Tritax EuroBox plc has agreed on the sale of its asset in Lodz, Poland, to clients of Savills Investment Management, for €65.5 million, representing a 4.95 percent gross initial yield. The sale price is 15 percent above the property’s most recent 30 September 2020 valuation, delivering to shareholders an attractive geared IRR of 16.5 percent per annum.
Nick Preston, Fund Manager of Tritax EuroBox, commented: “This sale of one of our earlier acquisitions has delivered strong returns to our investors. The successful completion in May 2019 of the forward funding pre-let development opportunity to expand the existing site in Lodz by a further 52,000 sqm, means we are in a position to crystallise a profit from a now stabilised asset, with a view to recycling the capital into higher returning investment opportunities. We can deploy this capital quickly due to a number of attractive opportunities both within the existing portfolio, and also from the pipeline of potential acquisitions secured from our asset management and development partners.”
Tritax EuroBox acquired the Polish asset, strategically located in Strykow, 15 km northeast of Lodz, in 2019 at a purchase cost of €55.0 million, or a gross initial yield of 5.80 percent. The 101,555 sqm property is leased to French DIY chain Castorama, part of Kingfisher plc, and has provided a period of stable income as the portfolio has grown. With a lease term of 6.7 years remaining, the property has no imminent asset management opportunities.
The German logistics market is a key target for capital reinvestment
Following Tritax EuroBox’s IPO on the London Stock Exchange just over two years ago, it has built up a prime portfolio of 13 large-scale logistics assets each strategically located close to population centres with very strong infrastructure. Tritax EuroBox is now fully invested across six core countries, with a portfolio valued at €870 million (30 September 2020).
Tritax EuroBox is particularly keen to expand its presence in the German market which it views as the most important, influential and robust in Europe. Its partner in Germany is Dietz AG, one of the leading players in the country with a solid forward development pipeline, has to date delivered six assets within the current portfolio. The already thriving German logistics real estate market has exploded during the Covid-19 pandemic following the jump in e-commerce volumes and the value of scarce development land has soared while rent rises are accelerating.
Europe as a whole has lagged behind the UK in terms of the penetration of online spending, but it is now growing very rapidly and the German market, in particular, is leading the way, along with the Netherlands.
Soaring e-commerce volumes across Europe continue to spur demand for logistics space Tritax EuroBox also sees compelling opportunities in the other European markets where it already has a presence and asset management and development partners. For example, in Belgium Tritax EuroBox has a partnership with developer LCP which is the asset manager of a 34,125 sqm logistics facility in Nivelles, south of Brussels, that it acquired in December 2020. Belgium is another European logistics real estate market with extremely low vacancy levels and insufficient supply to meet burgeoning tenant demand. Such favourable supply and demand dynamics, combined with strong
investor interest continues to drive yield compression.
Prime yields across European logistics markets tightened by 20-50 bps during the fourth quarter of 2020, according to data from advisor CBRE. Yield compression was strongest in Belgium (-50 bps to 4.25 percent), followed by the Netherlands (-40bp to 3.60 percent), and Spain (-35bp to 4.75 percent). Vacancy rates ticked up marginally in the fourth quarter across most regions in Europe compared with the start of the year but remain below 5 percent in most markets while Belgium recorded a low of just 1.3 percent and Italy 2.6 percent, the CBRE data reveal. Rental growth is evident in markets where supply is constrained such as Belgium (+5.8 percent YoY), Italy (+1.8 percent) and Germany (+1.4 percent).
Nick Preston concluded: “Online retailing has exploded in the past year with most markets in Europe reporting growth of as much as 50 percent. Covid-19 has conflated 10 years of evolution in e-commerce into just one year, which explains why investor interest in logistics real estate has turned red hot. In this environment, we have to be more thoughtful about how to continue delivering strong returns and are therefore recycling capital into more value-accretive assets. Lack of available stock is the prime constraint for investors in this market, but that doesn’t apply to EuroBox, as we have an extremely strong forward pipeline and are sitting in a ‘sweet spot’ compared with most of the rest of the European logistics real estate sector.”
