Tritax reported a 24.3% rise in net rental income to £276.0mn, and a 37.3% rise in underlying operating profit to £265.3mn. The £1.2bn acquisition of UKCM inflated results, though asset management activities like rent reviews and development contracts also contributed.
The portfolio increased in value from £5.0bn to £6.6bn, again driven by the UKCM acquisition but the existing portfolio also grew. The loan to value improved from 31.6% to 28.8%.
Vacancy rates increased from 2.5% to 5.7%, largely driven by new development projects completing at year end that had not yet been filled.
A dividend of 2.185p per share was announced, taking the total or the year to 7.66p, up 4.9%.
The shares were broadly flat in early trading.
Our view
Tritax has had a solid year in 2024, combining a significant acquisition with steady operational progress that delivered decent growth. The takeover of UK Commercial Property REIT brought in a set of quality urban logistics properties, increasing rental income and lifting earnings in a meaningful way.
The acquisition of UK Commercial Property REIT (UKCM) offers some complementary assets. But not everything fits with the strategy, so some assets are on the chopping block, and we were pleased to hear progress is being made on sales.
That capital is set to be reinvested into potentially high-yielding new developments like the recently announced energy and datacentre project. Tapping into the growing demand for sites to host new AI datacentres is a shift from the traditional Big Box properties, but the pipeline looks good and we think this will be a growing area – it’s early days but something to watch.
Rents have been getting a helpful boost from new developments coming online and rent reviews. These were snapped up by Tritax’s customers as building a strong logistics network is non-negotiable in this day and age.
Real estate investment trusts (REIT), like Tritax, must pay out the majority of rental profits to investors. Desirable assets mean attractive deal terms, such as upwards-only rent reviews, which are helping boost income. A wide range of high-quality tenants should hopefully add some more security to the dividend, while further expansion could lead to increasing payouts – though not guaranteed.
Paying out rental income makes expansion complicated, too. Tritax is selling lower-yielding mature assets to invest in higher-yielding development opportunities. Against an improving market backdrop, activity here is picking up which helps give options.
Developing new sites is also key, and a shortage of ready-to-occupy premises means customers have been snapping up units before they've been completed. But it's expensive to get sites and running, and if it doesn't get filled, it could become a financial headache.
It’s been a volatile start to the year for property names, with Tritax faring better than its peers. But, while off its lows, it’s still trading at a hefty discount to net asset value. We think that’s overdone, with Tritax having a good selection of growth levers, and a portfolio that carries less debt than peers.
As ever there are no guarantees and uncertainty around the interest rate outlook, plus downgrades to near term economic growth forecasts, are sector headwinds.
Tritax Big Box REIT key facts
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