Logistics Company P3 Group S.a.r.l. Assigned BBB Rating; Outlook

976_3s_p_ratings_report_2

ResearchUpdate:

LogisticsCompany P3GroupS.a.r.l. Assigned'BBB'

Rating;Outlook Stable

January27, 2022

RatingAction Overview

-Luxembourg-registered P3GroupS.a.r.l. (P3)isthe third-largestratedlogistics property companyin ContinentalEurope,with agrossasset valueofabout €6.7billionas ofJune30,

2021.The companyownsand manageshigh-qualitylogistics assetsacross11 European

countries. -P3 intendstodiversify itscapitalstructure withcapitalmarket instrumentsandit hasissued €1.0billion ofseniorunsecured bonds.Weunderstand thattheproceeds wouldbelargely used torepay existingunsecuredbank termloans. -We assignedour'BBB' long-termissuercredit ratingtoP3 andour'BBB' issueratingto its seniorunsecured notes. -The stableoutlookreflects ourviewof thecompany'sgood assetqualityand highgeographic diversity,which willlikelyenable ittocontinue generatingstableand predictableincome.Our base-casescenario alsofactorsin P3'scontinuingexpansion ofitsportfolio whilemaintaining financialdiscipline inlinewith ourcurrentratings.

RatingAction Rationale

P3is thethird-largestrated logisticspropertycompany inContinentalEurope, withagross assetvalue ofabout€6.7 billionasof June30,2021, andplansto growtheportfolio considerablyby 2023.Thecompany's strategyisto acquiremodernlogistics assetsinits key markets,with afocuson WesternEuropeancities, andtoexpand itsportfolioto about€9.0billion overthe nexttwoyears. Thecompany'sportfolio mainlycomprisesrelatively largeassets--about

93%of thetotalportfolio islargerthan 10,000squaremeters (sq.m.),with anaverageage of

about11 years.Webelieve thatP3'sasset typeandquality comparewellwith thelogisticsassets ofother ratedplayersin Europe,suchas BlackstonePropertyPartners EuropeHoldingsS.a.r.l. (BPPEH;BBB/Stable/--) andCTPN.V. (BBB-/Stable/--),whichhave anaverageasset sizeof between21,000 sq.m.and 26,000sq.m. andasimilar averageageof about10years. OfP3's assets,75% areinurban locationsinlogistics corridors(aone-hour drivefromthe population catchmentof twomillionpeople), ensuringeasyaccessibility andtosome extentsupporting

ResearchUpdate:

LogisticsCompany P3GroupS.a.r.l. Assigned'BBB'

Rating;Outlook Stable

January27, 2022

PRIMARYCREDIT ANALYST

ManishKejriwal

Dublin

+353 (0)15680609
manish.kejriwal @spglobal.com

SECONDARYCONTACT

NicoleReinhardt

Frankfurt

+49 6933999303
nicole.reinhardt @spglobal.comwww.spglobal.com/ratingsdirectJanuary 27, 2022 1 distributiondeliveries. Weunderstandthat thecompanyplans tocertify75% oftheexisting portfolioby theendof 2022,andaims tohavea largeamountof itsportfoliorated attheBREEAM levelof "VeryGood".This isinline withotherrated peersinthe logisticspropertysegment. P3'span-European presenceandstrong operatingperformanceshould supportstableincome andcash flowgeneration.P3'sportfolio iswell-diversifiedgeographically becauseitsassets are locatedacross 11Europeancountries (Germany33%;Czech Republic21%;Poland 10%;Spain

