REG - Warehouse REIT PLC - Final Results for Year Ended 31 March 2022
24/05/2022 07:16
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RNS Number : 5183M Warehouse REIT PLC 24 May 2022
24 May 2022
Warehouse REIT plc
(the "Company" or "Warehouse REIT", together with its subsidiaries, the
"Group")
RESULTS FOR THE YEAR ENDED 31 MARCH 2022
Robust financial performance with strong valuation uplift
Positioned for rental growth, enhanced through asset management and material
development opportunities
Warehouse REIT, the AIM-listed specialist warehouse investor, today announces
its results for the year ended 31 March 2022.
Financial highlights(1)
Year to 31 March 2022 2021
Gross property income £48.7m £35.8m
Operating profit before gains on investment properties £35.4m £24.8m
IFRS profit before tax £191.2m £123.1m
IFRS earnings per share 45.0p 35.2p
EPRA earnings per share 6.4p 5.3p
Adjusted earnings per share(2) 6.4p 5.3p
Dividends per share(3) 6.4p 6.2p
Total accounting return(4) 33.2% 27.7%
Total cost ratio(5) 27.1% 29.5%
As at 31 March 2022 2021
Portfolio valuation £1,012.0m £792.8m
IFRS net asset value £739.0m £574.1m
IFRS net asset value per share 173.9p 135.1p
EPRA net tangible assets per share 173.8p 135.1p
Loan to value ratio 25.1% 24.6%
· EPRA net tangible assets ("NTA") per share up 28.6% to 173.8 pence
(31 March 2021: 135.1 pence), primarily due to the revaluation increase of
38.5 pence per share
· Dividends totalling 6.4 pence per share paid or declared in
respect of the year, ahead of the full-year target of at least 6.2 pence per
share
· Total portfolio valued at £1,012.0 million (31 March 2021:
£792.8 million), with a like-for-like valuation uplift of 19.4%
· Portfolio valuation comprised £913.0 million in relation to the
investment portfolio of completed assets and £99.0 million of development
property and land (31 March 2021: £751.9 million and £40.9 million)
· Total accounting return for the year of 33.2% (year ended 31
March 2021: 27.7%)
· Continued strong rent collection performance, with 98.7% of rent
due in relation to the year collected at 19 May 2022
· Bank debt of £271.0 million and cash balances of £16.7 million
at the year end, resulting in a loan to value ("LTV") ratio of 25.1% (31 March
2021: 24.6%)
Operational highlights(6)
As at 31 March 2022 2021
Contracted rent £44.0m £43.0m
Passing rent £40.6m £38.6m
WAULT(7) to expiry 5.6 years 5.8 years
WAULT to first break 4.5 years 4.7 years
EPRA net initial yield 4.0% 4.7%
Occupancy 93.7% 95.6%
· Continued strong and increasingly diverse occupier demand, driven by
ongoing growth in e-commerce and the need to reinforce supply chains, combined
with growing constrained supply, contributing to significant market rental
growth
· Acquired six investment assets totalling 176,500 sq ft plus
adjacent development land in Cambridge and Crewe, reflecting a blended net
initial yield of 4.2% (excluding the development land). Total consideration
for the acquisitions was £43.4 million (including costs)
· Exchanged contracts to acquire an asset via a forward funded
development arrangement for £35.0 million. A 12-month rent guarantee has been
agreed with the vendor and would show a running yield in excess of 4.6%
· Further progress with the Group's sustainability strategy, including
improvements to assets' sustainability performance and EPC ratings through
asset management, conducting an ESG survey with more than 30 of our largest
occupiers and setting a range of ESG targets to track progress with our
strategy
· Unlocked further value from the portfolio through asset
management:
· Completed 116 lease events across 0.9 million sq ft of space,
contributing to like-for-like rental growth of 3.0%
· 62 new lettings, generating rent of £2.8 million per annum at
3.0% ahead of estimated rental value ("ERV"). If three agreements-for-lease
agreed during the year and, due to complete shortly are included, this
increases to 5.3%. The ERV across the portfolio has grown by 6.0% on a
like-for-like basis
· 54 lease renewals, securing income of £3.0 million and achieving
a 22.2% increase over previous contracted rents
· Investment portfolio capital expenditure of £6.5 million (year ended
31 March 2021: £1.9 million), to drive rental and capital value growth
· Occupancy of 93.7% at the period end (31 March 2021: 95.6%).
Effective occupancy, which excludes units undergoing refurbishment or under
offer to let, was 95.8% (31 March 2021: 98.2%)
· Planning application for another 1 million sq ft of new warehouse
space submitted at Radway 16, Crewe, bringing the total developable space to
1.8 million sq ft
· WAULT of 5.6 years at the period end (31 March 2021: 5.8 years),
reflecting the benefit of acquisitions and asset management initiatives
offsetting the natural reduction in WAULT over time
Post period end highlights
· In April 2022, exchanged contracts to acquire Bradwell Abbey
Industrial Estate, Milton Keynes, for £62.0 million excluding acquisition
costs
· In May 2022, the Group extended the RCF by £25.0 million; the
tenure and applicable interest rate are unchanged from the existing facility
· In May 2022, the Group signed an agreement with Panattoni to
accelerate the development of its logistics park situated at Radway 16, Crewe
just off J16 of the M6 motorway. The project will start on site Q4 2022 with
first buildings being available for occupation 2023
Neil Kirton, Chairman of Warehouse REIT, commented:
"This has been another good year for the Group. The successful execution of
our strategy since IPO has generated significant value for shareholders, as
our high-quality portfolio has benefited from the consistent rerating of the
asset class. We see further upside from the development potential of the land
within the portfolio. The Company's move to the Main Market, which we have
confirmed today, will make the shares available to a wider range of investors
and increase their liquidity. In turn, this will help us to continue to
deliver our strategy and create further value for all our stakeholders."
Andrew Bird, Managing Director of the Investment Advisor, Tilstone Partners
Limited, added:
"Market conditions in recent months have been unprecedented, with continued
growth in occupier demand and highly constrained supply resulting in material
rental growth. We continue to capture this growth through active asset
management, while progressing our plans to develop new space in areas of high
demand. With new supply unable to keep pace with demand, we expect continued
rental growth and strong returns."
Notes
1. The Group presents adjusted earnings per share ("EPS"), dividends per
share, total accounting return, total cost ratio, LTV ratio and EPRA Best
Practices Recommendations as Alternative Performance Measures ("APMs") to
assist stakeholders in assessing performance alongside the Group's statutory
results reported under IFRS. APMs are among the key performance indicators
used by the Board to assess the Group's performance and are used by research
analysts covering the Group.
EPRA Best Practices Recommendations have been disclosed to facilitate
comparison with the Group's peers through consistent reporting of key real
estate specific performance measures. Certain other APMs may not be directly
comparable with other companies' adjusted measures and are not intended to be
a substitute for, or superior to, any IFRS measures of performance. EPRA EPS
is set out in note 12. EPRA NTA is set out in note 22.
2. Adjusted earnings per share is based on IFRS earnings excluding unrealised
fair value gains on investment properties and derivatives, profit on disposal
of investment properties and one-off costs and ultimately underpins our
dividend payments. There were no one-off costs in the year ended 31 March 2022
or in the prior year. For detailed calculations, please refer to note 12 of
the financial statements and table two of the unaudited supplementary notes
not part of the consolidated financial information.
3. Dividends paid and declared in relation to the year, including a third
interim dividend paid on 1 April 2022 and a fourth interim dividend to be paid
on 30 June 2022. Dividends paid during the year totalled 6.2 pence per share
(year ended 31 March 2021: 4.7 pence per share). Please refer to note 11 of
the consolidated financial statements.
4. Total accounting return based on the increase in EPRA NTA per share of 38.7
pence plus dividends paid per share of 6.2 pence, as a percentage of the
opening EPRA NTA of 135.1 pence per share. Please refer to note 22 of the
financial statements and table 11 of the unaudited supplementary notes.
5. Total cost ratio represents the EPRA cost ratio including direct vacancy
cost but excluding one off costs. For detailed calculations, please refer to
table six of the unaudited supplementary notes not part of the consolidated
financial information.
6. All references to contracted rent, passing rent, ERV, WAULT, NIY, net
reversionary yield ("NRY"), occupancy and capital expenditure in this report
relate only to the investment portfolio of completed assets and exclude
development property and land. Development property and land is where the
whole or a material part of an estate is identified as having potential for
development. Such assets are classified as development property and land until
development is completed and they have the potential to be fully income
generating.
7. Weighted average unexpired lease term.
Meeting
A live webcast for investors and analysts will be held at 11:00 today and can
be accessed via:
https://webcasting.brrmedia.co.uk/broadcast/6256b154c9c5d518b20f39f1
(https://webcasting.brrmedia.co.uk/broadcast/6256b154c9c5d518b20f39f1)
The conference call dial-in for the meeting is: +44 (0)330 165 4012 and
participant access code is 4859470
Enquiries
Warehouse REIT via FTI Consulting
plc
Tilstone Partners Limited
Andrew Bird, Peter Greenslade +44 (0) 1244 470 090
G10 Capital Limited (part of the IQEQ Group), AIFM
Maria Glew +44 (0) 207 397 5450
Peel Hunt (Financial Adviser, Nominated Adviser and Broker)
Capel Irwin, Henry Nicholls, Carl Gough +44 (0) 20 7418 8900
Jefferies (Financial Adviser and Broker) +44(0)20 7029 8000
Tom Yeadon, Gaudi Le Roux, Harry Randall
FTI Consulting (Financial PR & IR Adviser to the Company)
Dido Laurimore, Richard Gotla, Ellie Perham-Marchant +44 (0) 20 3727 1000
Further information on Warehouse REIT is available on its website:
http://www.warehousereit.co.uk (http://www.warehousereit.co.uk)
Warehouse REIT is an AIM listed UK Real Estate Investment Trust that invests
in and manages e-commerce urban and 'last-mile' industrial warehouse assets in
strategic locations in the UK.
The Company is an alternative investment fund ("AIF") for the purposes of the
AIFM Directive and as such is required to have an investment manager who is
duly authorised to undertake the role of an alternative investment fund
manager. The Investment Manager is currently G10 Capital Limited and Tilstone
Partners Limited are the Investment Advisor.
The Company's purpose is to own and manage warehouses in economically vibrant
urban areas across the UK, providing the space its occupiers need for their
businesses to thrive.
As the Company grows, its vision is to become the UK's warehouse provider of
choice.
The Company's shares were admitted to trading on AIM in 2017.
Forward-looking Statements
Certain information contained in these half-year results may constitute
forward looking information. This information relates to future events or
occurrences or the Company's future performance. All information other than
information of historical fact is forward looking information. The use of any
of the words "anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", "should", "believe", "predict" and "potential" and similar
expressions are intended to identify forward looking information. This
information involves known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from those
anticipated in such forward-looking information. No assurance can be given
that this information will prove to be correct and such forward looking
information included in this announcement should not be relied upon.
Forward-looking information speaks only as of the date of this announcement.
The forward-looking information included in this announcement is expressly
qualified by this cautionary statement and is made as of the date of this
announcement. The Company and its Group does not undertake any obligation to
publicly update or revise any forward-looking information except as required
by applicable securities laws.
CHAIRMAN'S STATEMENT
Overview
We are now at the end of the fourth full financial year since many of you
supported the Company's IPO in September 2017. In the Prospectus that
accompanied the IPO we made a clear statement about our strategy to generate
attractive returns, explaining that we would acquire well-located pre-existing
assets that showed strong potential for effective asset management and rental
growth. At that time our proposition centred on the undervaluation of such
assets given the evolving market environment, in particular around home
shopping. The growth in e-commerce has now been augmented by other drivers,
including shifting supply chain dynamics and greater onshoring requirements.
We believe that both of these are unlikely to abate. As these drivers gathered
momentum, we have witnessed some key changes in the market for our chosen
asset class. These changes have been reflected in our strategic thinking and
subsequent activity levels in the year we are now reporting on.
Returns performance
At the end of every year, we commission an externally led independent
valuation of the investment portfolio. Between March 2018 and March 2022, the
year-end valuation has progressed from £291.0 million to £1,012.0 million
and valued our rental income on yields that have compressed from 7.0% in 2018
to 4.5% in 2022, reflecting the continued rerating of the asset class, whilst
like-for-like ERV movement of 6.0% demonstrates rental growth potential
embedded in the portfolio.
On the same timescale, the Company's net asset value has increased from IPO
100 pence to its current level of 173.8 pence as at 31 March 2022. With
dividends included, this equates to a total shareholder return since IPO of
97.8%.
Throughout this timeframe, the Board has been delighted with the execution of
the original strategy and its conversion into attractive returns for our
investors. Capital has been deployed into a portfolio of assets in strong
locations, with a number of very high-quality covenants and an increasing
weighted average unexpired lease length, something we identified as key and
targeted from the outset.
Financial highlights
The continued rerating of our chosen asset class was reflected in the 19.4%
like-for-like portfolio valuation growth at the year end, underpinning a gross
asset value exceeding £1 billion for the first time. The EPRA NTA per share
at 31 March 2022 was 173.8 pence, an increase of 28.6% from 135.1 pence per
share 12 months ago.
Capturing the potential rental growth embedded in the portfolio is an
important part of our value creation strategy. Like-for-like rental growth was
3.0% in the year and new leases (including agreements-for-lease) exceeded the
valuer's estimated rental value by an average of 5.3%.
Creating further value
Acquiring assets that offer attractive day one income remains central to our
strategy. As the value of warehouse assets has rerated, we have consciously
adopted an even greater level of discipline and rigour around screening and
selecting assets we are prepared to acquire and, importantly, the price at
which we are prepared to acquire them.
