ARA Dunedin Ties Up with Partners Group for Second UK Shed Deal This Month

ARA Dunedin has announced its second UK industrial transaction within 10 days, as the London-based unit of Singapore’s ARA Asset Management today unveiled a joint venture with Switzerland’s Partners Group aimed at profiting from a shortage of logistics space in central Britain.

The deal, which follows ARA Dunedin’s announcement of a £102 million ($140.5 million) warehouse joint venture with Carlyle Group on 12 October, is the London firm’s first hook-up with Zug-based Partners Group, with the joint venture aimed at building an industrial portfolio with a gross asset value of £250 million.

“We look forward to working with a new capital partner that shares our view that actively managing real estate adds value,” ARA Dunedin CEO Roun Barry said in a release on Friday. “We have a long record of rolling up our sleeves and in a very competitive market we believe this will provide our edge.”

ARA Dunedin is seeding its latest logistics strategy with a portfolio of seven logistics properties across central England which it acquired in July this year, with the joint venture partners saying that they aim to generate value-add returns by repositioning or expanding existing assets to feed unmet demand driven by a shift in global supply chains.

Aiming at the Middle

The foundation for the joint venture is the 801,787 square foot (74,322 square metre) logistics portfolio which ARA Dunedin had purchased from London stock exchange-listed Regional REIT in July for £45 million.

Five of the seven seed assets are located across the Midlands and northeastern regions, including properties in Nottingham, Telford, Winford, Bromborough and Scunthorpe, with one more in the eastern city of Wisbech, while the last property in Erith is just east of London.

ARA Dunedin and Partners Group are placing their bet as the Midlands’ logistics market continued to experience low supply in the first half of 2021, according to July reports by Savills Research. New supply dropped by 54 percent year on year to 3.42 million square feet (317,730 square metre) in the eastern Midlands, while the West Midlands recorded a 50 percent decline with new warehouse space entering the market during the first half falling to 4.31 million square feet.

This reduction in project flow as the country’s economic recovery continues to boost demand now means that there is less than a year’s worth of warehouse space available for lease in both regions. Savills also noted that many logistics properties in the West Midlands are requiring an upgrade, as Grade A assets currently account for less than a quarter of the space on the market, while a portion of the Grade B and Grade C properties that make up the bulk of the supply are also getting older.

“Developers are beginning to recognise this, and we are seeing older Grade B and C units refurbished to provide fit-for-purpose space,” Savills said.

Partners in Logistics

Partners Group Managing Director Rahul Gai said the JV will expand the 25-year-old company’s light industrial footprint in the UK, as the company, which had $119 billion in total assets under management at the end of June, continues to bet on an e-commerce-fueled logistics boom.

“This sector is seeing high levels of demand due to the rise of e-commerce, a key transformative trend we have been following, yet shrinking supply, which is being caused by competition for land from other real estate segments such as residential,” said Gai, who also co-heads the firm’s private real estate operations in Europe.

In late July, the Zug-based fund manager announced that it was acquiring a portfolio of light industrial and logistics properties in France worth approximately $140 million through a partnership with French developer Proudreed.

That joint venture was revealed just two weeks after Partners Group had reported that it was buying a 24.9 percent stake in Kuehne & Nagel Group’s Apex Logistics, an Asian-based freight forwarder.

ARA Continues Industrial Streak

Its partner in the duo ARA Dunedin, which has £1.2 billion of industrial and logistics assets, was formed in 2019 after Singapore’s ARA Asset Management merged with London-based Dunedin Property Asset in a bid to expand their footprint in the UK.

The JV marked the second industrial deal of ARA Dunedin this month, following the purchase of 11 logistics assets from Moorfield last week through its joint venture with US private equity giant Carlyle Group.

ARA Dunedin has entered its UK shed spree as its parent firm in Singapore continues to expand its warehouse pipeline through acquisitions in Asia Pacific. Early this week Logos Property, which ARA acquired in early 2020, announced that, backed by a consortium including the Abu Dhabi Investment Authority (ADIA) and Aussie giant AustralianSuper, it had agreed to buy a site near the Sydney airport from Qantas Airways for A$802 million ($594 million).

In August, ARA Asset Management had agreed to be acquired by logistics developer and fund manager ESR in a $5.2 billion transaction which is expected to be approved by ESR shareholders early next month.