SEGRO, the industrial and logistics developer, has updated on third quarter trading reporting positive letting and development progress.
The company signed contracts worth £15.3m of new headline rent during the third quarter, taking the total for the nine months to 30 September 2019 to £48.6m. Rental growth from existing space, net of take-backs, was £2.1m – taking the nine-month figure to £10.6m.
SEGRO said rent reviews and renewals so far this year have been conducted at around 20% premium to previous rent levels.
So far in 2019, SEGRO has completed 765,900 sq m of new developments, capable of generating £33.7m of rent (compared to 502,200 sq m and £29.7m in the first nine months of 2018) of which 88% has been let. Further developments capable of generating £15.1m of rent are expected to be completed in the fourth quarter, £12.7m of which has already been secured.
Pre-lets in the third quarter totalled £7.7m including deals to Ocado in East London, Leroy Merlin on the outskirts of Rome and consumer appliance retailer TERG in Wrocław, Poland.
As at 30 September 2019, 644,000 sq m of space was under construction, equating to potential future headline rent of £46m (30 June 2019: 459,200 sq m and £36m), of which 63% has been let. Once complete and fully let, SEGRO expects the pipeline to generate a yield on total development cost of around 7%.
During the third quarter SEGRO acquired £78m of urban warehouse assets, including two deals in London and two in Lyon, France. It also acquired £77m of new land during the period in London and Paris, including the acquisition of eight acres of land in Tottenham, North London.
Disposals in the quarter were modest at £16m bringing the total in the year to date to £122m.
Net debt at 30 September 2019 was £2.7bn equating to a loan to value of 27% (30 June 2019: 24%).
Around 36% of the interim dividend was paid as scrip, resulting in the issue of 3.3 million new shares during the quarter. Earnings per share for 2019 are expected to be based on an average of 1,081 million shares.
Chief executive David Sleath said: “We have continued to secure high levels of new rental income both from our existing portfolio and from our active development programme, in which we have over 1 million sq m of new space under construction or in advanced discussions. During the period we also added further land and assets in our core urban markets, including in London and Paris to support further growth.
“SEGRO continues to benefit from the structural trends of urbanisation and technological revolution, and despite the uncertain macro-economic backdrop at this time, we head into the final part of the year with confidence. Looking ahead, the combination of new rental income from the development programme, compounded with the benefits of active asset management of our existing portfolio, should enable us to drive sustainable growth in both earnings and dividends.”
SGRO : SEGRO updates on third quarter trading