Midpoint 18
Warehouse REIT said in a trading update that it had grown the Midpoint estate in Middlewich by 38,300 sq ft. Credit: via PNW archives

Warehouse REIT’s portfolio now surpasses 8.5m sq ft

Julia Hatmaker

Citing major acquisitions in Cheshire and South Cambridge, the investor said that it was well-positioned to handle the growing competition in the industrial market.

The data comes from a trading update listed on the London Stock Exchange that covers the period from 25 May.

Prominent acquisitions

Warehouse REIT spent £13.1m to complete four acquisitions is mostly off-market transactions. Those acquisitions total 100,500 sq ft. The deals presented a blended net initial yield of 5% and will generate £700,000 in contracted rent every year.

Of those acquisitions, two expanded Midpoint-18 in Middlewich by 38,300 sq ft. The Midpoint Estate is now larger than 600,000 sq ft. Warehouse REIT purchased the estate back in 2019 for £15.5m.

Other transactions grew Warehouse REIT’s Dales Manor Industrial Estate in South Cambridge.

Warehouse REIT has also exchanged contracts to grow its Radway Green multi-let estate by 16 acres. That estate is located just outside of Crewe. Cheshire East Council granted Warehouse REIT planning consent in February to build 803,000 sq ft of industrial space on that land.

Key lettings

Warehouse REIT said that it had completed 20 new lettings as well, totalling 112,000 sq ft. It also completed 13 lease renewals on a total of 87,000 sq ft. Those renewals include an uplift of 20.2% compared to the previous rent and will generate £600,000 a year in contracted rent.

One of the most prominent lettings was that of the 12,200 sq ft unit 5 at Midpoint-18. Warehouse REIT signed a 15 year contract with an international manufacturing business for the space, with rent at £7/sq ft.

However, Warehouse REIT also reported a decrease in total occupancy across its portfolio. Occupancy rates went down from 95.6% in April 2021 to 94.2%, as of July. Warehouse REIT caveated that 1.8% of its portfolio is under refurbishment and another 2% is under offer to let.

Warehouse REIT also said that rent collection was strong, with 94% of rent due in the June quarter collected.

Investment advisor’s take

Andrew Bird, managing director of Warehouse REIT’s investment advisor, Tilstone Partners, said:

“With lockdown restrictions easing, and H1 2021 take up 82% above long term take up (Savills July 2021), the chronic demand-supply imbalance of modern industrial space, in economically relevant locations, will continue to underpin attractive rental growth, which the company is ideally placed to capture given its increasing scale and asset management expertise.”

“The sector’s compelling fundamentals continue to attract new entrants into the market, which is driving yield compression and underpinning strong valuations,” he continued. “Despite this increased competition, with nearly a decade of experience investing in the space, we have been able to curate excellent relationships with prospective vendors, allowing the Company to continue making accretive acquisitions deliberately focusing on adjoining ownerships to existing assets.

“Whist our strategic priority is improving the quality of the income, we believe we can drive even stronger returns by complementing this approach through select tactical acquisitions with a value-add angle, as well as strategic development initiatives.”

The stock price for Warehouse REIT increased 2.8 pence following the trading update.

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