- Rising bond yields impact NAV
- Rents raised 29% on new lets and renewals
- Low loan-to-value and interest bill
Multi-let property investor Industrial REIT (MLI) demonstrated once again the strength of demand in its end markets with a substantial uplift in rents across its portfolio in the six months to September.
Despite the company’s better underlying performance, the shares fell 3% to 134p due to small fall in the valuation of its assets.
DEMAND FAR EXCEEDS SUPPLY
As a sign of the dearth of supply in the market for multi-let industrial units, the firm increased its passing rent on new lettings and renewals by a record 29% during the period.
Altogether, it has enjoyed eight consecutive quarters of 20%-plus growth in rent at renewal or on new letting.
With rent typically accounting for between 1% and 3% of customers’ turnover, multi-let units are highly affordable and rent rises can be sustainably absorbed.
Moreover, the range of businesses now looking for space means that units are very rarely vacant and the firm has been able to replace the small number of non-performing tenancies from the Covid era with new customers with more better business models.
During the period the company completed 64 new lettings and 133 lease renewals across nearly 700,000 square feet of space, generating £4.7 million of new rental income, and in October and November a further 49 leases were signed for another 187,000 square feet.
CONSERVATIVELY MANAGED
Due to the spike in bond yields late in the period the valuation of the portfolio dropped by 4.3% to £656.5 million, translating into an NAV (net asset value) per share of 162p on an IFRS basis (International Financial Reporting Standards).
However, September marked the low point for the sector and it is quite likely the portfolio valuation will be revised higher in six months’ time.
Meanwhile, the firm has conservative balance sheet with a loan-to-value exposure of just 26.5% and 90% of its debt is fixed or hedged against interest rate rises for another two years.
‘The group is well positioned to weather pressure on valuations and rising debt costs’, said chief executive Paul Arenson.
‘We anticipate that the current macroeconomic headwinds will see the investment market go through a period of repricing and we look forward to being able to capitalise on opportunities once the operating environment stabilises.’
LEARN MORE ABOUT INDUSTRIALS REIT
Disclaimer: The author (Ian Conway) owns shares in Industrial REIT.
