AIMCo and OMERS Beef Up Their Industrial Properties Portfolios

 

AIMCo put out a press release on it acquired two logistics warehouses in Dunstable, UK:

Alberta Investment Management Corporation (AIMCo), on behalf of certain of its clients, has acquired two recently completed logistics warehouses in Dunstable, U.K., from a fund managed by AXA IM Alts and which have been developed by Baytree Logistics Properties.

Unit A is a 267,000 sq ft warehouse let to UPS for a term of 5 years with a break at year 3. The building is rated as BREEAM “Excellent” and was awarded “Building Project of the Year” in the Business Green Awards 2019.

Unit B is a 143,000 square foot warehouse let to Amazon for a term of 15 years. The building is a build-to-suit Amazon “Delivery Station” to service the ‘last mile’ of the delivery process, where packages received from fulfillment and sortation centres are loaded into vans which deliver directly to customers. Features include a multi-storey van deck with electric charging provision to store and charge Amazon’s fleet of delivery vehicles and a 6-lane canopied area accommodating 72 van loading bays.

The two properties sit on a combined site area of 33 acres and are located in a core South East location, strategically located just 40 miles north west of London and 3 miles west of the M1 motorway.

Rupert Wingfield, Head of European Real Estate at AIMCo, commented: “We are very pleased to add these prime assets to our clients’ U.K. logistics portfolios. In addition to solid real estate fundamentals, the buildings’ strong green credentials are important to us and align closely with AIMCo’s commitment to responsible investment.”

Oxenwood Real Estate will manage the assets on behalf of AIMCo.

About Alberta Investment Management Corporation

AIMCo is among Canada’s largest and most diversified institutional investment managers with more than $150 billion of assets under management. AIMCo invests globally on behalf of 32 pension, endowment and government funds in the Province of Alberta. For more information about AIMCo please visit www.aimco.ca or follow us on LinkedIn or Twitter.

This is an excellent investment for AIMCo and its clients.

Two prime logitics properties in the UK let by Amazon and UPS serving London and surrounding areas. 

Moreover, as Rupert Wingfield, Head of European Real Estate at AIMCo, states: "In addition to solid real estate fundamentals, the buildings’ strong green credentials are important to us and align closely with AIMCo’s commitment to responsible investment.” 

Recall, along with CDPQ and BCI, AIMCo was named a leader in this year's Responsible Asset Allocator Initiative (RAAI) leaders list (see details here).

After I wrote that comment, Dénes Nemeth, Vice President Corporate Communications & Public Affairs, got back to me stating this:

Thank you again for posting on this topic. The acknowledgement from RAAI speaks volumes to the excellent work that AIMCo and Canada’s most responsible asset allocators are doing every day to serve the needs of our clients. We must find a time for you to learn more about AIMCo’s Responsible Investment practices, but in the meantime, I would share the attached from Alison Schneider, Vice President, Responsible Investment at AIMCo:

Thank you for your interest in learning more about AIMCo’s Responsible Investment (RI) program. We were certainly humbled and gratified to be acknowledged as an RAAI leader for the third year in a row! You may find it noteworthy to know that AIMCo’s RI journey began in 2010, when we became a signatory to the UN-backed Principles for Responsible Investment (PRI) – and our approach to RI was influenced by the PRI’s framework. I’ve copy-pasted a timeline for your convenience which details several highlights of our RI journey over the past decade:

By viewing AIMCo’s assets through an ESG lens, we believe we can add value and ensure we are protecting our clients’ interests over the long term. Our three responsible investment strategic priorities are:

1. Integrating ESG into the investment process
2. Advancing stewardship & advocacy
3. Navigating the transition to low-carbon economy

I’d be happy to connect with you to share more details on our RI program at AIMCo, such as how we align ESG strategies across asset classes, our work in collaborative RI focused initiatives such as GRESB and our progress in addressing climate risk and the Task Force for Climate-related Financial Disclosures recommendations.

Our latest RI Report, TCFD Report, and our RI related policies, guidelines and further details on our RI work are available on our website at: https://www.aimco.ca/what-we-do/responsible-investing. If you have any questions or we can provide additional information, please let us know.

I thank Dénes for getting back to me and look forward to covering how AIMCo aligns ESG strategies across asset classes with Alison in the near future.

Clearly, responsible investing is critical to all these pensions and they are adopting their ESG strategies across public and private markets.

In another major logistics deal, Oxford Properties, OMERS's real estate subsidiary, announced that it will establish a joint venture with EverWest to accelerate US light industrial portfolio growth:

Supporting its belief in the power of logistics to uphold the digital economy, Oxford Properties Group (‘Oxford’) today announced the formation of a joint venture (‘JV’) with EverWest Real Estate Investors (‘EverWest’) to accelerate Oxford’s U.S. infill industrial portfolio growth. Oxford, a leading global real estate investor, asset manager and business builder, alongside commercial real estate investment advisor, manager and developer EverWest, will seek to acquire and develop approximately US$1.0 billion (gross asset value) of infill, small-bay, industrial properties across the U.S. Alongside its formation, the JV also announces the acquisition of six initial assets totalling more than 1.1 million SF across Denver, San Diego, Portland, Phoenix, Houston and Nashville, at a combined value of ~US$160 million.

