We’ve combined the expertise and experience of Investec’s Specialist Funds Group and our Real Estate team to bring real estate funds flexible funding and risk management solutions that focus on driving returns.
Aberdeen Standard Investments
Aberdeen Standard Investments (ASI) is a leading international asset manager. It is dedicated to helping investors around the world reach their desired investment goals and broaden their financial horizons. ASI manage a total of £455.6bn across a range of asset classes on behalf of governments, pension funds, insurers, companies, charities, foundations and individuals across 80 countries (as at 30 June 2020).
In December 2017, ASI launched Aberdeen Standard European Logistics Income plc (ASELI), an investment company with a premium listing on the main market of the London Stock Exchange. It completed an IPO with the aim to tap into the growth of e-commerce across Europe, by investing in European logistic properties such as large “big box” modern warehouses and local “last mile” distribution centres. The company also invests in European logistics real estate to achieve its objective of providing its shareholders with a regular and attractive level of income return, together with the potential for long term income and capital growth.
Logistics is one of the strongest performing sectors in both the UK and European real estate market. ASI predicts that this will remain the case for the next three to five years. The competition is strong in the sector, but ASELI’s Evert Castelein still sees opportunities.
“Now, more than ever, logistics is enjoying an incremental tailwind due to the pandemic as consumers increasingly migrate online and ecommerce booms. There’s a lot of competition in the investment market with investors wanting to create a pipeline of projects, but not necessarily having the capital to do so.”
ASELI, working with Investec for the equity raise, was launched in 2017 to capitalise on the European logistics market by buying mid-sized and urban logistics buildings in Europe.
We thought that this was the right time for investors to diversify their risk to countries outside the UK in a growing sector with very strong fundamentals. Using that as our elevator pitch, by the time we launched the fund we had raised c.€220m. Investec encouragingly for us also took the decision to become a large investor in this vehicle after the equity raise and launch, understanding the opportunity and potential reward from such a fund.
However, Castelein and the team encountered challenges when trying to deploy the capital for projects in a timely manner as competition in the market increased. “We felt pressure due to the fact that the capital we raised was sitting in a bank account from day one with a negative interest rate penalty. We were paying interest and dealing with the impact of cash drag. In the years after, we had raised additional capital, but we were still paying interest and a 5% shareholder distribution on the capital we had raised. We required a solution that would provide us with more flexibility and a way to alleviate, at least in part, the penalty on our cash at bank. I needed capital to get exclusivity on property deals, and could raise capital more easily with a secured pipeline of assets but if possible wanted to avoid the impact of cash drag from holding monies raised in the bank for too long.”
The Investec team were able to craft an efficient €40m facility, without the usual commitment or non-utilisation fees. By relying on the facility to bridge acquisitions the fund avoids sitting on excess capital and the associated cash drag. By removing commitment fees the parties are aligned around the fund’s specific needs and deployment success.
We were keen to deliver capital in a slightly different way, which suited ASELI’s methods. The solution provided was really one of a kind. It uses technology from the private fund space and has been applied to the closed-ended fund space. Due to the partnership approach we have taken to this deal, we know it’s the right approach for both teams.
The finance package provided by Investec replaces ASELI’s existing overdraft facility and provides liquidity to support its investments going forward. The facility provides certainty of funds to bid for assets and due to the flexibility and efficiency of the facility, it can be used in different ways, Evert Castelein explains:
“I am very pleased that the company has been able to announce the signing of this new bank facility with Investec. This increases the company's flexibility to acquire new assets prior to any fresh equity raise and will reduce the impact of cash drag on investment returns. We have 14 logistical warehouses in our portfolio now, and we anticipate that we will use this facility tactically through the year. Investec was very helpful in getting this over the line, and we both understand that this is an opportunity for us to grow through this deal.”
Indeed, Investec is integrated from three different angles now. The wider team are helping to raise capital amongst other clients, helping on the funding side and also investing in the vehicle itself. Amy McVey from the ASI team commented:
“The Investec team were very pleasant and made themselves available for calls and discussions on various points in the run-up to the close of the deal. They took the time to understand and consider our position on LIBOR. All in all, I felt that it was a positive experience from a legal side.”
Slane confirms the opportunity that faces ASI and concludes by praising the robust partnership between the two firms:
“We are proud to continue to support and deepen our relationship with ASI. We are excited to be providing this flexible and efficient facility to support the team’s continued growth ambitions, with a structure that optimises the fund’s returns by minimising the costs associated with committed facilities.”
Head of Fund Solutions Origination
Crosstree Real Estate Partners
The Crosstree team was intent on developing a real estate private equity fund backed by commitments from a number of investors. Crosstree required a banking partner that could provide a commitment facility to allow the fund to act quickly once an investment decision has been made.