Transactions - JUNE 5, 2017

Chinese investors flex their muscles in Europe, the United States

by Jennifer Molloy

In the largest-ever real estate deal in Europe, China’s sovereign wealth fund, China Investment Corp., has put some of the weight of its more than $810 billion in assets under management behind the €12.25 billion ($13.81 billion) acquisition of Logicor, the pan-European logistics company owned by real estate funds managed by The Blackstone Group.

Spanning 17 countries, Logicor owns and operates a 13.6 million-square-meter (146.4 million-square-foot) portfolio of 630 high-quality logistics assets, with 70 percent of its portfolio concentrated along main transport corridors near large population centers in the United Kingdom, Germany, France and Southern Europe.

CIC now stands to benefit from ongoing growth in e-commerce, which relies heavily on the logistics sector. And, the sale scraps an IPO plan for Logicor that had also been under strategic consideration for the business.

“We built Logicor through over 50 acquisitions to be a premier pan-European logistics real estate company,” said Anthony Myers, Blackstone’s head of real estate, Europe, in a statement. “It will now have an excellent new long-term owner, and we have no doubt that it will go from strength to strength in a sector with hugely positive prospects.”

The Logicor deal, which is expected to close later this year, is reminiscent of Blackstone’s 2014 $8.1 billion sale of IndCor, its U.S. industrial platform, to GIC, Singapore’s sovereign wealth fund. In that deal, too, an IPO plan for IndCor was dropped.

In separate news, a wholly-owned subsidiary of the more than $146.8 billion China Life Insurance Group Co. has purchased a 95 percent stake in a 48-property portfolio of assets located in Tier 2 and Tier 3 markets across the United States from ElmTree Funds, based in St Louis. The deal values the 511,000-square-meter (5.5 million-square-foot) net-lease portfolio at $950 million, and offers the new joint venture the opportunity to acquire two more single-tenant, net-lease properties from ElmTree Net Lease Fund II.

Most of the assets, which are located in 20 U.S. states, were constructed recently, are build-to-suit and are leased to investment-grade tenants on a long-term basis. ElmTree Funds will remain asset manager of the portfolio, employing a core/core-plus strategy. The firm focuses on the acquisition, development and financing of office, industrial and healthcare properties.

China Life, in acquiring this large portfolio stake of already-built net-leased assets, can benefit from the income generation of these assets and avoid a number of the challenges associated with net-lease properties.

“Net-lease assets are true wealth builders, from both an ownership perspective and from the outlook of a net-lease service provider,” wrote David Sobelman, founder and CEO with Generation Income Properties (a public, net-lease REIT) and managing partner of net-lease brokerage firm Calkain Cos., in a May article on the sector for Commercial Property Executive. “But there are dozens of people involved in the development, ownership and possible sale of any one net-lease investment, making transactions in the sector more complicated.” Sobelman estimates the size of the U.S. net-lease market to be about $2 trillion.

The common theme for CIC and China Life? Diversifying into large, proven platforms of high-quality assets in Western nations should prove lucrative in the long run.

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