Warehouse REIT (WHR) has, in two separate releases, announced the acquisition of two adjacent distribution warehouses in Harlow as well as a fundraise that aims to raise gross proceeds of up to £45.9 million. The two warehouses total 177,000 sq ft and were purchased for £13.9 million including costs. The combined property generates £1.2 million of contracted rent per annum, which equates to a low passing rent of £6.72 per square foot, and reflects a net initial yield of 8.6%. WHR says that the property offers significant potential for rental growth. The proceeds from the fundraise, together with WHR’s existing facilities, will be used to help finance the Harlow acquisition and two further assets, which are currently under offer.
About the fundraise
WHR has announced a placing too raise gross proceeds of up to £45.9 million through the issue of up to 37,934,400 new ordinary shares at a price of 121.0 pence per share. The Placing Price represents a premium of 2.2 per cent. to the Company’s EPRA Net Tangible Asset Value as at 30 September 2020 (unaudited) of 118.4 pence per Ordinary Share. The Placing Price represents a discount of 4.0 per cent. to the closing price per Ordinary Share on 4 February 2021 of 126.0 pence per Ordinary Share.
About the Templefields property
Situated in the heart of the established Templefields industrial area, the property comprises two modern units of 115,000 sq ft and 62,000 sq ft respectively The larger unit is let to the UK subsidiary of a global beauty & cosmetics company, with over four years remaining on the lease, and reflecting the strategic location, serves as its primary UK distribution hub. The second unit is occupied by a specialist in shop fittings and supplies, currently assisting retailers with H&S and PPE, on a short term lease.
About Harlow and the Templefields industrial area
Harlow is an established commercial centre in the South East, located in the north east quadrant of London’s Orbital M25 motorway and 30 miles (45 km) north of Central London. It forms part of the London commuter belt, with approximately 200,000 people living within a 6 mile (10 km) radius. It benefits from excellent arterial connectivity, 4 miles (6 km) from Junction 7 of the M11 and 8 miles (13 km) from Junction 27 of the M25.
Strong take up in the south east industrial market
WHR’s announcement says that the south east industrial market continues to be characterised by strong take up with a number of major international and national retailers, 3PLs and manufacturers basing their national distribution operations in the region in order to benefit from the proximity to London, the South East and the Midlands. Harlow is especially attractive to occupiers due to a combination of readily available labour at comparably lower rates and discounted rental levels versus other M25 orbital locations.
Comments from Andrew Bird, Managing Director of the Investment Advisor, Tilstone Partners Limited, on the fundraising
“We are seeing unprecedented demand for modern, fit-for purpose warehouse space in economically relevant locations, underpinned by e-commerce growth which has accelerated as businesses of all size look to adapt and future proof their operations. Having committed to an investment strategy founded on this evolution back in 2013, the Company has been able to amass a portfolio of scale, delivering both rental and capital growth even against the backdrop of the current pandemic, allowing for the generation of significant returns for shareholders.
“Despite increasing competition for exposure to what has been a standout performing asset class, a combination of our on the ground intelligence and deep relationships and a wide pool of motivated sellers has seen the Company deploy the proceeds from last year’s capital raise on schedule and into highly attractive opportunities, offering both strong day one income and longer-term asset management opportunities. Having identified a sizeable pipeline at what we believe is favourable pricing and which will be immediately accretive, we look forward, with shareholder support, to building on this momentum.”
Comments from Andrew Bird on the Harlow acquisition
“Harlow is a highly sought after and fast growing South East industrial location offering access to a significant portion of the UK population in a relatively short drive time. These acquisitions fit with the Company’s strategy of acquiring a mix of strong day one income, near term lease events allowing us to capture the reversion as well as longer term asset management opportunities.
“Despite increasing investor appetite for industrial exposure, the strength of our UK wide origination capability means we are constantly screening new opportunities. Advanced due diligence and negotiations are underway on several assets that meet Warehouse REIT’s investment criteria, at both an individual asset and portfolio level.”