Tritax EuroBox has lined up €204 mln of assets in Germany as the start of a push to add up to another €1 bn of logistics to its portfolio.
The London-listed developer is prioritising growth from its current size of €870 mln of assets (GAV) across 13 properties in six countries, and expects to increasingly source opportunities via value-add activity rather than buying fully let standing assets. Eurobox launched two and a half years ago and is currently fully-invested.
Fund manager Nick Preston and finance director Mehdi Bourassi said the company had completed its ‘build-up phase’ and intends to raise capital for expansion by selective asset sales which could include part shares in the portfolio to third party investors.
Bourassi said EuroBox would also consider raising equity if the share price recovers from the discount it has been trading at this year. The shares rose 3.4% on 3 December to €1.075, on strong full year results to 30 September 2020 which included a jump in adjusted EPRA net reinstatement value per share of 7.4% to €1.30 and a like for like valuation increase of 5.5%.
Logistics is the hottest asset class in real estate and Preston explained the reason for Eurobox’s discount as partly down to its relatively small scale. ‘We have hit a number of red lights with certain investors because our liquidity levels aren’t high enough. It’s not connected to the portfolio or the market. We have had three or four quite material sellers in the last 12 months, some driven by Covid taking a more risk-off approach.’
EuroBox has one unsecured revolving credit facility of €425 mln of which €344 mln is drawn. The aim is to get to investment grade rating to drive the cost of debt down and access a wider range of lenders including the bond market where euribor is negative. ‘Rating agencies like our portfolio. The only thing missing is size. We believe we can get to investment grade when we get close to €1.2bn GAV, and we are about €300 mln short’, Bourassi said.
German pipeline
Preston said that the €204 mln of German pipeline assets are ‘three deals which we have in our control. One is a stable foundation asset leased to a strong company in a good location.
‘One of the others is a brown-field redevelopment of a building in North Rhine-Westphalia in a prime location. We will be constructing a 20,000 m2 building there and leasing it. The third is in Bavaria, another value-add initiative, a very low site-cover building with a couple of years left on the lease.’ The southern German acquisition will be developed with locally-based asset manager and partner Dietz.
In addition, the company has between €80 - €100 mln of additional assets coming through internally from developing on land embedded in the portfolio next to existing ownerships. These include an extension for Mango at its hub in north east Barcelona and 15,000 m2 more at Bornem near Antwerp in Belgium.
Preston said they are reviewing an additional circa €700 mln of ‘further out’ projects, either from the pipelines of Dietz or the group’s other regular partner LCP, or from other developer contacts. This includes in France, where EuroBox is not yet invested.
The effect of Covid in the existing portfolio has been minimal with only one of the 21 tenants not paying rent. Bourassi said this occupier would be paying the €1.6 mln deferred in instalments over nine-months from January 2021.
The weighted average unexpired lease term across the portfolio is 9.1 years and 95% of rental income is subject to an element of indexation each year.
Regarding Covid, Preston added: ‘We see a real tailwind effect, accelerating through the logistics sector with increasing demand for logistics space.’
