Singapore’s sovereign wealth fund, GIC, is set to further its reach in European warehousing through a joint venture announced this week that aims to acquire and develop last-mile distribution centres and urban logistics assets in the continent’s gateway cities.
Financial terms of the venture with logistics investment manager Melcombe Partners weren’t disclosed. But GIC in recent years has been on a tear in acquiring global logistics assets, including various portfolios integrated into the fund’s pan-European platform, P3 Logistic Parks.
Lee Kok Sun, chief investment officer for real estate at GIC, said the partnership with Melcombe reflects the fund’s continued confidence in the long-term potential of the logistics sector, as well as demand for specialised facilities to serve the needs of online shopping networks.
“The urban logistics sub-market will benefit from positive fundamentals, reinforced by increasing occupier demand due to accelerating e-commerce adoption and changing supply chain management strategies,” Lee said. “We believe the venture’s focused strategy, with the management of a skilled partner such as Melcombe, will generate resilient returns in the long run. We look forward to expanding our partnerships and exploring further opportunities in this attractive sector.”
Linking With a Continental Specialist
Ludovic Bernard, a Melcombe investment manager and partner, said the joint venture with GIC would “unlock the full potential of the fragmented European urban logistics markets and capture the sustained growth of the sector underpinned by spiking e-commerce activity, tightening supply of logistics space in large European cities, restrictive land planning rules and increased focus on global supply chain resilience”.
The Singaporean fund announced its link-up with Melcombe less than three months after the London-based investment manager, together with CastleLake LP, had sold a set of 28 last-mile facilities to Blackstone in a $321 million deal.
Melcombe’s geographical focus is on Western and Northern Europe, where it manages distribution centres serving cities and towns in dense regional hubs.
Bernard underscored Melcombe’s on-the-ground local presence as an advantage that would enable the venture to add value to logistics assets and end-customers.
Last-mile distribution refers to the challenging final leg of a delivery’s journey from logistics hub to final destination, which many logistics providers are seeking to bridge by establishing smaller-footprint urban distribution facilities.
The Singapore-UK joint venture could link GIC’s existing warehouse network with postcodes in heavily populated areas of Britain, France, Germany, Spain and the Netherlands. It could also yield a separate portfolio of properties in an emerging asset class.
In a report released this month, BNP Paribas Real Estate singled out Europe’s logistics and industrial sector as a “bright spot” amid the COVID-19 pandemic, with demand driven by booming e-commerce. Logistics take-up in six large countries during the first nine months of 2020 totalled 15.8 million square metres, up 7 percent from 14.7 million in the year-earlier period, the report said.
GIC laid the groundwork for its European campaign four years ago with the €2.4 billion (then $2.7 billion) acquisition of Prague-based P3, an owner, developer and manager of logistics properties, from TPG Real Estate and Ivanhoe Cambridge. At the time, GIC’s Lee said he looked forward to “expanding this attractive platform” and leveraging the fund’s experience in logistics investment to add value to P3.
Soon thereafter, GIC followed up with two more moves that bolstered its supply chain holdings in Europe: the acquisition of the 28-asset Maximus portfolio from Apollo Global Management for €950 million, a deal announced in December 2019; and an agreement in October of this year to buy the 33-property Matrix retail logistics portfolio in Germany.
Maximus spans more than 1 million square metres (10.8 million square feet) of industrial space across Austria, Belgium, Germany, the Netherlands, Poland and Slovakia. The tenant roster includes firms in automotive, electric vehicle equipment, distribution, e-commerce and last-mile logistics. Matrix, meanwhile, encompasses 650,000 square metres of retail logistics space in major German cities and towns, including Berlin, Dortmund, Nuremberg, Hamburg, Hanover, Cologne, Dresden and Leipzig.
P3 has been tapped to manage both portfolios for parent GIC.
Singaporeans Love Sheds
Closer to home, GIC has kept busy this year with a torrent of logistics deals in Asia Pacific. The fund kicked off 2020 with a January investment of A$366.1 million ($253 million) in an additional 24 percent stake in Dexus Australian Logistics Trust, increasing GIC’s interest in the unlisted trust to 49 percent. The same month, GIC and partner ESR Cayman announced a commitment of $500 million to a joint venture focused on developing logistics facilities in key cities across China.
In June, GIC committed A$400 million to a newly formed A$1 billion develop-to-hold logistics fund, the ESR Australia Development Partnership. And in yet another Down Under play with ESR, GIC in September committed A$480 million to the ESR Australia Logistics Partnership, upping its existing stake to 80 percent.