Urban Logistics REIT - Half Year Results
09/11/2023 07:00
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RNS Number : 8624S Urban Logistics REIT PLC 09 November 2023
9 November 2023
Urban Logistics REIT PLC
("Urban Logistics" or the "Company")
RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2023
A resilient portfolio weathers market conditions
Commenting on the results, Richard Moffitt, Investment Adviser CEO, said:
"Of all areas in commercial real estate, the logistics market retains some of
the strongest fundamentals. Our belief is that the Urban Logistics sub-sector,
comprising well located, single let logistics warehousing serving the UK's
urban areas, remains the most exciting part of this market."
"Given the interest rate environment, capital market transactions have been
subdued, and corporate decision making around leasing activity has slowed.
Despite this, the Company's portfolio valuation has remained stable over the
six-month period, and we continue to see asset management opportunities and
significant reversion within the portfolio. This is a testament to both our
ongoing asset management ability and the quality of our asset selection."
"With low levels of debt, which is 97% hedged or fixed to term, and
approximately 55% of the portfolio being in the Active Asset Management
category we believe that the Company is well placed to deliver returns to
shareholders both from income generated from our high quality tenant base and
capital growth delivered by our asset management initiatives."
HIGHLIGHTS
Strong Financial Performance
· Net rental income of £28.5m +12.1% (Sep 2022: £25.4m)
· High gross to net rental income ratio 96.5% (Sep 2022: 96.4%)
· IFRS profit of £16.9m (Sep 2022: £2.4m)
· Adjusted EPS(1) of 3.46 pence (Sep 2022: 3.38 pence)
· Interim Dividend per share of 3.25 pence (Sep 2022: 3.25 pence)
· 99.1% of H1 rents demanded were collected (Sep 2022: 99.6%)
Robust Balance Sheet
· EPRA net tangible assets(2) ("NTA") of 161.69 pence per share,
-0.5% since March 2023, - 11.7% since September 2022, (Mar 2023: 162.44 pence
per share, Sep 2022: 183.11 pence per share)
· IFRS net assets of £766m (Sep 2022: £871m)
· Loan to value ("LTV") of 29.3% (Sep 2022: 22.3%)
· £354m of debt with a weighted average maturity of 6.0 years (Sep
2022: £310m with a weighted average maturity of 6.4 years)
· Undrawn and available facilities of £64.5m (Sept 2022: £0m)
· Weighted average debt costs of 3.9% for the period, 97% hedged or
fixed to term (Sep 2022: 3.0%, 97% hedged or fixed)
High quality portfolio with significant asset management potential
· Balanced portfolio of 130 mid-box urban logistics assets covering 9.7
million sq ft with a valuation of £1,104m (Sep 2022: 125 assets, 9.1m sq ft,
£1,132m), providing reliable income and asset management opportunities to
drive value
· Portfolio ERV of £73.8m providing a 23% reversion to contracted
rent of £60.0m (Sept 2022: ERV of £66.3m vs contracted rent of £56.8m)
· WAULT of 8.0 years (Sep 2022: 8.3 years)
· 10% like-for-like rental increases across 10 lettings or rent
reviews completed during the period
· Portfolio like-for-like Estimated Rental Values (ERV) up by 1.4%
over the 6 month period, as occupational market remains active
· EPRA vacancy rate of 6.8%, with 6.3% of the vacancy consisting of
assets which were acquired with less than 12 months on the lease or recently
completed developments (Sep 2022: 5.0%)
Strong ESG credentials
· 55% of the portfolio with an EPC of A-B (H1 2023: 40%)
· GRESB score increased from 2 to 3 stars
· EPRA sBPR award increased from Silver to Gold
Outlook: Resilient income flows with continued positive occupational market
· Strong tenant base including Theo Muller Group, Unipart Group
(NHS), XPO Logistics, Giant Booker (Tesco) focused on essential goods and less
likely to be susceptible to broader economic headwinds
· 55% of the portfolio in Active Asset Management category, where
reversion to ERV is 30%
1. A full reconciliation between IFRS profit and Adjusted
earnings can be found in note 9 of the Financial Statements.
2. A reconciliation of other financial information can be
found in the Supplementary Information.
CHAIRMAN'S STATEMENT
NIGEL RICH CBE, Chairman
OVERVIEW
The prospect of a period of sustained high interest rates has had an effect
across the economy, and can be seen in the REIT sector in the significant
discounts to Net Asset Value (NAV) at which we, and many of our peer group,
currently trade. Despite this, the portfolio and tenant selection continue to
show the Company's strength and resilience. We have seen only one tenant
(Tuffnells) go into administration, and all leases involved have been
reassigned on the same terms to stronger covenants, with minimal loss of
income.
Our debt position remains conservative, and our debt costs remain low in
comparison to current rates, with LTV at just 29.3%, a weighted term of 6.0
years, and 97% fixed or hedged to term at an all-in cost during the period of
3.9%.
RESULTS
Our adjusted earnings, before changes in the fair value of investment
properties, exceptional items and the long-term incentive plan (LTIP)
increased to £16.3m, compared to £16.0m in the comparable period last year.
Adjusted EPS has risen to 3.46 pence per share vs 3.38 pence.
The value of our portfolio has remained stable compared with 31 March 2023
which, against a difficult macro-economic backdrop, reflects the benefit of
the active asset management which is employed by the Company's investment
adviser.
Our vacancy rate is higher than normal at 6.8% (30 September 2022: 5.0%),
reflecting the fact that two larger assets are currently vacant. These two
assets, which comprise the majority of the vacancy, are expected to lease up
in due course and we anticipate a significant valuation surplus when they do.
Our EPRA NTA of 161.69 pence per share has fallen marginally from the end of
March 2023, when EPRA NTA was 162.44 pence per share. This has been largely
driven by the payment of the second interim dividend in respect of the year
ended 31 March 2023.
DIVIDENDS
A first interim dividend of 3.25 pence per share will be paid on 15 December
2023 to shareholders on the record on 24 November 2023. This is unchanged from
the first interim dividend in the prior year, and it is our intention to
maintain the dividend for the second half of the financial year at 4.35 pence
per share, which is the same level as last year. We are confident that leasing
activity will enable us to increase earnings in the following year to cover a
dividend at this level.
INVESTMENT ADVISER
The new management arrangements, as voted on by shareholders, came into effect
on 12 May 2023, and a new reduced fee structure comes into effect from 13 May
2024, providing a significant cost saving for shareholders, as well as
stability in the advisory team. The previous management contract featured an
LTIP, which expired without value on 30 September 2023. No payment in cash or
equity has been made in respect of the LTIP.
OUTLOOK
With the shares trading at a substantial discount raising new money for the
purchase of assets is not possible in the immediate future. We will continue
to recycle mature assets for those offering asset management opportunities and
actively manage the existing portfolio to capture the reversionary value in
the rents. We do not believe this is the time to radically increase the LTV.
While we will regularly review the desirability of conducting share buy backs
it will be in the context of asset acquisition opportunities and the
self-imposed restriction on LTV.
We believe that we can create value for shareholders, including dividend
payments, through the active management of the portfolio.
Industrial Logistics remains a vibrant sector of the property market.
Nigel Rich CBE, Chairman
8 November 2023
INVESTMENT ADVISER'S REPORT
OVERVIEW
The economic volatility that defined the latter part of 2022 has continued
through much of 2023. Persistent inflation has shifted the market's view on
peak interest rate levels with corresponding swap rates and borrowing costs
fluctuating in line with the UK gilt market. It is only now as we move towards
the end of the year, with the Bank of England pausing monetary tightening,
that commentators anticipate a period of stability and correspondingly the
market's ability to price assets or benchmark risk free rates with any degree
of certainty.
The share price throughout most of 2023, in our view, does not accurately
represent the value of the underlying portfolio nor the opportunity that
exists going forward within this sub-sector of the market. The macro-economic
uncertainty that has plagued markets throughout 2023 has manifested itself in
the wide discounts which the majority of listed REITs are currently traded at
when compared to their underlying NAVs. These discounts reflect the uncertain
outlook on where the interest rate cycle will settle and the inherent impact
that will have on asset pricing. Urban Logistics remains well placed, with a
high quality portfolio positioned for income growth and underpinned by strong
credit covenants.
The pandemic was a key driver of industrial storage and distribution demand,
and we continue to see consumers' desire for speed of delivery driving this
demand in urban areas. Tenants continue to look for modern, efficient premises
with smaller carbon footprints, while ongoing planning restrictions,
construction costs and restricted land availability provide a cap on
oversupply in the face of fairly constant demand.
We have always taken a conservative approach to the balance sheet and have
retained that prudent strategy throughout the period. As at period end the LTV
sat at 29% with 97% either hedged or fixed to term and a cost of debt in the
period of 3.9%.
OUR MARKET
In the Company's financial year to date the Industrial Logistics market has
displayed occupational resilience and stable capital values, albeit with
relatively low trading volumes.
The case for our sector remains attractive: e-commerce continues to influence
the way goods are stored, sold and transported. The Covid pandemic and Brexit
have created major disruptions for supply chains in the form of border
restrictions, lockdowns, and access to labour. In order to minimise exposure
to long, global supply chains and potential disruptions in the future, many UK
companies are 're-shoring' industrial and logistics activities back to the UK
and in doing so are creating further demand for logistics real estate.
Against this backdrop, whilst there has been some tailing off of demand from
record levels seen in H1 2022, the story is positive with H1 2023 take up
totalling 10 million sq ft 1 and the national vacancy rate in the UK is still
relatively low at around 4%, half the level whereby research suggests rental
growth becomes marginal.
