Tritax Big Box REIT plc (LON: BBOX) today provided the following trading update ahead of the publication of the Company’s results for the year ended 31 December 2018, which are expected to be published on or around 6 March 2019.
HIGH QUALITY PORTFOLIO
· 54 Big Box assets and 114 acres of prime London distribution development land owned (the “Portfolio”) independently valued at £3.42 billion as at 31 December 2018 (30 June 2018: £2.90 billion) including all forward funded development commitments
o Like-for-like valuation uplift of 4.7% during the 12 month period to 31 December 2018 (2.6% during the six month period to 31 December 2018)
o Weighted average purchase yield since inception of 5.5%1, against a valuation yield of 4.4% as at 31 December 2018
o 86% of Portfolio assets acquired off-market since inception
o Weighted average unexpired lease term across the Portfolio as at 31 December 2018 of 14.4 years1,2
· Portfolio 100% let or pre-let to 39 institutional quality tenants with contracted annual rental income of £161.1 million as at 31 December 20181
o All leases provide for upward only rent reviews, of which 45% are RPI/CPI-linked, 37% are open market, 11% are fixed and 7% are hybrid3
o As at 31 December 2018, the Company’s largest tenant exposure was to Amazon, representing 13.6% of the Company’s total contracted rental income (30 June 2018: 4.1%)
INVESTMENT ACTIVITY
· Eight new Big Box investments acquired in 2018 (including seven pre-let forward funded developments), with an aggregate purchase price commitment of £641.5 million4
o Weighted average purchase yield of the eight investments of 5.1%
o Valuation uplift of 7.5% across the eight investments as at 31 December 2018 compared to the aggregate purchase price commitment5
o Weighted average unexpired lease term across the eight investments as at 31 December 2018 of 18.9 years2
· Planning permission secured for Phase 1 of the Company’s prime London distribution development site at Littlebrook, Dartford, comprising the proposed development of a 450,000 sq. ft. logistics facility
o The Company is targeting a yield on cost on Phase 1 of in excess of 6.5%
o The 114 acre Littlebrook site represents one of London’s largest big box logistics parks and is in a core South East “Last Mile” location on the edge of London and inside the M25 orbital motorway
· Seven pre-let forward funded developments, totalling 6.6 million sq. ft., under construction as at 31 December 2018
ASSET MANAGEMENT ACTIVITY
· Completion of a new 15 year lease at the Company’s distribution centre at Barlborough Links, Chesterfield, following the successful negotiation of a lease surrender with the previous tenant, reflecting an increase in annual rent of 25.4% from the previous passing level
· Completion of a 10 year lease extension with Kellogg’s at the Company’s distribution centre at Trafford Park, Manchester, reflecting an increase in annual rent of 20.0% from the previous passing level
· 2.0% average annual like-for-like growth in passing rent following the settlement of 10 rent reviews in 2018, representing 19.2% of the Company’s total contracted annual rental income at 31 December 2018
FINANCING ACTIVITY
· US private placement of £400 million senior unsecured fixed rate loan notes agreed in December 2018, with a weighted average coupon of 2.91% and a weighted average maturity of 9.8 years. The funds will be drawn on 28 February 2019
· Maturity date of £350 million unsecured revolving credit facility (with an uncommitted £200 million accordion option) extended by one year to December 2023
· £1.46 billion6 of committed debt financing in place, of which £834 million was drawn as at 31 December 2018 (27% LTV) and £386 million is allocated against existing forward funded commitments
· Weighted average term to maturity of debt facilities of 8.7 years as at 31 December 20186 (8.9 years as at 31 December 2017)
· Weighted average running cost of debt of 2.63%7, primarily comprising fixed rate debt (2.38% as at 31 December 2017)
· Successful significantly oversubscribed £155.6 million equity issue in April 2018
PROGRESSIVE DIVIDEND POLICY
· The Company is targeting an aggregate dividend of 6.7 pence per share for the year ended 31 December 2018, payable quarterly, of which 5.025 pence per share has been paid for the nine months ended 30 September 20188
· The Company intends to maintain its progressive dividend policy during 2019 and thereafter
Colin Godfrey, Partner of Tritax, said:
“We have maintained a patient and disciplined approach to capital deployment throughout the year, investing £641.5 million in eight off-market and attractively priced assets, including seven forward funded pre-let developments which are due for completion over the course of the next 18 months, each delivering effective income during the construction phase. These new assets will help maintain the modernity of our portfolio and have enhanced our WAULT which now stands at 14.4 years. The addition of these assets has further diversified our customer tenant base and increased our weighting to high calibre companies in the e-retail, manufacturing and electricals sectors. Three of these important new assets are pre-let to Amazon, now our largest tenant by rental income.
Planning consent for a 450,000 sq. ft. logistics facility was secured at our 114 acre development site at Dartford and we successfully repositioned two Value Add assets into Foundation assets through the negotiation and delivery of new long-term leases.
Despite the ongoing uncertainty around Brexit, logistics lettings in 2018 reached near record high levels and market rents continued to grow even though speculative supply has increased. This occupier demand has been underpinned by the continued growth in e-commerce and occupiers seeking improved supply chain efficiency through the application of larger, flexible and automated logistics property solutions. Investment demand has also remained high, as evidenced by further yield compression during 2018. The outlook for our Company remains positive and we expect UK logistics to remain a robust property investment sector during 2019.”
Notes
1) Excludes development site at Littlebrook, Dartford
2) To the earlier of lease expiry or break option
3) Based on contracted annual rental income as at 31 December 2018
4) Based on target commitments of £141.5 million in relation to the Company’s forward funded development at Integra 61, near Durham and £120.3 million in relation to the Company’s forward funded development at Link 66, Darlington
5) Excludes property purchase costs
6) Excludes £250 million short-term facility entered into in October 2018
7) Based on gross debt, excluding commitment fees
8) The target dividend is a target only and not a forecast. There can be no assurance that the target will be met and it should not be taken as an indication of the Company’s actual or expected future results
