RNS announcement

19 September 2018

Warehouse REIT plc

(the 'Company' or 'Warehouse REIT')

Asset Management Update

Ahead of its AGM today, Warehouse REIT, the AIM listed specialist warehouse investor, is providing the following asset management update for the period from 1 July to 18 September 2018. During the period the Company sold three assets, acquired one asset and completed a further ten lettings and six lease renewals with a total rental commitment of over £0.5 million per annum.

Disposals

As part of its stated strategy to actively manage the portfolio, the Company will consider selling the more mature, lower yielding or non-core assets and thereafter redeploy capital into opportunities that will generate additional, longer term income and higher total returns. The Company is therefore pleased to announce that it has disposed of three properties during the period for a total consideration of £15.75 million.  The disposals reflect a blended net initial yield of 5.3% and a combined 29% premium to March 2018 book values whilst delivering a combined ungeared IRR in excess of 50%:

·   The sale of the Connaught Business Centre in Mitcham to a specialist London industrial investor for £3.85 million, reflecting a net initial yield of 4% and a 36% premium to the March 2018 book value. Since acquiring the property in March 2018, the Company has undertaken a significant value enhancing asset management programme, reducing vacancy and growing rents from a base level of less than £14 psf to a new tone of £20 psf per annum.

·     The £9 million disposal of Quantum Park in Manchester to a UK pension fund, reflecting a net initial yield of 4.9% and a 33% premium to the March 2018 book value. The warehouse is let to Travis Perkins (with five years remaining before a tenant only break) and a specialist car repair centre.  The asset was acquired in December 2017 as part of a portfolio of seven assets.

·   Contracts have been exchanged to sell Warwick House in Solihull, a 15,500 sq ft purpose built 1970's office building, for £2.9 million, reflecting a 12% premium to the March 2018 book value. The Company regarded Warwick House office building, with its short-term income (two year WAULT), as a non-core asset.

Acquisitions

The Company has completed the purchase of Burntbroom Court, Edinburgh, for £2.4 million, reflecting a net initial yield of 8%. Situated on the Queenslie Industrial Estate, adjacent to its existing 56 acre site, the nine purpose-built industrial units total 47,430 sq ft and produce income of £206,877 per annum, reflecting an average rent of £4.36 psf. The Company has identified a number of near term CAPEX initiatives that should deliver significant rental growth with a reversionary yield rising to over 9%.

Leasing Activity

The Company has completed ten new lettings, 7% ahead of March 2018 ERVs, generating £384,267 per annum of additional income, and six lease renewals with a combined annual rent of £184,323, being 4% ahead of March 2018 ERVs and 14% ahead of previous rents.  Highlights include:

·    A new 10 year lease at Oldbury Point, West Bromwich, for a recently refurbished 20,000 sq ft unit, at £4.75 psf, having acquired the unit at IPO off an ERV of £3.60 psf.

·    A 23,000 sq ft letting to Ascent Logistics at Nexus, Knowsley, on a five year lease, at a headline rent of £4.17 psf, 18% ahead of the March 2018 ERV.

The Company continues to have a high retention rate at lease expiry/break.  The current level of portfolio vacancy has risen 1% of ERV (since last reported at 31 March), largely as a result of a warehouse in Deeside, Chester recently becoming vacant (former passing rent of £210,000 per annum) and for which the Company has already seen good letting interest at increased rental levels.  The Company continues to see strong levels of occupier demand across the sector and currently has 2% of the portfolio ERV under offer, which on a like for like basis would reduce overall vacancy to 6%.

Andrew Bird, Managing Director of Tilstone Partners Ltd, the manager of Warehouse REIT, commented: "We continue to undertake a range of activity across the portfolio that demonstrates both our market leading ability to generate very favorable returns on behalf of our shareholders, and the continued appetite from a range of occupiers for well-located, good quality industrial units across England. Growing the Company in a disciplined and accretive manner remains a priority and we have identified a number of opportunities that would allow us to continue to achieve our target returns in the near term."

-ENDS-

Enquiries:

Warehouse REIT plc                                                                                              via FTI Consulting

Further information on Warehouse REIT is available on its website:

http://www.warehousereit.co.uk/

Notes to editors:             

Warehouse REIT announced the results of its IPO on 15 September, having raised gross proceeds of £150 million (£146.8 million net) to invest in a diversified portfolio of UK warehouse assets located in urban areas.  As at 31^st March 2018 the Warehouse REIT has fully invested the IPO proceeds with the entire portfolio valued at £291m. 

Occupier demand for urban warehouse space remains strong as the structural change in the retail sector reduces the demand for high street stores in favour of the continuing growth in e-commerce and investment by retailers in the associated "last mile" delivery sector.

The Company is an alternative investment fund ("AIF") for the purposes of the AIFM Directive and as such is required to have an investment manager who is duly authorised to undertake the role of an alternative investment fund manager. The Investment Manager is currently G10 Capital Limited, whose role will pass to Tilstone Partners Limited ("TPL"), on receipt of FCA approval.