.

Moreover, Harry Stamoulis is the owner of 3XY Greek radio station, Hellas television channel and Ta Nea newspaper in Melbourne.

The Stamoulis family also owns the island of Nausika (Oxia) in the Ionian Sea.

Outside of Greece, Melbourne has the most Greeks of any city in the world.

Here in Canada, we also have a some very successful Greek-Canadian real estate investors like Sam Kolias, chairman and CEO of Boardwalk REIT, and Andreas Apostolopoulos, a Greek-Canadian billionaire businessman, primarily concentrated on real estate investment and redevelopment. He is best known for his ownership of the Silverdome in Pontiac, Michigan (the Apostolopoulos family are one of the richest Greek families in North America and the richest Greek family in Canada).

Anyway, it looks like Ivanhoé Cambridge is on the right track repositioning its massive real estate portfolio away from Retail into Industrial (logistics) properties.

 

It's a slow process but Nathalie Palladitcheff and her team are executing on their strategic plan and I have no doubt Ivanhoé Cambridge will emerge a lot stronger three to five years down the road.

 

Below, CGTNBizTalk spoke with Bruce Flatt, CEO of Brookfield Asset Management. I posted this last week but take the time to watch this interview, lots of great insights from one of the best investors in the world.

 

Update: Justinas Baltrusaitis of Buy Shares sent me an article he wrote showing leading logistic companies’ market cap rockets by 83% to over $2tn amid pandemic:

Data presented by Buy Shares indicates that the cumulative market capitalization of leading ten selected publicly-traded logistic companies grew by 83.27% on a Year-to-Date basis. By the close of markets on August 24th, 2020 the companies had a total capitalization of  $2.25 trillion.

Market cap grows by over $1 trillion in eight months

On January 1st, the ten firms have a cumulative market capitalization of  $1.23 trillion representing. The capitalization grew by  $1.02 trillion within eight months.

Japan-based SG Holding had the highest market capitalization at $1.56 trillion as of August 24th,  a 100.05% growth from $781.3 billion on January 1st. XPO Logistics has the least market capitalization at $7.85 billion, representing a growth of 7.09% from January 1st.

An analysis of the data shows that the surge in market capitalization which correlated with the global coronavirus pandemic. According to the research report:

“With most people staying at home, they turned on logistic companies for the delivery of essential supplies. When the pandemic broke out, stocks for logistic companies plunged. However, they later rebounded thanks to their role in home deliveries that were boosted with a surge in e-commerce. For example in China, when the government imposed lockdowns, only logistics and delivery companies were allowed to carry out the delivery. The strategic role the delivery companies played during the pandemic contributed immensely to the surge in market capitalization of the selected companies.”

The full story, statistics and information can be found here.

No doubt, the pandemic has inflated the value of publicly traded logistics companies but they also benefited from the massive liquidity injection from global central banks. There is a lot of beta in these stocks. Don't confuse private logistics deals with publicly traded logistics stocks but it goes to show you just how hot this sector has become.