Urban Logistics, the last mile logistics focused REIT, has acquired five assets for £90 million, reflecting a 4.5% net initial yield (NIY).
The REIT acquired;
-Brent Road, Southall, a 97,362 sq. ft. warehouse in West London, fitted out for frozen food storage. The purchase price paid was £46,000,000 at a NIY of 1.9% with two months remaining on the lease. The property is highly reversionary, with the current tenant paying £10 psf and rents in the area being in excess of £25 psf. We anticipate quickly letting the property to capture this reversionary yield, and anticipate signing a new long term lease providing a yield of 4.2%, which should create a significant valuation increase.
-Beveridge Lane, Bardon, a 249,211 sq. ft. logistics warehouse two miles from the M1. The purchase price paid was £35,385,000 at a NIY of 4.7%. The unit is let to DHL Supply Chain Ltd on a lease expiring in 2027. The asset has near term asset management potential.
-Downgate Drive, Sheffield, a 31,105 sq. ft. newly refurbished industrial warehouse close to the M1. The purchase price paid was £3,120,000 at a target NIY of 6.1%. The unit is currently vacant and is being marketed.
-Fowler Road, Dundee, a 29,834 sq. ft. logistics warehouse on the West Pitkerro Industrial Estate. The purchase price paid was £2,800,000 at a NIY of 6.5%. The unit is let to the DPD Group on a lease expiring in 2027.
-Silkstone Road, Barnsley, a 24,230 sq. ft. industrial warehouse located in the Dodworth Business Park. The purchase price paid was £2,600,000 at a NIY of 5.2%. The unit is let to a vintage clothing operator, who process and sort textile recycling on site, with the lease expiring in 2029. The low rent of £6.00 psf is subject to an open market review in 2024 offering good reversionary potential, with rents in this area being in excess of £7.50 psf.
Richard Moffitt, Chief Executive, commented: “During recent market volatility we have been deliberately patient in our deployment, and that patience has been rewarded by our ability to acquire these properties in prime locations on advantageous terms.
“Our occupational market, with its focus on supply chains for essential goods, remains strong with continued upward pressure on rents. We firmly believe that, at any stage in the property cycle, if we improve lease lengths we will see yield compression.
“We therefore see substantial potential valuation increases in these acquisitions, driven by our asset management plans.”