Urban Logistics REIT has said it will not be able to raise money to fund new acquisitions in the current economic climate.
Chair Nigel Rich said: “It is unlikely that we will be able to fund a pipeline of acquisitions in the immediate future. We will therefore look to recycle assets where we have maximised the income and replace them with properties offering lease events, as well as capitalising on the significant reversionary opportunities in the portfolio.”
Results for the year to the end of March showed that the REIT had boosted rental income by 45% to £53m, adding £6.1m in new rent through 41 leasing events.
A 9.8% like-for-like fall in values was offset by additions to the portfolio, resulting in the portfolio valuation climbing by 9% to £1.1bn. The total portfolio now consists of 130 mid-box urban logistics assets covering 9.7m sq ft.
Over the period the REIT acquired £160m of assets, at a blended NIY of 5.2%. As a result, LTV has risen from 11.3% last year to 29%.
Chief executive and investment adviser Richard Moffitt said: “The portfolio has proved to be resilient against a backdrop of challenging market conditions, with persistently high inflation and rising interest rates leading to repricing of assets across commercial real estate. Despite these challenges, our active asset management strategy of moving rents on, improving tenant covenants and increasing lease lengths has allowed us to add value to the assets and shield the company against the impact of a negative yield shift. This is demonstrated by the portfolio’s like-for-like downward revaluations, which is below that of the wider sector and above most expectations. Post period end we made two disposals as part of our asset recycling strategy, selling for 3.4% above the valuations.”
Moffitt’s Logistics Asset Management was appointed as investment adviser in May.
“Our conservative balance sheet, with a high proportion of our debt fixed or hedged and a low LTV, reduces our exposure to interest rate fluctuations. We have retained the management team for a further term until 2027, giving us stability and security.
Rich added that the REIT was unable to raise further money through a share offer, due to shares trading “at a significant discount to NAV”.
“However, there is significant potential within our own portfolio to drive growth through asset management, recycling and more efficient use of the land we already own. We are cautious, but believe we are very well positioned, and have everything we need in place to perform in an uncertain future.”
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