Savills Investment Management this week announced the launch of a pan-European logistics investment fund with partner Vestas Investment Management, targeting a gross asset value of up to €500 million ($604 million).
In a Monday press release, Savills IM described Vestas European Strategic Allocation Logistics Fund as one of the first-ever blind funds raised solely by Korean institutions for investment in European real estate. Known as VESALF I, the fund will seek logistics assets of €40-140 million across all of the continent’s key markets.
The announcement follows a string of earlier collaborations between the fund management affiliate of UK property consultancy Savills and the Seoul-based investment firm, and fits into a wave of cross-border activity that made South Korea Asia Pacific’s biggest investor in overseas real estate last year, with $17 billion in purchases, according to data from Real Capital Analytics.
In 2019, South Korean investors including Vestas spent €3.1 billion on logistics assets in Europe.
“Having advised and worked closely with Vestas for several years, we are delighted that the relationship has now led to us jointly establishing the first blind logistics fund for Korean institutions,” said Jon Crossfield, head of strategic partnerships at London-headquartered Savills IM. “It is a key milestone for both of our firms, and a clear sign of how the Korean market is maturing.”
Despite their advantages in empowering fund managers to strike quickly when opportunities for acquisitions or disposals become available, blind funds have been less easily accepted in Asian markets, where less-developed legal systems incentivise investors to keep tight control over funds through joint ventures or partnerships.
The fund will be seeded with the recent acquisition of a new 115,000 square metre (1,237,850 square foot) warehouse leased to Danish transport and logistics operator DSV in Tholen, Netherlands.
Vestas has raised €200 million for VESALF I, which combined with Savills IM’s co-investment and up to 60 percent gearing, will give the fund a target gross asset value of €450-500 million.
According to a report by Korean media outlet Pulse, the institutions in the blind pool include local pension funds and credit unions, and the annual internal rate of return on investment is estimated at 8 percent. Savills IM will be the European fund and asset manager in collaboration with Seoul-based Vestas. Global law firm Ashurst advised on the formation of the Savills IM-Vestas partnership, as well as on the acquisition of the seed asset.
Vestas is keen on the growing e-commerce market in Europe, especially as the COVID-19 pandemic drives demand for online delivery, the Pulse report said.
Boldly Going Abroad
“This is a big step for Vestas and builds on our five-year history of overseas investments,” said Vestas managing director Salvatore Lee. “We are very grateful to the Savills IM team who have supported and are now partnered with us. We are excited to continue deploying the capital on behalf of VESALF I over the next two years.”
Vestas signalled its continued interest in European logistics during April of this year with the €71 million acquisition of a distribution centre in central Poland.
Acting on behalf of Korean institutional investors, the investment firm partnered with Savills IM to buy the 123,000 square metre warehouse from Invesco Real Estate, the property arm of the US investment giant.
The purchase increased Vestas’s European logistics assets under management to €1 billion, with €470 million managed in partnership with Savills IM, according to the UK-based firm.
“The transaction underlines the attractiveness of central Poland both for institutional investors and the occupier market,” John Palmer, head of industrial investment in Poland for Savills, said at the time.
Winning the Crisis
Savills IM’s recent Outlook 2021 report identified logistics as a bright spot in the real estate landscape globally. The sector has continued to deliver strong returns throughout the COVID crisis because of the increase in online shopping, the report said, and is seen continuing to flourish because of solid fundamentals and structural tailwinds such as a further increase in e-commerce and low vacancy rates.
The report’s authors singled out European logistics as an “investor’s darling” and highlighted markets with fast-growing online penetration rates — such as Central, Eastern and Southern Europe — that offer attractive risk-adjusted returns.