Delin moves into development with Dutch project

Propertyeu.info | NO. 5 – June 2016

dutch-project

Delin Capital Asset Management (DCAM), a mid-sized logistics property asset and fund manager, is moving into development, PropertyEU has learned. The first project is a 40,000 m2 warehouse being developed in the Netherlands.

The project has a gross development value of €30 mln and is located between Moerdijk and the port of Rotterdam in the south of the Netherlands. ‘The prime location is attractive for DCAM because of the current low vacancy rates and strong take-up,’ new CEO Ekaterina Avdonina told PropertyEU in an exclusive interview. Delin’s current portfolio comprises 550,000 m2 of warehouse and distribution space, valued at €500 mln. Adding development activity to the fund management business is an integral part in Delin’s evolving strategy aimed at doubling assets under management to €1 bn within the next three years. ‘We plan to achieve this by a mix of further acquisitions and development,’ Avdonina said.

Delin was established in 2012 to focus on the acquisition and management of core logistics assets in the UK and western European markets, namely the Netherlands, Belgium and Germany, on behalf of its clients. To date Delin has acquired assets in the Netherlands and the UK, but has found that assets are difficult to come by in Belgium. ‘We need scale and while we always had a chance to do the first deal in Belgium, we were concerned about securing a second one’. Germany will be the next geographical location for Delin. Founding CEO Christian Jamison left the business earlier this year to ‘pursue other interests’ and he was succeeded by Avdonina, who served as chief investment officer from day one. Avdonina intends to position Delin as a specialist full-service western European logistics company at the forefront of the changes in the logistics sector which are being driven by technological changes and the growth of e-commerce. Last-mile urban distribution centres, a sector still in its infancy, will be a big focus. The company has recruited Bart de Sitter, former CEO of developer Ulogis, as development director and Amos Chia joins from Revetas to head the search for new acquisitions. ‘We firmly believe that logistics assets – both big box and urban units – will continue to benefit from strong occupational demand supported by the structural shifts taking palace in the purchase and delivery of goods driven by e-commerce,’ Avdonina said.


Delin Capital Asset Management launches new logistics strategy to include development

Kasmira Jefford, Costar 2 June 2016

Delin Capital Asset Management (DCAM) has launched a new strategy to become a full service leading European logistics real estate company, promoting Ekaterina Avdonina to managing director.

DCAM was founded in 2012, with the aim of buying and managing core logistics assets in the UK and Western Europe on behalf of investors. Avdonina will succeed Christian Jamison who has left
the business to pursue other interests. She has a strong track record in the logistics sector having been chief investment officer since the company was founded, helping to grow its assets under management to over €500m.

To date the company has acted as an asset manager, making investments on behalf of clients solelyinto prime logistics assets in the UK and Benelux. It currently manages a portfolio providing over 550,000 m² of warehouse and distribution space.

Under Avdonina’s leadership, the company plans to change its strategy to encompass the development, ownership, and active management of best in class warehouse and last mile urban logistics distribution properties, which are set to benefit from increasing growth in e-commerce. It has kicked off the new strategy by announcing its first large scale speculative development in the Netherlands of a 40,000 m², €30m GDV logistics warehouse close to the ports of Rotterdam and Moerdijk.

It has also made a string of new hires, appointing construction industry veteran Bart de Sitter as development director and Amos Chia, a former senior investment analyst at Revetas, in its investment team.

Avdonina, said:

“We firmly believe that logistics assets (both big box and urban units) will continue to benefit from strong occupational demand supported by the structural shifts that are taking place in the purchase and delivery of goods driven by E-commerce.”
“With a strong team in place, we are well positioned to identify further investment and development opportunities in order to grow our business and to become a key player in the
European market.


Delin moves into logistics development

Guy Montague-Jones, Property Week 2 June 2016

Delin Capital Asset Management (DCAM) has revealed plans to move into logistics development and announced its first project in the Netherlands.

