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TRITAX EUROBOX (EBOX) 103.8P Sep 2019 yield: 2.3% Pre­mium to NAV: 3.8%

While the lo­gis­tics prop­erty mar­ket in the UK might be look­ing very ex­pen­sive, Mike Prew, the prop­erty ex­pert at in­vest­ment bank Jef­feries, says the Euro­pean lo­gis­tics space is five years be­hind the UK.

This should cre­ate pos­i­tive dy­nam­ics for Tritax

Eurobox (EBOX), launched in July 2018 by the peo­ple be­hind the £2bn-plus Tritax Big Box REIT (BBOX).

The plan is to take the ex­tremely suc­cess­ful Big Box tem­plate to con­ti­nen­tal Europe. The strat­egy has been to rent out high qual­ity lo­gis­tics as­sets of 500,000 square foot or more to in­sti­tu­tional-grade ten­ants on long leases.

The rea­son the Euro­pean lo­gis­tics sec­tor is lag­ging the UK is that shop­pers do not cur­rently buy as much on­line in Con­ti­nen­tal Europe. As the chart shows, 18% of UK re­tail trade is done on­line with Ger­many the next clos­est in Europe at 15% and many other large Euro­pean coun­tries hav­ing much lower lev­els of on­line pen­e­tra­tion.

Un­sur­pris­ingly these im­ma­ture mar­kets are ex­pected to grow more quickly. This growth will re­quire ware­hous­ing fa­cil­i­ties to store and process or­ders and re­turns, pro­vid­ing sup­port to the yields Eurobox can achieve from its as­sets.

The £300m raised along­side its stock mar­ket flota­tion will be in­vested in a €1.8bn pipe­line of lo­gis­tics prop­er­ties – with Tritax ac­tively ne­go­ti­at­ing the pur­chase of as­sets worth up­wards of €600m.

It is tar­get­ing an ini­tial div­i­dend yield of 4.75% once fully in­vested, to be paid quar­terly in ster­ling, and a to­tal re­turn in the medium-term of 9% a year.

On 26 Septem­ber the com­pany an­nounced its first ac­qui­si­tion with the pur­chase of the global dis­tri­bu­tion cen­tre for cloth­ing re­tailer Mango in Barcelona for €150m.

The pur­pose-built fa­cil­ity was con­structed in 2016 and is let to Mango on a 30-year lease. There is also po­ten­tial to ex­tend to an ad­ja­cent plot of land.

Eurobox ex­pects to be fully in­vested by De­cem­ber with sev­eral other deals in progress. The shares do trade at a small pre­mium to net as­set value, prob­a­bly re­flect­ing in­vestors’ hopes that it can match the im­pres­sive per­for­mance of Big Box. We’re cer­tainly con­fi­dent, so buy its shares now.

THE EURO­PEAN LO­GIS­TICS MAR­KET E-com­merce as % of to­tal sales

Es­ti­mated on­line sales growth (2016-2021)

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