CTP Caught in a landslide, no escape from rationality

Since March, the market sentiment towards logistic developers has turned dramatically as interest rates shot up after years of irrational monetary policy. The market is now anticipating a swift reversal of the logistic RE investment boom that already reminds of the panic selling over the financial crisis in 2009. We accept that the NTA appreciation of the last couple of years will reverse, but we focus also on the cash generation potential from incoming rents and transformation of land into GLA. Current investment volumes in certain CEE markets are not sustainable in light of the economic outlook for Europe and we could also see some pressure on occupancy and rents into FY23-24. The market participants are now facing a kind of prisoner dilemma. Competitor VGP announced a significant slow-down in new developments over 1H22. We believe that interest rates will most likely cool down investments and also consolidation in the market will support a more rational investment strategy. Over the longer term, we believe that structural trends will prevent the logistic space to enter a long period of low occupancy and rent level declines. Our DCF valuation points to a 13.8 target, based on a 6.25% WACC.

Catalysts