EUROPE - A risk assessment published yesterday by Segro acknowledges that more than one-third of its portfolio is at risk from the euro-zone crisis as the UK logistics and office firm continues to offload non-prime assets. 

Segro, which is 7.5% owned by Dutch pension fund manager APG, identified the economic environment as the primary - and increasing - risk to its portfolio.

Around a third of the firm's portfolio is located in mainland Europe, where it acknowledges the economic environment remains difficult to forecast.

In an RNS issued earlier this week as a follow-up to its annual report, it said: "If macroeconomic conditions were to worsen, then this could result in reduced demand for business space, increased customer insolvency and falling asset values."

However, it pointed out that its mainland European portfolio was located predominantly in European economies, including 9% in Germany, 8% in France and 6% in Poland. 
It has around a 2% exposure to Italian real estate assets.

The firm last month announced a medium-term disposal programme for "non-income-producing or non-core assets", and a plan to recycle capital into multi-occupier estates, logistics and higher-value properties including data centres, suburban offices and R&D facilities.

Segro last month posted an 8.8% increase in EPRA profit before tax to £138.5m (€165.5m), partly as a result of disposals worth £110.9m over the course of the year and the February disposal of five secondary UK industrial assets for £80.2m.

In addition, new rental income totalled £38.4m in 2011, £9m of it from new assets, despite a decline in the overall value of the portfolio during the same period.

Four of the risks in the 10-point assessment published yesterday have increased over the past year.

They include, in addition to macroeconomic and portfolio performance risk, risks associated with implementing strategic change (3) and solvency risk (6).

The other six - capital structure (4), borrowing (5), FX risk (7), operational risk (8), market cycle risk (9) and risks associated with investment plans (10) - all remained stable, but none decreased during the same period.

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