Inospace forms R1,25bn last-mile logistics joint venture with Fortress Reit
One of the biggest South African property deals this year, the partnership will unlock the significant opportunity that exists in last-mile logistics.
South Africa's leading owner and operator of branded business parks, Inospace, has announced the conclusion of a partnership with Fortress Reit Ltd.
The deal will launch with an initial portfolio of twenty industrial properties in Cape Town and Johannesburg, Through Inospace, the partnership will offer a combination of warehouse, logistics, storage and work space at an initial valuation R1,25 billion. Fortress has contributed twelve multi-let assets, with Inospace contributing the balance.
The combined portfolio spans a total lettable area of 200,000m², with over 600 tenants. All the parks will be branded and repurposed to provide Inospace's value-enhancing facilities, such as staffed business hubs, meeting rooms and business storage.
A new range of amenities will be introduced to the parks to assist SMEs with last-mile logistics including rigging and lifting equipment, handling apparatus, packaging materials, waybill printers and an online courier and shipping platform.
The ongoing running of the assets in the JV are governed by a management contract, which ensures Inospace will utilise its technology-enabled platform to optimise, market and operate the assets.
"Our collaboration with Fortress represents a significant opportunity for both companies, and the Inospace team is excited about being able to grow our footprint and enhance our value-adding customer offering as a result", explained Inospace CEO Rael Levitt.
From supply chain jams to surges in online orders, the utility of logistics focused assets has boomed over the past two years, resulting in an unprecedented demand for delivery and distribution space and services.
According to Levitt, the demand for SME-focused industrial spaces predated the Covid pandemic. "With little new multi-let mini-industrial construction in a decade, favourable supply and demand fundamentals have resulted in low vacancies and strong demand by smaller companies. We are in a dynamic property niche with strong tail-winds which is proving to be structurally resilient".
Steve Brown, Fortress CEO, commented: "This partnership provides us with immediate scale in a niche and growing asset class through the formation of an attractive portfolio into which both Fortress and Inospace are contributing assets. We are excited to work alongside a specialised best in class operator that is reimagining the tenant/landlord relationship".
The transaction resulted from a trial with two Fortress owned properties in Gauteng, which were successfully repositioned into serviced business and micro-logistics parks named Wadeville Works and Electron Exchange. Of this, Brown says, "Specialisation in smaller urban industrial and last-mile logistics spaces has proven to be a high growth sector".
Subject to suitable investment opportunities, Inofort may consider opportunities to grow the JV's portfolio primarily through acquiring and repurposing additional assets from Fortress or finding other portfolios which suit their optimisation model. The partnership will capitalise on the asset management expertise of both Fortress and Inospace, who bring complementary skillsets to the joint venture.
"We're delighted to be growing our business by enhancing our partnership with Fortress," says director Jeremy Katzen. "We are poised for growth, both organically and by acquisition, and are uniquely positioned to take advantage of growing demand for our on-trend offering in this rapidly growing globally recognised real estate niche".
Inospace provides a range of spaces overlayed with a range of appealing value-adding services. With its branded products, SME-centric offerings, and flexible leases, Inospace has quickly grown into a niched sector specialist with assets under management of R2,25bn. www.inospace.com
Fortress REIT is one of the largest listed property REITs on the JSE. With an asset base over R40bn, it invests in direct real estate and listed property securities, focusing on logistics and retail, with industrial and office complementing the offering, and a geographic focus on South Africa and Eastern Europe. www.fortressfund.co.za