Expanding our logistics offering

Expanding our logistics
offering
Andy Gulliford, Chief Operating Officer
0
Right portfolio shape - Re-invest in growth areas
WHAT:
WHERE:
3. Expand LOGISTICS
business around major
commercial ports, airports
and logistic corridors
UK – South/Central
France – Paris/Lyon
Germany – Dusseldorf/Frankfurt/Hamburg
Benelux – Randstadt/Belgium triangle
Poland – Warsaw/Poznan/Lodz/Silesia
Czech Republic - Prague
1
An overview of logistics
Market characteristics
Asset characteristics
Relatively modern sub-sector of industrial
Large (>10k sq m) distribution warehouses
Western Europe since early 1990s
Single and multi-occupier buildings
More recently established in CEE
Local, national and international distribution
Growth driven by global trade
Ports, airports and transportation corridors
A growing sub-sector
Generic buildings, many users
2
Key logistics locations
3
Source: Jones Lang LaSalle
Rationale for expanding SEGRO’s logistics exposure
Large growing market
Attractive market
segment
Favorable demand/supply characteristics
Established asset investment class
Attractive returns and yields
Investment
appetite
Attractive to third party investors
Potential to share capital commitment
Ability to grow fee based revenue stream
Strong SEGRO
platform
c.£900m of existing logistics assets
Experienced operational team
Strong customer relationships
A logical play for SEGRO
4
Strong drivers of demand
Retailers
- Growth in multi-channel
UK logistics take up by sector
- Geographical expansion
- Higher frequency replenishment rates
1%
23%
6%
52%
Logistics service providers
- Client outsourcing
Manufacturers
18%
- Export growth
- Centralisation of inventory
Retailers
Manufacturers
Other
Logistics service providers
Waste/recycling
- Off-shoring to lower labour cost countries
Source: Jones Lang LaSalle
5
A growing market – take up volumes in Europe
Logistics take up rebounded strongly across Europe in 2010 and has
remained resilient into 2011
16
14
Millions sq m
12
10
8
6
4
2
0
2000
2001
2002
2003
2004
2005
CEE
2006
2007
2008
2009
2010
YTD
Western Europe
Source: Jones Lang LaSalle
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Attractive yields
Prime logistics yields from low point of cycle to Q1 2011
10%
9%
8%
7%
6%
5%
4%
London
Frankfurt
Hamburg
Brussels
Cyclical low
Rotterdam
Current yield
Paris
Amsterdam
Warsaw
Prague
Cyclical high
Source: CB Richard Ellis
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Attractive income orientated returns
Logistics assets are typically let to strong
covenants on relatively long leases
Limited ongoing capex requirement
Less management intensive
Takko, Hamburg
Frequently pre-let/built to suit
Returns boosted by higher rental yields
“Defensive” qualities compliment “value add”
multi-let industrials
Gliwice, Poland
8
Income outperformance
UK logistics warehousing has outperformed other real estate asset classes
8.0
Annualised income returns (%)
7.0
7.4
7.2
6.4
6.7
6.4
6.3
6.7
6.5
5.8
6.0
5.7
5.6
6.6
5.8
6.0
5.5
5.0
4.0
3.0
2.0
1.0
0.0
3 yr
Distribution warehouses
5 yr
Industrial
7 yr
All Property
Office
Retail
Source: IPD
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Rationale for expanding SEGRO’s logistics exposure
Large growing market
Attractive market
segment
Favorable demand/supply characteristics
Established asset investment class
Attractive returns and yields
Investment
appetite
Attractive to third party investors
Potential to share capital commitment
Ability to grow fee based revenue stream
Strong SEGRO
platform
c.£900m of existing logistics assets
Experienced operational team
Strong customer relationships
A logical play for SEGRO
10
Investment appetite
Logistics investment accounted for 10% of total European property
investment in H1 2011 compared with 8% in 2010
Strong institutional appetite for co-ownership of logistics assets
Investors seeking strategic asset management partner
Prepared to pay fees to manage on their behalf
Recent examples of European funds raised by peers:
Date
Company
Fund
Amount
Investor
Mar-11
VGP
European Property Investors Special Opps
€300m
AEW and Tristan Capital Partners
Mar-11
AMB/Prologis
Logistics Venture 1
$588m
ADIA/HIP
Feb-11
AMB/Prologis
Europe Logistics Venture 1
€400m
Allianz
Nov-10
Goodman
Europe Logistics Fund
€300m
APG (€150m) and PGGM (€100m)
Oct-10
Panattoni
Western Europe JV
€220m
Pramerica
June-10
Goodman
CE and UK Logistics Investment Ventures
£750m
CBRE Investors
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Rationale for expanding SEGRO’s logistics exposure
Large growing market
Attractive market
segment
Favorable demand/supply characteristics
Established asset investment class
Attractive returns and yields
Investment
appetite
Attractive to third party investors
