European listed logistics property specialist CTP said on Thursday that it has completed the takeover and delisting for German peer Deutsche Industrie REIT (DIR), in a move providing the group immediate scale in Europe’s largest economy.
In a statement, CTP said that its German activities now represents about 15% of the portfolio with Germany becoming its third largest market by gross asset value after the Czech Republic (42%) and Romania (21%).
CTP Germany plans to invest an additional €1 bn in development projects over the next five years. CTP said that it plans to implement a disciplined development strategy to double CTP Germany’s current GLA to 3.2 million m2 by 2026.
Udo Stöckl, formerly principle and managing partner at advisor Avison Young in Germany, has been appointed Chief Operating Officer at CTP Germany reporting to CTP and Germany CEO Remon Vos. Stöckl has an extensive track record in real estate management in Western Europe and North America. Most recently, he led the successful entry of Avison Young in Germany.
Remon Vos, CTP and CTP Germany CEO, said: ‘The German market is a compelling investment opportunity as it allows us to expand CTP’s network to meet growing occupier demand for urban logistics in one of Europe’s strongest economies. We have identified multiple opportunities to significantly enhance CTP Germany’s portfolio by applying the same disciplined development and operational skills that have been perfected in Central and Eastern European markets over the past 23 years. We will bring the portfolio up to our demanding ESG standards over time, maintaining our lead as the only major pan-European industrial and logistics real estate company with a 100 percent BREEAM-certified portfolio of ‘very good’ and above.’
CTP Germany’s five-year (2022-2026) business plan will involve two strategies intended to create value for stakeholders. To deliver this strategy, the company will recruit dedicated regional teams in four locations comprising some 50 people, including the current DIR employees.
As part of CTP’s strategy, the former DIR portfolio of 90 assets will be split into four components: ‘hold and maintain’; ‘hold and invest’; ‘hold and covert’ and ‘sell.’ The vast majority will be held for the long term with the sale of eight assets expected to be carried out within the first two years. The largest proportion of the portfolio is ‘hold and maintain’, representing quality sites generating stable income from financially sound tenants with longer lease terms. These properties also offer potential for asset management activities to increase rents and improve operating margins with a target 10% leveraged total return.
‘Hold and invest’ assets offer opportunities for modernisation to raise ESG standards, grow rents and improve margins. These assets are generally older with shorter lease terms, some vacancy and a higher rent potential and CTP has already identified some 100,000 m2 of land available for development. The Company is aiming for a leveraged total return of 10% for standing investments in this category and a yield on cost of 8% for development.
The ‘hold and convert’ properties, a minor portion of the total, are suitable for highly profitable repositioning into other asset classes, especially residential within the medium term. These assets will generate c8-10% leveraged total return prior to repurposing.
The second pillar of CTP’s strategy is aimed at doubling the GLA in Germany in five years through development. The firm has identified ten strategic zones around which this growth will be centred: Bremen/Hamburg, Berlin, Hannover, Dusseldorf/Cologne/Dortmund, Leipzig/Dresden, Frankfurt, Nuremberg, Karlsruhe/Mannheim, Stuttgart and Munich. It estimates €1 bn will be deployed to develop and acquire sites, particularly infill and conversion opportunities in and around major urban centres and science and technology parks.
Udo Stöckl, COO CTP Germany, said: ‘We have strategically entered this market at scale, buying significantly below replacement cost and acquiring a major platform in one of the most attractive logistics markets in Europe. The portfolio offers many opportunities to add substantial value through upgrades and active asset management. We envisage growth coming from last mile and infill development opportunities around major urban centres, as well as from science and technology parks. This will enable us to expand our existing German customer base and meet the new requirements of corporate clients with whom we already have relationships across the CEE platform.’
