Under Gazeley’s new president and chief executive Nick Cook, the company is due to take its engagement with tenants far beyond bricks and mortar as it looks to leverage the capital and expertise of its new owner GLP.
It also expects to ramp up the development of cutting edge logistics warehouses, in particular building multi-storey facilities.
Last month, GLP completed the €2.4bn purchase of the company from Brookfield, and at the same time Pat McGillycuddy stepped down as chief executive and became non-executive chairman with Cook promoted from chief operating officer.
McGillycuddy, a co-founder of Gazeley 30 years ago, is to take on responsibility in his new part-time role at a global level for advancing further its relationships across the GLP portfolio, beyond just the European portfolio of Gazeley.
In China and Japan the company has a substantial financing business that sees it lend to its customers to advance their core business initiatives that helps them expand and further integrate into GLP’s portfolio. It also invests into telematics – vehicle and transportation science and engineering – where it can push the agenda alongside its customers that use it. It is expected that this approach will be applied in Europe as well.
Growing the platform
“People that succeed in the next wave of logistics development for ecommerce are going to have to be those that are tied in to every facet of their customers’ business models and we are pushing very hard and looking intensely to find ways to do that,” says Steve Schutte, chief operating officer of GLP.
“We have a financial leasing group that helps with financing fit outs, which is fairly common, but beyond that we are looking at financing groups’ operations as we have competitive capital to help them grow their platform.
“It helps with customer stickiness and keeps customers close to you when you can provide a one-stop shop for their needs. For us, it is also about collecting information and, through having those extra touch points with customers, it helps us grow a platform.”
Such innovation is also apparent in GLP’s approach to development itself and it has globally developed more multi-storey facilities than any other company.
“I don’t mean just traditional buildings with mezzanines within them, but we will properly ramp up true multi-storey development,” says Cook.
“I’m absolutely sure that around the major conurbations with high land values like London and Paris we will see this take hold. We have a lot to learn from GLP and will get ahead of the game and competitors in delivering that.”
Investor interest
To fund the purchase GLP has established two new funds – GLP Europe Income Partners I and GLP Europe Development Partners I – the former of which will own standing assets, and the second Gazeley’s 16m sq ft development pipeline. Both will be €1.7bn sq ft, with the extra €1bn over the purchase price being used to develop out the pipeline.
Thus far, investors in the funds have contributed around 24% of the capital used to purchase the company with the remainder having been funded from GLP’s balance sheet. GLP intends to syndicate a total of around 85% of the equity in the company, which will be completed by April, and says that while the remainder has not been tied up it is already oversubscribed.
Investor interest has come from across regions, particularly Asia, including sovereign wealth funds, pension plans and financial institutions.
Schutte says that while there has been strong demand for both funds, the demand for the development fund has been notably strong compared to instances where it has created similar structures in the past outside of Europe.
He attributes this to the perception amongst investors that there is particular upside potential in the advanced ecommerce market in the UK, where the majority of the company’s development pipeline is located.
“The development portfolio is a bit unique and there’s lots of appetite. The potential in the UK is really what is driving interest and it really is one of the world’s central hubs of ecommerce,” he says.
As well as building out the development pipeline, Gazeley will also buy standing investments, typically where it has a particular asset management angle with a new tenant or adjacent to its existing portfolio.
“We think that the growth in Europe will primarily come through development but with some selective acquisitions. Most of the significant portfolio trades of quality have been done for now,” says Cook.
“There may be some further consolidation but I’d like to think GLP has bought the crown jewels and I’m not sure there are other equivalent quality platform opportunities out there. From a GLP perspective there will always be a watching brief on more strategic corporate acquisitions though, so I wouldn’t rule anything out.”
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