The JV will target a mix of core-plus, value-add investments and developments, focusing primarily on infill industrial properties across major U.S. high growth industrial markets. Benefitting from proximity to urban centres, the properties will be well positioned to meet the rapid increase in demand for fulfilment needs and provide occupiers locations close to their customer base.

Oxford will provide the primary source of capital and drive overall strategy for the JV, with EverWest leading the acquisitions and day-to-day operations for each asset. The JV is positioned to operate over the medium term to aggregate a sizeable industrial portfolio such that Oxford can retain long-term value once the venture concludes.

“As Oxford continues to expand its industrial business across North America, our strategic partnership with EverWest, which offers strong operational and development management capabilities, will accelerate and diversify our investment plan to meaningfully grow our national footprint,” said Chad Remis, Executive Vice President, North America at Oxford Properties.

“EverWest has built a reputation for successful strategic collaboration with our investment partners over the past few decades,” said EverWest Founder and CEO Rick Stone. “We are proud and excited to continue that tradition with the Oxford team, providing our unparalleled industrial acquisition capabilities and working side-by-side to further diversify Oxford’s U.S real estate exposure with quality, performance-focused investments.”

“Our investment is based on an immediate go-to-market aggregation opportunity that exists today in the industrial sector and, in partnering with EverWest, we have found an operator with the proven experience and know-how to support Oxford’s continued growth in the sector,” said Ankit Bhatt, Vice President, Investments at Oxford Properties. “As one of the multiple avenues we’re employing to expand our overall U.S. industrial business, this partnership will accelerate the buildout of our national light industrial platform and complements our recently acquired $2.2 billion infill portfolio from KKR, and existing 50% investment in IDI Logistics, a top-tier U.S. modern logistics developer. With strong market fundamentals and growth prospects, industrial remains one of our highest conviction sectors and core to Oxford’s North American strategy.”

Part of a thematic global capital allocation strategy, Oxford has substantially grown its U.S. industrial business over recent years. The company has invested across three main U.S. logistics verticals — big-box, infill light industrial, and niche/alternatives. In January 2019, it acquired leading big-box platform IDI Logistics alongside Ivanhoe Cambridge for US$3.5 billion. In 2020, it became a significant investor in Lineage Logistics, the world’s leading cold storage logistics provider.

This August, Oxford announced its acquisition of a 14.5 million square foot infill and light industrial portfolio from KKR for approximately US$2.2 billion. The portfolio consists of 149 high-quality distribution buildings strategically located across 12 major industrial U.S. markets, including the Inland Empire, Dallas, Atlanta, Phoenix, Chicago, Houston, Tampa, Orlando, San Diego and the Baltimore-Washington corridor.

In September, Oxford announced it had completed its acquisition of M7 Real Estate, a market-leading pan European logistics investment and asset manager. As a result of the transaction, Oxford is rapidly closing in on its goal to drive value by deploying one third of its equity in global logistics as it continues to invest in, build and buy the physical infrastructure that serves the digital economy.

In August, Oxford did acquire KKR's industrial real estate portfolio for US$2.2 billion:

Oxford Properties Group (‘Oxford’), a leading global real estate investor, asset manager and business builder, today announced it has agreed to acquire a 14.5 million square foot infill and light industrial portfolio from KKR, a leading global investment firm, for approximately US$2.2 billion. The portfolio consists of 149 high-quality distribution buildings strategically located across 12 major industrial U.S. markets, including the Inland Empire, Dallas, Atlanta, Phoenix, Chicago, Houston, Tampa, Orlando, San Diego and the Baltimore Washington corridor. The transaction is anticipated to close in the coming months.

”High quality, infill, consumption-driven industrial portfolios of scale trade infrequently, so this transaction is an important next step for Oxford to build a large scale industrial business in the U.S.,” commented Ankit Bhatt, VP of Investments at Oxford Properties who leads the firm’s U.S. industrial investment strategy. “Growing our U.S. industrial business is one of Oxford’s highest conviction global investment strategies as we continue to build, buy and invest in the physical infrastructure that serves the digital economy. The acquisition serves as a launchpad for Oxford’s light industrial business which perfectly complements our big box development platform, IDI Logistics. We believe scale will become an important differentiator for industrial real estate operators, and we continue to pursue opportunities in the U.S. light industrial sector.”

Oxford has substantially grown its global industrial business in recent years. In January 2019, it acquired IDI Logistics alongside Ivanhoe Cambridge for US$3.5 billion. In 2020, it became a significant investor in the U.S.-based Lineage Logistics, the world’s leading cold storage logistics provider. Oxford was a cornerstone investor in the IPO of ESR Cayman, the leading logistics real estate platform in Asia, and follow-on investments have made it one of the largest institutional investors in the company. In January this year, it announced it had agreed to acquire M7 Real Estate (‘M7’), a market-leading pan European logistics investment and asset manager. The acquisition of M7 accelerates Oxford’s ability and ambition to deploy more than US$4 billion into European industrial real estate by 2025.

“Across the globe, we are building, buying and growing world class industrial business in service of our global capital allocation priorities,” commented Chad Remis, EVP of North America at Oxford Properties. “As a result of this transaction, and recent activity in the sector, we are rapidly closing in our stated goal to have one-third of our global equity deployed into the industrial asset class. Having previously been a mezzanine lender on the portfolio acquired from KKR, we have a high degree of conviction on the growth potential of these assets. It also demonstrates the power of Oxford’s fully integrated Credit business to help drive future investment synergies while generating attractive returns.”

Since 2018, KKR strategically aggregated and scaled this portfolio of well located, high barrier to entry infill warehouses with a focus on high-growth markets with diverse multi-faceted demand drivers, near major supply chain hubs and transportation corridors. Roger Morales, Partner and Head of Real Estate Acquisitions, and Ben Brudney, Director on KKR’s real estate team leading its logistics efforts, architected the strategy and assembled the portfolio though more than 50 individual property transactions together with KKR’s industrial operating platform, Alpha Industrial Properties.

“Four years ago, we set out to create a large stabilized portfolio that would benefit from secular changes in the logistics sector largely driven by e-commerce and consumer preference changes. Given the highly fragmented asset class, the strategy included the creation of a best-in-class operating platform and a targeted investment effort focused on growing cities and key distribution nodes in the U.S.,” said Mr. Morales. “Today’s transaction not only demonstrates how this strategy is performing for our investors, but also reflects the tremendous market opportunity we continue to see in industrial real estate.”

Following the completion of the sale of the portfolio, KKR will continue to own over 20 million square feet of industrial property across major metropolitan areas in the U.S. Since launching a dedicated real estate platform in 2011, KKR has grown real estate assets under management to approximately $32 billion across the U.S., Europe and Asia as of June 30, 2021. KKR’s global real estate team consists of over 110 dedicated investment professionals, spanning both the equity and credit business, across 11 offices and eight countries.

CBRE National Partners acted as real estate advisor for KKR. JLL Industrial Capital Markets acted as advisor for Oxford.

No doubt, Oxford Properties is scaling into industrial properties in a meaningful and intelligent way, buying KKR's industrial portfolio and developing other properties with top operators. 

Did you catch what Chad Remis, EVP of North America at Oxford Properties stated here:

 “As a result of this transaction, and recent activity in the sector, we are rapidly closing in our stated goal to have one-third of our global equity deployed into the industrial asset class. Having previously been a mezzanine lender on the portfolio acquired from KKR, we have a high degree of conviction on the growth potential of these assets. It also demonstrates the power of Oxford’s fully integrated Credit business to help drive future investment synergies while generating attractive returns.”

Like I said, this is a phenomenal deal which they did in a very intelligent way, allowing them to scale quickly and close in on their goal to have one-third of their global equity deployed in industrial properties, a high conviction sector.

Earlier this week, I went over my recent discussion with Deborah Orida, CPP Investments' Chief Sustainability Officer and Global Head of Real Assets, where she told me that they have 30% of their $46 billion real estate portfolio in industrial properties, adding "we were first movers in this sector and it paid off nicely."

They aren't alone. HOOPP also identified industrial properties as a high conviction sector earlier than its peers, It has 32% allocated to this sector, allowing its Real Estate portfolio to return 0.2% on a currency-hedged basis last year when most of its peers suffered double-digit losses (see details here).

Then there is Ivanhoé Cambridge, CDPQ's massive real estate subsidiary. I spoke to its CEO Nathalie Palladitcheff last week and even though the focus of our conversation was ESG, I know they're beefing up their industrial properties all over the world.

The Oxford press release above mentions that in January 2019, it acquired IDI Logistics alongside Ivanhoé Cambridge for US$3.5 billion.

Today, I saw on Linkedin that LOGOS Group and its capital partners, AustralianSuper, AXA Investment Managers, TCorp and Ivanhoé Cambridge, on successfully completing the acquisition of the property components of Moorebank Logistics Park (MLP):

 

In February, BCI's real estate subsidiary, QuadReal, announced it entered into a strategic partnership with the GPT Group to establish a 50:50 joint venture with the objective to acquire and develop a high quality portfolio of Australian prime logistics assets, with an initial targeted investment of $800 million.

In June, QuadReal and CPP Investments upped their stake in GLP Continental Europe Development Partners Ib $1.7 billion:

Andrea Orlandi, Managing Director, Head of Real Estate Investments – Europe, CPP Investments, said, “GLP CDP I is a key part of our development-led growth strategy in the logistics sector globally. Given the success of the venture to date, we are pleased to be continuing and expanding our partnership with GLP and QuadReal. We have a strong conviction in the logistics and warehousing sector and the ability of GLP to execute on our strategy, enabling us to deliver long-term sustainable returns for our contributors and beneficiaries in Canada.”

Jay Kwan, Managing Director, Head of Europe, QuadReal, said, “Expanding our venture with GLP and CPP Investments was a natural evolution of our partnership given its success to date, continued favourable market conditions and strong relationships created with tenants. We’re pleased to be investing alongside two partners with whom we have a lockstep relationship.”

Since entering the European market in 2017, GLP has more than tripled its AUM. Following the upsize of GLP CDP I, GLP now manages more than €12 billion (~US$13 billion) of AUM across Europe’s strongest logistics markets.

Anyway, I started off talking about AIMCo and OMERS beefing up their industrial properties portfolios but as you can see, their peers are definitely active in this space. 

Clearly, logistics remains a high conviction sector for all of Canada's large pensions but some are ahead of others in their allocations. 

Below, high rents and demand for warehouse space coupled with unprecedented low vacancy rates have put the European logistics real estate sector firmly on investors’ radars. Experts share their opinions at an Investec Property Fund Pan-European Logistics Conference.

Update: On Thursday, Ivanhoé Cambridge announced it will strengthen its Hub & Flow logistics platform with the acquisition of a 92,000 m2 warehouse in Fos-sur-Mer, near Marseille:

Ivanhoé Cambridge announces the acquisition of a new logistics platform in Fos-sur-Mer, in the Bouches-du-Rhône region of France, from Faubourg Promotion (Groupe IDEC). Ideally located in the heart of an industrial zone, this asset of more than 92,000 m² will benefit from a strategic location in the “European backbone,” at the crossroads of France, Spain and Italy. This brand-new logistics warehouse is being developed in three phases. The first two, totalling 68,600 m², have already been delivered and leased to the Adéo Group (Leroy Merlin), the world’s third-largest retailer of consumer goods for the home improvement and décor sectors. The third phase, with a surface area of 23,648 m², will be delivered by mid-2023.

At the junction of three French regions with strong demographic growth, the asset is located close to numerous national and regional roads, making it easy to reach the main economic, industrial and transport hubs, in particular Marseille, located 50 kilometres away. In addition to immediate access to the port of Marseille – Fos, France’s second-largest port, the location of this warehouse features access to a substantial, high-quality employment pool, while enabling the activities located there to reach 12 million consumers within five hours by road.

This transaction is in line with Ivanhoé Cambridge’s logistics strategy in Continental Europe. In February 2020, the company acquired Hub & Flow, a portfolio of logistics assets in the main hubs of Paris and Lyon, which was completed in November 2020 with a 36,000 m² logistics platform in Roye (Hauts-de-France) and, in July 2021, with a 49,000 m² warehouse in Mer, southwest of Orléans. The addition of this new asset brings the Hub & Flow portfolio to 20 assets for a total of 600,000 m². Thanks to the signing of two new tenants at the Saint-Quentin-Fallavier site, the Hub & Flow portfolio has now a 94% occupancy rate.

This latest-generation Fos-sur-Mer platform (Class A) will feature high environmental standards (BREEAM Very Good) and 46,000 m² photovoltaic roofs. The solar energy generated will be redistributed to the regional network. The Panhard Group, which is already managing the Hub & Flow portfolio, will continue its work on this new warehouse.

“This acquisition strengthens our Hub & Flow logistics portfolio and rebalances our geographical coverage in the south of the European backbone, enabling us to cover the Marseille – Aix area and population. It also demonstrates Ivanhoé Cambridge’s ability to adapt developers’ needs by promoting or co-promoting developments, participating in VEFAs or, in this case, forward sales for Fos-sur-Mer,” says Arnaud Malbos, Head of Investments, Europe, Ivanhoé Cambridge.

Ivanhoé Cambridge was advised in this transaction by Allez & Associés, Gid e Loyrette Nouel, Lacourte Raquin Tatar, Panhard, Etyo, and BNP Paribas Real Estate. The transaction was completed by Capital Return Opportunity.

Great acquisition and only strengthens the argument that logistics properties remain a high conviction sector for all of Canada's large pensions.  

Update: See my comment on how CPP Investments will form a US$1.1 billion joint venture with Bridge for build-to-core industrial assets in the United States. Recall, I covered Bridge back in May when it and PSP Investments 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.