In my previous statements I have made a number of references to the fact that
we have acquired 'lazy acres' as part of our portfolio construction, which we
have known represented further upside for our shareholders. Perhaps the most
significant current example is Radway 16, Crewe, which is an asset that
Tilstone has assembled over a period of time and which now spans in excess of
100 acres of land immediately adjacent to the M6 near Junction 16, an area
where no similar assets exist. We continue to progress planning at Radway 16,
which has the potential to generate a substantial uplift in the site's value.
We have other smaller sites within the portfolio. Together with more
innovative ways of deploying capital into the sector - for example, our recent
transaction forward funding a development at Thame, Oxfordshire, these schemes
are likely to comprise an increased element of our future activity, albeit
within the investment policy parameters related to development activity.
A robust approach to ESG is increasingly important to value creation, since it
helps us to ensure our assets remain fit for purpose and enhances their
attraction to potential occupiers. My colleague Aimée Pitman chairs our
Sustainability Committee, which we established last year and which drives our
responsible business agenda across environmental, social and governance
matters.
Move to the Main Market
We have taken the decision to move the listing for the Company's shares from
AIM to the Main Market. This is a move that has been under review for some
time. While we felt that we have prospered on AIM, we also believe that we
have reached the stage of our evolution where shareholders would benefit from
such a move. In moving to the Main Market we have several objectives, but key
to this includes the continued enhancement of the liquidity of your shares,
together with a further increase in our access to capital as we evolve and
grow the Warehouse REIT brand. In this context, the appointment of Jefferies
as joint corporate broker alongside Peel Hunt is important.
Outlook
Whilst we remain vigilant to the impact of near-term macro-economic pressures,
in particular rising inflation, this is an exciting time for Warehouse REIT
shareholders. Our focus on the regional distribution, multi-let industrial and
last-mile segments of the market is key. They have the most diverse occupier
base and high replacement costs have inhibited new development and rents are
highly affordable. I am delighted to say that as yields have compressed we
have a number of examples of situations where our asset management
capabilities have generated significant increases in rents. Further details of
this are available in this Report.
The Board sees a future of continued value creation from the assets within the
portfolio and strong demand for both existing well-located warehouse assets
and locations that will attract high-quality occupiers. We continue to be
strongly committed to increasing dividends payable to our shareholders and
look forward to the future with confidence.
Neil Kirton
Chairman
23 May 2022
OBJECTIVES AND STRATEGY
We aim to create value through a top-down approach to investment, supported by
an appropriate mix of financing, followed by hands-on asset management with
best-in-class processes.
Our objectives
We aim to provide shareholders with an attractive total return, underpinned by
secure income.
Total accounting return
Target Outcome in 2021/22 Plan for 2022/23
Our target is at least 10% per annum, through a combination of dividends and Achieved We continue to target a return of at least 10% per annum.
growth in NAV
The total accounting return for the year was 33.2%
Dividends
Target Outcome in 2020/21 Plan for 2022/23
Our target for the year was a total dividend of 6.2 pence per share Achieved Our target dividend for 2022/23 is at least 6.4 pence per share.
We declared total dividends of 6.4 pence per share.
Our strategy
To achieve our objectives, we follow the strategy set out below:
Investment strategy Risks: During the year we: Post year end activity:
We look for: · poor performance of the Investment Advisor; · acquired six investment assets totalling 176,500 sq ft, plus · in April 2022, the Group exchanged contracts to acquire Bradwell
adjacent development land in Cambridge and Crewe, for £43.4 million; Abbey Industrial Estate, Milton Keynes, for £62.0 million excluding
· sites close to major transport links and large conurbations, with · poor returns on portfolio;
acquisition costs
high occupier demand, a suitable workforce and appropriate ESG credentials;
· exchanged on a 170,000 sq ft forward funded development, for a
· significant rent arrears/irrecoverable bad debt; and total commitment of £35.0 million; and
· buildings or land with a range of uses and long-term flexibility,
including the potential to change permitted use; and · acquisition of inappropriate assets or unrecognised liabilities, or · acquired 16 acres of land at Radway 16 and exchanged on a further 1
a breach of the investment strategy. acre to give a total holding of 102 acres.
· buildings that match occupiers' current and future needs, including
their sustainability objectives. Progress measured by:
Multi-let estates spread risk and offer more asset management opportunities · like-for-like valuation increase;
than single-let assets. Rental increases can also be reflected across the
estate. We generally target buildings of less than 100,000 sq ft and have an · EPRA NAV; and
average size of 10,000 sq ft.
· dividend per share.
Asset management strategy Risks: During the year we: Post year end activity:
We budget to spend 0.75% of our gross asset value ("GAV") on capital · poor performance of the Investment Advisor · invested £6.5 million or 0.8% of GAV in capital expenditure; · completed two new lettings and two new lease renewals, 37.0% ahead
expenditure each year, with a target return of at least 10%. We also target a
of previous rent and 1.4% ahead of March 22 ERV
vacancy level of 5-7%, since vacant properties allow us to carry out asset · impact of climate change · completed 62 new lettings, at rents 3.0% ahead of ERV;
management activities.
Progress measured by: · completed 54 lease renewals, with a 22.2% increase in headline
Improving the sustainability performance of our assets, for example by
rents; and
improving their energy efficiency, is an important part of maintaining · occupancy;
property values and occupier appeal.
· made progress with our development project at Radway 16, including
· like-for-like rental income growth; and submitting planning for 1 million sq ft of new space, agreed leases on the
planned development assets at Nexus Industrial Estate, and worked to secure
· rental increases agreed versus valuer's ERV. pre-lets at Queenslie Park.
Financial strategy Risks: During the year we: Post year end activity:
We fund the business through shareholders' equity, bank debt and any disposal · interest rate changes; · progressed our plans to move the Company's listing to the premium · intention to transfer listing notice AIM 41 issued on 24 May 2022
proceeds we generate. We look to raise equity at times when we can make
segment of the Main Market of the London Stock Exchange, thereby increasing
investments that are accretive to shareholders. · loss of REIT status; and the number of potential investors in the Company's shares, in the UK and · the Group extended the RCF by £25.0 million; the tenure and
overseas; applicable interest rate are unchanged from the existing facility
Our strategy for debt financing is to maintain a prudent level of debt, with a · breach of borrowing policy or loan covenants.
LTV range of 30‑40% in the longer term. We look to hedge the interest on a
· maintained the LTV ratio to allow for future accretive
proportion of our debt, to provide certainty over our financing costs. Progress measured by: acquisitions; and
· LTV ratio · engaged Lazard to review the structure of the Group's debt
· Interest cover ratio
KEY PERFORMANCE INDICATORS
We use the following key performance indicators ("KPIs") to monitor our
performance and strategic progress.
Occupancy
2019: 92.0%
2020: 93.4%
2021: 95.6%
2022: 93.7%
Description
Total open market rental value of the units leased divided by total open
market rental value, excluding development property and land, and equivalent
to one minus the EPRA vacancy rate.
Why is this important?
Shows our ability to retain occupiers at renewal and to let vacant space,
which in turn underpins our income and dividend payments.
How we performed
Occupancy fell slightly over the period, largely due to the timing of
refurbishment and letting activity. Adjusted for properties under
refurbishment or under offer, occupancy was 95.8%.
Like-for-like rental income growth
2019: 2.1%
2020: 2.0%
2021: 2.9%
2022: 3.0%
Description
The increase in contracted rent of units owned throughout the period,
expressed as a percentage of the contracted rent at the start of the period,
excluding development property, land and units undergoing refurbishment.
Why is this important?
Shows our ability to identify and acquire attractive properties and grow
average rents over time.
How we performed
We delivered further good rental growth, as we continued to capture the
reversionary potential in the portfolio through active asset management, as
well as benefiting from strong market rental growth.
Rental increases agreed versus valuer's ERV
2019: 10.0%
2020: 5.1%
2021: 4.3%
2022: 6.0%
Description
The difference between the rent achieved on new lettings and renewals and the
ERV assessed by the external valuer, expressed as a percentage above the ERV
at the start of the period.
Why is this important?
Shows our ability to achieve superior rental growth through asset management
and the attractiveness of our assets to potential occupiers.
How we performed
We maintained our track record of achieving rental levels ahead of ERV.
Like-for-like valuation increase
2019: 4.3%
2020: 2.5%
2021: 18.8%
2022: 19.4%
Description
The increase in the valuation of properties owned throughout the period under
review, expressed as a percentage of the valuation at the start of the period,
and net of capital expenditure.
Why is this important?
Shows our ability to acquire the right quality of assets at attractive
valuations, add value through asset management and drive increased capital
values by capturing rental growth.
How we performed
The portfolio saw another material increase in its valuation, benefiting from
further market yield compression and our asset management programme.
Total cost ratio
2019: 29.4%
2020: 27.1%
2021: 29.5%
2022: 27.1%
Description
EPRA cost ratio including direct vacancy costs but excluding one-off costs.
The EPRA cost ratio is the sum of property expenses and administration
expenses, as a percentage of gross rental income less ground rents paid.
Why is this important?
Shows our ability to effectively control our cost base, which in turn supports
dividend payments to shareholders.
How we performed
The total cost ratio declined significantly in the year, reflecting the strong
revenue increase and our focus on cost control.
EPRA NTA
2019: 109.7p
2020: 109.5p
2021: 135.1p
2022: 173.8p
Description
This net asset value measure assumes entities buy and sell assets, thereby
crystallising certain levels of deferred tax liability.
Why is this important?
Shows our ability to acquire well and to increase capital values through
active asset management.
How we performed
The significant growth in the portfolio valuation was the primary driver of
the increase in the NTA during the year.
Dividends per share
2019: 6.0p
2020: 6.2p
2021: 6.2p
2022: 6.4p
Description
The total amount of dividends paid or declared in respect of the financial
year, divided by the number of shares in issue in the period.
Why is this important?
Shows our ability to construct a portfolio that delivers a secure and growing
income, which underpins progressive dividend payments to shareholders.
How we performed
We outperformed our dividend target for the year of at least 6.2 pence per
share.
Loan to value ratio
2019: 39.7%
2020: 40.2%
2021: 24.6%
2022: 25.1%
Description
Gross debt less cash, short-term deposits and liquid investments, divided by
the aggregate value of properties and investments.
Why is this important?
Shows our ability to balance the additional portfolio diversification and
returns that come from using debt, with the need to manage risk through
prudent financing.
How we performed
The LTV increased over the year to 25.1% and we continue to seek accretive
acquisitions that will further raise the LTV towards our 35% target.
INVESTMENT ADVISOR'S REPORT
This was another very good year for the Group, with the strong financial
performance reflecting the continued successful execution of the strategy.
Market conditions remain favourable for asset owners, given the strength of
occupier demand versus available supply in key locations. This is reflected in
the ongoing success of our asset management strategy, as we capture rising
rents and progress a number of development opportunities.
Acquisitions
The Group continued to add assets to its investment portfolio during the year,
which increased the Group's holdings in existing locations. This gives us
scope to add value, since we already understand occupiers' need for space and
the rents being paid, and can also create marriage value, for example by
extending existing buildings.
At Dales Manor Business Park near Cambridge, the Group completed three
transactions and acquired 26 units totalling more than 130,000 sq ft. The
blended net initial yield was 4.5%. This is a highly attractive location in
the Oxford-Cambridge arc, with occupancy and prime rents at record highs. The
acquisition offers scope for value creation through letting vacant space and
through rental growth. The Group also bought an adjacent development site with
planning permission for 14 units totalling 73,000 sq ft. We intend to
undertake a phased development of this site, against partial pre-lets. The
aggregate purchase price was £29.3 million, including the development land.
The Group completed two transactions that increased its holding at Midpoint
18, Middlewich, by a further 38,300 sq ft. The total cost was £4.0 million,
reflecting a net initial yield of 5.2%. The Group's holding now extends beyond
600,000 sq ft in this strategically important North-West location.
The Group also extended its holding at Maxwell Road Industrial Estate,
Peterborough, by 3,000 sq ft. The acquisition cost was £0.2 million,
reflecting a net initial yield of 5.5%.
In March 2022, the Group exchanged contracts to acquire, via a forward funding
agreement, a 170,000 sq ft multi-let industrial development in Thame,
Oxfordshire. The developer will deliver the scheme under a fixed-price
turn-key contract with a total commitment of £35.0 million. A 12-month rent
guarantee has been agreed with the vendor and would show a running yield in
excess of 4.6%, based on the total commitment. The scheme has detailed
planning permission and is scheduled to practically complete in December 2022.
It will be delivered to the highest sustainability specifications, achieving
an EPC rating of A and a BREEAM Excellent certification. Features will include
a renewable energy source on site and the buildings will be set up for
electric vehicle charging. The acquisition further increases the Group's
exposure to the Oxford-Cambridge arc, with some 16.5% of the portfolio now
located in this key region. The Oxfordshire industrial market is characterised
by an acute demand-supply imbalance and strong rental growth is forecast.
During the year, the Group made further progress with its development plans at
Radway 16, Crewe, by completing the acquisition of an adjoining owner's
16-acre site for £7.5 million before costs and exchanging on a further acre
of land with a long-stop date of February 2023 for £1.8 million.
Asset management
Working with occupiers
Multi-let estates make up around two thirds of the portfolio, enabling the
Group to benefit from a large and diverse occupier base, spread across
different industries and business sizes. This helps to mitigate financial and
leasing risk and avoids reliance on any one occupier. The Group's top ten
occupiers account for 29.9% of the contracted rent roll.
