Segro: UK Occupational Market Still Remains Challenging

Segro PLC (SGRO.LN), a European provider of business space, said Tuesday market conditions still remain challenging, however investment markets have continued to recover in the U.K. and it is recommencing its development program in response to specific occupier demand.

MAIN FACTS:

-In Continental Europe, capital values appear to be stabilizing, particularly for prime assets.

-Conditions in the occupational market remain challenging, although there are a number of encouraging signs:

*In the first quarter of 2010 the level and quality of new enquiries has improved and the Group has a healthy leasing pipeline going into the second quarter.

*The U.K. business secured GBP7.6 million of annualized rental income from new lettings in Q1 2010 (including GBP2.8 million in respect of pre-lets taken up in the quarter but signed in earlier periods) with GBP3.0 million of annualized rental income being lost from space returned.

*Overall U.K. vacancy rate has recorded a slight improvement to 14.6% at the end of Q1 2010 (31 Dec 2009: 14.8%).

-SEGRO's main Continental European markets are in the early stages of economic recovery

-Lettings signed in the three months to Mar. represented GBP3.0 million of annualized rental income compared with GBP5.4 million of income loss from space returned (of which GBP4.5 million is attributable to the previously anticipated return of space following the insolvency of Karstadt-Quelle in Germany).

-Net debt as at Mar. 31 was GBP2.4 billion, unchanged from Dec. 31 2009.

-Cash and undrawn bank facilities as at Mar. 31 stood at GBP709 million.

-GBP453 million of the Group's bank facilities (of which GBP231 million are drawn) and GBP67 million of bonds / notes are due for repayment or rollover before the end of 2011 and are covered by existing committed bank lines.

-Capital expenditure in the first three months of the year amounted to GBP21 million.

-The Group has authorized four new pre-let developments since year end with aggregate capital expenditure of GBP34 million.

-The aggregate remaining expenditure on all authorized or committed developments, all of which are fully pre-let, amounts to GBP40 million, with annual rental income of GBP8.3 million.

-Shares closed Monday at 318.9 pence.

-By Elliott Ball, Dow Jones Newswires; 44-20-7842-9314; [e-mail]