11%;Italy 8%;Slovakia6%; France5%;the Netherlands3%;and Romania3%).We viewpositively

themarkets inwhichP3 ispresent,especially Germany,CzechRepublic, France,theNetherlands, andSpain, whichinour viewarehistorically moreresilientto economicdifficultiesand have recentlybenefited frompositivee-commerce tailwindsasdemand outpacesnewsupply. The assetsexhibit highphysicalaverage occupancy(95%as ofJune30, 2021)andhigh rent-collection rates(above 99%),whichwe believeshouldsupport stablecashflow generationoverthe nexttwo years.This compareswellwith otherratedplayers inEurope,such asBPPEHand CTP,whichown good-qualitylogistics realestateportfolios inurbanlocations inthemain Europeancorridors.P3 hasa healthytenantbase withahigh retentionrateof about80%,and agoodaverage lease duration(about sevenyearsof weighted-averageleaseterms), whichhighlightthe company's strongcompetitive advantageandrelationship withtenants.Its largesttenantis MetroInc. (BBB/Stable/--),representing about14%of totalgrossrental incomeasof June30,2021. Wesee limiteddevelopment exposure(representingabout 5%ofthe totalgrossasset valueasof June

2021)and mostofthe developmentsarepre-let. P3aimsto maintainatleast 70%pre-letlevels

forits futuredevelopments.That said,ourassessment ofP3also considersitssmaller assetbase (portfolioof €6.7billion)than thatofhigher ratedpeers',such asPrologisEuropean LogisticsFund (A-/Stable/A-2),which ownsareal estateportfolioworth €15.3billionas ofJune30, 2021.In addition,there issomeconcentration amongthetop 20tenants,which accountfor42% ofrental incomeas ofJune30, 2021,butwe understandthatmost arelarge,creditworthy tenants. Wetreat P3'sshareholderloans asequityin ourleveragecalculations. Thecompany's capital structureincludes over€900million ofshareholderloans asofOct. 31,2021,from EuroVitus PrivateLtd., whichowns100% ofP3shares. Weexcludethese instrumentsinour leverage calculationsbecause theyexhibitequitylike characteristics,aslaid outinour criteria(see"The TreatmentOf Non-CommonEquityFinancing InNonfinancialCorporate Entities,"publishedApril

30,2018, onRatingsDirect).The non-commonequity(NCE) effectivefinancingmaturity dateis

beyondthat oftheother existingdebtand arestructurallyand contractuallysubordinatedto other debtin thecapitalstructure. WhiletheNCE documentationincludesan earlyredemptionoption (prepayment)that couldbetheoretically exercisedatany timebythe borrower,theprepayment flexibilityis substantiallymitigatedby thecompany'sinter creditoragreement,which restrictsany earlyrepayment oftheshareholder loansubjectto priorwrittenconsent ofeachsenior debt creditorrepresentative. Furthermore,weunderstand thatthecompany's intentionisto maintain thisinstrument outstandinginthe capitalstructure.Therefore, webelievethat therearestrong contractualprovisions thatensurethis instrumentwillact asloss-absorbingcapital inthefuture andas suchexcludethe NCEfromour leveragecalculations.The paymentofinterest on shareholderloans ispermittedin certaincircumstances;however, weunderstandthat inthe normalcourse ofbusiness,the companyexpectsinterest onshareholderloans toaccrueand be capitalized.Should anyofthe termsandconditions mitigatingearlyprepayment alterinthe future,we maychangethe treatmentofthe NCE,whichin turnmaysignificantly affectourkey creditmetrics. www.spglobal.com/ratingsdirectJanuary 27, 2022 2 Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable Weexpect P3'sleverageratios toremainat currentlevels,in linewithits financialpolicyof a loan-to-value(LTV) ratioofup to47.5%.Ourassessment ofP3'sfinancial riskprofileis supportedby thesizableand stablerecurringcash flowbase,thanks totherelatively long contractsand stableoccupancy.The companyhasa prudentfinancialpolicy withanet LTVofup to47.5% (whichtranslatesto S&PGlobalRatings-adjusted debttodebt plusequityof about

