Segro Falls Most in Two Months After Tenant Files Bankruptcy

Segro Plc, the U.K.’s largest publicly traded owner of industrial properties, declined the most in two months after the tenant of a German industrial property filed for insolvency.

Segro fell as much as 2.3 percent in London trading, the most since May 4, after the company said in a statement today it might not be able to replace the rent from Frankfurt-based GmbH. The stock was down 1 percent at the close.

Neckermann, a mail-order business, leases 94 percent of a 309,000 square-meter (3.33 million square-foot) facility in Frankfurt, from the Slough, England-based company. The building is valued at 86 million pounds ($134 million) and would be worth half that if Neckermann leaves, Segro said, citing a valuation by CBRE Group Inc.

“Segro is seeking to identify both alternative customers and alternative uses for the Frankfurt site in the event that Neckermann exits the facility,” the company said in the statement. “There is a significant risk that, from the beginning of 2013, Segro will be unable, at least in the short term, to replace the rent currently being generated from Neckermann.”

Mike Prew, a Jefferies Group Inc. analyst, cut his price target for Segro to 232 pence from 240 pence after the announcement. The Frankfurt building was bought for 132 million pounds in 2007, and the new CBRE appraisal is a “worst case raw land valuation,” he wrote in a note to investors.

The German company has paid rent through July and Segro said it has a bank guarantee “which should cover rent and other payments due in respect of the site over the remainder of 2012.”

Neckermann also leases a distribution building in Alzenau, 35 miles from Frankfurt from Segro. That has been sub-leased to another company until the end of the year.

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