Tritax Big Box’s full-year headline rents were up 7.8% in 2023, compared to growth of 12.9% in the prior year. An additional £4.9mn rental income was generated from annual rent reviews, while new development lettings added £7.8mn to rents.
£327mn of assets were disposed of across the year, in line with previous guidance. The group plans to invest these proceeds into “higher returning opportunities” amidst the “improving market backdrop”.
Rent collection remained at 100% over 2023, with a 2.5% vacancy rate. The weighted average lease term was 11.4 years.
The group has access to more than £500mn of liquidity, with a 5.2 year average maturity on its debt.
The shares were broadly flat following the announcement.
View the latest Tritax share price and how to deal
Our view
Tritax Big Box generates income by renting out giant warehouses. These so-called ‘Big Boxes’ are at the heart of modern logistics and e-commerce, from highly automated large-scale fulfilment centres to small urban or last-journey warehouses.
Despite an uncertain market backdrop in 2023, rents got a helpful boost from new developments coming online. These were snapped up by Tritax’s customers as building a strong logistics network is non-negotiable in this day and age.
Once Tritax rents out a big box, it's a long-term source of income. Tenants build up distribution networks around the site, making changing location costly, risky and time-consuming. Some have even sought to extend leases many years before their scheduled expiration, so determined are they to retain the use of the facility.
Highly 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 more security to the dividend, while further expansion could lead to increasing payouts. Real estate investment trusts (REIT), like Tritax, must pay out the majority of profits to investors.
We are seeing a subtle shift to bring on more assets in the last mile area, these are smaller units so a little different to the big boxes that make up the bulk of the portfolio. It’s very much on a deal-by-deal basis for now, but yields here look attractive, so we’re supportive of the strategy flex and it enables Tritax to serve a broader range of customers.
Development is also key, with a focus on capturing the increased demand for e-commerce and the distribution needs that follow. That creates some additional risks. It's expensive to get a logistics hub up and running, and if it doesn't get filled, it could become a financial ball and chain. Luckily, this hasn't proven to be a problem so far. A shortage of ready-to-occupy premises means customers are snapping up units before they've been completed.
Paying out rental income makes expansion complicated, too. Tritax is having to recycle its portfolio - selling lower-yielding mature assets in order to invest in higher-yielding development opportunities. Against an improving market backdrop, asset sales are now well underway. This strategy brings additional risk, but cost pressures on the build side are easing which should provide plenty of breathing room for yields.
Serious questions around the health of the UK economy and the knock-on effect that could have on Tritax’s customers has weighed on sentiment. We’ve seen a rebound more recently, but the group still trades at a discount to its longer-term valuation. We continue to believe this could present an attractive entry point, for those willing to ride short-term uncertainty. As with any investment, there are no guarantees.
Tritax key facts
- Forward price/book ratio (next 12 months): 0.87
- Average forward price/book ratio since listing (2016): 0.94
- Prospective dividend yield (next 12 months): 4.8%
- Average prospective dividend yield since listing (2016): 4.7%
All figures are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.
Sign up for Tritax research updates
Find out more about Tritax shares including how to invest
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
Share insight: our weekly email
Sign up to receive weekly shares content from HL
Please correct the following errors before you continue:
Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.