Warehouse REIT H1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
November 21, 2024

There are 7 speakers on the call.

Operator

Good morning, and welcome to the Warehouse REIT's Half Year Results Presentation for the Six Months to September 24. I'm Simon Hope, Joint Managing Director of Tilstone Partners and Co Founder of the Warehouse REIT. I'm joined this morning by Paul Macon, our Investment and Property Director Peter Greenslade, our Finance Director. We'll follow the usual running order. I will cover the highlights of the period, provide an overview of our markets, then Paul will talk through the portfolio performance, and Peter will present the numbers.

Operator

I'll wrap up with a conclusion, and we'll leave plenty of time for Q and A. Starting with the highlights, the key takeaway for the half year is our valuation performance. The whole portfolio is up 2.3% on a like for like basis to GBP $811,000,000. But most strikingly, the value of our multilet assets is up five percent. Not only does this reflect our continued leasing momentum supporting an increase in ERVs, but we have also seen yield contraction on the multilet assets for the first time since 2022.

Operator

So the portfolio is now valued on an equivalent yield of 6.4%. This positive valuation movement has driven an increase of 2.5% in the NTA per share to 127.5p. We've continued to capture reversion with our leasing activity securing £5,500,000 of rent and supporting an increase in our operating profits of 8%. And we've continued to deliver on the strategic priorities we set ourselves in June. These priorities are summarized on Slide six.

Operator

I'll give you the highlights now, but between the three of us, we will cover them off in detail throughout the presentation. First, we've added GBP 1,400,000.0 of new rent and captured GBP 600,000.0 of reversion in the half. The last few months have been busy with a further £800,000 of new rent added since. The £3,200,000 of reversion available short term and with strong ERV growth, we've increased the reversionary potential of the portfolio to over 16%. We've made further sales ahead of book value, proving our valuation and focusing the portfolio on higher value opportunities.

Operator

And as you know, we've made one acquisition in the period, the Ventura Retail Park in Tamworth, which has performed exceptionally well for us. At the time we bought it, we envisaged that it would be the seed investment for a joint venture. Markets have moved quickly, more quickly than we thought. And as a result, it has not proved possible to deliver the joint venture as we hoped, and it is no longer under consideration. However, with a valuation uplift of 9.6% in just three months, it's proved a positive addition to our portfolio.

Operator

Making progress on Ragway Green, our development asset in Crewe, is our third objective, which I'd like to spend some time on and is one of the biggest drivers of our fourth objective, which is rebuilding dividend cover. One final point before I turn to Radway. You may have seen in this morning's announcement that the Board is evaluating the management arrangements. It wouldn't be appropriate to comment before the outcome of this process is known, but what I can say to you is it will deliver cost savings for the REIT and further increase alignment between us, the investment adviser and shareholders. So turning to Radway.

Operator

We announced plans to realize capital from this scheme last year. It is not income producing, with interest rates remaining elevated, hold on our balance sheet impacts our earnings. Following a thorough process, we've now agreed terms for sale of the first phase, which is the first part of the site we acquired. It has probably taken a bit longer than we envisaged. That's partly because it's a complicated scheme, and the macro environment over the past year has not been supportive of development, but also because getting reserve matter approvals, dealing with the environment agency, and securing the power took time and was absolutely critical to unlocking value.

Operator

Solicitors have now been instructed, and we'd expect the sale to complete by the end of the calendar year. We can't talk about the price at this stage, but our valuation, which Paul will talk you through, reflects offers received on this asset. That brings me to the second phase, which is where the bulk of the value lies. We have outlined consent for five units covering 1,000,000 square feet, but we think that could be increased with the flexibility to deliver a single or multiple units. Again, refining the planning consent will be key to getting the right price.

Operator

And as a team, we are very clear on the need to progress this as quickly as possible. Before I talk about the wider market, I'd just like to remind you why we believe multilet warehouses are such an attractive asset class and why they sit at the heart of our strategy. First, this is a highly reversionary sector, and the frequency of lease events means you can access that reversion faster. Around 95% of our leases are on an open market basis, which means we are not tied by capped or collared arrangements, which are typical of big boxes, so we can push the rents ahead of inflation. We also only invest in assets with good bones.

