Alongside the UK and France, Germany will be a key focus of the two investment partners’ second joint venture targeting urban logistics.
Canada’s QuadReal Property Group and European logistics specialist Valor have hit the gas pedal on their plans to invest in European urban logistics, with the launch of a second strategy targeting as much as €3 bn of assets across Europe.
Under the new partnership, which will employ a value-add and development strategy, the partners will look to up their exposure to industrial assets in and around major metropolitan areas, specifically ‘last mile’ logistics, at a time when the sector is demonstrating its resilience in the face of economic and political adversity.
‘The past couple of years with the pandemic have really shown the defensive qualities of the logistics sector. Despite the economic shocks caused by Covid and now the Ukraine crisis, we have seen online spending continue to grow and we don’t expect this trend to change, although there is the broader unknown of the extent to which high inflation will affect consumer spending. But the acute imbalance between supply and demand, which is driving rental growth, is expected to remain for some time,’ Christian Jamison, founder and managing partner of Valor Real Estate Partners told PropertyEU in an interview. Commenting on the partnership structure, Jamison said that Valor will be responsible for originating and executing deals, asset management, as well as property management, offering a full service to Quadreal. The Vancouver-based investor on the other hand has put in the substantial majority of the equity to be invested, although Valor has also got ‘real skin in the game’. ‘We are very well aligned. Valor is a minority partner, but it is a significant minority partner,’ he added.
The new partnership comes hard on the heels of Valor and Quadreal’s first, €1 bn investment partnership, launched in November 2020. In just over 12 months, Valor and Quadreal were able to deploy the majority of the €400 mln of committed equity, with the JV completing 26 investments totalling €900 mln of gross asset value across 2.7 million ft² (250,000 m²) and approximately 53 buildings. This comprised 14 investments in London, eight in Paris, two in Berlin and single acquisitions in Birmingham and Lyon. Said Jamison: ‘We hit the ground running and soon invested the majority of the first JV’s capital. Then last year we started thinking about a second vehicle, with a similar strategy. We were able to execute the new joint venture quickly; it was signed at the end of last year with an equity commitment of over €1 bn.’
In terms of geographic focus, the upscaled partnership will continue to focus on the main gateway cities in Europe, especially London and Paris but with an increased focus on the German market. ‘We launched the Valor business in 2016 with an initial focus on London and Paris, since when we have added assets in Manchester, Birmingham, Lyon, as well as Berlin, Frankfurt and Düsseldorf. Now is the time to look at entering the other Big 5 German cities. Germany is a sizeable market where we are looking to generate a lot more revenue and where we see lots of opportunities going forward. We are also actively tracking other markets such as the Netherlands, Spain and the Nordics and all these markets may yield attractive investment opportunities.’
As urban logistics is a granular sector which also requires intensive asset management, the group will be looking to develop scale in these markets and open new offices, he noted. Over the past five years the firm has amassed a €2.5 bn portfolio, with offices in London, Paris, Munich and Berlin.
Jamison is confident the portfolio will continue to grow at pace, while continuing to deliver strong investor returns.
‘There is an acute supply-demand imbalance, particularly in and around Europe’s big cities. This is coupled with consumer demand for online that is forecast to continue growing, so the sector fundamentals remain strong,’ he said.
‘While we have not yet seen a direct impact from the situation in Ukraine, it will clearly have an effect on logistics supply chains, energy and food prices will spike, and inflation will very likely increase even further. This higher inflation environment we are seeing takes time to filter through to the real economy, but it undoubtedly will. A speedy resolution to the conflict is to be hoped for, the longer it goes on, the more of an impact it will have for everyone.’