MLI trading update Q4 FY 2023

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

28 April 2023

MLI trading update Q4 FY 2023

Strong tenant demand delivers 4.8% p.a. growth in passing rents

Industrials REIT, the UK multi-let industrial ("MLI") property company, today publishes a trading
update on its MLI portfolio for the period 1 January 2023 to 31 March 2023 and up-to-date rent
collection across the Company's whole portfolio.

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

"Our final trading update of the financial year has seen continued strong underlying occupational
conditions in the MLI market driven by high demand, limited supply and affordable rents. Whilst the
macro-economic backdrop remains challenging in the UK, our MLI portfolio has delivered on target,
with 4.8% like-for-like growth in passing rents and 10.6% growth in estimated rental values over the
12 month period.

"The Industrials Hive platform continues to support the business by generating a strong pipeline of
new lettings and enabling the business to transact with increasing efficiency. During the quarter, we
concluded 120 leasing transactions taking the total for the financial year to 401, a 50% increase on the
prior year. We saw average uplifts in rent of 27% on all lettings signed during the quarter, totalling a
further £2.6 million of rent, with 73% of new lettings on Smart Lease® terms and conditions and over
82% of leases including 3% p.a. fixed uplifts. Furthermore, in the small number of instances where
units have been handed back due to tenant move-outs, insolvency or forfeiture, demand remains
sufficiently robust to maintain occupancy levels and to continue delivering rental growth.

"Finally, in early April, we completed the sale of our interest in a care homes joint venture in Germany,
representing the completion of the non-MLI asset disposal programme we started in March 2018,
following the initial acquisition of 25 MLI estates in June 2017, and completing our transition into a
fully focused MLI operating business. This transaction released approximately £15 million in equity,
which we intend to reinvest in accretive MLI opportunities in the UK.

"Despite the economic headwinds, the MLI occupational market remains robust and supportive of
rental growth. However, Industrials REIT is not immune to these forces, and during this period is likely
to see a proportion of top line revenue growth eroded by higher interest rates and cost base inflation.
Nevertheless, the business remains well positioned to weather the storm with a low level of debt and
a highly diversified customer base and portfolio."

Key metrics

                                                        Quarter Ended

                       Q4       Q1       Q2       Q3        Q4       Q1       Q2       Q3       Q4
     Key metrics
                      FY21     FY22     FY22     FY22      FY22     FY23     FY23     FY23     FY23

     Occupancy       93.7%     94.7%    93.9%    93.8%     93.8%   93.7%    92.8%    92.4%     92.3%

  Change in rent
   (L4L over 12       5.6%     8.0%     5.0%     4.8%      4.4%     3.2%     2.7%     5.0%     4.8%
  Change in ERV
   (L4L over 12       5.5%     5.5%     5.1%     8.0%      4.3%    11.4%    12.2%    10.5%     10.6%
 Average uplift in
    on letting or    20.0%     21.0%    21.0%    21.6%     22.3%   27.3%    30.4%    31.0%     27.2%

400 leasing transactions completed over the last year

 -        We completed 120 letting transactions this quarter with a combined rent roll of
          £2.6 million (previous quarter: 84 lettings and £2.2 million), which takes the total for the
          year to 31 March 23 to 401 leasing transactions and £9.4 million of rent (previous year:
          265 transactions and £7.1 million of rent). This quarter, we completed 65 lease renewals
          and 55 new lettings across a total of 358,590 sq ft (previous quarter: 50 renewals and 34
          new lettings across 280,376 sq ft) with a further 11 lettings exchanged across 38,000 sq ft
          and expected to complete in the next quarter (previous quarter: 7 lettings across
          23,000 sq ft), taking the total area of leases exchanged or completed during the quarter to
          397,000 sq ft (previous quarter: 303,000 sq ft).
 -        The average passing rent increased by 27% on the aggregate of all new lettings and lease
          renewals (previous quarter: 31%), with average uplifts of 28% and 26% for renewals and
          new lettings respectively (previous quarter: 28% on renewals, 36% on new lettings). This
          is the tenth successive quarter of  20% average uplifts and is driven by unlocking the
          strong reversionary potential within the portfolio, with average passing rents lagging
          estimated market rental values on leased MLI units by 15.8% (previous quarter: 17.5%).
 -        Good leasing momentum continues with 301,000 sq ft of lettings under offer across 76
          transactions as at 31 March 2023 (previous quarter: 343,000 sq ft across 43 transactions),
          of which 172,000 sq ft related to new lettings and 129,000 sq ft to existing customer
          renewals (previous quarter: 185,000 sq ft of new lettings and 158,000 sq ft of lease
 -        Lease terms remain unchanged, with the average lease signed during the quarter for
          4.5 years with a tenant break option after 3.1 years and 0.9 months’ rent free (previous
          quarter: 4.5 years, 3.3 years and 0.9 months respectively).
 -        73% of completed leases were contracted through Industrials REIT’s short-form digital
          ‘Smart Leases’ (previous quarter: 73%).
 -        82% of leases signed included at least a 3% annual uplift in rent throughout the term of
          the lease (previous quarter: 70% of leases signed).