Operator

So the rate of obsolescence is very low, and it requires very limited CapEx to deliver high quality space. Paul will give you some examples of how we are doing that. Conversely, building these assets from scratch is expensive, so supply is very constrained. For our multilet warehouse assets, the reinstatement value is over GBP 120 per square foot, which compares to a capital value of around £100 a foot. So the land is in for nothing.

Operator

Warren Buffett calls this an economic note. A range of unit sizes also means we can cater to occupiers as they grow, and the diversity of the occupier base makes our income streams more resilient through the cycle. What's been very noticeable this year is that these attributes are gaining recognition more widely. So the volume of investment into the multilayer industrial sector, both from private equity and in the listed space, is increasing and has already surpassed last year's total. Looking at the market more broadly, and you can see how the cost of building multilet assets is constraining development.

Operator

There is just 3,300,000 square feet of multilet space currently under construction, equivalent to only one month supply at current take up levels. That's why voids are generally low in the sector at sub 6% in our key markets, which compares to 7% for big box and prime industrial. And of course, lower vacancy is very supportive of rental growth. What you can see on the right is how the reversion for multilet industrials has been building, and it's that potential for rental growth that's really attracting capital to the sector and driving cap rates down. To give you a few examples, I've set out on this slide some recent multilet transactions.

Operator

You can see that assets are changing hands at yields of between 35%. That compares to 5% to 6% a few years ago. This has, of course, supported our own valuations, and we've seen some very strong individual performances. For example, Gateway in Birmingham and Tramway in Banbury were both up 11% at the half year. Bradwell Abbey in Milton Keynes was up 10%, and Granby also in Milton Keynes was up over 20%.

Operator

On that note, I'll hand over to Paul to provide a review of the portfolio.

Speaker 1

Thank you, Simon. To start, I'd like to highlight some of the key numbers, and then I will set out how capital activity has impacted on the headlines and run through some of our active asset management activity. The value of the portfolio now stands at £811,000,000 and benefited from a like for like valuation uplift of 2.3%, more than offsetting our £23,000,000 worth of sales. Contracted net sales. Contracted net rent at £43,600,000 was pretty much in line with the full year, but up marginally on a like for like basis.

Speaker 1

We had a few new vacancies in the period, which softened like for like rental growth, but creates opportunity to drive rental growth in the near future. Portfolio ERV was also in line at £53,400,000 but up 2.6% like for like. Reflecting the valuation increase and capital recycling, the capital value has risen to £102 per square foot, but is still a good margin below the building replacement cost, so the land is still in for nothing. Finally, we've seen weighted average unexpired lease term come down a bit, but that largely reflects the sale of Chesterfield, a large single let asset with close to ten years unexpired. Looking at our capital activity in a bit more detail, you can see that we have exchanged a single let lower yielding assets where our ability to capture reversion is limited with a higher yielding multi let asset that offers more opportunity.

Speaker 1

Ventura Retail Park in Tamworth was our sole acquisition during the period. It benefits from an excellent location in a market where ERVs are growing strongly and where we see potential to significantly raise the rental tone through active asset management. And as Simon has said, we no longer expect to create a warehousing joint venture, but we are pleased with the asset and it has supported our overall valuation performance with an uplift of 9.6% in just three months. Looking at the valuation in a bit more detail, and it's clear that the benefit of a multi let strategy are bearing fruit, with the value of the multi let portfolio up 5% like for like. ERV growth was also strong

Speaker 1

And for the first time since 2022, we saw yield compression of around 12 basis points on these assets. Our last mile assets also performed well with ERV growth of 2.82.2% valuation uplift. Larger single S assets were a bit weaker overall, but still showed a like for like valuation increase. This is an asset class that we have been actively reducing our exposure to with a preference for multi let industrial where the supply demand dynamics are more favorable as Simon has set out. The valuation of our developments, principally Radway Green Crew, was down 13.4% like for like.

