Aberdeen Standard European Logistics buys Dutch warehouses in Zeewolde and Waddinxveen, revises gearing target
Zeewolde
Aberdeen Standard European Logistics has exchanged contracts to acquire a newly built pre-let warehouse in Zeewolde, the Netherlands, for a purchase price of EUR29.25 million providing a net initial yield of 5.0%. The agreement with developer Borghese, a developer of logistics, residential and office and projects, is structured as a forward funded transaction with a 2.55% coupon rate. The development commenced in September 2018 and has an expected delivery date of 1 June 2019.
This high quality freehold property has been pre-let to VSH Fittings B.V., a strong covenant tenant, on a 15 year lease commencing in June 2019 and capped CPI indexation of 2.4% per annum in accordance with local provisions. VSH Fittings B.V. was founded 85 years ago and is a wholly-owned subsidiary of Aalberts Industries N.V., a Euronext listed company with over 16,000 employees, 70 business locations and activities in over 50 countries. The company specialises in the production and distribution of industrial valve products and fittings used for sprinklers, heating and piping systems. VSH is based in the towns of Amersfoort and Hilversum, but is looking to consolidate its growing business in Zeewolde.
Zeewolde is located in the heart of the Netherlands in the province of Flevoland, close to Almere, the fastest growing municipality in the Netherlands and Lelystad, an ideal location for national distribution. The economy of Flevoland is flourishing and will be boosted by the expansion of Lelystad Airport (both Transavia and Ryanair will be using the airport from 2019). The attractiveness of the region is proven by the development of a new warehouse for Inditex (Zara) with a total size of 100,000 square metres opening in 2019. Zeewolde is also ideally located close to several motorways, the A6, A27 and A28. In addition to its central location in the Netherlands, Zeewolde is well positioned with regards the availability of labour and the relatively low land costs, resulting in attractive rent levels.
The property is situated within an established logistics business park in Zeewolde, alongside other well-known logistics companies. The tenure is freehold and the total plot size is 55,000 square metres, with the warehouse comprising 35,000 square metres alongside office space and 161 parking places. Developed to the latest standards for modern logistics, the manager believes that this together with the central location and the long lease with a strong covenant tenant will generate a durable income stream in the future.
Waddinxveen
The company has also signed a sale-and-leaseback purchase agreement for the acquisition of an existing cross-dock warehouse in Waddinxveen for EUR33 million and a net initial yield of 5.0%. The property is leased to Combilo International B.V. on a 15 year triple net lease with capped CPI indexation of 2.5% per annum.
Waddinxveen is centrally located in the heart of the densely populated Randstad conurbation close to Gouda with an excellent road network via the A12 and A20 linking with the Hague and Rotterdam through to Germany. The property is located on the Distripark Business Park which is occupied by several large logistics companies. Vacancy rates in this part of the Netherlands remain very low for logistics warehousing space and the municipality is seeking to prevent oversupply.
The freehold property itself is an existing cross-dock warehouse of approx. 28,000 square metres with 51 loading doors providing excellent facilities across 6 units (5 being cooled). Cross-docking is the procedure of unloading materials from an incoming vehicle and loading them directly into outbound vehicles with little or no storage in between. The building has good free height and floor load capacity and flexibility which lends itself to conversion to multi-tenant use. Additional land provides future asset management options.
Combilo International B.V. is a stable, family-owned company that specialises in the import and export and packaging of fruit and vegetables for supermarkets and wholesalers. The company has a broad client base across Europe. Combilo has occupied the building since 2001. Its commitment to the location and building is explained by the central location in the Randstad, the most densely populated area in the Netherlands, and the large concentration of greenhouses with growers of fruit and vegetables.
The manager believes this warehouse will generate a durable income stream thanks to its central location, good building specifications and long lease with a strong covenant tenant with the potential option to further expand the building.
Future acquisitions and gearing
With the exchange of contracts on Zeewolde and Waddinxveen, the company has now invested, or committed to invest, the whole of the net equity proceeds raised at launch in December 2017. In line with expectations set out at the time of launch, the company has therefore deployed its initial funds in a portfolio comprising 8 properties spread over 4 countries, of which 5 are brand-new high quality warehouses. The current portfolio is expected to generate a healthy income return thanks to an average lease length of 10.8 years, all with indexed leases to strong covenant tenants. The pipeline of investment opportunities for the company remains strong, with the manager at very advanced stages of due diligence on a number of potential acquisitions. As a result the company is also in the process of putting gearing facilities in place, secured on certain properties within the portfolio, to provide financing for additional assets and to fund stage payments that are required for forward funded projects.
The board and the manager remain confident that the market for European logistics assets will continue to offer many attractive investment opportunities in the future, and the intention remains to seek to grow the company through further equity issuance in the coming months, alongside the deployment of associated debt in accordance with the company’s prevailing gearing guidelines.
The board recognises the need for the manager to continue to build a portfolio of the highest quality assets to provide shareholders with the targeted levels of return and with the in-depth due diligence required. At the same time, it is cognisant of the very strong levels of market interest for logistics assets seen over the past twelve months and the tightening of yields which has ensued. The board remains committed to the overarching maximum gearing policy limit of 50 per cent. of gross assets; however, subject to the requisite formal approval by shareholders in general meeting, it expects to seek to adjust materially the current gearing guideline of 30-35 per cent. of gross assets in the very near future, with a view to ensuring that the company’s targeted returns remain achievable without compromising on the very high quality of logistics assets which the manager has already brought to the portfolio.
ASLI : Aberdeen Standard European Logistics buys Dutch warehouses