German banks are determined to finance core logistics property in their local market as foreign institutional investors increase their exposure to the asset class.
Last week, Germany’s DekaBank announced a €117.3 million financing of three German prime logistics facilities on behalf of KWASA Goodman, a co-investment between global industrial property group Goodman and Malaysia’s biggest pension fund EPF, in a deal that illustrates this trend.
The financing, structured as a forward facility with three different drawdowns upon the completion of each asset, was jointly underwritten by DekaBank and pbb, with the first acting as debt arranger.
One of the logistics assets, located in Ergolding, is fully let to BMW until 2032, while the other two are in Marl and let to the Metro Group on long leases, DekaBank said. The Metro properties, with a combined area of approximately 235,000 square metres, are among the largest logistics assets in Europe.
DekaBank in January also wrote a €94 million senior debt facility to support Dubai-based Rasmala Investment Bank’s entry into the German logistics property market, in another example of German lenders backing European logistics acquisitions from foreign investors.
As DekaBank focuses on growing its loan book portfolio with similar financings involving core assets to experienced sponsors, the share of logistics properties in pbb’s loan book has grown from 8 percent to 11 percent in the past five years.
“We believe the demand for good-quality logistics space is likely to continue,” a spokesman from pbb told Real Estate Capital, noting that more than 50 percent of the capital invested in European logistics comes from investors outside Europe – a figure the bank expects to increase.
The German logistics sector has had an “extremely positive” performance over in the past five years and the asset class is now “firmly established” as a major component of professional investment portfolios, according to a report from JLL.
During that period, investment volumes in Germany’s commercial real estate investment market, attributable to logistics, warehousing and industrial properties, grew from 7 percent to 15 percent. In 2017 – and “exceeding all expectations” – the investment market for logistics and industrial properties reached a record transaction volume of €8.7 billion, JLL said.
“Logistics properties continue to fuel the strongest yield momentum,” JLL said in a Q2 2018 report on Germany’s property investment market.
The average prime yield for the top seven German regions – Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich and Stuttgart – currently stands at 4.25 percent, which represents a fall of 15 basis points over the first quarter of the year, on the back of solid demand.
“There has been no drop in demand from investors for well-positioned logistics halls or portfolios. The yield compression of almost 70bps within the past 12 months illustrates this trend, which is further compounded by the persistently low availability of products,” JLL noted.