Ivanhoé Cambridge Signs Eight Leases in its Hub & Flow Portfolio in France

Today, CDPQ's real estate subsidiary Ivanhoé Cambridge announced 170,000 square meters leases in its Hub & Flow logistics portfolio in France:

Paris, France, May 30, 2023 – Ivanhoé Cambridge, a global real estate leader, is proud to announce that it has signed eight leases for assets of its Hub & Flow logistics portfolio in France. These leases cover a total surface area of nearly 170,000 square meters.

The Hub & Flow portfolio currently comprises 17 logistics platforms across France with a total surface area of some 510,000 square meters.

Originally acquired in February 2020, the portfolio has since been expanded through acquisition of two assets for development in Mer (south of Orléans) and Roye (midway between Paris and Lille), plus a new asset in Fos-sur-mer (near Marseille). It has also been extended in Continental Europe with, among others, the May 2022 acquisition of a 115,000 m² asset in Hamburg, Germany, 100% leased to H&M Group. The total surface area of the Hub & Flow portfolio in Europe is now 625,000 square meters.

“The Hub & Flow portfolio is especially attractive to tenants because these logistics facilities offer high quality and are strategically located, providing access to major highways,” says Martin Chevallier, Senior Manager, Asset Management, France, Ivanhoé Cambridge. “The closing of these leases further strengthens our position as a leading player in the French logistics market and reaffirms our diversification strategy in this industry.”

Back in September of last year, I discussed how Ivanhoé Cambridge partnered up with NVELOP to expand its logistics portfolio in Germany and provided little background for those who are not familiar with Hub & Flow:

In February 2020, Ivanhoé Cambridge acquired Hub&Flow, a portfolio of 17 logistics assets in the main hubs of Paris and Lyon, from The Carlyle Group:

Ivanhoé Cambridge has acquired a 430,000 m² (4,628,500 ft²) logistics portfolio, as well as its brand name Hub&Flow, from The Carlyle Group. It is one of the largest transactions in recent years in France’s logistics real estate market.

The portfolio, comprising 17 high-quality assets, ideally meets the market’s expectations and needs in terms of surface area (10,000 to 40,000 m² / 107,639 ft² to 430,566 ft²), technical specifications and location. The assets are situated within France’s logistics backbone, encompassing the country’s largest logistics hubs, serving all consumer markets.

This acquisition aligns with Ivanhoé Cambridge’s major transactions in logistics platforms in North America, Latin America and in the Asia-Pacific region, as well as the creation of PLP, an operating platform in the United Kingdom.

Karim Habra, Head of Europe and Asia-Pacific, Ivanhoé Cambridge, says: “This strategic investment marks a new chapter of our expansion in continental Europe with the aim of creating a leading logistics platform focused on the key European hubs. Like Hub&Flow, we intend to invest in top-quality assets that can benefit from future value creation. This portfolio, located at the heart of the main consumer areas, will enable Ivanhoé Cambridge to respond impeccably to the very strong demand generated by e-commerce.”

Peter Stoll, Managing Director and Head of the Carlyle Europe Real Estate team added: “We are delighted to have been able to work with Ivanhoé Cambridge for the sale of the Hub&Flow portfolio. This transaction marks the culmination of a major acquisition and asset management effort that has resulted in the creation of an institutional quality logistics portfolio focused on the Paris and Lyon markets, benefiting from a buoyant market environment in which we intend to remain active.”

Since then, Ivanhoé Cambridge has expanded its European logistics portfolio in Paris and other cities in France and more recently in Hamburg which was the first transaction for the Hub & Flow platform in Germany:

Berlin, Germany, May 16th, 2022 – Ivanhoé Cambridge strengthens its Hub & Flow logistics portfolio with the acquisition of a warehouse in Hamburg, Germany, from ADF Asset Management, a South Korea based asset management firm. This transaction is the first for the Hub & Flow platform in Germany, contributing to the portfolio’s geographical diversification in continental Europe.

Located near the port of Hamburg, Europe’s third-largest port in terms of freight transport, this logistics asset with a total surface area of 114,760 m², on a freehold land, benefits from a strategic location in continental Europe.

Ideally positioned in the Allermöhe business park, one of Hamburg’s most established logistics areas, the warehouse benefits from access to a major highway network serving more than 7 million consumers.

The Hamburg warehouse has benefited from several initiatives to improve its ESG performance, such as the installation of solar panels on the roof, enabling to develop a power supply with immediate tracking of the energy created and consumed. Efficient office space, conference rooms and a roof terrace are further core components of the utilisation concept.

The asset is 100% leased to H&M Group.

