Warehouse Reit (WHR ) has put its Radway Green logistics development in Crewe up for sale as it is unable to fund its completion alone and will instead use the proceeds to pay down debt and rebuild dividend cover.

Reporting in its interim results for the six months to end of September, the portfolio of logistics warehouses may have seen a stabilisation in the value of its underlying portfolio – up 1% at £811m – but it has run into an issue with its key logistics development.

The Radway Green development was supposed to deliver 1.8m square feet of space over two separate phases in a location just 1.5 miles from junction 16 of the M6.

In June, WHR announced it was in discussions around a pre-let on the phase one part of the build but the planned tenant has since pulled out, leaving the trust in a sticky position as it cannot afford to complete the build itself.

Andrew Bird, managing director of Tilstone and the manager of the Reit, said the proposed occupier has been ‘trading very well’ since the discussions and has ‘seen an acceleration in its timetable which cannot be accommodated at Radway Green’.

‘As a result the pre-let has fallen away,’ he said. ‘The group is currently evaluating a number of options to deliver value for shareholders from this scheme which include a sale of the whole, or a majority, of the asset but in any event will not progress the development alone.’

Numis investment companies analyst Andrew Rees said it may be ‘disappointing for shareholders that the company is not going to be able to see this attractive development opportunity through to completion, there is still the possibility that management can achieve an accretive disposal, that would reduce leverage and allow the company to focus on its multi-let strategy’.

Proceeds from the Radway Green sale will be used to pay down debt and would add to the £39.6m of non-core assets the group sold in the period, that generated £5.4m of profit.

In turn this takes total sales to £94.3m since November 2022 when the fund announced its disposal plan.

Trust chair Neil Kirton said the trust will contintue to ‘focus on rebuilding dividend coverage’ in the second half of the year. The current dividend is just 0.7x covered.

‘We have a clear plan to achieve this, which includes capturing the reversion in our portfolio, actively seeking a majority partner for or sale of our Radway Green development and further reducing our finance costs through asset sales and active financial management,’ he said.

He added that the plan ‘underpins our recommendation to pay a second interim dividend of 1.6p, taking the total dividend for the period to 3.2p, in line with last year’.

Bird said the strategy is still ‘highly-focused on multi-let estates’, which make up just over 70% of the portfolio by value, rather than single-let assets as they create ‘more opportunities to raise the rental tone and therefore more quickly capture the reversion created, while reducing risk by having a more diverse range of occupiers’.

This strategy has seen the net asset value (NAV) remain broadly stable over the six months, increasing 0.9% while the total return, which includes dividends, was up 3.5%. This reflected the 3% increase in estimated rental value to £52m as occupier demand remained strong, with occupancy at 96%.

Leasing activity brought in an additional £1.2m of rent, meaning contracted rent was £43.8m at the end of September, a like-for-like increase of 1.7%.

Trust chair Neil Kirton said multi-let was a ‘scarce asset class with new development constrained by a strict planning environment and with average capital values of £92.40 per square feet well below rebuild cost, new development is rarely economic’.

‘At the same time, it appeals to a broad spectrum of occupier from light industrial, to technology, to warehousing and e-commerce,’ he said.

Kirton said he was particularly pleased with the performance of Bradwell Abbey in Milton Keynes, which was an ‘undermanaged estate in an emerging economic hub’.

A partial refurbishment means ‘top rents of £10.00 per square foot on the largest units to £19.00 per square foot on the smaller units’ are now being paid, an increase on the average rent of £7.89 per square foot charged previously.