Acquisition of Two Highly Sustainable Logistics Assets in Prime Locations in Germany For €290.0m

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Tritax EuroBox plc is dedicated to Continental European logistics real estate. Tritax EuroBox plc  focuses on 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 manage a well-diversified and environmentally sustainable portfolio of European logistics assets that deliver an attractive capital return and secure income.

The strategy aims to capture market rental value growth, which is becoming evident in the key distribution markets of continental Europe.

Our investment strategy

Tritax EuroBox meets 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 focuses on investment in properties fulfilling a key part of the logistics and distribution supply chain for occupiers including retailers, manufacturers and third-party logistics operators. The portfolio is invested in large, modern distribution warehouses. A proportion of the portfolio offers exposure to urban distribution hubs, which help occupiers fulfil the “final mile” part of the distribution chain.

Tritax EuroBox seeks to invest in locations with limited supply of logistics assets that benefit from structural changes in occupational demand

In accordance with typical lease lengths prevalent in continental Europe, the Company targets and maintains a weighted average unexpired lease term of greater than five years across the portfolio.

To enhance equity returns the Company uses gearing. The level of gearing is on a prudent basis for the asset class, with a medium term target of 45% of Gross Assets and a maximum limit of 50% of Gross Assets.

Target portfolio characteristics

The Company manages 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 are large, modern, well specified, well-located properties which satisfy modern occupier requirements.

The Manager has a strong pipeline of high quality, large scale logistics assets, in which it can deploy capital raised. All the assets in the investment pipeline have been sourced through the Manager’s existing relationships, predominantly on an off-market basis, and are focused on income-producing standing assets and pre-let forward funded developments.

Large, modern assets

Tritax EuroBox targets large, modern, well specified Big Box assets which satisfy modern occupier requirements.

Prime locations

Tritax EuroBox targets assets located in established distribution hubs with strong transportation connectivity, good availability of labour, within close proximity to major population centres.

Technically sophisticated

Tritax EuroBox targets assets which benefit from value enhancing capital investment by tenants in state of the art automated handling systems.

Barriers to entry

Tritax EuroBox targets assets in locations with limited availability of land due to pressures from alternative uses.

Last mile fulfilment centres

A proportion of Tritax EuroBox’s portfolio includes urban distribution hubs providing fulfilment of the “last mile” distribution chain.

Asset Management

Tritax EuroBox targets assets which present potential for asset management and value enhancing initiatives during the lease term.

Investment Policy

The majority of the Company’s portfolio is invested in completed, let investments and pre-let income-producing forward funded developments, however a proportion of the portfolio may be invested in land zoned for logistics use (and options over such land). These types of acquisition allow the Company to source higher quality, lower priced assets than could be delivered from purely targeting built assets.

They allow the Company to enter into earlier stage discussions with developers and prospective occupiers, thereby minimising competition with other investment buyers.

Completed and let investments

The Company acquires completed and let assets from investors, operators or developers which are income-producing.

Pre-let forward funded developments

The Company invests 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.

Assets benefitting from rental guarantees

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.

Land zoned for logistics use

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 authority has identified for logistics as the preferred use and that logistics buildings can be developed subject to detailed planning 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 from a Rental Guarantee.

Four pillar investment approach

The Company categorises its investments in accordance with their proven four investment pillars strategy. On a long-term fully invested and geared basis, the Company 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

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

Value Add Assets provide value add opportunities. These assets are fundamentally strong assets let on shorter leases to financially strong tenants allowing implementation of asset management initiatives to drive value, for example by lease renegotiation or building extension.

Growth Covenant assets

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

Strategic Land assets are investments in land zoned for logistics use in strong locations and include options over land. 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.