Speaker 1

This was partly as a result of macro factors with interest rates cuts being slower to materialize than initially hoped, But this also reflects offers received on Radway, which were below book, but consistent with the broader risks of a larger scale development in the current environment. Overall, the investment portfolio is now valued at a net initial yield of 5.5%, which compares to a reversionary yield of 6.7. Remember, these are based on valuers' ERVs, which we continue to outperform. And the average rent per square foot on the portfolio is now only 6.5 per square foot compared to an ERV of 7.6 per square foot, demonstrating that our space is highly affordable to occupiers and offers considerable uplift from here. I'd now like to see how just to set out how we are capturing that reversion.

Speaker 1

We've maintained our leasing momentum with 46 lease events in the half year, nearly two a week. Excluding fixed uplift, deals are on average 25% ahead of prior rents. Occupancy has ticked down a little, but with three notable vacancies arising in the half. But these assets are well located in strong towns and cities such as Leicester, Peterborough and Swindon. We've allocated CapEx to fund comprehensive refurbishment programs and delighted to have either agreed terms or are seeing significant interest in each at levels well ahead of prior rents.

Speaker 1

Post period end, thanks to the hard work of our asset managers, I'm pleased to say that we've maintained the deal momentum and have concluded another 15 lease events, covering 3,000,000 of contracted rent, 29% ahead of ERV and capturing £800,000 of additional rent. I'd now like to take you through a brief case study on a multilet asset management, which really brings out our strategy to life. At Gateway Park in Birmingham, which sits on the apron of Birmingham Airport and is a flagship asset for us, we continue to work through our active asset management, taking advantage of having a range of unit sizes. We've agreed an early surrender on 22,000 square foot prime unit fronting the airport, securing the full rent paid up to the break date of the December 24. Refurbishment tenders have been twin tracked with the dilapidations process with the result being that the outgoing occupier covered the majority of the capital expenditure required.

Speaker 1

Marketing of the unit commenced ahead of refurbishment and contractors are now on-site. We've already agreed terms for a new ten year lease to an airport logistics occupier at a new high watermark rent, 50% ahead of the previous rent. And we expect the occupier to take occupation once work's complete at the January 2025. Not bad considering we secured rent up to Christmas Eve. Elsewhere on the park, we're working with two occupiers both looking to double their space.

Speaker 1

The active asset management and flexible approach enables us to create new rental evidence and capture reversion quicker than waiting for the next lease event, helping to drive rental income and value. This also releases a smaller unit, allowing us to attract a new occupier onto the estate, which will hopefully grow in the future. We've talked before about this process being like musical chairs. But now I think it's better to refer to it as a conveyor belt of lease events driving rents upwards. This is just one of multiple opportunities we have to capture reversion.

Speaker 1

On this slide, I've set out more examples of where we have done just that. At Gawesworth Court in Warrington, we renewed a lease to a multinational manufacturing business signed 56% ahead of the prior rent. At Bradwell Abbey and Milton Keynes, we signed a new lease to Abbey Precision, a high-tech engineering business, 30% ahead of the prior rent. And at Stadium Industrial Estate in Luton, we let space to a vehicle glass repair business 38% ahead. And these aren't isolated examples, and we're doing deals like this across the business.

Speaker 1

Bringing this all together, assuming we maintain a circa 5% vacancy, you can see on this slide that the full recovery potential of the reversionary potential of the portfolio is now £7,100,000 a year, of which more than £5,000,000 is in the multi let portfolio. We have another £3,200,000 to target in the next eighteen months. And post period end, we've already captured another £600,000 of annual reversion. This is clearly a big year for capturing reversion. But as I set out in June, a lot of it only becomes available towards the end of the year.

Speaker 1

And since it typically takes a few months to negotiate transactions or carry out a light refurbishment of the space to maximize rents, we don't expect to capture it all this year. But it will be captured. And given we usually beat valuers ERVs, we hope to do better than that. And again, as Rocky Balboa would say, this is a case of capturing the reversion one lease at a time, one review at a time, one renewal at a time. As well as our ability to grow rents, ensuring that our rental streams are robust and resilient is also really important.

Speaker 1

The diversity of our occupier base, which is one of the key benefits of a multiletter state, gives us a lot of comfort in that respect. As well as some household names such as John Lewis, DHL and Sainsbury's and the NHS, we have a number of successful smaller local businesses, but they're not necessarily that small. In fact, 73% of our occupiers have turnover above £10,000,000 a year, and 90% of our occupiers have a turnover above £1,000,000 a year. Looking at our rent collection, I'm pleased to say we've collected 99% of the rent for the half year, and we're working on the rest. I'd like to finish by touching on sustainability.

