Real estate investment trust SEGRO PLC (LON:SGRO) has made a sprightly start to 2018, securing an unprecedented amount of new headline rent in the quarter.
The company contracted £27.3mln of new headline rent, up from £16.3mln the year before, and a record level for a single quarter.
Since the end of 2017, the vacancy rate had crept up to 5.0% from 4.0%, which the company said reflected the impact of development completions, which were up 0.7% year-on-year, acquisitions & disposals, plus a modest net take-back of existing space.
Net debt, including SEGRO's share of debt in joint ventures, was unchanged at the end of March from the year-end figure of £2.4bn.
The look-through loan to value (LTV) ratio at 31 March 2018 (based on asset values at 31 December 2017, adjusted for development expenditure, acquisitions and disposals) was 30%, unchanged from 31 December 2017.
“Occupational demand remains encouraging across all our markets, particularly driven by the growth of online retailing. Our profitable and largely pre-leased development pipeline is expected to generate £55mln of new rent when fully built and leased, and there are further projects in advanced discussions, which will add to this in the coming months,” said David Sleath, the chief executive of SEGRO.
"The combination of attractive yields and rental growth, resulting from limited supply and the enduring positive structural drivers of occupier demand, continues to appeal to investors. Consequently, the investment market remains active with evidence of some further yield compression in recent urban and big box warehouse transactions," he added.
Our development pipeline contains over a million square metres of new buildings and we will spend in excess of £350 million on development in 2018. Read the full press release on our website at https://t.co/kZpHhjkxkg #SEGROresults
— SEGRO plc (@SEGROplc) April 18, 2018
Numis Securities reiterated its "add" recommendation following the trading update.
"In our view, SGRO’s scale and speed of development is key to its return profile, and 1Q18 suggests that momentum continues. Despite the shares now trading on a +10% premium to spot NAV [net asset value] we continue to view SGRO as one of the most attractive names in our universe at this time," the broker said.
Shares in SEGRO were up 4p at 630p.
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