The Logistic Property Handbook - Deloitte Logistic Property Handbook Investment & Financing Keys ... Logistic Investment volume increased in 2016 ... 8 Carrefour Logistics State 38.5

@ 2016 Deloite Financial Advisory 1

The Logistic Property HandbookInvestment & Financing Keys

Spain 2017

Financial Advisory I Real Estate

April 2017


The Logistic Property HandbookSpain 2017

Javier García-Mateo, MRICS

PartnerFinancial Advisory ‖ Real Estate

[email protected]: +34 659 90 02 15

Ana Granado, MRICS

DirectorFinancial Advisory ‖ Real Estate

[email protected]: +34 630 78 44 73

Jose María Espejo

Senior ManagerFinancial Advisory ‖ Real Estate

[email protected]: +34 918 232 692

Lorena Juriol

ManagerFinancial Advisory ‖ Real Estate


Luis González Martino, MRICS



Francisco Astorga




2Supply &

Demand

4Key Investment and Financing Drivers

3Logistic Investment Market 5 Key

Factors


EXECUTIVE SUMMARY

► The EMEA region accounts 12% of the total Logistic Investment volume. Spain accounts 4% of this amount

► In Spain, Logistic Investment volume increased in 2016 by 38% (€930m) and accounted for 8% of total non-residential investment

► SOCIMIs (Spanish REITs) took part in 35% of total Logistic transactions in Spain during 2016

► Spain leads Europe in Capital Value growth (22%). Madrid capital values is increasing by 21% and Catalonia capital

values is increasing by 14% in 2016

Full Due Diligence required to perform the optimal deal analysis:

► Financial Factors: Understanding of NOI vs GRI ► Business Performance: Analysis of income

sustainability analysis► Legal Factors: All intervenient contract analysis.

Urban and legal risk analysis.► Tax Factors: Analysis of tax impact on result

analysis► Technical Factors: Floor slab & roof condition.

Importance of the Property Management and the warehouse design (BREEAM + LEED certifications)

Market Overview

1

► GDP growth: +3.3% 2016 (+2.3% 2017 F)

► Unemployment rate fell to 19.2% during 2016, (2.9% decrease YoY)

► Industrial Production Index: 2.1% annual growth followed by 16.2% annual growth in logistic take-up (CAGR 2013-2016)

► Export growth: +6.9% (CAGR 2009-2016)

► Business and Consumer Confidence Indexes show figures above pre-crisis levels

► e-commerce: Yearly double-digit growthsince 2011

2015 vs 2016

Consolidation of the recovery in most macro-economic fundamentals

► Madrid’s Vacancy Rate stood at 8.5% due to the limited and outdated over-supply. While Catalonia’s healthy activity recorded a 4.6%Vacancy Rate, gradually decreasing YoY (5.5% 2015)

► High expectations in Madrid’s potential speculative and turnkey new developments (500k sqm) in 2017. Moderate but balanced new supply expected for Catalonia

► Catalonia’s Take-Up hit its all-time record with 770k sqm in 2016, while take up in Madrid was more stable at 500k sqm concentrated mainly in the city’s surrounding areas

► Rent stability, with expected upturn due to the lack of quality space and the high level demand. The Barcelona city market ranks #2 within European Market Rent increase (2.5-5.0% Growth Rate)

► High Liquidity from an Equity perspective. However,

the lending activity remains weak

► High yields continue to ease the financing debt service

► Large divestment pipeline on the sale side to pave the way for the

entry of core / core+ investment players

► Forward funding is back



EXECUTIVE SUMMARY

Drivers of the cross-border investment

increase:

2

3

1

4

Yielding Assets are more attractive than Investment Grade Bonds

Dollar strength (For American investors) and Euro weakness

Political and financial uncertainly in certain countries is favouring Spain

(3 %)

(7%)

(21%)

22%12% 21%

11%8%

5%7%

4%7%

4%

5%

1.100

1.300

1.500

1.700

1.900

2.100

0

Un

ited

Kin

gd

om

Fran

ce

Germ

an

y

Irela

nd

Neth

erla

nd

s

Sp

ain

Belg

ium

Au

str

ia

Ita

ly

Po

rtu

gal

Po

lan

d

Czech

Rep

ub

lic

Sw

ed

en

No

rw

ay

0%

2%

4%

6%

8%

10%

12%

Cap

ital

Val

ues

Gro

wth

(%

)2

01

5-2

01

6

Yiel

ds

Tren

d (

%)

