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@ 2016 Deloite Financial Advisory 1
The Logistic Property HandbookInvestment & Financing Keys
Spain 2017
Financial Advisory I Real Estate
April 2017
@ 2016 Deloite Financial Advisory 2
The Logistic Property HandbookSpain 2017
Javier García-Mateo, MRICS
PartnerFinancial Advisory ‖ Real Estate
jgarciamateo@deloitte.esMob: +34 659 90 02 15
Ana Granado, MRICS
DirectorFinancial Advisory ‖ Real Estate
agranado@deloitte.esMob: +34 630 78 44 73
Jose María Espejo
Senior ManagerFinancial Advisory ‖ Real Estate
jespejo@deloitte.esMob: +34 918 232 692
Lorena Juriol
ManagerFinancial Advisory ‖ Real Estate
ljuriol@deloitte.esMob: +34 600 569 579
Luis González Martino, MRICS
ManagerFinancial Advisory ‖ Real Estate
lgonzalezmartino@deloitte.esMob: +34 636 177 733
Francisco Astorga
ManagerFinancial Advisory ‖ Real Estate
fastorga@deloitte.esMob: +34 626 735 311
@ 2016 Deloite Financial Advisory 3
2Supply &
Demand
4Key Investment and Financing Drivers
3Logistic Investment Market 5 Key
Factors
The Logistic Property HandbookSpain 2017
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
@ 2016 Deloite Financial Advisory 4
The Logistic Property HandbookSpain 2017
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
@ 2016 Deloite Financial Advisory 5
Belgium0%Russia
1%
Ireland1%
Switzerland2%Norway
4%
Poland4%
Spain4%
Italy5%
Netherlands8%
Sweden9%
France11%
Germany18%
United Kingdom34%
European Investment Market
Source: Deloitte
The Logistic Property HandbookSpain 2017
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)
@ 2016 Deloite Financial Advisory 6
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
The Logistic Property HandbookSpain 2017
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
For more information see CHAPTER 3 (Investment Market)
@ 2016 Deloite Financial Advisory 7
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
The Logistic Property HandbookSpain 2017
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
For more information see CHAPTER 3 (Investment Market)
# 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
@ 2016 Deloite Financial Advisory 8
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
The Logistic Property HandbookSpain 2017
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
@ 2016 Deloite Financial Advisory 9
Recovery of activity indicators is having an impact on rent
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).
The Logistic Property HandbookSpain 2017
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
@ 2016 Deloite Financial Advisory 10
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)
Recovery of activity indicators is having an impact on rent
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.
The Logistic Property HandbookSpain 2017
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
The Logistic Property HandbookSpain 2017
EXECUTIVE SUMMARY
5% - 7%(Office sqm/Warehouse sqm)
7-10%(Office sqm/Warehouse sqm)
12% of Contract duration
14% of Contract duration
8% of Contract duration
10-12% of Contract duration
8% of Contract duration
10-12% of Contract duration
Source: Deloitte
For more information see CHAPTER 2 (Supply & Demand)
3(months)
5% of Contract duration
8% of Contract duration
10% of Contract duration
@ 2016 Deloite Financial Advisory 12
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
The Logistic Property HandbookSpain 2017
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
@ 2016 Deloite Financial Advisory 13
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
For more information see CHAPTER 4 (Key Investment and Financing Drivers)
@ 2016 Deloite Financial Advisory 14
Most active players expected to stay active in
2017:
Main Players:
Equity
Debt(€m)
2015 2016CORE PROFILE STILL DOMINATES:
Source: Deloitte
The Logistic Property HandbookSpain 2017
EXECUTIVE SUMMARY
Core75%
ValueAdded
25%
Core
70%
Value Added30%
(€m)
Core 471
Value Added 203
(€m)
Core 610
Value Added 207
Source: Deloitte
For more information see CHAPTER 4 (Key Investment and Financing Drivers)
@ 2016 Deloite Financial Advisory 15
The Logistic Property HandbookSpain 2017
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
@ 2016 Deloite Financial Advisory 16
The Logistic Property HandbookSpain 2017
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