SEGRO has raised £907m in a placing of shares – a real vote of confidence in the real estate behemoth, its growth plans and the logistics sector.
The company increased the size of the raise from around £800m to £900m due to demand. It also raised £7m from retail investors via the PrimaryBid platform.
I n total, 110,585,366 new ordinary shares were issued at a placing price of 820p. The price represents a discount of 3.4% to the closing price on 27 February 2024, which was 849p. In aggregate, the placing represented around 9.0% of the existing issued ordinary share capital of SEGRO prior to the placing. The dilutive impact for existing SEGRO shareholders represents around 8.3% of the company’s issued share capital.
David Sleath, Chief Executive, said: “We appreciate the support from our investor base for this equity placing and the confidence it demonstrates in our business. In addition to the profitable growth opportunities within our development pipeline, we expect further exciting opportunities to emerge in the coming months which this additional capital will help us to deliver.”
Use of proceeds
- The new equity will allow the group to pursue additional growth opportunities, including new and existing development projects and to take advantage of potential acquisition opportunities which may arise, whilst maintaining a strong balance sheet.
- Occupier markets in which SEGRO has chosen to focus its prime portfolio remain favourable and this, combined with constrained supply, is resulting in continuing rental growth.
- Market expectations for lower interest rates, if sustained, should provide a positive backdrop for a recovery of investment market sentiment as the year progresses. SEGRO is well-placed for further attractive growth as asset values start to bottom-out, rents continue to grow, and developments offer attractive profitability.
- In the next three years, SEGRO expects to increase its passing rents by more than 50% through capturing embedded reversion and developing projects within its existing land bank.
- The additional capital from this placing, together with SEGRO’s land bank in UK and Continental European prime urban and logistics centres, as well as the relatively short build-time for warehouse space, provides flexibility and optionality to accelerate growth in response to occupier demand.
- SEGRO has a sizeable development pipeline that it estimates has the potential to deliver over £440m of additional rent, requiring development capital expenditure of over £3.8bn (including buildings under construction). It expects to develop over a third of this over the next three years, and also intends to commence infrastructure works of £350m to unlock future development opportunities. Investment into the development programme, including these spends, is expected to be approximately £600m per annum. The anticipated yield on cost (total development cost including land and infrastructure expenditure) on new developments in the pipeline averages between 7% and 8%.
- Data centre projects within this land bank, as well as redevelopment opportunities within the existing portfolio such as on the Slough Trading Estate, combine to give the potential for 1.2 GW of new capacity across 24 sites in the UK and Continental Europe. The rental income from sites within the land bank has the potential to triple the £50m headline rent currently attributed to this customer sector, with additional upside from redevelopment of the existing portfolio (which is not included within the development pipeline). The current development programme includes two pre-let data centres which are expected to deliver a yield on cost of over 10%.
- As investment markets stabilise, SEGRO expects to see the emergence of potentially attractive asset acquisition opportunities. SEGRO believes that it has a significant competitive advantage here given its established local platforms and stakeholder relationships, strong balance sheet, significant liquidity, and its unsecured funding model.
- The new equity raised will be supplemented by SEGRO’s disciplined approach to capital recycling and SEGRO continues to expect to dispose of between 1% and 2% of its gross asset value each year.