“With the acquisition of this first logistics asset in Hamburg, we continue to reinforce our presence in Germany, one of the key markets for our growth in Europe”, said Christian Daumann, Vice President, Investments, Germany at Ivanhoé Cambridge. “The growth of logistics is a major focus of our strategic plan, which aims, in particular, to triple the size of our logistics portfolio in Europe by 2025. We will therefore continue to build a resilient and diversified portfolio across the European continent.”

This transaction is in line with Ivanhoé Cambridge’s logistics strategy in Continental Europe, which was initiated by the Hub & Flow portfolio in February 2020 and continued with the acquisitions of three projects currently under development in Roye (Hauts-de-France), Mer (southwest of Orléans) and Fos-sur-Mer (Bouches-du-Rhône) in France. This portfolio complements Ivanhoé Cambridge’s European logistics operations, such as the partnership with PLP for the development of a first-class logistics portfolio in the United Kingdom and the collaboration with URBZ Capital as part of its strategy dedicated to last-mile logistics in Europe.

Ivanhoé Cambridge was advised in this transaction by Avison Young, Drees & Sommer and Allen & Overy.

Now, as Christian Daumann, Vice President, Investments, Germany at Ivanhoé Cambridge stated then: “The growth of logistics is a major focus of our strategic plan, which aims, in particular, to triple the size of our logistics portfolio in Europe by 2025. We will therefore continue to build a resilient and diversified portfolio across the European continent.”

And this is exactly what they are doing, executing on their strategic plan to triple the size of their logistics portfolio in Europe by 2025.

I covered a lot more here. 

I'm glad Ivanhoé Cambridge has signed eight leases for assets of its Hub & Flow logistics portfolio in France.

Logistics properties remain a very active area in commercial real estate as do multifamily properties. 

Unfortunately, Office and Retail remain the biggest drags on commercial real estate portfolios especially in North America.

Last week, I spoke with CPP Investments' CEO John Graham who told me they took major writedowns in Office and Retail in their North America portfolio but some locations are doing better than others:

If you read the annual report, you'll see we try to put a lot of rigor into our valuation process. I wouldn't make blanket statements on private valuations. As I highlighted, there are some markets that are still quite robust, the renewable energy and infrastructure space, but Office is in a price discovery mode for sure, trying to find a clearing price (bid-ask spread). As you highlighted, one of the challenges is you can't do a transaction without the financing up, you highlighted bad commercial real estate loans sitting on the bank books and one of the implications of that is availability of commercial credit going forward and is this going to amplify any type of monetary policy in the broader market and I think that's a big question. We are going to see a contraction of credit because of commercial real estate woes.

In real estate, location. Some markets around the globe are in better shape than others, for sure. We see it in our data. Some of our offices in Hong Kong, Dubai and London are almost back at pre-Covid levels of attendance whereas n North America, we are probably sitting at 60% attendance. 

For us, we took some big markdowns in our US office portfolio and in the retail portfolio too. Our portfolio is class A, higher quality buildings, we are not going to sell, we are going to wait for supply and demand to come back in equilibrium. We do believe they will come back in equilibrium, but for lower quality buildings, it will be problematic for a long time.

I suspect the same is going at Ivanhoé Cambridge, they are looking at their immense global portfolio, writing down assets where warranted.

As I said, logistics and multifamily remain hot areas but if we head into a major global downturn over the next 6 to 12 months, even those portfolios will experience some challenges.

Remember, no large Canadian pension fund has gone through a 70s style prolonged global downturn with the public/ private portfolios they have, so it will be interesting to see how they navigate through a major global recession which lurks for a couple of years.

I know, as long as the Nasdaq led by a few AI stocks keeps grinding higher, we will avert a major recession.

I wouldn't bet on this and as far as France specifically,  its credit rating was recently reduced to negative from stable by Scope Ratings, raising questions about President Emmanuel Macron’s efforts to spur growth and reduce a crisis-swollen debt burden.

Europe makes me very nervous these days, we can probably coast by the summer and then going into the fall and winter, I fear the worst lies ahead. 

Still, any downturn in Europe, the US and elsewhere will present Canada's large pension funds opportunities to seize opportunities as they arise.

In other related news, Ivanhoé Cambridge was recognized as the Global Real Estate Investor of the Year at the 2023 IPE Real Estate Global Awards, winning a total of nine accolades:

We were honoured to win the Global Real Estate Investor of the Year award at the 2023 IPE Real Estate Global Conference & Awards, held May 16^th in Milan.

This award recognizes the work and professionalism of all our teams globally, and we salute the daily commitment of the women and men who implement our strategy. It particularly highlights our achievements in recent years and the successful transformation of our business model to prioritize our role as an investor and to reposition our portfolio in the most promising sectors.

The jury commented: “There is so much that is being done right at Ivanhoé Cambridge, that one does not know where to start. In the past two years alone, it has truly stood out by demonstrating extreme agility in massively repositioning its footprint in response to post-COVID structural changes in the global real estate market.”

