One sector of the property market that’s still moving
RICHARD MOFFITT is a dyed-inthe-wool property man, with more than 25 years’ experience in logistics, buying and selling sites used by companies to shunt goods around the country.
Having successfully built up a business and sold it to CBRE, the largest property advisory group in the world, Moffitt decided to have another go.
In 2016, he set up Urban Logistics, a company specialising in so-called ‘last-mile’ warehouses. The business floated at £1. The shares closed at £1.23 last week and they should continue to increase in price. The firm also offers a generous dividend, forecast at 7p for this year and 7.5p for 2020.
E-commerce has turned the logistics industry on its head. Once considered dull and boring, logistics is now viewed as one of the most exciting areas in the property sector. However, most attention is focused on the huge distribution sites that are often the size of several football pitches and used as central distribution hubs by companies such as Amazon or Tesco.
Urban Logistics is rather different. It owns smaller properties, used by firms to deliver goods direct to homes and businesses.
As e-commerce becomes increasingly prevalent, the need for these sites is growing, while supply remains constrained. This is where Moffitt’s experience comes into its own, supported as he is by a team of property veterans.
Between them, they hear about sites coming up for sale before anyone else, they can gauge values more accurately than less established operators and they know when to drive a bargain.
Urban does extensive research into each site, making sure it is well located, assessing tenants’ creditworthiness and analysing whether there is scope to charge higher rents and lengthen leases.
The strategy is delivering results. The company has 34 properties, rent agreements have been restructured on 15 of them and discussions are under way with the remaining 19. Market conditions are on Urban’s side as well, with growing demand for smaller warehouses driving up rents across the sector.
Moffitt strives to give something back to tenants too. He and his team will talk directly to foremen on site so they can upgrade properties with the bits and pieces that businesses really need. Tenants fall into three groups. There are wellknown logistics firms, such as DHL and Kuehne & Nagel, large listed businesses such as Sainsbury’s and Travis Perkins, and smaller companies too.
The latter include Jas Bowman & Sons, a family-owned milling business that is using Urban Logistics’ Bedford warehouse to store glutenfree breadcrumbs. Another is ACO Technologies, a water management firm whose products range from sinks to airport runway drainage systems.
Many of these tenants have occupied their buildings for years and are unlikely to leave, because moving costs millions of pounds and is hugely disruptive for most businesses. Moffitt also chooses sites suited to the kind of tenants he feels comfortable with – those who can easily afford to pay the rent and sell essential items, such as food, drugs and building materials, rather than high fashion.
As a result, the group is more resilient than many property firms to the economic cycle, a conscious decision by Moffitt as he has been through three downturns and knows how painful they can be.
Looking ahead, Urban is keen to expand and acquire more sites. This will require funds, so the group may well return to the stock market with a share placing of some kind in coming months.
Any such move would be a positive step for the company. MIDAS VERDICT: Urban Logistics operates in an area of the property market that is growing at pace and should continue to do so. Its tenants are financially strong, rents are attractive and the dividend provides an appealing yield of more than 5.5 per cent. Moffitt is a seasoned entrepreneur and the shareholder register includes names such as Allianz, M&G, Killik and Charles Stanley. At £1.23, the shares are undervalued and should deliver long-term gains.