First Read: SEGRO "Possible SEGRO and Prologis Combination" (Restricted) Gauge

Research evidence excerpt

First Read: SEGRO "Possible SEGRO and Prologis Combination" (Restricted) Gauge

Forecast returns

Forecast price appreciation -

Forecast dividend yield -

Forecast stock return -

Market return assumption 9.1%

Forecast excess return -

Company Description

SEGRO is a leading FTSE100 owner and developer of urban warehousing and light industrial

property. The REIT's UK portfolio is concentrated in key warehousing locations, including the

Slough Trading Estate, Park Royal, Heathrow and the Midlands. In continental Europe, SEGRO

is focused on key conurbations and major distribution hubs in France, Germany, Poland and

Italy.

Valuation Method and Risk Statement

The real estate sector can be cyclical and faces risks at a number of levels. First the level of the

economy both macro and local can adversely affect demand and the ability of tenants to pay

rent. Excessive levels of supply can also lead to falling rents. Rising interest rates can impact

the security of the tenant base, lower development margins significantly, and reduce

investment appetite. Interest rates, bond yields and the relative attractions of other asset

classes can all impact property values. Property values can also be affected by changes in

planning, taxes, technology and lease structures. These risks can be amplified in the real

estate sector through development exposure, gearing and the rating. SEGRO maintains an

overweight position to the UK (57% of capital value), of which the majority is situated in

London and the Thames Valley. Over the past decade they have increased their exposure to

Continental Europe where the main markets are Germany, France, Italy and Poland. Their

specialism is Urban Logistics, particularly in the UK where the Slough Industrial Estate is the

key asset in the portfolio.