Urban Logistics REIT to forward fund speculative development

Urban Logistics REIT (SHED)

Urban Logistics REIT has forward funded on a speculative basis the development of five assets in the East Midlands for £23m.

The group has exchanged contracts with developer Wilson Bowden Developments, conditional on receipt of planning permission, to finance the construction of two sites in Nottingham and Leicester.

The development yield on cost of 6.12% and the deal will be financed through a combination of cash resources, the sales of assets and debt.

The first site, an 8.1-acre plot at Blenheim Park in Nottingham, will comprise four units totalling 166,330 sq ft. The second site is a 2.5-acre plot at Optimus Point in Leicester and will comprise one unit totalling 43,850 sq ft.

During construction, which is expected to commence in September 2021, Urban Logistics REIT will receive a 5.5% interest rate coupon on the forward funding provided. Practical completion is anticipated between September 2022 and February 2023.

The group also has an option over two further sites owned by Wilson Bowden until July 2021 that it said are in locations seeing strong rental growth and yield compression for new ‘Grade A’ stock.

Richard Moffitt, chief executive, said: “COVID-19 has highlighted the importance of warehousing and logistics real estate, especially the scarce, high-quality, single-occupier regional and last mile urban properties on which the company focuses.

“The development programme announced today, which we have sourced off market, will add further high-quality new assets to the company’s portfolio at a time when smaller urban logistics warehouses are in short supply. Given the strength of demand for space from occupiers seeking representation in the East Midlands market, we expect to achieve favourable lease terms on each of the assets with high quality tenant counterparties.”

[QD comment: This is Urban Logistics REIT’s first foray into the world of speculative development (where it will develop the asset without a tenant in place). Market conditions are perfect for this kind of development where greater returns are on offer. Demand for logistics space close to towns and cities across the UK has been insatiable since the pandemic as online retailing has taken off. Couple that with a dearth of supply of good-quality assets and speculative development like this makes sense.]

SHED : Urban Logistics REIT to forward fund speculative development

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