Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a876457

High yielding ‘Big Box’ trust bucks property slowdown

Tritax Big Box, one of 2015's best performing UK property funds, looks to raise £100 million to invest in warehouses and back a 5% dividend yield.

 
High yielding ‘Big Box’ trust bucks property slowdown

(Update) Tritax Big Box (BBOX ), the UK’s only listed fund specialising in warehouses or ‘big boxes’ or 'sheds', is looking to raise £100 million from investors.

The £900 million real estate investment trust, which offers a dividend yield of 5.1%, owns 25 distribution centres let to retailers such as Sainsbury’s, Next and B&Q. It has announced a placing and open offer for 80.6 million new shares at 124p, a 5.8% discount to yesterday’s closing price.

The company, which before Christmas spent £42 million buying a warehouse near Liverpool from Matalan, the clothing retailer, wants to use the money to acquire new assets and expand its geographical reach.

It says increasing the size of the fund will also help make it more cost-efficient and reduce last year's total expense ratio of 1.1%.

The fund raising comes at a buoyant time for Tritax, which by yesterday’s close had bucked the stock market turmoil with a 1.5% gain in its share price this year.

Last year, its net asset value advanced 19.4%, according to Numis Securities, as property investors switched their attention to good quality assets outside London and the South East. Total shareholder returns since launch in December 2013 have exceeded 40%.

Numis analyst Ewan Lovett-Turner said that with around three quarters of the portfolio offering relatively low yields as a result of the surge in prices, Tritax was now focusing a quarter of its assets on warehouses that it could upgrade and improve.

'Performance of the "value add/growth covenant" part of the portfolio, along with the ability to continue to source low cost debt will be increasingly important to shareholder returns in our view,' he added.

The company has declared a 3p interim dividend, which will not be paid to new shareholders, and is targeting total dividends of 6.2p per share this year which it expects to be covered by earnings.

The shares closed at 131.6p yesterday, a 5.7% premium to the unaudited net asset value per share of 124.5p at 31 December. They have dipped 1.9p or 1.5% today.

Property trusts lose lustre

The past year has been difficult for big real estate investment trusts offering below sector average yields. Shares in F&C Commercial Property (FCPT ) and UK Commercial Property (UKCM ), which, like Tritax, invest in physical 'bricks and mortar', have dropped below net asset value (NAV) having traded at double-digit premiums last spring.

TR Property (TRY ), which largely invests in the shares of property developers, has also de-rated and stands 11% below NAV. 

However, Standard Life Investments Property Income (SLI ) remains on one of the biggest premiums of 5% supported by a 5.5% yield compared to the sector average of 4.6%.

The future for 'boxes'

Although Tritax is the only dedicated retail warehouse fund listed on the London Stock Exchange, all the generalist property funds have some exposure to the sector. F&C Commercial Property, F&C UK Real Estate (FCRE ) and UK Commercial Property each have a 23% weighting to retail warehouses, according to Numis data.

Last year UK commercial property generated an overall return of 13.8%, with 7.8% from capital, or price increases, and 5.6% from income, according to the IPD UK Property Index. This year capital growth is expected to slow with an increasing proportion of total returns coming from income, or rental growth, says the Investment Property Forum (IPF). IPF forecasts industrial assets, which includes warehouses, will generate a total return of 10%, behind offices at 10.4%.

2 comments so far. Why not have your say?

Michael Beaman

Jan 27, 2016 at 16:56

It is misleading to call this a retail warehouse fund. Retail warehouses are places that you can buy stuff. B&Q and suchlike. Tritax are providing immense sheds to the logistics business The funds you refer to have a limited number of these relatively rare investments e.g. UK Commercial Property hold major Argos & Ocado facilities.

report this

Micawber

Jan 28, 2016 at 13:51

SEGRO also has a strong focus on tactical warehousing and distribution and on data centres, but is more in the South UK and continental Europe.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

New Economies - Frontiers and Latam Exciting markets, unrealised investment opportunities


From Brazil and Mexico, to Vietnam and Nigeria, the rapidly developing economies of Latin American and frontier markets, which are some of the smaller, less developed economies in the world, provides investors with a wealth of potential opportunities. Discover why BlackRock's investment trust range is well placed to help you make more of these exciting regions.

Watch Now

More about this:

Look up the investment trusts

  • Tritax Big Box (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • F&C Commercial Property (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • UK Commercial Property (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • TR Property (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Standard Life Inv. Prop. Inc. (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • F&C UK Real Estate Investments (Ordinary Share)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Read more...

The Expert View: WPP, Costain and WH Smith

by Michelle McGagh on Aug 25, 2016 at 05:01

Sorry, this link is not
quite ready yet