The properties are located in four key Italian logistics hubs – Rome, Milan, Verona and Bologna – where demand for quality logistics buildings is strong, driven by scarcity of prime products and structural consumer trend towards e-commerce. These assets are owned and managed by a leading logistics specialist with a demonstrated track-record on that segment.
Sylvain Deschamps, debt fund manager at AEW, an affiliate of Natixis Investment Managers, said: “This deal helps to fill the gap for Grade A logistics assets in dynamic regions of Italy and is expected to provide an interesting risk-adjusted return for the lenders.”
Of the 20 properties being financed, 15 are still under development, driving the day-1 yield of 300bps above Euribor, which is then to be progressively reduced down to 225bps once the portfolio is fully stabilized. “The fact that most of the properties have not yet been delivered has led us to allocate the deal to the return enhancer bucket of the portfolio,” said Deschamps. “However, there are here some strong mitigants to the risk profile of the deal.”
First, logistics has long been a priority sector for AEW’s equity real estate investments, and AEW’s debt team can call on the firm’s local expertise in at least 10 European countries. Deschamps said: “We were able to talk to our experts on the ground in Italy and establish that once the properties have been delivered, they will represent an unrivalled portfolio of prime logistic assets in Italy thanks to their excellent locations, their state-of-the-art technical specifications and best-in-class environmental profile, also allowing for the debt to be classified as a green loan and meet our ESG requirements”.
Another risk mitigant is that despite the development profile , 40% of the areas are already let or prelet to tenants with strong covenants, such as Amazon, allowing the borrower to already rely on secured cash-flows.
Finally, loan-to-costs of the deal is low – below 50% at closing and capped at 60% by the time the loan is fully drawn down. The drawdown of debt is dependent on whether the sponsor is able to deliver on the business plan and achieve target occupancy rates for the properties. In case of underperformance on the leasing side, the relevant debt is not drawn down enabling senior lenders to tighly monitor their outstanding risk at anytime.
For further reading:
- AEW Participates in Pan-European Green Loan
- AEW Finances Pan-European Logistics Deal
- AEW consolidates real estate debt platform ahead of planned growth
- AEW and Natixis IM in Refinancing of Iconic ENI Headquarters
- Real Estate Debt Helps Investors Ride out Crisis
- AEW/Ostrum AM Invest €64m in German Residential Property
- Covid-19: What is the impact on Commercial Real Estate Debt in Europe?
- AEW and Ostrum Asset Management complete final investments in Senior European Loan Fund II (SELF II)
- Bricks, Mortar and Loans
- Real Estate Debt is the Real Deal
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