PSP and Bridge Industrial to Target UK Logistics Properties
Mack Burke of Commercial Observer reports Bridge Industrial and PSP Investments supply $1.4B for UK industrial assets:
Bridge Industrial and the Canadian pension fund, Public Sector Pension Investment Board (PSP Investments), have partnered to deploy around $1.4 billion into the acquisition and development of last-mile warehousing and distribution facilities in, and around, London and the Midlands region of the United Kingdom, according to information released on Thursday.
The duo will look for urban infill investment and development opportunities to build out its portfolio, targeting that $1.4 billion number as the potential size of the collection they hope to assemble.
According to the duo’s announcement, they will focus on “build-to-core” opportunities, which will revolve around last-mile facilities in “high barrier infill submarkets” around London and the Midlands region, which includes Birmingham and its surrounding towns — England’s second-largest metropolitan area.
Bridge Industrial, an investment and development firm founded in 2000, that has executed on more than $7.8 billion worth of industrial real estate in its time, will oversee all development activities and “value-add measures” for purpose-built properties.
Bridge Industrial CFO Sean Zasche expressed the firm’s excitement in forming the joint venture with PSP Investments, adding that his firm “continues to grow its global portfolio and capital partnerships … [PSP’s] focus on high-quality, infill real estate and long-term ownership aligns well with Bridge’s business model.” The firm’s operations in the U.K. are led by Partner Paul Hanley, who heads up a group of investment and development pros based out of its London office.
“We’re extremely excited about the growth in the logistics industry that is creating strong demand for facilities across the United Kingdom,” Hanley said. “This joint venture with PSP Investments marks the beginning of a long-term partnership that will allow us to continue the strategic expansion of our portfolio.”
PSP Investments is one of Canada’s largest investment managers, sporting a whopping $169.8 billion in net assets under management, with about $24 billion of that concentrated in real estate — about 19 percent of the real estate book is in the industrial sector — according to its 2020 annual report. Last year, the pension fund investor, which has a sizable portfolio of industrial assets, actually made some big splashes within the film studio front, investing, as part of a massive consortium, in Amazon Studios’ Culver City campus and Manhattan Beach Studios; it also picked up a minority interest in CBS Television City studio complex in Los Angeles. On the industrial front last year, it engaged in a number of large transactions globally, including in Europe and Mexico.
“We are pleased to be partnering with Bridge to invest in the U.K. logistics sector as we grow our already extensive European logistics portfolio,” said Stéphane Jalbert, a managing director at PSP, who covers real estate investments in Europe and Asia Pacific. “Urban logistics is a key sector for PSP globally, given the accelerated growth of e-commerce and the need to adapt real estate to meet shifting consumer behavior. Bridge has proven development capabilities from which the venture will benefit, enhancing returns beyond the sector trend.”
Rob Kozlowski of Pensions & Investments also reports PSP Investments targets UK real estate with joint venture:
Bridge Industrial (“Bridge”) and the Public Sector Pension Investment Board (“PSP Investments”) today announced the establishment of a joint venture to acquire and develop logistics properties in the United Kingdom, targeting a portfolio value of £1 billion ($1.4 billion USD).The venture has a build-to-core focus, including the acquisition and development of last-mile logistics assets within high-barrier infill submarkets in Greater London and the Midlands region. Bridge will oversee development and the implementation of value-add measures to create state-of-the-art, purpose-built infill industrial assets. The venture will target market-leading sustainability credentials.
“We are excited to form this strategic partnership with PSP Investments as Bridge continues to grow its global portfolio and capital partnerships,” said Sean Zasche, Bridge’s Chief Financial Officer. “Their focus on high-quality, infill real estate and long-term ownership aligns well with Bridge’s business model.”
Bridge’s UK operations are led by Paul Hanley, Partner, who oversees a London-based team of acquisition and development professionals.
“We’re extremely excited about the growth in the logistics industry that is creating strong demand for facilities across the United Kingdom,” said Hanley. “This joint venture with PSP Investments marks the beginning of a long-term partnership that will allow us to continue the strategic expansion of our portfolio.”
PSP Investments is one of Canada’s largest pension investment managers with a diversified global portfolio across public and private markets.
“We are pleased to be partnering with Bridge to invest in the UK logistics sector as we grow our already extensive European logistics portfolio,” said Stéphane Jalbert, PSP’s Managing Director for Europe and Asia Pacific, Real Estate Investments. “Urban logistics is a key sector for PSP globally, given the accelerated growth of e-commerce and the need to adapt real estate to meet shifting consumer behaviour. Bridge has proven development capabilities from which the venture will benefit, enhancing returns beyond the sector trend.”
