LondonMetric snaps up assets from cautious owners

While some corners of the real estate industry were frozen in the face of lockdown, LondonMetric (LMP) was active in the investment market. The commercial landlord made almost £100m in acquisitions during the first half, predominantly in ‘long-income’ convenience retail assets that included the £62m sale and leaseback of five Waitrose stores. 

Cautious owners resulted in more appealing asset valuations, said chief executive Andrew Jones. “They were offering quality opportunities that wouldn’t really present themselves in a normalised market,” he said. However, many of those value opportunities have disappeared, according to Mr Jones, with competition for logistics assets more ferocious than ever. 

That is understandable. Within the group’s own portfolio, like-for-like net rental income was up 2.3 per cent and in contrast to other commercial landlords, rent collection was almost undisturbed by lockdown at a rate of 98 per cent for the most recent quarter. 

Around 657,000 square/feet of development is under way or due to commence shortly, which is expected to generate £5.6m of additional rent a year. That includes the regional distribution warehouse scheme in Bedford Link, which has been extended by the speculative construction of a further 350,000 sq/ft in space. 

The acceleration in ecommerce and supply/demand imbalance looks set to drive rental growth from logistics assets higher over the long-term, which bodes well for asset values. Panmure Gordon forecasts an adjusted NAV of 173p a share at the end of March, rising to 178p the same time the following year. Those attractions are reflected in the 34 per cent premium attached to the shares versus forecast NAV, but that seems justified by consistently growing rental income. Buy.

Last IC view: Buy, 216p, 10 Jun 2020