Segro bucks Brexit vote blues with warehouse fund-raising

Segro, Britain’s largest listed industrial property developer, shook off wider Brexit concerns on Friday, raising £325mn ($433mn) to develop new logistics warehouses as “e-retailing” grows across Europe.Property was one of the sectors hardest hit by Britain’s June 23 referendum to leave the European Union, with companies that own offices and retail blocks seeing their stocks plunge and investors pulling money from commercial funds.Segro’s share placement took place at a 4.4% discount to the company’s Thursday closing price of 455.2 pence.One of its bookrunners had earlier said investors were buying at discounts of 4.4% to 5.5%.Both current and new investors bought shares, a company spokeswoman said, adding this was indicative of a strong appetite to fund warehouse development.Some types of commercial property have continued to do well despite fears over the impact of Brexit on the British economy and the financial services industry in London.Segro has seen demand for warehouses continue to rise, with retailing and delivery companies needing more space as they expand their door-to-door services to cater for an increasing number of people going online to purchase everything from clothes to air conditioners.Over the last 10 years, the retail sector has accounted for over 40% of all the warehouse space rented, according to property consultant Savills.According to a CBRE index that focuses on the modern warehousing property industry in the UK, total returns for logistics in the first six months outperformed industrial and property sectors collectively.Segro, which operates mainly in the UK, France, Germany and Poland, said it had not seen any impact on occupational demand since the vote and that it had signed pre-let deals that will generate annualised rents of £6mn since June-end.Recent data showed British consumer morale improved last month after suffering in July.The Brexit vote is expected to considerably reduce commercial property development in the UK, as investors forego riskier projects in an uncertain market. However, for projects such as warehouses, lenders will even back projects with lower levels of pre-lets, as demand from e-retailers and delivery firms is not expected to be dented by Brexit.Warehouse development activity has not halted since the referendum, as national vacant rates of just 7.1% are way below long-term averages, according to Savills.Segro had development projects approved, contracted or under construction totalling 629,108 square feet, representing 198.9mn pounds of future capital expenditure as of August 25.The company placed about 9.9% of its issued share capital to fund an identified pipeline of mainly pre-let developments. As of Thursday’s close, the placing would have been worth about £340mn.BofA Merrill Lynch and UBS Ltd acted as joint bookrunners for the placing.“The industrial and logistics sector will continue to benefit from strong occupier demand as retailers upgrade their supply chainsrespond to the demand for internet shopping,” Stifel analysts wrote in a note.