Fund manager Tritax is looking to raise £200m for a new real-estate investment trust (Reit) to invest in 'big-box' logistics warehouses. These are vast assets, typically located in the Midlands and leased by national retailers as central distribution hubs, both for their store networks and, increasingly, e-commerce. Tritax expect to buy between five and seven sheds, using both the equity raised in the flotation and £150m of debt promised by Barclays.
Chairman Richard Jewson - who already chairs the board of Raven Russia (RUS), a warehouse investor in the Moscow area - is targeting a dividend yield of 6 per cent. This is in line with the yields on book value offered by Segro (SGRO) and Hansteen (HSTN), two existing UK industrial landlords. The new Reit would, nonetheless, be the only pure play on the low-risk big-box sector (Segro has a broader range of assets, while Hansteen focuses on sub-prime trading estates).
Tritax's upcoming float is likely to appeal to income investors. Big distribution warehouses are highly cash-generative and come with limited risk. Segro and Hansteen are also both trading at premia to book value, suggesting the proposed issue at parity would be good value. One risk to bear in mind is that it can take time for new property funds to deploy investors' cash, limiting dividends in the first year. We will update on the Tritax Big Box Reit following publication of the prospectus.
