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Some aspects about DSV logistics portfolio investment
EfTEN Real Estate Fund III AS performed already the third transaction in its one-year history, by acquiring the assets of the logistics firm DSV in three Baltic countries. This is a sales-leaseback transaction, where DSV will remain a long-term tenant in the buildings. The importance of the transaction lies in the following points:
- The first two investments with fund III were made in Lithuania – the Saulės Miestas shopping centre, in Šiauliai, and the Ulonų office building, in Vilnius. The transaction includes three buildings in each Baltic capital city or in their vicinity, being a perfect match to the Pan-Baltic investment mandate of the fund. The biggest of the three buildings is located in Estonia, at the Laagri entrance to the city, along the side of Pärnu Highway;
- With this transaction we are making our first investment into the logistics segment, alongside shopping centre and office building, which ensures a balanced division of assets between different commercial property segments;
- A long-term unbreakable lease agreement with DSV, one of the world’s leading logistics companies, ensures stable rental income for the fund;
- The smallest building in the portfolio is located in Riga. We have agreed with the seller on a substantial expansion of the centre in Riga, which will be completed by the beginning of 2018, at the latest;
- As equity for the transaction we will use the funds that were raised with the public offering in April, 2016. Considering the transaction volume, we can put to use almost all of equity involved as soon as 3 months after the share emission.
One may ask, why DSV decided to sell its assets. Large international corporations in different industries are increasingly focusing on their core activity, selling and at the same time leasing back the real estate that is needed for their business. Real estate is often booked in the companies’ balance sheet as fixed assets with a very large proportion and if it is sold, the company can free up capital and invest the funds in their core activity. In addition, a sale- and leaseback transaction ensures an optimal asset-cost structure compared to competitors. On a global scale, business models, in which the only critical success factor is possessing your own real estate, are not sustainable.
Considering today’s extremely favourable environment of bank loans we can ensure our investors sound annual dividends, which is the primary goal of our funds. The aftermath of the British referendum has notably rocked the world’s fragile economic balance. While the response of financial markets after the referendum was sharp, as expected, but already two days later world markets are recovering. The jovial mood of the commercial real estate sector might suffer a setback, reflected in the slowing of deal flow and stabilizing yield levels.