Barwood and Delancey form UK industrial and logistics development joint venture to be called db symmetry

6 January 2015

Delancey, a specialist real estate investment, development and advisory company acting on behalf of clients, today announces it has formed a UK logistics development joint venture through the purchase of a 60% holding in Barwood Developments Limited (“BDL”), a leading UK logistics developer, with the remaining shareholding being retained by the existing Barwood management team.  The new company will be re branded as db symmetry.

BDL’s existing portfolio comprises 1,330 acres of strategic land holdings with an expected development value of over £1.4 billion, which are expected to receive planning consent for over 20 million sqft of primarily logistics property over the next four years. In addition, BDL has seven other projects funded by third party investors. The portfolio is extremely well located being concentrated around the main motorway arteries of the UK and primarily around the ‘Golden Triangle’ of the M1 and M40.

Delancey has acquired the 60% stake as a strategic move to access the logistics sector which it sees as a growth area over the next decade.  The sector currently exhibits extremely favourable supply and demand fundamentals driven by the seismic shift in retail habits, in particular the continued growth of online retailing and the increase in click and collect creating a significant requirement for urban logistics space and last mile delivery.

The creation of db symmetry provides Barwood with a strong partner and Delancey with access to BDL’s significant existing portfolio of logistics development opportunities. Under the terms of the transaction, Delancey has committed to provide further funds which will allow db symmetry to accelerate the bringing forward of the existing landbank and development portfolio. Delancey’s strategic investment will also allow db symmetry to grow through the acquisition of additional strategic land and development opportunities.

Barwood is a group of associated companies involved in the investment and development of commercial and residential property, as well as the promotion of unallocated land through the planning system. The remaining Barwood companies remain unchanged and it will be business as usual for them.

Led by Richard Bowen, who will continue as Managing Director of db symmetry, BDL was founded in 1996. It is run by a highly experienced management team, including Henry Chapman, Christian Matthews and Andrew Dickman who have an excellent track record in securing planning for over 7 million square feet of office and logistics space, and in the subsequent delivery of commercial property developments. Since foundation, the BDL team has invested over £500 million into the delivery of over 14 million sqft of commercial real estate development, of which around 9.6 million sqft has been in the Logistics sector. Recent pre lets include 115,000 sq ft to Prodrive at CM40 Banbury and 230,000 sq ft to Aston Martin at Wellesbourne

BDL has a team of 9 real estate professionals which operate from offices in Northampton and Manchester, the latter having been established in 2012 to capitalise on the increasing logistics focus in the North of the UK.  The team undertakes all land promotion, planning, financing and development management work to maximise efficiency and ensure projects remain focused and under their direct control.

The existing Barwood team will remain in place with the exception of the current chairman Alan Rudge, who will step down from BDL to focus on the other Barwood businesses, and Joanna Greenslade, BDL’s Finance Director, who will also step down from BDL and become Managing Director of Barwood Capital as well as maintaining her role on the Boards of the Barwood residential land and development businesses.  The remaining Barwood businesses will continue as usual and are unaffected by this transaction.

Tim Haden-Scott, Investment director of Delancey said: “We are delighted to have formed this new JV with Barwood, and to be entering the logistics area, particularly at such an exciting period of change in the retail market. Alongside the Barwood shareholders and management, Delancey has strong ambitions for the new JV and we look forward to working together to maximise the potential of db symmetry and the existing first class management team and assets.”

Richard Bowen, Managing Director of db symmetry, said: “Having established a very successful track record of securing well located strategic land and promoting it through the planning system, as well as the subsequent delivery of logistics and industrial development, the creation of db symmetry marks a significant step forward in the evolution of the business.  The strategic investment by Delancey will provide db symmetry with access to significant amounts of equity which will allow us to accelerate the bringing forward of our substantial development portfolio. It also provides us with a strong partner to facilitate the acquisition of new projects from the pipeline of opportunities we have identified at a very opportune point in the cycle for logistics property, which is supported by favourable supply and demand dynamics that will allow us to deliver strong returns for our investors.”

-ENDS-

For further information:

FTI Consulting

+44 (0) 20 3727 1000

Richard Sunderland

Nick Taylor

Notes to editors

The UK Logistics Market: A New Landscape

According to JLL, the supply chain logistics industry in Europe has undertaken a wholesale change in the past five years, in part driven by the dramatic increase of on-line retail sales, resulting in retailers and logistics providers reviewing how they maximise efficiencies within their supply chain.

Strong Demand resulting from growth in on-line retailing

The demand for long term logistics solutions within easy reach of major road networks with access to markets and a flexible work force remains strong.  Take up in 2013 reached its highest level since 2010, up 57% on 2012, and comfortably above the long term average. Key demand drivers were:

  • stronger UK economic fundamentals and growth in the UK manufacturing sector
  • UK shoppers spent £91bn online in 2013, a 16% increase on the previous year, with £107bn predicted to be spent in 2014 – a 17% increase
  • John Lewis saw 30% of its overall sales in 2013 coming from its online business. Source: Internet Retailing 22nd January 2014

Changing Requirements – Move to Build-to-Suit

The requirements of modern logistics have changed to include:

  • Larger buildings for economies of scale (1,000,000 sq. ft.+)
  • Larger yards to cater for point of time delivery
  • Proximity to customers for next day delivery
  • Broad employee base, including skilled IT technicians in addition to traditional blue collar jobs
  • High tech racking / picking systems

The requirements of modern logistics for larger, specialist facilities cannot be accommodated in second hand buildings and is driving a significant swing towards new facilities, typically Build To Suit (BTS).

