Oxford Properties has struck a deal to sell a stake in its European warehouse portfolio, such as the facility in France pictured here, to a major Australian pension fund.Supplied
Oxford Properties Group is selling a 50-per-cent stake in a $1.2-billion portfolio of European warehouses to AustralianSuper, forming a joint venture with Australia’s largest pension fund manager to help ramp up its exposure to logistics and industrial properties.
In addition to buying half of Oxford’s warehouse assets, AustralianSuper will become a co-owner of M7 Real Estate, a European investment manager focused on the logistics sector that Oxford acquired in 2021.
Oxford Properties is the real estate arm of the Ontario Municipal Employees Retirement System (OMERS), the $134-billion pension fund manager that invests on behalf of more than 600,000 members who have worked for municipalities, school boards, transit systems and electrical utilities, among other employers.
The largest allocation of Oxford’s investments – roughly a third of its assets – is now in the logistics sector. The company is investing heavily in infrastructure that serves an expanding digital economy, and warehouses and related properties have performed relatively well in a period that has seen office and retail real estate hit hard by shifting habits around work and shopping.
The portfolio AustralianSuper is buying into is worth about €840-million ($1.2-billion) and comprises 76 urban logistics and distribution warehouses in Western Europe with 730,000 square metres of space. Oxford and AustralianSuper said the warehouses are near key distribution hubs in the United Kingdom, Denmark, France, Germany, the Netherlands and Spain. The properties are roughly 90-per-cent occupied.
“I think logistics will remain a cornerstone certainly of our European strategy,” Oxford chief investment officer Chad Remis said in an interview.
Logistics, which is broadly the business of storing and transporting goods, is a sector that has grown in popularity among large investors in recent years. That has made it more competitive, but the European logistics market is attractive to Oxford partly because it is more fragmented than in countries such as the United States, Mr. Remis said. More onerous regulations in Europe also make it harder to develop new properties, which means that buying the right properties in the right locations can potentially give investors such as Oxford an edge.
The M7 team has “incredibly deep relationships and understanding and ability to attract the types of buildings and the types of returns that we’re seeking. We’ve been building a pipeline for the last six to 12 months and are just going to go execute on that pipeline.”
Oxford has built its portfolio over the past few years while streamlining M7 from a company with 230 staff in 14 countries to 150 people focused on six core markets and managing €5.5-billion ($8.1-billion) worth of assets. The process to bring in an institutional partner with capital to help the business grow was launched in earnest last year, and Oxford ultimately chose AustralianSuper.
The two partners are aiming to boost the portfolio’s gross asset value to €4.5-billion ($6.7-billion) over a period of three to five years.
The partnership “brings a significant and, importantly, a like-minded capital partner alongside us into both the M7 portfolio and the M7 Real Estate platform … while providing fresh capital from both partners to grow the platform as we enter into a new real estate cycle,” Joanne McNamara, Oxford’s head of Europe, said in a statement.
Paul Clark, AustralianSuper’s head of European real assets, said in a news release that the pension fund manager has been tracking the urban logistics and distribution sector in Europe “for several years to find the right portfolio that meets our ambitions.”