FTSE 250 real estate investment trust (REIT) Londonmetric Property PLC (LON:LMP) (LMP.L) has announced the sale of three distribution warehouses today. The total consideration is £24.3 million, with there being various buyers.
The sale price is 4% above book value and represents a blended net initial yield of 5.4%. Two of the properties are located in Wakefield, with the third being a regional distribution warehouse in Ashby-de-la-Zouche. Combined, they have a weighted average unexpired lease term of 3.4 years, with them being subject to open market rent reviews.
Londonmetric has reported that the market remains strong for real estate assets with structural support. The company is continuing to focus on the growth of its logistics portfolio, with it seeking to monetise some of its shorter let assets where it has been able to benefit from yield compression, and where it believes rental growth is less certain.
Overall, the company believes that asset sales of £66 million since its half-year end have the potential to strengthen the remaining portfolio.
In my view, the prospects for the company appear to be relatively bright. From an income investing perspective, its dividend yield of around 4.7% is relatively high when compared to some of its REIT sector peers. I also believe that its strategy could be relatively sound, with it seeking to refocus capital on areas where it may have a better risk to reward ratio over a long-term time period.
Of course, Londonmetric and many of its sector peers face an uncertain outlook when it comes to the prospects for the UK economy. Brexit is expected to cause some disruption in the near term, and this may lead to volatility in share prices across the sector.
At the same time, though, I believe that in a number of cases those risks may already be factored into valuations. As a result, I’m upbeat about the stock’s prospects from a long-term investment perspective.