The company, which has built a €500m logistics portfolio since launch in 2012, will speculatively develop a 430,000 sq ft warehouse close to the ports of Rotterdam and Moerdijk with a gross development value of €30m.

The move into development is part of a new strategy unveiled by new chief executive Ekaterina Avdonina, who took over earlier this year from Christian Jamison.

The company’s vision is to become a “multi-faceted leading European logistics real estate company.”

To support the plans, it has made two key hires. Bart de Sitter has joined as development director and Amos Chia has joined the investment team from Revetas where he was a senior investment analyst.

“I am excited to be leading the next phase of DCAM’s evolution which will see it become a fullservice Western European logistics company, building on our existing expertise and track record in the sector,” said Avdonina. “With a strong team in place, we are well positioned to identify further investment and development opportunities in order to grow our business and to become a key player in the European market.”


Jersey’s Delin starts logistics development projects

Property Investor Europe 2 June 2016

Private logistics advisor Delin Capital Asset Management, which has been acquiring and managing assets in the UK and western Europe on behalf of investors, will now move into development and ownership under the leadership of Ekaterina Avdonina.

The company has launched its first large development project in the Netherlands – a 40,000 sq.m. logistics warehouse located close to the port of Rotterdam and Moerdijk and valued at €30m, it said in a statement today. The company’s new strategy will also encompass ownership and active management of warehouse and last mile urban logistics distribution properties.

jerseys-delin-startsEkaterina Avdonina

Avdonina, who will lead the strategic change, commented: “I am excited to be leading the next phase of DCAM’s evolution which will see it become a full-service western European logistics company, building on our existing expertise and track record in the sector. We firmly believe that logistics assets (both big box and urban units) will continue to benefit from strong occupational
demand supported by the structural shifts that are taking place in the purchase and delivery of goods driven by E-commerce.”

DCAM hired Bart de Sitter as development director and added Amos Chia to its investment team, putting him in charge of identifying and underwriting new acquisitions, to strengthen the team.
Established in 2012, DCAM currently manages a portfolio providing more than 550,000 sq.m. of warehouse and distribution space.


E-commerce drives value and opportunities in logistics across Europe

Logistics property breakfast

e-comm-value

European logistics boom to accelerate as e-commerce takes hold

The rapid evolution of the logistics sector will accelerate in the coming decade as e-commerce grows across Europe, drawing even more investors into what has become a mainstream property sector closer aligned to retail than its industrial roots, the logistics property breakfast audience heard.

“What we have seen in the last 10-15 years is nothing compared with what we will see in the next 10-15 years,” declared Smith. He acknowledged that logistics has grown from a niche play into a mainstream property sector, accounting for some 11-13% of commercial real estate volume in Europe. However, he added that it had much further to go as the continent has three times less warehouse space per capita than the US, and e-commerce typically requires three times more % floor space than normal logistics, which could mean up to nine times more capacity is needed. “ at number is probably an exaggeration,” Smith admitted. “But imagine any other property sector – any other industry – that could go through that thought exercise with you and talk about being nine times underserved for a particular core product they sell.”

“The e-commerce market has made it much easier for investors to understand what logistics is. We have seen a lot more investors come into the market in the last few years and we have seen contraction in yields because of that capital,” Beyer said.

Yields on prime logistics in core markets now vie with shopping centre or office yields below 5% in the UK, with Germany likely to follow soon. “Capital values in some markets have peaked – the UK has really peaked – but in some European markets we think the capital values are still below their previous peak levels,” said Ekaterina Avdonina, managing director at Delin Capital Asset Management. “We still see a lot value attracted to fundamentals in core markets,” she said, adding the structural shift in logistics means it has emerged as an institutional real estate sector in its own right, separate from industrial property and in some instances more closely correlated to retail property.