About Bridge Industrial
Bridge Industrial (www.bridgeindustrial.com) is a privately-owned, vertically integrated real estate operating company and investment manager that focuses on the acquisition and development of Class A industrial real estate in the supply constrained core industrial markets of Chicago, Miami, New Jersey/New York, Los Angeles/San Francisco, Seattle, and London. Since its inception in 2000, Bridge has successfully acquired and developed more than 48 million square feet of industrial buildings/projects valued at more than $7.8 billion.
About PSP Investments
PSP Investments is one of Canada’s largest pension investment managers with approximately $169.8 billion of net assets as of March 31, 2020. It manages a diversified global portfolio of investments in public financial markets, private equity, real estate, infrastructure, natural resources and private debt. Established in 1999, PSP Investments manages net contributions to the pension funds of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montreal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow PSP Investments on Twitter and LinkedIn.
This is a great deal for PSP Investments in the red-hot logistics area.
Why logistics? Stéphane Jalbert, PSP’s Managing Director for Europe and Asia Pacific, Real Estate Investments states it in the press release: “Urban logistics is a key sector for PSP globally, given the accelerated growth of e-commerce and the need to adapt real estate to meet shifting consumer behaviour. Bridge has proven development capabilities from which the venture will benefit, enhancing returns beyond the sector trend.”
Founded in 2000, Bridge Industrials (Bridge) is a vertically integrated real estate operating company and investment manager focused on the development and acquisition of industrial properties in supply-constrained core markets in the US and the UK.
The company has six offices spread across the US and one in London.
Bridge leverages its local offices and expertise to identify, execute and
manage opportunities on behalf of its institutional capital
partnerships.
It manages investment vehicles across the risk/return spectrum and focuses on three main strategies:
- Build-To-Core: Development of irreplaceable infill industrial properties for long-term ownership and cash flow.
- Value-add: Acquiring existing infill industrial properties to create value through leasing, redevelopment, and capital improvements.
- Core/ Core-Plus: Acquire best-in-class industrial properties in Bridge’s core infill markets to benefit from long-term ownership and cash flow.
The joint venture with PSP has a build-to-core focus, including the acquisition and development of last-mile logistics assets within high-barrier infill submarkets in Greater London and the Midlands region.
Bridge will oversee development and the implementation of value-add measures to create state-of-the-art, purpose-built infill industrial assets. The venture will target market-leading sustainability credentials.
The joint venture is targeting a portfolio value of £1 billion ($1.4 billion USD) to acquire and develop logistics properties in the United Kingdom, which is a sizable deal for PSP and especially for Bridge.
In fact, since its inception in 2000, Bridge has successfully acquired and developed more than 48 million square feet of industrial buildings/projects valued at more than $7.8 billion.
So a $1.4 billion joint venture with a pension fund the size of PSP is a big deal, I'm pretty sure it's the only joint venture Bridge has done with a large pension (from what I can see).
In PSP, Bridge gains a solid long-term strategic partner as it looks to grow its global portfolio and capital partnerships.
For PSP, it gains the operational expertise of this real estate company which specializes in logistics properties and it can develop a long-term relationship with it and really leverage off this relationship given the sizable commitment it is making in this joint venture.
Lastly, as stated above, PSP has roughly 19 percent of its $24 billion real estate book in the industrial sector as at March 30, 2020 (new fiscal year results are not released yet).
It's important to note, PSP's massive real estate portfolio is very well diversified across geographies and sectors, an approach that goes back to the days Neil Cunningham, its CEO, was in charge of that portfolio as they diversified it based on long-term secular trends.
That tells me PSP's real estate portfolio most likely didn't experience the same hit that some of its large Canadian peers experienced last year but I'm just guessing as the official results aren't out yet.
Below, over 900 people registered for Colliers latest UK Industrial and Logistics webinar which took place earlier this year. Take the time to watch this, it's excellent and provides great insights.
Also, earlier this week, PSP Investments' President and CEO, Neil Cunningham, was interviewed in a virtual event hosted by the Canadian Club of Montreal. I wrote about it here and you can watch it below.
Update: On Friday morning, Reuters reports that private equity firm Blackstone Group has made a 1.21 billion pound ($1.68 billion) buyout proposal for St. Modwen Properties, sending shares in the British real estate developer soaring:
The potential offer comes at a time when the housebuilder and logistics firm, which counts e-commerce players Amazon UK, DHL and Ocado as clients, has seen a growth in warehousing demand due to online shopping during the pandemic.
...The Birmingham-based company builds homes, owns and manages several industrial and logistics assets in Britain and develops sites for housebuilding, commercial and other projects.
The Evening Standard also notes that St Modwen’s bumper logistics property business is likely to be what has attracted Blackstone as the takeover target has a pipeline of 19 million square feet of warehouse space it could build.
This is further validation that logistics properties all over the world continue to be a hot commodity and PSP Investment's joint venture with Bridge Industrial will prove to be a great long-term investment.
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