A joint venture between US private equity giant Carlyle Group and a UK unit of Singapore’s ARA Asset Management has acquired 11 UK logistics assets for £102 million ($139.16 million), expanding its European logistics portfolio to ride the e-commerce boom.
The investment is aligned with Carlyle Europe Realty (CER) platform’s focus on European logistics, Carlyle said in a statement on Tuesday, with the asset class proving resilient during the coronavirus pandemic as it benefits from a boom in shopping from home.
“The portfolio consists of highly complementary assets to our existing footprint, and the acquisition exemplifies our strategy of identifying well-located assets in the European distribution logistics market, which continues to be an asset class with attractive fundamentals and benefiting from strong structural trends,” Anssi Halonen, managing director on the Carlyle Europe Realty advisory team, said in the statement.
The joint venture between Carlyle and ARA Dunedin, a London-based unit of ARA Asset Management, is acquiring the one million square foot (92,900 square metre) portfolio from Moorfield Real Estate Fund IV, an investment vehicle managed by Mayfair-based private equity shop Moorfield Group, to stand alongside an initial set of warehouses it acquired in March of this year.
Bulking Up on Warehouses
The Carlyle-ARA joint venture’s latest set of properties are located across southeast and northwest England and are currently fully leased. The new portfolio adds to the nine logistics assets acquired in March of this year when the joint venture was first announced, which includes five assets purchased from LSE-listed Urban Logistics REIT for £30 million.
CER is Carlyle’s pan-European real estate platform with the €540-million venture providing equity for this latest investment jointly with ARA Dunedin.
While the Carlyle statement did not provide details regarding the properties involved in this week’s the transaction, it did note that the portfolio was acquired from Moorfield Group’s Moorfield Real Estate Fund IV.
In December 2020, Moorfield, via the fund, had acquired four logistics assets located across southeast England which cover a total area of 205,322 square feet (19 million square metres) valued at £25 million.
That purchase came after the group had spent £14 million in 2019 buying a warehouse in Milton Keynes from Aberdeen Standard Investments, and in a separate deal, acquiring a distribution facility in Suffolk, via a sale-and-leaseback deal. Both of the 2019 assets were purchased on behalf of Fund IV.
“At Moorfield we are always looking for demographic, societal, technological and other trends that are driving consumer behaviour and having identified those underpinning the growth of the logistics sector many years ago, it has been and will continue to be a key part of our investment strategy,” Chris Perera, senior investment manager at Moorfield said. “Alongside this we have undertaken a programme of value enhancing initiatives, significantly improving the income characteristics and profile of the portfolio, culminating in this strategically timed disposal.”
Bryan Cave Leighton Paisner, CBRE, CMS, Deloitte and Howden advised Carlyle and ARA Dunedin on the transaction, while Moorfield was advised by Womble Bond Dickinson, Savills and PwC.
Mingtiandi sought comment from both the buyer and seller, however, no further details were provided by the time of publication.
This week’s announcement marks the latest industrial deal for ARA Dunedin, which is on track to become part of Hong Kong-listed logistics giant ESR, under the terms of a buyout proposed in early August.
“Our vision has always been to build a leading fund manager focused on technology-enabled real estate, especially logistics and more recently data centres, on the back of major secular trends including the rapid rise of e-commerce, digital transformation and the financialisation of real estate in Asia Pacific,” ESR Perlman said in explaining the merger at the time, putting this week’s deal safely under the group’s new economy umbrella.
During that same month, ARA Dunedin agreed to purchase the European operations of London-based property fund manager InfraRed Real Estate, in a move which allowed the ARA branch to rapidly expand its European fund management business.
Led by chairman Mark Ebbinghaus, before merging with ARA in 2019, Dunedin Property already had more than a decade and a half of experience in the UK logistics market, including teaming up with Brockton Capital to acquire a portfolio of 130 warehouse assets which were sold to Blackstone and M7 Real Estate for £559 million in 2017.
UK Logistics on the Rise
As the pandemic ramps up online retail, Savills Research in a July report noted that the UK logistics sector booked an all-time high take-up of 24.41 million square feet of warehouse space in the first half of this year, which was nearly double the long-term average of 13.4 million square feet for the period.
Vacancy also fell to 4.37 percent — its lowest point since Savills Research began recording the metric — while available supply dropped by its fastest pace ever to 25.08 million square feet.
With warehouses filling up, investments in the region’s logistics market are also expected to continue pouring in during the second half of the year after recording £3.8 billion in total transactions from January through June. That number represented a 239 percent increase over the same period last year, according to Savills.
Further tilting the field on behalf of landlords, Savills Research said the sector should brace for a potential warehouse supply crunch over the next 18-24 months.
“The availability of construction materials will mean that the pace of delivery for new speculative supply will not be able to keep up with demand,” the report read.
Carlyle is a global investment firm based in New York with $276 billion of assets under management as of end-June. In February, the company agreed to sell its Metropolitan Real Estate Equity Management to global real estate investment management advisor BentallGreenOak.