50%).We understandthatthe companyaimsto expanditsportfolio base,mainlythrough

developmentsand someacquisitions,while maintainingitscurrent leverage.Weassume €500 million-€600million ofnetasset growtheachyear andthereforeexpect P3'sdebtto debtplus equityto increasetoward51%-52% inthenext 12-24months(49.7% asofDec. 31,2020).We expectdebt toEBITDAto remainslightlyhigh atabout14x-15x (16.9xasof Dec.31,2020), where fullEBITDA contributionmaynot beachievedin thesameyear, andpartof growthexpensesare notcapitalized likesomeof P3'speersbut areexpensedand inlinewith thecompany's accountingstandards. Thecompanyassumes amixof debtandequity tofundits futureportfolio growth.P3 demonstratesasolid capacitytocover itsinterestburden, withEBITDAinterest coveragethat weexpectto remainwellabove 5xinthe nexttwoyears, andalow averagecostof debtincluding therecentbond issuance.Thecompany intendstorefinance itscurrentunsecured bankloans mainlytowardan unsecuredcapitalmarket debtstructure.Including therecentbond issuance,the companyhasvery limitedrefinancingneeds overthenext twoyears. P3'sstrong shareholder,prudentfinancial policy,andwell-positioned creditmetricsunder its currentassessment supporttherating. Ourrating onP3incorporates aone-notchupward adjustmentbased onourcomparable ratingsanalysis.We considertheultimate shareholder, Singaporesovereign fundGIC(Realty) PrivateLtd.,as averystrong strategicowner.We understandthat GIChasa long-terminvestmenthorizon forP3and supportsP3'scapital structureby providingguaranteesto theexistingunsecured bankloans.This allowsP3to benefit fromunsecured bankfundingat extremelylowinterest costs,versusthe traditionalsecuredbank financingthat mostpeershave aspartof theircapitalstructure. Weunderstandthat no guaranteeswill begivenfor futureissuancesor refinanceddebt;however, weexpectthat GICwill continueto supportP3with additionalequitycontributions inthefuture, whichmaybe usedfor acquisitionsand newprojectcapital expenditure(capex)requirements. Thisshouldhelp the companyto growitsportfolio whilemaintainingfinancial disciplineinline withourcurrent ratings. Inaddition, thecompany'soverall creditmetricsare betterpositionedthan thoseofother real estatecompanies withthesame financialriskprofile assessment.

Outlook

Thestable outlookreflectsour viewofP3's strongassetquality andhighgeographic diversity, whichwill likelyenableit tocontinuegenerating stableandpredictable income.Ourbase-case scenarioalso factorsinP3's continuingexpansionof itsportfolioand increasingexposureto high-qualitylogistic assets,whilemaintaining itscreditmetrics. Underourbase-case scenario, weanticipate thatP3should maintainadjustedEBITDA interestcoverageratio above5xand a debt-to-debt-plus-equityratio ofabout51%-52% inthenext 12-18months.

Downsidescenario

Wecould lowertherating iffinancialratios weakensuchthat:

-Debt todebtplus equitymovestoward 55%orabove onasustained basis;www.spglobal.com/ratingsdirectJanuary 27, 2022 3

Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable -EBITDA interestcoveragemoves toward2.4xor below;and -A changeinits currentownershipstructure thatweview aslessfavorable orachange in existingor futureshareholderloans leadsusto reviewtheequity treatment. Wewould alsotakea negativeviewif P3acquiredproperties withweakercharacteristics--for example,properties inlessfundamentally solidlocations--orif thecompanywere toincreaseits exposureto underperformingassets.

Upsidescenario

Wesee aratingupside aslimited,unless P3significantlyexpands itsportfolioscale andscope beyondour basecase,while maintainingpositivelike-for-like rentalgrowthand stableoccupancy levels.In addition,thecompany wouldneed: -A maintainedEBITDAinterest coverageasper ourbasecase; -Debt todebtplus equitybelow40% overasustained period;and -Debt-to-annualized EBITDAratiowell below13.0xon asustainablebasis.

CompanyDescription

P3is alimitedliability companyincorporatedin Luxembourganda realestateowner ofindustrial properties.The companywasestablished in2001and ownsagross portfoliovalueof about€6.7 billion(6.6 millionsq.m. ofgrossleasable area)asof June30,2021. Thetotalportfolio includes about300 logisticspropertiesspread across11European countries. P3is 100%ownedby EuroVitusPrivate Ltd.,whichis ultimatelycontrolledby thesovereign wealthfund GIC.