When looking at the breakdown of take-up, 3 PLs (third party logistic
operators) represent the largest share of 2023 demand at 43% compared to an
annual average of 29% between 2019 and to 2022. Importantly Urban Logistics
has limited exposure within its portfolio to online retailers whose share of
take up has consistently fallen in the period since 2021.
UK Logistics Sector by Take-up 2
Supply side dynamics continue to be conducive to sustained rental growth
(albeit at lower levels than the past two years), with high construction costs
and high development finance costs resulting in fewer speculative
developments.
Total trading volumes for the first half of the year were limited at
£2.2bn 3 (H1: 2022 £5.4bn 4 ) as investors deferred investment decisions in
the wake of macro-economic uncertainty. However, an estimated $345bn of
private equity capital was raised in 2022 for real estate and Industrial and
Logistics is a key real estate sub sector for the private equity industry.
There is therefore a significant weight of capital targeting the sector,
frustrated by a limited investment supply. Against this backdrop prime yields
at valuation level have remained stable during the period, with buyers
typically acquiring in cash and taking a longer-term view beyond current
interest rate volatility.
ASSET SALES AND CAPITAL ALLOCATION
Given these market conditions, in the period to 30 September 2023, we have
focused on careful asset recycling, and the Company has sold two assets for
gross proceeds of £15m, representing a 3.4% gross premium to the March book
value, and demonstrating the portfolio value.
In line with a conservative approach to the balance sheet, these funds have
been allocated towards paying down floating rate debt, bringing the total
hedging position to 97% hedged or fixed to term at period end. We anticipate
further asset sales in the second half of the year and using the proceeds to
bring our debt book to 100% fixed or hedged to term.
The Company's low LTV of just 29% provides 'dry powder' to deploy capital into
assets, where the opportunities arise to deploy this in an earnings and NAV
accretive manner. While we do not anticipate distress in the market given the
strong fundamentals, we do see dislocation, creating potential buying
opportunities in the future. We remain cautious however, and will continue to
advise the Company to allocate capital carefully in the manner which will most
add value to shareholders.
PORTFOLIO VALUATION
The portfolio value over the last 6 months has been stable, with a LFL
property revaluation increase of 0.2%, and the overall value of the portfolio
at £1.1bn, consistent with the £1.1bn valuation in March 2023.
The portfolio was valued at an equivalent yield of 6.25% at the period end,
consistent with the March 2023 year end yield of 6.23%. The like for like
valuation increase of 0.2% has therefore been driven through a combination of
asset management activity and rising Estimated Rental Values (ERVs) across the
portfolio.
As at 30 September As at 31 March
2023 2023
Portfolio value(1) £1,104m £1,107m
Equivalent yield 6.25% 6.23%
WAULT (to expiry) 8.0 years 8.2 years
Area 9.7 million sq ft 9.7 million sq ft
Contracted rent £60m £59m
EPC ratings: A-B 55% 52%
1. As per CBRE valuation
We continue to focus on a portfolio balanced across three key areas: 'Core'
assets, with long term secure income underpinning the dividend, 'Active Asset
Management' opportunities where we can apply our expertise to improve leases
and buildings, and a carefully selected limited pool of development
opportunities.
Core Active Asset Management Developments/ Development Land(1) Total
Capital Value £495m £603m £6m £1,104m
Percentage of portfolio 44% 55% 1% 100%
Area 3.7m sq ft 6.0m sq ft NA 9.7m sq ft
Contracted rent £27.6m £32.4m NA £60.0m
ERV/Expected rent £31.6m £42.2m NA £73.8m
WAULT 12.3 years 4.3 years NA 8.0 years
EPC A-B 70% 45% NA 55%
Equivalent yield/yield on cost 5.9% 6.5% NA 6.3%
1. Made up of plots of stand alone development land, with or without
planning permission.
In the medium term, the ambition is to position the Core assets at circa 35%
of the portfolio by value. This rebalancing of the portfolio will allow the
Company to realise value in assets where the asset management is complete and
value has been created, and then reinvest in assets where we can provide added
value through leasing activity, thereby driving capital and rental growth.
The £603m active asset management portfolio is well-positioned to benefit
from the enhancements that will be driven through value creation initiatives.
With a low WAULT of just 4.3 years, and a 30% reversion to ERV there is
significant upside to be captured here in the coming years, even without
further ERV growth or yield compression. In addition, development land valued
at £6m will provide the opportunity for further outsized returns in the
future.
ASSET MANAGEMENT
Asset management is core to the business model, and in times of uncertainty
expertise at re-letting assets and regearing leases is a key driver of value.
The period has mainly focused on the letting down of vacant properties, and
this activity has generated an additional £0.8m of rental income through
doing so, as well as a further £0.4m through settling rent reviews, at a like
for like increase of 10%, demonstrating the reversion potential in the
portfolio.
No. of Additional LFL rental WAULT
deals rent Uplift (to expiry)
New lettings and rent reviews 10 £1.2m 10% 11.5 years
Lease re-gears/assignments 12 £0.0m NA 11.4 years
Total 22 £1.2m 10% 11.5 years
Tenant covenant strength has always been a focus of the Company's investment
approach, and we are happy to see that Dunn and Bradstreet's analysis is
showing that 82% of our contracted rent is rated as 'Low' or 'Low-Moderate', a
significant improvement on March 2023 (56%).
Despite this, in any period of economic turbulence, some tenants will
struggle, and in the period we saw Tuffnells, a Third Party Logistics operator
representing 3.3% of our contracted rent in March 2023, fall into
administration. We are pleased to report that all 12 leases had been
reassigned before the period end, reflecting the underlying quality of the
real estate. The majority of the assets (86% by asset value) were assigned to
DX Network Services Limited ("DX"). DX represent a stronger covenant, and this
contributed to an increase in the value of the properties affected of £0.4m.
DEVELOPMENTS
In recent years we have had success with our model of forward funding
developments in locations with a significant undersupply of quality space, and
working with developers with strong balance sheets, to ensure that the Company
is exposed only to letting risk, and not cost overruns. This is a model we
plan to return to; however the increase in development costs over the last 12
months have meant that we have not signed new funding agreements in the
period, but instead have focused on completing and letting the development
projects already underway.
In addition, we have a number of plots of potentially developable land in the
portfolio, some with planning consent and some without, giving us
opportunities to produce significant returns in the future.
Completed in period GDC September NBV Yield on Cost Area sq ft ERV
Unit 100, Colchester £3.6m £4.0m 6.7% 12,437 £0.2m
Newhall Road, Sheffield £13.8m £14.9m 7.5% 132,977 £1.0m
Total £17.4m £18.9m 7.3% 145,414 £1.2m
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
A focus on ESG is embedded across the business, reflecting our corporate
values and the influence of stakeholders, including shareholders looking for
transparent reporting, debt providers looking for ESG related loans, tenants
for greener buildings to operate from, and the UK government regulation
targeting a net zero future. Our business model embeds ESG throughout the
investment and asset management process. We often acquire assets in need of
improvement, and actively enhance their ESG credentials resulting in
increasing rental rates and capital values.
We measure ESG performance in a number of ways. External rating agencies are
an important gauge of progress, and we are proud that in the latest GRESB
results the Company has moved from 2 stars to 3 stars, and that EPRA has
awarded the Company a gold star for the clarity of our reporting, an
improvement from silver. Seen alongside the recent upgrade in MSCI's ESG index
to an 'A', this suite of reporting standards shows a sustained improvement.
At the asset level, EPCs will always remain a priority, and the portfolio has
shown considerable improvement, with 55% rated A/B, up from 40% 12 months ago,
with significant improvements from 6 months ago, as shown in the table below.
All assets with an EPC less than a B have an asset management plan to upgrade
the EPC, and our targets are to achieve these improvements well ahead of the
time set by the MEES regulations. We work with our tenant base, made up of
larger corporates who share our ESG goals, to align our asset management
initiatives to achieving both our own and their ESG targets. This typically
involves investment from the tenant which mitigates significant incremental
capital expenditure.
Sept 2023 March 2023 Sept 2022
A 14% 12% 11%
B 41% 40% 29%
C 32% 34% 46%
D 13% 14% 14%
E 0% 0% 0%
F 0% 0% 0%
Total 100% 100% 100%
Based on percentage of the portfolio by floor area
Looking forward, we have a strong focus on achieving our published ESG goals,
and are now working to build on our scope 1 and 2 targets by developing a
scope 3 target. We have engaged CBRE's ESG team to support our efforts across
our ESG priorities.
THE INVESTMENT ADVISER TEAM
The Investment Adviser continues to be led by Richard Moffitt, with Justin
Upton as CIO and Christopher Turner leading on property management. Mike
Perkins, CFO of the Investment Adviser, has decided to step down, to be
replaced by Jamie Waldegrave, who qualified as a Chartered Accountant at PwC,
and who has worked in the business for several years as COO. We would like to
take this opportunity to thank Mike for his many years of service to the
Investment Adviser and to Urban Logistics, and to welcome Jamie into his new
role.
OUTLOOK
The logistics sector will continue to provide rental and capital growth
opportunities given the strong underlying market dynamics. The current
economic and interest rate environment has created challenges in the sector
but also provides a strong, well managed and well capitalised business such as
Urban Logistics opportunities to capitalise on any dislocation which may
arise.
