January share purchase no.2: BBOX

My second purchase of January was Tritax Big Box (BBOX). This is a wonderfully dull business - they specialise in the provision of "...very large logistics facilities in the UK".  Having visited a couple of these facilities, I can attest to them being very large indeed. The BBOX IPO was in 2013 and they have seen impressive and pretty consistent growth since, at the time of writing their market cap is over £2bn. Their tenants make up a nice cross section of both UK and international businesses, including Screwfix, M&S, through to Amazon and Unilever.

The ecommerce goldrush is already is full swing (take your pick of stats here), but there's still gold in them hills, and as everyone knows the best way to make money in a goldrush is to sell shovels. Logistics being one type of shovel for the current day.

BBOX is a Real Estate Investment Trust, these are financial vehicles that came into being in the UK in 2006/7. In exchange for following certain rules around their design, these businesses avoid corporation tax and capital gains tax on their property portfolio, and are required to payout 90% of their income to investors. However, since they are paying out most of their cash, when it comes to investing in their business, and going after more properties, they will typically have to raise money through issuing more shares, or borrowing, neither of which is perfect. It's a convenient way of investing in property without all of the usual hassle that typically comes with actually buying property.

Based on their Q3 factsheet, issued in September 2018, the average lease had around 14 years to run, all assets were occupied. Their customers look, like a relative sound set of businesses, but with a couple of exceptions, most notably New Look, which appears to be struggling. Marks & Spencer and Dixons Carphone have also had their difficulties recently. However, apart from those 3, the remainder look like very solid businesses.

I've had my eye on this for while, but the price had moved steadily upwards, not offering a dip to buy into until the summer just past when the price started sliding. It kept sliding all the way to offering a discount of nearly 8% vs. NAV, which considering it had hardly offered any discount in it's history looked pretty tempting. Then just after the January trading update BBOX announced the acquisition of db Symmetry to add to the BBOX asset portfolio. Since the acquisition was viewed as dilutive, the share price took a dip from what I could gather the overall impact of the additional assets would outweigh this.

Now unfortunately I'm no expert on REITS, and I didn't feel as if my screeners, and excel number crunching tools could be applied, but I'm quite comfortable with this. I see it as a fairly defensive investment, that should pay a steady dividend and it adds some diversification to the portfolio too.