Positive six month period for The Warehouse REIT

Property group The Warehouse REIT has increased rental income and profits, it revealed, in today’s figures for the six months to September 30.

The business, which has a Chester base, saw rental income for the period rise from £6.566m to £10.736m, while pre-tax profits of £10.958m compared with £8.365m this time last year.

The AIM-listed business said its property portfolio was valued at £284.3m compared with £291m in March this year, but this follows £15m of disposals during the period, which represented an increase of 6.5% on the aggregate purchase price.

Profit on disposal of investment properties totalled £3.7m in the period, and the company’s bank debt fell to £109.5m.

The company reported continued strong tenant demand, supported by the further growth of ecommerce, which it said is driving robust rental increases.

However, the supply of new multi-let warehouse space remains constrained across the UK, with capital values below replacement cost.

Since the end of the six month reporting period, the company obtained planning permission for a major mixed-use development at Queenslie Business Park, Glasgow for an additional 250,000 sq ft of warehouse and ancillary uses. The scheme has a gross development value of £25m.

It has also acquired a 49,000 sq ft urban warehouse unit in Widnes, Cheshire, let to a global internet retailer on a new five-year lease with a tenant’s break at year three, for £2.8m, reflecting a net initial yield of 7.3%. This global internet retailer is now the second largest tenant by portfolio rental income.

And it has let 60,000 sq ft at Deeside to A&D Transport (NW) Ltd on a 15-year term, with a tenant-only break at 10 years, at an average rent over the first five years at 16% above the previous rent following a programme of landlord works for the restoration of the premises.

Chairman Neil Kirton said: “This was a strong period for the group, as we maintained our focus on both knowing our tenants and understanding their needs.

“We continued to demonstrate our ability to extract value from the portfolio.

“The group has undertaken substantial asset management activity in the period, including numerous renewals and re-lettings at rental levels ahead of ERV (estimated rental value).”

He added: “This, in turn, supports the group’s robust and growing income stream, which allows us to pay attractive and growing dividends to shareholders.

“There continues to be significant reversionary potential in the portfolio and we look forward to reporting further value creation in the second half of the year.

“We remain ambitious to grow and continue to both source and attract deal flow within the asset class.”

Andrew Bird, managing director of the investment manager, Tilstone Partners Limited, added: “The market remains attractive and we continue to see substantial tenant demand for good-quality, well-located urban warehouse assets.

“Vacancy levels across the market are low and the supply of new assets remains constrained, with replacement costs being higher than capital values.

“Coupled with the continued growth in ecommerce, these market conditions are feeding through into rental growth.

“We, therefore, expect the group to make further progress over the remainder of the year.”