Why I’d invest in this exciting property sub-sector with this on-trend REIT

Top management appears to be united in its enthusiasm, and I reckon shares in this company are attractive.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While driving somewhere close to Milton Keynes recently I was struck by the acres of enormous warehouse buildings that filled the landscape. These things look like you could fit several football pitches into the floor area of each one. And many of them are painted in the colour of the sky to make them less eye-catching and invasive.

Welcome, I thought, to the modern world of supply chain logistics, which has been pumped up by the growing trend of internet retailing to proportions that I’d liken to a bodybuilder on steroids. Wouldn’t it be interesting, I mused, to find a way of focusing an investment on these upcoming modern-day mega-structures?

A specialist sub-sector

Sometime later, I stumbled across Urban Logistics REIT (LSE: SHED). The firm focuses on a specialist sub-sector of the UK real estate market by investing in industrial and logistics properties. The key investment thesis behind the company is that e-commerce demands new infrastructure and modern distribution networks capable of handling the escalating demand for transporting, storing and delivering goods.

So Urban Logistics  operates in a similar area as the owners of those massive buildings I’d seen and the firm is responding to a similar theme, but its operations are not an exact fit with my investing vision.

The website explains that the supply of urban logistics assets in the UK is constrained “by a variety of factors,” which together with the shift towards online commerce creates “heightened demand” for “well-located smaller-sized” warehouses, and that’s the area that the firm focuses on. Although some of its properties are still quite impressive in their proportions.

Encouraging results and a positive outlook

The firm started out in April 2016 and says on its website it is building a portfolio of “high-quality” assets with “strong” income and capital growth potential. The assets it owns attract a diverse range of tenants from various industries. As with many property firms, Urban Logistics is not content to merely buy and hold properties indefinitely and instead aims to buy and sell real estate at opportune times to enhance shareholder returns.

I find today’s full-year results report to be encouraging. Earnings per share rose almost 43% and the net asset value lifted by 13% to a smidgeon below 138p per share. Today’s share price close to 129p suggests the firm remains conservatively valued by the stock market. During the period, the company acquired seven logistics properties, spending £48m and disposed of £11.3m worth of property, saying it achieved an average total property return on the sold properties of just over 25%.

Meanwhile, the firm’s portfolio of property is “fully occupied,” and the directors see upside potential in ongoing rent reviews, which have been increasing average rents by a little under 40%. Chief executive Richard Moffitt said in the report: “Urban Logistics remain real estate’s top performing sub-sector.” And chairman Nigel Rich explained in the narrative that the fundamentals of the market remain attractive and we are confident of continuing to deliver consistent returns for our shareholders.”

Top management appears to be united in its enthusiasm, and I reckon shares in Urban Logistics REIT are attractive.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »