Ivanhoé Cambridge Partners With NVELOP to Expand Hub & Flow in Germany

Last week, Ivanhoé Cambridge announced it is partnering up with NVELOP to expand its logistics portfolio in Germany:

Berlin, Germany, September 13^th, 2022 – Ivanhoé Cambridge, the global real estate firm, strengthens its commitment to the German logistics market by partnering with the logistics real estate specialist NVELOP. With NVELOP as a specialized developer, investor and manager of logistics and industrial real estate as well as data centers in Germany and Europe, Ivanhoé Cambridge continues to expand Hub & Flow, its continental European logistics portfolio which aims at building a platform of logistics properties along key supply chains.

Ivanhoé Cambridge plans to invest in logistics real estate opportunities from development to core-plus in Germany. NVELOP will provide project development expertise and be responsible for asset management of the properties. Ivanhoé Cambridge aims to deploy around €200 million in its first investment phase, with the potential for further investment phases.

In line with the stated strategy, Ivanhoé Cambridge has made its first investment, acquiring a prime 72,000 sqm logistics development project in the Frankfurt market.

Christian Daumann, Vice President, Head of Investments, Germany, Ivanhoé Cambridge commented: “We are pleased to team up with an experienced project developer with whom we can optimally leverage opportunities in the German logistics real estate market. Based on a long-lasting relationship with the founders of NVELOP, we are convinced we can jointly identify and implement development opportunities with a strong emphasis on large-scale developments. Furthermore, this partnership demonstrates our strong ambition in the logistics market in Europe, a major focus of our strategic plan.”

Logistics properties have become a mainstay for a future-proof real estate portfolio. The sector has been benefiting from two structural trends, urbanization and the ongoing digitalization of the economy which has accelerated significantly with the pandemic. Ivanhoé Cambridge’s European logistics operations allows it to create and own assets that are essential to the current evolution of the supply chain throughout Europe.

Artie Ioakim, co-founder and Chief Investment Officer, NVELOP, added: “We are very proud to be partnering with Ivanhoé Cambridge to launch NVELOP’s first programmatic development partnership. We look forward to working together to capture the opportunities and strong long-term dynamics we see in the German logistics property sector.”

Ivanhoé Cambridge’s logistics strategy in continental Europe was initiated with the Hub & Flow portfolio in February 2020 and, most recently, the company acquired an approximately 115,000 square-meter logistics property in Hamburg. This portfolio complements Ivanhoé Cambridge’s European logistics operations, such as the partnership with PLP for the development of first-class logistics properties in the United Kingdom and the collaboration with URBZ Capital as part of its strategy dedicated to last-mile logistics in Europe.

A 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.

When I covered the Hamburg deal back in June, I said this:

I looked into CDPQ's 2021 Annual Report which you can download here and checked out the geographic and sector exposures for Real Estate on page 47:

As you can see, over the last five years, exposure to the US, Europe and Asia Pacific increased while there was a decrease in Canada, mostly in Retail and Offices, while residential (multifamily) and especially logistics saw a sharp increase in exposure during that time.

The push toward logistics started before the pandemic and accelerated throughout it.

Now, tripling the size of its logistics portfolio in Europe by 2025 sounds ambitious but it's definitely achievable.

The time is ripe for European investments. The war in Ukraine and the ECB's loose monetary policy have sent the euro to multi-year lows relative to the US dollar and now is the time to take advantage of opportunities there across public and private markets:

Apart from the weak euro, however, there are secular reasons to invest in logistics properties throughout Europe, Germany and France being the focus but other areas too.

The rise in e-commerce is a global phenomena, as consumers become more comfortable buying things online, they have packages constantly shipped to their homes, you need logistics properties especially for that last mile (or kilometer) to deliver all these goods.

What about inflation roaring in Europe, especially in Germany? No doubt, there are serious economic headwinds in Germany and Europe, the same thing is going on in North America except the Fed and Bank of Canada are already raising rates and the ECB will follow suit.

But I don't want people getting caught up in short-term macro analysis.

Pensions funds invest in long duration assets (real estate and infrastructure) because they are able to weather these storms.

When it comes to logistics properties, focus on the secular theme and it remains a strong one.

The euro remains weak relative to the US dollar, there is a full-blown energy crisis in Germany and the rest of Europe. The risks of a serious recession are rising as the ECB has started hiking rates aggressively, effectively ending its ultra-loose monetary policy.

A recession in Europe will hit all assets but the good thing with real estate is just like infrastructure, there is an embedded inflation protection component and if you own quality assets, you can keep your vacancy low.

This is why as rates rise all over the world, Canada's large pension funds are focusing on logistics and multifamily properties in key areas where opportunities lie. 

Back to the NVELOP deal.

I note this is NVELOP’s first programmatic development partnership but as Christian Daumann, Vice President, Investments, Germany at Ivanhoé Cambridge states: "Based on a long-lasting relationship with the founders of NVELOP, we are convinced we can jointly identify and implement development opportunities with a strong emphasis on large-scale developments."

NVELOP is a specialist developer, investor and manager of logistics, industrial and data center properties in Europe.

If you look at its website, you'll see its two founders, Blake Horsley (CEO) and Artie Ioakim (CIO) have extensive development and transaction expertise across Europe and they are experts in logistics properties.

I also note this on their strategy:

Over the past five years, our team has managed over €2 billion of logistics and industrial developments across nine European countries. 

We are passionate about creating innovative real estate solutions for our clients.

Initial focus on acquiring land sites in Germany to develop logistics, industrial and data centre properties.

Our long term objective is to be a leading developer, investor and manager of logistics, industrial and data centre properties across Europe.

In the short term, our focus is on Germany – where we see an opportunity to generate attractive risk-adjusted returns through development.

NVELOP will provide project development expertise and be responsible for asset management of the properties:

 

The press release states Ivanhoé Cambridge plans to invest in logistics real estate opportunities from development to core-plus in Germany and aims to deploy around €200 million in its first investment phase, with the potential for further investment phases.

The release also states in line with the stated strategy, Ivanhoé Cambridge has made its first investment, acquiring a prime 72,000 sqm logistics development project in the Frankfurt market.

This demonstrates that despite what is going on in Germany and Europe right now, Ivanhoé Cambridge and NVELOP are focusing on finding opportunities for the long run and are already starting to develop logistics properties in the Frankfurt market.

It's important to focus on the long run and this part of the press release explains why:

Logistics properties have become a mainstay for a future-proof real estate portfolio. The sector has been benefiting from two structural trends, urbanization and the ongoing digitalization of the economy which has accelerated significantly with the pandemic. Ivanhoé Cambridge’s European logistics operations allows it to create and own assets that are essential to the current evolution of the supply chain throughout Europe.

Ivanhoé Cambridge is looking to develop and acquire assets which are critical to the evolution of the supply chain throughout Europe and it has partnered up with a great partner to expand Hub & Flow portfolio in Germany.  

Below, record 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 (2021).

Also, Patrick Rieder of the Goodman Group discusses the project details of the Pforzheim Logistics Center in Germany. Listen to how top logistics firms are answering the needs of their customers, including building environmentally efficient properties and providing great amenities for the well-being of their employees.