UK-based Industrials Reit, which owns multi-let industrial (MLI) assets providing workspaces for small- and medium-sized businesses is now a 100% MLI business after the sale of its last non-MLI asset.
Five years ago, the company started the transition to become a fully MLI-focused business through selling non-MLI assets which have achieved more than £600m to date.
The London- and JSE-listed fund is the only 100% MLI listed real estate investment trust (Reit) in the UK. It owns and operates more than 7-million square feet of purpose-built MLI assets located around towns and cities in England, Scotland and Wales.
Industrials Reit sold its interest in its German care home asset for £15.6m, and the sale proceeds will be used to fund new acquisitions in the UK.
“The sale of our German care home interest is the final non-MLI investment remaining in our portfolio, and our goal is to continue scaling our UK MLI platform,” said CEO Paul Arenson.
MLI is an asset class that offers significant potential, and is a big beneficiary of several important structural and societal changes taking place globally.
However, these assets are often misunderstood as investors tend to dismiss MLI as small tenants on short leases. The best way is to think of MLI is as self-storage but one level up with bigger units.
In the third quarter trading update for the 2023 financial year, Industrials Reit recorded a more than 20% average rental increases for the ninth successive quarter, driven by constrained supply and growing demand for MLI units across the UK.
The company said it is focused on driving rental building efficiencies and growing the portfolio.
Industrials Reit set a £100m target in MLI acquisitions in 2022 — the intention being to double its portfolio to £1bn in the next four years, thus cutting costs and increasing earnings through economies of scale.
Industrials Reit has consistently shown strong property fundamentals with high occupancy rates and growth in rentals, especially towards the end of 2021, indicating the low supply of MLI and affordable rents at the time.
Despite this, Industrials Reit, along with Sirius Real Estate, Capital & Counties, Hammerson and Lighthouse Capital were the biggest losers of 2022, with losses of as much as 41% due to their exposure to UK and European property, which was badly affected by rising inflation and interest rates in the region.
This share price loss didn’t stop private equity firm Blackstone offering £700m to buy the company.
When news of the acquisition broke, Industrials’ share price surged to 37.5%, closing at R35.75 on April 3. At the close of trade on Wednesday, its share had gained 0.27% to R36.50.
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