Warehouse real estate investment trust (Reit) is seeking to raise £150 million through a flotation on the Alternative Investment Market (AIM), targeting a dividend yield of 5.5% in its first year.
The property company, which provides warehouses for Amazon and Boots, if offering 150 million shares valued at £1 each. The placing closes on 15 September, with trading expected to commence on 20 September.
The Reit will target an annual return of ‘at least 10%' from capital growth and dividends, with the first payout expected to be declared in January 2018 of approximately 1p and the next in May 2018 of 1.5p.
The trust, which was spun off from industrial property business Tilstone with a seed portfolio of 27 properties and counts Mothercare and Argos among tenants, is aiming to use the money it raises to capitalise on the demand for urban warehouse spaces driven by e-commerce. The portfolio is currently worth £108.85 million and delivers a net initial yield of 7%.
The rise of online retailers has seen demand for warehouse spaces rise exponentially, with these types of business accounting for just 1% of demand in 2007 but 29% last year. Online sales are projected to nearly double by 2021.
The trust said available warehouse stock was ‘close to historic lows’, and vacancy rates had been falling over the past five years from double digits to just 4%.
‘The low availability of rental stock together with increased demand will give rise to the potential for rental growth,’ said the trust in an announcement to the stock exchange.
Neil Kirton, non-executive chairman of Warehouse Reit, said it offered investors an ‘exposure to what has been one of the best performing asset classes in the sector and which is supported by compelling underlying drivers for future outperformance’.
‘With an identified pipeline of assets with similar characteristics, we are confident that Warehouse Reit will provide shareholders with an attractive income focused total return,’ he said.
Andrew Bird, managing director of Tilstone, said there was an opportunity to ‘continue to build a diverse UK warehouse property portfolio which will benefit from the ongoing rental growth independently forecast to be 3% per annum over the next five years’.
Tilstone will retain £16milion of equity in the trust, which will be locked up for two years, with members of the board subscribing for a further £1.8 million in shares.
Jefferies analyst Mike Prew said warehousing and logistics was a ‘hot sector getting hotter and going mainstream’, with £4 billion of properties bought in the first six months of the year.
The Warehouse Reit float continues a trend for IPOs in the alternative asset sector. Recent flotations include Residential Secure Income (RESI), a Reit targeting inflation-linked dividends from the social housing sector and PRS Reit (PRS) that gives investors the change to invest in private rental homes outside London.