The recent announcement of the acquisition of M7 Real Estate by Oxford Properties is another significant marker for institutional investors’ appetite for the real estate market in general and the industrial and logistics sectors specifically.
It is also a major sign of Oxford’s drive to place capital in those markets in the UK and Europe over the next few years, following its other logistics fund investments and its restructuring of its global real estate teams in recent years.
Most interestingly, it further demonstrates the trend in the market of institutional capital’s shift in real estate investment strategy, with investors looking to achieve scale (and at speed) by taking equity ownership positions in operating partners and GPs.
This emerging trend was also highlighted this week by the announcement of EQT’s acquisition of Exeter Property Group, through which EQT can access Exeter’s significant UK industrial portfolios built up over the last year, leverage off its management expertise and profit from its carried interest share.
Transactions like these show just how much more creative real estate capital has become. By taking these types of operating partner/manager positions, investors are clearly looking to maximise access to real estate opportunities in the most highly competitive markets – logistics is about as congested a sector as they come and it shows no signs of letting up any time soon.
Once the dust settles, this trend may bring about other indirect consequences too, with a potential shift in deal terms and negotiation dynamics between well-capitalised operating partners fueled with institutional capital and other capital partners who were, until now at least, the dominant party in a joint venture. It will be interesting to watch how this impacts deal negotiations between such parties particularly around issues such as liquidity, governance and divorce rights. Our London PERE team will be monitoring these trends and engaging with our clients.
Oxford Properties makes M7 its primary European logistics play The Canadian pension, which is significantly underallocated in the sector, will aim to more than double the UK-based firm’s AUM in the next five years.