In 2013, the take up of new space was more than double the level recorded in 2012 and around 77% of all new floor space taken up was BTS.

UK Logistics Market: Outlook

The UK is currently experiencing a significant shortage of Grade A logistics supply due to low volumes of development during the recession.

Shortage of New Supply

The supply of new logistics facilities has fallen year on year since 2009 creating a significant lack of availability in traditional distribution locations. At the end of 2013, Grade A availability stood at 15.8m sq. ft., down from 19.2m sq. ft. six months earlier and 79% below the pre-recession peak. Based on immediately available Grade A supply and speculative development there is now only approximately 1.5 years’ supply in the market.

Key drivers for the shortage in supply are:

  • Resurgence in occupational demand from traditional sources and growth in demand from new sources such as retailers; and
  • The lack of speculative development in post recessionary times – from 2009 to 2013 only three large scale logistics facilities were speculatively developed in the UK

Midlands Location remains key

The Midlands continues to be the preferred location for logistics facilities and tenants, accounting for 40% of UK take up in 2013. The central location and proximity to motorway networks make for excellent transit times to all parts of the UK with a standard goods vehicle being able to reach the majority of England and Wales within 9 hours.

Unsatisfied Market Requirements

As a result of supply side pressures, there are many high profile large scale requirements that remain unsatisfied. Current estimates stand at some 24m sq. ft. nationally and 7m sq. ft. in the Midlands, offering significant BTS opportunities.

Medium Term Outlook

In order to meet the existing and growing demand, the logistics sector requires significant access to green and brownfield development land in established logistics locations, particularly the Midlands. Local Authorities and stakeholders are supportive of new logistics planning allocation due to the employment opportunities this creates, increased revenue for local businesses and increased business rates. As the supply shortage becomes increasingly acute in the short term, rents are increasing, evidenced by hardening incentives and growth in headline levels.

UK Logistics Market: Investment

Strong institutional investor demand and a shortage of prime stock

Rents

Whilst prime distribution rents have remained broadly unchanged so far in 2014, there is evidence that rents are hardening as the market continues to improve and supply diminishes. Incentives are reducing and this is leading to growth in net effective rents.

At March 2014, JLL’s latest forecasts indicate distribution warehouse rental growth of 1.4% per annum over the five years 2014 to 2018.

Capital Markets

UK industrial investment property remains very sought after with a weight of money targeting the sector from both domestic and international investors. Overall investment in UK industrial property totalled £5 billion in 2013, a significant year on year increase of c. 50% and significantly ahead of the five-yearly annual average (2009-2013) of £3.2 billion.

There are however limited investment opportunities to satisfy this demand and as a result of limited supply, attractive market fundamentals and growth prospects, investment yields have continued to move in. At the end of Q1 2014 prime distribution yields in the South East, assuming a 15-year lease and an open market rent review, stood at 5.75%, and Regional prime yields stood at 6.00%.

About Delancey

Delancey is a specialist real estate investment, development and advisory company with over 18 years’ experience and a portfolio that covers retail, residential and commercial developments across London and the UK.  Working with a wide range of assets, partners and clients, Delancey takes a diverse approach to creating value from property. As well as sourcing and negotiating direct property and corporate transactions, Delancey advises on appropriate capital structures, procures third party financing and provides pro-active asset management and development services. One of Delancey’s most high profile assets is the East Village (formerly known as the Athletes’ Village), which it co-owns with Qatari Diar. Adjacent to Here East and Queen Elizabeth Olympic Park, East Village offers a once in a lifetime opportunity to be able to develop and deliver a vibrant new neighbourhood and community for London.

For further information visit www.Delancey.com

About Barwood

Barwood is a highly successful group of associated companies generating excellent returns from investment, development, trading and asset management in the property and land sector.

The other Barwood businesses comprise:

  • LAND: Identifies, secures and promotes land with the potential to add value through the planning process
    • Raised £15m with Aberdeen Asset Management in 2011 and recently closed further £15m fund with Rockspring PIM.
    • Focus is strategic opportunities that anticipate planning and investment trends, while having regard to established planning frameworks.
    • Whilst we continue to focus on our strategic land portfolio, we continue to look for opportunities to acquire land or to secure it by way of option or Joint Venture and partnership where the arrangement can genuinely benefit from our extensive planning and development experience.
  • HOMES: Aspirational living, in prime locations,  with exceptional design
    • Barwood Homes was set up in 2010 as a Midlands based homebuilder specialising in well designed, high specification developments.
    • To date (Oct 2014), Barwood Homes has secured sites that will deliver at total of around 371residential units and has a strong pipeline which includes sites in solicitors hands which are capable of delivering a further 540 residential units.
  • CAPITAL: FCA authorised fund manager and adviser, delivering outstanding returns to investors from a broad range of property opportunities
    • Manage funds invested in £100m of property assets delivering returns to investors between 12%-20% p.a.
    • Raising further fund in early 2015 from HNWI and family offices which will deliver significant returns from a wide range of commercial and residential property opportunities within the regions, outside of London.