from European banks. Finally,e-commerce penetration is
still at an early stage on the Continent with strong forecast
growth, creating an attractive investment backdrop.
Growth is expected to be strongest in the urban logistics
sub sector, especially assets in dominant cities that
have warehousing supply constraints and demand from
different land uses, resulting in higher land costs and
ultimately underpinning higher rents. Parcel delivery
specialists are continuing to improve their services by
reducing delivery times and thereby transportation costs.
Operating a logistics warehouse in close proximity to their
ultimate customer base is the best way to reduce their
cost base with rental and building costs materially less
impactful than transportation costs.
Approximately 53% of the Company’s portfolio by value
comprises urban logistics warehouses with locations such
as Barcelona, Madrid, Frankfurt Rhine-Main, Warsawand
Den Hoorn located in the Netherlands between the cities of
The Hague and Rotterdam. In 2021, nine of the ten assets
acquired were urban logistics warehouses, all located in first
ring city locations. In December 2021, the Company closed
a milestone transaction in Gavilanes, Madrid, acquiring a
portfolio of seven income-producing urban warehouses
(“Phases I-III”) with a further warehouse/parking station
under development, with a completion date anticipated
in Q2 2022 (“Phase IV”). The total investment cost was
€227.3million with a net initial yield of 3.4%. The largest tenant
within this portfolio is Amazon, accounting for approximately
43%of total rental income with other tenants including the
global supermarket retailer Carrefour, operating their first
grocery e-commerce platform in Spain, electric vehicle
manufacturer Arrival, electronics distributor MCR which
boasts Amazon as its main client and Talentum, amarketing
and distribution company with 130employees across Spain
and Asia. After London and Paris, Madrid is the third largest
city in Europe and continues to grow with development
land scarce. Thisportfolio is located in Galivanes, a key
last-mile logistics hub located in the first ring of Madrid,
only17kilometres south of Madrid city centre and with a
population of approximately 6 million people accessible
within a 30minute drive.
We are extremely excited to see the completion of
PhaseIV of the Madrid portfolio, expected in Q2 2022.
Thisasset comprises a state-of-the-art parcel delivery
hub, optimised for last-mile delivery, let to Amazon on a
25 year lease (15 years to first break). The asset includes
a multi-level van parking station, offering over 500 parking
spaces and electric charging for last-mile delivery
vans, significantly increasing the operational efficiency
of the asset. As is typical of last-mile distribution units,
theproperty has been configured for the high volume
turnover of inventory with the asset’s low site cover,
multi-deck parking and large canopy with numerous
van loading areas maximising the number of parcels
which can be loaded and distributed. We believe this
asset represents the next-generation of urban logistics
warehousing and we look forward to seeing it become
operational and income producing later this quarter.
In July 2021, we acquired an urban logistics warehouse
located in the first ring of Barcelona for a net price of
€18.7 million, yielding 3.7%. The asset is let to Mediapost
and is highly reversionary, with a net reversionary yield
on acquisition of 4.7%. Barcelona is supply constrained by
nature due to the presence of the sea and the surrounding
mountains making it very hard to replicate this building
which is surrounded by residential units. This undersupply
situation is clearly reflected in the low vacancy rates of
2.4% providing further confidence that this asset has
strong upside potential.
An earlier transaction that the Company concluded
in April2021 was the purchase of a brand new, multi-
tenanted warehouse in Lodz, Poland, for a net purchase
price of €28.1 million and a net initial yield of 5.6%. Lodz
is the third largest city in Poland and centrally located
making it an ideal location for national distribution.
The warehouse is located on the Bosch-Siemens Campus
and alongside a key intermodal rail terminal for the Silk
Road railway connection between Asia and Europe.
Low labour costs have created a dominant manufacturing
industry in Poland and Lodz, creating an attractive
environment for tenants inthis warehouse who work
partly as subcontractors for theseindustries.
At the time of writing this report, the Company is in
exclusive talks with regard to the purchase of a warehouse
in the Netherlands. The building is located close to the
German border in one of the main logistics hubs in the
Netherlands. The Manager believes there is good potential
for this asset as there is ample land available and the
current site coverage of the building is only 16% of the
plot against a market standard of around 50%. Having
the flexibility to extend and possibly double the size of a
building in the future is very attractive and can add value
to the portfolio.
The Manager is also in exclusivity over a portfolio of
three assets in France which have comparable low site
coverage characteristics. It is expected that the purchase
of these warehouses located across three different areas
in France will complete in the coming weeks.
As at the Company’s year-end, 17 out of the
23warehouses held in the portfolio were newly developed
at the point of purchase and have been constructed
since 2018. This means specifications are very modern
and in line with tenant requirements. The portfolio is well
diversified with 23 buildings spread across five different
countries. As at 31December2021,
New stacking system at Zeewolde, Netherlands
28 Annual Report 2021