OurBase-Case Scenario

Assumptions

-Real GDPinthe eurozonetogrow by4.5%-5.0%in 2022and2023. Weexpectunemployment in theeurozone toremainat about7.0%-7.5%in 2022,withmoderate inflationofabout 3%-3.5% inthe next12-24months. -Annual like-for-likerentalgrowth ofabout1.5%-2.0% overthenext twoyears,mostly benefitingfrom consumerpriceindex inflation,andlimited growthfromrent reversion,given thecompany's lowlevelof leasesthatwill expireinthe nexttwoyears. -Occupancy levelstoremain atabout95% inthenext 12-24months,mainly supportedbyhigh occupancyin Germany,CzechRepublic, andtheNetherlands. -Positive portfoliorevaluationof 7%-8%in2021, mainlysupportedby revaluationgainsof about €475million-€500 millionalreadyachieved asofJune 30,2021.We expectanannual 2%-3% revaluationfrom 2022.

-Acquisitions ofabout€400 millionin2021 andabout€500 million-€550millionannually inthe

comingyears, aspermanagement's intentiontoincrease thecompany'sscale andpresencein www.spglobal.com/ratingsdirectJanuary 27, 2022 4

Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable

Europeanmarkets.

-About €350million-€400million developmentcapexin 2021andabout €300million-€350 millionper yearin2022 andfutureyears. -Disposals ofabout€250 millionin2021. Wealsoforecast disposalsof€150 million-€200 millionin 2022andfuture yearsasper management'sintentionto disposecertainnoncore assets. -Steady EBITDAmarginsof closeto77%-78% inthenext fewyears.

Keymetrics*

-A debt-to-debt-plus-equityratioof about51%-52%over thenext24 months. -Adjusted debttoEBITDA ofabout14x-15x overthenext 24months;however, asaresult ofthe portfolioexpansion plan,thisdoes notreflectthe fullannualizedEBITDA contributionfromthe investmentsmade duringtheyear. Hence,weexpect thistodecrease overtime;and -Adjusted EBITDAinterestcoverage ofabove5.0x inthenext twoyears. *Includingits shareholderloansas equityforour creditmetricscalculations.

Liquidity

Weanticipate P3'sliquiditysources willlikelycover liquidityusesby morethan1.2x inthe12 monthsstarted Oct.1,2021. Therefore,weassess liquidityasadequate. Weestimate principalliquiditysources forthe12 monthsfromOct. 1,2021,as follows: -€278.6 millioninavailable unrestrictedcash; -Undrawn revolvingcreditfacility (RCF)of€750 million,maturingin over12months; -Our estimateoffunds fromoperationsof about€200million-€220 million;and -Unsecured bondsof€1.0 billion. Weestimate thefollowingprincipal liquidityusesfor thesameperiod asfollows: -About €1.0billionof unsecuredbankloan repayment; -About €400million-€450million ofcommitteddevelopment capex;and -Committed acquisitionsof€200 million-€210million,mainly toacquireassets forfuture growth.

Covenants

Thecompany hasnofinancial covenantsonits unsecuredbankterm loans.Weunderstand that thenew RCFhasongoing maintenancefinancialcovenants. Wealsounderstand thatthebonds havefinancial covenantsthatrestrict theabilityto raiseadditionaldebt relatedtoa maximumnet loan-to-valueratio of60%,a minimuminterestcoverage ratioof1.5x, andunencumberedassets tonet unsecureddebtgreater than150%,and prioritydebtwould begreaterthan 40%ofthe

propertyvalue. Weforecastthat thecompanywill keepsufficientheadroom (greaterthan15%) www.spglobal.com/ratingsdirectJanuary 27, 2022 5

Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable underall itscovenantsof thecapitalstructure, includingtherecently issuedbonds.

