SEGRO has raised £680 million to invest in development projects and land in the UK and continental Europe to take advantage of investment opportunities arising from disruption caused by COVID-19.
"We are delighted with the outcome, the placing was over subscribed and it shows that there is fundamental demand even in a period of uncertainty,'' David Sleath, chief executive officer of SEGRO said. "The pandemic has demonstrated the need for more and better warehousing and more local supply chains and we want to make sure we are in the best position possible to take advantage of those opportunities.''
A total of 82,926,829 new ordinary shares or 7.5% of the company's share capital were placed in the offering which was oversubscribed, raising gross proceeds of approximately £680m for the company. The stock was placed at 820p, a discount of 4.5% to yesterday's closing share price and BofA Securities and UBS acted as joint bookrunners.
While investor appetite for industrial assets has increased as result of the pandemic which has accelerated changes in e-commerce that has been positively impacting the warehouse sector in recent years, lending has dried up as banks pause to assess the economic fallout, limiting access to funding for some bidders and placing SEGRO at an advantage. The company, which this week announced the £203m acquisition of Perivale Park in West London, will continue to target a payout ratio of 85 to 95% of adjusted profit after tax and use the proceeds of the placing to continue its expansion across the UK and Europe.
SEGRO has a portfolio covering 7.8m sq m of space valued at £12.2 billion. Two-thirds of the assets comprise urban warehouses concentrated in and around Europe’s major cities, particularly London, Paris, Düsseldorf, Frankfurt, Berlin and Warsaw, where supply of warehouse space vital to facilitating rapid “last mile” distribution is constrained. The remaining one-third of the portfolio is mainly big box warehouses which are used for large-scale centralised distribution and fulfilment.
The placing and the retail offer will provide additional capital to respond to increased demand across the UK and Continental Europe and will allow SEGRO to invest more than £1b of capital in 2020 and 2021 through development capital expenditure and the acquisition of land for future development.
SEGRO is currently building, or has identified, development projects which require capital expenditure of £595m to complete, the company said in a trading update for the period from January 1, 2020 to June 8. Once fully let, these projects are expected to yield a return on total development cost of 6.8%, or 8.7% yield on new money. At May 31, 2020, SEGRO had development projects approved, contracted or under construction totalling 702,100 sq m, representing £216m of future capital expenditure and £40m of annualised gross rental income when fully let.