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Warehouse Reit propelled by ecommerce acceleration

The logistics landlord generated a stellar total return last year
Warehouse Reit propelled by ecommerce acceleration
  • New lettings completed at 9 per cent ahead of estimated rental values
  • Capital of just under £200m raised to plough into new assets

No sub-sector of UK real estate is more en vogue than logistics. On trend Warehouse Reit (WHR) unveiled a 28 per cent total accounting return for the 12 months to March, well ahead of an annual target of 10 per cent. Alongside the fat dividend, the portfolio of industrial assets rose almost a fifth in value on a like-for-like basis. 

The Reit raised just under £200m in gross proceeds for acquistions during the 12-month period, but shareholders will likely forgive the dilution to their holdings. Warehouse Reit has demonstrated a strong ability in mining impressive returns from assets that are in high demand thanks to the acceleration in ecommerce. 

It completed 54 lettings of vacant space at an average 9.2 per cent ahead of estimated rental value (ERV). The ERV across the portfolio rose by 3.7 per cent on a like-for-like basis.

“[There is] definitely a rising awareness among occupiers of the limited choice in terms of available space,” said Andrew Bird, managing director of the Reit’s investment advisor, Tilstone Partners. The landlord is not only agreeing leases at higher rents, said Bird, but increasingly signing deals for terms of 10 years, up on the typical five year duration. 

House broker Peel Hunt increased its forecast NAV at the March 2022 year-end by 7 per cent to 144p a share. The shares have risen by almost 30 per cent over the past 12 months as investors have been attracted to the generous income on offer. In February the Reit announced its intention to list its shares on the main market later this year, which could broaden the shareholder register even further. While the shares still trade at a marginal discount to forecast NAV, buy. 

Last IC view: Buy, 114p, 30 Dec 2020

WAREHOUSE REIT (WHR)    
ORD PRICE:141pMARKET VALUE:£ 599m
TOUCH:140.4-141p12-MONTH HIGH:141pLOW: 101p
DIVIDEND YIELD:4.4%TRADING PROP:nil
PREMIUM TO NAV:4%  
INVESTMENT PROP:£807mNET DEBT:36%
Year to 31 MarNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2018*1028.45.02.5
201911022.813.76.0
202011020.78.66.2
202113512335.26.2
% change+23+494+309 
Ex-div: 03 Jun   
Payment: 30 Jun   
*Trading for 1 Aug to 31 Mar