Property costs are typically a small proportion of overall costs for
businesses and e-commerce continues to increase the income-generating capacity
of industrial space. This means the space offered to the Group's occupiers
remains affordable. However, we are conscious of the potential impact of other
costs on occupiers, such as rising energy prices caused by factors such as
inflationary environment, rising interest rates, and geopolitical conflicts.
We did not experience any notable bad debts in the year and we continue to
carry out assessments on all occupiers, so we can assess the spread of credit
risk across the Group's portfolio. This enables us to strategically target
specific occupiers or units from an asset management perspective.
The strength of the Group's occupiers continues to be reflected in our rent
collection performance. As at 19 May 2022, we had collected 98.7% of the rent
due in respect of the year and we expect this will continue to increase as we
work with occupiers to collect the outstanding amounts.
Disposals
The Group did not dispose of any assets in the year. Disposals are an
important part of our approach to portfolio optimisation and we continually
review the portfolio to identify opportunities to increase efficiency and
dispose of any assets that are considered ex-growth or non-core.
Capital expenditure
Carefully targeted capital expenditure is a key element of the asset
management strategy. The Group aims to invest around 0.75% of its gross asset
value ("GAV") in capital expenditure each year. This excludes investment in
development projects and is therefore based on GAV excluding developments.
Total capital expenditure in the year was £6.5 million, equivalent to 0.8% of
GAV. At the year end, approximately 1.6% of the portfolio's ERV was under
refurbishment (31 March 2021: 1.5%).
Expenditure in the year included a series of smaller refurbishment projects,
driven by lease renewals and expiries and linked to occupier dilapidation
receipts. We have also undertaken more significant refurbishments, where we
believe these will add value and drive rents. Significant projects in the year
included £1.5 million of spend at Evolution 27, Nottingham; £1.3 million at
Parkway Industrial Estate, Plymouth; £0.5 million at Granby Industrial
Estate, Milton Keynes; and £0.5 million at Queenslie Park, Glasgow. These
projects are designed to raise the quality of the assets and enhance their
energy efficiency rating and green credentials, in line with the Company's
sustainability strategy. For example, at Granby Industrial Estate,
approximately half of the spend this year was devoted to a full refurbishment
and redecoration of Unit 1, including investing in a new roof with a 25-year
warranty and further improvements which combined should raise the building's
EPC from D to B. Other initiatives include replacing standard lighting with
energy efficient LEDs.
Leasing activity
The high level of occupier demand and shortage of available supply is enabling
us to be even more selective in our leasing strategy. In addition to using
lease expiries to improve assets through refurbishment, as described above, we
have taken the opportunity to further enhance the occupational mix, focusing
on high-quality occupiers with sustainable requirements, while increasing
rents. In doing so, we have maintained the Group's record of leasing
outperformance, with new lettings consistently achieving rents ahead of ERV
and lease renewals driving strong growth over previous contracted rents. This
reflects both the occupiers' confidence in their businesses and the shortage
of available space in key locations.
New leases
The Group secured 62 new leases on 0.4 million sq ft of space during the year.
These will generate annual rent of £2.8 million, achieved at 3.0% above the
ERV. If three agreements-for-lease agreed during the year, but due to complete
shortly are included, this increases to 5.3%. The level of incentives remains
steady.
Notable new lettings in the year included:
· 12,200 sq ft at Midpoint 18, Middlewich to an international
manufacturing business for a new 15-year term at a rent in excess of £7.00
per sq ft, as well as simultaneously acquiring the freehold of its adjoining
premises with the occupier taking a lease back on similar terms;
· 22,700 sq ft of vacant space at Groundwell Industrial Estate,
Swindon to an existing occupier specialising in print and digital marketing
for ten-years for £117,400 at 8.9% above ERV, combined with a five-year lease
extension over two units at an average of 26.8% ahead of previous rent;
· 18,750 sq ft of vacant space at Gawsworth Court, Warrington to an
automotive trader for ten-year lease with a break in year five for £131,000
at 11.4% above ERV; and
· 4,000 sq ft of vacant space at Newport Road, Cardiff to a leading
international food operator, on a new 15-year lease with no break. The rent of
£105,000 per annum represents a 23.5% premium to 31 March 2021 ERV.
Lease renewals
The Group continues to retain the majority of its occupiers, with 69.1%
remaining in occupation at lease expiry and 76.5% with a break arising in the
year not exercised.
In total, there were 54 lease renewals on 0.5 million sq ft of space during
the year. The renewals resulted in an average uplift of 22.2% above the
previous passing rent and 8.5% above the ERV.
Notable lease renewals in the year included:
· a ten-year renewal, with no breaks, at Walton Road Industrial Estate,
Stone. The agreement reflects an 18.6% uplift to previous rent paid, with a
headline rent of £260,100 per annum or £6.32 per sq ft;
· a seven-year renewal, with a break at year three, at Queenslie Park,
Glasgow to a large international telecommunications company for 13,100 sq ft
of space, at an uplift of 30.6%;
· a ten-year lease renewal, with a break at year five at Units 1 & 2
Rossendale Industrial Estate in Burnley. The new lease generates total rent of
£114,000 per annum and is 39.0% ahead of the previous rent; and
· a five-year renewal with a break after year three at Linkway
Industrial Estate, Middleton. The agreed rent is £240,000 and is 50.6% ahead
of the previous rent and 24.3% ahead of ERV.
Development activity
We look to extract value from unused or underutilised land, either on or
adjacent to the Group's estates. This will enable us to create new assets for
the portfolio at a yield ahead of acquiring similar pre-existing investment,
while also accelerating the ongoing improvement in the portfolio's
sustainability characteristics, for example by building to high energy
efficiency standards. The Company's investment policy limits investment in
development activity to 15% of GAV at the time of purchase and we will not
build new space without first achieving a pre-let on at least some of the
proposed space or de-risking the project in a similar alternative manner.
We made good progress with our plans at Radway 16, Crewe. As noted above, the
Group completed the acquisition of 16 adjoining acres during the year, giving
us full control of 41 acres which have planning consent for 803,000 sq ft of
warehouse space. We are taking steps to secure vacant possession of the site
and to undertake enabling works, such as demolition, realignment of the estate
roads and installing enhanced utility services.
Having exchanged contracts on a further 60 greenfield acres adjoining Radway
16, in November 2021 we submitted a hybrid planning application for what will
become phase two. This comprises a detailed application in respect of highways
and landscaping and outline particulars for 1,020,000 sq ft of additional
warehouse space. Securing this consent has the potential for a material uplift
in value for the total site, with an anticipated completed investment value in
the region of £300.0 million. In addition, the Group has exchanged contracts
to acquire a further small adjoining plot, which will enable us to make more
efficient use of the overall site. In parallel with the planning process, we
have been exploring options for funding and building out part of the scheme.
At Queenslie Park, Glasgow, our proposal to develop underutilised plots is at
the more detailed planning stage, with the Group working on the site's
ecological conditions, landscaping and transportation conditions. On the
construction side, the retained professional team are working up the scheme's
detailed design. In parallel, we have advanced the pre-lettings strategy to
de-risk the development. Overall, the project is on track to break ground in
the coming year, producing up to 235,000 sq ft of modern, sustainable
industrial space.
At Nexus Industrial Estate, Knowsley, the Group owns two parcels of land with
outline consent for roadside use and a 30,000 sq ft warehouse. The Group has
signed agreements for lease for a petrol filling station operator on the
roadside site and for the warehouse, which enabled us to submit detailed
planning and reserved matters respective applications in the second half of
the year. The proposed leases are for 25 and 12 years, thereby increasing the
estate's overall WAULT and improving the quality of income. The development
also enhances the estate's ESG credentials through the provision of new and
efficient warehouse space and delivers marriage value.
Portfolio analysis
The acquisitions and asset management activity during the year contributed to
the portfolio valuation of £1,012.0 million at the year end (31 March 2021:
£792.8 million), across a total of 8.5 million sq ft of space (31 March 2021:
8.5 million sq ft).
The table below analyses the portfolio as at 31 March 2022:
Value (£'m) Occupancy by ERV % NIY (%) NRY WAULT to expiry WAULT to break Average rent Capital value
(%) (£ per sq ft) (£ per sq ft)
Regional distribution 176.9 100.0% 3.7% 4.0% 8.1 7.8 5.12 128.17
Last Mile 135.4 83.5% 3.6% 5.4% 6.6 4.9 5.11 111.96
Multi-let 100k sqft + 399.0 95.7% 4.7% 5.4% 4.7 3.6 5.47 100.72
Multi-let Less than 100k sqft 201.7 92.7% 5.4% 6.1% 5.4 3.8 6.34 101.01
Total 913.0 93.7% 4.5% 5.3% 5.6 4.5 5.56 106.81
Development land 99.0
Total 1,012.0
At the year end, the contracted rent roll for the investment portfolio, which
excludes development property and land, was £44.0 million, compared with the
ERV of £51.5 million. In addition, the Group had contracted rent of £0.4
million from development property. Total contracted rents increased by 3.0% on
a like-for-like basis. The NIY of the investment portfolio was 4.5% at 31
March 2022, with a reversionary yield of 5.3%.
The WAULT for the investment portfolio stood at 5.6 years at the year end (31
March 2021: 5.8 years), with acquisitions and asset management initiatives
partially offsetting the natural reduction in WAULT over time.
Occupancy across the investment portfolio was 93.7% at the year end (31 March
2021: 95.6%). Effective occupancy, which excludes units under offer to let or
undergoing refurbishment, was 95.8% at the year end (31 March 2021: 98.2%),
with 0.5% of the investment portfolio under offer to let and a further 1.6%
undergoing refurbishment at that date.
Financial review
Performance
Rental income grew by 28.6% to £44.0 million (year ended 31 March 2021:
£34.2 million), as a result of a full year of acquisitions made during the
prior year, the initial contribution from assets acquired this year and
underlying rental growth. EPRA like-for-like rental income rose by 3.9%.
Total property income, which includes insurance recharges, dilapidation
income, service charge income and any surrender premiums, was £51.4 million
(year ended 31 March 2021: £38.8 million).
The Group's operating costs include its running costs (primarily the
management, audit, company secretarial, other professional and Directors'
fees), and property-related costs (including legal expenses, void costs and
repairs). Total operating costs for the year were £16.0 million (year ended
31 March 2021: £14.0 million). The Investment Advisor fee (which is based on
EPRA NTA) was £6.5 million (year ended 31 March 2021: £4.4 million),
primarily as a result of the strong net asset growth.
The net increase in the expected credit loss allowance was modest at £0.3
million (year ended 31 March 2021: £0.4 million), reflecting the diversity
and quality of the Group's occupiers and our close relationships with them.
While some smaller occupiers did cease trading during the year, we typically
have rent deposits in these cases, giving the Group some protection from bad
debts.
The total cost ratio, which is the adjusted cost ratio including direct
vacancy cost, was 27.1% (year ended 31 March 2021: 29.5%). This reflected the
revenue growth in the year, our focus on cost control, including actively
managing voids and associated costs, and the fixed or semi-fixed nature of a
number of the Group's expenses. The ongoing charges ratio, representing the
costs of running the REIT as a percentage of NAV, was also lower at 1.2% (year
ended 31 March 2021: 1.4%).
There were no asset disposals in the year and hence no profit or loss on
disposal (year ended 31 March 2021: £0.5 million loss).
At the year end, the Group recognised a gain of £163.7 million on the
revaluation of its investment properties (year ended 31 March 2021: gain of
£105.0 million).
Financing costs include the interest and fees on the Group's revolving credit
facility ("RCF") and term loan (see debt financing and hedging). Net financing
costs totalled £7.8 million in the year (year ended 31 March 2021: £6.2
million). The increase reflects increased borrowings as a result of the
acquisitions completed and a small rise in the weighted average cost of debt
of 50 basis points. The all-in cost of debt as at 31 March 2022 is 2.6% (year
ended 31 March 2021: 2.1%).
Statutory profit before tax for the year was £191.2 million (year ended 31
March 2021: £123.1 million).
As a REIT, the Group's profits and capital gains from its property investment
business are exempt from corporation tax. The corporation tax charge for the
year was therefore £nil (year ended 31 March 2021: £nil).
Earnings per share ("EPS") under IFRS was 45.0 pence (year ended 31 March
2021: 35.2 pence). EPRA EPS was 6.4 pence (year ended 31 March 2021: 5.3
pence).
Dividends
The Company has declared the following interim dividends in respect of the
year ended 31 March 2022:
Quarter to Declared Paid Amount (pence)
30 June 2021 3 August 2021 1 October 2021 1.55
30 September 2021 9 November 2021 30 December 2021 1.55
31 December 2021 4 February 2021 1 April 2022 1.55
31 March 2022 24 May 2022 30 June 2022 1.75
Total 6.40
The total dividend for the year of 6.4 pence per share was ahead of the target
of at least 6.2 pence and was fully covered by EPRA EPS. All four interim
dividends were declared in full as property income distributions.
The cash cost of the total dividend paid during the year was £26.3 million
(year ended 31 March 2021: £15.6 million).
Valuation and net asset value
The portfolio was independently valued by CBRE as at 31 March 2022, in
accordance with the internationally accepted RICS Valuation - Global Standards
2020 (incorporating the International Valuation Standards) (the "Red Book"),
and the RICS Valuation - Global Standards 2017 - UK national supplement.
The portfolio valuation was £1,012.0 million (31 March 2021: £792.8
million). This represented a 19.4% like-for-like valuation increase, taking
into account the total capital expenditure in the year of £7.6 million. The
like-for-like valuation increase was primarily driven by yield compression, as
well as income growth. The EPRA NIY was 4.0% (31 March 2021: 4.7%).
