Logistics delivers

Stephan Riechers is an investment manager for logistics real estate. With a portfolio deal worth around 800 million euros, he has just delivered a masterpiece in his asset class. By Elke Hildebrandt (text) and Benne Ochs (photos)

South of Hamburg, in the Allermöhe commercial zone, lies the epicentre of a booming logistics hotspot. A constant stream of lorries transporting all manner of goods heads along the A25 motorway and takes the nearby exit. Convoys of trucks snake their way along Rungedamm road to the many huge grey warehouse complexes. Around seven years ago, Stephan Riechers acquired the logistics centre at Rungedamm 32, then still a development project, on behalf of Union Investment. He has come to Allermöhe today to visit the centre. As head of Investment Management Logistics, he wants to see how the building has evolved in the meantime as a hub for warehousing and cargo handling. “Investing in real estate is a bit like gardening,” the logistics expert explains. “You plant a seedling and then you have to check on how it has grown.”

The investment in Allermöhe has clearly flourished over the years. On a tour of the warehouse areas, Riechers discusses the details with his Hamburg-based Union Investment colleague Matthias Wagner. It was Wagner who took over the modern logistics complex in the portfolio of the UniImmo: Deutschland real estate fund in 2013 and he has been responsible for managing the asset ever since. The senior business expert has oversight of all of Union Investment’s logistics properties and maintains close contact with warehouse tenants across Germany. He agrees leases, solves space problems and arranges structural modifications to accommodate changing user requirements. At Rungedamm 32, the approximately 64,000 square metres of space has been fully let to DHL on a long-term lease. DHL runs three shifts a day at the facility, processing orders for a wide variety of customers, including Volvo, Karstadt and wine merchant Rindchen’s Weinkontor. DHL is also in charge of highly automated cargo handling within Germany for fashion company Tom Tailor.

Visitors are required to undergo a security check before being allowed to enter the six warehouse areas full of stock and must be accompanied by a DHL staff member at all times.

The external appearance of the building belies its highly impressive interior: about 20-metre-high shelving within full-height cages, automated stacker cranes running independently on rails, scores of cardboard boxes criss-crossing each other on package lines running above, below and next to each other, conveyor belts that wind around at various heights along a four-kilometre route, repackaging stations and intermediate storage areas as far as the eye can see. In the automated section of the warehouse, the air is filled with the whirring noise of more than 1,000 electric motors as they transport items towards the roller doors.

Functionality is crucial

The property originally consisted of just one relatively small warehouse and Union Investment was initially undecided whether this should be demolished to make way for a completely new logistics complex on the site. During the transaction, however, the investor decided to retain the old building core dating from 1989 and expand it by adding a large new build. “That made sense because we were able to save resources and because functionality is what really counts in logistics,” explains Riechers.

"A pallet doesn’t care whether a building is old or new," he adds. The crucial thing is for the building to function efficiently and flawlessly for the tenant. Standards for floor load capacity, supporting pillars, ceiling height, doors and, above all, fire safety obviously had to be met. "As a general rule, Union Investment favours properties built in 2000 or later, in order to ensure that as many as possible fit the defined acquisition criteria," says Riechers.

Riechers had been gradually expanding the logistics portfolio since 2006, the year he joined Union Investment, and it has grown to comprise 25 properties worth €1.2 billion in total. Until very recently, the focus was on “acquiring individual properties in Germany in very good locations,” says the logistics expert. “Some 75 percent of our investments involved development projects.”

In Hamburg-Allermöhe, Stephan Riechers visits the DHL logistics centre at Rungedamm 32, where the investment manager was responsible for the purchase of the former project development and is reviewing the development of the site.
Benne Ochs


Stephan Riechers (48) is a real estate professional, a certified business management expert for the housing industry and a real estate economist (ebs). He is also a member of the Royal Institution of Chartered Surveyors (MRICS) and a member of the German Property Federation’s (ZIA) logistics property committee. He has worked in the real estate industry since 1991 and has held senior positions in the residential housing sector, most recently at Dahler & Company. In June 2006, he joined Union Investment Real Estate GmbH in Hamburg and now works in the Investment Management Europe segment as Head of Investment Management Logistics. He is responsible for the acquisition and sale of logistics properties in Europe and for developing the logistics portfolio.

