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LondonMetric Property buys three urban logistics warehouses

LondonMetric Property buys three urban logistics warehouses as it announces results for year to 31 March 2017 that show NAV up 1.4%.

LondonMetric Property buys three urban logistics warehouses

LondonMetric Property has bought three separate urban logistic warehouses in Crawley, Coventry and Huyton for GBP23.9 million. The purchase price reflects a blended yield of 6.0% and a reversionary yield of 6.8%. The WAULT is 11.7 years.

At Crawley, LondonMetric has acquired a 51,000 sq ft warehouse located close to Gatwick airport. The warehouse is let for a further 6.4 years to TNT at a rent of GBP6.31 psf compared to an ERV of GBP9.00psf. There is a break clause and an open market rent review in 2018.

At Coventry, LondonMetric has acquired a 90,000 sq ft warehouse located immediately adjacent to Coventry Airport and 0.5 miles from the A45/A46 junction. The warehouse is let to DHL on a new ten year lease at a rent of GBP4.75 psf. There is a break clause and an open market rent review in five years.

At Huyton, LondonMetric has acquired a 120,000 sq ft warehouse located on the M62/M57 intersection. The warehouse is let to Antolin Interiors, part of Grupo Antolin, on a new 15 year lease, at a rent of GBP6.20 psf, subject to RPI rent reviews to a minimum of 2% pa and a maximum of 4% pa.

Andrew Jones, Chief Executive of LondonMetric, commented: “Over the last 12 months our urban logistics portfolio has grown substantially to GBP185 million across 26 assets. We will continue to build on this critical mass as the sector benefits from an increasingly favourable demand/supply imbalance. Following these purchases, the proceeds of our recent equity raise have now been fully committed in line with our strategy, into attractive real estate that offers high occupier appeal, in strong locations with good reversionary potential.”

Results for year to 31 March 2017

EPRA earnings of GBP51m or 8.2p per share, up 5%

  • Net rental income up 5% to GBP82m
  • GBP21m revaluation surplus contributed to a reported profit of GBP63m

Dividend increased 3% to 7.5p for year, 109% dividend cover in year

  • Fourth quarterly interim dividend declared today of 2.1p with scrip alternative

EPRA NAV of 149.8p (FY 16: 147.7p)

  • Portfolio revaluation surplus(1) of GBP44m in second half resulted in a gain of GBP21m for the year (FY 16: GBP50m
  • Portfolio valued at GBP1,534m, topped up NIY of 5.4%
  • Total Property Return of 7.4% compared to IPD of 4.6%, 280 bps outperformance

Distribution weighting up to 64% following post period end activity, retail parks down to 13%

  • GBP148m of retail, leisure and residential assets sold, with a further GBP42m sold PPE
  • GBP107m of distribution investments and, as announced today, a further GBP24m acquired PPE
  • Urban logistics portfolio of 26 assets as at today, valued at GBP185m with strong terminal values

Strong income growth across the portfolio

  • GBP5.8m pa of additional income from 33 lettings at an average WAULT of 18.2 years
  • GBP1.3m pa of additional income from 36 rent reviews at 4.6% above passing, 4.3% above ERV
  • Portfolio delivered 4.6% like for like income growth and 3.8% ERV growth, 5.6% on distribution

Short cycle development activity creating future long income and capital growth

  • 1.1m sq ft delivered at yield on cost of 6.5%, adding GBP7.9m pa of additional income
  • 0.7m sq ft under construction at yield on cost of 6.3%, adding GBP4.9m pa of additional income

Portfolio metrics reflect income longevity, contractual uplifts and occupier contentment

  • Occupancy of 99.6%, WAULT of 12.8 years and only 1% of income expiring within 3 years
  • 28% of rental income is inflation linked and 24% subject to fixed uplifts

Finances strengthened and diversified by private debt placement and equity placing

  • Undrawn facilities of GBP300m and LTV at 30% (FY 16: 38%)
  • Debt maturity of 5.2 years, average cost of debt at 3.5% with marginal cost at 1.5%
  • GBP95m of placing proceeds now fully allocated

Andrew Jones, Chief Executive of LondonMetric, commented: “On top of political and economic uncertainty, the World continues to be transformed by technological innovation and continuing social change. This is having a profound impact on real estate. The tectonic plates in retail are shifting and the industry is experiencing radical disruption driven by these trends. 

Retailers are closing marginal stores and investing in ‘flagship’ destinations and new supply chains to service ever-increasing online sales and consumer expectations. Retailers are prioritising distribution and fulfilment ahead of their stores, which is why we have repositioned LondonMetric’s portfolio from retail into logistics. Logistics will soon represent more than 70% of our investments as our urban logistics portfolio grows further and our short cycle developments complete. 

In a low interest rate environment, investors are increasingly searching for reliable and repetitive income streams. Compounding our income returns is central to our strategy as we embrace the very purpose of a REIT. Our logistics focus has enhanced our portfolio’s income characteristics and we believe that it is these structural calls that will help define the real estate winners.”

LMP :

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