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Prime property yield movement hits Tritax Big Box REIT

Tritax Big Box toasts £90m acquisition of Europe's largest wine production warehouse

Tritax Big Box REIT has posted a 19.0% drop in EPRA net tangible assets (NTA) in 2022 results.

The fall, to 180.37p per share, was the result of the impact of rising interest rates on prime property yields, but was less than anticipated.

The group’s portfolio value decreased 15.2% on a like-for-like basis in the year to £5.06bn, with the portfolio’s equivalent yield moving out to 5.3% (from 4.1% at the end of 2021).

The company saw a 9.2% like-for-like increase in ERV over the year. While adjusted earnings per share dropped 5.3% to 7.79p due to lower development management income. Excluding this, adjusted earnings increased 1.8% to 7.51p per share. The company raised its dividend 4.5% to 7.0p per share.

The portfolio has a low vacancy rate of 2.1% and a WAULT of 12.6 years (2021: 13.0 years).

The company’s loan to value (LTV) was 31.2% (2021: 23.5%), with an average debt maturity of 5.4 years. 99% of drawn debt is fixed or hedged at 31 December 2022, with an average cost of 2.6%.

Market conditions

The group said that the occupational market remains strong and supports rental growth. There were 38 million sq ft of UK lettings in 2022 (2021: 42 million sq ft) to a diverse range of occupiers, the third highest year on record and 33% above the 10-year average.

Supply remains constrained with ready to occupy vacant space at just 2.0% (2021: 1.6%).

The company added that it was seeing early signs of the investment market stabilising as investor confidence begins to return, following a hiatus of activity in the second half of 2022. Full year investment volumes totalled £6.7bn (2021: £11.2bn).

Prime market yield for high-quality logistics real estate investment with 15-year unexpired lease and open market rent reviews was 5.0% as at 31 December 2022, it said, a 150 basis point move from a year earlier (2021: 3.5%).

Chairman comments

Aubrey Adams, chairman of Tritax Big Box REIT, said: “We made excellent operational progress this year, successfully deploying capital into higher yielding development opportunities and delivering record levels of new lettings, validating both our strategy and our decision to accelerate development activity in 2022. The income generated from these lettings will increasingly flow into earnings during 2023 and we will see the full benefits in 2024.

“Despite this positive operational performance we have not been immune from the rapid fall in property valuations in the second half of the year. However, we entered this period with a strong balance sheet and high-quality assets, providing us with the headroom to weather these changes as we continued to implement our strategy. Encouragingly, the strength of the occupational market continues to support attractive rental growth and we are seeing early signs of the investment market stabilising as investor confidence begins to return.

“We have a high-quality portfolio delivering resilient and growing income that leaves us well positioned for the future, whatever the economic backdrop. The demand and supply fundamentals of our sector remain highly compelling and we are confident in our ability to deliver further income and capital value growth.”

BBOX : Prime property yield movement hits Tritax Big Box REIT

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