Strong growth in the logistics portfolio

Last year, fund management began pursuing a broader strategy with a stronger focus on logistics properties than in the past. “We’re aiming to roll out our logistics cluster concept across Europe and at least double our investment over the coming years.

Following our success with other use types, we now want to significantly boost our logistics exposure in Europe,” explains the investment manager. Logistics properties have accounted for only around 2 percent of the large retail funds up to now; the aim is to raise this proportion to 10 percent in the future. “Achieving that growth target automatically means getting into portfolio transactions,” says Riechers. The logistics expert is delighted to have been able to deliver success more quickly than expected with an early, high-value portfolio acquisition. As announced in February of this year, Union Investment has acquired Logistrial Real Estate AG from Garbe Industrial Real Estate and taken over a total of 13 existing properties and 6 development projects as part of the transaction. Three of the logistics properties are in the Netherlands, one is in France, one in Austria and the rest are located in major German conurbations. His long-standing personal links with the Garbe Group enabled Riechers to get the ball rolling on the transaction, which has a total value of around €800 million.

“We spotted the opportunity to secure this portfolio for our investment funds,” recalls Riechers, “and we were able to get the deal done in just a few weeks.” In the wake of this package deal and in anticipation of future planned transactions, Union Investment intends to increase the headcount in its Investment Management Logistics and Asset Management Logistics teams accordingly. Property management, on the other hand, will continue to be handled by external partners. These include Habacker, Ixocon, Frasers, Pfenning and Garbe, all of whom specialise in logistics.

In Riecher’s experience, reliability and speed are the key criteria that an investment manager needs to demonstrate in order to gain recognition in the market as a credible investor. It’s also crucial, he says, for an investor to actively work on solving problems rather than shy away from them. “In terms of logistics properties, that means we also see opportunities in the core plus and manage to core categories, where other investors might be reluctant to get involved.” Even lost deals can pave the way for a positive transaction. “We missed out on the Maximus portfolio, but the market saw that we are serious players and are ready and willing to do a portfolio deal,” says Riechers. “If you behave transparently and fairly in a deal, even a failure can open doors to the next opportunity.”

Union Investment is aiming to raise the profile of its growth strategy in European logistics markets through its successful completion of the recent Matterhorn transaction. “And the best way to do that is via deals,” says Riechers. He’s a great believer in contacting developers directly and talking at regular intervals.

“One opportunity is revolving new business with trusted partners, including teaming with them to enter new markets. We benefit hugely from already having in-depth country-specific knowledge thanks to our investments in the office, retail and hotel segments across Europe. Another option is to do business with new players. We’re also interested in spin-offs and sale-and-leaseback transactions. Additionally, our strong asset management ability is a major advantage when it comes to securing follow-up business.”

Logistics properties can live with being seen as the “ugly ducklings” of the real estate sector, reckons Riechers. “In the past, the beauty of a logistics property lay in its profitability,” he comments.” With gross initial returns in Germany currently below four per cent, investors are now increasingly coming to appreciate the other advantages of this asset class. According to Riechers, these mainly include “high re-letting rates, long-term leases and little need for incentives”. Because the automation and digitisation of the logistics industry is taking place within warehouses and is thus a matter for tenants, this often very substantial investment inevitably creates a strong attachment to the location, explains the logistics expert.

Convinced networker

For his part, Riechers is deeply attached to his native Hamburg. The 48-year-old investment manager lives with his family in the city’s Rotherbaum district. A former competitive swimmer, he spends his leisure time jogging around the Alster lake and sailing on the Baltic. Riechers believes that personal contacts are vital in the work environment and are the only way to build trust and obtain crucial information.

The logistics expert therefore sees himself essentially as an information manager and a dedicated networker. So it’s hardly surprising that he joined the Hamburg-based fund manager in summer 2006 following a tip-off from a Union Investment employee. Since then, Riechers has been a big fan of his asset class. “Logistics really does deliver attractive opportunities,” he says.

By Elke Hildebrandt (text) and Benne Ochs (photos)

Title image: Benne Ochs

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