The valuation resulted in an EPRA NTA of 173.8 pence per share at the period
end (31 March 2021: 135.1 pence per share). This primarily reflects the
revaluation gain noted above, equivalent to 38.5 pence per share.
Debt financing and hedging
The Group has a debt facility with a club of four banks: HSBC, Bank of
Ireland, Royal Bank of Canada and Barclays. The facility runs for five years
from January 2020 and transitioned from LIBOR to SONIA from July 2021.
At the start of the financial year, the facility comprised an RCF of £63.0
million, a term loan of £182.0 million and a remaining accordion of £55.0
million, giving a total facility of £245.0 million. This facility was drawn
£222.0 million at 31 March 2021.
During the year we extended the RCF facility by a further £75 million to a
give a total facility of £320.0 million, with £49.0 million undrawn.
As at 31 March 2022, £89.0 million was drawn against the RCF and £182.0
million against the term loan. This gave total debt of £271.0 million (31
March 2021: £222.0 million), with the Group also holding cash balances of
£16.7 million (31 March 2021: £27.2 million). The LTV ratio at 31 March 2022
was therefore 25.1% (31 March 2021: 24.6%), with the increase reflecting the
drawdown in the year, offset by the year-end valuation increase. The Group has
two interest rate caps of £30.0 million each. They run until November 2022
and November 2023 and have respective rates of 1.50% and 1.75%, excluding
lending margin. At the year end, the Group had therefore hedged the interest
costs on 22.1% of its debt. There were no changes to the Group's interest rate
hedging arrangements during the year.
As the portfolio grows, we continue to explore opportunities to diversify the
Group's sources of debt funding, extend the average maturity of its debt and
further reduce the average cost of debt.
Post year end activity
In April 2022, the Group exchanged contracts to acquire Bradwell Abbey
Industrial Estate, Milton Keynes, for £62.0 million excluding acquisition
costs.
The Group has also completed on the disposal of Pentagon Retail Park,
Ballymena for £1.8 million, 3.7% ahead of book value as at 31 March 2022.
Compliance with the investment policy
The Group's investment policy is summarised below. The Group continued to
comply in full with this policy throughout the year.
Investment policy Status Performance
The Group will only invest in warehouse assets in the UK. ü All of the Group's assets are UK-based urban warehouses or for sites for
development into urban warehouses.
No individual warehouse will represent more than 20% of the Group's last ü The largest individual warehouse represents 7.3% of GAV.
published gross asset value ("GAV"), at the time it invests.
The Group will target a portfolio with no one occupier accounting for more ü The largest occupier accounts for 6.8% of gross contracted rents and 7.3% of
than 15% of its gross contracted rents at the time of purchase. No more than gross assets.
20% of its gross assets will be exposed to the creditworthiness of a single
occupier at the time of purchase.
The Group will diversify the portfolio across the UK, with a focus on areas ü The portfolio is well-balanced across the UK.
with strong underlying investment fundamentals.
The Group can invest no more than 10% of gross assets in other listed ü The Group held no investments in other funds during the year.
closed-ended investment funds.
The Group will not speculatively develop properties, except for refurbishing ü Other than refurbishing vacant units, the Group did not undertake any
or extending existing assets. Speculative developments are those which have speculative development in the period.
not been at least partially leased, pre-leased or de-risked in a similar way.
The Group may invest directly, or through forward funding agreements or ü The Group's exposure to developments at the year end was 9.8% of GAV.
commitments, in developments (including pre-developed land), where:
· the structure provides us with investment risk rather than
development risk;
· the development is at least partially pre-let, sold or de-risked in
a similar way; and
· we intend to hold the completed development as an investment asset.
The Group's exposure to these developments cannot exceed 15% of gross assets
at the time of purchase.
The Group views an LTV of between 30% and 40% as optimal over the longer term ü The LTV at 31 March 2022 was 25.1%.
but can temporarily increase gearing up to a maximum of LTV of 50% at the time
of an arrangement, to finance value-enhancing opportunities.
Investment Manager
The Company is an alternative investment fund for the purposes of the
Alternative Investment Fund Managers Directive ("AIFMD") and, as such, is
required to have an Investment Manager who is duly authorised to undertake
that role. G10 Capital Limited ("G10") is the Company's AIFM and Investment
Manager and is authorised and regulated by the Financial Conduct Authority.
Investment Advisor
The Company has appointed Tilstone Partners Limited as Investment Advisor to
the Company and the Investment Manager.
23 May 2022
PRINCIPAL RISKS AND UNCERTAINITY
Recognising and managing our risks is the key to successful delivery of our
business ambitions
Managing our risk
We recognise the importance of identifying and managing both the financial and
non-financial risks faced by the business, and the Board has agreed a robust
risk management framework to facilitate this. The framework ensures that
risk management responsibilities are allocated and those, along with the
Board's appetite for risk, are clearly communicated and understood. This
allows the REIT's Investment Advisor to take advantage of opportunities and
make effective business decisions, within a recognised set of parameters.
Responsibilities
The Board
The Board has overall responsibility for the Group's approach to risk
management and internal control, including:
· ensuring the design and implementation of risk management and internal
control systems which identify the risks facing the business and enable the
Board to make an assessment of principal risks;
· determining the nature and extent of the principal risks faced, and
those risks which the Group is willing to take;
· agreeing how principal risks should be managed or mitigated to
reduce the likelihood of their incidence or impact;
· ensuring that there is sufficient relevant, reliable and valid
assurance about the mitigation of risk; and
· reviewing the disclosures to be included in the Annual Report and
Accounts, to ensure that the statements made are supported by valid, relevant
and reliable assurances received from the organisation.
The Audit Committee
The Audit Committee provides independent oversight of the framework, monitors
principal risks, and undertakes the annual review of the Group's approach to
risk management and compliance with the framework.
As the majority of the operations of the REIT are outsourced, the Board and
Audit Committee must rely on representations and information in relation to
the management of risk from its service providers, in particular from the
Investment Advisor.
The external auditor will also provide information to the Audit Committee
concerning the system of internal control and any material control weaknesses.
Any significant issues are referred to the Board for consideration.
To fulfil its responsibilities the Audit Committee:
· monitors key risks and changes in risk throughout the year;
· periodically formally considers each of the principal risks, the
business' mitigation strategies, and reviews assurances from both management
and independent sources; and
· undertakes an annual review of the effectiveness of the risk
management process, covering:
o risk culture, and whether this culture is embedded within the
organisation;
o the operation of risk management and control systems, including the
determination of those risks which are principal to the Company;
o integration of risk management and internal control with strategy and
business planning processes;
o changes in the nature, likelihood and impact of principal risks, and
the REIT's ability to respond to changes;
o the extent, frequency and quality of the communication of the results
of management's monitoring to the Board and Audit Committee in relation to
risk and control;
o any issues dealt with in reports reviewed during the year, in
particular any significant control failings or weaknesses that have been
identified, and the extent of the impact which they had or could have had; and
o the effectiveness of the Company's public reporting processes.
The Investment Advisor
The Investment Advisor supports the Audit Committee and Board, and is
responsible for risk identification, documentation and evaluation, including
both current and emerging risks, for the implementation of appropriate
controls and for meaningful reporting to the Audit Committee.
Risk culture and appetite
Risk management is embedded in our decision-making processes, supported by
robust systems, policies, leadership and governance. Our business uses an
outsourced model, and we are reliant on our service providers to make
decisions and take risks within agreed parameters in the delivery of our
objectives. Those parameters are summarised in our stated risk appetite.
The level of risk considered appropriate to accept in achieving business
objectives is determined by the Board. The REIT has no appetite for risk in
areas relating to regulatory compliance, and the health, safety and welfare of
our Directors, occupiers and the wider community in which we work. We have a
moderate appetite for risk in relation to activities which are directed
towards driving revenues and increased financial returns for investors.
Documenting and reporting
The Group's corporate risk register is the core of the risk management
process, containing an overall assessment of the risks faced by the Group
together with the controls established to reduce those risks to an acceptable
level.
We categorise our risks into groups, as although we recognise that they are
all closely linked, in most cases these categories determine the allocation of
responsibility for control, monitoring and reporting.
Our reputation is important to us, and we consider the potential for damage to
reputation in the assessment of all our risks. We do not therefore include
reputational risk as a category, as it underpins our approach to all risk
evaluation and mitigation.
· Business risks - relating to the delivery of our business,
including strategy, market, systems and processes and stakeholders.
· Operational risks - which focus on the REIT's core business, and
include the composition of our portfolio, valuation, and tenancy management.
· Compliance risks - the regulatory environment in which we operate
continues to develop and drive higher standards and expectations for the
REIT. Compliance risk covers every aspect of our business, from listing
rules, environmental rules, the requirements of the FCA, and general business
regulation such as health and safety, taxation and modern slavery.
· Financial risks - arising from our strategy for the funding of
business operations, including investors, joint ventures, debt and cash
management, and covering market, credit and liquidity risk.
The corporate risk register is updated by the Investment Advisor throughout
the year, and reports are provided to each meeting of the Audit Committee.
Reports to the Audit Committee highlight changes in risk, changes to the
controls in place, or changes to the evaluation of exposure of risks.
Emerging risks
A key element of our risk management process is the identification of emerging
risks, to make an assessment of the potential impact on our business.
The regular risk reviews completed by the Investment Advisor specifically
include review of emerging risks, and this is also part of the review by and
discussions with the REIT's Audit Committee. The assessment considers:
· Is this risk relevant to the REIT's business activities?
· What is the potential impact, if the risk crystallises?
· What are our potential strategies for the management and mitigation
of the risk?
· How could we get assurance that these strategies are effective in
practice?
· Is this a risk that we should continue to proactively monitor?
Our risk reviews during the year have resulted in the addition of new risks to
the corporate risk register, although none of these emerging risks are
currently considered to be principal risks. We have added emerging risks
relating to:
· Development and capital programme delivery - the REIT has a programme
of capital works to enhance the condition of existing assets, and we are also
planning to commence a development programme, building new assets. The
successful delivery of these programmes may be impacted by supply chain risks,
including significant cost increases, availability of materials, and
availability of skilled labour resources in the construction market. Our
budgets and capital plans are developed to include contingency funding, and
plans are stress tested to ascertain potential costs and returns in different
economic conditions. Contracting arrangements will be designed to minimise
the risk of variations for the REIT, but the supply chain challenges and cost
increases being seen across the construction sector in the latter half of 2021
and early 2022 are increasing risk in this area.
· Delivering on our ESG and climate change related plans - we have
invested in the development of our ESG programmes, and plans to mitigate
climate change impacts, and have set challenging targets for the business.
Failing to deliver on these could impact on our finances and reputation, and
also impact on our current and potential occupiers. To help mitigate this
risk, we have identified funding in our budgets to deliver on our ambitions,
and have sought external specialist support to ensure the REIT is
appropriately positioned.
Environmental, social and governance risk
The Group takes its ESG responsibilities seriously, investing time and
resources to enhance knowledge and to develop and co-ordinate action plans
across each of the pillars, aiming to deliver positive change and benefits as
part of our day-to-day business.
We have integrated the consideration and evaluation of climate change risk
within the Group-wide risk management process through the inclusion of ESG and
specific climate change risks within the corporate risk register and have
proactively considered ESG ambitions and their associated risks during our
regular reviews. Climate change risk remains one of the Group's principal
risks, as we seek to both reduce our impact on the environment and the impact
of climate change on our activities, portfolio and finances.
The nature of the risks we face from climate change arise from both the
physical aspects of climate change itself and also the potential for
regulatory and commercial changes in the markets in which we operate. In
particular, as governments seek to drive change through increasing regulation
and cost for businesses (for example, changes to building standards, increased
energy efficiency requirements, or the use of emission zones), there is the
potential for some assets to become less attractive to occupiers, and for
significant expenditure to be needed to ensure the portfolio is compliant with
changing standards.
Principal risks
Principal risks are those which are considered material to the Group's
development, performance, position or future prospects. The principal risks
are captured in the corporate risk register and are reviewed by the Board and
Audit Committee, who consider:
· any substantial changes to principal risks;
· material changes to control frameworks in place;
· changes in risk scores;
· changes in tolerance to risk;
· any significant risk incidents arising; and
· progress with any additional mitigating actions which have been
agreed.
Changes in principal risks during the year
The Audit Committee undertakes a regular and rigorous assessment of risks,
particularly principal risks, throughout the year, considering external and
commercial pressures and any changes arising from business activities
and operations.
Based upon that assessment we have reduced the assessment of risk in relation
to the Covid-19 pandemic, and no longer consider this to be a principal risk
for the Group. There were no additional risks identified which are
considered to be fundamental to the business, and therefore we have not added
to the principal risks reported previously. However, the evaluation of
exposure to some of our principal risks has changed during the year, as
business pressures have changed. Our principal risks, along with mitigation
strategies and an explanation of any changes from last year, are summarised
below.
Risk Risk Mitigation Change Category
1 Interest rate changes The Investment Advisor maintains detailed cash flow forecasts, which are ñ Financial
subject to scenario testing. We have interest rate caps in place and will be
Changes in interest rates could directly impact on our cost of capital, and revising our funding arrangements during the next 12 months, considering
indirectly may impact on market stability. different financing options.
Interest rates have been extremely low for some time, but rates are rising
Interest rates have increased, and it is expected that this will continue across the market.
during the year ending 31 March 2023.
Whilst we will be renegotiating our funding and seeking alternative financing
options, increases in rates are not completely within our control.
Whilst the new funding will provide the Group with the means to invest and
grow the business, changes in interest rates could have an impact on returns
and profitability.
