Redefine Properties continues to expand into the Polish market with the acquisition of a 95% share for €185.8 million (R2.9 billion) in a portfolio consisting of nine operating properties located throughout the country. The group has also entered into a five-year exclusive priority right for a pipeline of twenty-four warehousing and logistics developments with Panattoni, the leasing and development logistics properties group in Europe.
The developed properties are situated in established logistics locations and they were bought from a fund managed by one of the United States’ largest global asset management companies. The properties have a gross leasable area of 315 507 square metres with a 98% occupation and a weighted average lease expiry of 3.5 years. Griffin Real Estate sourced the transaction, owning the remaining 5%.
The portfolio has attracted sought-after tenants such as Kaufland, Carrefour, Saint Gobain, Hellmann, Terg, Eurocash, CEVA, BRANDBQ and DSV, to name a few.
Panattoni has developed 35% of the modern industrial facilities in Poland and the group has developed nine operating properties that have been acquired. The development pipeline consists of twenty-four identified development opportunities with a total gross leasable area of 1.9 million square metres. Redefine will have the right (but not the obligation) to acquire and to develop these assets.
Redefine’s CEO, Andrew Konig comments:
“This move into the rapidly expanding Polish logistics sector is an exciting opportunity to expand our European brand by building a significant logistics platform.”
The developed assets being bought have an initial income yield 7.1%, while interest rate and currency volatility has been mitigated through full hedging.
“We accessed offshore funding at competitive pricing and productively deployed a portion of recycled offshore capital, while there is no additional burden to Redefine’s resource base. Incremental distributable income will be applied towards our stated intention of phasing out non-recurring income,” says Konig.
The Polish industrial market, which has a total supply of 13.9 million square meters of modern industrial and logistics space, is benefiting from a significant increase in demand for logistics space on the back of robust retail growth. National vacancies were at historical lows of 4.8% at the end of the first quarter in 2018.
The sector is also underpinned by strong long-term fundamentals due to recently introduced limitations on agricultural land trades, which is slowing down the development pipeline and increasing the value of zoned land holdings. An increase in construction costs of about 20% during the past year has increased market rentals and is expected to improve the re-letting potential of current supply.
Redefine late last year acquired a strategic 25% stake in Chariot Top Group for R907.9 million, giving it direct access to a retail portfolio of 28 quality, established and well-located assets across Poland. Prior to this Redefine had acquired a majority interest in EPP on 1 June 2016, marking the largest ever real estate investment transaction in Poland, as well as the largest ever single South African transaction of income generating real estate assets in Central Eastern Europe.
“This transaction enhances the geographic and sectoral diversification of our portfolio as we continue to invest strategically in exciting geographies, engage talent, optimise capital, operate efficiently and grow our reputation,” concludes Konig.