Potential to share capital commitment
Ability to grow fee based revenue stream
Strong SEGRO
platform
c.£900m of existing logistics assets
Experienced operational team
Strong customer relationships
A logical play for SEGRO
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Existing platform
Represented in all key markets
Benelux:
c.£130m
200k sq m
Strong operational capability
Significant asset base in
Continental Europe
UK:
Poland:
c.£320m
c.£230m
245k sq m
Germany:
490k sq m
c.£65m
120k sq m
Czech:
c.£45m
UK clusters around
London/South East
90k sq m
France:
c.£140m
250k sq m
Core logistics assets:
June 2011 valuations @ 100% JV share
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Strong customer relationships
SEGRO has existing relationships with many of the major occupiers
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Strong customer relationships
“We know, that we can always
count on partnership cooperation
and mutual understanding from
SEGRO’s side”
“SEGRO works in partnership
with us and has added real
value to our company. We like
doing business with them”
Juliusz Skurewicz, President of
Hellmann Worldwide Logistics
Paul Graham, SVP Real Estate
EMEA, DHL
“SEGRO’s co-operation has
helped enormously and we look
forward to working with them in
the future.”
“We decided to move into
SEGRO’s facility because it is
the only modern and technically
efficient infrastructure”
Anka Czarniecka-Oles, Logistics
Manager, Helion Publishing House
Miroslav Pivrnec, Financial Director,
ČERVA
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Our strategy
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Key European logistics locations
17
Source: Jones Lang LaSalle
Right portfolio shape – right markets
SEGRO’s primary target markets for logistics
UK – South/Central
France – Paris/Lyon
Germany – Dusseldorf/Frankfurt/Hamburg
Benelux – Randstadt*/Belgium triangle
Poland – Warsaw/Poznan/Lodz/Silesia
Czech Republic - Prague
* Amsterdam and Rotterdam
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How we plan to do it
Build critical mass in key markets
UK, France, Germany, Benelux, Poland,
Czech Republic
Individual asset acquisitions/developments
Grow organically
Use existing landbank e.g. Poland
Build on existing capabilities
Grow via acquisitions
Portfolio acquisitions
Multiple potential opportunities
Use third party capital
Earn fees, grow faster
Manage using existing resources
Greater economies of scale
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Significant logistics landbank
Benelux:
20 hectares
Poland:
167 hectares
260 hectares of logistics
land to develop in Northern
and Central Europe
Germany:
23 hectares
Czech:
50 hectares
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The indicative shape of our logistics portfolio
0.9
0.8
0.7
Value (£bn)
0.6
0.5
0.4
0.3
0.2
0.1
0
UK
France
Germany
Current portfolio
Poland & Czech
Benelux
Future portfolio
We aspire to grow our logistics portfolio to c.£2.5bn AUM
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Current values based on core assets at June 2011 valuations (100% JV share)
Poland – An example of what we have achieved
SEGRO enters
Polish market
2006
2007
Acquired Grontmij Real Estate
€19.1m purchase price
Completed Jan 2006
71 ha of Polish logistics space
16k sq m Warsaw office space
An established
player today
2008
2009
c500,000 sq m of
logistics development
completions since
2006
2010
Capital value:
Landbank
2011
c.£230m
167 ha
Equivalent yield:
8.5%
IRR (ungeared)
10.4%
Vacancy rate
1.6%
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Summary
Clear rationale for expanding our presence
• Attractive market fundamentals
• Strong existing platform
Targeted approach to portfolio expansion
Growth both organically and through acquisitions
Introduce third party capital partners
Aspire to c.£2.5bn AUM; benefit from economies of scale
A logical play for SEGRO
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Forward-looking statements
This presentation may contain certain forward-looking statements with respect to
SEGRO’s expectations and plans, strategy, management’s objectives, future
performance, costs, revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to events and depend
upon circumstances that may occur in the future. There are a number of factors
which could cause actual results or developments to differ materially from those
expressed or implied by these forward looking statements and forecasts. The
statements have been made with reference to forecast price changes, economic
conditions and the current regulatory environment. Nothing in this presentation
should be construed as a profit forecast. Past share performance cannot be relied on
as a guide to future performance.
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