MLI trading update Q3 FY2022 shows continued strong leasing momentum

(formerly Stenprop Limited)
(Registered in Guernsey)
(Registration number 64865)
LSE share code: MLI  JSE share code: MLI
("Industrials REIT" or the "Company")

28 January 2022

MLI trading update Q3 FY2022 shows continued strong leasing momentum

-MLI portfolio increases to 95% with a further six acquisitions over the quarter-

Industrials REIT Limited, the UK multi-let industrial (“MLI”) property company, today publishes a
trading update on its MLI portfolio for the period 1 October 2021 to 31 December 2021 and up-to-
date information on transactions and rent collection across the Company's whole portfolio.

Commenting on the trading update Paul Arenson, CEO of Industrials REIT, said:

“Despite the onset of the Omicron variant at the end of 2021, we successfully completed one of the
busiest periods for new lettings and renewals in the last quarter. This is the fifth successive quarter
that we have achieved average uplifts in rent of more than 20% at lease expiry or renewal, illustrating
the continued strength of the MLI market, which remains characterised by affordable rents and low
levels of supply. These supportive market dynamics and high levels of portfolio activity have helped
us deliver like-for-like growth in passing rents at the top end of our 4-5% per annum target.

“We also had a successful quarter for transactions, adding six further MLI estates to the portfolio with
a combined value of over £40 million. All the purchases offer attractive income returns, with potential
to create value and grow rents over time utilising our operating platform.

“During the quarter, we also disposed of our penultimate non-MLI asset, taking MLI to 95% of our
total portfolio. Our last remaining non-MLI asset in Germany is held for sale, and we look forward to
completing our transition shortly, in line with our original target.

“We were pleased to move our London listing to the premium segment of the Main Market of the
London Stock Exchange in December, another milestone for the Group which we believe will provide
access to a broader universe of potential investors. We are now looking forward to the next chapter
for the Company where we plan to scale the business and extract greater performance from our assets
through our Industrials Hive operating platform.”

Strong demand continues to drive up rents

•     Another strong quarter of leasing activity during which a 22% weighted average uplift on the
      previous passing rent was recorded on new lettings, as well as a 21% increase on lease renewals,
      with an average uplift 22% across all leasing transactions (previous quarter: 27% and 17%
      respectively, averaging 21% across all transactions).
•     31% increase in the total rental value of new leases signed during the quarter to £1.54 million
      across 43 new lettings and 17 lease renewals over 238,009 sq ft (previous quarter: £1.18 million
      of new income over 26 new lettings and 27 renewals on 170,081 sq ft). In addition, a further
      11 lettings across 22,000 sq ft of space had exchanged by the quarter end (previous quarter: 13
      deals over 72,963 sq ft), taking the total amount of space upon which new leases were
      completed or exchanged to 260,000 sq ft (previous quarter: 243,000 sq ft).
•     Rents continue to track towards the top end of expectations, with like-for-like passing rent
       0.7% during the quarter and  4.8% over 12 months (previous quarter: 0.0% and  5.0%
      respectively). Passing rent across the portfolio remains highly affordable at £5.68/sq ft
      (previous quarter: £5.57/sq ft).
•     The reversionary potential in the portfolio continues to grow, with like-for-like Estimated Rental
      Value (ERV) growth of  8.0% in the 12 months to 31 December 2021, increasing the premium
      between passing rent and ERV to 13% (previous quarter:  5.1% like-for like growth and a 10.7%
      premium to passing rent). The growth in ERVs has been bolstered by strong leasing
      performance at two of the largest assets in the portfolio (Compass Industrial Park, Speke and
      Dana Trading Estate, Paddock Wood), and by capital investment initiatives at estates in
      Sheffield, Liverpool and Preston.
•     Occupancy across the MLI portfolio remains largely unchanged at 93.8% as at 31 December
      2021 (30 September 2021: 93.9%, 30 June 2021: 94.7%, 31 March 2021: 93.7%, 31 December
      2020: 93.1%).
•     58% of completed leases were contracted through Industrials REIT’s short-form digital
      ‘Smart Leases’, whilst 80% of leases signed included at least a 3% annual uplift in rent
      throughout the term of the lease (previous quarter: 47% of new leases were Smart Leases,
      whilst 70% of leases signed contained 3% fixed uplifts).

A healthy pipeline of lettings

•     A record pipeline of new lettings and renewals under offer at the start of 2022 across 91
      transactions and over 500 000 sq ft of space (previous quarter: 86 transactions over
      415,980 sq ft of space). Of this, 283,000 sq ft related to new lettings and 235,000 sq ft to
      existing customers renewing their lease (previous quarter: 254,814 sq ft and 161,166 sq ft
• website visitors were unchanged over the quarter (previous quarter: -9%) and
      up 6.1% year on year.
•     Leasing enquiries were 20% lower compared to the previous quarter (previous quarter:
       0.5%), due to the Christmas period. However, enquiries were up 8.6% when compared to the
      same period in 2020, whilst average weekly enquiries for the whole of 2021 were 45% higher
      than in 2020.

Asset management highlight

An extensive capital improvement project at Brasenose Industrial Estate in Liverpool is nearing
completion. The Estate is strategically located less than three miles from Liverpool city centre, giving
it ready access to a substantial catchment population with strong connectivity. Since purchase in
December 2018, the estate has been fully let, but we identified an opportunity to grow rents
significantly by investing in the asset.

