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Warehouse Reit growing income from high-demand industrial

The warehouse landlord recorded a rise in portfolio valuation and rental income over its first-half
Warehouse Reit growing income from high-demand industrial
  • More than 90 per cent of rent collected over latter three quarters of the year
  • Demand for industrial assets rising, in contrast to office and retail
IC TIP: Buy at 111p

Like peers, Warehouse Reit (WHR) has proved itself as one of the few income hopes within the real estate investment trust (Reit) sector post-pandemic. The dividend, which at the current price leaves the shares yielding more than 5 per cent, was backed by a rent collection rate of 93 per cent for the final quarter and over 97 per cent for the prior six months.

The multi-let warehouse landlord completed 23 new lettings during the six months, 8.5 per cent ahead of 31 March estimated rental value. Management’s focus is on deploying the remainder of the £149m raised in June, which should be completed by the end of December. Acquisitions made during the period include a £57m fulfilment centre, which has been fully-let to Amazon.

In contrast to the office and retail segments, a net 22 per cent of respondents to the Royal Institution of Chartered Surveyors third quarter commercial property survey saw a pick-up in demand for industrial assets. 

Unsurprisingly, competition for assets is significant, said Andrew Bird, managing director of the Reit’s investment advisor, Tilstone Partners. “We have seen existing investors bidding strongly for stock and we are seeing lots of new numbers of investors entering the market,” he said. That can mean transactions are more complex and take longer to complete. 

Management is targeting fully covering the dividend by earnings by March 2022, when the payout is forecast to reach 6.65p a share, based on analyst consensus. The shares may now demand a narrow premium versus forecast NAV, but that seems warranted. 

WAREHOUSE REIT (WHR)    
ORD PRICE:111pMARKET VALUE:£ 421m
TOUCH:109-112p12-MONTH HIGH:122pLOW: 69p
DIVIDEND YIELD:5.7%TRADING PROP:nil
DISCOUNT TO NAV:6%  
INVESTMENT PROP:£572mNET DEBT:27%
Half-year to 30 SepNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
20191102.81.23.0
201011840.413.23.1
% change+7+1343+1000+3
Ex-div: 26 Nov   
Payment: 31 Dec   
*XD and payment dates refer to second quarter dividend of 1.55p a share