The Company's investment strategy and philosophy remain the same: last mile,
single let logistics assets, strong underlying fundamentals, actively managed
to drive shareholder value. The team, led by Richard Moffitt, has always
advocated a 'through the cycle approach' to the portfolio, with asset
management adding additional value, rather than relying on market driven yield
compression.
We believe we have seen, or are close to seeing, the bottom of the market and
are well placed to take advantage of the opportunities which will be presented
to us in the coming years. There is significant rental upside to be captured
in the portfolio, and we and the Board will be working to capture that upside
on behalf of shareholders in the coming year and beyond.
THE INVESTMENT ADVISER
8 November 2023
FINANCIAL REVIEW
Financial Review
IFRS profit
30 Sep 2023 30 Sep 2022 31 Mar 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revenue 29,731 26,500 55,305
Property operating costs (1,218) (1,069) (2,313)
Net rental income 28,513 25,431 52,992
Other operating income 88 41 57
Administrative and other expenses (4,487) (4,977) (9,683)
Long-term incentive plan (charge)/credit (11) 3,503 4,345
Operating profit before changes in fair value of investment properties 24,103 23,998 47,711
Changes in fair value of investment property 940 (22,162) (121,119)
Profit on disposal of investment property 56 - -
Operating profit/(loss) 25,099 1,836 (73,408)
Finance income 71 42 72
Finance expense (7,840) (4,587) (10,752)
Exceptional items (391) - -
Changes in fair value of interest rate derivatives (68) 5,102 1,431
IFRS reported profit/(loss) 16,871 2,393 (82,657)
Net rental income
In the financial period to 30 September 2023, the portfolio generated net
rental income of £28.5 million (30 September 2022: £25.4 million), an
increase of £3.1 million or 12.1% compared to the prior period. The increase
was driven by a combination of asset management and the acquisition of new
properties part way through the prior period.
Property operating costs increased by £0.1 million or 13.9%. Our gross to net
rental income ratio remains high at 96.5% (30 September 2022: 96.4%),
illustrating the strength of our core strategy.
Administrative expenses
Administrative expenses, which include all operational costs of running the
business, decreased by £0.5 million to £4.5 million. This is primarily due
to the reduction in net asset value following the revaluation of the portfolio
in March 2023, resulting in a lower fee to the Investment Adviser.
Exceptional items
Exceptional items of £0.4m relate to costs involved with the adjustment to
the management arrangements in the year. In May 2023 PCP2 Ltd was replaced by
G10 Capital Limited as the AIFM, and Logistics Asset Management LLP was
appointed as the Investment Adviser. This was approved by shareholders
following the publication of a circular.
Total cost ratio
We continue to monitor the operational efficiency of the Group through the
total cost ratio, which has improved to 18.5% (30 September 2022: 21.6%). The
total cost ratio has improved as anticipated, as we have benefitted from a
full period of income from properties acquired in the prior period. Over the
medium term we would target this falling further to approximately 15%,
including vacant property costs. Further detail on cost ratios can be found in
EPRA supplementary information, note VI.
30 Sep 2023 30 Sep 2022 31 Mar 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total costs including vacant property costs 18.5% 21.6% 21.2%
Total cost excluding vacant property costs 16.0% 18.8% 18.3%
Net finance costs
The net finance costs for the period, excluding fair value movement of our
interest rate derivatives, were £7.8 million (30 September 2022: £4.5
million), an increase of £3.3 million compared to the prior period. The
increased costs were driven by the higher gross debt position at the period
end of £353.7 million, compared with £310.0 million at 30 September 2022, as
well as the higher weighted average cost of debt.
The weighted average cost of debt for the period was 88bps higher than the
previous period at 3.86% (30 September 2022: 2.98%). This rise is primarily
due new debt taken out at a higher rate later in the period, as well as
increased costs on our small portion of floating rate debt. Interest cover has
reduced to 3.3x (30 September 2022: 5.1x), due to a higher level of drawn
debt, and higher weighted average cost of debt in the period. The weighted
average debt maturity is 6.0 years (30 September 2022: 6.4 years).
IFRS profit and adjusted earnings
IFRS profit after tax for the period was £16.9 million (30 September 2022:
£2.4 million), representing a basic and diluted earnings per share of 3.57
pence, compared with 0.51 pence for the prior period. The improvement in
earnings was primarily the result of a £0.9m property revaluation surplus, as
opposed to a £22.2m deficit in the period to 30 September 2022.
Adjusted earnings for the period were £16.3 million representing an increase
of £0.3 million when compared to the prior period (30 September 2022:
£16.0m), resulting an improvement in adjusted earnings per share to 3.46
pence (30 September 2022: 3.38 pence).
The Directors consider adjusted earnings as a key measure of the Company's
underlying operating results, and therefore excludes non-cash and exceptional
items. A full reconciliation between IFRS profit and Adjusted earnings can be
found in note 9 of the financial statements.
Dividend
In the period to 30 September 2023, the Company paid and declared the
following interim dividends:
Amount In respect of
pence financial year Paid/
Declared per share ended to be paid
22 June 2023 4.35p 31 March 2023 21 July 2023
8 November 2023 3.25p 31 March 2024 15 December 2023
An interim dividend of 3.25 pence per share will be paid on 15 December 2023
to shareholders on the register at the close of business 24 November 2023, and
the full amount is a property income distribution ("PID").
IFRS net assets
30 Sep 2023 30 Sep 2022 31 Mar 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment property 1,103,609 1,131,911 1,106,507
Bank and other borrowings (348,970) (305,316) (346,774)
Cash 30,853 57,321 30,159
Other net liabilities (22,373) (19,669) (23,198)
EPRA net tangible assets 763,119 864,247 766,694
Interest rate derivatives 2,966 6,705 3,034
Intangible assets 26 39 32
IFRS net assets 766,111 870,991 769,760
At 30 September 2023, IFRS net assets attributable to Ordinary Shareholders
were £766.1 million (31 March 2023: £769.8 million), representing a basic
and diluted net asset value per share of 162.32 pence (31 March 2023: 163.09
pence).
The Group considers EPRA net tangible assets ("NTA") a key measure of overall
performance. At 30 September 2023, NTA was £763.1 million (31 March 2023:
£766.7 million), representing an EPRA NTA per share of 161.69 pence (31 March
2023: 162.44 pence), a decrease of 0.5%.
The Total Accounting Return for the period, which reflects growth in EPRA NTA
plus dividends paid in the period, was 2.2% (30 September 2022: -0.7%). The
average annualised Total Accounting Return since IPO in 2016 has been 12.3%,
including dividends paid and declared.
Portfolio valuation
The value of our portfolio at 30 September 2023, which includes land for
future development, was £1,104 million, a decrease of £3 million, or 0.3%
over the six-month period. In the period, the Group disposed of two properties
with a net book value of £14.5m. In addition, the Group incurred capital
expenditure of £9.4 million, which was made up of £5.6m on developments or
major refurbishments, with the remainder on value enhancing refurbishment
works.
The Group recognised a valuation surplus (excluding provision for profit
share) of £0.9 million upon revaluation of the portfolio.
The portfolio delivered a Total Property Return ("TPR") of 2.3% for the
six-months to 30 September 2023 (30 September 2022: 0.3%).
Financing
At 30 September 2023, the Group had drawn debt totalling £353.7 million (30
September 2022: £310.0 million).
On 7 July 2023, the Group entered into a £57.3 million sustainability linked
loan facility with Aviva Investors, which provided a 10-year term and came at
a fixed cost of 6.17%. This facility includes, inter alia, margin rate
improvement available on hitting environmental targets across the assets
charged. The proceeds of this debt were used to refinance the RCF portion of
the Barclays facility at SONIA plus 2.22% margin, resulting in a total cost of
7.41% at 30 September 2023. In September 2023 we used the proceeds from the
sale of two assets to further reduce the drawn portion of the Barclays
facility to £86.5m.
These transactions have had the effect of moving our weighted average debt
maturity to 6.0 years, an increase from 5.4 years at March 2023, and of
increasing our fixed or hedged percentage to 97%, from 85% in March 2023.
Loan Drawn at % Fixed /
Maturity Commitment 30 Sep 2023 Hedged at
Lender Date (£m) (£m) 30 Sep 2023
Barclays (syndicate of 3 banks) Aug 2025 151.0 86.5 87.3%
Aviva Investors (7-years) Mar 2028 88.4 88.4 100.0%
Aviva Investors (10-years) May 2032 178.8 178.8 100.0%
Total 418.2 353.7 96.9%
At 30 September 2023, the weighted average cost of debt across all drawn
facilities is 4.1% (30 September 2022: 3.3%), of which 96.9% (30 September
2022: 96.5%) is either fixed or hedged to term.
Cash and net debt
During the period, the Group's cash balances slightly increased by £0.7
million, as illustrated in the table below:
30 Sep 2023 30 Sep 2022 31 Mar 2023
(unaudited) (unaudited) (audited)
£m £m £m
Cash generated from operations 21.6 27.5 43.1
Cash generated from/(used in) investing activities 5.2 (138.7) (201.3)
Cash (used in)/generated from financing activities (26.1) 41.1 61.0
Net increase/(decrease) in cash 0.7 (70.1) (97.2)
Opening cash balance 30.2 127.4 127.4
Closing cash balance 30.9 57.3 30.2
At 30 September 2023, the Group's cash balance was £30.9 million, of which
£4.3 million is earmarked for committed capex and £7.5 million is restricted
accounts. Over the six-month period, net debt increased by £2.1 million to
£322.9 million, representing a loan to value ("LTV") of 29.3% (30 September
2022: 22.3%).
