Warehouse REIT cautiously optimistic, despite slipping to interim loss

Warehouse REIT, the specialist warehouse investor which operates out of Chester, said it is cautiously optimistic about the future, despite showing a £46.4m pre-tax loss for the six months to September 30, 2022.

The loss compares with a pre-tax profit of £86.4m in the same period a year ago. However, the group revealed that, at 30 September 2022, it recognised a loss of £73.4m on the revaluation of its investment properties, compared with a gain of £73.2m in the prior year, reflecting a softening of yields.

Gross property income for the reporting period was £24.1m, up slightly from £23.4m a year ago.

The operating profit before gains on investment properties was £17m, against £16.7m in 2021.

The dividend per share for the interim period is recommended at 3.2p, compared with 3.1p last year.

During the six month period the total portfolio was valued at £1.006bn, against £1.012bn at March 31, reflecting a like-for-like decrease, excluding acquisitions and disposals, of 6.9% comprising, £918.9m for the investment portfolio of completed assets and £87.2m of development property and land (March 31, 2022: £913m and £99m).

The REIT enjoyed continued strong rent collection performance, with 94.2% of rent due in relation to the period collected at November 4, 2022, with occupier covenants continuing to be monitored through the use of credit rating providers.

It said it has a strong balance sheet with bank debt of £336m and cash balances of £11.2m.

A short term strategy to reduce gearing is on track through the disposal of non-income earning, non-core properties.

During the period the REIT completed its transfer from AIM to the main market on July 12, with the shares included in the FTSE 250, All-Share and FTSE EPRA/NAREIT Global Real Estate Index Series from September 19, 2022.

It said the occupational market remains favourable, despite more difficult economic conditions, with strong demand and constrained supply driving further rental growth.

The business secured planning committee approval for a further one million sq ft of warehouse space at Radway 16, in Crewe, bringing the total scheme to 1.8 million sq ft, and signed an agreement with Panattoni UK to deliver the scheme, with a first quarter 2023 start date.

It also acquired a multi-let industrial estate in Milton Keynes, for £62m, while disposing of two non-core assets for a combined total of £4.8m, ahead of the March 31, 2022 valuation.

Andrew Bird, managing director of the investment advisor, Tilstone Partners, said: “We are looking forward with cautious optimism: the UK warehouse occupational market still remains favourable, ensuring minimal impact on the company’s trading performance, its assets are critical to occupiers and rents account for only a fraction of their total costs.

“The group’s portfolio also presents further opportunities to create value through active asset management, which we believe is a key differentiator, enabling us to capture the significant reversion and deliver continued earnings growth.”

He added: “In addition, we have continued to successfully implement our value creation strategy during the period, in particular by securing committee approval for planning at Radway 16, Crewe. This is a major milestone for the group and will see us deliver much needed logistics space in one of our key regional markets.”

Neil Kirton, chairman of Warehouse REIT, said: “Since the start of the period, economic conditions have changed markedly, with inflation and interest rates in the UK both rising sharply.

“However, the successful and consistent execution of our strategy has given us a resilient portfolio of well located assets, a large and diverse base of occupiers and a strong financial position.

“The transfer from AIM to the main market in July was an important step for the company and demonstrates the progress we have made since our IPO in 2017. The board remains rigorously focused on managing risk and carefully deploying capital, and we believe we are well placed to continue to create value for shareholders and our other stakeholders.”