Caisse accelerates industrial real estate shift with deal for logistics firm

MONTREAL — With a growing number of consumers moving away from shopping malls to online shopping, the Caisse de depot et placement du Quebec is accelerating its shift in industrial real estate by getting hold of U.S. firm IDI Logistics for nearly $4.7 billion.

The amount was put forward at the end of November by the pension fund manager’s real estate subsidiary, Ivanhoe Cambridge, as part of its transaction with Brookfield Asset Management. The amount paid was not disclosed, but various sources have confirmed the price.

Due to the size of the transaction, the institution recruited an ally and announced Wednesday an equal partnership in the venture with Oxford Properties Group, the real estate subsidiary of the Ontario Municipal Employees Retirement System (OMERS) for its first foray into the United States.

Each party will contribute about $2.4 billion.

“This is certainly the most strategic investment we’ve made in logistics resulting from our shift a few years ago,” Ivanhoe executive vice-president industrial North America Mario Morroni told The Canadian Press.

Ivanhoe Cambridge decided to solicit a partner because of the volatility of markets and the uncertain economic context, he added.

“It had become quite clear that at a time when markets seemed extremely nervous, that our preferred choice was to buy the business and immediately find a partner,” he said.

With the growing popularity of e-commerce, retailers and other giants like Amazon are turning to industrial buildings and logistics centres to store merchandise for shipping.

It is in this context that Ivanhoe Cambridge began to change its direction over two years ago. Since then, its investments in this sector have reached $9 billion, including the IDI Logistics transaction.

Based in Atlanta, IDI Logistics operates a portfolio of 111 assets from six offices and owns land generally near major centres that represent a potential for about 1.3 million square metre of space.

IDI Logistics’s clients include giants like Amazon, Wayfair, Costco and Walmart, Morroni said.

“To get the same quality of assets while having such a good management team in place (…) it would have taken us easily from five to 10 years to build such a platform,” he said.

Logistics assets are coveted by managers on both sides of the border. In Canada, the industrial vacancy rate reached a new low of 2.8 per cent at the end of 2018, according to recent data from Avison Young.

According to Ivanhoe Cambridge, most of IDI Logistics’ properties are only seven or eight years old, making them better suited to the needs of online commerce. Morroni explained that the goal is often to have buildings of a certain height in order to store a maximum of items inside.

With this addition, industrial real estate accounts for 10 to 11 per cent of Ivanhoe Cambridge’s portfolio. It hopes to raise that to 20 per cent in about four years, he said.

Ivanhoe Cambridge has reduced its ownership of Canadian shopping centres to 28 from 48 in 2009, according to its website. As of June 30, its assets were valued at $60 billion.

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