Warehouse REIT reports robust year, part-acquires Ventura Retail Park

25th Jun 2024 09:48

(Sharecast News) - Warehouse REIT reported a robust set of full-year results on Tuesday, driven by strong occupational demand and a focus on multi-let assets.

The London-listed company's operating profit increased 8.7% to £35m, supported by leasing momentum and a reduction in the EPRA cost ratio to 24.4% - the lowest ever recorded.

Adjusted earnings rose to £20.6m, with adjusted earnings per share up 2.1% to 4.8p.

The dividend was maintained at 6.4p, 95% covered when including profits on disposals.

Warehouse REIT also refinanced £320m of debt, acquiring additional interest rate caps and increasing hedged debt to over 90%.

The portfolio value increased 2% on a like-for-like basis to £810.2m, with the investment portfolio value up 2.6% and the multi-let portfolio up 3.1%.

That growth was driven by a 7.7% increase in estimated rental values.

EPRA net tangible assets per share rose 1.5% to 124.4p, and the total accounting return was 6.7%.

The company secured £10m in contracted rent from 103 lease events over 1.5 million square feet, with rents 28.6% ahead of prior passing rents.

Occupancy stood at 96.4%, with approximately 99% of 2024 rent already collected.

"The standout feature of this year has been the resilience of the industrial occupational markets, reinforcing our conviction in the multi-let asset class and driving a 5.1% increase in like-for-like rental growth," said chairman Neil Kirton.

"This part of the market remains structurally under-supplied in terms of well-located, quality assets, supporting an increase in our valuation and enabling us to capture an uplift on previous rents of nearly 30%.

"We have continued to execute on our disposal strategy, with £165.2m of non-core assets sold since our disposal plan was announced in November 2022."

Kirton said that included Barlborough Links, Chesterfield, a single-let asset which sold for £46m in June.

"Releasing capital from Radway Green in Crewe will complete that plan and negotiations are well advanced."

Warehouse REIT's disposal plan was meanwhile nearing completion, focusing on lower-yielding, non-core assets.

Since 1 April 2023, the company had exchanged or completed £110.5m of asset sales, including post-year-end sales totaling £57.5m.

The company also completed a £38.6m acquisition of phase two of the Ventura Retail Park in Tamworth, representing a net initial yield of 7.4%.

That acquisition aligned with Warehouse REIT's strategy of focusing on multi-let assets and leverages the management team's expertise in both retail and industrial warehousing.

The board said the Ventura Retail Park acquisition comprised a fully-let 13-unit scheme with high-quality tenants including Boots, Sports Direct and H&M, generating contracted rent of £3.1m and a weighted average unexpired lease term of 6.4 years.

Located near Birmingham, Ventura was described as being part of a larger retail cluster with prime space occupiers such as Next, Primark, and M&S.

The acquisition followed the completion of £165m in sales since November 2022, which reduced net debt to around £235m, thus strengthening Warehouse REIT's balance sheet and enabling selective, accretive acquisitions while maintaining low and manageable leverage and finance costs.

"This was a rare opportunity to acquire an asset that will be earnings enhancing in year one," said Simon Hope of the company's investment adviser, Tilstone Partners.

"Retail warehousing is a sector where we have deep experience, and which plays to our strengths in multi-let asset management.

"Rents have rebased and are now starting to grow, while pricing remains attractive relative to equivalent assets on the multi-let industrial side, which should support earnings and help rebuild dividend cover - a key priority for this business."

At 1032 BST, shares in Warehouse REIT were up 0.13% at 80.6p.

Reporting by Josh White for Sharecast.com.