Last-Mile Delivery Might Not Be Profitable Yet But BlackStone Found A Way To Make It Work

Mileway was formed by Blackstone in 2019 to store the portfolio of urban warehouses and dark kitchens owned by its European property funds in and near populated areas. Companies such as Amazon.com, Deliveroo and parcel delivery provider Deutsche Post rely on these so-called last-mile locations as important distribution points to ensure that their customers receive their packages on time.

Sale To Own Investors

Instead of floating the company, Blackstone decided to sell the company directly to its own investors. Enabling these to keep their exposure to the asset indefinitely. Because the private equity firm and its investors are both buyers and sellers of the asset, this type of transaction can lead to conflicts of interest. Blackstone said it utilized outside counsel to check Mileway's valuation to avoid this scenario.

Mileway, whose investors include significant U.S. pension plans and international sovereign wealth funds, is valued at €21 billion, according to the New York-based corporation. This is over three times the €8 billion valuation at the time of the Amsterdam-based firm's inception.

Lasting Changes

According to Blackstone, Mileway's warehouse network has grown by more than 65% in less than three years, to over 1,700. The structures can be found in ten nations, including the United Kingdom, Germany, the Netherlands, Sweden, and France.

The Covid-19 pandemic has expedited the transition toward e-commerce and food delivery, which is fueling demand for space near densely populated regions where online orders may be loaded onto trucks and vans or picked up by couriers for local delivery. Near big cities, retailers and restaurants experience a scarcity of last-mile space. As more businesses promise same-day or even two-hour delivery, such space is becoming more valuable.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Claudio Schwarz on Unsplash.