SEGRO plc has announced that SEGRO European Logistics Partnership (‘SELP’) has exchanged contracts to acquire a portfolio of prime logistics assets and development land in Germany, Poland and France for €472 million from two funds, one managed by Tristan Capital Partners (CCPIII) and the other co-managed by Tristan Capital Partners and AEW Europe (EPISO).
Completion is expected in the second quarter of 2014, subject to certain closing conditions.
SEGRO holds a 50% stake in SELP and acts as asset, property and development manager for the joint venture.
The portfolio comprises 14 prime, modern logistics assets (10 in Germany, three in Poland and one in France) covering approximately 679,000 m² of lettable space, including one building under construction, and 51 hectares of development land in Germany.
The purchase price of the completed assets and land is €463 million, reflecting a net initial yield on the standing investments of 7.1% and an equivalent yield of 7.0%. The portfolio currently generates €31.6 million of contracted annualised net rental income. 80% of the properties in the portfolio by area have been constructed within the last five years, the weighted average lease length (to earlier of break or expiry) is just over six years and the portfolio vacancy rate is 4%.
Amongst the portfolio’s tenants are major global logistics providers, including existing SEGRO customers such as Deutsche Post, Nagel Group, DB Schenker and Geodis.
The building under construction totals 13,250 m² and is located in Leipzig and is scheduled for completion in the first quarter of 2014. SELP will buy the asset on completion for approximately €9 million and the vendor will provide a rental guarantee for two years in the event that it is not pre-let by completion.
The acquisition is not subject to financing. However, it is intended that SELP will fund the acquisition, either at or shortly after completion, in line with its stated policy of having a loan to value ratio of approximately 40%. SEGRO’s net equity contribution, totalling approximately €142 million, will be funded from existing cash resources.
The acquisition is fully aligned with SEGRO’s strategy of expanding its presence in its target Continental European logistics markets in partnership with third party capital. The acquisition is also in line with SELP’s investment strategy in terms of location, asset quality, lease terms and expected returns and represents a major step towards delivering the objective of doubling the size of the joint venture over the coming years.
Assets acquired located in prime logistics locations:
- Germany: 64% of the portfolio by value comprises 10 assets in Germany (within which there is one building under construction). The assets are in established logistics locations, adjacent to main road transport corridors or interchanges, or in close proximity to manufacturing centres, including Hamburg, Leipzig, Berlin and Ingolstadt;
- Poland: 21% of the portfolio by value comprises three assets in Poland, on the outskirts of Warsaw, Lodz and Poznan, all established locations for SEGRO; and,
- France: The remaining 15% of the portfolio by value is one asset in France, close to the Port of Marseille, and a key node on the Lille-Paris-Lyon-Marseille central logistics spine. SEGRO is already present in Paris/Ile de France and Lyon.
Commenting on the acquisition, SEGRO’s Chief Executive Officer, David Sleath, said: “The off-market acquisition of this significant portfolio, just four months after the creation of SELP, increases the joint venture’s position in some of the best logistics markets in Europe by almost 50%. The assets deliver an attractive income yield from modern, flexible buildings and strong covenants and their addition to SELP’s existing assets will accelerate its investment strategy.
“The transaction is in line with our strategic objective to grow the SELP portfolio and marks a further step in our drive to create a leading Continental European logistics platform.”
JLL European Capital Markets advised Segro.
Source: FTI Consulting