Expected to be finalised by the end of February, Madison International Realty is acquiring a 46.5% equity stake in JSE-listed Redefine Properties' Polish logistics platform held through European Logistics Investment (ELI). As part of the transaction, Griffin Real Estate, which own 5% in ELI, will acquire a further 2% from Redefine on the same terms as Madison, leaving Redefine with a 46.5% equity interest.
The platform comprises 19 assets totalling around 560,000m2
, with 80,000m2
nearly completed and an additional development pipeline of 270,000m2
to be started once pre-leases are secured. The completed properties are around 95% occupied and spread across the distribution hubs of Poland in Warsaw, Lodz, Krakow, Silesia, Pomerania and Poznan regions.
As part of the transaction, Madison will provide a €150m (approximately R2.4bn) commitment to ELI, of which €83.7m (approx. R1.3bn) will be used to acquire their share of the existing assets and developments in progress while leaving a commitment of €66.3m (approx. R1.1bn) to expand the portfolio over the next three years. In terms of the deal, Redefine will match Madison’s equity commitment of €66.3m. European logistic developer Panattoni Europe is a co-manager of the platform.
Reduced loan-to-value ratio
Andrew Konig, CEO, Redefine Properties, says, “The deal fits perfectly with our investment strategy and provides us with an opportunity to reduce our loan-to-value ratio. It also means we are able to source additional, well-priced capital in order to secure the exclusive priority right to development opportunities with Panattoni over the next three years.”
“The focus for 2020 firmly remains on asset quality, offshore expansion through development activity, notably through ELI and leveraging opportunities to participate in a broader, more diversified portfolio of logistics assets. We are delighted to be working with Madison in the heart of CEE’s most attractive real estate market.”
Redefine will realise €87.2m (approx. R1.4bn) from this transaction of which €14.7m (approx. R235m) will be surplus cash after reinvestment in ELI to the tune of €72.6m (approx. R1.2bn) – comprising the equity commitment of €66.3m and completing existing developments in progress totalling €6.3m (approx. R101m).
“The JV with Madison enables Redefine to continue to benefit from the priority right development pipeline with Panattoni. By co-investing with Madison, over the next two to three years, ELI will have access to sufficient capital (€148.7m) for its logistic platform portfolio to grow to a sizable scale (increasing from 560,000m2
to circa 910,000m2
in gross leasable area) and benefit from attractive development yields and low cost of European debt funding,” adds Konig.
The final closing of the transaction is targeted for end February 2020 and is conditional on Polish regulatory clearance.