Urban Logistics REIT has refinanced £151m of debt and deployed some of the proceeds into the acquisition of four assets.

The company has refinanced its existing £100m term loan and £51m revolving credit facility (which was due to mature in August 2025) with a £140m term loan and a £50 million revolving credit facility.

The debt comes with a fixed interest rate of 4.48% until August 2025 and 4.98% until maturity in 2027.

The proceeds have been deployed into four assets for a total purchase price of £42.2m at a blended net initial yield of 6.6%. The spread between acquisition yield and cost of debt provides immediate earnings accretion.

The company said that it has identified asset management initiatives with the assets that could unlock further potential income and total return enhancement.

The new debt brings a small increase in pro forma LTV to 32.6%.

Richard Moffitt, of Urban Logistics, commented: “At our full year results announcement in June, we flagged an arbitrage emerging between debt rates and asset pricing in our pipeline of opportunities. We have been able to deploy additional capital into the acquisition of carefully selected buildings at very attractive initial yields. The properties also provide the potential for active asset management opportunities to drive additional income and capital returns for our shareholders.

“This activity supports the growth in our earnings, whilst still maintaining our balance sheet discipline and low LTV. The refinancing provides strong validation of our business from our lenders with our debt maturity extended and our debt costs fixed at attractive rates.

“With a view to generating a strong total return for shareholders we are actively seeking to sell selected assets where our asset management initiatives have been completed and their sale will deliver an attractive return on investment. We will be reinvesting that capital into assets that not only provide a good income return but also provide asset management opportunities and can therefore provide a meaningful contribution to total return going forward. To that end we have a number of assets already under offer and a strong pipeline of further potential acquisition opportunities.”

Debt refinance details

Urban Logistics has refinanced the company’s existing secured bank facility, which comprised a £100m term loan and £51m revolving credit facility. At 31 March 2024, the term loan on this facility was £87m drawn at an ongoing rate of 4.99%.

The new facility comprises a £140m term loan and a £50m revolving credit facility, and is provided by a club consisting of Barclays, ING and Santander. The facility has a maturity of three years, sustainability links, and two optional one-year extensions and a £100m accordion option, at the lender’s discretion.

The facility is priced at a margin above SONIA of 1.75%, and is hedged through to term. Existing hedges mean an interest rate of 4.48% until August 2025, and from that date to term forward dated hedges fix the rate at 4.98%.

Following the refinance and acquisitions (more details below), the company has a proforma net LTV of 32.6%, at the lower end of its medium-term target of 30-40%. The company’s debt facilities are 100% fixed or hedged through to term.

Acquisitions

The additional debt has been used to acquire four assets purchased in individual acquisitions for a total purchase price of £42.2m at a blended net initial yield of 6.6%, providing immediate earnings-accretion.

With a blended WAULT to first break of 4.1 years and a blended reversionary yield of 7.1%, the assets provide a significant arbitrage to the debt costs from day one, with opportunities to capture reversion and grow income as well as capital values in the near term.

In total, the acquisitions will add more than 0.4m sq ft of single-let, last mile logistics real estate space to the company’s portfolio. Further acquisitions are currently in advanced stages.

The four assets are:

• A 145,998 sq ft unit in Wolverhampton, acquired for £17.0m at a net initial yield of 6.3%, let to Ibstock Bricks Limited for a term ending in 2033, with a first break in 2028
• A 130,676 sq ft unit in Doncaster, acquired for £11.7m at an NIY of 7.1%, with a two-year rent guarantee and immediate asset management potential
• A 108,897 sq ft unit in Peterlee, acquired for £8.3m at an NIY of 6.6%, let to Caterpillar Ltd for a term ending 2030, with a review in 2025, and
• A 28,938 sq ft unit in Dartford, acquired for £5.2m at an NIY of 6.2%, let to Booker Ltd for a term ending in 2033, with a review in 2028.