Tritax Big Box REIT (BBOX) has announced its annual results for the year ended 31 December 2016. During the period, BBOX’s EPRA net asset value per share increased by 3.46% or 4.71% on a like-for-like basis to 129p (2015: 124.68 pence), whilst its EPRA NAV total return was 9.6% (BBOX’s medium-term target is 9% per annum). The share price total return was 15.1%. According to BBOX, this is ahead which of the FTSE 250 Index, the FTSE All-Share REIT Index and the EPRA NAREIT UK index which delivered total returns of 6.7%, -7.0% and -8.5% respectively. Dividends declared in relation to the 2016 year totalled 6.20p per share, which BBOX says is in line with its target. BBOX’s dividends were fully covered by its adjusted earnings per share of 6.51p.
The period saw further diversification of BBOX’s sources of borrowing, with a new £72 million, long-term, fixed-rate facility with Canada Life. The Loan to Value (LTV) as at 31 December 2016 was 30.0%. The portfolio’s contracted annual rent roll has increased to £99.66 million (31 December 2015: £68.37million), which BBOX says includes all of its forward funded commitments. BBOX increased its scale significantly during the period raising £550 million of equity during 2016, through two substantially oversubscribed share issues. It says that, reflecting the benefits of increased scale, it has a reducing EPRA cost and total expense ratio of 15.8% and 1.06% respectively.
In terms of operational developments, BBOX acquired 10 Big Box assets during the year with an aggregate purchase price of £524.4 million, which it says further diversified the portfolio by geography and tenant. It says that the Average net initial yield of the portfolio at acquisition is 5.70%, against its year-end valuation of 4.93% and that its portfolio was fully let, or pre-let and income producing during the year.
As at the year-end, BBOX’s portfolio comprised 35 assets, covering more than 18.2 million square feet of logistics space. Four forward funded pre-let developments reached practical completion in the year, with a total valuation of £272.8 million at 31 December 2016. At the year-end, the weighted average unexpired lease term (“WAULT”) was 15.3 years, against BBOX’s target of at least 12 years.
Since the year end, BBOX has announced a dividend target of 6.4p per share for the 2017 year. It has also invested in a forward funded development that is pre-let to Hachette UK and has agreed a new 10 year fixed term loan facility with a fixed rate payable of 2.54%pa.
In terms of outlook, the company’s chairman, Richard Jewson, says that they consider there to be limited potential for capital growth through further yield compression and that, whilst more challenging, they are maintaining a 9% per annum total return target. He says that Capital growth is likely to come from steady state capitalisation rates being applied to growing income and that they believe that income will remain the most important component of total return over the next 12 months. He says that there are strong drivers to rental growth in the market, both due to the ongoing imbalance between occupational supply and demand and the increase in build costs in 2016, which they expect will feed through to rents. He expects that this rental growth will help to support the BBOX’s progressive dividend policy. He also says that they see further opportunities to acquire high-quality standing assets and to forward fund pre-let developments.
Tritax Big Box REIT performing in line with its targets : BBOX