20

15

-20

16

Min. 2007 Max. 2009 2015 2016

10 Year Bond

2016-2017(1st March

2017) 1,67%▼17 bps

0,34%▼ 43 bps

0,91%▼16 bps

0,23%▼ 34 bps

0,92%▼4 bps

1,15%▼65 bps

2,12%▲ 50 bps

3,91%▲121 bps

0,73%▼18 bps

Source: Deloitte RE, Bloomberg

0,45%▼44 bps

3,85%▲ 91 bps

0,68%▼ 2 bps

0,55 %▼ 59 bps

1,62%▲ 22 bps

Cap

ital V

alu

e

per e

ach

€1

of

ren

t

€17

€19

€15

€13

€11

360 bpsYield 2016 – Dif. 10 years bond

488 bps 502 bps 609 bps 526 bps 508 bps 577 bps 580 bps 478 bps 590 bps 290 bps 582 bps 520 bps 388 bps

The Logistics Market: Capital Values and Trend Yield Analysis

International logistics giants expect to

consolidate their

international platforms in 2017.

Returns expected in Spain through logistic investment are well above the European average


Belgium0%Russia

1%

Ireland1%

Switzerland2%Norway

4%

Poland4%

Spain4%

Italy5%

Netherlands8%

Sweden9%

France11%

Germany18%

United Kingdom34%

European Investment Market

Source: Deloitte


EXECUTIVE SUMMARY

€188m €180m €160m €150m €144m

GermanyUnited KingdomUnited KingdomSpainFrance

TechnologieparkKöln

Logistics

BUYEREQT Real Estate

VENDORJaffé / Narat GmbH

116,115 sqm

London Distribution Park

Logistics

BUYERLegal & General Prop.

VENDORRoxhill Developments

204,380 sqm

Le Citrail

Logistics

BUYERn/a

VENDORCnp Assurances

150,000 sqm

Mango Logistics Park

Logistics

BUYERVGP

VENDORMango

180,000 sqm

Amazon Mountpark Bardon

Logistics

BUYERVestas Investment Mgmt

VENDORMountpark Logistics

124,712 sqm

Mango Logistics Park (Spain) with €150m of Investment Volume was the fourth transaction of 2016 in Europe.

Mango Logistics Park

4% of the Total Logistic Investment

Source: Deloitte

For more information see CHAPTER 3 (Investment Market)


European Investment Market: Spain still counts

European Yields (2016):

For more information see CHAPTER 4 (Key Investment and Financing Drivers)

in the full report.

Source: Deloitte


EXECUTIVE SUMMARY

Spain, with €930m of logistic investment volume in 2016, is playing a role at last within the European Market.

5 Spanish transactions are included within the Top 20

European deals.

Amounting to €549m, these Spanish transactions account for 24% of the

Top 20 investment volume

CountryPrime Yield

2016Minimum last

10 years

Germany 5.25% 5.50%

Italy 6.90% 6.50%

France 5.80% 6.00%

Spain 6.00% 5.50%

UK 4.50% 4.25%

Belgium 6.50% 6.75%

Sweden 5.75% 5.75%

# Country AssetGLA

(sqm)

