Warehouse REIT (WHR) has announced that it has purchased an eight asset fully-let portfolio of reversionary warehouse and distribution assets, from Aviva Investors, for £70 million. Producing an annual rent of £5.38 million, the purchase price reflects a net initial yield of just over 7%. An additional deferred payment of up to £5 million is due on or before September 2023.
WHR says that, following this transaction, it has now fully deployed the £120 million of available firepower it had amassed since undertaking a £76.5 million capital raise in March this year. With these proceeds, it has acquired a total of 14 assets at an average net initial yield of 7.0%.
About the portfolio of eight warehouse and distribution assets
The portfolio comprises one multi-let and seven single let warehouses providing a total floor area of 995,106 sq ft, with individual units ranging from circa 50,000 to 217,000 sq ft. The occupiers include Iron Mountain, Direct Wines, the Sytner Group and Amazon. The portfolio has a WAULT of circa 5.3 years and, what WHR describes as “a low average rent of £5.40 per square foot”.
WHR says that all of the assets are located close to major UK conurbations and on or near arterial routes: Reading and Gloucester in the South; Coventry, Leicester and Nottingham in the Midlands; Grimsby and the Humber Docks in the North East; and Warrington in the North West.
Transactions strengthens Warehouse REIT’s portfolio
WHR says that the acquisition of the portfolio strengthens its portfolio from both a property and revenue perspective, with over 60% of the income being produced by assets located in the Midlands and the South of England. With the purchase of the Amazon Reading warehouse, this internet retailer becomes the REIT’s second largest tenant accounting for c 4.5% of the total rent. The Gloucester warehouse, which is let to Direct Wines, the trading name of the UK’s largest home-delivery wine merchant Laithwaites Wine (named Online Retailer of the Year 2019), will become the Company’s third largest income stream. WHR says that both examples clearly reflect the growth of e-commerce warehousing from superior strength covenants within the REIT’s portfolio. Together with recent lettings, such as the new 10 year lease to Alliance Healthcare at Daneshill in Basingstoke, the combined overall portfolio WAULT (to expiry) will strengthen to 5.0 years.
Comments from Andrew Bird of Tilstone
“This is a highly attractive portfolio with 100% of income secured against D&B rated “minimum risk” covenants. The reversionary nature of the portfolio sits within some short leases and some below-market rents, however the quality of the assets and the strength of their locations give us confidence that we will be able to unlock value through active management.
“This transaction means that the Company has now acquired 14 assets within six months, fully deploying the proceeds of our most recent fundraise. We are pleased that the Company has utilised shareholders’ funds quickly but prudently and are excited about the quality of those assets that the Company has purchased, which we expect will deliver good operational performance. We continue to see attractive acquisition opportunities underpinned by solid occupation demand and remain focussed on the continued management of the Company’s portfolio to drive future shareholder returns.”
Click here to subscribe for free equity research on investment trusts, funds and listed companies.