Industrial REIT SEGRO plans to sell more than £1.6bn of assets “over the coming years” following a wide-ranging business review carried out by new chief executive David Sleath.
The firm has identified £640m of large non-strategic assets, including pure suburban offices and bespoke manufacturing campuses and £1bn of other industrial and land holdings which will be sold over the coming years.
It said that the uncertain market conditions for these assets as a result of the ongoing eurozone crisis – in particular, the potential impact on large office parks and specialist industrial properties – could wipe as much as £150m off the assets at the year-end valuation.
The recycling of capital is one step in a “clear plan which is to be taken to reshape the portfolio and position the group to deliver stronger returns to shareholders”.
The former finance director said the firm will also:
· reduce leverage, targeting a loan-to-value ratio of around 40% over the medium term, although this may increase at “various stages of the cycle and during the portfolio re-shaping period”;
· reinvest in growth areas including light industrial and higher-value uses in and around a few specified major conurbations in the UK and continental Europe, and logistics focused in and around major ports, airports and transportation corridors in the UK, France, Germany, Benelux, Poland and the Czech Republic.
The REIT also plans to expand the use of third-party capital “to support our growth and enhance the risk-adjusted returns for our shareholders”.
Sleath said: “We are outlining a clear strategy today for the future of SEGRO which builds on our great strengths as an industrial specialist. Over the coming years we will take a number of steps to reshape the portfolio and address underperforming areas of the business. Current market conditions are likely to influence the timing of our execution of this plan and we will be pragmatic as to when we sell assets and reinvest in attractive opportunities.
“However, the board and senior management team are committed to making the changes necessary to reshape SEGRO to ensure that we are positioned for future income and NAV growth and to deliver better returns to our shareholders.”
In an interim management statement also released today, the firm said that it continued to deliver good operational results in the third quarter of the year, despite the unsettled macro economic environment. The company said it witnessed a good level of enquiries across its portfolio, with demand both for new space and prelet developments holding up well, and further reduced its vacancy rate to 10.2%.
Sleath said: “We are pleased to have delivered a strong performance in the third quarter, keeping our retention rate high, generating good levels of letting and prelet development activity and further reducing our vacancy rate.
In the UK, take-up in the period generated £6.3m of annualised rental income, up 14.5% on the prior-year period.
bridget.oconnell@estatesgazette.com
