SEGRO is planning to raise £650m through a share issue and retail offer to fund its expansion strategy in the UK and continental Europe.
Shares will be issued at 10p per share as part of the placing. The landlord will open the door to retail investors with a separate retail offer of new ordinary shares of 10p each in the capital of the company.
The proceeds will be used for additional investment opportunities across the UK and continental Europe through further development projects that are mostly prelet, as well as land acquisitions and investment asset purchases.
The company said it expects to be able to invest more than £1bn of capital in 2020 and 2021, through development capital expenditure and land acquisitions for future development.
It also pointed to scope for opportunistic acquisitions of standing assets, to speed up its growth strategy in key markets across the UK and continental Europe.
The REIT is building, or has identified, development projects requiring capital expenditure of £595m to complete. Once fully let, these projects are expected to yield a 6.8% return on total development cost, including land.
Solid performance
SEGRO also reaffirmed its target for a dividend payout ratio of 85-95% of adjusted profits before tax, as part of a trading update.
As at 31 May, SEGRO said 82% of rent billed for the second quarter of 2020, including rent typically billed on a monthly basis in continental Europe, had been collected or is expected to be paid shortly. It received 83% of rents due in the UK, and 79% from its occupiers in continental Europe.
The landlord added that new headline rents on review and renewal so far in 2020 are around 13% higher than previous passing rents, and that no customers have withdrawn from any contracted prelet discussions. In the UK, new rents achieved have been 15% above previous passing rents.
Prelets equivalent to £4m of headline rent have been signed since mid-March, upping its near-term pipeline of conditionally agreed prelets to a potential £33m of headline rent as at 31 May. SEGRO said this was “approximately twice as large as a year ago”.
Vacancy has inched up to 5.6%, from 4% in December, on the back of recently completed speculative developments. Customer retention stands at 88%.
What the chief executive said
David Sleath, chief executive, said: “The Covid-19 pandemic has accelerated the adoption of technology and e-commerce across society.
“Alongside a renewed focus by many occupiers on the critical importance of best-in-class logistics supply chains, this is likely to help drive strong occupier and investor demand for modern, high-quality warehouses.”
He added: “SEGRO’s business continues to progress well, despite the uncertainty caused by the pandemic, with new lettings and prelet development agreements at levels above our expectations at the beginning of the year.
“We are working constructively to support a small proportion of customers facing short-term cash flow challenges as a result of government lockdown measures.
“Our strong, primarily prelet, development pipeline across the UK and continental Europe reflects the demand from customers looking to grow. Our list of additional near-term prelets, which is approximately double the size of a year ago, and our well-located land bank mean we are well placed to make further progress in the months ahead.”
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