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Warehouse Reit’s over-achieving debut

In less than half a year of trading, Warehouse Reit has boosted its NAV by 4 per cent
May 23, 2018

Think ‘hot property’, and a motorway-flanking warehouse is unlikely to spring to mind. Yet scan the UK real estate market and you’ll find last-mile delivery distribution centres in the high-demand, supply-constrained sweet spot. For proof, look no further than Warehouse Reit (WHR), which exceeded several of the goals it set at its September IPO in less than half a year of trading.

IC TIP: Buy at 103p

The headline achievement was a 4 per cent uplift in net asset value (NAV), after stripping out listing fees. Regardless, the increase in the value of the property portfolio was enough to offset combined acquisition and IPO costs of £10.1m. Impressively, this uplift was chiefly driven by an 8.5 per cent increase in the value of the portfolio acquired on admission.

Yet investors could equally take encouragement from the management of the portfolio to date. Market forecasts are for industrial rents to grow at 3.5 per cent a year until 2022, but of the 18 lease renewals outstanding at the acquisition of the seed portfolio, Warehouse has renewed 12 at 8.2 per cent above their estimate rental value, and four vacated units at 13 per cent above market. No wonder the target dividend for the 12 months to March 2019 has been raised from 5.5p to 6p.

By that point, analysts at Peel Hunt forecast that adjusted NAV will have climbed to 109p, a 4p increase on their previous estimate.

WAREHOUSE REIT (WHR)   
ORD PRICE:103pMARKET VALUE:£171m
TOUCH:102-103p12-MONTH HIGH:105pLOW: 98p
DIVIDEND YIELD:2.4%TRADING STOCK:nil
PREMIUM TO NAV:1%NET DEBT:73%
INVESTMENT PROP:£295m   
1 Aug to 31 MarNet asset value (p)Net rental income (£m)Earnings per share (p)Dividend per share (p)
2018*1026.575.02.5
% change----
Ex-div: 7 Jun   
Payment: 6 Jul   
*Initial public offering Sep 2017, prior to which no pro-forma net rental income, EPS or dividend figures exist. Dividends paid quarterly, XD and payment dates refer to fourth-quarter dividend of 1.5p.