Plans are to double the portfolio in the UK and make a step into Europe, says Cain’s Europe boss Daniel Harris.
Cain International made a splash in the logistics sector earlier this month with the acquisition of a 22-property strong portfolio in the UK for £550 mln (€659 mln). But the massive deal is just the start of the privately-held investment firm’s plans in the market.
‘We have a UK platform now, which we would like to grow in Europe, although we have not yet decided what form this expansion will take. We are a long term believer in the residential sector and we believe there will continue to be a strong need for high-quality, ESG logistics assets,’ Daniel Harris, senior managing director and head of European investment for Cain International, told PropertyEU in an interview. ‘Certain countries such as France, Spain, the Netherlands and Germany present very interesting investment opportunities and I hope that we will be able to expand into these markets over the next few years.’
In the UK, the group is looking to double its current portfolio and has recently signed one of the largest financing agreements in the UK logistics sector by securing a £420 mln (€505 mln) loan facility from US asset management giant Blackstone.
The five-year senior loan will be used to refinance Cain’s acquisition of a 3.25 mln sq ft logistics portfolio completed in mid April as well as to fund the development of this portfolio with the aim to double the size over time. ‘This deal marks Cain’s entry into the logistics sector and reflects our strong belief in the long-term attractiveness of this market,’ Harris said, adding that the year 2021 saw the largest logistics take-up ever in the UK, and that 2022 started just as strongly. ‘The growth in e-commerce and the growth in transportation delivery have significantly sped up as a result of Covid-19 and the appetite for logistics assets is expected to continue.’
While Harris could not disclose details of the loan facility, he said the financials of the debt package were not the only element that attracted them to the lender. ‘We are looking to grow the portfolio significantly in the near future so it was important for us to find a provider with whom we would be able to grow over time and increase the facility size as well. This is why Blackstone is a very attractive partner for us,’ he said.
Under the acquisition, which was first agreed in March, Cain took over a portfolio of 22 assets across the UK from developer Firethorn Trust. The group paid £550 mln (€659 mln) for a package of sites totaling 3.25 mln sq ft including two newly built developments, plus five consented land sites that are on course for completion this year and the first half of 2023.
The loan facility will now allow the group to bring forward the development of the two projects as well as the five consented land sites.
Harris: ‘We acquired this portfolio because its scale and quality strongly aligned with our ambition to grow our reach in the UK logistics sector in a meaningful and strategic way. Working with a partner of Blackstone’s caliber is a strong endorsement of this approach and we look forward to working with the team there and with Firethorn Trust on the delivery of this portfolio in the coming 12 months.’
As part of the transaction, Firethorn Trust will develop the remaining sites and act as leasing and asset manager across the portfolio on behalf of Cain. As part of their long-term partnership with Firethorn, the group will also look to finance the development of other sites to be acquired by Firethorn. ‘We would like to reach a volume of £1 bn in the logistics sector in the next 12 months,’ Harris added. ‘The challenge is to be able to find portfolios which meet our criteria in terms of ESG features and high technical standards.’
Firethorn was formed in 2018 and since then has acquired 190 acres across 7 sites and is delivering over 3.25 mln sq ft across the UK.
Cain was founded in 2014 and manages $10.8 bn (€9.72 bn) of assets internationally. Earlier this year it announced another major investment programme with the launch of a new joint venture with student accommodation developer, Fusion Students to invest in Purpose Built Student Accommodation (PBSA) across popular UK university cities.
The new platform was seeded with five assets worth some €400 mln in Portsmouth, Liverpool, Manchester, Nottingham, Birmingham and London totaling over 3,000 beds. Plans are to build up a portfolio worth £1.5 bn comprising 7,500 to 10,000 beds. ‘We have another couple of assets under exclusivity, lifting the value of the portfolio to about €600 mln,’ Harris said.
The JV will be looking to make acquisitions across major university cities via the forward funding and forward purchase of new schemes with between 350 and 700 beds, with a focus on Russell Group universities and London.
Cain, co-founded and led by Jonathan Goldstein, already has significant expertise in PBSA through its real estate debt team, which has provided close to £200 million for the development of 1,700 beds in Coventry, Cardiff, and Warwick.