Insurance giant forms logistics joint venture in plan to boost property assets, writes Jane Roberts
This month, German insurer Allianz Real Estate took a step towards its goal of boosting its indirect property holdings by €5bn in the next three to four years when it committed an initial €400m of equity to a logistics joint venture with AMB Property Corporation. The move was in line with Allianz’s strategy to invest indirectly in markets where it has little or no in-house expertise, says head of indirect investments Matthew Ryall.
“We were significantly underweight in logistics, although we are in ProLogis European Property Fund II,” Ryall says. “We wanted to make a long-term and large initial commitment to increase our eurozone exposure to the sector. We spoke to a number of groups and AMB’s philosophy was close to ours.”
The investment vehicle is structured as a Luxembourg FCP-FIS, designed for in-house Allianz German clients initially, but is flexible for the future. The fact that it is not a fund but a joint venture – AMB will co-invest €70m and will manage the vehicle – is a sign of the times. Ryall says another attraction of this structure is it gives Allianz control over the strategy.
The group doesn’t rule out investing in more funds. Ryall says the portfolio, now worth around €900m, has “eight or nine” fund investments, including PEPF II, UK and European outlet retail malls managed by Henderson, and Invesco’s first hotels fund. During the difficult past few years, Ryall’s focus was on finding value from buying secondary stakes in funds at discounts; now it has shifted back to the primary market.
Allianz’s well-publicised ambition is to expand its property weighting from around 4% to 6%, or from nearly €19bn of assets, 95% of which are direct assets, to a massive €30bn, with 20% likely to be indirectly held. The real estate team, headed by Ryall’s boss, Olivier Piani, also wants to raise the retail element from 10% to 30-40%. As retail is not a specialism, this will be partly achieved via indirect ventures.
“Allianz is significantly underweight in retail,” Ryall says. “Last year we acquired a number of retail assets in joint ventures, including Budapest’s Allee Shopping Centre with ING REIM, Porta di Roma with Corio and St Quentin in Paris with Hammerson.” Ryall says Allianz will announce “a number of things before summer. We don’t necessarily wait for a fund. We talk to managers, including about structuring investments. We are a more proactive indirect investor than we would have been a few years ago.”
Several managers, including ECE, ING REIM and Grosvenor (see news), are raising capital for pan-European shopping centre funds. Ryall says Allianz could invest in this kind of vehicle, but stresses that the company is looking at more than “just shopping centres” in the retail sector. Allianz also plans to invest up to €2bn in European senior debt in the next two years, starting in Germany, and wants to double its weighting in Asia-Pacific and the Americas to 20%.
Allianz looks to AMB’s logistics nous to drive performance
The new logistics joint venture has a core strategy and is not a development vehicle – unlike some other recent tie-ups, including Goodman’s and CB Realty’s last year and Pramerica’s and Panattoni’s, which was expanded from Central and Eastern Europe into Western Europe last month. AMB will seek well-located buildings at airports and seaports, preferably in big Western eurozone distribution markets, such as Germany, Belgium, France and the Netherlands. “We will look for locations that will be attractive for 20 to 30 years and use AMB’s skills in leasing to drive performance,” says Allianz’s Matthew Ryall.
James Markby, a capital markets director in CB Richard Ellis’s cross-border logistics and industrial team, says the tie-up was good for both sides, “but it is by no means easy to buy good quality, stabilised assets”. San Francisco-based AMB, which has developed about 1.4m m2 of distribution space in Europe, has just agreed a $14bn merger with US rival ProLogis. AMB chairman and chief executive Hamid Moghadam calls the Allianz joint venture “a significant investment from an insurance company in their backyard, which endorses our strategy”.