Redefine Properties is strengthening its balance sheet and enhancing its logistics platform in the fast-growing Polish market through the introduction of leading international real estate private equity firm, Madison International Realty (Madison) as an equity investor.
In terms of the deal, recently announced and expected to be finalised by the end of February, Madison is acquiring a 46.5% equity stake in Redefine’s Polish logistics platform held through European Logistics Investment (ELI). As part of the transaction, Griffin Real Estate who own 5% in ELI will acquire a further 2% from Redefine on the same terms as Madison, leaving Redefine with a 46.5% equity interest. The transaction is in line with Redefine’s stated intention to introduce a high-quality international equity partner to strengthen Redefine’s balance sheet and continue to expand its Polish logistics platform.
The platform comprises of nineteen assets totaling around 560,000 sqm, with 80,000 sqm nearly completed and an additional development pipeline of 270,000 sqm to be started once pre-leases are secured. The completed properties are around 95% occupied and spread across the key distribution hubs of Poland in Warsaw, Lodz, Krakow, Silesia, Pomerania and Poznan regions and developed to a high technical specification.
The Polish logistics market is poised to continue to grow as a key logistics hub for international e-commerce players, as well as an increasing number of manufacturing companies establishing their operations in Poland.
As part of the transaction, Madison will provide a €150 million (approximately R2.4 billion) commitment to ELI, of which €83.7 million (approx. R1.3 billion) will be used to acquire their share of the existing assets and developments in progress while leaving a commitment of €66.3 million (approx. R1.1 billion) to expand the portfolio over the next three years. In terms of the deal, Redefine will match Madison’s equity commitment of €66.3 million. Panattoni Europe, a market leading European logistic developer, is a co-manager of the platform.
Andrew Konig, CEO, Redefine Properties, says, “The deal fits perfectly with our investment strategy and provides us with an opportunity to reduce our loan to value ratio. It also means we are able to source additional, well priced capital in order to secure the exclusive priority right to development opportunities with Panattoni over the next three years.”
“The focus for 2020 firmly remains on asset quality, offshore expansion through development activity, notably through ELI and leveraging opportunities to participate in a broader, more diversified portfolio of logistics assets. We are delighted to be working with Madison in the heart of CEE’s most attractive real estate market.”
Redefine will realise €87.2 million (approx. R1.4 billion) from this transaction of which €14.7 million (approx. R235 million) will be surplus cash after reinvestment in ELI to the tune of €72.6 million (approx. R1.2 billion) – comprising the equity commitment of €66.3 million and completing existing developments in progress totaling €6.3 million (approx. R101 million).
“The JV with Madison enables Redefine to continue to benefit from the priority right development pipeline with Panattoni. By co-investing with Madison, over the next two to three years, ELI will have access to sufficient capital (€148.7 million) for its logistic platform portfolio to grow to a sizable scale (increasing from 560 000 sqm to circa 910 000 sqm in gross leasable area) and benefit from attractive development yields and low cost of European debt funding,” adds Konig.
“In attracting this level of commitment from Madison, we’re continuing our track record of speed and agility in both sourcing capital and building a diversified and significant logistics platform, improve letting and capital value appreciation, as-well-as realisation of value prospects,” says Konig.
“This transaction clearly demonstrates Redefine is on course to reduce balance sheet risk while continuing to deliver sustainable quality earnings, as well as alleviating investors’ apprehension around liquidity.”