In pursuit of €4.5 billion of warehouses, it pays to have the right partners

At Oxford, we believe that success in real estate often hinges on finding the right partners.

When it comes to sourcing the best deals, local knowledge can go a long way. Similarly, there are times when it makes sense to invest a significant amount of capital in a short period; when pricing is attractive, for example. Finding partners that share our goals enable us to capitalize when it matters the most.

Our strategic partnership with AustralianSuper, Australia’s largest superannuation fund, encapsulates this approach. In January, the firm acquired a 50% stake in our €840 million European industrial and logistics portfolio, which is managed by M7, the European investment and asset management business that we acquired in 2021.

“Given that values corrected quite a lot, it made sense to bring in a well-capitalized, like-minded partner,” says Alicia Peters, Vice President, Industrial & Logistics at Oxford . “We think this is the time to acquire assets and we’re entering this next phase of the real estate cycle with significant capital to deploy.”

The portfolio currently comprises 76 high-quality urban logistics and distribution warehouses spanning about 730,000 square meters (sqm). The properties are well located in 19 of the most strategic urban ‘last mile’ and distribution hubs, including the UK, Denmark, France, Germany, the Netherlands and Spain. Together, we aim to grow the venture to €4.5 billion during the coming three to five years.

M7 will play a vital role in that process. Urban logistics and distribution is among the hottest sectors in real estate; the rapid expansion of e-commerce and ‘near-shoring’ has fueled demand for warehouses within easy reach of customers. At the same time, a shortage of land in urban locations means that occupiers are competing for a limited supply of properties, which is underpinning rental growth.

However, investing can be challenging for global firms. Unlike trophy offices in prime city-center locations, these properties are often found in little-known suburbs. They also tend to have multiple occupiers – our portfolio already has more than 200 tenants – which can make them intensive to manage.

Our acquisition of M7 turned those challenges into advantages, says James Boadle, Senior Vice President, Europe, at Oxford. The team knows the customers, properties and locations, allowing them to extract maximum value from the portfolio.

Meanwhile, the diversity of tenants strengthens income security; no single customer represents more than 5% of total rent.

“M7 gives us a competitive advantage in a space that is naturally quite granular,” James explains. “They have boots on the ground, and they have this ability to drive value over and above what's in the tenancy schedule. That’s been critical to our success so far.”

The experience of the M7’s senior leadership team, many of whom have worked together for decades, compounds those advantages, Alicia adds.

“They are really connected to the local broker networks, the local tenant networks, and are able to source opportunities off market,” she says. “We’re securing deals that aren't being fully marketed – they are presented to M7 on a one-to-one basis.”

This is a tried and tested model that suits modern global real estate investing. Acquisitions of entire platforms enable Oxford to build the kind of scale that would take years through individual property purchases. In 2020, we purchased a 50% interest in Investa Office Management Holdings to bolster our on-the-ground property and asset management capabilities in Australia. A year earlier, we purchased a half stake in the US warehouse developer IDI Logistics. Ivanhoe Cambridge owns the other half of the 52-million-square-foot portfolio.

“A lot of this comes down to the flexibility of our capital,” James concludes. “In the case of M7, we saw an opportunity at the more granular end of the supply chain - one that required a more hands-on approach than our European business was set up for. That led us to decide that the best execution method was to acquire the M7 platform, creating synergies between our balance sheet, global logistics experience and in-house team, with the capability and infrastructure of M7. The introduction of AustralianSuper is an expansion of Oxford’s blue-chip roster of global institutional partners and a key milestone in our European strategy as we look to significant grow this venture, [alongside our other indirect and direct drive strategies.]”