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties associated with the Company's business
are broadly unchanged from those set out in the 2023 Annual Report and
include, but are not limited to:
· Weakening macroeconomic environment in the UK, including higher
interest rates, inflationary pressures and the risk of recession
· Insufficient funds and available credit for operational
requirements of business, including investing in CAPEX for the existing
portfolio
· Inability of the Company to raise new money to develop and grow
the business, due to the Company share price trading at a discount to NAV
· Risk of higher interest rates affecting financial performance and
banking covenants
· Tenant default and vacancy management
· Increased CAPEX spend connected to hitting MEES legislation, and
potential reduction in property values if legislation is not met
· Reluctance of tenants to take leases in buildings with a lower
than average environmental performance
· ESG roadmap not sufficiently ambitious and detailed
· Reputational and governance risks around related party
transactions
Information on these risks and how they are managed is set out on pages 50 to
54 of the 2023 Annual Report. The Board regularly reviews the principal risks
to ensure that the risk assessment is correct and relevant, adjusting
mitigating factors and procedures as appropriate.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
· that these condensed interim financial statements have been
prepared in accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and Transparency
sourcebook of the United Kingdom's Financial Conduct Authority; and
· this Interim Report includes a fair review of the information
required by:
A) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the period under
review and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
B) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place during the period ended 30
September 2023 and that have materially affected the financial position or
performance of the Company during that period and any material changes in the
related party transactions described in the last Annual Report.
This Interim Report was approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Nigel Rich
Chairman
8 November 2023
INDEPENDENT REVIEW REPORT TO URBAN LOGISTICS REIT PLC
Conclusion
We have been engaged by Urban Logistics REIT PLC ("the Company") to review the
condensed set of financial statements of the Company and its subsidiaries (the
'Group') in the interim financial report for the six months ended 30 September
2023 which comprises condensed consolidated statement of comprehensive income,
condensed consolidated statement of financial position, condensed consolidated
cash flow statement, condensed consolidated statement of changes in equity and
the notes to the interim financial report. We have read the other
information contained in the interim financial report and considered whether
it contains any apparent material misstatements of fact or material
inconsistencies with the information in the condensed set of financial
statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the six months ended 30 September 2023 is not prepared,
in all material respects, in accordance with International Accounting Standard
34, "Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards, and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued for use in
the United Kingdom. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK-adopted International Accounting Standards.
The condensed set of financial statements included in this interim financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group and
the Company to cease to continue as a going concern.
Responsibilities of Directors
The interim financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with International Accounting Standard 34,
"Interim Financial Reporting" as contained in UK-adopted International
Accounting Standards and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the interim financial report, the directors are responsible for
assessing the Group's and the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the Review of the Financial Information
In reviewing the interim financial report, we are responsible for expressing
to the Company a conclusion on the condensed set of financial statements in
the interim financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information performed by the Independent Auditor of the Entity". Our review
work has been undertaken so that we might state to the Company those matters
we are required to state to them in an independent review report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
8 November 2023
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Revenue 6 29,731 26,500 55,305
Property operating expenses (1,218) (1,069) (2,313)
Net rental income 28,513 25,431 52,992
Administrative and other expenses (4,487) (4,977) (9,683)
Other operating income 88 41 57
Long-term incentive plan credit/(charge) 10 (11) 3,503 4,345
Operating profit before changes in fair value of investment properties 24,103 23,998 47,711
Changes in fair value of investment property 7, 12 940 (22,162) (121,119)
Profit on disposal of investment property 56 - -
Operating profit/(loss) 25,099 1,836 (73,408)
Finance income 71 42 72
Finance expense 8 (7,840) (4,587) (10,752)
Changes in fair value of interest rate derivatives (68) 5,102 1,431
Exceptional items (391) - -
Profit/(loss) before taxation 16,871 2,393 (82,657)
Tax charge for the period - - -
Profit/(loss) and total comprehensive income (attributable to the 16,871 2,393 (82,657)
shareholders)
Earnings/(loss) per share - basic 9 3.57p 0.51p (17.51)p
Earnings/(loss) per share - diluted 9 3.57p 0.51p (17.51)p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Non-current assets
Investment property 12 1,113,149 1,148,395 1,101,583
Intangible assets 26 39 32
Interest rate derivatives 14 876 6,705 1,883
Total non-current assets 1,114,051 1,155,139 1,103,498
Current assets
Assets held for sale - - 14,500
Trade and other receivables 8,956 9,669 8,006
Interest rate derivatives 14 2,090 - 1,151
Cash and cash equivalents 30,853 57,321 30,159
Total current assets 41,899 66,990 53,816
Total assets 1,155,950 1,222,129 1,157,314
Current liabilities
Trade and other payables (12,393) (17,816) (13,233)
Deferred rental income (12,688) (11,366) (11,596)
Total current liabilities (25,081) (29,182) (24,829)
Non-current liabilities
Long-term rental deposits (5,989) (6,943) (6,504)
Lease liability (9,799) (9,697) (9,447)
Bank borrowings 13 (348,970) (305,316) (346,774)
Total non-current liabilities (364,758) (321,956) (362,725)
Total liabilities (389,839) (351,138) (387,554)
Total net assets 766,111 870,991 769,760
Equity
Share capital 16 4,720 4,720 4,720
Share premium 17 438,418 438,418 438,418
Capital reduction reserve 18 228,760 228,760 228,760
Other reserves - 962 120
Retained earnings 94,213 198,131 97,742
Total equity 766,111 870,991 769,760
Net asset value per share - basic 20 162.32p 184.54p 163.09p
Net asset value per share - diluted 20 162.32p 184.54p 163.09p
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Cash flows from operating activities
Profit for the period (attributable to equity shareholders) 16,871 2,393 (82,657)
Add: amortisation and depreciation 55 71 127
Add/(less) changes in fair value of investment property 7, 12 (940) 22,162 121,119
Add/(less): changes in fair value of interest rate swaps 68 (5,102) (1,431)
Less: profit on disposal of investment property (56) - -
Add: finance expense 8 7,840 4,587 10,752
Long-term investment plan charge/(credit) 10 11 (3,503) (4,345)
(Increase)/Decrease in trade and other receivables (1,945) 10,952 8,665
Decrease in trade and other payables (263) (3,999) (9,111)
Cash generated from operations 21,641 27,561 43,119
Net cash flow generated from operating activities 21,641 27,561 43,119
Investing activities
Purchase of investment properties - (34,877) (86,112)
Capital expenditure on investment properties 12 (9,397) (20,920) (34,796)
Disposal of investment properties 14,556 - -
Acquisition of a subsidiary, net of cash acquired - (82,925) (80,391)
Net cash flow generated from/(used in) investing activities 5,159 (138,722) (201,299)
Financing activities
Bank borrowings drawn 13 57,250 121,600 121,600
Bank borrowings repaid 13 (54,500) (51,000) (10,000)
Loan arrangement fees paid 13 (1,179) (2,019) (2,058)
Other borrowings repaid - (3,104) (3,058)
Interest paid (7,056) (3,843) (9,346)
Finance lease payments (90) - (308)
Dividends paid to equity holders 11 (20,531) (20,531) (35,870)
Net cash flow (used in)/generated from financing activities (26,106) 41,103 60,960
Net increase/(decrease) in cash and cash equivalents for the period 694 (70,058) (97,220)
Cash and cash equivalents at start of period 30,159 127,379 127,379
Cash and cash equivalents at end of period 30,853 57,321 30,159
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Share Share reduction Other Retained
Six months ended 30 September capital premium reserve reserves earnings Total
2023 (unaudited) £'000 £'000 £'000 £'000 £'000 £'000
1 April 2023 4,720 438,418 228,760 120 97,742 769,760
Profit for the period - - - - 16,871 16,871
Total comprehensive income - - - - 16,871 16,871
Transactions with shareholders in their capacity as owners
Dividends to shareholders - - - - (20,531) (20,531)
Long-term incentive plan - - - 11 - 11
Transfer between reserves - - - (131) 131 -
30 September 2023 4,720 438,418 228,760 - 94,213 766,111
Six months ended 30 September 2022 (unaudited)
1 April 2022 4,720 438,418 228,760 4,465 216,269 892,632
Profit for the period - - - - 2,393 2,393
Total comprehensive income - - - - 2,393 2,393
Transactions with shareholders in their capacity as owners
Dividends to shareholders - - - - (20,531) (20,531)
Long-term incentive plan - - - (3,503) - (3,503)
30 September 2022 4,720 438,418 228,760 962 198,131 870,991
Year ended 31 March 2023 (audited)
1 April 2022 4,720 438,418 228,760 4,465 216,269 892,632
Profit for the year - - - - (82,657) (82,657)
Total comprehensive income - - - - (82,657) (82,657)
Transactions with shareholders in their capacity as owners
Dividends to shareholders - - - - (35,870) (35,870)
Long-term incentive plan - - - (4,345) - (4,345)
31 March 2023 4,720 438,418 228,760 120 97,742 769,760
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
Urban Logistics REIT plc (the "Company") and its subsidiaries (the "Group")
carry on the business of property lettings throughout the United Kingdom. The
Company is a public limited company incorporated and domiciled in England and
Wales and listed on the Main Market of the London Stock Exchange. The
registered office address is 6th Floor, 65 Gresham Street, London, EC2V 7NQ.
These condensed interim financial statements were approved for issue on 8
November 2023.
These condensed interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 March 2023 were approved by the board
of directors on 21 June 2023 and delivered to the Registrar of Companies. The
report of the auditors on those accounts were unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under section
498 of the Companies Act 2006.The interim financial statements for the period
to 30 September 2023 have been reviewed, not audited.