Over the past three years, our strategic transformation materialized through 250 transactions totalling C$27 billion. Our C$77 billion portfolio is now more geographically and sectorally diversified, thus strengthening our resilience and performance. In fact, more than half of our 2022 performance was generated by investments less than five years old.

Our investment strategy widely recognized

Since 2020, portfolio construction has been at the heart of our transformation, and we were proud to receive the Portfolio Construction award. In particular, the members of the jury highlighted that our “portfolio optimization is very strong, based on forecasting and comparisons between underwriting, asset managers and appraisers”. Indeed, we embrace a perpetual cycle where we define, test, and challenge our convictions while quickly transitioning to the optimal portfolio allocation.

Our global investment strategy received top honours in the Opportunistic and Value-added categories. These were welcome recognitions as our opportunistic approach accounts for more than half of our investment plans over the next four years, and our value-added strategy represents 11 % of our efforts.

In 2022, Ivanhoé Cambridge invested and committed more than C$ 6 billion in new opportunistic investments and developments and more than C$ 2.5 billion in new value-added strategies. This mainly included commitments in residential, logistics, and projects and properties linked to life sciences and technology in a large variety of markets.

Ivanhoé Cambridge also won three regional awards:

• Investment in Asia Pacific where we committed more than C$3.2 billion and completed 15 transactions, with a focus on the residential, logistics, and life sciences sectors.
• North America and Investment in North America, our portfolio’s largest region by far. In 2022, we invested C$10 billion and completed 34 transactions as we focused on diversification and resiliency while embedding ESG at every step.   

These accolades shine a spotlight on our diversification strategy and are a testament to the expertise and drive of our local teams.

Our performance over the last few years shows that we are now positioned in the right growth sectors and that we are fully capable of weathering headwinds. Our new organizational structure based on geographical hubs, implemented early in 2022, was instrumental in giving us greater flexibility and increased synergies in our portfolio-building and investing strategies.

Sustainable investment at the heart of our mission and vision

Our desire to rethink the real estate of the future has also led us to fully integrate sustainable investment and ESG factors into our decision-making. Our commitments and our results in that field were lauded by the jury as we won the ESG award and the Environmental Sustainability award.

Our ambition remains to be carbon-neutral by 2040. Our efforts and actions in recent years have already yielded results. By the end of 2022, we had reduced the carbon intensity of our portfolio by more than 30% compared to 2017, and we made more than C$3.3 billion in new low-carbon investments between 2020 and the end of 2022. Finally, 60% of our properties have received at least one “green” certification in recent years.

Our commitment, however, is not limited to environmental and climate issues. We are also looking to make a meaningful and lasting difference within our communities by promoting diversity, equity and inclusion (DEI) and increasing our impact on affordable housing.

Going forward, we intend to maintain this innovative approach to sustainable investment for the benefit of our property occupants and employees. We will continue to optimize our portfolio to meet the needs of tomorrow while seeking to achieve superior relative performance in order to create value for our depositors.

The full list of awards and winners is available on the IPE Real Estate website: Winners 2023: IPE Real Estate Global Conference & Awards 2023 (swoogo.com)

I commend all of Ivanhoé Cambridge's employees and their leader, Nathalie Palladitcheff and their COO Michèle Hubert who recently discussed their agility and evolution. 

I would say the biggest thing Nathalie and her team did was reorient this massive portfolio away from non-performing assets in retail into growth assets like logistics, residential, life science and other niche and growing assets.

All of Canada's large pension funds have done this including Cadillac Fairview, OTPP's real estate subsidiary, which is in the midst or repositioning its portfolio geographically and by sector.

Below, Nathalie Palladitcheff, Ivanhoe Cambridge CEO, joins ‘Squawk on the Street’ to discuss the state of the global real estate market and corporate real estate stress.

Second, Breaking Points' Krystal and Saagar discuss commercial real estate taking major losses as the reverberations from the pandemic continue, stating LA, Washington and other cities are seeing a collapse in office real estate.

Also, Breaking Into CRE discusses the domino effects of rising interest rates on commercial real estate in 2023. Over the past few weeks, CBRE released their Q1 2023 figures for each of the 4 major real estate product types (multifamily, industrial, office, & retail) along with their US Capital Markets and US Lending Figures reports, each of which included some really interesting insights into the state of the commercial real estate market and what's going on in the industry right now.

Lastly, Patrick Carroll, Carroll Founder and CEO , joins 'Squawk on the Street' to discuss signs of weakness in the housing market, the commercial real estate crisis, and the repurposing office buildings as more people work remotely.

Again, I want to stress that most of the destruction taking place in commercial real estate is in specific markets and in class B and C buildings that are obsolete. 

But if we do see a major global economic recession that lingers for a few years, no sector or geography will escape the carnage in commercial real estate. And let's hope we never see another pandemic during our lifetime!