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Tritax EuroBox

February 2021 Investor Forum

11 Feb 2021 / Corporate research

Growth in demand for large, modern logistics real estate is accelerating. 12% of Continental European retail was via internet shopping in 2020. Savills quotes data projecting 15.3% this year. Onshoring and lengthening of supply chains add to the trend. Tritax EuroBox (EBOX) invests entirely in this sector. It capitalises on Tritax Group’s extensive expertise in the sector (£5bn assets, including the eight year-old Tritax Big Box in the UK). Its prospective dividend yield is 4.2%. We calculate the dividend yield on the largest UK real estate stocks to be 3.9%, while the largest logistics real estate REIT, Segro, offers a historical dividend yield of 1.9%.

  • Strategy: EBOX is an investment trust, launched and floated in mid-2018, with a further €135m equity raised in May 2019. It is dedicated to investing in the structurally undersupplied Continental European logistics market. Rents grew 2.9% like-for-like last year, and there is every indication this should accelerate.
  • New development: EBOX projects 7.0% rent returns on its three developments (one under way). There is thus a latent revaluation uplift of as much as €20m, or more, in total to be delivered over the next three years. Further developments are planned. Supply/demand is attractive, so modest, judicious new development is low-risk.
  • Valuation: Tenant demand strength indicates a steady NAV rise as rents rise. Furthermore, value generated by new development is clear, and this may indicate a premium to NAV being warranted. It is worth noting this company has achieved critical mass, but a greater capital base may enhance the valuation.
  • Risks: This asset class’s valuation basis is almost exactly in line with the total market but, in the past, logistics assets have been valued at higher yields. Growth in logistics and internet fulfilment is a long-standing driver. New development is never without some risk. There are taxes payable, and the quantum may vary.
  • Investment summary: Growth in demand has been accelerated by COVID-19, and this is set to continue. In many of EBOX’s markets, this has taken market vacancies down to near zero. Value rises tend to lag such events, and this – added to the developments – gives high visibility to NAV growth. Income has now risen to the target indicated at IPO. There is a €2bn acquisition pipeline.
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