Urban Logistics Reit Share Discussion Threads

[scruff1] 01/7/2023 11:19

Been a bloody expensive dividend so far - about 9p

[spectoacc] 30/6/2023 16:07

Interesting, thanks.

[gbcol] 30/6/2023 16:00

And Shift are possibly involved as well. Initially reported that they were taking over all depots but not sure this has been tied up yet. Not sure where this fits in with DX potentially wanting some. May be helpful to SHEDs negotiating position if more than one party interested.

[spectoacc] 30/6/2023 15:31

Disappointing performance since XD yesterday.

Guess we'll wait to be enlightened on DX/Tuffnells.

[lefrene] 29/6/2023 11:13

Skinny, transport is indeed a "shocking" game, full of small limited companies hiding under the shelter of a bigger trading name. The companies run up bills, go bust, and another ltd company is already in place to continue using the assets but leaving the debts behind. It only cost me £10k to find that out with Cardinal Group 30 years ago!

Chances are that new terms will be wanted by DX, but at least premises won't be lying idle with no cash flow. SHED seem an astute crew, no doubt they'll get terms that work for them.

[skinny] 29/6/2023 11:00

DX - must have reinvented themselves - they used to be a shocking outfit.

[nickrl] 29/6/2023 10:22

@specto was a time when DX were on the floor. Anyhow removes an income threat i presume although never really know how it works when a company is in administration as to whether the administrators will withhold payment as nominally an unsecured creditor.

[spectoacc] 29/6/2023 07:23

DX taken on a bunch of Tuffnells sites, could/should be a positive for SHED.

[volsung] 28/6/2023 07:37

I would rather to to my local men’s SHED

[scruff1] 28/6/2023 06:11

COMMERCIAL PROPERTY
27 JUN, 2023
Urban Logistics swings to a loss but pricing 'equilibrium' in sight
The last-mile warehouse investor has been hit by the selloff in commercial property but says investors are being tempted back by repriced assets.
Michelle McGagh
BY
MICHELLE MCGAGH
Urban Logistics (SHED) swung to a full-year loss as the warehouse investor counted the cost of the commercial property selloff but says a pricing ‘equilibrium’ will return more quickly than in previous downturns.

The £556m real estate investment trust (Reit), led by chief executive Richard Moffitt, reported a 31 March net asset value (NAV) of 162.44p, which represents a 14% decline for the full year and an 11% drop over the six-month period since 30 September, when the disastrous mini-Budget caused a gilt meltdown and a sharp repricing in property markets.

The fall was, unsurprisingly, driven by a 9.8% decline in valuation over the year. The Reit fell to a pre-tax loss of £82.7m from a profit of £171.8m the year before.

As is the story with most commercial property trusts, while valuations took a hit, rental income was buoyant, with estimated rental value growing by 9.5% over the year. Rents increased most in the ‘active management’ part of the portfolio, up 10.9%, where tenant covenants were improved and leases lengthened.

Moffitt, whose management contract has been extended to 2027 on the approval of shareholders, said this helped ‘protect against the impact of negative yield shift’ in the portfolio.

‘By holding firm to the strategy first set out in 2016, we aim to mitigate the worst effects of the economic downturn,’ he said.

High demand
Despite the valuation write-down, Moffitt said the portfolio of last-mile, single-let logistics assets is ‘in high demand given the undersupply of assets of this type, driven by long-term structural shifts in our economy and a chronic lack of supply’.

‘This supports the occupational market and allows us to offset yield erosion with rising rental rates, captured in 42 lease events over the year, generating £6.1m in additional rental income,’ he said.

Property investors had hoped for a swift uptick in price after the selloff but Moffitt said the ‘macroeconomic and geopolitical picture for 2023 and beyond continues to evolve’.

‘Given the repricing of real estate assets and land values in 2022, we believe the equilibrium level where buyers and vendors will trade has been found more quickly than witnessed in previous cycles.

‘Investors are already returning to the market, attracted by re-based higher yields, rental value growth and the long-term drivers of the logistics sector.’

Moffitt said e-commerce, which powers much of the logistics sector, remains a ‘fundamental and growing part of the economy’ and therefore provides a ‘sound footing to our business model of last-touch, mid-sized logistics assets, let to financially resilient tenants’.

Low vacancy rates also provide confidence to investors wanting to buy properties and although the cost-of-living crisis is burdening the consumer, and higher labour costs and business rates are weighing on companies, Moffitt said the logistics sector remains ‘attractive217;.

