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QD view – Is a European logistics powerhouse on the cards?

Aberdeen Standard Investments has put its considerable backing behind the logistics real estate sector with the acquisition of Tritax Management.

The deal to buy a 60% stake in Tritax and putting it in charge of global real estate logistics, is both a clear sign of the attractiveness of the sector and is testament to the reputation and credentials of Tritax.

Tritax has £5.1bn of assets under management, mainly in logistics, including listed companies Tritax Big Box REIT and Tritax EuroBox.

Reporting in to Tritax would be ASI’s own fund managers in logistics, including that of the London listed Aberdeen Standard European Logistics Income (ASLI).

It has thrown up the possibility of a merger of EuroBox and ASLI to create a European logistics powerhouse.

While the two companies aesthetically look the same – investors in European logistics assets, their portfolios and investment strategies are quite different.

EuroBox is focused on big box assets, with the majority of its portfolio over 40,000 sqm in size with some well over 100,000 sqm. ASLI, on the other hand, is focused on mid-box assets around 30,000 sqm.

EuroBox has more of a value-add development approach, with several opportunities for new developments and extensions within its existing portfolio. That’s not to say ASLI’s portfolio is dry. Opportunities exist for value-add development at five of its assets.

Both companies have an absolute focus on location. As the saying goes, location, location, location is key in real estate, and it is just as crucial in logistics. With increased online retailing, being close to major conurbations is critical for retailers. Owning logistics assets in these locations is becoming like gold dust as demand for space soars and supply can’t keep up.

Both companies are eager to expand too, so it would make sense to combine their portfolios to create a €1.3bn asset company. As things stand, they have a combined 27 assets in seven countries – Germany, France, the Netherlands, Belgium, Italy, Spain and Poland.

Investors often question a management house running two similar listed funds side-by-side under the same umbrella, with two sets of costs. A merger would provide scale and increased diversification, with a platform for future growth. It would also create an exciting powerhouse in one of the hottest real estate growth sectors.

Alternatively, the combined manager could seek to emphasise the differences between the trusts and expand both.

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