UK logistics REIT Segro has acquired an urban warehouse estate in London’s Canning Town for £133 mln (€145.8 mln) as it reports strong Q3 results.
Electra Business Park was purchased from Schroders and is a 5-hectare urban warehouse estate located close to Canary Wharf and London City Airport in east London.
The park provides 21,200 m2 of lettable space across 10 units of which nine are let, with the final unit currently under offer. The WAULT on the let space is 4.3 years to break and 6.4 years to expiry. The estate generates a topped-up passing rent of £3.4 mln.
Segro said the topped-up net initial yield upon acquisition is 2.3%, rising to 2.6% once the vacant unit, currently under discussion, is let and the equivalent yield is 3.3%.
Alan Holland, business unit director for Segro’s Greater London portfolio, said: ‘This acquisition is an exciting opportunity for Segro to consolidate its leading London footprint and is a strong fit with its well established prime urban warehouse portfolio.
‘Electra Park helps us to build further scale in an area where we have made great progress through the East Plus partnership in conjunction with the Greater London Authority. This enables us to improve choice and provide an excellent customer experience as well as represents an opportunity for us to create value by applying our asset management expertise and knowledge of the local market.’
Segro was advised by JLL, while Schroders were advised by Gerald Eve.
Trading update
Together with news of the deal, Segro issued a trading update for the period from 1 July 2020 to 20 October 2020.
The company said it collected 96% and 95% of Q2 and Q3 rents respectively, and of the remaining £9 mln, £6 mln is due to be collected by the end of the year and the remainder in 2021.
Segro said Q4 rent collection in the UK was currently at 85% of total rent billed, higher than at the equivalent date in the second and third quarters. Current indications for Q4 rent collection in Continental Europe are that this is also tracking ahead of previous quarters (98% for both Q2 and Q3).
The company further said it signed contracts worth £15.8 mln of new headline rent during the third quarter, taking the total for the nine months to 30 September 2020 to £49.6 mln, up slightly on the year-earlier £48.6 mln. Rent roll growth from existing space was £5.6 mln, taking the nine-month figure to £7.9 mln (9M 2019: £10.6 mln).
At 30 September 2020, 645,800 m2 of space was under construction, equating to potential future headline rent of £38 mln, of which 75% has been secured.
Commenting on the Q3 performance, CEO David Sleath said: ‘Segro has continued to perform well in the third quarter with the acceleration of structural trends fuelling further demand for our asset class from both customers and investors, outweighing any negative economic impacts from the pandemic.
'This has led to another period of strong leasing activity, helping us grow rental income on the existing portfolio through capturing reversion as well as continuing to secure further pre-let developments. Our active, substantially de-risked, development programme comprises over 1 million m2 of new space under construction or in advanced discussions.
‘Rental collection has improved this quarter and we remain confident in the outlook for our business despite the macroeconomic uncertainties caused, in part, by Covid-19. We expect to continue to drive sustainable growth in both earnings and dividends from the combination of new rental income from the development programme, compounded with the benefits from active asset management of our existing prime portfolio.’
