Tritax Eurobox targeting €1bn of new European deals

The UK-listed developer Tritax EuroBox is targeting a major new push into the European logistics market with plans to add a further €1bn to its portfolio.

The company said at its full-year results announcement recently that it planned to buy assets earlier in the development process as it shifts its strategy to a more value-add approach. It already has exclusive partnerships with two European developers, Dietz and Logistics Capital partners, that keep it well supplied with a pipeline of opportunities.

It also said it will take a more active capital allocation and recycling policy that could include the sale or partial sale of assets to fund new acquisitions, new debt facilities and when appropriate an equity raise.

In the year to end-September, the company boosted its IFRS net asset value (NAV) per share by 5.3% to €1.19 while growing its portfolio by 5.4% on a like-for-like basis, and increasing rental income by 16.7% to €40.6m.

The German pipeline amounts to more than €200m and includes three imminent deals. The first, according to Preston, is a stable foundation asset leased to a strong company in a good location. The second is a brown-field redevelopment of a building in North-Rhine Westphalie in a prime location, on which Tritax will be constructing a 20,000 sqm building and leasing it. The third, another value-add project, is a very low site-cover building in Bavaria with a couple of years left on the lease. It will be developed with locally-based asset manager and partner Dietz.

At a recent call-in event organized by US investment bank Jeffries, Preston was asked about his views on the German market. He responded: ‘We are a pan-European investment vehicle, but we really like the German market and we want to do more there to grow our current weighting. We do see other good opportunities in other markets and in terms of price and performance prospects, the yields in Germany are the lowest in Europe. That pricing reflects the performance prospects, but we can also get good value in other markets.

'We believe Germany, the Netherlands and northern European markets will fare better economically than some of the eastern and southern European economies post-Covid. We have already bought part-vacant properties with a leasing risk which is a good thing in certain markets, like the Netherlands and Poland, and we’re looking to do more of that in the future. The current conditions are very supportive and we can be a little bit more adventurous in the right markets and locations.’

Tritax’s partner company Dietz was also present to field questions, and CEO Wolfgang Dietz talked about the current most prized locations on the German logistics landscape. These are the big five logistics hubs - Munich, Stuttgart, Cologne, Frankfurt and Hamburg. 

“But there is huge demand and very low supply in these regions because land is very expensive and limited there so we have to go a little bit further”, he said. “For the last three to five years, other parts of the country like the Leipzig region and especially Berlin have become very strong. These regions are still growing so the key is to be centrally located somewhere close to the leading German highways, north, south, east or west.“

On rental growth he said, „Rental growth is the logical result of the lack of available space. We are quite positive this will continue in the next two to three years. In the big five German cities, rents are already quite high, but we’re seeing significant increases at the moment in surrounding areas and there are many examples of rental increases over the past six months as well. In those areas where land is available and warehouses can be developed at short notice, it’s a landlord’s market. That is not the case everywhere, but it’s certainly true of many key regions across the country.”

Tritax Eurobox, founded only in 2018, currently owns and manages €870m of assets across six European countries – high-quality, very large logistics properties. Its two bosses, Nick Preston and Mehdi Bourassi, have made it clear the company needs to grow faster if it is to retain the loyalty of a number of investors who become jumpy as a result of COVID-19. At a gross asset value of €1.2bn upwards, the company could achieve a scale that would enable it to gain investment grade rating and hence drive down its cost of debt, as well as accessing a wider range of lenders.