2 Impact of climate change on our portfolio We have a Sustainability Committee, chaired by a Board member, which has ó Business
developed and agreed our ESG strategy. This incorporates our plans to manage
Climate change could have an increasing impact across the business. both our impact on the environment, and the potential impacts of climate
change on the business.
Potential impacts range from direct risk such as adverse weather affecting
properties through flooding or extreme temperatures; to business impacts such We have also appointed external expertise to assist us with plans and
as the increasing cost of utilities, general supply chain disruption, and the delivering to targets.
potential for property values to be impacted, where new building standards and
materials are available elsewhere. Our plans include:
· targets on EPC ratings for our assets;
· developments to meet BREEAM or the relevant industry equivalent;
and
· new utility contracts to be renewables based.
We are also working with our occupiers to ensure we are supporting them to
meet their sustainability objectives. We are surveying our most significant
occupiers to understand how we can work together to improve across a range of
themes, including energy usage and wellbeing.
3 Inappropriate acquisitions, unrecognised liabilities, or breach of the We have comprehensive governance procedures supporting acquisition ó Operational
investment policy decisions. These are driven by the matters reserved for the Board and
delegated authority matrix, which are translated into operational processes
Inappropriate acquisitions could increase risk in relation to portfolio through the acquisition protocol approved by the Board. The protocol sets
returns, as properties may be harder to let, may not generate appropriate out detailed due diligence steps which must be completed and fully evidenced
revenues, or may require additional costs to support. as part of the decision-making process. Acquisition decisions are approved
by the Investment Advisor's investment Committee and the Investment Manager's
investment committee, and any higher risk acquisition decisions (by value or
complexity) are escalated to the Board.
4 Significant rent arrears/irrecoverable bad debt Our diverse portfolio of assets, and wide range of occupiers, is key to ò Operational
maintaining a low risk profile in relation to bad debts.
A substantial increase in our bad debt, level of arrears or slow payment could
We had increased our evaluation of this risk previously, because of
have a direct impact on cash flow and profitability and could also have an We have 541 occupiers across our portfolio of 91 estates, and our top ten uncertainty around the impact of the Covid-19 pandemic and associated
impact on average lease lengths, void levels and costs. occupiers generate less than 30% of our rent roll. This is closely monitored lockdowns. In the light of our positive collection performance over the last
to ensure that we are not at significant risk from any individual occupier. year, we consider it is appropriate to reduce the evaluation
Furthermore, poor payment performance would increase the focus required from
the property managers and Investment Advisor asset managers, impacting on At an operational level, we have robust processes in place across our tenancy
resource availability to manage other aspects of the business. management activities, ensuring that we accurately record, invoice and collect
amounts due.
There is a rigorous due diligence process prior to the acceptance of
occupiers, with rent guarantees or rent deposits taken where appropriate.
Occupiers management routines include credit control processes to identify any
potential arrears problems and ensure that debt is recovered, or actions are
taken at an early stage. We consider it appropriate to reduce the evaluation
back to normal risk levels.
5 Loss of REIT status The Board has approved a clear governance framework which incorporates the ó Compliance
matters reserved for the Board and delegated authorities, which are further
supported by the clear, contracted allocation of responsibilities to our
third-party service providers.
Loss of our REIT status, through failing to meet regulatory requirements or
the AIM rules, would have a significant impact on our reputation and the
financial returns for our investors.
The Investment Advisor reviews the position against REIT legislation with Link
quarterly, and this is reported to the Audit Committee and Board. We are
further supported by Deloitte, who complete our PID tracker.
Dividend cover and cash is continuously monitored and forecast forward, and
the position reported to the Audit Committee and Board.
6 Poor portfolio returns The investment strategy is set by the Board, and performance against key ñ Business
targets and KPIs is reviewed on an ongoing basis.
The assessment has very slightly increased during the year, which we consider
is related to the competition for assets increasing acquisition costs.
There is a risk that the returns generated by the portfolio may not be in line
with our plans and forecasts. There are many factors that could drive this, The Investment Advisor and Investment Manager have the expertise required to
including: deliver returns and have a successful track record of doing so.
Overall, the risk is mitigated by the increasing portfolio valuation.
· inappropriate investment strategy set by the Board;
· poor delivery of the strategy by the Investment Advisor; and Significant decisions, relating to assets or occupiers follow established
protocols, ensuring there is proper assessment, at the right levels.
· poor yields from the property portfolio because of reduced capital
valuations or rental income.
The Investment Advisor reports to the Board each quarter, with key financial
and non-financial performance information, which is produced to an estate
This would have an impact on the financial performance of the REIT, and level.
returns for our investors.
7 Breach of loan covenants or our borrowing policy. Our financial position is closely and regularly monitored, and in particular ó Compliance
the Investment Advisor monitors LTV % against our loan covenant and borrowing
policy on an ongoing basis.
Our loan funding is subject to conditions, and breach of those could result in
restrictions on funding and activities going forward. In addition to the
loan covenants, the Board approved and communicated our borrowing policy, and In addition, forward forecasts are prepared and reviewed both to assess the
breach of those limits may risk financial and reputation damage. business' position, and to ensure that any acquisition decisions include
consideration of the cash and funding impact.
The Board receives a formal update each quarter, and there is a quarterly
compliance letter prepared for the bank.
8 Poor performance of the Investment Advisor or Investment Manager Members of the Investment Advisor have investments in the REIT, which reduces ò Business
the risk that the Investment Advisor may not fulfil its responsibilities and
activities effectively. The Investment Advisor has continued to invest in staff and resources during
the year, to build additional strength and depth, and to develop in-house
The REIT operates with an outsourced model and is reliant on the performance expertise in specialist areas such as project management and data control.
of its third-party service providers.
They have a proven track record, demonstrated by the REIT's consistently good
There are formal contracts in place with the Investment Advisor and Investment performance.
Manager (and other third-party service providers), setting out
responsibilities and expectations.
In particular, poor performance of the Investment Advisor could have a
significant impact on the performance of the REIT, as it is fundamental to the Both provide regular quarterly reports to the Board, which include key
management and delivery of all aspects of the business. performance targets and KPIs.
The Management Engagement Committee carries out an annual service review,
which is reported to the Board.
GOING CONCERN AND VIABILITY
Going concern
The Board monitors the Group's ability to continue as a going concern.
Specifically, at quarterly Board meetings, the Board reviews summaries of the
Group's liquidity position and compliance with loan covenants, as well as
forecast financial performance and cash flows. Throughout the year, the Board
had been meeting frequently, in conjunction with the Investment Advisor, to
review the current uncertainties created by Covid-19, geopolitical tensions
and rising inflation and interest rates, specifically rent collection, cash
resources, loan facility headroom and covenant compliance, acquisitions and
disposals of investment properties, discretionary and committed capital
expenditure and dividend distributions.
The Group ended the year with £10.8 million of unrestricted cash and £49.0
million of headroom readily available under its facilities. An extension to
the current facility has been agreed, providing the additional funding to
complete on the acquisition of Bradwell Abbey, Milton Keynes. In light of the
Group's objective to seek accretive acquisitions that will further raise the
LTV towards our 35% target, the Group has engaged Lazard to review the current
debt structure. Discussions are well progressed to develop and implement the
next stage of the financing strategy, in order to provide the Group with the
funding it requires to complete the other acquisition to which it is currently
committed, being the forward funding development in Thame, Oxfordshire, as
well as to enable it to enter into further accretive acquisitions. At the
right point in time, the Group will also look to raise further equity through
a share issue or placement programme. Furthermore, disposals are an important
part of our approach to portfolio optimisation and we continually review the
portfolio to identify opportunities to increase efficiency and dispose of any
assets that are considered ex-growth or non-core, recycling that capital into
accretive acquisitions.
The Group is operating significantly within its covenants and a sensitivity
analysis has been performed to identify the decrease in valuations and rental
income that would result in a breach of the LTV, market value covenants or
interest cover covenants. Valuations would need to fall by 40.4% or rents by
53.4%, when compared with 31 March 2022, before these covenants would be
breached, which, based on available market data, is considered highly
unlikely.
As at 19 May 2022, 98.7% of rents invoiced in March 2022 in relation to the
quarter to June 2022 were received.
As part of the going concern assessment, and taking the above into
consideration, the Directors reviewed a number of scenarios which included
extreme downside sensitivities in relation to rental cash collection, making
no acquisitions or discretionary capital expenditure, adverse refinancing
conditions and minimum dividend distributions under the REIT rules. The
Investment Advisor has prepared projections for the Group covering the going
concern period to 31 May 2023, which have been reviewed by the Directors.
Accordingly, based on this information, and in light of mitigating actions
available and the reasonable expectation that the Group refinancing will be
available when required, the Directors have a reasonable expectation that the
Group and the Company have adequate resources to continue in business for a
period of at least 12 months from the date of approval of the Annual Report
and Financial Statements.
Assessment of viability
In accordance with the AIC Code of Corporate Governance, the Directors have
assessed the Group's prospects over a period greater than the 12
months considered by the going concern provision.
The Directors have conducted their assessment over a three-year period to May
2025, allowing a reasonable level of accuracy given typical lease terms and
the cyclical nature of the UK property market.
The principal risks detailed above summarise the matters that could prevent
the Group from delivering its strategy. The Board seeks to ensure that risks
are kept to a minimum at all times and, where appropriate, the potential
impact of such risks is modelled within its viability assessment.
The nature of the Group's business as the owner of a diverse portfolio of UK
warehouses, principally located close to urban centres or major highways and
let to a wide variety of occupiers, reduces the impact of adverse changes in
the general economic environment or market conditions, particularly as
the properties are typically flexible spaces, adaptable to changes in
occupational demands.
The Directors' assessment takes into account forecast cash flows, debt
maturity and renewal prospects, forecast covenant compliance, dividend cover
and REIT compliance. The model is then stress tested for severe but plausible
scenarios, individually and in aggregate, along with consideration of
potential mitigating factors. The key sensitivities applied to the model are a
downturn in economic outlook and restricted availability of finance,
specifically:
(i) increased occupier churn and occupier defaults;
(ii) increased void periods following break or expiry;
(iii) decreased rental income; and
(iv) increased interest rates.
Current debt and associated covenants are summarised in note 16, with no
covenant breaches during the period. The sensitivity analysis identifies the
decrease in valuations and rental income that would result in a breach of the
LTV, market value covenants or interest cover covenants.
Taking into account mitigating actions, the results of the sensitivity
analysis and stress testing demonstrated that the Group would have sufficient
liquidity to meet its ongoing liabilities as they fall due, maintain
compliance with banking covenants and maintain compliance with the REIT regime
over the period of the assessment.
Furthermore, the Board, in conjunction with the Audit Committee, carried out a
robust assessment of the principal risks and uncertainties facing the Group,
including those that would threaten its business model, strategy, future
performance, solvency or liquidity over the three-year period. The risk review
process provided the Board with assurance that the mitigations and management
systems are operating as intended. The Board believes that the Group is well
positioned to manage its principal risks and uncertainties successfully,
taking into account the current economic and political environment.
The Board's expectation is further supported by regular briefings provided by
the Investment Advisor. These briefings consider market conditions,
opportunities, changes in the regulatory landscape and the current economic
and political risks and uncertainties. Additionally, the trend for increased
warehouse space driven by online sales and the shortage of supply nationally
is seen as mitigation. These risks, and other potential risks which may arise,
continue to be closely monitored by the Board.
Viability statement
The period over which the Directors consider it is feasible and appropriate to
report on the Group's viability is a three-year period to May 2025. This
period has been selected because it is the period that is used for the Group's
medium-term business plans. Underpinning this plan is an assessment of each
individual unit's performance, driving the overall letting assumptions and
corresponding forecast cash flows.
Having made an assessment of each individual units' performance, the forecast
cash flows, covenant compliance and the impact of sensitivities in
combination, the Directors confirm that, taking account of the Group's current
position, the principal risks and in light of the current economic
uncertainty, they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over the
three-year period of their assessment.
On behalf of the Board
Neil Kirton
Chairman
23 May 2022
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable UK law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements of the Group in accordance with UK adopted international
accounting standards. Under company law, the Directors must not approve the
financial statements unless they are satisfied that they present fairly the
financial position, financial performance and cash flows of the Group and
Company for that year.
In preparing the financial statements, the Directors are required to:
· select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors and apply them
consistently;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group's
financial position and financial performance;
· state that the Group has complied with UK adopted international
accounting standards, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and estimates that are reasonable and prudent; and
· prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a strategic report, Directors' report, Directors' remuneration
report and corporate governance statement that comply with that law and those
regulations, and for ensuring that the Annual Report includes information
required by the AIM Rules and (where applicable) the Disclosure Guidance
and Transparency Rules of the FCA.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website. The
work carried out by the Auditor does not involve consideration of the
maintenance and integrity of this website and, accordingly, the Auditor
accepts no responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website. Visitors to the
website need to be aware that legislation in the UK covering the preparation
and dissemination of the financial statements may differ from legislation in
their jurisdiction.
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with UK adopted
international accounting standards and in conformity with the requirements of
the Companies Act 2006, give a true and fair view of the assets, liabilities,
financial position and profit of the Company (and Group as a whole); and
· the Chairman's statement and Investment Advisor report include a
fair review of the development and performance of the business and the
position of the Company (and Group as a whole), together with a description of
the principal risks and uncertainties that it faces.
