The increasing importance of equity in the logistics real estate market

Swiss Life Asset Managers’ recent logistics JV is a clear example of how strategic partnerships and a strong equity base can be the key to sustainable growth and success.  

Current challenges, including high energy prices, rising construction costs and the turnaround in interest rates, have recently had a profound impact on the logistics property market. These developments have led to a phase of uncertainty in which the importance of equity capital and the search for reliable partners have increasingly come to the fore for project developers. The recent joint venture of Swiss Life Asset Managers is a clear example of how strategic partnerships and a strong equity base can be the key to sustainable growth and success, even in challenging times.

Equity as a foundation for stability and growth
For a long time, the logistics sector was driven by the expansion of retail and e-commerce. Even though this momentum has slowed down a bit, the sector continues to be characterised by demand that exceeds supply. This is primarily due to the ongoing shortage of space for logistics or industry, particularly in urban centres. This imbalance between supply and demand emphasises the importance of sound investments in this sector, which can offer both an attractive return and a certain degree of protection against vacancy risks and market fluctuations.

Equity plays a decisive role in this context. It not only provides the financial basis for the realisation of projects, but also signals trust and reliability to tenants and investors. By providing sufficient equity with low debt ratios (leverage), project developers can build on a solid financial basis, which facilitates the realisation of ambitious projects and minimises risk.

The recent joint venture between Swiss Life Asset Managers and a global investor makes use of this strategy by building up an initial portfolio worth 320 million euros with fully let logistics properties in prime locations. These properties not only provide a stable source of income and protection against inflation through index-linked leases, but also demonstrate the benefits achieved through strategic equity utilisation.

The strategic importance of partnering
Beyond financial security, this collaboration emphasises the importance of strategic partnerships in the real estate sector. The joint venture leverages Swiss Life Asset Managers’ logistics platform and aims to capitalise on the continued high demand for logistics real estate in key retail and transport centres across continental Europe. For project developers, constellations like this offer several advantages: In times of financial uncertainty, access to capital is more fundamental than ever. Strong equity positions and the support of reliable partners secure the necessary start-up financing and offer the opportunity to efficiently bridge financing gaps without having to utilise debt or mezzanine solutions with very high costs.

This is particularly relevant when unforeseen expenses arise or when projects require additional funding in critical phases. Solid access to capital makes it possible to drive projects forward with greater certainty and without unnecessary delays. In addition, with a strong equity base and the backing of experienced partners, developers can tackle more ambitious projects that would normally be considered too risky or too large. This ability to realise scaled and potentially more profitable projects is a key competitive advantage. Experienced partners not only bring their specific expertise and market knowledge but can also play a crucial role in building relationships with other stakeholders such as authorities, end users and financing institutions.

Risks and challenges of equity investments and partnerships
Although equity investments and strategic partnerships in the logistics property market offer significant benefits, they are not without risks and challenges. One of the key risks lies in the potential mismatch of business objectives and cultures between the partners. Different management approaches and expectations can lead to conflicts that can delay the realisation of projects.

Furthermore, equity investments require careful due diligence and market analysis, as misjudgements regarding location, market development or tenant requirements can lead to financial losses. This emphasises the importance of careful planning and the selection of compatible partners with similar goals for long-term success. Nevertheless, the benefits show that equity investments and joint ventures provide a strong foundation for project developers to succeed in a rapidly changing market environment. They serve as a buffer against financial uncertainties as well as a springboard for growth and innovation.


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