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Tritax EuroBox plc is dedicated to Continental European logistics real estate. This new investment trust is to be listed on the Specialist Fund Segment of the Main Market of the London Stock Exchange with a target size of £300 million (c.€340 million).
Tritax EuroBox plc will exploit the structurally undersupplied Continental European logistics market, capitalising on Tritax Group’s extensive logistics experience and long-established network of key occupier, owner, developer and agency relationships.
The Company’s objective is to build a well-diversified portfolio of European logistics assets in order to deliver an attractive capital return and secure income.
Tritax EuroBox will seek to meet its Investment Objective through investment in, and management of, a portfolio of logistics assets in Continental Europe diversified by geography and tenant, targeting well located assets in established distribution hubs, within or close to densely populated areas.
The Company will focus on investments in properties fulfilling a key part of the logistics and distribution supply chain for occupiers including retailers, manufacturers and third-party logistics operators. The majority of the portfolio is expected to be invested in large, modern distribution warehouses. A proportion of the portfolio may offer exposure to urban distribution hubs, which help occupiers fulfil the “final mile” part of the distribution chain.
The Company will seek to invest in locations with limited supply of logistics assets that are likely to benefit from structural changes in occupational demand and/or assets benefitting from long term index-linked leases.
The Company will target and seek to maintain a weighted average unexpired lease term of greater than five years across the portfolio in accordance with typical lease lengths prevalent in continental Europe.
The Company will build a well-diversified portfolio of European logistics assets which fulfil key roles in the logistics and distribution supply chain focused on the most established logistics markets and on the major population centres and logistics terminals. These assets will be large, modern, well specified properties which satisfy modern occupier requirements.
Tritax EuroBox will target large, modern, well specified Big Box assets which satisfy modern occupier requirements.
Tritax EuroBox will target assets located in established distribution hubs with strong transportation connectivity, good availability of labour, within close proximity to major population centres.
Tritax EuroBox will target assets which benefit from value enhancing capital investment by tenants in state of the art automated handling systems.
Tritax EuroBox will target assets in locations with limited availability of land due to pressures from alternative uses.
A proportion of Tritax EuroBox’s portfolio may include urban distribution hubs providing fulfilment of the “final mile” distribution chain.
Tritax EuroBox will target assets which present potential for asset management and value enhancing initiatives during the lease term.
The majority of the Company’s portfolio is expected to be invested in completed, let investments and pre-let forward funded developments. A proportion of the portfolio may be invested in land zoned for logistics use (and options over such land) and assets benefitting from rental guarantees. These types of acquisition will allow the Company to source higher quality, lower priced assets than could be delivered from purely targeting build assets. They allow the Company to enter into earlier stage discussions with developers and prospective tenants, thereby minimising competition with other investment buyers.
The Company will acquire completed and let assets from investors, operators or developers which are income-producing.
The Company will invest in assets which are either ready for, or in the course of, construction provided they are pre-let to an acceptable tenant. In such circumstances, the Company may seek to negotiate the receipt of immediate income from the asset, such that the developer is paying the Company a return on its investment during the construction phase and prior to the tenant commencing rental payments under the terms of the lease. In such circumstances, the Company will acquire the land in advance and make staged payments to the developer through the construction period until practical completion of the building and the tenant taking up the lease.
The Company may invest in assets, either built or under construction, but not yet leased by a tenant, with the benefit of Rental Guarantees provided by the vendor in circumstances where the Manager believes that the asset can be let to an acceptable tenant before the expiry of the Rental Guarantee.
The Company may invest in land zoned for logistics use and options over such land. “Land zoned for logistics use” is land that the relevant local government planning authority has identified for logistics as the preferred use and that logistics buildings can be developed subject to detailed planning application and consent being granted. The Company may seek to negotiate the receipt of immediate income from the asset, such that the developer is paying the Company a return on its investment until either a pre-let arrangement or a Rental Guarantee is agreed. On agreement of a pre-let arrangement or Rental Guarantee, the land in question will be treated by the Company as a pre-let forward-funded development or, as the case may be, an asset benefitting form a Rental Guarantee.
The Company intends to categorise its investments in accordance with their proven four investment pillars invest strategy. On a fully invested and geared basis, the Company currently expects approximately 50% of its Gross Assets to be invested in Foundation Assets, 20% of Gross Assets to be invested in Value Add Assets, 20% of Gross Assets to be invested in Growth Covenant Assets and 10% of Gross Assets to be invested in Strategic Land (including options over land and assets benefitting from Rental Guarantees).
Foundation Assets are core low risk income assets. They typically benefit from long leases to institutional grade covenants in prime locations with index-linked rents, providing the foundation to the portfolio.
Value Add Assets provide value add opportunities. They assets are fundamentally strong assets let on shorter leases to financially strong tenants allowing implementation of asset management initiatives to drive value, principally by lease renegotiation.
Growth Covenant Assets are fundamentally strong assets in good locations but let to tenants with improving financial covenants. These assets offer the opportunity to add value as the tenant’s financial standing improves and hence improving income security.
Strategic Land are investments in land zoned for logistics use in strong locations and include options over land and assets benefitting from Rental Guarantees. These assets offer the opportunity to add value as they are positioned at an earlier stage of the development cycle and so can generate Foundation Assets for the future.
The Directors, all of whom are non-executive and independent of the Manager are responsible for the determination of the Investment Policy and have overall responsibility for the Company’s activities including its investment activities, reviewing the performance of the Company’s portfolio and for overseeing the performance of the Manager.
The Company’s Manager is Tritax Management LLP and is part of the Tritax Group. Since 1995, the Tritax Group has acquired and developed commercial property assets with an acquisition value of more than £4.0 billion on behalf of property unit trusts, limited partnerships and syndicates, involving more than 122 separate investment vehicles and including Big Box assets, industrial properties, office, retail and hotels.
As at January 2017, the Tritax Group had total assets under management with an acquisition value of approximately £2.4 billion, across more than 122 investment vehicles (including the Company), consisting of over 22m sq ft of real estate assets.
Since 2000, the Tritax Group has delivered an average exit IRR across its non-tax products of approximately 16.0% pa, with a number of its tax products achieving performance in excess of this average. Its tenant list has currently and historically included Amazon, Next, Intercontinental Hotels Group, Sainsbury’s, RBS, Royal Mail, Tesco, IBM, HMRC, Halfords, GDF Suez, Accor and Asda.
The Manager has in place an experienced team with the capability and capacity to build up and manage a substantial portfolio of logistics assets across continental Europe.
Nick Preston, who will have overall responsibility for the provision of investment management and advisory services to the Company, has over 25 years of experience in institutional fund management, across a wide range of property subsectors including the logistics sector. He has managed a wide range of funds and portfolios, principally for institutional investors. James Dunlop will provide a focus on the acquisition of assets using his extensive contacts within the logistics market in the UK and continental Europe.
The Manager has appointed each of LCP and Dietz as an asset manager in relation to the Group and its assets. LCP is an established pan-European provider of project development and asset management services for logistics real estate in Europe. They have offices in the UK, the Netherlands, Belgium, Italy and Spain, employing 19 staff. Dietz has substantial experience covering a wide range of services relating to construction and commercial real estate, including project management, marketing, property management and construction.