The Directors consider that the Annual Report and Financial Statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
On behalf of the Board
Neil Kirton
Chairman
23 May 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2022
Continuing operations Notes Restated
Year ended Year ended
31 March 31 March
2022 2021
£'000 £'000
Gross property income 3 48,714 35,758
Service charge income 3 2682 3,070
Service charge expense 4 (3,011) (3,435)
Net property income 48,385 35,393
Property operating expenses 4 (4,789) (4,247)
Gross profit 43,596 31,146
Administration expenses 4 (8,244) (6,324)
Operating profit before gains on investment properties 35,352 24,822
Fair value gains on investment properties 13 163,685 105,023
Realised loss on disposal of investment properties 13 - (504)
Operating profit 199,037 129,341
Finance income 7 321 26
Finance expenses 8 (8,154) (6,257)
Profit before tax 191,204 123,110
Taxation 9 - -
Total comprehensive income for the period 191,204 123,110
Earnings per share (basic and diluted) (pence) 12 45.0 35.2
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued during the year.
There is no other comprehensive income and therefore the profit for the year
after tax is also the total comprehensive income.
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2022
31 March 31 March
2022 2021
Notes £'000 £'000
Assets
Non-current assets
Investment property 13 1,026,066 807,063
Interest rate derivatives 337 16
1,026,403 807,079
Current assets
Cash and cash equivalents 14 16,706 27,185
Trade and other receivables 15 9,849 5,977
26,555 33,162
Total assets 1,052,958 840,241
Liabilities
Non-current liabilities
Interest-bearing loans and borrowings 16 (268,216) (219,099)
Other payables and accrued expenses 18 (16,550) (17,050)
Head lease liability 17 (14,200) (14,259)
(298,966) (250,408)
Current liabilities
Other payables and accrued expenses 18 (6,855) (7,573)
Deferred income 18 (7,487) (7,531)
Head lease liability 17 (696) (638)
(15,038) (15,742)
Total liabilities (314,004) (266,150)
Net assets 738,954 574,091
Equity
Share capital 19 4,249 4,249
Share premium 20 275,648 275,648
Retained earnings 21 459,057 294,194
Total equity 738,954 574,091
Number of shares in issue (thousands) 424,862 424,862
Net asset value per share (basic and diluted) (pence) 22 173.9 135.1
The accompanying notes form an integral part of these financial statements.
These financial statements were approved by the Board of Directors of
Warehouse REIT plc on 23 May 2022 and signed on its behalf by:
Neil Kirton
Company number: 10880317
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Share Share Retained
capital premium earnings Total
Notes £'000 £'000 £'000 £'000
Balance at 31 March 2020 2,403 74,028 186,688 263,119
Total comprehensive income - - 123,110 123,110
Ordinary shares issued 19, 20 1,846 205,965 - 207,811
Share issue costs 20 - (4,345) - (4,345)
Dividends paid 11 - - (15,604) (15,604)
Balance at 31 March 2021 4,249 275,648 294,194 574,091
Total comprehensive income - - 191,204 191,204
Ordinary shares issued 19, 20 - - - -
Share issue costs 20 - - - -
Dividends paid 11 - - (26,341) (26,341)
Balance at 31 March 2022 4,249 275,648 459,057 738,954
In the prior period the capital reduction reserve and retained earnings were
presented separately. As both amounts represent distributable profits
available to the members of the plc, the directors have made the decision to
present them together as retained earnings.
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2022
Year ended Year ended
31 March 31 March
2022 2021
Notes £'000 £'000
Cash flows from operating activities
Operating profit 199,037 129,341
Adjustments to reconcile profit for the period to net cash flows:
Gains from change in fair value of investment properties 13 (163,685) (105,023)
Realised loss on disposal of investment properties 13 - 504
Head lease asset depreciation 4 181 134
Operating cash flows before movements in working capital 35,533 24,956
Increase in other receivables and prepayments (6,318) (4,173)
(Increase)/decrease in other payables and accrued expenses (970) 3,415
Net cash flow generated from operating activities 28,245 24,198
Cash flows from investing activities
Acquisition of investment properties (45,178) (224,803)
Capital expenditure (7,536) (1,041)
Development expenditure (1,133) (1,368)
Disposal of investment properties - 15,945
Net cash used in investing activities (53,847) (211,267)
Cash flows from financing activities
Proceeds from issue of ordinary shares 19,20 - 198,834
Share issuance costs paid 19 - (4,345)
Bank loans drawn down 16 49,000 73,300
Bank loans repaid 16 - (37,800)
Interest received 7 - 26
Loan interest and other finance expenses paid (6,087) (4,577)
Loan issue costs paid (392) (315)
Head lease payments (1,057) (748)
Dividends paid in the period 11 (26,341) (15,604)
Net cash flow generated from financing activities 15,123 208,771
Net increase in cash and cash equivalents (10,479) 21,702
Cash and cash equivalents at start of the period 27,185 5,483
Cash and cash equivalents at end of the period 14 16,706 27,185
The accompanying notes form an integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. General information
Warehouse REIT plc is a closed-ended Real Estate Investment Trust ("REIT")
with an indefinite life incorporated in England and Wales on 24 July 2017.
The Company began trading on 20 September 2017. The registered office of the
Company is located at Beaufort House, 51 New North Road, Exeter EX4 4EP.
The Company's shares are admitted to trading on AIM, a market operated by the
London Stock Exchange.
The Group's consolidated financial statements for the year ended 31 March 2022
comprise the results of the Company and its subsidiaries (together
constituting the "Group") and were approved by the Board and authorised for
issue on 23 May 2022.
2. Basis of preparation
The financial information set out in these financial statements does not
constitute the Company's statutory accounts for the year ended 31 March 2022,
but is derived from those accounts. Statutory accounts for the year ended 31
March 2022 will be delivered to the Registrar of Companies following the
Company's Annual General Meeting. The auditor has reported on those accounts;
their report was unqualified, did not draw to attention any matters by way of
emphasis of matter without qualifying their report and did not contain
statements under s498(2) or (3) of the Companies Act 2006. The text of the
Auditor's Report can be found in the full Annual Report.
These financial statements are prepared in accordance with IFRS issued by the
International Accounting Standards Board ("IASB") and in conformity with the
requirements of the Companies Act 2006. The financial statements have been
prepared under the historical cost convention, except for the revaluation of
investment properties and financial instruments that are measured at revalued
amounts or fair values at the end of each reporting period, as explained in
the accounting policies below. Historical cost is generally based on the fair
value of the consideration given in exchange for goods and services. The
audited financial statements are presented in Pound Sterling and all values
are rounded to the nearest thousand pounds (£'000), except when otherwise
indicated.
2.1 Going concern
The Directors have made an assessment of the Group's ability to continue as a
going concern. They carefully considered areas of potential financial risk and
reviewed cash flow forecasts, evaluating a number of scenarios which included
extreme downside sensitivities in relation to rental cash collection, making
no acquisitions or discretionary capital expenditure and minimum dividend
distributions under the REIT rules.
Accordingly, based on this information, and in light of mitigating actions
available and the reasonable expectation that the Group refinancing will be
available when required, the Directors have a reasonable expectation that the
Group and the Company have adequate resources to continue in business for a
period of at least 12 months from the date of approval of the Annual Report
and Financial Statements (see Going Concern for details).
Furthermore, the Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as a going
concern. Therefore, the financial statements have been prepared on the going
concern basis.
2.2 Changes to accounting standards and interpretations
There were a number of new standards and amendments to existing standards
which are required for the Group's accounting period beginning on 1 April
2021, which have been considered and applied as follows:
Interest Rate Benchmark Reform - Phase 2 (Amendments to various standards:
IFRS 9 Financial Instruments, IAS 39 Financial Instruments; Recognition and
Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance
Contracts and IFRS 16 Leases.) The amendments address issues that might affect
financial reporting when an existing interest rate benchmark is replaced with
an alternative benchmark interest rate. The Group's borrowings have
transitioned from the London Interbank Offer Rate ("LIBOR") benchmark to the
Sterling Overnight Index Average ("SONIA") benchmark. There have been
negligible costs involved in the borrowing facility transition and the
respective hedge instrument amendments. Within Phase 2, a practical expedient
was offered under B5.4.5 of IFRS 9, whereby updating the effective interest
rate was possible without the needed for the Group to recognise an immediate
gain or loss. This practical expedient applies only to such a change and only
to the extent that it is necessary as a direct consequence of interest rate
benchmark reform, and the new basis is economically equivalent to the previous
basis.
Conceptual Framework for Financial Reporting
The Conceptual Framework is not a standard, and none of the concepts contained
therein override the concepts or requirements in any standard. The revised
Conceptual Framework includes some new concepts, updated definitions and
recognition criteria for assets and liabilities and clarifies some important
concepts. These amendments had no impact on the consolidated financial
statements of the Group.
There are no other standards that are not yet effective that would be expected
to have a material impact on the Group in the current or future reporting
periods and on the foreseeable future transaction
2.3 Significant accounting judgements and estimates
The preparation of these financial statements in accordance with IFRS requires
the Directors of the Company to make judgements, estimates and assumptions
that affect the reported amounts recognised in the financial statements.
However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the
asset or liability in the future.
Judgements
In the course of preparing the financial statements, no judgements have been
made in the process of applying the Group's accounting policies, other than
those involving estimations, that have had a significant effect on the amounts
recognised in the financial statements.
Estimates
In the process of applying the Group's accounting policies, the Investment
Advisor has made the following estimates which have the most significant risk
of material change to the carrying value of assets recognised in the
consolidated financial statements:
Valuation of property
The valuations of the Group's investment property are at fair value
as determined by the external independent valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation - Professional
Standards January 2020 (incorporating the International Valuation Standards)
and in accordance with IFRS 13. The key estimates made by the valuer are the
ERV and equivalent yields of each investment property and land values per acre
for development properties. The valuers have considered the impact of climate
change and that this has not had a material impact of the valuation at the
current time. See notes 13 and 23 for further details.
2.4 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are stated in the notes to the financial statements.
a) Basis of consolidation
The Company does not meet the definition of an investment entity and therefore
does not qualify for the consolidation exemption under IFRS 10. The
consolidated financial statements comprise the financial statements of the
Group and its subsidiaries as at 31 March 2022. Subsidiaries are consolidated
from the date of acquisition, being the date on which the Group obtained
control, and will continue to be consolidated until the date that such control
ceases. An investor controls an investee when the investor is exposed, or has
rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. In
preparing these financial statements, intra-group balances, transactions and
unrealised gains or losses have been eliminated in full. All subsidiaries have
the same year end as the Company. Uniform accounting policies are adopted in
the financial statements for like transactions and events in similar
circumstances.
b) Functional and presentation currency
The overall objective of the Group is to generate returns in Pound Sterling
and the Group's performance is evaluated in Pound Sterling. Therefore, the
Directors consider Pound Sterling as the currency that most faithfully
represents the economic effects of the underlying transactions, events and
conditions and have therefore adopted it as the functional and presentation
currency.
c) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being the investment in and provision of, UK urban warehouses.
2.5 Restatement of financial statements
Following a review of the Group's accounting policy for recognition of service
charge income, it has been identified that the nature of the arrangements with
the property managers and occupiers is such that the Group is acting as the
principal in respect of the provision of services. Service charge income
should therefore be accounted for gross in the consolidated statement of
comprehensive income. This income had previously been netted off related
expenditure. The comparatives have been restated to gross up income and
expenditure by £3.1 million. There is no impact on reported profit for the
year ended 31 March 2021 or net assets at that date.
3. Property income
Restated
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Rental income 44,020 34,225
Insurance recharged 1,507 930
Dilapidation income 3,187 603
Gross property income 48,714 35,758
Service charge income 2,682 3,070
Total property income 51,396 38,828
Accounting policy
Rental income arising from operating leases on investment property is
accounted for on a straight-line basis over the lease term and is included in
gross property income in the Group statement of comprehensive income. Initial
direct costs incurred in negotiating and arranging an operating lease are
recognised as an expense over the lease term on the same basis as the lease
income. Rental income is invoiced in advance and for all rental income that
relates to a future period, this is deferred and appears with current
liabilities on the Group statement of financial position.
For leases which contain fixed or minimum uplifts, the rental income arising
from such uplifts is recognised on a straight-line basis over the lease term.
A rental adjustment is recognised from the rent review date in relation to
unsettled rent reviews, once the rental uplifts are agreed.
Occupier lease incentives are recognised as an adjustment of rental revenue on
a straight-line basis over the term of the lease. The lease term is the
non-cancellable period of the lease together with any further term for which
the occupier has the option to continue the lease where, at the inception of
the lease, the Directors are reasonably certain that the occupier will
exercise that option.
Insurance income is recognised in the accounting period in which the services
are rendered.
Amounts received from occupiers to terminate leases or to compensate for
dilapidations are recognised in the Group statement of comprehensive income
when the right to receive them arises, typically at the cessation of the
lease.
Service charge income is recognised when the related recoverable expenses are
incurred. The Group acts as the principal in service charge transactions as it
directly controls the delivery of the services at the point at which they are
provided to the occupier.
4. Property operating and administration expenses
Restated
Year ended 31 March Year
ended 31 March
2022 2021
£'000 £'000
Service charge expenses 3,011 3,435
Premises expenses 2,313 2,326
Insurance 1,558 1,047
Rates 490 339
Utilities 87 136
Loss allowance on trade receivables 341 399
Property operating expenses 4,789 4,247
Investment Advisor fees 6,484 4,393
Directors' remuneration 175 150
Head lease asset depreciation 181 134
Other administration expenses 1,404 1,647
Administration expenses 8,244 6,324
Total 16,044 14,006
Details of how the Investment Advisory fees are calculated are disclosed in
note 27.
Accounting policy
All property operating expenses and administration expenses are charged to the
consolidated statement of comprehensive income and are accounted for on an
accruals basis.