Price

(€m)Buyer Vendor

1 Germany Technologiepark Köln 116.115 188 EQT Real Estate Jaffé/ Narat GmbH & Co. KG

2 United Kingdom London Distribution Park 204.380 180 Legal & General Property Roxhill Developments Ltd

3 United Kingdom Amazon Mountpark Bardon 124.712 160 Vestas Investment Mgmt, BNP Mountpark Logistics

4 Spain Mango Logistic Park 180.000 150 VGP Mango (Isak Andic)

5 France Le Citrail 150.000 144 n/a Cnp Assurances

6 United Kingdom Howdens Joinery Raunds 88.905 120 Tritax Big Box Roxhill Development

7 Spain Saba / Abertis Portfolio n/a 115 Merlin Properties - SOCIMI Saba / Abertis

8 France Portfolio (6 warehouses) 207.500 110 Prologis France I EURL Tristan Capital Partners

9 France Portfolio (8 warehouses) 214.597 101 Fonciere Des Regions Rockspring Property Inv.

10 Spain Metrovacesa (16 warehouses) 250.000 100 CBRE Global Investors Metrovacesa

11 France Portefeuille de 19 entrepôts 360.000 100 Proudreed France Stam Europe

12 United Kingdom Dixons Carphone 66.145 99 Tritax Big Box Consensus Business Group

13 United Kingdom Argos National Distribution Centre 60.726 97 Tritax Big Box Rotch Property Group

14 Spain Metrovacesa Portfolio n/a 96 Merlin Properties - SOCIMI Metrovacesa

15 United Kingdom Birch Coppice Bus Park 72.553 94 Tritax Big Box REIT Plc M&G Property Portfolio

16 France 1 Warehouse 29.000 91 Compagnie Du Parc De Bercy Tikehau Investment Management

17 France Portfolio (4 warehouses) 136.430 88 Axa Real Estate Inv. Cbre Global Investors France

18 Spain Zaphir Portfolio 151.459 87 Neinver & Colony Zaphir Logistics

19 Germany Am Romerfeld 4-6 99.998 85 Invesco RE Willi Betz

20 Germany Siemens Siplace Training Center 27.494 85 Fiduciary Capital GmbH Sirius Real Estate

36 Spain BSH 79.998 44 GreenOak Prologis

38 Spain Proyecto logístico San Fernando 121.000 43 Axiare n/a

39 Spain 4 Naves Logísticas 72.484 43 Trajano n/a

48 Spain Centro logístico Carrefour 44.000 39 Blackstone (Logicor) Brookfield

52 Spain Centro logístico H&M 36.000 32 Blackstone (Logicor) Brookfield

Source: Deloitte



150 279 88 120 596 674 930 750 576

519 607

897

2.702 2.045 1.467

591 571 751

2.242

1.263

660 644

687 365

867

2.297

1.894 3.769

1.460

1.056

544

807

2.520

5.313

4.895

4.470

3.189

2.087

3.151

8.552

11.845 12.298

-

2.000

4.000

6.000

8.000

10.000

12.000

2010 2011 2012 2013 2014 2015 2016

Top 10 Spanish transactions:

A total pipeline investment volume of €600m is expected to be traded in Spain

Spanish Investment Market

Source: Deloitte

Source: Deloitte


EXECUTIVE SUMMARY

Total Logistics investment volume

in Spain as at 2016: €930m

Logistics

Hotels

Retail High Street

Retail Shopping Centre

Offices

8%

92%

Logistic Typology

Rest of CRE

38%

Short Term Medium Term Long Term TOTAL

75%100%

17%

8%

Logistic property investment increased by 38% in 2016 while total non residential investment only increased by 4%. The “revolution” which is taking place throughout the whole supply change cycle for products and services is key. The logistics segment continues to gather momentum.

Source: Deloitte


# ASSET PRICE (€m) GLA (sqm)

1 Mango Logistics Park 150.0 180,000

2 Saba Portfolio 115.0 n.d.

3 Metrovacesa (16 warehouses) 100.0 250,000

4 Metrovacesa Portfolio 95.7 n.d.

5 Zaphir Portfolio 87.0 151,496

6 San Fernando Logistics Park 43.0 121,000

7 4 Warehouses 42.9 72,484

8 Carrefour Logistics State 38.5 44,000

9 H&M Logistics State 31.5 36,000

10 2 Warehouses 14.2 28,035


Average Rents Catalonia

Recovery of activity indicators is having an impact on rent

Lease Market

Logistic assets are in greater demand as e-commercesignificantly increases and logistic

companies improve their business

performance

Average Rents Madrid

vs


EXECUTIVE SUMMARY

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

13

)

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

13

)

First ring Second ring Third ring First ring Second ring Third ring

95

105

109

100

113 119

145

111

129

156

90

100

110

120

130

140

150

160

2013 2014 2015 2016

Source: Deloitte

For more information see CHAPTER 2 (Supply & Demand)

104

108

108

100

105

116

100

117

90

95

100

105

110

115

120

125

130

2013 2014 2015 2016



Lease Market

Rents in the Prime area remain moderately

stable except for the new built assets.

Relevant up-sticks given a greater demand

for large warehouses located in secondary

areas (Toledo and Guadalajara).


EXECUTIVE SUMMARY

Source: Deloitte

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

13

)

First ring Second ring Third ring

Average Rents Madrid

95

105

109

100

113 119

145

111

129

156

90

100

110

120

130

140

150

160

2013 2014 2015 2016

High level of stock (vacancy rate 8.5%) with

significant impact on rents increase.

Potential gap between rents depending on the assets

year of construction and qualities.

MADRIDA-2/A-4

6.0%6.25% 6.25%

7.25%7.5%

8.5%

6.50%

7.25%

8.0% 8.0%

5.0%

6.0%

7.0%

8.0%

9.0%

1.5

2.5

3.5

4.5

5.5

6.5

Yie

ld (

%)

Ren

t (€

/sq

m/m

on

th)

Min. Rent Average Rent Max. Rent Yield (%)

1st Ring 3rd Ring 1st Ring 2nd Ring 3rd Ring2nd Ring


CATALONIAPrime /1st/ 2nd/ 3rd Rings

Rent stability, with expected upturn, due to the lack

scarcity of quality space and high level of demand.

Barcelona city Prime area ranked #2 within European

market rents increase (between 2.5-5% Growth Rate)


Lease Market

Prime rents have reached stability.

