Urban Logistics REIT plc
("Urban Logistics" or the "Company")
Acquisitions and Covid-19 update
Urban Logistics, (AIM: SHED) the specialist UK industrial and logistics REIT, today announces the £56.1 million acquisition of nine urban logistics properties and a development site following the successful £136.1 million equity capital raise which completed in March. These properties, apart from the NHS distribution centre in Normanton, formed part of the Advanced Pipeline as outlined in the Circular.
§ £56.1 million of acquisitions at an average net initial yield ("NIY") of 6.3%, comprising:
§ a portfolio of seven single-let regional distribution warehouses for £31.9 million at 6.8% NIY
§ an NHS distribution centre in Normanton for £13.0 million at 5.2% NIY
§ a regional distribution centre in Rubery for £5.5 million at 6.0% NIY
§ conditional agreement for the forward funding of a high-quality logistics property on a 3-acre site in Peterborough
§ Acquisitions are funded from the proceeds of March's £136.1 million capital raise
§ Further portfolio in the final stages of acquisition, expected to complete in April
§ 93% of rents for the quarter to June 2020 collected as at the date of this announcement, (compared to 91% at the same time last year)
§ Robust balance sheet:
§ As at the date of this announcement, £94 million of available cash resources
§ Current debt facility matures in December 2022
§ Significant covenant headroom
§ Advanced discussions regarding increased banking facilities
Richard Moffitt, Chief Executive, commented:
"Covid-19 has posed challenges for business and society as governments seek to manage the contagion and its long-term impact. Throughout this crisis our priority has been ensuring that the Company operates safely and in line with the government's evolving guidance.
"The crisis has highlighted the importance of warehousing and distribution real estate, especially scarce regional and last mile properties focused on essential goods and consumer staples.
"Having raised £136 million from new and existing shareholders in March, we are delighted to have deployed £56 million into these regional logistics properties close to established urban locations. The properties are well located and provide a good balance of asset management opportunities and income.
"Our strong balance sheet, conservative debt and robust rent roll performance enables the business to manage the impact of Covid-19. We will continue to proceed cautiously and review further acquisition opportunities and report on these when appropriate."
On 7 April, the Company acquired a portfolio of seven single-let regional distribution warehouses, (the "Portfolio") from Paloma Capital LLP for a total consideration of £31.9 million, representing a NIY of 6.8%. Completion of one property, located in Glasgow, has been delayed as a result of Scotland's Land Registry being closed, due to Covid-19, and will take place when it reopens.
The Portfolio, which was sourced off-market and acquired freehold, comprises 482,012 sq ft of warehousing with a low capital value of £66 per sq ft, low average passing rent of £4.86 per sq ft and presents opportunities for asset management. The properties are located in Melksham, Redditch, Telford, Ellesmere Port, Glasgow, Tewksbury and Leeds.
The sites are all in close proximity to established regional transport networks, have good labour availability and are located in well-populated areas where there is strong occupier demand.
Single asset acquisitions
The Company has also completed the following acquisitions:
§ Normanton - a 153,473 sq ft property acquired for £13.0 million at a 5.2% NIY. The unit is let to Unipart Logistics through to 2036, with a rent review due in 2026, and serves as an NHS distribution hub. The 14-acre site has low site cover of 25% and a passing rent of £4.70 per sq ft. There is the potential to add c.80,000 sq ft of additional warehousing on site
§ Rubery - a 51,600 sq ft property acquired for £5.5 million at a 6.0% NIY. The unit was constructed in 2016 and is let to Aqua Pak Polymers through to 2031 with a parental guarantee from Systems ADI Group Limited. Rent is subject to review in 2021 and 2026 and linked to RPI with a 3.0-5.0% cap and collar
§ Peterborough - subject to planning, a commitment to acquire a three-acre land site and forward fund a 46,500 sq ft facility on the well-established Peterborough Gateway Logistics Park at a total development cost to the Company of £5.8 million. The project is part pre-let to DPD. Development sites remain less than 10% of the gross asset value of the Company
M1 Agency fees
As part of some of these acquisitions, fees of £299,300 will be paid to M1 Agency LLP for acting as a property agent. These fees were incurred at arm's length and in line with standard commercial market terms. The M1 Agency is a partnership in which Richard Moffitt is a designated member and is considered a related party for the purposes of the AIM Rules. In accordance with Rule 16 of the AIM Rules, total fees paid to M1 Agency over the last 12 months, including the fees above, aggregate to a total of £552,000. The independent Directors, having consulted with their Nominated Advisor N+1 Singer Advisory LLP, are satisfied that the aggregate fees paid to M1 Agency LLP are fair and reasonable and in accordance with standard commercial terms insofar as the Company's shareholders are concerned.