2. BASIS OF PREPARATION
This condensed interim financial report for the half-year ended 30 September
2023 has been prepared in accordance with the UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 March 2023, which
has been prepared in accordance with UK-adopted International Accounting
Standards and the requirements of the Companies Act 2006.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period, except for the
adoption of new and amended standards as set out below.
The Group's financial information has been prepared on a historical cost
basis, except for investment property and derivative interest rate swaps which
have been measured at fair value.
The functional currency of the Group is considered to be pounds sterling as
this is the currency of the primary environment in which the Group operates.
GOING CONCERN
The Directors have reviewed the current and projected financial position of
the Group, making reasonable assumptions about future trading performance. As
part of the review, the Group has considered its cash balances, its debt
maturity profile, including undrawn facilities, and the long-term nature of
the tenant leases.
The Group has undertaken risk assessments in respect of the impact on key
objectives and has appropriate response plans such as stress testing,
monitoring of tenant performance and financial reviews. On the basis of this
review, and after making due enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the Interim
Financial Statements.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Interim Financial Statements in conformity with the
generally accepted accounting practices requires management to make estimates
and judgements that affect the reported amounts of assets and liabilities as
well as the disclosure of contingent assets and liabilities at the Statement
of Financial Position date and the reported amounts of revenue and expenses
during the reporting period.
FAIR VALUE OF INVESTMENT PROPERTY AND PROPERTIES UNDER CONSTRUCTION
The Group values its investment properties using a yield capitalisation
methodology. Principal assumptions and management's underlying estimation of
the fair value of those relate to: capitalised occupancy levels; expected
future growth in rental income and operating costs; maintenance requirements;
capitalisation rate; and discount rates. There are inter-relationships between
the valuation inputs and they are primarily determined by market conditions.
The effect of an increase in more than one input could be to magnify the
impact on the valuation. However, the impact on the valuation could be offset
by the inter-relationship of two inputs moving in opposite directions, e.g.
an increase in rent may be offset by a decrease in occupancy, resulting in a
minimal net impact on the valuation. A more detailed explanation of the
background, methodology and judgements made by management that are adopted in
the valuation of the investment properties is set out in note 12 to the
Financial Statements.
The market value of an investment property is determined by real estate
valuation experts, to be the estimated amount for which a property should
exchange on the date of the valuation in an arm's-length transaction. Each
property has been valued on an individual basis. The valuation experts use
recognised valuation techniques and the principles of IFRS 13.
The valuations have been prepared in accordance with RICS Valuation - Global
Standards January 2022 (the "Red Book"). Factors reflected include current
market conditions, annual rentals, lease lengths and location. The significant
methods and assumptions used by the valuers in estimating the fair value of
investment property, including sensitivities, are set out in note 12.
RELATED PARTY RELATIONSHIPS
The Company is advised by Logistics Asset Management LLP ("the Adviser"), and
the Company has considered whether the Adviser is controlled by the Company
and should therefore be consolidated into these accounts as per the provisions
of IFRS 10.
Under IFRS 10, an investor controls an investee if, and only if, the investor
has all three of the following elements:
· power over the investee
· exposure, or rights, to variable returns from its involvement
with the investee
· the ability to use its power over the investee to affect the
amount of the investor's returns.
The Company has no investment in the Adviser. Whilst the Company is currently
the Adviser's only client, the Adviser's fee for its services is defined by a
formula, therefore it does not have exposure, or rights, to variable returns,
nor can it affect the amount of the investor's returns. The Company does exert
influence over the Adviser due to a shared directorship; Richard Moffitt, the
controlling owner of the Adviser and a Board member of the REIT, however he is
excluded from all Board discussions involving the Adviser.
The Company has concluded that it does not meet all three of the required
elements of IFRS 10 to have control over the Adviser, and therefore it has not
consolidated the Adviser's financials into these accounts.
4. PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
Financial Statements are consistent with those applied within the Company's
Annual Report and Financial Statements for the year ended 31 March 2023.
BASIS OF CONSOLIDATION
The Financial Statements consolidate the accounts of the Company and all
subsidiary undertakings drawn up to the same year end.
INVESTMENT IN SUBSIDIARIES
Investments in subsidiaries are stated at cost less any provision for
permanent diminution in value. Realised gains and losses are dealt with
through the Statement of Comprehensive Income. A review for impairment is
carried out if events or changes in circumstances indicate that the carrying
amount may not be recoverable, in which case an impairment provision is
recognised and charged to the Statement of Comprehensive Income.
BORROWINGS
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit and loss over the borrowings period using the
effective interest method.
BORROWING COSTS
Borrowing costs in relation to interest charges on bank borrowings are
expensed in the period to which they relate. Fees incurred in relation to the
arrangement of bank borrowings are capitalised and expensed on a
straight-line basis over the term of the loan.
SEGMENTAL REPORTING
IFRS 8 requires operating segments to be identified on the basis of internal
reports that are regularly reported to the Board to allocate resources to the
segments and to assess their performance. The Directors consider there to be
only one reportable segment, being the investment in the United Kingdom into
small logistics warehouses.
INVESTMENT PROPERTIES
Investment properties comprises completed property that is held to earn
rentals or for capital appreciation, or both, and development properties that
are under development or available for development.
Investment properties are initially recognised at cost including transactions
costs. Transaction costs include transfer taxes and professional fees for
legal services. Subsequent to initial recognition, investment properties are
carried at fair value, as determined by real estate valuation experts. Gains
or losses arising from change in fair value are recognised in the Statement of
Comprehensive Income in the period in which they arise.
Investment properties cease to be recognised when they have been disposed of.
The difference between the disposal proceeds and the carrying amount of the
asset is recognised in the Statement of Comprehensive Income. A disposal is
recognised on exchange if the sale contract is unconditional; if the sale
contract on exchange is conditional, the disposal is recognised on legal
completion.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the Statement of
Financial Position when the Group becomes a party to the contractual
provisions of the instrument.
FINANCIAL ASSETS
Trade receivables are held in order to collect the contractual cash flows and
are initially measured at the transaction price as defined in IFRS 15, as the
contracts of the Group do not contain significant financing components.
Impairment losses are recognised based on lifetime expected credit losses in
profit or loss.
Other receivables are held in order to collect the contractual cash flows and
accordingly are measured at initial recognition at fair value, which
ordinarily equates to cost, and are subsequently measured at cost less
impairment due to their short-term nature.
FINANCIAL LIABILITIES
Financial liabilities, equity instruments and warrant instruments issued by
the Group are classified in accordance with the substance of the contractual
arrangements entered into and the definitions of a financial liability and an
equity instrument. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Trade and other payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate
method.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments, comprising interest rate caps and swaps for
hedging purposes, are initially recognised at cost and are subsequently
measured at fair value, being the estimated amount that the Group would
receive or pay to terminate the agreement at the period end date, taking into
account current interest rate expectations and the current credit rating of
the Group and its counterparties.
The gain or loss at each fair value measurement date is recognised in the
Statement of Comprehensive Income. Premiums payable under such arrangements
are initially capitalised into the Statement of Financial Position,
subsequently they are remeasured and held at their fair values.
Hedge accounting has not been applied in these Interim Financial Statements.
REVENUE RECOGNITION
Rental income and service charge income from operating leases on properties
owned by the Group is accounted for on a straight-line basis over the term on
the lease. Rental income excludes service charges and other costs directly
recoverable from tenants.
Lease incentives are amortised on a straight-line basis over the term of the
lease.
LICENCE FEES RECIEVABLE
The Group receives licence fee income from the date of initial investment in a
forward-funded agreement to the date of practical completion. This is payable
by the developer to the Group on practical completion and typically reflects
the approximate level of rental income that is expected to be payable under
the lease. IAS 40.20 states that investment property should be recognised
initially at cost, being the consideration paid to acquire the asset,
therefore such licence fees are deducted from the cost of the investment
property and recognised within revenue, as licence fee income, within the
Statement of Comprehensive Income.
EXCEPTIONAL ITEMS
The Group defines exceptional items to be those that warrant, by virtue of
their nature, size or frequency, separate disclosure on the face of the income
statement where, in the opinion of the Directors, this enhances the
understanding of the Group's financial performance.
LEASES
At inception, the Group assesses whether a contract is or contains a lease.
This assessment involves the exercise of judgement about whether the Group
obtains substantially all the economic benefits from the use of that asset,
and whether the Group has the right to direct the use of the asset.
The Group recognises a right-of-use ("ROU") asset and a corresponding lease
liability at the commencement date of the lease. The ROU asset is initially
measured based on the present value of lease payments, plus initial direct
costs and the cost of obligations to refurbish the asset, less any incentives
received.
Lease payments generally include fixed payments and variable payments that
depend on an index (such as an inflation index). When the lease contains an
extension or purchase option that the Group considers reasonably certain to be
exercised, the cost of the option is included in the lease payments.
Each lease payment is allocated between the liability and finance cost. The
lease payments are discounted using the interest rate implicit in the lease if
that rate can be readily determined or, if not, the incremental borrowing rate
is used, which is the weighted average cost of debt. The finance cost is
charged to profit or loss over the lease period so as to produce a constant
rate of interest on the remaining balance of the liability for each period.
As the head leases meet the definition of investment property, they are
initially recognised in accordance with IFRS 16, and then subsequently
accounted for as if they were investment property in accordance with the
Group's accounting policy. After initial recognition, the ROU head lease asset
is subsequently carried at fair value and the valuation gains and losses
recognised within "Changes in fair value of investment property" in the
Statement of Comprehensive Income.