However potential increases can be expected

given the high level of demand.

2nd and 3rd rings rents notched up the

highest increases given the lack of available

quality product.


EXECUTIVE SUMMARY

Source: Deloitte

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

13

)

Average Rents Catalonia

104

108

108

100

105

116

100

117

90

95

100

105

110

115

120

125

130

2013 2014 2015 2016

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

13

)

First ring Second ring Third ring

6.0%

6.25%6.5%

6.75%

7.0%

7.5%

5%

6%

7%

8%

1.5

2.5

3.5

4.5

5.5

6.5

7.5

Yie

ld (

%)

Rent

(€

/sqm

/m

onth

)

Min. Rent Average Rent Max. Rent Yield (%)

PRIME 2nd Ring 3rd Ring1st Ring

@ 2016 Deloite Financial Advisory 11Source: Deloitte

Standard lease terms generally accepted

Average Rent Free Period –Prime/1st Ring(% / Total signed months)

2nd Ring

3rd Ring

2014 2015 2016Contract Duration (years)

Total Office Space leasedOffice (sqm) / Logistics (sqm)

2-3 5 5

Transfer of Property Tax and Community Charges to the tenant

80%

5%(Office sqm/Warehouse sqm)

6(months)

3(months)

100% 100%

Main

Term

s

The lease contracts have

responded positively to the market momentum,

particularly in Prime areas,

experiencing significant decrease in

rent free periods and cost

recoverability

THE KEY FOR SUCCESS

Source: Deloitte


EXECUTIVE SUMMARY

5% - 7%(Office sqm/Warehouse sqm)

7-10%(Office sqm/Warehouse sqm)

12% of Contract duration



10-12% of Contract duration


10-12% of Contract duration

Source: Deloitte

For more information see CHAPTER 2 (Supply & Demand)

3(months)





Significant Demand appetite for new

built projects.

New supply: What to expect! Speculative Projects, with potential over-supply.

Positive capital value growth given

yield compression.

Balanced Market? High Demand &

Low Vacancy Rate.

Moderate new supply Turnkey & Built

to Suit Projects.

Higher Liquidity? Rents upturn trend &

Significant Yield Compression.

2016 TAKE UP FIGURES

Source: Deloitte


EXECUTIVE SUMMARY

770Ksqm

500sqm

Where to invest?

2017 High Expectations for

Madrid while Catalonia returns to standard Take Up levels.

Larger units

Large volume

Less Deals

Smaller units

Smaller volume

More Deals


P&L reconstruction Restructure of the Financial Sector

Fundamentals improvement

Alternative to the fixed income / bond yields

Forward funding: Turnkey projects: limited

lenders

Senior Debt: Yielding assets:

gathering momentum

MAIN DRIVERS FOR THE INCREASING LENDING APPETITE

Monetary Policy: QE, low funding costs, etc.

Excess of Liquidity: Increase in transactions

Entry of new sponsors

FINANCIAL SECTOR

REAL ESTATE INVESTMENT MARKET

MACROECONOMIC ENVIRONMENT

Yielding assets: Lending activity still remains weak

Financing MarketThe Logistic Property HandbookSpain 2017

EXECUTIVE SUMMARY

Main

Conditio

ns

LTV

Upfront Fee

Spread

2014

n/a n/a 50%

2015 2016

n/a n/a 125-175bps

n/a n/a 250-300bps

Framework

Main Players

Balloon n/a n/a 65%

Credit Access Constraints

Financing Upturn

Institutional Investors / Debt Funds

Banking / Insurance Companies

2013

50-55%

100-150bps

200-250bps

80%

Source: Deloitte



Most active players expected to stay active in

2017:

Main Players:

Equity

Debt(€m)

2015 2016CORE PROFILE STILL DOMINATES:

Source: Deloitte


EXECUTIVE SUMMARY

Core75%

ValueAdded

25%

Core

70%

Value Added30%

(€m)

Core 471

Value Added 203

(€m)

Core 610

Value Added 207

Source: Deloitte




EXECUTIVE SUMMARY

Logistic

Property

GlobalizationEmerging markets

RelocationReshoring and Nearshoring

Pick up Locationconsumer demand

Urban Consolidation Center Centrally-located city hubs

DisruptionProcess Automation & Robotics

BREEAM & LEEDfacing the future

BREEAM and LEED certifications are the

most relevant sustainability certifications

worldwide. Both standards are

regularly updated in line with the market momentum.

LEADING SUSTAINABILITY CERTIFICATIONS



Documents

The Logistic Property Handbook - Deloitte Logistic Property Handbook Investment & Financing Keys ... Logistic Investment volume increased in 2016 ... 8 Carrefour Logistics State 38.5