Segro Plc in an interim Q1 statement today said investment markets continued to recover in the UK (with the IPD Industrial Index showing capital growth of 2.1%in Q1) and in Europe, capital values appear to be stabilising, particularly for prime assets.
Occupier markets remain difficult in both the UK and Europe with the vacancy rate in the ex-Brixton portfolio reduced from 22.1% at December 2009 to 20.7% at the end of Q1 2010, and the rate continuing to fall. The non-Brixton portfolio has also shown an underlying improvement in vacancy rate but the completion of a partly pre-let office development at Winnersh, which is currently un-let, meant the headline rate increased slightly from 10.8% to 11.4%.
Rental levels have held up reasonably well with the average transactional rental value in Q1 2010 being 1.3% below December 2009 ERVs offset by a reduction in average rent free incentives.
Net debt as at 31 March 2010 was £2.4 billion, unchanged from 31 December 2009.
Cash and undrawn bank facilities as at 31 March 2010 stood at £709million. But £453million of the Group's bank facilities (of which £231million are drawn) and £67million of bonds / notes are due for repayment or rollover before the end of 2011 and are covered by existing committed bank lines. The Group has a passing rent roll of £345 million.
Ian Coull, Chief Executive commented:
"Whilst conditions in occupational markets remain challenging, we have made good progress on a number of fronts in the early part of 2010. Our priorities continue to be to stay close to our customers, to fill empty space, to manage our finances and other risks prudently, and to recycle our capital into suitable reinvestment opportunities, particularly pre-let development."
Segro also announced today that it had acquired a 50% stake in the Airport Property Partnership (APP) from BAA, which is it's entire holding , the balance being held by Aviva Fund Management Ltd. BAA claim that the transaction is worth £244 million as Segro is assuming debt and liabilities of £128 million as well as paying £116 million cash.
Segro say the transaction is part of a larger transaction with Aviva Investors in which APP purchases £240 million worth of property from Segro, the net effect of which will be to net Segro £50 million of cash. Segro will manage the portfolio and Aviva will manage the Fund.
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