ROU assets are included in the heading "Non-current assets", and the lease
liability included in the heading "Non-current liabilities", on the Statement
of Financial Position.
Where the ROU asset relates to land or property that meets the definition of
investment property under IAS 40, the ROU assets are included in the heading
"Investment properties", and the lease liability in the heading "Non-current
liabilities", on the Statement of Financial Position.
LONG-TERM INCENTIVE PLAN
There has been a long-term incentive plan ("LTIP") in place whereby Logistics
Asset Management LLP, has subscribed for C Ordinary Shares issued in Urban
Logistics Holdings Limited, a subsidiary of Urban Logistics REIT plc (the
"Company"). Under the terms of the LTIP, the Company is obliged to acquire the
C Ordinary Shares in Urban Logistics Holdings Limited, in return for services
provided by Pacific Industrial LLP, subject to certain conditions.
The fair value of the share price element of the LTIP award is calculated at
the grant date using the Monte Carlo model. The resulting cost is charged to
the Statement of Comprehensive Income over the vesting period.
The LTIP had a final vesting date of 30 September 2023, and vested with zero
value.
Further details have been provided in note 10.
TAXATION
Taxation on the profit or loss for the period not exempt under UK REIT
regulations comprises current and deferred tax. Current tax is expected tax
payable on any non-REIT taxable income for the period, using tax rates enacted
or substantively enacted at the period end date, and any adjustment to tax
payable in respect of previous years.
DIVIDENDS
Dividends on equity shares are recognised when they become legally payable. In
the case of interim dividends, this is when paid. In the case of final
dividends, this is when approved by the shareholders at the Annual
General Meeting.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and short-term deposits with
banks and other financial institutions, with an initial maturity of three
months or less.
5. STANDARDS IN ISSUE BUT NOT YET EFFECTIVE
As at the date of authorisation of these Financial Statements there were
standards and amendments which were in issue but which were not yet effective
and which have not been applied. The principal ones were:
· classification of Liabilities as Current or Non-Current -
Amendments to IAS 1.
· disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
· definition of Accounting Estimates - Amendments to IAS 8
· deferred tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
· sale of contribution of assets between an investor and its
associate or joint venture - Amendments to IFRS 10 and IAS 28
The Directors do not expect the adoption of these standards and amendments to
have a material impact on the Financial Statements.
In the current period, the following amendments have been adopted which were
effective for the periods commencing on or after 1 January 2022:
· property, plant and equipment: Proceeds before intended use -
Amendment to IAS 16
· reference to the Conceptual Framework - Amendments to IFRS 3
· onerous contracts - Costs of Fulfilling a Contract - Amendment to
IAS 37
· annual improvements to IFRS Standards 2018 - 2020
The adoption of these amendments has not had a material impact on the
financial statements.
6. REVENUE
The Group is involved in UK property ownership and letting and is considered
to operate in a single geographical and business segment. The total revenue of
the Group for the period was derived from its principal activity, being that
of property lettings. No single tenant accounted for more than 10% of the
Group's gross rental income in either period.
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rental income 29,292 25,675 54,119
Service charge income 197 154 251
Licence fee 242 671 935
Total revenue 29,731 26,500 55,305
7. CHANGES IN FAIR VALUE OF INVESTMENT PROPERTY
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Revaluation surplus/(deficit) 886 (21,508) (120,420)
Provision for profit share 54 (654) (699)
Total 940 (22,162) (121,119)
8. FINANCE EXPENSE
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest on bank borrowings 8,624 4,038 10,697
Swap interest (received)/paid (1,568) (228) (1,351)
Amortisation of loan arrangement fees 625 594 1,092
Interest on lease liabilities 159 183 314
Total 7,840 4,587 10,752
9. EARNINGS PER SHARE
The calculation of the basic earnings per share ("EPS") was based on the
profit attributable to Ordinary Shareholders divided by the weighted average
number of Ordinary Shares outstanding during the period, in accordance with
IAS 33.
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit attributable to Ordinary Shareholders
Total comprehensive income 16,871 2,393 (82,657)
Weighted average number of Ordinary Shares in issue 471,975,411 471,975,411 471,975,411
Basic earnings per share (pence) 3.57p 0.51p (17.51)p
Number of diluted shares under option/warrant - - -
Weighted average number of Ordinary Shares
for the purpose of dilutive earnings per share 471,975,411 471,975,411 471,975,411
Diluted earnings per share (pence) 3.57p 0.51p (17.51)p
Adjustments to remove:
Changes in fair value of investment property (940) 22,162 121,119
Changes in fair value of interest rate derivatives 68 (5,102) (1,431)
Profit on disposal of investment property (56) - -
EPRA earnings 15,943 19,453 37,031
EPRA earnings per share 3.38p 4.12p 7.85p
Adjustments to add back:
LTIP (credit)/charge 11 (3,503) (4,345)
Exceptional items 391 - -
Adjusted earnings 16,345 15,950 32,686
Adjusted earnings per share 3.46p 3.38p 6.93p
10. LONG-TERM INCENTIVE PLAN
The Company has had an LTIP, accounted for as an equity-settled share-based
payment. At 30 September 2023, Logistics Asset Management LLP, has subscribed
for 1,000 C Ordinary Shares of £0.01 each issued in Urban Logistics Holdings
Limited, a subsidiary of the Company. The LTIP was valued on a combination of
NAV growth and share price performance. At 30 September 2023 the valuation of
the LTIP was calculated at zero, and no payment in equity or cash has been
made to Logistics Asset Management.
Charge/(Credit) for
Fair value the period
Date granted Class of share £'000 £'000
August 2017
- Share price element C Ordinary - 11
- EPRA NTA element C Ordinary - -
Total - 11
11. DIVIDENDS
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Ordinary dividends paid
2022: Second interim dividend: 4.35p per share - 20,531 20,531
2023: First interim dividend: 3.25p per share - - 15,339
2023: Second interim dividend: 4.35p per share 20,531 - -
Total dividends paid in the period (£'000) 20,531 20,531 35,870
Total dividends paid in the period 4.35p 4.35p 7.60p
12. INVESTMENT PROPERTIES
In accordance with IAS 40: Investment Property, investment property is carried
at its fair value as determined by an external valuer. This valuation has been
conducted by CBRE and has been prepared as at 30 September 2023,
in accordance with the RICS Valuation - Professional Standards UK January
2022 (the "Red Book").
The valuations have been prepared in accordance with those recommended by the
International Valuation Standards Committee and are consistent with the
principles in IFRS.
Investment Development
properties properties Total
£'000 £'000 £'000
At 1 April 2023 1,074,102 17,905 1,092,007
Capital expenditure 5,080 4,317 9,397
Transfer of completed development properties 15,362 (15,362) -
Movement in tenant lease incentives 1,319 - 1,319
Revaluation surplus/(deficit) in period 950 (64) 886
Investment properties excluding head lease 1,096,813 6,796 1,103,609
ROU assets at 30 September 2023
Add: right-of-use asset 9,540 - 9,540
Total investment properties at 30 September 2023 1,106,353 6,796 1,113,149
Investment property - level 3
The Group's investment property assets are classified as level 3, as defined
by IFRS 13, in the fair value hierarchy. Level 3 inputs for the asset or
liability that are derived from formal valuation techniques include inputs for
the asset or liability that are not based on observable market data.
The valuation has been prepared on the basis of fair value ("FV"), in
accordance with IFRS 13, which is defined as:
"The price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date."
Fair value, for the purpose of financial reporting under IFRS 13, is
effectively the same as market value, which is defined as:
"The estimated amount for which an asset or liability should exchange on the
valuation date between a willing buyer and a willing seller in an arm's length
transaction, after proper marketing and where the parties had acted
knowledgeably, prudently and without compulsion."
The table below analyses:
· the fair value measurement at the end of the reporting year;
· a description of the valuation techniques applied;
· the inputs used in the fair value measurement, including the ranges
of rent charged to different units within the same building; and
· for level 3 fair value measurements, quantitative information about
significant unobservable inputs used in the fair value measurement.
Valuation techniques
The yield capitalisation approach is used when valuing the Group's commercial
investment properties which uses market rental values with a market
capitalisation rate. The resulting valuations are cross-checked against the
net initial yields and the fair market vales based on recent market
transactions.
For investment properties under development, properties are valued using a
residual method approach. The fair value is calculated by estimating the fair
value of the completed property using the yield capitalisation approach less
estimated costs to complete and a risk premium.
The key unobservable inputs made in determining the fair values are as
follows:
Key
Fair value Valuation unobservable
31 March 2023 £'000 technique inputs Range
Completed investment 1,096,813 Yield capitalisation ERV £30,000-£3,441,936 per
Equivalent yield annum
4.0%-12.5%
Development property 6,796 Residual method Various
1,103,609
Sensitivities
Significant increases/decreases in the ERV (per sq ft per annum) and rental
growth per annum in isolation would result in a significantly higher/lower
fair value measurement. Significant increases/decreases in the long-term
vacancy rate and discount rate (and exit yield) in isolation would result in a
significantly higher/lower fair value measurement.
Generally, a change in the assumptions made for the ERV (per sq ft per annum)
is accompanied by:
· a similar change in the rent growth per annum and discount rate
(and exit yield); and
· an opposite change in the long-term vacancy rate.