‘We continue to take pride in what we have achieved in what has been a challenging 12 months,’ he said.

‘We have renewed leases with existing tenants, built warehouses for new tenants, and welcomed new team members and shareholders to the company. We see significant opportunity and value within the portfolio and look to the future with a mix of caution, ambition and excitement.’

Leasing success
Numis analyst Andrew Rees said the Reit has a ‘strong track record of leasing success’ that the trust should be ‘well placed to capture over the next 12 months’.

‘This runway for top line rental growth, combined with relatively low cost of debt, should help further improve dividend cover towards 100%,’ he said.

‘In the current environment transaction activity will be focused on the “active management” portion of the portfolio, and we would therefore not be surprised to see further disposals of “core” assets in addition to the £15m since year-end.’

Shares in the trust have been weak recently and are trading at a 27% discount to NAV, which Rees said is ‘not reflective of the attractive occupational demand story, notwithstanding the scope for further yield driven valuation weakness as interest rates look set to be raised further’.

[matchbox1] 27/6/2023 18:34

Director buys ranging from 113-118p

[makinbuks] 27/6/2023 09:30

You're right that SHED's dividend isn't covered but its financing issues are limited with a low LTV and hedging. The emphasis now needs to be on incremental development of the estate to restore a safe dividend model

[lefrene] 23/6/2023 10:47

Epic Warlock, those comments re property values being marked downwards could well apply to almost any leveraged property play. ie, as values fall in a slump and the assets have to be marked down on the balance sheet, does that then raise the cost of finance? As the loan to value will be rising, and as per usual bank lenders love to pile on the agony and make things worse, at the time guaranteed to cause maximum pain.

I like the proposition of SHED ie distribution locations near major trunk roads on the edge of cities, but kept away due to my fears of how lenders behave when things get difficult, and how that can swiftly hit dividends. I realise I need to do more research into how SHED funds it's business model.

[jonwig] 23/6/2023 10:01

Press edit next to the post, delete the text and insert one character (such as a space).

[epicwarlock] 23/6/2023 09:37

So, the yield is the better part of 7% here right now, which is surely above what the "risk free" rate will get to in the UK, even with Bailey muddling us through and no doubt under real pressure from current govt inflation targetsRevenue is almost exclusively long term and paid by the government. Ever Growing old/ ageing population supports demand.Property portfolio of 513 properties the main asset and likely subject to the broader based risks of a potential downward correction in property values...is it correct that this is the main risk associated with this investment, or am I missing a trick? From what I see (admittedly with possible blind spots), this looks like a great way to grow my SIPP over the next 20yrs to retirement. Would appreciate the expertise & views of others on how they see things...

[skinny] 22/6/2023 11:19

A decent bounce (so far) with reasonable early volume.

[nimbo1] 22/6/2023 11:03

It really wouldn't surprise me to see someone buy shed thinking about it.

[skinny] 22/6/2023 10:33

For context - 3 year low is 115p.

[nimbo1] 22/6/2023 09:56

All of these trusts now hold assets which are valued way below the cost of replacement. Nothing will be built from here at these valuations but demand from onshoring and online delivery and the like will continue for the foreseeable. I don't know what the prices are going to do but at some point these trusts become too cheap to ignore. Shed is the best structured rest in the sector imo.

The market could get worse as there aren't many buyers around and still funds needing to raise cash!

When to take the plunge...

[nickrl] 22/6/2023 09:40

@Specto they did note the administration as a note on bottom p19 then in post report events its noted again and stated that its 3.5% of rent. Based on declared contracted rent thats lost them 2m pa as that business isn't being traded - how much is covered by deposit - 6mths?

Looking at results divi isn't covered at cash level but prior to Tuffnells they were on target for coverage next year and will still break even as they have about 10% of NRI up for review this year.

Not in here but certainly looks interesting down at these levels and they aren't overly committed to a pipeline like some of their peers although that could work against them atm better to be light imv.

[epicwarlock] 22/6/2023 08:36

SHED is appropriately named when I look at what's been happening over the last month....shedding value hand over fist

[spectoacc] 22/6/2023 07:58

Ah. Thanks @matchbox1

[matchbox1] 22/6/2023 07:57

3.3% of rental income. ‘TuffnellsR17;
States that they hold rent deposits but nothing else.