Speaker 1

Improving our EPC rating is a key priority, and every refurbishment targets a B rating. So we were pleased that 15 units achieved a minimum B rating on assessment in the half year. And by the end of the year, 64% of the total portfolio was EPC A to C. We've also spent some time evaluating the opportunity to fit solar PV panels to the roof, and we're pleased that panels were fitted to our asset in stone, covering 40,000 square foot, and there are other opportunities across the portfolio. Our good progress in sustainability reporting was again recognized, and we've maintained our EPRAT Gold Award for both financial and sustainability reporting this year, and we're working with our advisers to set a Scope three target.

Speaker 1

And on that note, I'll hand over to Peter to take you through the financials.

Speaker 2

Thank you very much, Paul. I don't propose going through the results line by line. But aim to pull out the salient numbers and ratios. But if you have any questions, I'll be only too happy to answer them at the end. NAV increased 2.7p to 128.8p at the September, reflecting the 2.3% like for like revaluation increase in the period with other balance sheet movements broadly netting off.

Speaker 2

Adjusted earnings per share were 2.9p for the half year, up from 2.3p for the comparative period, with higher property income benefiting from controlled costs and from dilapidation income, which was ahead of normal run rates. The 2.9p of earnings give dividend coverage of 90% for the half year, and I will return to our pathway to full coverage shortly. LTV increased marginally to 34.1% at the period end, but will trend downwards as a result of post period end sales and will remain below our self imposed target of 35% as we continue with our constant review of the portfolio. I'll talk more to our debt strategy later, but with £37,000,000 of facility headroom, a comfortable LTV, pounds $250,000,000 of interest rate caps and a weighted average cost of debt of 4.2%, our balance sheet is robust. IFRS profit increased to £25,100,000 which is 14% higher than a year ago, reflecting the revaluation gain combined with the earnings increase I've already mentioned.

Speaker 2

Adjusted EBITDA was 8% ahead at £18,700,000 and adjusted earnings were £12,300,000 in the period against £9,800,000 a year ago, up 26%. EPRA and adjusted earnings were similar at 2.8 and 2.9p, with the only difference being surrender premiums, which are now excluded under new EPRA guidance recently issued. I've already mentioned the NAV at 128.8p, which compares to the EPRA NTA of 127.5p, up 2.5% half year on half year. The cost ratio was 19 bps higher than a year ago at 26.3%, driven largely by higher void costs, but it is lower at 22% when vacancy costs are excluded. The 2.3p of earnings for the six months to September '3 tracked 2.9p for this half year through higher dilapidation income, growth from capturing reversion and lower net interest cost offset by lower rents due to disposals and operating and admin costs marginally ahead.

Speaker 2

Looking ahead, as Simon has set out, we're focused on rebuilding our dividend coverage. On this slide, you can see the key drivers to that increase. First, the disposal of noncore and low earning assets. The sale of Radway will contribute materially as it is non income earning. We hope to complete the sale of the first phase by the end of this calendar year, so we will start to see the benefit from Q4 this financial year.

Speaker 2

The full benefit won't be felt until the next fiscal year when we expect to sell Phase two. Second, we will capture reversion through focused leasing activity. Every £1,000,000 of new rent adds 0.25p to earnings. Third, we will look to refinance the debt to take advantage of lower banking margins. To give you some idea of the upside, when were we to refinance today, we expect to share expect to achieve a margin some 40 bps lower, equating to a cost saving of some £800,000 or 0.2p per share earnings based on current debt levels.

Speaker 2

Fourth, we will maintain our discipline on costs within the business. And lastly, by working with the Board to restructure the investment management arrangements that Simon has already referenced. Clearly, there are a lot of moving parts there in terms of both timing and quantum, but together, these initiatives should support a fully covered dividend on a run rate basis by the second half of the next financial year. When we look at the NTA bridge from 124p to 127.5p, you will see that half year earnings of 2.9p covered the 3.2p dividend by 90%, And there was a favorable fair value movement of 4p and a small 0.6p outflow in relation to the deferred payment of interest rate caps. Addressing our balance sheet and hedging in a little more detail, it's worth noting that we are 88% hedged with £200,000,000 of caps at 1.5%, half for a further nine months and half for further two years and nine months.