The improvement works cover c.42,000 sq ft of MLI space across 15 units and include upgrading the
cladding to the roofs and elevations and the replacement of most of the roller shutter doors and
windows. Vacant units have further benefitted from a full internal refurbishment including more
sustainable LED lighting.

Total forecast expenditure is £575,000, reflecting £13.75 psf, and as a result of the works we have
completed or agreed seven new lettings or renewals, generating an additional £59,000 in recurring
revenue compared to the previous passing rent. We forecast total additional revenue of £128,000 per
annum once all the units are renewed or relet, reflecting an uplift of £3.00 psf on the previous passing
rent and delivering a yield on development cost of 22%.

As a result of the works, we have also seen the customer base gentrifying, with space let to specialists
in bespoke furniture and e-commerce, as well as a letting to a last-mile grocery delivery business.

Rent collections continue to grow:

Rent collection statistics show the improving trend of total rents collected for each invoicing period
since the outbreak of the pandemic as at close of business on 21 January 2022, as follows:

                                                  Rent collected vs billed (%)

                                         2020                        2021               2022

                      Portfolio   Apr-    Jun-   Sep-    Dec-    Mar-     Jun-   Sep-   Dec -   Weighted
                      Weighting   Jun     Sep    Dec     Mar     Jun      Sep    Dec    Mar     average
    County / Sector

    UK MLI              95%       97%     97%    97%     96%     96%      94%    91%    85%       94%

    Germany              5%       94%     98%    97%     83%     98%     100%    96%    97%       95%

    average            100%       96%     97%    97%     94%     96%      94%    91%    85%       94%

The rent collection situation continues to improve despite the extra complications introduced because
of Omicron (previous quarter: MLI collections 92% overall), and we are looking forward to the end of
the government restrictions on bad debt enforcement which are due to expire on 31 March 2022.

Strong investment activity and a healthy pipeline of MLI opportunities

Six new MLI estates totalling £40.26 million were acquired this quarter and we completed the disposal
of our penultimate non-MLI asset in Switzerland.

•     Acquisition of Arkgrove Industrial Estate in Stockton on Tees on 22 October 2021 for
      £4,200,000, reflecting a net initial yield of 6.5% and a capital value of £78 psf. (1)
•     Acquisition of Junction 1 Industrial Estate in Birkenhead on 27 October 2021 for £10,800,000,
      reflecting a net initial yield of 7.1% and a capital value of £64 psf. (1)
•     Acquisition of Dundyvan Industrial Estate in Coatbridge on 28 October 2021 for £3,000,000,
      reflecting a net initial yield of 7.8% and a capital value of £75 psf. (1)
•     Acquisition of Harmony Court, Glasgow on 26 November 2021 for £5,250,000, reflecting a net
      initial yield of 5.6% and a capital value of £109 psf. (1)
•     Acquisition of three additional terraces at Belmont Industrial Estate, Durham on 17 December
      2021 for £9,110,000, reflecting a net initial yield of 5.7% and a capital value of £110 psf. These
      terraces form part of an existing estate owned by Industrials REIT, taking our total holding at
      Belmont Industrial Estate to over 200,000 sq ft across 68 units. (1)
•     Acquisition of Beacon Business Park in Caldicot on 21 December 2021 for £7,900,000,
      reflecting a net initial yield of 6.0% and a capital value of £87 psf. (1)
•     Disposal of leisure asset, Lugano, Switzerland on 9 December 2021 for a price which reflected
      an asset value of CHF12.5 million (c. £10 million). (1)

Since the quarter end, we have also completed on the following acquisition:

•     Acquisition of Primrose Hill Industrial Estate in Stockton-on-Tees on 18 January 2022 for
      £4,310,000, reflecting a net initial yield of 6.2% and a capital value of £57 psf. (1)

In addition to the above transactions, at the time of this announcement, we have a further three
industrial estates under offer with a combined value of £11.2 million and a strong pipeline of other
potential opportunities.

Continued low leverage with a flexible balance sheet positioned for growth

As at close of business on 31 December 2021, Industrials REIT’s loan-to-value ratio (LTV) was 28% on
drawn facilities, and approximately 25% when allowing for unrestricted cash. (2)


The financial information on which this trading update is based has not been reviewed or reported on
by the Company's external auditors.

1) This transaction has already been announced in a previous RNS and SENS or Trading Update. For full
   details please visit

2) Calculated as gross borrowing less unrestricted cash, divided by gross asset value based on our 30
   September 2021 valuations adjusted for subsequent acquisitions and disposals and changes in foreign
   exchange rates. Unrestricted cash is cash and cash equivalents after deducting amounts for service
   charge, tenant deposits and cash held in debt service accounts.

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For further information:
Industrials REIT Limited                                                        44(0)20 3918 6600
Paul Arenson (
Julian Carey (
James Beaumont (

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Hugh Jonathan
Vicki Paine

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Richard Sunderland
Richard Gotla
Neel Bose

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About Industrials REIT:
Industrials REIT is a UK REIT listed on the LSE and the JSE. The objective of the Company is to deliver
sustainable growing income to its investors. Industrials REIT invests in a diversified portfolio of UK
multi-let industrial (MLI) properties with the strategic goal of becoming the leading MLI business in
the UK. For further information, go to

Date: 28-01-2022 09:00:00
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