Urban Logistics refinances £151m facility, acquires four assets

17th Sep 2024 08:40

(Sharecast News) - Urban Logistics REIT announced the successful refinancing of its £151m debt facility on Tuesday.

The FTSE 250 company said it had swiftly deployed the majority of the net proceeds to acquire four high-quality logistics assets, totaling £42.2m.

It said the refinancing replaced its existing £100m term loan and £51m revolving credit facility with a new £140m term loan and a £50m revolving credit facility.

The new debt carried a fixed interest rate of 4.48% until August 2025, which would increase marginally to 4.98% until its maturity in 2027.

It said the arrangement secured favourable borrowing costs for the company over the next several years.

The company said it invested the net proceeds into four strategically located logistics properties, achieving a blended net initial yield (NIY) of 6.6%.

It said the spread between the acquisition NIY and the cost of debt was expected to result in immediate earnings per share accretion, enhancing shareholder value from the outset.

Urban Logistics said it had also identified asset management initiatives within the properties that offered the potential for additional income and total return enhancement.

The initiatives were designed to optimise property usage and tenant mix, further boosting the assets' performance.

Urban Logistic said the refinancing had led to a modest increase in the company's pro forma loan-to-value (LTV) ratio to 32.6%, up from previous levels but still reflecting conservative leverage.

It said it remained modestly geared and benefitted from having 100% of its debt facilities at fixed or hedged interest rates, providing protection against potential future rate fluctuations.

"At our full year results announcement in June, we flagged an arbitrage emerging between debt rates and asset pricing in our pipeline of opportunities," said director Richard Moffitt.

"We have been able to deploy additional capital into the acquisition of carefully selected buildings at very attractive initial yields.

"The properties also provide the potential for active asset management opportunities to drive additional income and capital returns for our shareholders."

Moffitt said the activity supported the growth in earnings, while still maintaining its balance sheet discipline and low loan-to-value.

"The refinancing provides strong validation of our business from our lenders with our debt maturity extended and our debt costs fixed at attractive rates.

"With a view to generating a strong total return for shareholders we are actively seeking to sell selected assets where our asset management initiatives have been completed and their sale will deliver an attractive return on investment.

"We will be reinvesting that capital into assets that not only provide a good income return but also provide asset management opportunities and can therefore provide a meaningful contribution to total return going forward.

"To that end we have a number of assets already under offer and a strong pipeline of further potential acquisition opportunities."

At 1012 BST, shares in Urban Logistics REIT were up 1.13% at 125.6p.

Reporting by Josh White for Sharecast.com.