Speaker 2

There is also a cap of £50,000,000 at 2% for a further two years. The average cost of debt was 4.2% in the period as it was for the whole of the last financial year. The debt is constantly reviewed, and with a lower net debt level than anticipated, there's opportunity to cancel some of the RCF and therefore avoid nonutilization costs, obtain lower banking margins through a refinance, as I mentioned earlier, and as interest rates fall, weigh out the requirement for new caps alongside fixed term debt opportunities. There are 100,000,000 of caps that expire in July year, and we will replace these as appropriate with the objective of maintaining the average cost of debt at the current level. It should also be mentioned that all covenants have been comfortably met, and this is projected to continue.

Speaker 2

Net debt at March 2024 was £268,000,000 and that compares to £276,000,000 at the half year end. This will, however, fall to $264,000,000 when £13,000,000 of recent disposals complete. The main changes in net debt over the half year were disposal proceeds of £55,200,000 and operating profit of £19,100,000 in terms of income, offset by dividends paid of £13,600,000 net finance costs of £9,200,000 CapEx spend was £2,400,000 plus £11,000,000 for the final payments of the Phase 2 Radway land. And working capital rose £4,900,000 largely due to £6,000,000 owed from an interest bearing deferred payment from the sale of Chesterfield. With recent sales agreed, our pro form a debt is trending towards our £250,000,000 hedge level.

Speaker 2

And of course, the sale of Radway Phase one will accelerate that. Simon?

Operator

Thanks, Peter. I'd like to conclude by revisiting this slide, showing our progress against our strategic priorities. In summary, we've made good progress capturing the reversion, but there's plenty of upside in the portfolio to come, and the occupancy market for multilet industrial continues to be buoyant. We've also undertaken significant capital recycling. A lot of the heavy lifting has been done, but we continue to refine the portfolio to focus on the highest quality assets with the most potential.

Operator

The principal outstanding transaction is Radway, and here we expect to close the first phase by the end of the year. A sale of both phases would get us well below our hedging level of £250,000,000 which will be a milestone for our business and instrumental in improving dividend coverage, which is the last pillar of our strategy. As I mentioned earlier, we're working with the Board to deliver changes to management arrangements, which will reduce costs for the REIT and help rebuild dividend coverage. As significant shareholders ourselves, we are very much behind this. Thank you, and I'd like to turn now the meeting to questions.

Operator

James?

Speaker 3

Morning. It's James Carswell from Peel Hunt. Some of your peers have talked a little bit about some of the smaller kind of 3PL companies struggling, and we've seen a few kind of tenant failures elsewhere. I'm wondering if you've seen any about your own portfolio. And just what is your exposure to that kind of subsector?

Operator

I'll ask Paul to answer that.

Speaker 1

I think the statistics speak for our own. We've got a 99% rent collection during the period. We do get the odd smaller occupier who gets into difficulty. But for us, because I think we've got the diversity of the unit sizes, this gives us opportunity to work with other occupiers. And what's really pleasing is when all of a sudden, one of our occupiers hears that next door is struggling and comes and knocks on the doors and say, before we talk to an house, can we take it?

Speaker 1

And so this is having this relationship with our occupiers means that we can work these estates. And at the moment, we're being able to hoover up any that do come back to us, it gives us opportunities.

Speaker 3

Thanks. And then maybe just in terms of noncore selling, Radware's clearly you've been pretty clear there. But in terms of other noncore sales, mean, parts of the portfolio are they likely to come from? Is that more going to be the single let units? And then what are seeing in terms of the market, the investment market, where are seeing the best

Operator

So very strong investor demand for core multi let. But we're adopting good estate management and portfolio principles. And the drop bottom 10% by way of lot size, by way of geography, by way of depreciation, we're rotating. So we've sold £74,000,000, to this point of a portfolio of £811,000,000 Clearly, over and beyond anything, the the strategy behind Radway is clear. There's no income from land, and therefore, that's the biggest needle mover in our dividend coverage.

