Established in the Czech Republic in 1998, CTP has expanded across Europe and now operates over 180 sites for around 1,000 international clients in 10 countries. The founder, Remon Vos, still runs the business and is the majority shareholder.
Key to CTP’s success has been its ‘parkmaker’ concept which combines site development and operations to build long-term relationships with tenants. These come from a range of industries with around three quarters of its 12.4 million m² leasable area split between manufacturing, third-party logistics and automative clients.
CTP is SKAGEN m²’s fourth largest holding at 4.8% of the portfolio. We have been invested in the company since it floated on Euronext Amsterdam in early 2021 with a strategy to capitalise on the developing industrial and logistics sectors in CEE. In the period since IPO, it has grown assets by over 60% and expanded into Germany, Austria and the Netherlands.
Around three quarters of CTP’s assets are in the Czech Republic, Romania, Hungary and Slovakia, with average market share of 28% across the four countries. Its largest exposure is in the Czech Republic, where it is the biggest player in one of Europe’s strongest logistics markets.
The two-day meeting offered an interesting opportunity to meet management and hear about the company’s progress as well as developments in CEE, which is benefitting from growing consumption and e-commerce as the region catches up with more advanced economies. We visited a number of strategically well-located warehouses in Romania, the second largest CEE country where CTP has 24% of its portfolio, and Serbia, where the company is the market leader with 42% market share.
Nearshoring opportunities
As well as domestic consumer-led growth, a big driver in CEE is nearshoring as companies look for a gateway into Europe. Boosted by competitive labour costs (the region is around two-thirds cheaper than Western Europe) and improved infrastructure (motorway length has grown by 276% since 2000), nearly 10% of CTP’s portfolio is currently leased to companies from Asia manufacturing on-site for European clients. It opened an office in Hong Kong last year to serve Asian clients, notably in the semi-conductor and defence industries.
Environmental regulation is another factor behind companies looking to shorten their supply chains and avoid levies on carbon-intensive imports by European lawmakers. CTP has strong ESG credentials as the first real estate developer in CEE to achieve 100% BREEM certification and the company has issued several billion Euros of green bonds to help finance its expansion. CTP is also committed to expanding its forest preserves across its markets on a 1:1 ratio with the company’s built portfolio as part of its net carbon neutrality strategy.
Wheel of growth
CTP’s ‘wheel of growth’ business model aims to ensure that the company expands alongside its clients (two-thirds of new leases are signed with existing tenants). It has the largest landbank in Europe – over twice the size of its existing portfolio at 25.5 million m² – of which nearly two-thirds is located within existing parks. This land has been acquired at attractive prices and has c. €4bn revaluation potential once developed.
CTP has historically enjoyed a yield on cost above 10% which is very value accretive and higher than its competitors. This should remain high as much of its landbank was acquired or locked in cheaply, particularly in CEE, but also because CTP operates very lean and cost-effective construction processes.
Its parkmaker model translates into a 95% client retention rate, which means that the company also enjoys strong occupancy levels (currently 93% but targeted to hit 95% next year). At the Capital Markets Day CTP also reiterated its target of generating €1 billion rental income by 2027, equivalent to 11% growth.
To achieve this, the company will unlock its existing landbank and may also look at acquisitions, potentially in Western Europe. CTP has also flagged that it is looking to expand opportunistically into data centres, possibly in Germany and Poland.
The holding is one of SKAGEN m²’s fund’s top ten contributors year-to-date with the share price gaining 8.1% and we still see upside of over 20% to our target price. After seeing first-hand the company’s growth drivers and well-run operations, we expect CTP’s wheel of growth to keep turning and generating value for shareholders as well as clients.