Property expenses are costs incurred by the Group that are not directly
recoverable from an occupier, as well as professional fees relating to the
letting of our estates.
5. Directors' remuneration
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Neil Kirton 47 45
Lynette Lackey 37 35
Martin Meech 37 35
Aimée Pitman 37 35
Total 158 150
A summary of the Directors' emoluments, including the disclosures required by
the Companies Act 2006, is set out in the Directors' remuneration report. The
Group had no employees in either period.
6. Auditor's remuneration
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Audit fee 148 152
Total 148 152
The Group reviews the scope and nature of all proposed non-audit services
before engagement, to ensure that the independence and objectivity of the
Auditor are safeguarded. Audit fees are comprised of the following items:
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Group year-end Annual Report and Financial Statements 130 122
Subsidiary accounts 18 30
Total 148 152
Non-audit fees are comprised of the following:
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Tax advice - 163
Services provided as reporting accountant on equity raise - 45
Services provided as reporting accountant on postponed equity raise - 13
Total - 221
The Group's auditor for the year ended 31 March 2022 was BDO LLP (31 March
2021: Deloitte LLP).
7. Finance income
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Income from cash and short-term deposits - 26
Change in fair value of interest rate derivatives 321 -
Total 321 26
Accounting policy
Interest income is recognised on an effective interest rate basis and shown
within the Group statement of comprehensive income as finance income.
8. Finance expenses
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Loan interest 5,816 4,512
Head lease interest 1,030 1,016
Loan arrangement fees amortised 898 721
Loan arrangement fees expensed 392 -
Bank charges 18 2
8,154 6,251
Change in fair value of interest rate derivatives - 6
Total 8,154 6,257
Accounting policy
Any finance costs that are separately identifiable and directly attributable
to an asset which takes a period of time to complete are amortised as part of
the cost of the asset. All other finance costs are expensed in the period in
which they occur. Finance costs consist of interest and other costs that an
entity incurs in connection with bank and other borrowings. Fair value
movements on derivatives are recorded in finance expenses or in finance income
depending on the fair value movement during the year.
9. Taxation
Corporation tax has arisen as follows:
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Corporation tax on residual income - -
Total - -
Reconciliation of tax charge to profit before tax:
Year ended 31 March Year ended 31 March
2022 2021
£'000 £'000
Profit before tax 191,204 123,110
Corporation tax at 19.0% (2021: 19.0%) 36,329 23,392
Change in value of investment properties (31,092) (19,860)
Tax-exempt property rental business (5,237) (3,532)
Total - -
Accounting policy
Corporation tax is recognised in the consolidated statement of comprehensive
income except where in certain circumstances corporation tax may be recognised
in other comprehensive income.
As a REIT, the Group is exempt from corporation tax on the profits and gains
from its property rental business, provided it continues to meet certain
conditions as per the REIT regulations.
Non-qualifying profits and gains of the Group continue to be subject to
corporation tax. Therefore, current tax is the expected tax payable on the
non-qualifying taxable income for the period, if applicable, using tax rates
enacted or substantively enacted at the balance sheet date.
10. Operating leases
Operating lease commitments - as lessor
The Group has entered into commercial property leases on its investment
property portfolio. These non-cancellable leases have a remaining term of up
to 15 years.
Future minimum rentals receivable under non-cancellable operating leases as at
31 March 2022 are as follows:
31 March 2022 31 March 2021
£'000 £'000
Within one year 42,364 40,530
Between one and two years 35,838 35,046
Between two and three years 27,002 29,182
Between three and four years 21,154 21,625
Between four and five years 17,058 17,059
More than five years 58,219 62,818
Total 201,635 206,260
11. Dividends
Pence
For the year ended 31 March 2022 per share £'000
Third interim dividend for year ended 31 March 2021 paid on 1 April 2021 1.55 6,585
Fourth interim dividend for year ended 31 March 2021 paid on 30 June 2021 1.55 6,586
First interim dividend for year ended 31 March 2022 paid on 01 October 2021 1.55 6,585
Second interim dividend for year ended 31 March 2022 paid on 30 December 2021 1.55 6,585
Total dividends paid during the year 6.2 26,341
Paid as:
Property income distributions 6.2 26,341
Non-property income distributions - -
Total 6.2 26,341
Pence
For the year ended 31 March 2021 per share £'000
Fourth interim dividend for year ended 31 March 2020 paid on 3 July 2020 1.60 3,844
First interim dividend for year ended 31 March 2021 paid on 2 October 2020 1.55 5,880
Second interim dividend for year ended 31 March 2021 paid on 31 December 2020 1.55 5,880
Total dividends paid during the year 4.70 15,604
Paid as:
Property income distributions 4.70 15,604
Non-property income distributions - -
Total 4.70 15,604
As a REIT, the Group is required to pay PIDs equal to at least 90% of the
property rental business profits of the Group.
A third interim property income dividend for the year ended 31 March 2022 of
1.55 pence per share was declared on 4 February 2022 and paid on 1 April 2022.
Accounting policy
Dividends due to the Company's shareholders are recognised when they become
payable.
12. Earnings per share
Basic EPS is calculated by dividing profit for the period attributable to
ordinary shareholders of the Company by the weighted average number of
ordinary shares during the period. As there are no dilutive instruments in
issue, basic and diluted EPS are identical.
Year ended 31 March 2022 Year ended 31 March 2021
£'000 £'000
IFRS earnings 191,204 123,110
EPRA earnings adjustments:
Loss on disposal of investment properties - 504
Fair value gains on investment properties (163,685) (105,023)
Changes in fair value of interest rate derivatives (321) 6
EPRA earnings 27,198 18,597
Group-specific earnings adjustments:
None - -
Adjusted earnings 27,198 18,597
Year ended 31 March 2022 Year ended 31 March 2021
Pence Pence
Basic IFRS EPS 45.0 35.2
Diluted IFRS EPS 45.0 35.2
EPRA EPS 6.4 5.3
Adjusted EPS 6.4 5.3
Year ended 31 March 2022 Year ended 31 March 2021
Number Number
of shares of shares
Weighted average number of shares in issue (thousands) 424,862 349,648
13. UK investment property
Completed investment Development Total investment
property property and land property
£'000 £'000 £'000
Investment property valuation brought forward as at 1 April 2021 751,930 40,870 792,800
Acquisition of properties 30,027 13,364 43,391
Capital expenditure 6,467 1,103 7,570
Movement in rent incentives 4,545 (6) 4,539
Fair value gains on revaluation of investment property 120,066 43,619 163,685
Total portfolio valuation per valuer's report 913,035 98,950 1,011,985
Adjustment for head lease obligations 14,081 - 14,081
Carrying value at 31 March 2022 927,116 98,950 1,026,066
Completed investment Development Total investment
property property and land property
£'000 £'000 £'000
Investment property valuation brought forward as at 1 April 2020 433,550 16,970 450,520
Acquisition of properties 229,272 17,293 246,565
Capital expenditure 1,938 625 2,563
Disposal of properties (16,455) - (16,455)
Movement in rent incentives 4,584 - 4,584
Fair value gains on revaluation of investment property 99,041 5,982 105,023
Total portfolio valuation per valuer's report 751,930 40,870 792,800
Adjustment for head lease obligations 14,263 - 14,263
Carrying value at 31 March 2021 766,193 40,870 807,063
Included within the carrying value of investment properties as at 31 March
2022 is £9.1 million (31 March 2020: £4.6 million) in respect to rent
incentives as a result of the IFRS treatment of leases with rent free periods,
which require recognition on a straight-line basis over the lease term. The
difference between this and cash receipts change the carrying value of the
property which revaluations are measured.
All investment properties are charged as collateral on the Group's borrowings.
One asset is also subject to a second ranking charge in relation to deferred
consideration outstanding. See note 18 for further details.
Realised loss on disposal of investment properties
31 March 31 March
2022 2021
£'000 £'000
Net proceeds from disposals of investment property during the year - 15,951
Carrying value of disposals - (16,455)
Realised loss on disposal of investment properties - (504)
Accounting policy
Investment property comprises property held to earn rental income or for
capital appreciation, or both. Investment properties are recognised upon legal
completion of the contract, where costs are reliably measured and future
economic benefits that are associated with the property flow to the entity.
Investment properties are measured initially at cost including transaction
costs. Transaction costs include transfer taxes and professional fees to bring
the property to the condition necessary for it to be capable of operating. The
carrying amount also includes the cost of replacing part of an existing
investment property at the time that cost is incurred, if the recognition
criteria are met.
Development property and land is where the whole or a material part of an
estate is identified as having potential for development. Assets are
classified as such until development is completed and they have the potential
to be fully income generating. Development property and land is measured at
fair value if the fair value is considered to be reliably determinable. Where
the fair value cannot be determined reliably but where it is expected that the
fair value of the property will be reliably determined when construction is
completed, the property is measured at cost less any impairment until the fair
value becomes reliably determinable or construction is completed, whichever is
earlier. It is the Group's policy not to capitalise overheads or operating
expenses and no such costs were capitalised in either the year ended 31 March
2022 or the year ended 31 March 2021.
Subsequent to initial recognition, investment property is stated at fair value
(see note 23). Gains or losses arising from changes in the fair values are
included in the consolidated statement of comprehensive income in the period
in which they arise under IAS 40 Investment Property.
Investment properties cease to be recognised when they have been disposed of
or withdrawn permanently from use and no future economic benefit is expected.
Gains or losses on the disposal of investment property are determined as the
difference between net disposal proceeds and the carrying value of the asset.
Movements in rent incentives are presented within the total portfolio
valuation.
Where an investment property is held under a leasehold interest, the headlease
is initially recognised as an asset at cost plus the present value of minimum
ground rent payments and is subsequently measured at fair value. The
corresponding rental liability to the head leaseholder is included in the
balance sheet as a finance lease obligation (see note 17).
14. Cash and cash equivalents
31 March 2022 31 March 2021
£'000 £'000
Unrestricted cash and cash equivalents 10,787 21,260
Restricted cash and cash equivalents 5,919 5,925
Total 16,706 27,185
Restricted cash comprises £5.9 million (2021: £5.9 million) of cash held by
the Company's Registrar to fund the shareholder dividend, less withholding
tax, which was paid on 1 April 2022 as disclosed in note 11.
Accounting policy
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.
15. Trade and other receivables
31 March 2022 31 March 2021
£'000 £'000
Rent and insurance receivables 5,445 4,193
Payments in advance of property completion 2,090 22
Occupier deposits 535 593
Prepayments 198 193
Other receivables 1,581 976
Total 9,849 5,977
The rent and insurance receivables balance represents gross receivables of
£6.2 million (31 March 2021: £5.1 million), net of a provision for doubtful
debts of £0.8 million (31 March 2021: £0.9 million).
Payments in advance of property completion represent the deposits paid to
vendors upon exchange of purchase contracts.
Accounting policy
Rent and other receivables are recognised at their original invoiced value and
become due based on the terms of the underlying lease or at the date of
invoice.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
To measure expected credit losses on a collective basis, trade receivables are
grouped based on similar credit risk and ageing.
The expected loss rates are based on the Group's historical credit losses
experienced over the two‑year period prior to the year end. The historical
loss rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's customers.
16. Interest-bearing loans and borrowings
31 March 2022 31 March 2021
£'000 £'000
At the beginning of the year 222,000 186,500
Drawn in the year 49,000 73,300
Repaid in the year - (37,800)
Interest-bearing loans and borrowings 271,000 222,000
Unamortised fees at the beginning of the year (2,901) (3,310)
Loan arrangement fees paid in the year (781) (363)
Amortisation charge for the year 898 772
Unamortised loan arrangement fees (2,784) (2,901)
Loan balance less unamortised loan arrangement fees 268,216 219,099
During the year, the Company transitioned all of its borrowings subject to a
variable rate of interest from LIBOR to SONIA. SONIA is an overnight rate,
whereas LIBOR was a term rate. SONIA is close to a risk-free measure of
borrowing costs. It is compounded over a lending period to produce a
backward-looking term interest rate.
From 1 January 2022, all borrowings under these agreements will attract a
margin of 2.0% - 2.2% per annum above SONIA, plus a credit adjustment spread
equal to 11.93 bps. It is expected that this change in risk free rate will not
lead to a material change in overall borrowing costs.
The Group has a debt facility with a club of four banks: HSBC, Bank of
Ireland, Royal Bank of Canada and Barclays. The facility runs for five years
from January 2020 and comprises an RCF of £138.0 million and a term loan of
£182.0 million. The facility will expire on 22 January 2025 with an option to
extend the duration by a further two years, subject to lender consent. The
facilities are secured on all properties within the portfolio.
As at 31 March 2022, there is £49.0 million (31 March 2021: £23.0 million)
available to draw.
The loan principal is repayable in January 2025, however the facility has an
option to extend for a further two years.
The debt facility includes interest cover and market value covenants that are
measured at a Group level. The Group has complied with all covenants
throughout the financial period.
Accounting policy
Loans and borrowings are initially recognised at the proceeds received net of
directly attributable transaction costs. Loans and borrowings are
subsequently measured at amortised cost with interest charged to the
consolidated statement of comprehensive income at the effective interest
rate, and shown within finance costs. Transaction costs are spread over
the term of the loan.
