Urban Logistics builds outperforming warehouse assets

Deploying the proceeds of two equity raises in only eight months has been Urban Logistics’ (SHED) priority this year, as it has ploughed more than £200m into the in-demand warehouse sector. Yet shareholders might forgive the dilution to their holdings – which can be expected to repeat in the near future – for an underlying 5 per cent rise in the portfolio value and a 99 per cent rental collection rate.  

Together with existing banking facilities, the logistics landlord has £115m to invest over the coming months. Competition for urban warehouses has increased further in recent months. However, management believes an increase in sellers facing funding difficulties this year will provide opportunities. “There will be people that find debt restructuring difficult in the current environment,” said chief executive Richard Moffitt. It has already purchased assets from owners that have lost development funding partners, as well as open-ended property funds needing to make quick sales.  

A 3.25p a share dividend was declared ahead of the closing of October’s capital raise and management intends to declare the next dividend following the release of full-year results in May. However, the consensus forecast for this financial year is a payment of 6.7p a share and 9.16p in 2022. Although the previous discount attached to the shares versus forecast NAV has now disappeared, they still offer the attraction of a prospective dividend yield of 4.7 per cent. Given the pared-back income prospects of the real estate sector, that seems good value. Buy.