That shift along with the potential for 10 and 20-year leases with blue-chip e-commerce companies is increasingly attractive for conservative investors who want long term security. “We are having more conversations about logistics. People who would never have considered logistics are now asking questions and are seriously considering it,” De Blasio said. He gave the example of a large Italian pension fund which has never invested in logistics before but sees that it is a valuable investment sector that can help it fund pension liabilities in 20, 30 and 40 years’ time. “ they are convinced logistics will be there in the future,” De Blasio said. pie

Lines blur between logistics and retail

As e-commerce makes logistics an easier sector for investors to understand, it is also blurring the lines between more traditional retail subsectors and those warehouses geared towards online retail. “Now we are at level where I would say – what is the difference between a retail warehouse park and logistics? It’s a very similar story in the end,” Beyer said. Avdonina agreed that mainstream logistics may be more closely correlated with retail warehousing. “I think we will see some more subsectors of logistics being more closely aligned with retail,” she added.

Smith went even further and speculated that logistics assets could ultimately account for 40% of commercial property volumes as new formats may bring it closer to offices also. “You are going to see it bleeding into other sectors; you are going to see a blurring of the lines between logistics and retail. But why not between logistics and offices? Or logistics and multi-family? It’s kind of invading other sectors. It does not need to be the big XXL build-to-suit,” Smith said. He said the continued rise of e-commerce put logistics “at the start of the trend, not at the end of the trend”.

The shift in perceptions surrounding logistics is also leading to a rapid contraction in yields. Audience members spoke up about recent deals for UK logistics assets that priced at yields of 4.5% and 4.75%, as well as an Amazon warehouse in Poland at under 5.5%. “The yield compression which comes with a lot of capital going in is a correction,” Beyer explained, adding that he believes prime yields in Germany will also go through 5% this year.

However, investors still need to take care not to invest in poor locations, or fall foul of furious levels of development which are increasing supply. “We talk about capital values and cap rates [but] people also have to watch out for the rent levels,” Avdonina said. “What will be the ERV (estimated rental value) of the large logistics hubs going forward, and how that would balance with secondary stock is a big question in my mind,” she added. pie

E-commerce drives need for variety of spaces

The all-pervasive rise of online retail is having a big impact on the volume of space being taken by tenants. Not only do those companies need about three times more space than traditional warehouse tenants per €1m of revenues, but the explosion in the number of tenants is still rising. “2015 was a very good year for take-up. It surpassed ten-year averages and  ve-year averages across all the countries,” Avdonina said. “About 30% was e-commerce take-up – and that didn’t exist before 2008-09.” From Beyer’s experience, about one-third of logistics lettings turnover in Germany was driven by the retail sector – with the majority of that stemming from online retailing – putting the segment well ahead of more traditional industrial logistics. E-commerce tenants in particular need property of different sizes and locations to  t their business models. “We do see the big boxes are still very much in demand. But there is also the much smaller stuƒ closer into the city, which has been much more tricky to  nd – and that’s why there might be a little bit more value in there,” Beyer said.

“Investor and tenant demand remains high in pretty much all cases,” Smith added. Demand for 100,000 sq.m. XXL warehouses has been a function of the emergence of global online platforms like Amazon after build to-suit facilities on long leases. In addition, e-commerce companies need small units close to towns and cities that can serve for so-called “last mile” parcel delivery and accept customer returns. In some cases, imaginative developers are repositioning shopping centres to meet that demand. But despite the very particular needs of online retailers, more traditional logistics centres of about 30,000 sq.m. are still sought after, with virtually all sites built in the speculative glut before the  financial crisis now taken by tenants. “ ere is no risk of immediate functional obsolescence,” Smith added.

