Logos seeking investors in its $3bn prime logistics and industrial portfolio

Real estate funds house Logos is poised to begin the largest property deal of the year so far.

Real estate funds house Logos is poised to begin the largest property deal of the year so far, as it seeks to bring new investors into its flagship $3bn logistics and industrial property portfolio.

The company’s move will crystallise a longtime investment by Middle East sovereign wealth fund the Abu Dhabi Investment Authority, which has backed the portfolio’s growth for almost a decade and will retain part of its interest.

The offer comes as a new class of high-tech warehouses cement their place as the most sought-after property asset class, despite concerns about the value of offices and shopping malls.

Logistics has locked in its position as the top-performing asset class in the country, and has more growth on the back of the e-commerce revolution and big companies pouring billions into their supply chains as they combat slowing economic conditions.

Logos is seeking a new partner to take an interest in the portfolio, which comprises 10 super prime industrial assets across four capitals, as well as expansion land for new facilities.

The move marks one of the largest industrial deals for years, and the scale is comparable to US private equity house Blackstone’s sale of Milestone Logistics to Asian warehousing giant ESR for $3.8bn in 2021.

The play will provide an opportunity for incoming investors to take a stake of about 50 per cent in one of the top funds in the fast-growing property sector. While values may have peaked late last year, conditions on the ground are hot, with even speculatively built complexes winning tenants before they are finished.

The process is being handled by investment bank Jarden and real estate agency Cushman & Wakefield, which allows for both traditional real estate strategies as well as corporate options to be pursued.

The portfolio is likely to appeal to the local listed property groups, which are want to boost their industrial portfolios, and offshore players which see the sector as one of the hottest globally due to the supply shortages super heating rents.

International pension funds and local superannuation funds have also nominated logistics as the area where they still want to lift their exposure.

While Logos is seeking to bring new investors into the flagship fund, ADIA is still keen to remain due to the strong returns being spun out of the Logos Australian Logistics Ventures portfolio, which is on the road to hit $5bn in coming years.

The portfolio comprises the 10 super prime logistics estates and the development projects are in areas like Sydney’s Eastern Creek. The embedded development pipeline is capable of delivering up to 293,000 sqm of space at a time when space is at a premium.

The properties are concentrated on eastern seaboard capitals, and there is also a major Perth asset. These areas are most in demand.

Logistics continues to be the sweet spot even as the economy slows and the portfolio is well positioned to capture both high rents being paid for the new class of warehouses and as the rents set years ago on older properties jump up to current levels.

The part recapitalisation will give incoming investors a chance to work with Logos on taking the flagship fund into the next generation of warehouses, which are increasingly sought out by big tenants and investors.

One of the last comparable deals in terms of scale was when Dexus in late 2021 unveiled Blackstone’s Core+ Real Estate strategy as the buyer of GIC’s 49 per cent joint venture stake in the Dexus Australian Logistics Trust.

That $2.1bn deal showed that institutional capital was chasing the booming industrial sector and was struck at a yield below 4 per cent. That may not be matched as interest rates have since jumped, but values have held up due to extraordinary rental growth.

The portfolio houses big tenants including Ingham’s, Woolworths and DHL.

Supply chains have become more important for companies as they chase long-lasting savings as they also seek to serve the rising population. Big warehouses also carry very long leases, which are attractive to pension funds.

Logos is benefiting from still rising e-commerce penetration, which is forcing supply chains to respond faster. This is driving a new wave of automation, and Covid-19 has forced companies to rework their systems to hold more stock.

While the company has launched the capital-raising process for the LAVL and hopes to hook like-minded investors to co-invest alongside ADIA, the original pair will keep growing their investment in the logistics sector with the Middle Eastern fund to maintain a significant stake and investing in the firm’s new projects.