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Listed industrial property group Segro said on Monday it has agreed the acquisition of a portfolio of eight prime French logistics estates for EUR 161 mln (£130 mln) from Foncière Europe Logistique, a subsidiary of Foncière des Régions.

The portfolio comprises 13 buildings totalling 255,000 m² of lettable space which currently generate EUR 14.2 mln of annualised rental income. The properties are 10 years old on average, The purchase price represents a net initial yield of 8.4% and reversionary yield of 7.7%.

Five estates are located in established logistics locations in the Ile de France region around Paris, within close proximity to Segro's existing core logistics and light industrial estates. The remaining three are located in Lyon, where Segro already has a presence. All eight estates are fully let to a range of strong covenants, including UPS, Geodis, Daher, Sony, DSV and Saint-Gobain. The weighted average lease length is 6.0 years to expiry.

The acquisition is part of Segro's plan to develop its logistics platform across key transportation corridors in the UK and Continental Europe. Following this acquisition, Segro will have prime logistics assets under management of £1.4 bn, £500 mln of which in France. The French portfolio totals 900,000 m² generating over £40 mln of annualised rental income.

The acquisition, which is expected to complete in September 2012, will be funded using part of the proceeds from the £377 mln of non-core asset disposals which Segro has announced so far this year. These proceeds have also been used to pay down debt, in line with the group's strategy to reduce leverage over the medium term.

'This transaction provides us with a rare opportunity to acquire some of the best logistics assets in the two strongest markets in France. The assets deliver an attractive income yield from strong covenants and will allow us to drive operational efficiencies from greater critical mass with the potential to add value over time,' said chief investment officer Phil Redding.

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