Mo Barzegar is heading a $4bn charge into Europe for US firm AMB, and UK property is on his shopping list.
Since 2002 US industrial giant AMB has been quietly plotting an invasion of Europe.
Buying up warehouses in lucrative locations such as Amsterdam’s Schiphol and Paris’s Charles de Gaulle airports, it has increased its holdings in continental Europe from zero to $1bn (£504m). It plans to increase this fourfold to £4bn (£2bn) by 2010 and has its sights firmly fixed on the UK.
The US REIT, which has $15bn (£7.7bn) under management, wants 18% of its 180m sq ft portfolio to be located in Europe over the next few years from the roughly 6% it is now.
The man heading the charge is Mo Barzegar, managing director of AMB Europe. The softly spoken Iranian, who studied at Berkeley in California and loves cooking (see box), may not be exactly what the UK sheds market is expecting to front such an aggressive campaign. Yet, as Property Week found out in his first UK interview, he is not to be underestimated.
Barzegar’s first deal in the UK was buying, rebranding and letting Graftongate’s former Binary Park in Dagenham. Bought for £35m in October, just a month later it hooked printing company DSI CMM for 178,000 sq ft at the newly named East London Distribution Park. It has certainly signalled the company’s intent and is also a good indicator of its operating strategy.
‘It’s a good first acquisition for us,’ Barzegar says. ‘We liked the location – it represents our fundamentals. Our policy in new markets is to learn the ropes by doing a small transaction and then, as we get to understand the market and the customs, we go for more.’
The smart money
It has already proved to be a wise policy. In retrospect, hanging back as the industrial market rose relentlessly and then fell with the rest of the market as part of the credit crunch – looks, in Barzegar’s own words, ‘either smart or lucky’. Had AMB entered the UK market when it began seriously looking around 18 months ago, it would now be looking at values on the new stock that would have been 10% lower, according to the latest Investment Property Databank figures.
Barzegar adds: ‘We did pursue some opportunities but local investors were more bullish. We had concerns over the bubble in the market and the pricing and the yields, and so, as a long-term investor, we were patient.’
It is thought that pricing issues scuppered AMB’s bid for the UK’s biggest industrial portfolio, the £1.1bn sale of Morley and baa’s Airport Property Partnership. Once Brixton and ProLogis had teamed up to provide the financial muscle, the deal looked too difficult for AMB to do alone and it pulled out after failing to find a funding partner. The portfolio is also considered to be overpriced in the current market.
Barzegar is understandably reticent, saying only that AMB has money ready for other options: ‘We like taking risks in the right locations and we have a strong balance sheet.’
Buying the portfolio, which would have been the largest-ever industrial deal in the UK, and what Barzegar calls a ‘unique opportunity’, would have represented a giant leap of faith for the US company with no UK team yet on the ground. It would also have been a break from its strategy of buying small until it is established. Its first acquisition in Paris, for example, cost around $7.7m (£3.9m).
Moving on from that deal, though, Barzegar is confident that AMB is in a strong position for acquisitions in 2008. It is understood to have teamed up with Graftongate to put in an aggressive bid of around £35m for Bedfont Lakes, a 15 acre site near Heathrow being sold by Phillip Nelson and Simon Bakewell, founders of NB Real Estate, whose Westport Land company is in administration.
‘The market correction is good for us,’ Barzegar says. ‘It separates the long-term, well-capitalised players from the opportunistic short-term players.
‘We like the shake-out,’ he adds. ‘There are opportunities to be picked up now at the right price. In the next six to 12 months there are some interesting deals, not like the last three years when anything could be sold to anyone.’
AMB now plans to build up a team in the UK and has secured a significant amount of funding – Barzegar says it is ‘not limited’ – for up to four further purchases by the end of 2008.
AMB will focus on the supply-constrained London market, particularly around transport hubs such as Heathrow, in keeping with its global policies to invest in prime locations. Barzegar will look at what he calls ‘chunky’ purchases, probably with local partners.
‘The land spots are smaller, so we won’t be building big boxes,’ he says. ‘We will do smaller sheds and combinations. Our designs are flexible and open to multi-let and multistorey sheds.’
He cites Goodman and ProLogis as AMB’s biggest UK and global competition.
‘ProLogis is one of the only truly global players and AMB is one of them too,’ he says.
‘On Goodman, the jury’s out a bit more on how it’s rolled out its global play in such a tight timeframe – AMB and ProLogis have a more organic approach to growth.’
But it is unlikely that the pair scare him too much. Growing up in Iran, particularly during the revolution of 1979, when a large contingent of his family left the country, has made Barzegar a tough cookie. His American education – a degree in economics at Berkeley and a masters in finance and real estate from the University of Pennsylvania has left its mark, although Barzegar says the 20 years spent in California have not turned him completely into an American. ‘When we close a deal we don’t go to a yoga class and have a mint tea,’ he says.
That said, he was caught up in the US obsession with the internet, starting an online property company, RealPrompt, in 1999. The idea was that users would be able to do deals from start to finish online.
‘The dot.com fever caught everyone, but it was ahead of its time,’ Barzegar says. ‘There could be more deals done online – but it’s a while from now. Real estate is very personal, people like to touch and feel it.’
When RealPrompt collapsed, AMB spotted an opportunity and drafted in Barzegar to lead its European charge. He says the new challenge was ‘too tempting to refuse’.
Of course, he could always just have stayed on the farm back home in Iran. His second name means ‘farmer’ in the Persian tongue Farsi, Barzegar’s first language, which he is now teaching his eight-year-old son.
‘I grew up as a kid on the farm, and from the early days liked playing in the mud,’ he says.
Surely there is no better background for the rough and tumble of the UK sheds market.
Read more: http://www.propertyweek.com/news/barzegar’s-bounty/3106584.article#ixzz1Gn0Pjxrx
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