Investing in mainland Europe by UK property companies has more often than not been associated with ruinously expensive ventures that fail to deliver. But there are signs that selective investments can still pay dividends, certainly something that real estate group Segro (SGRO) believes. Through Segro European Logistics Partnership (SELP), in which it has a 50 per cent stake with PSP Investments, one of Canada's largest pension investment managers, Segro has acquired a portfolio of prime logistics assets and development land in Germany, Poland and France for £393m, with a net equivalent yield of 7.1 per cent.
The portfolio includes 10 sites in Germany, three in Poland and one in France of around 679,000 square metres of lettable space including one building under construction and 51 hectares of development land in Germany. There is no financing attached to the deal, with Segro contributing £118m out of cash resources.
Demand for prime commercial property sites in Europe lags behind the renaissance being enjoyed in the UK, and this is likely to restrict any gain in property values. But this latest acquisition by Segro offers a useful revenue stream, and while the European market may be lagging, at some point equity and debt capital will become more widely available. This process may take time to gain traction as the eurozone economy is still struggling to its feet, and rental markets may not show much recovery this year.