A 5% increase in estimated rental value ("ERV") would increase the completed
property portfolio valuation by £54.8 million and a 5% decrease would
decrease the completed property portfolio valuation by £54.8 million.
Similarly, a decrease in net initial yield ("NIY") by 0.25% would increase the
completed property portfolio valuation by £45.3 million and an increase of
0.25% would decrease the completed property portfolio valuation by £41.8
million.
Fair value hierarchy
The Company uses the following hierarchy for determining the fair value of
financial instruments:
Level 1: quoted (unadjusted) prices in active markets for identical assets and
liabilities.
Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3: inputs for the asset or liability that are derived from formal
valuation techniques that include inputs for the asset or liability that are
not based on observable market data.
Interest rate derivatives are classified as level 2 financial instruments.
There were no transfers between levels 1, 2 and 3 fair value measurement
during the current or prior year.
13. BANK BORROWINGS AND RECONCILIATION OF LIABILITIES TO CASH FLOWS FROM
FINANCING ACTIVITIES
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method.
Bank Lease
borrowings Liability Total
£'000 £'000 £'000
Balance at 1 April 2023 346,774 9,719 356,493
Bank borrowings drawn in period 57,250 - 57,250
Bank borrowings repaid in period (54,500) - (54,500)
Loan arrangement fees paid (1,179) - (1,179)
Rental payments - (90) (90)
Non-cash movements:
Amortisation of loan arrangement fees 625 - 625
Interest on lease liability - 159 159
Reclassification - 11 11
Total 348,970 9,799 358,769
Being
Drawn debt 353,715 - 353,715
Unamortised loan arrangement fees (4,745) - (4,745)
Lease Liability - 9,799 9,799
Total 348,970 9,799 358,769
On 7 July 2023, the Group entered into a £57.3 million sustainability linked
loan facility with Aviva Investors, which provided a 10-year term and came at
a fixed cost of 6.17%. This facility includes, inter alia, margin rate
improvement available on hitting environmental targets across the assets
charged.
The bank borrowings from both facilities are secured over the investment
properties owned by the Group.
14. INTEREST RATE DERIVATIVES
The Group has used interest rate swaps to mitigate exposure to interest rate
risk. The total fair value of these contracts is recorded in the Statement of
Financial Position. The interest rate derivatives are marked to market by the
relevant counterparty banks on a quarterly basis in accordance with IFRS 9.
Any movements in the fair value of the interest rate derivatives are taken to
finance expense in the Statement of Comprehensive Income.
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Interest rate swaps:
At beginning of period 3,034 1,603 1,603
Change in fair value in the period (68) 5,102 1,431
Total 2,966 6,705 3,034
Current derivative interest rate swaps 2,090 - 1,151
Non-current derivative interest rate swaps 876 6,705 1,883
Total 2,966 6,705 3,034
15. FINANCIAL RISK MANAGEMENT
Financial instruments - Group
The Group's financial instruments comprise financial assets and liabilities
that arise directly from its operations: cash and cash equivalents, trade and
other receivables, trade and other payables, lease liabilities and accruals,
interest rate derivatives and bank borrowings. The main purpose of these
financial instruments is to provide finance for the acquisition and
development of the Group's investment property portfolio.
Book value Fair value Book value Fair value
30 September 30 September 31 March 31 March
2023 2023 2023 2023
(unaudited) (unaudited) (audited) (audited)
£'000 £'000 £'000 £'000
Financial assets
Trade and other receivables 4,944 4,944 4,679 4,679
Cash and short-term deposits 30,853 30,853 30,159 30,159
Interest rate derivatives 2,966 2,966 3,034 3,034
Financial liabilities
Trade and other payables (10,876) (10,876) (9,257) (9,257)
Bank loans (353,715) (327,655) (350,964) (319,384)
Lease liabilities (9,799) (9,799) (9,719) (9,719)
Rent deposits (7,506) (7,506) (7,048) (7,048)
The fair value of the non-current borrowings are based on discounted cash
flows using a current borrowing rate. They are classified as level 3 fair
values.
16. SHARE CAPITAL
30 September 30 September
2023 2023
(unaudited) (unaudited)
Number £'000
Issued and fully paid up at 1p each
At beginning of period 471,975,411 4,720
At 30 September 2023 471,975,411 4,720
30 September 30 September
2022 2022
(unaudited) (unaudited)
Number £'000
Issued and fully paid up at 1p each
At beginning of period 471,975,411 4,720
At 30 September 2022 471,975,411 4,720
31 March 31 March
2023 2023
(audited) (audited)
Number £'000
Issued and fully paid up at 1p each
At beginning of period 471,975,411 4,720
At 31 March 2023 471,975,411 4,720
17. SHARE PREMIUM
Share premium relates to amounts subscribed for share capital in excess of
nominal value less any associated issue costs that have been capitalised.
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Balance brought forward 438,418 438,418 438,418
Total 438,418 438,418 438,418
18. CAPITAL REDUCTION RESERVE
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Balance brought forward 228,760 228,760 228,760
Total 228,760 228,760 228,760
19. RELATED PARTY TRANSACTIONS
During the interim period, the amount paid for services provided by Logistic
Asset Management LLP (the current Investment Adviser) or PCP2 Limited (the
former AIFM) totalled £3,408,445 (30 September 2022: £3,950,500). On 13
July 2023 the Company paid £151,418 on behalf of Richard Moffitt, this amount
was outstanding at period end, but was reimbursed on 26 October 2023.
M1 AGENCY LLP
During the interim period, the Group incurred fees totalling £266,554 (30
September 2022: £1,075,937) from M1 Agency LLP, a partnership in which
Richard Moffitt is a member. These fees were incurred in relation to the
letting of investment properties.
For the transactions listed above, Richard Moffitt's benefit is derived from
the profit allocation he receives from M1 Agency LLP as a member and not from
the transaction.
The Board, with the assistance of the AIFM and the Investment Adviser
(excluding Richard Moffitt), reviews and approves each fee payable to
M1 Agency LLP, and ensures the fees are in line with market rates and on
standard commercial property terms.
20. NET ASSET VALUE PER SHARE
Basic NAV per share is calculated by dividing net assets in the Condensed
Consolidated Statement of Financial Position attributable to Ordinary
Shareholders by the number of Ordinary Shares at the end of the period.
Net assets have been calculated as follows:
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Net assets per Condensed Consolidated Statement of Financial Position (£'000) 766,111 870,991 769,760
Adjustments for:
Fair value of interest rate derivatives (£'000) (2,966) (6,705) (3,034)
Intangible assets (£'000) (26) (39) (32)
EPRA net tangible assets (£'000) 763,119 864,247 766,694
Ordinary Shares in issue at period end (basic and diluted) 471,975,411 471,975,411 471,975,411
IFRS NAV per share (basic and diluted) 162.32p 184.54p 163.09p
EPRA NTA per share 161.69p 183.11p 162.44p
21. POST BALANCE SHEET EVENTS
On 8 November 2023, the Company declared an interim dividend for the six
months to 30 September 2023 of 3.25 pence per Ordinary Share. The dividend
will be paid as a property income distribution on 15 December 2023 to
shareholders on the register on 24 November 2023.
SUPPLEMENTARY INFORMATION
I. EPRA PERFORMANCE MEASURES SUMMARY
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
EPRA EPS (diluted) 3.38p 4.12p 7.85p
EPRA net tangible asset value 161.69p 183.11p 162.44p
EPRA net reinstatement value 177.36p 199.19p 178.16p
EPRA net disposal value 162.32p 184.54p 163.09p
EPRA net initial yield 4.9% 4.5% 5.0%
EPRA "topped up" net initial yield 5.0% 4.6% 5.1%
EPRA vacancy rate 6.8% 5.0% 7.4%
EPRA cost ratio (including vacant property costs) 18.5% 21.6% 21.2%
EPRA cost ratio (excluding vacant property costs) 16.0% 18.8% 18.3%
EPRA LTV 30.3% 28.8% 29.3%
II. INCOME STATEMENT
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross rental income 29,731 26,500 55,305
Property operating costs (1,218) (1,069) (2,313)
Net rental income 28,513 25,431 52,992
Administrative expenses (4,487) (4,977) (9,683)
Other operating income 88 41 57
Long-term incentive plan (charge)/credit (11) 3,503 4,345
Operating profit before interest and tax 24,103 23,998 47,711
Net finance costs (7,769) (4,545) (10,680)
Exceptional items (391) - -
Profit before tax 15,943 19,453 37,031
Tax on EPRA earnings - - -
EPRA earnings 15,943 19.453 37,031
Weighted average number of Ordinary Shares 471,975,411 471,975,411 471,975,411
EPRA earnings per share 3.38p 4.12p 7.85p
III. BALANCE SHEET
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment properties 1,113,149 1,148,395 1,101,583
Other net assets 1,932 27,912 14,951
Net borrowings (348,970) (305,316) (346,774)
Total shareholders' equity 766,111 870,991 769,760
Adjustments to calculate EPRA NTA:
Fair value of interest rate derivative (2,966) (6,705) (3,034)
Intangible assets (26) (39) (32)
EPRA net tangible assets 763,119 864,247 766,694
Ordinary Shares in issue at year end (basic and diluted) 471,975,411 471,975,411 471,975,411
EPRA NTA per share 161.69p 183.11p 162.44p
The Group considers EPRA NTA to be the most relevant measure for its operating
activities, it is therefore the Group's primary measure of net asset value. A
reconciliation of the three net asset value measurements is provided in the
table below.
