Logistics real estate investor Tritax Eurobox will continue to concentrate on reducing leverage by selling assets before making new acquisitions, CEO Phil Redding told PropertyEU at Mipim.
The company has divested a total of €139 mln out of an initial target of €150 mln over the past 12 months, a figure that will probably be surpassed when the process is completed.
Tritax Eurobox was previously present in seven countries, but this proved challenging, so it is streamlining operations and focusing on fewer countries. The company is exiting Sweden after recent asset sales in Malmo and Gothenburg and is reconsidering its single remaining asset in Poland.
Faced with challenges like a high cost ratio, unsustainable dividend payments, and increased leverage, Tritax Eurobox managed to sell assets at good prices, as they were modern, met high ESG standards and had strong financials, Redding said.
‘We expect to get leverage under control by the end of the year, depending on valuations. Once the leverage issue is resolved, we can take a more positive outlook on investments,’ he explained.
Germany is the company's main focus, representing 40-45% of its portfolio. Redding is upbeat about the German logistics market, despite struggles in certain parts of the office sector. ‘We are still very comfortable with Germany, with its massive economy, a very big industrial base,’ he added.
The CEO points out that there was a lot of uncertainty regarding interest rates and how they might affect valuations, but the market has since adjusted. ‘I believe interest rates will eventually start to go down. However, if they don’t fall, the market could stay flat all year until that happens. There might be more positive signs towards the end of the year, but we'll have to wait and see.’
According to Redding, there is currently a wait-and-see approach, as sellers still want a premium and buyers are hesitant to overpay. However, he believes this will be resolved quickly. ‘Unlike previous cycles with speculative building leading to oversupply, new construction hasn't kept pace with high demand. While there's been a recent increase in new supply, vacancy rates remain low. This healthy supply-demand balance should comfort investors and encourage them to reinvest later in the year,’ he added.
For Tritax Eurobox, the big-box segment remains profitable thanks to high demand from large-scale retailers, manufacturers, and e-commerce companies, while delivering strong market fundamentals as a result of convenient locations and efficient delivery infrastructure.
