SEGRO sees fall in new rental contracts

Out of town property specialist, SEGRO, said the first quarter of 2012 went well although it warned that the general economic climate could affect both rental and investor demand.

SEGRO is a real estate investment trust (REIT) and tends to focus on out of town properties and those near major transport hubs.

In the first three months of 2012 it contracted £5.5m in new annualised rental income, just below the £5.6m figure seen at the same point of 2011.

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The group lost £6.2m from so called "take-backs" when tenants' leases expired or exercised break clauses in their contracts. This was down on the £8.1m figure seen in the first three months of 2011.

SEGRO's vacancy rate increased to 9.6% by the end of the quarter versus 9.1% seen at the end of December 2011.

The group claims it has a strong development pipeline, with four new pre-let developments signed, and three pre-let developments completed, since the start of the year.

In total SEGRO has 21 developments currently contracted or under construction, representing £18.5 million of annualised rental income, of which 75 per cent is pre-let.

Annualised income lost due to customer insolvencies during the first quarter was £0.7m, over 30% below the prior year but the firm says: "in view of uncertain macro-economic conditions, this remains an area that we continue to monitor carefully."

On that note, it's certainly having to monitor one of its struggling European customers, which, according to SEGRO, could request "a significant restructuring of their lease" - worth £12m annually.

At March 31st 2012, net borrowings were unchanged from December 31st 2011 at £2.3bn.

Commenting on the first quarter, SEGRO's Chief Executive, David Sleath said: "Although the macro-economic environment is likely to remain unsettled for some time and could impact both occupiers and investment markets, we made a good start to the year."

On the markets SEGRO shares had fallen 0.35% by 08:14. Over the last 12 months the stock has lost 28.3%.

BS