Chicago-headquartered Logistics Property Company, a North America-focused logistics platform backed by Australian bank Macquarie’s real assets business, Macquarie Infrastructure and Real Assets, has raised $1 billion in equity for a develop-to-core fund.
PERE understands LPC took about a year to close LPC Logistics Venture One. Three undisclosed institutional investors, including two sovereign wealth funds, make up nearly all the investor capital in the vehicle.
This is LPC’s debut fund since the company’s launch. In early 2018, MIRA Real Estate and the management of a company called Ridge Property Trust, established the logistics development platform to invest across tier one US markets. MIRA Real Estate is the majority shareholder in LPC.
Eric Wurtzebach, head of Americas and senior managing director at MIRA Real Estate, said the investment in LPC was part of the firm’s global strategy to “partner with high-quality real estate managers, operators and developers to deliver ongoing growth in their businesses.”
“The industrial market mostly consists of private equity development vehicles, value-add funds, or core ownership,” he said, talking about the debut fund’s differentiated approach. “You do not get vehicles with a holding period over the lifetime of the asset. Our whole premise is delivering core assets to industrial investors at around 15-25 percent lower cost than buying in the marketplace.”
By opting for a develop-to-core strategy, LPC also expects to generate higher returns than a typical core logistics strategy.
“During the development phase, we are looking for projects that would achieve levered 20 percent IRR. Once stabilization occurs, the project enters the core period at which time the blended return over the hold period would be expected to generate low double digit returns in the 10-12 percent range over the entire ownership period,” explains Jim Martell, chief executive at LPC, who formed Ridge in the 1990s and led the creation of LPC with MIRA Real Estate.
He added: “When you are buying pure core today, you would expect to get initial cash-on-cash yields in the 4-5 percent range on an average across the US. So, overall levered returns might be between the 6-8 percent.”
Approximately 90 percent of LPC Logistics Venture One fund has been allocated for projects in markets such as Atlanta, Chicago, Dallas and Houston. Once the entire fund is deployed and the portfolio is fully developed, its gross asset value is expected to reach in excess of $2 billion.