Multi-let industrial property company Industrials REIT (MLI) reported a healthy increase in rents and valuation in the six months to September driven by continued strong occupier demand, especially in e-commerce, lifting its shares 0.7% to 184p.
The firm recorded its fourth consecutive quarter of over 20% average growth in rent on renewals and new lettings, with occupancy running at 93.9% and rent collections trending towards 95% in line with 2020.
The net asset value per share increased by 7.4% to 159p against 148p in March, while diluted earnings per share jumped 59% to 13.34p. The interim dividend was kept at 3.375p per share, with guidance for the full year maintained at ‘at least 6.75p’.
During the period the company bought seven multi-let estates for a total of £36.5 million, generating £2.5 million of additional rental income per year or an initial yield of 6.85%.
Since September the firm has bought another four estates for £23.3 million, bringing in another £1.7 million in rent which equates to an initial yield of 7.3%.
Following the sale of two non-industrial assets, the company said it was on track to complete its aim of being 100% invested in multi-let estates by next March.
That should pave the way for further growth in net asset value and dividends as rising rents translate into higher income and capital values.
Manager Paul Arenson commented: ‘It is very pleasing to see not only how well our portfolio has withstood one of the worst economic shocks in modern times, but also how well it has continued to demonstrate its potential in a post-pandemic landscape, where the economy as a whole is growing and regional businesses with e-commerce capabilities are taking up increasing amounts of MLI units.’
While demand is booming, supply remains tight as older industrial estates in and around towns are often bought and turned into housing and the price of available land in densely populated areas makes buying and developing new sites uneconomic.
As a result, the estimated rental value of the portfolio on a per square foot basis continues to rise, and Arenson believes there is more to come as the firm improves the returns on its newly purchased assets.
As an example, the seven new estates acquired in the second quarter cost the equivalent of £66 per square foot, roughly half their replacement cost, while passing rents were £4.90 per square foot compared with an average across the portfolio of £5.67 as of September, meaning there is plenty of scope to increase rents at renewal or re-letting.