Environmental,Social, AndGovernance

ESGcredit indicators:E-2S-2 G-2

ESGfactors havenomaterial influenceonour creditratinganalysis ofP3.We understandthatthe companyplans tocertify75% ofthetotal portfoliobythe endof2022 withatarget toachievelarge portfolioat BREEAMverygood plus.Thisis inlinewith otherratedpeers inthelogistics property segment.We believecustomer(tenant) demandforsustainable buildingshasbeen increasing acrossEurope inthepast coupleofyears.

IssueRatings -SubordinationRisk Analysis

Capitalstructure

Thegroup's capitalstructurecomprises about100%of unsecureddebt.The companyhasexisting bankterm loans,butthose areunsecured,because GIC(theultimate shareholder)provides guaranteesto theexistingunsecured banktermloans. Thecompanyexpects topartiallyreplace theexisting banktermloans withtherecent bondissuanceand newRCFand theremainderof the existingbank termloansto berefinancedin thecomingyears.

Analyticalconclusions

Weexpect P3'sgroupexposure tosecureddebt toremainbelow 40%oftotal fairmarketvalue of theassets inthenext 12-24months.Although unsecureddebtissuance isstructurally subordinatedto otherdebtobligations, thesubordinationdoes notaffectthe ratingonthe unsecureddebt. Therefore,ourissue ratingisthe samelevelas theissuercredit rating.

RatingsScore Snapshot

Issuercredit rating:BBB/Stable/--

Businessrisk: Satisfactory

-Country risk:Low -Industry risk:Low -Competitive position:Satisfactory

Financialrisk: Significant

-Cash flow/Leverage:Significant

Anchor:bbb-

Modifiers:

-Diversification/Portfolio effect:Neutral(no impact)www.spglobal.com/ratingsdirectJanuary 27, 2022 6

Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable -Capital structure:Neutral(no impact) -Liquidity: Adequate(noimpact) -Financial policy:Neutral(no impact) -Management andgovernance:Fair (noimpact) -Comparable ratinganalysis:Positive (+onenotch)

RelatedCriteria

-General Criteria:Environmental,Social, AndGovernancePrinciples InCreditRatings, Oct.10, 2021
-General Criteria:GroupRating Methodology,July1, 2019 -Criteria |Corporates| General:CorporateMethodology: RatiosAndAdjustments, April1,2019 -Criteria |Corporates| Industrials:KeyCredit FactorsForThe RealEstateIndustry, Feb.26,2018 -Criteria |Corporates| General:MethodologyAnd Assumptions:LiquidityDescriptors ForGlobal

CorporateIssuers, Dec.16,2014

-Criteria |Corporates| General:TheTreatment OfNon-CommonEquity FinancingIn

NonfinancialCorporate Entities,April29, 2014

-General Criteria:Methodology:Industry Risk,Nov.19, 2013 -Criteria |Corporates| General:CorporateMethodology, Nov.19,2013 -General Criteria:CountryRisk AssessmentMethodologyAnd Assumptions,Nov.19, 2013 -General Criteria:Methodology:Management AndGovernanceCredit FactorsForCorporate

Entities,Nov. 13,2012

-General Criteria:PrinciplesOf CreditRatings,Feb. 16,2011

RelatedResearch

-Logistics CompanyP3Group S.a.r.l.AssignedPreliminary 'BBB'Rating;Outlook Stable,Jan.17, 2022

RatingsList

NewRating

P3Group S.a.r.l.

IssuerCredit RatingBBB/Stable/--

SeniorUnsecured BBB

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criteria.Please seeRatingsCriteria atwww.standardandpoors.comfor furtherinformation.A descriptionofeach ofwww.spglobal.com/ratingsdirectJanuary 27, 2022 7

Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable S&PGlobal Ratings'ratingcategories iscontainedin "S&PGlobalRatings Definitions"at https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352Complete ratings

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Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable www.spglobal.com/ratingsdirectJanuary 27, 2022 9 Research Update: Logistics Company P3 Group S.a.r.l. Assigned 'BBB' Rating; Outlook Stable

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