Although e-commerce is the principal driving factor, manufacturing trends are also reshaping demand for industrial property. The return of manufacturing to Europe’s largest economies from cheaper locations in eastern Europe and China is breathing new life into factories and supply chains. “We are beneftting from the onshoring process – taking business to Italy from eastern Europe and China. But what I see is not demand for new spaces but demand to revamp existing stock,” De Blasio said. He gave the example of Italian car manufacturer FIAT, which is investing heavily to restart auto production in Milan and southern Italy. pie

Demand across Europe but investors to be wary

Investor demand for logistics is widespread across Europe, with many open to all countries. “Global platforms are not necessarily focusing on specifc markets. I see that investors are now considering Europe as a market and they are trying to pick up opportunities west and east,” De Blasio said, although he added: “Many of my clients see Poland as a must-go destination for logistics.” He also said that Prologis is considering Italy as an important investment destination, with changes in legislation in Italy, as well as Spain, lifting those locations up investors’ wish lists. “Italy and Spain used to have very protective tenant legislation, but now you can write what you want into a lease agreement. As a result, northern European tenancy laws are less attractive than Italy and Spain, and Italian and Spanish labour laws are more flexible,” he added.

Avdonina said investors should be wary of putting eastern European countries on a par with western and northern Europe. “Political risk is something that investors should underwrite. When you have Polish yields lower than in Benelux, I raise my eyebrows,” she said. Avdonina highlighted locations like Hamburg’s port area as ones where demand will always remain robust, and said investors should also consider countries’ legal systems and business transparency.

Yet, even in core countries like Germany, there are challenges. “Germany still has a lot of older sheds. I would think that more that 50% of the stock is older and might be outdated.  These stocks are often in very good locations, closer to the city and there is definitely potential in them. But all these sheds need to be refurbished, renewed and maybe even demolished,” Beyer said. He said that there has been more green field logistics construction in Germany and less brown field renewal.

Smith said there remain pockets of value across the continent, even though regions like central Europe and countries like Spain oƒ er fewer opportunities than a few years ago. Some investors are looking broadly across the entire continent for deals, although others are taking a different tack. Smith cited the example of a global real estate investor that has decided not to invest in all Europe simultaneously. “Let’s pick a small country oƒ the beaten path and put a % ag down there and try to get our head around that one country – which I think is probably just as good a strategy,” he said. “It doesn’t really matter much which market, value is to be found pretty much anywhere at this point in the cycle.” pie


Urban logistics good long-term development strategy

Property Investor Europe

While European logistics offer opportunities across the board, urban schemes represent an especially good development strategy for the long-term, says Ekaterina Avdonina, Vice-President and Head of Investments at Delin Capital Asset Management, and panelist at the PIE Logistics Property Breakfast this month.

“Key gateway markets and major urban conglomerations all represent great development opportunities,” Avdonina told PIE in a pre-event statement. Urban logistics in particular is still relatively unsaturated across key European cities and thus represents a good development strategy for the long-term. “Over the short-term, we favour locations in land constrained markets with excellent multi-modal accessibility and good availability of labour, as all major logistics sites are becoming increasingly labour intense,” she added.

The sector in general has posted unprecedented investment volumes, surpassing the previous peak by 50%. “International capital is recognising the structural reconfiguration of supply chains in light of consumer spending changes and growth in e-commerce,” said Avdonina. She also underlined that modern logistics stock is scarce in Europe, both per capita and per GDP, when compared to other advanced markets such as the US. “These structural forces are behind the increase in investment volumes.” At the same time, the sector is experiencing a re-rating from an alternative to a mainstream property asset class alongside offices and retail. “Attractive fundamentals and higher yields make logistics and light industrials probably still the best “€˜priced’ asset class available today,” she told PIE.

Avdonina will be part of a panel of experts discussing value opportunities in European logistics at the PIE Logistics Property Breakfast on 29 October at the London City offices of law firm DLA Piper.


Retail revolution sparks change in logistics sites

Kate Allen, Financial Times

Delivery firms may not be expected to match Santa Claus’s dash around the world in a single night but many are coming under pressure to meet tighter deadlines.

The move to same-day and next-day deliveries is forcing retailers and distributors to make radical changes to their property portfolios. Logistics companies have previously required fairly humdrum industrial property — and their breeze-block sheds have struggled to compete with glossy offices and bustling shopping malls for investors’ attention. But getting things to where they need to be is no longer such a simple matter.

