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Warehouse REIT boosts income credentials

The specialist REIT has exceeded its 10 per cent accounting return target thanks to NAV and dividend growth
May 21, 2019

Warehouse REIT (WHR) spent its first full year as a publicly listed company beefing up its portfolio of multi-let, motorway-flanking warehouses, adding sites in Glasgow, Cheshire and Cheltenham. However, acquisition activity was amplified by investment manager Tilstone Partners, following a £76.5m post-year-end placing, of which more than half has been used to acquire four assets totaling 568,600 square feet of floorspace.

IC TIP: Buy at 105.5p

The specialist REIT is capitalising on a lack of supply of small- to medium-sized warehouses, as new construction continues to be hampered by high build costs. Sixty-two lettings were completed in the year to March, generating annual rent of £2.1m, which was 13 per cent ahead of estimated rental values.

Meanwhile, rent renewals contributed income of £1.5m, and a 14.6 per cent increase in contracted rents. Refurbishment of vacated units can add between £5 and £7 in rental value per square foot, according to Tilstone Partners' Andrew Bird. Asset recycling is also boosting investment firepower. Four disposals generated £19m in the period, equivalent to a 27 per cent premium to the assets' March 2018 book values.

Analysts at house broker Peel Hunt expect adjusted net assets of 111p a share at the March 2020 year-end, rising to 119p in FY2021.

WAREHOUSE REIT (WHR)    
ORD PRICE:105.5pMARKET VALUE:£253m
TOUCH:104.5-105.5p12-MONTH HIGH:107pLOW: 91p
DIVIDEND YIELD:5.7%^TRADING PROPERTIES:nil
DISCOUNT TO NAV:4%  
INVESTMENT PROPERTIES:£312mNET DEBT:67%
Year to 31 MarNet asset value (p)Pretax profit (£m)Earnings per share (p)Dividend per share (p)^
2018*1028.45.042.5
201911022.813.76.0
% change+8+172+172+140
Ex-div: 30 May   
Payment: 28 Jun   
*Trading for 1 Aug to 31 March. ^Dividends paid quarterly, XD and payment dates refer to fourth-quarter dividend of 1.5p.