Wednesday, 7 March 2018

Tritax Big Box - Full Year Results

This commercial property REIT was added to my income portfolio in October 2016 following a placing of shares at 132p.

Tritax Big Box is the only Real Estate Investment Trust dedicated to investing in and funding the pre-let development of very large logistics facilities in the UK. The company believes these properties, known as Big Boxes, are one of the most exciting and highest-performing asset classes in the UK real estate market.

Big Boxes offer tenants economies of scale and cost savings not available from smaller, older buildings. They are also crucial to the efficient and effective operation of retailers, and in particular the fulfilment of e-commerce orders. Because the nature of what the companies use these buildings for is so fundamental to their very existence, Tritax is unlikely to suffer from unexpected vacancies.

BBox have sought to distinguish themselves through the quality of location and modernity of their real estate assets let to high calibre tenants, which provide long term income and attractive prospects for growth.

The group hold a portfolio of distribution assets which are located close to motorways and are let to tenants including some of the leading supermarkets - Sainsbury, Tesco, Morrisons as well as M&S and Next. Some other tenants include:

Amazon - the world’s largest electronic and e-commerce retailer

Argos -  the UK’s leading multi-channel retailer, offering more than 33,000 products both on-line and in-store.

Brake Bros -  the number one food service distribution company in the UK

Ocado -  the world’s largest dedicated online grocery retailer.

Wolseley - the world’s number one distributor of heating and plumbing products

The UK has been one of the fastest global adopters of online retail and continues to exhibit significant growth in the sector, driving new demand for logistics real estate including Big Box assets. Successful large-scale retailers (online and conventional) and logistics providers are increasingly relying on the Big Box asset and demand is evident from companies up-scaling to such facilities.


Tritax Big Box was first listed at the end of 2013 at an initial floatation price of 100p. During 2016 it raised £550m of equity through two substantially oversubscribed share issues. In May it raised a further £350m which was invested over the rest of 2017 and brings the market cap to £2bn.

They have today issued 
results for the 12 months to end December 2017 (pdf via website). Total Shareholder return for the period was 15.2%. The company target a total return (being the increase in EPRA NAV + dividends paid) of 9.0% per year - the figure for 2016 was 9.6%.

Profits came in at £247m (2016 £92m) and total portfolio assets are valued at £2.6bn across 46 assets (2016 £1.9bn across 35 assets).


Building on payouts for the previous three years of 4.15p in 2014 and 6.0p in 2015 and then 6.2p, the declared dividend for the full year 2017 is 6.40p rising to 6.70p in the coming year. At the current share price this provides a fwd yield of ~4.7%.

The company have now moved to quarterly dividend payments. The Group's dividends are not quite covered by adjusted earnings of 6.37p, which are underpinned by strong rental stream and low cost base.

Commenting on the results, chairman Richard Jewson said:
“We have a sector-leading portfolio of UK Big Box assets that are benefiting from structural change driven by increasing e-commerce penetration, and the operational and financial benefits which they can provide to our Customers. The fundamentals of our market remain positive and are largely unaffected by current geopolitical and economic uncertainties. Despite the uncertainties it brings, Brexit may provide a silver lining, since with increased border controls our Customers will require more warehousing domestically, further supporting our business case".


I like what I have seen so far and I believe the model offered by Big Box which is basically tapping into a part of the online revolution, has potential for growth as well as a fairly secure dividend underpinned by the long leases and upward-only rent reviews. The share price has gained 8% compared to my purchase price of 132p. In addition, I have received a dividend of 6.4p and the prospect of an additional 4.7% increase to 6.7p for the coming year.

The way we shop has changed quite significantly over the past decade and internet sales are forecast to account for over 20% of total sales by 2020. To remain competitive in this environment, retailers need to have large, highly efficient distribution facilities that can fulfil orders quickly and accurately. This need is only becoming more acute as customers demand ever-shorter delivery times.

The demand for the BIG boxes offered by this REIT is likely to remain strong which means the dividend is reasonably secure and should easily keep pace with inflation.

This article is a record of my personal investment thoughts/decisions and is not a recommendation - as always, please DYOR.


  1. Thanks for the update, DIY. I bought BBOX after you drew my attention to it and I'm happy to keep it in my portfolio and to top up when the price is right. As you say, thhe way we shop has already changed so much and I do believe these warehouses are the way to go.

    1. Thanks weenie, and hope it continues to deliver for us.