The problems faced by delivery network Yodel and retailer Tesco earlier this month in coping with a deluge of parcels highlighted the practical challenge that retailers and distributors face.

Before the advent of E-commerce, distribution activity was largely focused on a handful of huge hubs such as the UK’s golden triangle in the Midlands and the Benelux corridor stretching inland from Europe’s biggest ports, Rotterdam and Antwerp.

Those hubs are still in demand but a new array of smaller sites of 70,000-100,000 sq ft (one or two football pitches) are also developing around major population centres in order to fulfil faster delivery times and supply local convenience chains.

Gareth Osborn, logistics director at listed industrial property specialist Segro, says: “Retailers are taking industrial units around the main conurbations, to break up big lorry loads into lots of small deliveries in a fleet of small vans. That requires a different type of building [to traditional big-box facilities].”

About 35 per cent of Segro’s tenants are parcel delivery companies, third-party distributors and retailers, up from 10 per cent a decade ago.

Access to land is the biggest problem for these new facilities, Mr Osborn says, with housing developers in particular proving tough competition.

A shortage of suitable space means that investors expect rents to rise in the next couple of years. “In the short term there’s a bit of a capacity problem, with parcel numbers going through the roof,” says Christian Jamison, chief executive of Capital, which launched a £400m pan-European logistics fund in 2012.

As a result, investors have been piling into this asset class this year. European logistics property investment volumes jumped by a third to top €20bn in the 12 months to the end of September, according to figures from Standard Life Investments.

One reason for this demand is the high returns. European industrial property — including logistics — produced an 8 per cent total return in that period, compared with 5.7 per cent from offices and 5.6 per cent from retail, according to data company IPD.

“What resonates with investors about logistics is that it’s a very defensive asset class to invest in,” says Mr Jamison. “Even in the absence of economic growth you will get increasing demand for logistics because E-commerce is taking up more of the retail market.”

Demands are also changing for the bigger, out-of-town warehouses more traditionally used by retailers and distributors.

Buildings are becoming taller, with ceiling heights rising from 6-7m up to as high as 25-30m, and wider, with floor space of up to 1m sq ft — the size of 23 football pitches. Technology such as automated packing systems and mechanised storage means tenants can cram more into their buildings.

“The size of these assets now gives international investors the opportunity for scale,” says David Paine, head of real estate at Standard Life Investments. “It is becoming increasingly hard to deploy a lot of capital into offices and retail quickly, but large-scale logistics platforms enable investors to do that.”

UK-listed retail landlord LondonMetric began to move into logistics property two years ago. Its chief executive Andrew Jones says it was a natural next step. “I look at distribution as the fifth type of retail property, alongside shopping centres, supermarkets, retail parks and the high street. As this Christmas is demonstrating, most retailers don’t have [logistics] space which is fit for purpose,” he says.

Investors’ push into Europe follows a similar trend in North America. “Investors are looking at Europe as a place where you can get a significant spread compared to the US market,” says Philip Dunne, president of the European division of Prologis, one of the world’s largest logistics landlords.

Blackstone led the way in the US from 2010 onwards, accumulating the $8.1bn IndCor portfolio that it sold earlier this month to Singapore sovereign wealth fund GIC. It is now trying to replicate the portfolio in Europe with its Logicor platform, which has accumulated 61m sq ft of space across 12 countries.

Mo Barzegar, Logicor chief executive, says four global trends are driving the need for “a more sophisticated supply chain”: globalisation, consumption growth, urbanisation and the changing face of retail.

While few in the industry have the global coverage of Santa, the emergence of pan-continental distributors and retailers also means that even the biggest logistics landlords need to deal with relatively few tenants.

“It is a very homogenous asset class — whether you are in London, Barcelona, Prague or Moscow the boxes are the same and the occupiers to a large extent are the same,” says Mr Jamison.