Higher demand sees Tritax Big Box end year strongly

3rd Mar 2022 11:01

(Sharecast News) - Tritax Big Box reported a 14.8% improvement in adjusted earnings per share on Wednesday, to 8.23p, driven by development completions, portfolio rental growth, and higher development management agreement (DMA) income.

The FTSE 250 real estate investment trust said adjusted earnings per share, excluding DMA income above its anticipated run-rate, was ahead 6.8% at 7.38p for the 12 months ended 31 December.

Its dividend grew 4.7% to 6.7p per share, with the company reporting a 91% pay-out ratio when adjusted for exceptional DMA income.

The firm also reported a record total accounting return of 30.5%, up from 19.9% in 2020, driven by the execution of its strategy, and strong market conditions.

Looking at its market drivers, Tritax reported a "strong" take-up of 42.4 million square feet in 2021, down from 43 million square feet in 2020 but 64% higher than the annual average since 2010.

It said a limited supply had led to a record low 1.6% market vacancy, down from 4.1% a year earlier, and "strong" rental growth.

The board said there was opportunity for further prime market yield compression in 2022, as investor interest in logistics remained high.

Tritax Big Box said its portfolio value grew 24.3% to £5.48bn at year-end, from development gains, asset management activity and strong market conditions, including a capital valuation surplus of 19.1% net of capital expenditure.

It reported rent collection of 100% for both 2020 and 2021, a weighted average unexpired lease term (WAULT) of 13 years as at 31 December, and 0% vacancy at year-end.

The firm's contracted rent roll was up £15m to £195.6m, including £5m generated from rent reviews, achieving an 8.7% increase in passing rent across 32% of the portfolio.

That, the board said, translated into EPRA like-for-like rental growth of 3.3% for the year.

Like-for-like estimated recovery value growth was 7.5% over the year, with an 11% portfolio rental reversion at year-end.

Tritax reported a "strong start" to 2022, with 1.8 million square feet of near-term development starts in the first quarter, adding a potential £13.1m of contracted rent, of which 56% was pre-let.

Its 2022 guidance increased to between three and four million square feet of starts, and £350m to £400m of capex into development, compared to its long-term target run rate of two to three million square feet per annum, maintaining a 6% to 8% target yield on cost.

The company said there were "record levels" of occupier demand across its portfolio, with active negotiations on more than 10 million square feet over 11 sites.

Its total near-term development pipeline was 8.8 million square feet, with £60m to £70m of rent potential.

"This was an excellent year for Tritax Big Box - with all areas of our business performing well, we delivered our strongest results to date with total accounting returns of 30.5%," said chairman Aubrey Adams.

"Our performance is underpinned by the alignment between our strategy, the extensive capabilities and activity of our manager, and the long-term structural changes in our market. With a strong balance sheet, we have the financing capacity to accelerate our development programme, enabling us to capture a growing share of the unprecedented levels of occupier demand in the market.

"In parallel, we continue to actively manage our investment portfolio to maximise returns through lease reviews and extensions, physical extensions and acquiring and disposing of assets.

"This demand, combined with continued constrained supply, is contributing to strong rental growth and rising capital values, reinforcing our ability to deliver further attractive total returns to shareholders over the coming years."

At 1214 GMT, shares in Tritax Big Box REIT were down 0.67% at 237.4p.