Speaker 3

Thanks.

Speaker 4

Good morning. Excuse me. It's Matt Sapir from Peel Hunt. You've very clearly got some real upsides come from capturing the reversion in the portfolio, and there seems plenty of it to go for in the near term. I was just wondering how much of that do you think you can actually capture with the existing tenants in place?

Speaker 4

Or how much of it you're going to have to intervene to capture? And if there are interventions to be made, will there be sort of minimal CapEx be spent to actually realize that?

Operator

I think we've got if there's some 100,000 feet of vacancy, which I would just point at this moment in time, That generates its three locations, Swindon, Leicester and Peterborough. That we've got with deep negotiations on all of that space that would throw up significant reversion of a rent of 800,000. What we're finding on the whole is the dilapidations, yeah, under the 54 landlord and tenant act is largely covering the refurbishment. What's different from the pre COVID times, so post Brexit, post COVID, post quantitative easing, post inflation, is that we're seeing significant rental growth like we've never seen before, particularly in the multilet sector. So as Paul has alluded, at Gateway Birmingham, Federal Express have retreated back to it to another airport center, and we've let that space to an occupier.

Operator

It's on the apron of the airport. Aviation market, hospitality market is booming. Yeah. Rents have gone there from £8 to £12. We're very, very critical and forensic when we buy an asset.

Operator

We have a clear scorecard of what characteristics that estate or unit has to have, you know, in terms of its location, in terms of its connectivity to road, rail, air, water, but also labor. We and that's coming home in terms of performance, in terms of occupiers. And I can go to the five major gateway estates we've got, and we've got, you know, between 3050% reversion sitting out there. So we're confident in all parts of our portfolio that if we get a surrender or an insolvency or whatever, what that allows us to do is to harvest that reversion.

Speaker 1

I think if look to the deals that we've done post half year end, just to give you an example, they're live. So we've the three sectors, we've done six lettings, 40% ahead of prior rent, where we have taken the back or perhaps done the refurbishment exactly as you say. But on the other side, we've done five renewals, 29 ahead of the previous passing rent, and we've done four reviews, 27%. And I think because if you look, we've only got we've now only got about 5% of our leases or actually got any form of indexation or cap in them. We're exposed, and we like the fact that we can grab the open market, and that's where the rental reversion is coming.

Speaker 1

And again, the beauty of a multiletter state is we can refurbish the unit next door to one that's let, and we can take advantage of the new tone that we've created next door without having to do it on that unit itself, and then we can capture it through the rent review and the reversion and the renewal process.

Speaker 5

Thanks. Andrew Rees, Deutsche Numis. Just touching on Radware, obviously, positive news on Phase one there. I wonder if you can give a bit more color on Phase two and some of the further enabling works that are required to sort of get that to a position where it can become marketable and sellable? And then I guess just sort of building on the question around that disposal and also sort of other disposals, looking where rates have moved over recent months and sort of expectations of higher for longer, does that increase the urgency for you guys and can bring down that kind of portion of unhedged debt?

Speaker 5

I guess, particularly thinking about £100,000,000 of caps at 1.5% rolling off in six, seven months' time, are you kind of more urgent in that kind of other noncore disposal process?

Operator

So dealing firstly with Radware Phase two, we've got an outlined planning consent there for 1,000,000 square feet. We could do two boxes, 200. There is scope, we believe, to expand that planning consent by as much as 20% to £1,200,000 So further work is needed in terms of reserve matters, in terms of detailed planning consent, and that has been worked on and refined at the moment. We've secured the power. Power is probably the biggest issue facing development in all sectors in The U.

Operator

K, and that's contracted to be provided in 2026. So sequencing wise, we're looking to expand the plan and consent. The environment agency in terms of sign off is pretty much there. Highways are there. Biodiversity is there.

Operator

The timing around the power is critical in terms of developing that space. What the sale of Phase one does is it further cements the placemaking of the location. Crewe and its greater sort of environ, you've seen developers such as Panettone, Prologis, PLP all build here. So it's a very well established location. We're right on the roundabout on the M6 with major traffic movements.

