Warehouse REIT has provided a trading update for the period since 1 October 2019 during which it has completed 24 new lettings and 20 lease renewals 6.4% ahead of estimated rental value (ERV).
The group has also increased its dividend for the quarter and its target for the year from 6p to 6.2p per share.
The new lettings and renewals cover a total of 189,000 sq ft of space and generate £1.1m per annum of contracted rent. As a result, Warehouse REIT’s portfolio now has a total occupancy of 92.6% (from 91.5% on 30 September 2019) with effective vacancy only 3.1% excluding units under refurbishment or under offer to let.
During the period, the company also completed the disposal of five smaller non-core assets for a combined price of £4.4m, at an average of 5.6% ahead of 30 September 2019 book values and 12.4% ahead of cost.
Andrew Bird, managing director of Tilstone Partners, the investment advisor of Warehouse REIT, said: “Alongside Warehouse REIT’s disciplined deployment of shareholders’ funds from our most recent fundraise, we continue to extract strong operational performance from the company’s diversified portfolio of UK warehouse assets. The company has achieved both rents and strategic disposals in excess of valuations, while competition for space from an ongoing broad range of tenants has translated into increased occupancy levels. Furthermore, the current rent roll does not reflect a number of income and value enhancing projects which we are confident will be delivered in the near term.
“We continue to see attractive acquisition opportunities that meet Warehouse REIT’s investment criteria, at both an individual asset and portfolio level, underpinned by solid occupational demand. We are confident that our conviction call on the well-located multi-let urban warehouse space – where rents are forecast to outperform – will allow the company to deliver its shareholders with an attractive, progressive and well covered dividend.
“Underpinned by our confidence in the ongoing asset management and with the benefit of the recent deployment of capital ahead of target, the company is today pleased to declare a quarterly dividend of 1.6p per share, reflecting a 6.7% increase on the previous quarterly dividend.”
Asset management
The 24 new lettings represent 143,000 sq ft of floor space, generating rental income in excess of £811,000 per annum, 7.5% ahead of the 30 September 2019 ERV. The 20 lease renewals generate a combined annual rent of £300,000, an uplift of 9.2% as compared to the previous rent.
Highlights include:
- A new 10-year lease with no break, to a building materials manufacturer and distributor, on a 20,000 sq ft unit at Gawsworth Court, Warrington. The rent of £137,000 per annum represents an 11.8% premium to the 30 September 2019 ERV.
- A 5,600 sq ft letting to a sports charity, at Yale Business Park, Ipswich, on a 10-year lease with a break at year six, at £43,000 per annum, 18.5% ahead of the 30 September 2019 ERV.
- The renewal of a 2,500 sq ft unit at Smeed Dean Centre, Sittingbourne on a new seven-year lease. The average rent over the lease term represents a 63.6% premium to the previous rent.
- An 11,400 sq ft unit at Goodridge Business Park, Gloucester has been re-let on a four-year term, to a fluid technology company, at 18.9% ahead of the previous rent.
Total contracted rent is now £31.5m. The vacant space that is under offer will deliver around £389,000 per annum of rent, with the lettings 5.3% ahead of 30 September ERVs.
Alongside ongoing asset management activity, in October 2019 planning permission was secured on 4.2 acres of surplus land at Warehouse REIT’s existing Nexus estate in Knowsley for 35,000 sq ft of warehouse space, a petrol filling station with associated ancillary uses of 5,000 sq ft and a 2,200 sq ft drive-through. The existing estate comprises 12 units totalling 184,800 sq ft and has strong transport links being situated on Junction 4 of the M57, approximately seven miles from Liverpool city centre. The company said discussions with potential occupiers are progressing well.
Acquisitions and disposals
In October 2019, the company completed the acquisition of the 29-acre Midpoint Estate in Middlewich, Cheshire. The 182,500 sq ft multi-let estate comprises 20 high quality warehouse units in a strategic location within two miles of Junction 18 of the M6 motorway and approximately 26 miles south of Manchester. The purchase price of £15.5m represented a net initial yield of 6.6%. Since the acquisition the company has increased overall passing rents by 3.7%, increasing the running yield to 6.8%, and also extended the WAULT to expiry by 1.2 years to 6.5 years.
The disposals of five smaller assets totalling 82,517 sq ft were completed during the period for a combined price of £4.4m, an average of 5.6% above 30 September 2019 book values, reflecting a blended 4.2% net initial yield. The sales are part of the ongoing strategy to dispose of non-core assets (one was retail, two were office and two were sold to an owner occupier).
Dividend
The company declared its third quarterly interim dividend for the financial year ending 31 March 2020 of 1.6p per ordinary share payable on 31 March 2019 to shareholders on the register on 28 February 2020. This represents an increase of 6.7% on the two interim dividends paid to date of 1.5p per ordinary share.
The company said the increase reflects the successful deployment of the proceeds of the capital raise in April 2019 and the positive outlook for earnings. The dividend target for the year has been increased to 6.2p per share from the previous target of 6p per share. Thereafter, the company will adopt a progressive dividend policy, in line with anticipated growth in earnings.
The ex-dividend date will be 27 February 2020. The dividend of 1.6 pence per ordinary share will be paid in full as a Property Income Distribution.
WHR : Warehouse REIT provides trading and increases dividend