Where Gazeley’s refi could lead

Judging by what is happening to Europe’s other big logistics platforms, Brookfield’s refinancing of Gazeley could foreshadow a private sale to an Asian state buyer.

Almost four years after Brookfield bought EZW Gazeley for a reported £370 million, the hallmarks of an exit process for the European logistics platform can now be seen.

Morgan Stanley has been hired to handle a refinancing process. The last time a major European logistics refinancing was completed – P3 Logistics Parks’ €1.4 billion debt deal last October – it was followed soon after by a sale.

Here are three informed predictions about Gazeley’s future.

1. There will be a sale

Neither Brookfield nor Gazeley have confirmed a sale process has begun. However, Real Estate Capital and sister title PERE heard on good authority Morgan Stanley’s appointment to arrange the logistics firm’s refinancing would elicit consideration of a sale – should offers materialise. We’ve been here before: just one month after private equity firm TPG Capital and Canadian pension fund property firm Ivanhoé Cambridge refinanced P3, their European logistics platform – with banks also including Morgan Stanley – it struck a deal to sell it to Singapore’s sovereign wealth fund, GIC Private. It is a classic part of any opportunity fund manager’s playbook and any opportunistic investment’s maturation to stabilisation.

Brookfield purchased EZW Gazeley just as it was closing its first global opportunity fund, Brookfield Strategic Real Estate. Given the limited-life nature of that capital, an exit effort is a certainty. It is a matter of timing, but as the purchase was one of the first for the fund, it stands to reason the exit will be sooner rather than later in the vehicle’s lifetime which started four years ago. To add further weight to this claim, rumours are circulating that a professional services firm has also been appointed to advise on matters, including the appointment of a broker to formally bring the company to market.

2. It will not be a public affair

There is little chance Brookfield will exit the Gazeley assets via the public markets. Share buyers were not accommodating when P3’s management attempted a flotation in 2013 and although Blackstone confessed to running dual track sale processes for Europe’s biggest logistics business Logicor, well-informed sources are convinced the public process is more a stalking horse than a credible bet. In that situation, they predict a repeat of when Blackstone exited its US logistics business IndCor to GIC for $8 billion in 2014 after previously flirting with a flotation.

Beyond a wholesale offload being a cleaner affair for a private equity fund than the traditional drip-feed of stock onto an exchange, the relatively smaller scale of Gazeley’s European footprint also makes it a less meaningful public listing than P3 – which was rejected – and the comprehensively bigger Logicor. P3’s transaction value was €2.4 billion; Logicor closer to €11 billion. It is unclear what Gazeley’s European assets are worth, but even if a meaningful proportion of the 11.84 million square feet of developable land captured when Brookfield bought the business was converted into occupied property, that would still be meaningfully shy of the 35 million square feet of existing property owned by P3, never mind the 146 million square feet of Logicor.

3. But it will be an Asian sovereign affair

The precedents also suggest Asian ownership is on the cards. As previously mentioned, P3 ended up on the books of Singapore’s GIC Private and Logicor’s private process has reportedly attracted bids by three Asian bidding groups: China Investment Corporation; Asia’s biggest logistics business, the GIC Private-backed Global Logistic Properties; and a joint venture between Temasek with its investment manager Mapletree. Unlike Asia’s recently deregulated insurers, or its pension funds, the region’s state investors have developed aspirations for strategic positions in western logistics markets and, given their longer-dated liabilities to match, can afford to beat the competition on pricing. Add to the equation, capital controls in China stymieing large scale yuan expatriation by China Inc right now, and the ball is very much in the sovereign’s court.

Those are our predictions, but what are yours? If you have a view on Gazeley’s fate, do let us know. daniel.c@peimedia.com