Tritax Big Box targeting higher dividends in 2018

Tritax Big Box REIT updated the market on its trading for the full-year to 31 December 2017 on Wednesday, confirming that it acquired 11 new ‘big box’ investments in 2017 with an aggregate purchase price of £435m, along with 124 acres of prime London distribution development land for a total consideration of £62.5m.

The FTSE 250 company also notes its four pre-let forward funded developments, totalling 2.0 million square feet, which reached practical completion in 2017.

As at 31 December, £2.46bn - including forward funded commitments - was invested in a portfolio of 46 big box assets, as well as the 124 acres of development land at Littlebrook, Dartford.

Tritax said its portfolio was 100% let or pre-let to 36 institutional quality tenants, with contracted annual rental income of £124.6m and all leases providing for upward-only rent reviews.

It said it had a weighted average purchase yield since inception of 5.7%, and a weighted average unexpired lease term across the portfolio of 13.9 years.

Since 31 December, the board said a further three big box assets had been acquired with an aggregate purchase price of £139.8m, increasing the portfolio to a total of 49 assets and extending the weighted average unexpired lease term across the portfolio to 14.5 years.

On the financial front, the board noted its debut issue of £500m in senior unsecured loan notes with an average term of 11.5 years, rated Baa1 by Moody's, following the establishment of a £1.5bn euro medium term note programme.

It also highlighted its new five-year £350m unsecured revolving credit facility, with an uncommitted £200m accordion option, and the repayment in full of its £550m secured syndicated facility due 2020 and £7.0m and £11.6m Helaba facilities due 2019.

Tritax said its weighted average term to maturity of debt facilities was 8.9 years as at 31 December, up from 4.8 years as at 31 December 2016, while its weighted average running cost of debt was 2.38% pa, primarily comprising fixed rate debt.

It also pointed out its successful, significantly oversubscribed £350m equity issue in May last year.

On the subject of dividends, Tritax said it was targeting an aggregate dividend of 6.4p per share for the 2017 year, payable quarterly, of which 4.8p per share had already been paid for the nine months to 30 September.

Consistent with its progressive dividend policy, the company confirmed it was targeting an aggregate dividend of 6.7p per ordinary share for the 2018 year - a 4.7% increase over the 2017 dividend target.

That increase would be in excess of the rate of retail price index inflation over the 2017 calendar year, the board pointed out, with dividends expected to be fully covered by adjusted earnings from the company's portfolio.

“We continue to implement the company's strategy, further diversifying our portfolio by geography and tenant whilst remaining patient and disciplined in our approach,” said Tritax partner Colin Godfrey.

“During 2017, whilst maintaining a high proportion of foundation assets to underpin the portfolio's core, low-risk income - 74% of the portfolio by value - we have also sought to selectively acquire some value-add opportunities, which included 124 acres of prime development land at Dartford, which offer the potential to deliver further value to our shareholders in 2018 and beyond.”

Godfrey said the company’s increased scale brought further strategic benefits, including the issuance of its £500m debut unsecured loan notes, which nearly doubled its average term to maturity at an attractive fixed cost of debt.

He said the compelling fundamentals of Tritax’s market remained largely undisturbed by the ongoing uncertainties associated with the economic and geopolitical backdrop.

“The weight of occupier and investor demand for big box logistics assets, coupled with a lack of meaningful supply, ensured that values and rental growth remained robust during 2017, with evidence suggesting that such attractive dynamics are likely to continue to support the performance of the sector into 2018,” Godfrey explained.

Tritax Big Box said it expected to publish its results for the year to 31 December 2017 on 7 March.