4.8% p.a. growth in passing rents

 -       Occupancy across the MLI portfolio (adjusted to exclude yard areas) was stable at 92.3%
         (previous quarter: 92.4%).
 -       Like-for-like passing rent over 12 months grew  4.8% (previous quarter:  5.0%) despite a
         reduction in occupancy over the same period of c. 1.2%, meaning that when adjusting for
         occupancy the underlying rents have grown by c. 6% p.a. Like-for-like passing rent grew
          0.8% over the quarter (previous quarter:  3.1%).
 -       Like-for-like ERV growth across the portfolio was 0.6% over the quarter and 10.6% over
         the last year (previous quarter: 1.8% for the quarter and 10.5% over the year). ERVs on
         our MLI units remain highly affordable at an average of £7.06 psf, compared to an average
         passing rent of £6.02 psf (previous quarter: £6.99 psf and £5.94 psf respectively).

Industrials Hive generates strong demand

 - website users were up  20% vs the previous quarter, and up  34% year-
         on-year (previous quarter: -6% vs previous quarter and  15% year on year) produced by
         improvements to our website which resulted in better search engine
         visibility and enhanced user experience.
 -       Continued efficiency improvements with enquiry-to-lead qualification conversion rates up
         to 13%, with 92% of leads going on to take a viewing on a rolling 12-month basis (previous
         quarter: 12% and 83% respectively).
 -       Lead volumes were up  53% year-on-year, reflecting the depth and quality of leasing
         enquiries being generated by the Industrials Hive platform and the desirability of space in
         our portfolio (previous quarter:  27%).
 -       Total viewing/building tour numbers were 230 for the quarter, up 10% on the previous
         quarter with 19% of viewings resulting in a new letting on a rolling 12-month basis
         (previous quarter: 207 viewings with a 22% conversion rate to letting).

Asset management highlight

Lake Enterprise Park in Bromborough was acquired by Industrials in January 2021 and comprises a
37,000 sq ft estate with 35 units averaging 1,050 sq ft. The property is located adjacent to Croft
Business Centre, another Industrials REIT property, which was acquired as part of the original
Industrials portfolio in June 2017, and also comprises small ‘starter units’ averaging around 1,000 sq
ft. The properties are in a mixed commercial area with a range of industrial and retail uses, including
the adjacent 450,000 sq ft Croft Retail & Leisure Park.

Upon acquisition we identified that Lake Enterprise Park would benefit from capital investment to
enhance its ‘yard appeal’ and enhance rental growth. In October 2022, we commenced a four month
refurbishment program principally focused on renewing the roofs and other external improvements
designed to improve the appearance, appeal and longevity of the property. The investment totalled
£350,000 (£9.38 psf) and completed ahead of time and below budget.

We have since renewed, relet or reviewed rents on 16 units on the estate, generating an uplift in rent
of over £77,000 vs the previous passing rent. All new lettings and renewals were completed on Smart
Leases. In addition, there are a further 13 refurbished units left to renew, relet or review over the
next few years, with potential to deliver additional rent of c. £50,000 per annum. In aggregate, the
scheme is forecast to deliver an uplift in revenue of £127,000 per annum, a 43% increase from the
pre-works passing rent.

Finally, because of upgraded insulation and lighting installed as part of the works, we have seen the
average EPC rating across all units on the estate improve from a Grade D to a Grade C. This ensures
compliance with all future and proposed EPC regulations until at least 2030 and is in line with our
broader strategy of continually upgrading the environmental credentials of our portfolio through
active asset management.

Rent collections continue to improve

    -    92% of rents due for the quarter ended 31 March 2023 had been collected by 21 April 2023
         (previous quarter: 90% of rents collects at the same point after the quarter day)
    -    96% of rents due for the financial year ended 31 March 2023 had been collected by 21
         April 2023
    -    98% of rents due for the financial year ended 31 March 2022 had been collected by 21
         April 2023

Completion of the final non-MLI asset sale

On 5 April 23 the Company announced that it had sold its interest in a Care Home joint venture in
Germany generating net proceeds of £15.6 million (€17.8 million). For further information please see

No new MLI acquisitions were completed during the quarter.

Low leverage with significant covenant headroom

As at close of business on 31 March 2023, Industrials REIT’s loan-to-value ratio was 29% on drawn
facilities, and approximately 23% when allowing for unrestricted cash1. The average cost of debt is
2.8% (based on SONIA at 4.2%). With 90% interest hedging against drawn debt, a 1% rise in SONIA
increases the weighted average cost of debt by 0.10%. The average maturity of drawn debt is 3.2
years (rising to 4.4 years assuming loan extension options are exercised), with strong headroom across
all debt covenants.


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

1 Calculated as gross borrowing less unrestricted cash, divided by gross asset value based on our 30
September 2022 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.

On 14 April 2023 the Company announced that it had agreed the terms of a cash acquisition of the
entire issued, and to be issued, share capital of Industrials REIT. The transaction has been
recommended by the Industrials REIT board and remains subject to shareholder approval. The full
announcement can be found on the Company’s website,

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

Numis Securities Limited (Financial Adviser)                                             44(0)20 7260 1000
Hugh Jonathan
Vicki Paine

FTI Consulting (PR Adviser)                                                              44(0)20 3727 1000
Richard Sunderland
Richard Gotla
Neel Bose

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(JSE Sponsor)

About Industrials REIT:
Industrials REIT is a UK REIT with a primary listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange. The objective of the Company is to deliver a combination of sustainable growing
income and growth in value to its investors. Industrials REIT focuses on owning and operating a diversified
portfolio of UK purpose built multi-let industrial (MLI) estates across the UK. The Company aspires to be the
leading MLI business in the UK. For further information, go to

Date: 28-04-2023 08:00:00
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