Tritax Big Box REIT has reported a 31.1% rise in the value of its portfolio, but warns that Brexit presents a significant economic risk that could dent the warehousing market’s “positive attributes”.
The value of its portfolio leaped to £3.42bn during the year to 31 December.
This stretched across 54 assets as well as 114 acres of land, including forward-funded development commitments.
EPRA NAV per share also grew in the period, by 7.4% to 152.83p.
The portfolio’s contracted annual rent roll increased by 27.9% to £161.12m.
Sir Richard Jewson, chairman of Tritax Big Box REIT, said: “While the continued delays and lack of clarity over Brexit presents a substantial uncertainty for the UK economy, our market has remained robust.
“Since the referendum in June 2016, occupiers have continued to search for space, rents have risen and yields have hardened. Brexit is also encouraging manufacturers and retailers to hold additional stock domestically, increasing occupational requirements for UK warehouse space while supply constraints continue.
“This reinforces the favourable dynamics for landlords. Nonetheless, Brexit does present significant risk for the UK economy which could impinge upon the current positive attributes of our market.
“We see good opportunities to continue to add assets to the portfolio at prices that create value at the point of purchase.”
The REIT also diversified its sources of borrowing during the year, with debut unsecured loan notes totalling £400m.
Its loan-to-value ratio at 31 December 2018 was 27.3%.
During the year Tritax acquired eight big-box sheds with an aggregate purchase price of £641.45m.
Acquiring db symmetry
After the year end, Tritax bought an 87% interest in db symmetry, and raised £250m of equity to fund the acquisition.
James Dunlop, the partner responsible for property sourcing at Tritax, tells EG: “We are not changing the DNA of the company but have just extended the runway for how we capture forward-funded pre-lets, which are at the core of our model.
“Our yield on costs with dbs will be 7-8% as opposed to 5%. Our average purchase price last year was 5.1%, set against valuation of [around] 4.5%, so the dbs piece gives us access to more interesting dialogue with our occupiers, gets them earlier in the process and has pricing attractions.”
Following the acquisition, Tritax will now also explore the opportunity to recycle more assets. It is now undergoing a “rigorous appraisal process” for potential disposals.
Dunlop said: “By getting more forward-funded pre-lets under our control through the dbs model, we may well dispose of a few assets over the next 12 months, where we are replacing assets that have performed very well for us but where performance going forward might not be fit for purpose for us.
“[These would be] replaced with brand new, best-in-class assets coming through on the dbs model. So, the dbs acquisition can unlock the recycling of assets as well as NAV growth.”
Dunlop added that the market can expect to see a series of new pre-let agreements and planning consent for new schemes within the next six to 18 months.
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