Urban Logistics acquires Connect Group portfolio of depots
Urban Logistics Reit
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16:39 07/05/24
Specialist industrial and logistics investor Urban Logistics REIT announced on Monday that it has exchanged contracts to acquire a portfolio of six parcel distribution depots from Connect Group for a total consideration of £9.9m before purchaser costs, at a 7.04% net initial yield.
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The AIM-traded real estate investment trust also announced the purchase of two logistics properties in Sittingbourne and Thatcham for £5.3m, at a blended net initial yield of 5.9%, which it said extended the portfolio's weighting across south east England.
It said the warehouses were 21,875 square feet and 26,478 square feet respectively, and let to DHL Parcel UK.
The acquisitions were being funded from cash and existing bank facilities, the board confirmed.
Looking at the Connect portfolio, Urban Logistics said it comprised 84,872 square feet of warehousing with a low average site cover of about 18%.
It said it contained a mix of freehold and long leasehold properties, with the depots located in Coventry, Newport, Plymouth, Leighton Buzzard, Andover and Perth.
Completion was expected on or around 27 September for the freehold properties, and by early November for the leasehold properties.
The depots would be leased back to a subsidiary of Connect Group, Tuffnells Parcels Express, for 20 years on a fixed rental uplift, being a minimum of 1.0% to a maximum of 4.0% per annum, cap and collar, linked to the retail price index.
Connect Group would act as guarantor.
Urban Logistics described Tuffnells as a business-to-business distributor, specialising in irregular dimensions and weights and serving small and medium sized companies across the UK.
Post-acquisition, Tuffnells would represent around 6.0% of the firm’s rent roll.
The board said it was continuing to evaluate acquisition opportunities across three investment strands - business-to-business parcel depots, last mile warehouses and the forward funding of new logistics properties.
That, the directors claimed, would “diversify and modernise” the portfolio in a “sustainable manner”, and ensure it was well-placed to capture rental growth.
“We continue to focus on creating value across the portfolio and securing attractive acquisitions,” said Urban Logistics chief executive officer Richard Moffitt.
“We're delighted to have further diversified our portfolio, through the leasing agreement with Tuffnells.”
Moffitt said urban logistics remained the top performing real estate sub-sector, adding that despite perceived uncertainties created by the current political climate, the company was focussed on growing its portfolio and undertaking asset management initiatives.
“Looking ahead, we have a high-quality acquisition pipeline and continue to assess the potential for additional financing to grow the business.
“We remain confident in our ability to continue sourcing opportunities which can perform consistently well in the longer term.”