Aberdeen Standard European Logistics Income (ASLI) has acquired a portfolio of ‘last mile’ urban logistics assets in Madrid for €227m, fully deploying the proceeds of its recent equity raise.
The portfolio consists of four phases, with phases one to three comprising seven newly constructed logistics warehouses and phase four comprising one under construction logistics warehouse with accompanying multi-level delivery van parking station. It is let to five tenants, with Amazon Europe accounting for 43% of the total portfolio rental income.
Global food retailer Carrefour, UK electric delivery vehicle maker Arrival and Spanish companies Talentum and MCR comprise the remaining portfolio tenants. On completion of phase four, Amazon is expected to become ASLI’s largest tenant by rental income.
All of the assets in the portfolio are located in the first ring of Madrid, in Gavilanes, one of the leading last-mile logistics hubs in Madrid and the wider Spanish market. Almost 6 million people are accessible within a 30-minute drive time, ASLI said.
The acquisition price of €227m represents a net initial yield of 3.4%. All leases are upward only, annual inflation linked and have an unexpired lease term of 14.8 years to expiry and 8.7 years to break.
On the sustainability front, assets in phases one and two are certified LEED Silver, phase three is certified LEED Gold and a certification of BREEAM Very Good is expected for phase four.
Tony Roper, chairman of ASLI, commented: “Raising equity in September was a significant milestone for the company and reflected our strong conviction in the Continental European logistics proposition. Having stated an ambition to scale the company, this substantial acquisition enables us to invest the equity proceeds within three months and provide shareholders with further exposure to high-quality, well-located logistics assets with inflation protected income. The investment manager’s scale and local presence continues to provide the company with a strong source of investment opportunities and we are excited for the future prospects of the company.”
Evert Castelein, investment manager for ASLI, added: “This is an extremely rare opportunity to acquire a portfolio of truly last-mile warehouses, leased to investment grade counterparties, in one of Europe’s nascent but fastest growing e-commerce markets. Furthermore, the scale, specification and market leading environmental credentials increase its uniqueness as an investment proposition. This acquisition further increases the weighting of the company’s assets to last-mile logistics, where a number of drivers are forecast to provide strong future rental income growth. Despite recent growth, Continental Europe remains materially behind the UK in terms of e-commerce sales penetration and we believe this provides a compelling backdrop for further strong performance.
“Our Madrid-based transaction team played a crucial role in securing this transaction and completing the required due diligence over a short timescale. This acquisition has once again highlighted the importance of having local teams with strong relationships and a deep understanding of the key local market drivers. The abrdn European logistics platform continues to grow and we are confident this will provide further near-term attractive investment opportunities.”
The portfolio
Totalling 122,000 sqm of space, the portfolio comprises seven last-mile logistics facilities constructed between 2019 & 2021, alongside one state-of-the-art logistics warehouse, which is under construction, with accompanying multi-level delivery van parking station, optimised for last-mile parcel delivery. Annual rental income across the portfolio will be around €7.7m with upward only, index linked leases.
The four phases consist of the following:
- Phase one: two fully occupied single let warehouses constructed in 2019, with a total gross lettable area of 33,000 sqm. Talentum occupies one warehouse of 22,000 sqm. Talentum is a Spanish marketing and distribution company with 130 employees across Spain and Asia and the property serves as its key distribution hub for the Iberian Peninsula. The second warehouse, of 11,000 sqm, is let to Amazon, utilised as a fully functional last-mile parcel delivery station servicing the Madrid market. The weighted average lease term across Phase one is 8.3 years, with 5.8 years to break
- Phase two consists of three warehouses constructed in 2020, with a total of 24,600 sqm. Carrefour, the global food retailer, occupies one warehouse of 9,500 sqm. This is Carrefour’s first last-mile e-commerce delivery warehouse in Spain and the company has invested materially into the asset to meet its operational requirements. The second warehouse, of 7,700 sqm, is let to MCR, a market leading Spanish electronics and IT hardware distributor. MCR services several electronics retailers such as Amazon and MediaMarkt from the asset. A third warehouse totalling 7,400 sqm is currently vacant. This asset is subject to a one year vendor rental guarantee. Excluding the rental guarantee, the weighted average lease term across Phase two is 10.2 years, with 3.7 years to break
- Phase three comprises two warehouses constructed in 2021 with a total area of 27,200 sqm. Phase three is single let to Arrival, the UK headquartered and Nasdaq listed electric vehicle manufacturer. Arrival will utilise the warehouses for the production and distribution of its electric delivery vans, for a variety of clients including global 3PL specialist UPS. ASLI said that Arrival was committed to undertaking a significant fit out program to meet its highly automated operational requirements. The weighted average lease term across Phase three is 9.4 years, with 5.4 years to break
- Phase four is a state-of-the-art logistics hub comprising a 16,500 sqm warehouse and 20,700 sqm multi-level delivery van parking station, on a long-term lease to Amazon. It is currently under development with completion expected in Q2 2022. Phase four has been configured for a high volume of inventory turnover with the asset’s low site cover, multi-level parking and large canopy with numerous van loading areas maximising the number of parcels which can be loaded and distributed. The multi-level parking station will offer over 530 parking spaces and electric charging for last-mile delivery vans, significantly increasing the operational efficiency of the asset. The Phase four lease represents 33% of the annual portfolio rental income and is for a term of 25 years, with 15 years to break.
Madrid
The portfolio is located in the first ring of Madrid, 17 kilometres south of Madrid city centre. With 2.7 million people accessible within a 20-minute drive time and almost 6 million people accessible within a 30-minute drive time (87% of Madrid’s population), ASLI said it was considered one of the most sought after last-mile logistics hubs in both Madrid and the wider Spanish market.
Reflecting the increasing shift amongst occupiers from just-in-time to just-in-case supply chain strategies, take up of warehouse space in Madrid in the first half of 2021 reached a six year high, increasing by 120% on the same period in 2020. With land constraints and supply chain issues putting pressure on new development, vacancy rates have fallen to just 2% in Gavilanes and 4% in the Madrid Central area, which is supporting year on year yield compression and rental growth. Occupier demand is forecast to continue growing, whilst the first lockdown in 2020 led to a 50% increase in online sales in Spain, pre-pandemic e-commerce penetration of approximately 5% lagged other major European countries including Germany, France, Poland and Italy.
ASLI’s portfolio
Following the acquisition of the portfolio, ASLI’s asset base is expected to consist of gross assets of around €730m across 24 last-mile logistics and mid-box warehouses located across five European countries. Assets located in Spain will account for 38% of gross assets by value, with assets located in the Netherlands accounting for 31%, with the remaining assets located across France, Germany and Poland.
Last-mile logistics warehouses will account for 53% of the portfolio by value, and the manager said strong rental growth is forecast across last-mile logistics assets as e-commerce penetration in Continental Europe continues to grow significantly.
The company’s tenant base will be diversified across 50 tenants, consisting predominantly of 3PLs, e-commerce and grocery-focused vendors. Amazon will become the company’s largest tenant by rental income (10%).
Further pipeline
Following the acquisition of the portfolio, all of the September equity issue proceeds will have been fully deployed. The investment manager currently has two additional acquisitions under offer on assets in the Netherlands and France (totalling four logistics warehouses) and a strong near-term pipeline of further acquisition opportunities.
ASLI : ASLI secures €227m Madrid logistics portfolio