Strong operational performance, successful disposal programme and weighting towards multi-let sector provide a strong platform for growth
Neil Kirton, Chairman of Warehouse REIT commented:
“This financial year saw a marked divergence between equity market valuations and the continued strength of the occupier market. Operationally, our performance has been strong; our focus on multi-let assets in key industrial hubs where demand remains firm but supply is constrained is paying off with like-for-like growth in contracted rents of 5.3%. We were not immune from the rapid rise in interest costs, which impacted both our valuation and our earnings, but we acted decisively, with £90 million of non-core disposals in line with our plan, supporting the balance sheet and further focusing the business on its core assets.
Since year end, there are clearer signs that investors are returning to the market, evidenced by activity across the sector and our most recent sales, which are ahead of book. At Radway, our flagship scheme in Crewe, we are now in advanced negotiations for a significant pre let, a major milestone which validates our ambitious but highly disciplined approach to development. This opportunity, coupled with an improved financial position and our 71% weighting towards multi-let assets, the strongest part of our market, leaves us well positioned for the future.”
Maintained strong operational performance, capturing in-built portfolio reversion and driving growth
· £45.3 million contracted rent, including:
o £3.0 million from 40 new lettings, 29.1% ahead of previous contracted rent
o £1.0 million from renewals, 15.8% ahead of previous contracted rent
o £2.0 million from rent reviews, 21.5% ahead of previous contracted rent
· 5.3% like-for-like rental growth, with 17.6% portfolio reversion as at 31 March 2023
· Occupancy up 3.1% from 30 September 2022 to 95.8%
· c.99.0% of FY23 rent collected
· In advanced negotiations for a 350,000 sq ft pre let at the first phase of Radway 16, Crewe
£158.5m of targeted capital activity, delivering on disposal strategy and further focusing the business on its core assets
· £59.6 million of asset disposals, crystallising an ungeared IRR of 8.0%; further £29.9 million completing post period end
· £64.0 million of acquisitions including Bradwell Abbey, a multi-let industrial estate in Milton Keynes, 45.0% reversionary
· £5.0 million of capital investment or 0.5% of GAV, driving rents and values
Portfolio valuation impacted by sector-wide asset re-pricing
· Like-for-like portfolio valuation decreased 18.5% to £828.8 million (2022: £1,012.0m); 131 bps equivalent yield expansion partially offset by strong like-for-like growth in rental values of 6.2%, reflecting a robust occupier market
· EPRA NTA per share 122.6p (2022: 173.9p) with total accounting return of (25.7%) (2022: 33.2%); five year total accounting return of 10.8%
Resilient financial performance and strengthened balance sheet
· Adjusted earnings of £19.8m (2022: £27.2m), primarily reflecting increased debt costs
· Adjusted EPS of 4.7p (2022: 6.4p), with the dividend maintained at 6.4p
· Two interest rate caps of £100m acquired; 75.2% of debt hedged against interest rate volatility
· £320.0 million of debt refinanced with improved covenants
· LTV at 33.9%, with further headroom of £14.0 million in available resources; pro forma LTV at 30.5% adjusting for post balance sheet sales
Progressing our sustainability strategy
· 60.2% of the portfolio now EPC A-C rated; advanced our pathway to Net Zero
Financial highlights
| Year ended 31 March | 2023 | 2022 |
| Gross property income | £47.8m | £48.7m |
| Operating profit before change in value of investment properties | £32.2m | £35.4m |
| IFRS (loss)/profit before tax | (£182.8m) | £191.2m |
| IFRS earnings per share | (43.0) | 45.0p |
| EPRA earnings per share | 3.9p | 6.4p |
| Adjusted earnings per share2 | 4.7p | 6.4p |
| Dividends per share3 | 6.4p | 6.4p |
| Total accounting return4 | (25.7%) | 33.2% |
| Total cost ratio5 | 28.4% | 27.1% |
| As at | 31 March 2023 | 31 March 2022 |
| Portfolio valuation | £828.8m | £1,012.0m |
| IFRS net asset value | £528.5m | £739.0m |
| IFRS net asset value per share | 124.4p | 173.9p |
| EPRA net tangible assets (“NTA”) per share6 | 122.6p | 173.8p |
| Loan to value (“LTV”) ratio | 33.9% | 25.1% |
Operational highlights
| As at | 31 March 2023 | 31 March 2022 |
| Contracted rent | £45.3m | £44.0m |
| Passing rent | £41.2m | £40.6m |
| WAULT7 to expiry | 5.5 years | 5.6 years |
| WAULT to first break | 4.5 years | 4.5 years |
| EPRA topped up yield | 5.5% | 4.4% |
| Occupancy | 95.8% | 93.7% |
Meeting
A meeting for investors and analysts will be held at 9.00am on 6 June 2023 at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD.
The results presentation is available in the Investor Centre section of the Group’s website.
Warehouse REIT is a FTSE 250 UK Real Estate Investment Trust that invests in UK warehouses, focused on multi-let assets in industrial hubs across the UK.
We provide a range of warehouse accommodation in key locations which meets the needs of a broad range of occupiers. Our focus on multi-let assets means we provide occupiers with greater flexibility so we can continue to match their requirements as their businesses evolve, encouraging them to stay with us for longer.
We invest in our business by selectively acquiring assets with potential and by developing opportunities we have created. Through pro-active asset management we unlock the value inherent in our portfolio, helping to capture rising rents and driving an increase in capital values to deliver strong returns for our investors over the long term.
Sustainability is embedded throughout our business, helping us meet the expectations of our stakeholders today and futureproofing our business for tomorrow.
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 (“AIFM”). The AIFM and the Investment Manager is currently G10 Capital Limited (Part of the IQEQ Group).