Operator

What we've seen is that there was a major site in Northampton, the Coca Cola site that was offered 53 acres, but it only got four seventy three watts of power. So you could build 1,000,000 square foot unit there. That sale has not gone through now because you've got to wait for four, five years for the power. And we have seen parties come to us to talk about the capability of our site to deliver a million square feet. Phase one, we've got to get it done.

Operator

We're hoping to get it done by Christmas. We're expecting and hoping to get a closure on phase two, but it is a liquid site. It has got outline. It will get detailed, and we're not seeing major hurdles to stop that liquidity event in 2025. On the caps, let me hand over to Peter.

Operator

I mean we've got pricing there, pounds 100,000,000 worth of caps today, haven't we?

Speaker 2

Yes. I mean as I said in the presentation, there are a whole load of moving parts in there. And we want to maintain the 4,200,000,000.0 blended cost of debt going forward. And part of that will be replacing a portion of those caps. I don't think we will need to do the whole £100,000,000 I think it will be 60,000,000 or 70,000,000 probably at the end of the day.

Speaker 2

We've got pricing. The pricing was rather nice three weeks ago. It spiked in the last week, but we don't have to do it until July year. So the hope is it won't be the semi horrible pricing of today. So if for sake of argument, we end up buying 60,000,000 or £70,000,000 of caps at that sort of level, based on the prices of three weeks ago and hopefully next year, pounds 3,000,000 is that sort of number.

Speaker 2

But it will just provide us with that base level of and constancy of the cost of our debt.

Operator

The sales point, which was the third point you raised, the sale of Phase one would bring us down below the $250,000,000 Phase two would bring us down even lower again. In terms of allocation of capital, share buybacks is a standing item on the agenda for the board. We are starting to see some opportunities that we really like. We think there's real value outside of the Southeast. Places like Liverpool, where we have a big estate next door to Jaguar Land Rover, significant reversions there.

Operator

The South Manchester area, have a big estate at Middlewich. It's a stellar performer for us. So I think we've got a good eye for spotting where the performance can come, and we've got a very good management team that Paul runs, that rotates the the the the the I say the bottom element. It's assets that maybe are ex growth or somebody bids a very strong price. So there's a sale yesterday, Paul, that you could talk about in terms of rugby?

Speaker 1

Yes. So asset which we have been looking to we were approached off market for opportunity to sell low yielding accretive sale.

Operator

No more excitement?

Speaker 6

So there's one more on the website. Can you give us a bit more clarification as to why the Retail Warehouse joint venture is no longer going ahead? And related to that, whether you would make further Retail Warehouse acquisitions on balance sheet? And that's from Miranda Kobin at Berenberg.

Operator

So, we envisage a structure whereby Tamworth was a seed investment in a joint venture. However, the retail warehousing market has moved very quickly. And indeed, Tamworth is up 9.6% in three months. So we didn't think it's in the shareholders' best interest to make further acquisitions in these elevated levels, and that was agreed with our partner. So it's no longer under discussion.

Operator

Any future investment activity will be focused on the core sector of multilet industrial. So there's no more, but we're delighted with the performance of that asset. Finito.

Speaker 2

Thank you.

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Key Takeaways

  • Like-for-like portfolio valuation rose 2.3% to £811 m, with multilet assets up 5% and equivalent yields contracting to 6.4%, boosting NTA per share by 2.5% to 127.5 p.
  • Secured £5.5 m of new rent and have over 16% reversionary potential, supported by 46 lease events averaging 25% ahead of prior rents and driving an 8% increase in operating profit.
  • Agreed terms to sell Radway Green Phase 1 by year-end, unlocking non-income capital for dividend cover, while Phase 2 has outline consent for 1 m sq ft and is being refined to maximize value.
  • Adjusted EPS rose to 2.9 p (from 2.3 p) with 90% dividend cover, LTV at 34.1%, £250 m of hedged debt and a pathway to full dividend cover by H2 next year via asset sales, reversion capture, refinancing and cost savings.
  • Continued portfolio recycling with £23 m of disposals and the acquisition of Ventura Retail Park, which saw a 9.6% valuation uplift in three months, reaffirming focus on higher-yielding multilet industrial assets.
AI Generated. May Contain Errors.
Earnings Conference Call
Warehouse REIT H1 2025
00:00 / 00:00