EPRA NTA EPRA NRV EPRA NDV
30 September 2023 £'000 £'000 £'000
IFRS equity attributable to shareholders 766,111 766,111 766,111
Fair value of interest rate derivatives (2,966) (2,966) -
Intangible assets (26) - -
Real estate transfer tax - 73,942 -
EPRA net asset value 763,119 837,087 766,111
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 161.69p 177.36p 162.32p
EPRA NTA EPRA NRV EPRA NDV
30 September 2022 £'000 £'000 £'000
IFRS equity attributable to shareholders 870,991 870,991 870,991
Fair value of interest rate derivatives (6,705) (6,705) -
Intangible assets (39) - -
Real estate transfer tax - 75,838 -
EPRA net asset value 864,247 940,124 870,991
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 183.11p 199.19p 184.54p
EPRA NTA EPRA NRV EPRA NDV
31 March 2023 £'000 £'000 £'000
IFRS equity attributable to shareholders 769,760 769,760 769,760
Fair value of interest rate derivatives (3,034) (3,034) -
Intangible assets (32) - -
Real estate transfer tax - 74,136 -
EPRA net asset value 766,694 840,862 769,760
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 162.44p 178.16p 163.09p
IV. EPRA NET INITIAL YIELD AND "TOPPED UP" NET INITIAL YIELD
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Total properties per Financial Statements 1,113,149 1,148,395 1,101,583
Less head lease right-of-use asset (9,540) (9,550) (9,576)
Less development properties (6,796) (17,285) (17,905)
Completed property portfolio 1,096,813 1,121,560 1,074,102
Add notional purchasers' costs 73,486 75,145 71,965
Gross up completed property portfolio valuation (A) 1,170,299 1,196,705 1,146,067
Annualised passing rent 58,767 54,832 59,307
Less irrecoverable property outgoings (1,760) (516) (2,181)
Annualised net rents (B) 57,007 54,316 57,126
Contractual rental increases for rent-free period 1,366 530 989
"Topped up" annualised net rent (C) 58,372 54,846 58,115
EPRA net initial yield (B/A) 4.9% 4.5% 5.0%
EPRA "topped up" net initial yield (C/A) 5.0% 4.6% 5.1%
V. EPRA VACANCY RATE
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Annualised potential rental value of vacant properties 5,013 3,289 5,517
Annualised potential rental value for the completed property portfolio 73,782 65,581 74,176
EPRA vacancy rate 6.8% 5.0% 7.4%
VI. EPRA COST RATIO
Six months to Six months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Total cost ratio £'000 £'000 £'000
Costs
Property operating expenses(1) 1,218 1,069 2,313
Administrative expenses 4,487 4,977 9,683
Less: service charge income (197) (154) (251)
Less: service charge costs recovered through rents but not separately invoiced - (208) -
Less: ground rents (50) (71) (112)
Total costs including vacant property costs (A) 5,458 5,613 11,633
Group vacant property costs (748) (734) (1,566)
Total costs excluding vacant property costs (B) 4,710 4,879 10,067
Gross rental income
Gross rental income 29,731 26,500 55,305
Less: ground rents paid (50) (182) (112)
Less: service charge income (197) (154) (251)
Less: service charge costs recovered through rents but not separately invoiced - (208) -
Total gross rental income (C) 29,484 25,956 54,942
Total cost including vacant property costs (A/C) 18.5% 21.6% 21.2%
Total cost excluding vacant property costs (B/C) 16.0% 18.8% 18.3%
EPRA cost ratio
Total costs (A) 5,458 5,613 11,633
Long-term incentive plan crystallisation - - -
EPRA total costs including vacant property costs (D) 5,458 5,613 11,633
Vacant property costs (748) (734) (1,566)
EPRA total costs excluding vacant property costs (E) 4,710 4,879 10,067
EPRA cost ratio (including vacant property costs (D/C) 18.5% 21.6% 21.2%
EPRA cost ratio (excluding vacant property costs (E/C) 16.0% 18.8% 18.3%
1. Property operating expenses are cost of sales. These typically
include utilities, business rates, letting fees and other direct costs.
GLOSSARY OF TERMS
ENERGY PERFORMANCE CERTIFICATE ("EPC")
A measure of the energy efficiency of a property on a scale of A (most
efficient) to G (least efficient) and is a legal requirement for a building to
be sold, let or constructed. Once obtained, an EPC is valid for ten years.
EPRA COST RATIO
Administrative and operative costs (including and excluding costs of direct
vacancy) divided by gross rental income.
EPRA EARNINGS PER SHARE ("EPS")
Earnings from continuing operational activities divided by weighted average
number of shares in issue during the year.
EPRA LIKE-FOR-LIKE RENTAL GROWTH
Compares the growth of the net rental income of the portfolio that has been
consistently in operation, and not under development, during the two full
preceding periods that are described.
EPRA NET DISPOSAL VALUE ("NDV")
Represents the shareholders' value under a disposal scenario, where deferred
tax, financial instruments and certain other adjustments are calculated to the
full extent of the liability, net of any resulting tax.
EPRA NET INITIAL YIELD
Annualised rental income based on the cash rent passing at the balance sheet
date, less non-recoverable property operating expenses, divided by the market
value of the property. Increased with (estimated) purchasers' costs.
EPRA NET REINSTATEMENT VALUE ("NRV")
Assumes that entities never sell assets and aims to represent the value
required to rebuild the entity.
EPRA NET TANGIBLE ASSETS ("NTA")
Assumes that entities buy and sell assets, thereby crystallising certain
levels of unavoidable deferred tax.
EPRA "TOPPED-UP" NET INITIAL YIELD
EPRA net initial yield adjusted for expiration of rent-free periods or other
unexpired lease incentives such as discounted rent periods and step rents.
EPRA VACANCY RATE
Estimate market rental value ("ERV") of vacant space divided by ERV of the
whole portfolio.
EUROPEAN PUBLIC REAL ESTATE ASSOCIATION ("EPRA")
The European Public Real Estate Association ("EPRA") is the industry body for
European Real Estate Investment Trusts ("REITs").
LOAN TO VALUE ("LTV")
The Group's net debt expressed as a percentage of the investment portfolio.
NET INITIAL YIELD
Annual rents on investment properties as a percentage of the investment
property portfolio valuation having added notional purchasers' costs.
OCCUPANCY RATE
The ERV of the let units as a percentage of the total ERV of the investment
property portfolio.
PROPERTY INCOME DISTRIBUTION ("PID")
Dividends from the Group's tax-exempt property business.
TOTAL ACCOUNTING RETURN ("TAR")
Represents the movement in EPRA NTA per share plus dividends paid during the
period expressed as a percentage of EPRA NTA per share at the beginning of the
period.
TOTAL PROPERTY RETURN ("TPR")
Capital growth in the portfolio, plus net rental income and gain or loss on
property disposals expressed as a percentage return on the period's opening
value.
WEIGHTED AVERAGE UNEXPIRED LEASE TERM ("WAULT")
The average lease term remaining to expiry across the portfolio weighted by
contracted rental income.
COMPANY INFORMATION
DIRECTORS
Nigel Rich CBE FCA Chairman
Richard Moffitt Director
Bruce Anderson ACMA FCIOBS Director
Heather Hancock Director
Lynda Heywood FCA FCT Director-appt 1 May 2023
COMPANY SECRETARY
LINK COMPANY MATTERS LIMITED
Central Square, 10th Floor
29 Wellington Street
Leeds
LS1 4DL
REGISTERED OFFICE
6th Floor
35 Gresham Street
London
EC2V 7NQ
MANAGER AND AIFM (until 11(th) May 2023)
PCP2 LIMITED
124 Sloane Street
London
SW1X 9BW
MANAGER AND AIFM (post 11(th) May 2023)
G10 CAPITAL LIMITED
4th Floor 3 More London Riverside,
London
SE1 2AQ
INVESTMENT ADVISER (post 11(th) May 2023)
Logistics Asset Manager LLP
Bond House,
19-20 Woodstock Street London,
W1C 2AN
JOINT BROKERS
SINGER CAPITAL MARKETS LLP
One Bartholomew Lane
London
EC2N 2AX
PANMURE GORDON UK LTD
40 Gracechurch Street
London
EC3V 0BT
LEGAL ADVISERS TO THE COMPANY
GOWLING WLG (UK) LLP
4 More London
London
SE1 2AU
FINANCIAL ADVISER
KINMONT LIMITED
5 Clifford Street
London
W1S 2LG
BANKERS
BARCLAYS BANK PLC
1 Churchill Place
London
E14 5HP
AVIVA PLC
St Helen's
1 Undershaft
London
EC3P 3DQ
LLOYDS BANK PLC
25 Gresham Street
London
EC2V 7HN
SANTANDER
2 Triton Square
Regent's Place
London
NW1 3AN
DEPOSITARY
INDOS FINANCIAL LIMITED
The Scalpel, 18(th) Floor
52 Lime Street
London
EC3M 7AF
AUDITOR
RSM UK AUDIT LLP
25 Farringdon Street
London
EC4A 4AB
COMMERCIAL PROPERTY VALUER
CBRE LIMITED
Henrietta House
London
W1G 0NB
REGISTRARS
COMPUTERSHARE INVESTOR SERVICES PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
WEBSITE
www.urbanlogisticsreit.com
LEI: 213800P6ODJW2UFNDC37
1 CBRE UK Logistics Property Overview September 2023
2 CBRE UK Logistics Property Overview September 2023
3 JLL Industrial Spotlight September 2023
4 JLL Industrial Spotlight September 2022
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. END IR KZMGMGRVGFZZ
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