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Tritax EuroBox looks to raise €200m

Tritax EuroBox, the European logistics investor, has proposed an equity raise of £173m (€200m) as it looks to expand its portfolio in the burgeoning property sector.

The group will use the proceeds, together with existing cash (from the €65.5m sale of a Polish asset last week) and new debt, to acquire a near term pipeline of assets worth €416m.

The issue price of 103p per share is at the same level as the group’s most recently published IFRS net asset value (NAV) per share at 30 September 2020 of €1.19 (£1.03).

It represents a slight discount to last night’s closing share price of 105.5p.

The acquisition pipeline

The group’s manager, Tritax Management, is in exclusive negotiation to buy three assets in Germany for a total of €317m. All three assets have been sourced through the group’s exclusive relationship with developers on an off-market basis.

The first, located in Bavaria, is a brand new property let to a global sportswear brand and has high ESG credentials. The second is located just north of Frankfurt and is let to a fast growing online retailer, and the third is a development project near Dusseldorf that will see EuroBox receive income during the construction of the property from the developer as well as a one year rent guarantee at practical completion.

The group expects to complete these deals by the end of March.

It also has a short-term pipeline of three development assets worth €99m – two in Italy (Turin and Milan) and one in Bavaria, Germany – that have also been sourced through its developer relationships. All three developments are located in supply constrained markets that have strong demand characteristics.

The group said it was confident of deploying the proceeds of the issue within three months.

Benefits of the issue

The deployment of the €200m issue, plus €160m of new debt and existing resources, into the pipeline will bring the company’s portfolio to more than €1.3bn and should see it achieve an investment grade credit rating.

This has several benefits to the company, including an automatic and immediate 30 basis points drop in the cost of its current debt.

Becoming investment grade will also open it to a deeper pool of potential lenders, and the potential issuing of an investment grade bond or US private placement, at a lower cost of borrowing.

There are also economies of scale benefits of a larger investment portfolio, with fixed costs spread over a larger capital base.

On top of this, the manager has reduced its management fee by 0.15% on NAV above €500m (such that management fees will be 1.15% between NAV of €500m and up to and including €2bn, as opposed to 1.15% between NAV of €1bn and up to and including €2bn).

Placing programme

The group has also announced a placing programme of up to 300 million further shares and/or C shares, conditional upon the passing of certain shareholder resolutions at a general meeting of the company expected to take place on 8 March 2021.

[QD comment: The strength of the European logistics market is underpinned by rising occupier demand driven by the rapid growth of e-commerce, internet shopping and convenience retail. This trend has been accelerated during the COVID-19 pandemic and is expected to last well into the future. A lack of supply of high quality logistics properties near to cities across Europe has added to the strong favourable characteristics of the sector.

Current rates of market penetration for online sales in Continental Europe materially lag that seen in the UK and have the potential to grow exponentially in the coming years.

The strength of the pipeline highlights perfectly the benefits of the group’s exclusive relationships with logistics developers where it has first refusal on all development projects. Being able to source these deals on a off-market basis in a property sector that has seen investment prices rocket as investors from all over the world clamber to get in on the action is really quite impressive.

The development projects are a significant step in the group’s move up the investment risk curve to a more value-add approach. Buying sites at an earlier stage in their development presents the group with the opportunity of significantly better returns than buying the finished product.]

EBOX : Tritax EuroBox looks to raise €200m

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