SEGRO Acquires Vailog Srl
SEGRO plc ('SEGRO') has exchanged contracts to acquire 90 per cent of Vailog Srl ('Vailog') from the majority shareholder, FBH Spa ('FBH'), for €39.6 million (£28.1 million1), subject to completion adjustments. This transaction will allow SEGRO immediately to establish a strategic big box warehouse presence and operating platform in the important northern Italy logistics market with opportunities to grow additional scale through development.
Vailog is one of Italy's leading logistics real estate development companies and it has an excellent track record: since it was founded in 2003, Vailog has developed over 1.5 million sq m of logistics space in Italy, France and the Netherlands, working with investors including Deka Immobilien, AEW and Hines. It also owns high quality logistics properties in Italy and France, together with a land bank (and options over land) principally in the major European logistics hubs of Milan, Bologna, Rome, Paris, Lyon and Arnhem in the Netherlands.
David Sleath, SEGRO's Chief Executive Officer, said:
"Northern Italy is one of the major Continental European logistics markets, benefiting from a strong manufacturing heritage and an affluent population. SEGRO has been active in the region for some time but the acquisition of Vailog provides an immediate logistics platform there. Together with the benefits of adding critical mass to our existing big box logistics presence in Paris, this acquisition provides significant future development opportunities. We are looking forward to working with Eric Véron and his very successful team to build on this position over the next five years."
Eric Véron, Managing Director of Vailog, said:
"I am proud of what we have achieved at Vailog over the past 12 years and I look forward to working as part of the SEGRO Group and, with its strong financial support, to accelerating Vailog's development activity in markets which are well known to us and which offer many interesting opportunities for high quality, big box logistics warehouses."
Benefits to SEGRO
- Immediate strategic presence in northern Italian big box logistics market: Northern Italy shares a number of important characteristics with SEGRO's existing Continental European big box logistics markets in terms of a limited supply of high quality big box logistics space and improving occupier demand, not least from e-commerce. It is also a strong region economically within both Italy and Continental Europe as a whole. Vailog's portfolio contains 29,800 sq m of recently-completed big box warehouses in northern Italy, together with a 94,300 sq m pre-let warehouse currently under construction. Furthermore, we estimate that this transaction should allow SEGRO to build a presence in Italy of approximately 500,000 sq m of assets under management within the next five years.
- Attractive long-term returns: The standing assets are valued on a 7.1 per cent topped-up EPRA net initial yield (reflecting secured lease terms of over 10 years and high quality tenants) and the future development pipeline is expected to generate a yield on total development cost of approximately 8 per cent. It is expected that the standing assets acquired will be offered to the SEGRO European Logistics Partnership ('SELP') joint venture in due course, as will newly-completed developments.
- Experienced and successful management and operational team: The Vailog team of ten people brings considerable expertise in the Italian big box logistics development market and further strengthens SEGRO's existing relationships with national and international customers.
The Vailog portfolio contains property assets valued at €104.8 million comprising:
- Completed assets of €39.0 million: The portfolio contains recently completed assets totalling 45,400 sq m of logistics space in Bologna, Milan and Paris valued on a 7.1 per cent topped-up EPRA net initial yield and a net equivalent yield of 6.8 per cent. The assets are fully-let to logistics companies, including Geodis, One Express and Dachser, with an average weighted unexpired lease length to first break of 10.8 years.
- €24.3 million pre-let warehouse under construction: The 94,300 sq m distribution warehouse which is under construction is pre-let to Leroy Merlin on a 13 year lease and has a gross development value of €24.3 million. It is located within Italy's largest logistics campus, the CSG Logistics Park, near Piacenza, at the junction of Italy's A1 north-south and A21 east-west motorways. Construction is due to complete in August 2015.
- Land bank of €25.3 million: The 100 hectare land bank is mainly around Milan and other major logistics markets in northern Italy and is capable of supporting 338,000 sq m of development within the next five years at an estimated yield on cost of approximately 8 per cent.
- Options over further 80 hectare land bank valued at €1.8 million: Agreements have been signed to acquire two plots of land in Piacenza and Lyon totalling 14 hectares for €5.3 million capable of supporting 63,500 sq m of logistics space. These acquisitions are expected to complete by the end of 2015.
- Photovoltaic plant (PV) assets valued at €14.4 million: Vailog is involved in generating income from PV cells installed on its previously developed big box warehouses in Italy, producing annual EBITDA of approximately €1.8 million.
Details of the transaction
Agreement has been reached for SEGRO to acquire 90 per cent of Vailog from the majority shareholder, FBH. The remaining 10 per cent stake is retained by Eric Véron, who is the co-founder of Vailog. Vailog will become a subsidiary of SEGRO and Mr Véron will remain as its Managing Director. Completion is expected by the end of June 2015. Arrangements are in place for SEGRO to be able to acquire the remaining 10 per cent within the next three to five years.
At 31 March 2015, Vailog's enterprise value (at 100 per cent) was €99.2 million and its net asset value was €44.0 million.
Committed capital expenditure as at 31 March 2015 totals €41.8 million (at 100 per cent), including the acquisition of the two plots of land under option and future costs to complete the development currently under construction.
Vailog has recently transferred its operations in China to other FBH-related entities and this business does not therefore form part of the transaction.