MLI trading update Q4 FY21 shows continued strong demand for multi-let industrial

Stenprop Limited (“Stenprop” or the “Company”), the UK multi-let industrial property company, today publishes a trading update on its UK multi-let industrial (“MLI”) portfolio for the period 1 January 2021 to 31 March 2021 and up-to-date information on transactions and rent collections across the Company’s whole portfolio.

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

“We have had another excellent quarter of leasing activity, during which we have captured strong rental uplifts averaging 20%. Demand for MLI space across the UK is as high as we’ve ever witnessed. Through our operating platform we are successfully capturing and converting this into new customers, which is reflected in the falling vacancy rate.

“The most recent lockdown has had an impact on rent collections, although the impact has not been as severe as we witnessed in early 2020. We remain optimistic that the majority of rents due during this latest lockdown period will ultimately be collected in line with historic rental collection trends seen since the start of the pandemic with amounts due now closing in on high 90% collection levels.

“We are also pleased to have achieved our divestment and investment targets for the year ending 31 March 2021. We completed over £90 million of MLI acquisitions during the period. At the same time our disposal programme continued to be materially ahead of expectations, with our German retail sales transacting at an average 15% premium to 31 March 2020 valuations.

“It has been a strong final quarter for the financial year, and we look forward to reporting our annual results to 31 March 2021 on 11 June 2021, and to setting out a detailed schedule for our transfer from the Specialist Fund Segment to the Premium Segment of the Main Market of the LSE.”

A record quarter for leasing drives improved occupancy and higher rents

• 24% average uplift on the previous passing rent on new lettings and 15% on lease renewals (average: 20% across both).1
• £1.54 million per annum of rental income1 contracted through 50 new lettings (previous quarter: 39) and 33 lease renewals (previous quarter: 18) over 212,533 sq ft.
• 75% of leases contracted through Stenprop’s short-form digital ‘Smart Leases’.
• 78% of leases signed included at least 3% annual uplifts in rent throughout the term of the lease.
• Like-for-like passing rent up 1.8% during the quarter (previous quarter: 0.8%) and up 5.6% over 12 months. Average passing rent up 1.5% to £5.46/sq ft (previous quarter: £5.38/sq ft).
• The estimated rental value of the portfolio increased 4.4% during the quarter to £6.16/sq ft (previous quarter: £5.90/sq ft), resulting in an increased 12.8% premium to the average passing rent, providing enhanced scope for uplifts in rent at lease expiry and renewal (previous quarter: 9.6% premium).
• Rental incentives remain low on new lettings and renewals with average rent-free incentives of under one month on an average lease term of 4.25 years (3.0 years to earliest break).1.
• Occupancy across the MLI portfolio increased to 93.7% as at 31 March 2021 as high demand continues to put pressure on vacancies (31 December 2020: 93.1%, 30 September 2020: 93.3%, 30 June 2020: 92.0%, 31 March 2020: 91.0%).
• Asset management highlight: In January 2021, a comprehensive package of roof works was completed across 29 units totaling 25,028 sq ft at Old Mill Industrial Estate in Preston. The total project cost was £270,000 and since completion our team has concluded six lease renegotiations at rents reflecting a 30% premium to previous passing rents and an 18% premium to our pre-work ERVs. These transactions should enhance the value of the estate by c. £500,000, demonstrating the value which can be created by providing high quality, well-maintained MLI units in densely populated areas.