Looking ahead, the Company continues to evaluate acquisitions across business-to-business parcel depots and last mile warehouses. A further portfolio acquisition is in the final stages of negotiation and is anticipated to complete in April.
A key element of the Company's acquisition strategy has been to focus on tenants' businesses with a notable bias towards food and pharmaceuticals, consumer staples and other essential goods.
This strategy has endowed the Company's portfolio with resilience, as evidenced by 93% of rents for the quarter to June 2020 having been collected as at the date of this announcement, compared to 91% at the same time last year.
Of the 38 properties in the Company's portfolio, only four are not fully operational as a result of Covid-19 and the Manager is currently discussing a revised payment plan with one of these tenants.
As at today's date, after taking the acquisitions into account, the Company is in a strong net cash position with available resources of £94 million. The Company will maintain a more cautious approach to leverage in the short term to maintain balance sheet strength.
While existing debt facilities are not due to mature until December 2022, the Company is currently in the process of arranging additional facilities to cater for its increased size and scale.
Looking forward, it is too early to assess the full impact of Covid-19 on the wider economy or the real estate market as a whole. Nonetheless, the Board continues to believe that logistics assets remain relatively well positioned in terms of value and occupier demand with prices remaining resilient.
The Company will provide further updates as appropriate and intends to announce its Preliminary results for the year ended 31 March 2020 in May, subject to further guidance from the Financial Conduct Authority and Financial Reporting Council. The 31 March 2020 valuation is likely to include a statement from the independent valuers highlighting material uncertainty, given the current situation. Whilst the valuation is taking place at a point in time when there is unprecedented short-term uncertainty, the Company believes the structural resilience of the portfolio underpins its intrinsic long-term value.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO 596/2014 ("MAR").
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For further information contact:
Urban Logistics REIT plc
+44 (0)20 7591 1600
Montfort - Financial PR and IR adviser
+44 (0)78 1234 5205
N+1 Singer - Nominated Adviser and Broker
James Maxwell / James Moat (Corporate Finance)
Alan Geeves / James Waterlow / Sam Greatrex (Sales)
+44 (0)20 7496 3000
Panmure Gordon (UK) Limited - Joint Broker
Chloe Ponsonby (Corporate Broking)
Emma Earl (Corporate Finance)
+44 (0)20 7886 2500
About Urban Logistics REIT
Urban Logistics REIT plc is a property investment company, quoted on the AIM market of the London Stock Exchange, (AIM: SHED).
The Company has been established to invest in UK-based logistics properties with the objective of generating attractive dividends and capital returns for its shareholders. Its investment strategy focuses on strategically located smaller single let properties servicing high-quality tenants. Investment returns will be generated by an experienced management team focusing on quality stock selection and active asset management.
A number of structural and commercial factors currently support the attractive opportunity in the last mile/regional industrial and logistics real estate sub-sectors targeted by the Company, including: strong occupier demand, (driven by the growth of e-commerce and investment by retailers in their associated supply chain) and a decline in the supply of smaller sized lettable space in industrial and logistics real estate across the UK.