SEGRO, Europe's leading owner-manager and developer of industrial property, has agreed the acquisition of a portfolio of eight prime French logistics estates for 160.8 million from Foncière Europe Logistique, a subsidiary of Foncière des Régions.
The portfolio comprises 13 buildings, which are 10 years old on average, totaling approximately 255,000 m² of lettable space and currently generating 14.2 million of annualized rental income. The purchase price represents an attractive net initial yield of 8.4% and reversionary yield of 7.7%.
Five estates are located in established logistics locations in the Ile de France region around Paris, within close proximity to SEGRO's existing core logistics and light industrial estates. The remaining three estates are located in Lyon, one of France's most important logistics and transportation hubs, where SEGRO already has a presence.
All eight estates are fully let to a range of strong covenants, a number of which SEGRO already has relationships with, including UPS, GEODIS, Daher, SONY, DSV and Saint-Gobain. The weighted average lease length is 6.0 years to expiry.
This transaction will significantly enhance SEGRO's existing strong platform in the Ile de France, one of Europe's wealthiest and largest economic regions, and strengthen its asset base in the key logistics market in Lyon. The acquired assets will increase SEGRO's portfolio in the Ile de France region by approximately £95 million (approx. 117 million) to over £400 million (approx. 495 million).
Overall, it will have approximately £500 million (approx. 619 million) of assets in France, totaling over 900,000 m² and generating over £40 million (approx. 49.5 million) of annualized rental income.
The acquisition, following on from the purchase earlier in the year of a 50% stake in the UK Logistics Fund, is further evidence of SEGRO delivering on its strategy, announced in November 2011, to develop its logistics platform across key transportation corridors in the UK and Continental Europe.
These transactions mark important steps towards creating a lower risk portfolio which will generate high quality and resilient income focused returns with minimal cost leakage. Following this acquisition, SEGRO will have prime logistics assets under management of approximately £1.4 billion (approx. 1.7 billion) located in its target markets.
The acquisition, which is expected to complete in September 2012, will be funded using part of the proceeds from the £377 million (approx. 467 million) of non-core asset disposals which SEGRO has announced in the year to date. These proceeds have also been used to pay down debt, consistent with the Group's objective to reduce leverage over the medium term.
Commenting on the acquisition Chief Investment Officer, Phil Redding, said: "This transaction provides us with a rare opportunity to acquire some of the best logistics assets in the two strongest markets in France. The assets deliver an attractive income yield from strong covenants and will allow us to drive operational efficiencies from greater critical mass with the potential to add value over time."