17. Head lease obligations
The following table analyses the present value of minimum lease payments under
non-cancellable head leases using an average discount rate of 6.91% for each
of the following periods:
31 March 2022 31 March 2021
£'000 £'000
Current liabilities
Within one year 696 638
Non-current liabilities
After one year but not more than five years 2,931 3,268
Later than five years 11,269 10,991
14,200 14,259
Total head lease obligations 14,896 14,897
31 March 2022 31 March
£'000 2021
£'000
Head lease liability - opening balance 14,897 8,807
Cash flows (1,057) (748)
Non-cash movements
Interest 1,030 1,016
Additions - 6,037
Disposals - (242)
Head lease accrual 26 27
Head lease obligations - closing balance 14,896 14,897
The following table analyses the minimum undiscounted lease payments under
non-cancellable head leases for each of the following periods:
31 March 2022 31 March 2021
£'000 £'000
Current liabilities
Within one year 1,053 1,031
Non-current liabilities
After one year but not more than five years 4,211 4,211
Later than five years 85,526 86,578
Total 90,790 91,820
The fair value of the Group's lease obligations is estimated to be equal to
its carrying value.
Accounting policy
At the commencement date, head lease obligations are recognised at the present
value of future lease payments using the discount rate implicit in the lease,
if determinable, or, if not, the property specific incremental borrowing rate.
18. Other liabilities - other payables and accrued expenses, provisions and
deferred income
31 March 2022 31 March 2021
£'000 £'000
Administration expenses payable 2,576 1,979
Capital expenses payable 2,042 2,363
Loan interest payable 1,444 915
Property operating expenses payable 465 1,580
Other expenses payable 328 736
Total other payables and accrued expenses - current 6,855 7,573
Other payables and accrued expenses are initially recognised at fair value and
subsequently held at amortised cost.
31 March 2022 31 March 2021
£'000 £'000
Capital expenses payable 16,550 17,050
Total other payables and accrued expenses - non-current 16,550 17,050
During the year ended 31 March 2021, the Group had exchanged contracts to
acquire land for £15.0 million. The first two instalments were paid for a
total of £1.5 million in the year ended 31 March 2021 with a further £1.0
million paid on 26 August 2021. Of the £12.5 million outstanding, £500,000
is due in September 2022 and is included with current capital expenses
payable.
In addition, capital expenses payable includes deferred consideration of £4.5
million in relation to a property acquired during the year ended 31 March
2020. The deferred consideration is due in September 2023, or earlier if the
property is sold before that date. The consideration is secured on a second
ranking charge over the asset. The impact of discounting the deferred
consideration balances would not be material
31 March 31 March
2022 2021
£'000 £'000
Total deferred income 7,487 7,531
Accounting policy
Deferred income is rental income received in advance during the accounting
period. The income is deferred and is unwound to revenue on a straight-line
basis over the period in which it is earned.
19. Share capital
Share capital is the nominal amount of the Company's ordinary shares in issue.
31 March 31 March
2022 2021
Ordinary shares of £0.01 each Number £'000 Number £'000
Authorised, issued and fully paid:
At the start of the period 424,861,650 4,249 240,254,043 2,403
Shares issued - - 177,025,308 1,770
In specie share issue - - 7,582,299 76
Balance at the end of the period 424,861,650 4,249 424,861,650 4,249
The share capital comprises one class of ordinary shares. At general meetings
of the Company, ordinary shareholders are entitled to one vote on a show of
hands and on a poll, to one vote for every share held. There are no
restrictions on the size of a shareholding or the transfer of shares, except
for the UK REIT restrictions.
20. Share premium
Share premium comprises the following amounts:
31 March 2022 31 March 2021
£'000 £'000
At the start of the period 275,648 74,028
Shares issued - 197,064
In specie share issue - 8,901
Share issue costs - (4,345)
Share premium 275,648 275,648
Share premium represents the excess over nominal value of the fair value of
the consideration received for equity shares net of direct issue costs.
21. Retained earnings
Retained earnings comprise the following cumulative amounts:
31 March 31 March
2022 2021
£'000 £'000
Capital reduction reserve 161,149 161,149
Total unrealised gains on investment properties 289,378 125,693
Total unrealised gain/(loss) on interest rate caps 196 (125)
Total realised profits 76,554 49,356
Dividends paid from revenue profits (68,220) (41,879)
Retained earnings 459,057 294,194
Retained earnings represent the profits of the Group less dividends paid from
revenue profits to date. Unrealised gains on the revaluation of investment
properties and interest rate caps contained within this reserve are not
distributable until any gains crystallise on the sale of the investment
property, interest rate caps. The capital reduction reserve is a distributable
reserve established upon cancellation of the share premium of the Company on
17 November 2017.
22. Net asset value per share
Basic NAV per share amounts are calculated by dividing net assets attributable
to ordinary equity holders of the Company in the statement of financial
position by the number of ordinary shares outstanding at the end of the
period. As there are no dilutive instruments in issue, basic and diluted NAV
per share are identical.
31 March 2022 31 March 2021
£'000 £'000
IFRS net assets attributable to ordinary shareholders 738,954 574,091
IFRS net assets for calculation of NAV 738,954 574,091
Adjustment to net assets:
Fair value of interest rate derivatives (337) (16)
EPRA NTA 738,617 574,075
31 March 2022 31 March 2021
Pence Pence
IFRS basic and diluted NAV per share (pence) 173.9 135.1
EPRA NTA per share (pence) 173.8 135.1
31 March 2022 31 March 2021
Number Number
of shares of shares
Number of shares in issue (thousands) 424,862 424,862
23. Fair value
IFRS 13 defines fair value 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. The following methods and assumptions
were used to estimate the fair values.
The fair value of cash and short-term deposits, trade receivables, trade
payables and other current liabilities approximate their carrying amounts due
to the short-term maturities of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised cost. The
carrying value of the loans and borrowings approximate their fair value due to
the contractual terms and conditions of the loan. The loans are at variable
interest rates of 2.0% to 2.2% above SONIA.
Six-monthly valuations of investment property are performed by CBRE,
accredited independent external valuers with recognised and relevant
professional qualifications and recent experience of the location and category
of the investment property being valued. The valuations are the ultimate
responsibility of the Directors however, who appraise these every six months.
The valuation of the Group's investment property at fair value is determined
by the independent external valuer on the basis of market value in accordance
with the internationally accepted RICS Valuation - Professional Standards
January 2020 (incorporating the International Valuation Standards).
Completed investment properties are valued by adopting the 'income
capitalisation' method of valuation. This approach involves applying
capitalisation yields to current and future rental streams, net of income
voids arising from vacancies or rent-free periods and associated running
costs. These capitalisation yields and future rental values are based on
comparable property and leasing transactions in the market using the valuer's
professional judgement and market observations. Other factors taken into
account in the valuations include the tenure of the property, tenancy details
and ground and structural conditions.
Development property and land has been valued by adopting the 'comparable
method' of valuation and where appropriate supported by a 'residual
development appraisal'. The comparable method involves applying a sales rate
per acre to relevant sites supported by comparable land sales. Residual
development appraisals have been completed where there is sufficient clarity
regarding planning and an identified or indicative scheme. In a similar manner
to 'income capitalisation', development inputs include the capitalisation of
future rental streams with an appropriate yield to ascertain a gross
development value. The costs associated with bringing a scheme to the market
are then deducted, including construction costs, professional fees, finance
and developer's profit, to provide a residual site value.
The fair value of the interest rate contracts is recorded in the statement of
financial position and is determined by forming an expectation that interest
rates will exceed strike rates and discounting these future cash flows at the
prevailing market rates as at the year end.
The following tables show an analysis of the fair values of investment
properties and interest rate derivatives recognised in the statement of
financial position by level of the fair value hierarchy(1):
31 March 2022
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value £'000 £'000 £'000 £'000
Investment properties - - 1,011,985 1,011,985
Interest rate derivatives - 337 - 337
Total - 337 1,011,985 1,012,322
( )
31 March 2021
Level 1 Level 2 Level 3 Total
Assets and liabilities measured at fair value £'000 £'000 £'000 £'000
Investment properties - - 792,800 792,800
Interest rate derivatives - 16 - 16
Total - 16 792,800 792,816
1.
Explanation of the fair value hierarchy:
· Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the measurement
date;
· Level 2 - use of a model with inputs (other than quoted prices
included in Level 1) that are directly or indirectly observable market data;
and
· Level 3 - use of a model with inputs that are not based on
observable market data.
Sensitivity analysis to significant changes in unobservable inputs within the
valuation of investment properties
The following table analyses:
· the fair value measurements at the end of the reporting period;
· 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.
Key
Valuation unobservable
Fair value £'000 technique inputs Range
31 March 2022
Completed £913,035 Income capitalisation ERV £3.00 per sq ft - £17.50 per sq ft
investment property Equivalent yield 3.5% - 13.2%
Development property and land £98,950 Comparable method Sales rate per acre £300,000 - £1,750,000
£1,011,985
31 March 2021
Completed £751,930 Income capitalisation ERV £2.44 per sq ft - £10.91 per sq ft
investment property Equivalent yield 4.1% - 15.0%
Development property and land £40,870 Comparable method Sales rate per £220,000 - £710,000
acre
£792,800
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 equivalent yield) in isolation would
result in a significantly higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV 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.
The table below sets out a sensitivity analysis for each of the key sources of
estimation uncertainty with the resulting increase/(decrease) in the fair
value of completed investment property:
As at 31 March 2022
Completed investment property Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in ERV of 5% 45,652 (45,652)
Change in net equivalent yields of 25 basis points (48,513) 43,630
Development property and land Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in sales rate per acre of 5% 4,751 (4,751)
Change in net equivalent yields of 25 basis points (118) 126
As at 31 March 2021
Completed investment property Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in ERV of 5% 31,963 (42,684)
Change in net equivalent yields of 25 basis points (37,655) 30,232
Development property and land Increase in sensitivity Decrease in sensitivity
£'000 £'000
Change in sales rate per acre of 5% 1,954 (1,954)
Change in net equivalent yields of 25 basis points (51) 54
Gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy amount to
£163,685,000 (31 March 2021: £105,023,000) and are presented in the
consolidated statement of comprehensive income in line item 'fair value gains
on investment properties'.
All gains and losses recorded in profit or loss for recurring fair value
measurements categorised within Level 3 of the fair value hierarchy are
attributable to changes in unrealised gains or losses relating to investment
property held at the end of the reporting period.
The carrying amount of the Group's assets and liabilities is considered to be
the same as their fair value.
24. Financial risk management objectives and policies
The Group's principal financial liabilities are loans and borrowings. The main
purpose of the Group's loans and borrowings is to finance the acquisition of
the Group's property portfolio. The Group has trade and other receivables,
trade and other payables and cash and short-term deposits that arise directly
from its operations.
The Group is exposed to market risk, interest rate risk, credit risk and
liquidity risk. The Board of Directors reviews and agrees policies for
managing each of these risks, which are summarised below.
Market risk
The Group's activities expose it primarily to the financial risks of changes
in interest rates. The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate risk. There has been no
change to the Group's exposure to market risks or the manner in which these
risks are managed and measured.
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Group's exposure to the risk of changes in market interest rates relates to
its variable rate bank loans. In order to address interest rate risk, the
Group has entered into interest rate cap instruments.
The instruments have a combined notional value of £60.0 million, with £30.0
million at a strike rate of 1.50% and a termination date of 21 November 2022
and £30.0 million at a strike rate of 1.75% and a termination date of 21
November 2023.
Changes in interest rates may have an impact on consolidated earnings over the
longer term. The table below provides indicative sensitivity data.
2022 2021
Increase in interest rates by 1% Decrease in interest rates by 1% Increase in interest rates by 1% Decrease in interest rates by 1%
Effect on profit before tax: £'000 £'000 £'000 £'000
Increase/(decrease) (2,498) 2,498 (1,850) 1,850
Credit risk
Credit risk is the risk that a counterparty or occupier will cause a financial
loss to the Group by failing to meet a commitment it has entered into with the
Group.
All cash deposits are placed with approved counterparties, currently HSBC Bank
plc. In respect of property investments, in the event of a default by a
occupier, the Group will suffer a shortfall and additional costs concerning
re-letting of the property. The Investment Manager monitors the occupier
arrears in order to anticipate and minimise the impact of defaults by
occupational occupiers.
Credit risk is not considered material.
The following table analyses the Group's exposure to credit risk:
31 March 2022 31 March
2021
£'000 £'000
Cash and cash equivalents 10,787 21,260
Restricted cash 5,919 5,925
Trade and other receivables¹ 7,561 5,784
Total 24,267 32,969
¹Excludes prepayments and payments in advance of property completion
Liquidity risk
Liquidity risk is defined as the risk that the Group will encounter difficulty
in meeting obligations associated with financial liabilities that are settled
by delivering cash or another financial asset. Exposure to liquidity risk
arises because of the possibility that the Group could be required to pay its
liabilities earlier than expected. The Group's objective is to maintain a
balance between continuity of funding and flexibility through the use of bank
deposits and loans.
Set out below is a comparison by class of the carrying amounts and fair value
of the Group's financial instruments that are carried in the financial
statements:
2022 2021
Fair value Carrying Fair value Carrying Fair value
hierarchy value value
£'000 £'000 £'000 £'000
Held at amortised cost
Cash and cash equivalents n/a 10,787 10,787 21,260 21,260
Restricted cash n/a 5,919 5,919 5,925 5,925
Trade and other receivables¹ n/a 7,561 7,561 5,784 5,784
Other payables and accrued expenses² n/a (23,209) (23,209) (24,271) (24,271)
Head lease liabilities n/a (14,896) (14,896) (14,897) (14,897)
Interest-bearing loans and borrowings n/a (268,216) (268,216) (219,099) (219,099)
Held at fair value
Interest rate derivatives (assets) 2 337 337 16 16
¹Excludes prepayments and payments in advance of property completion
²Excludes VAT liability and capital expenses payable
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments:
Less Three
than three to 12 One to Two to More than
months months two years five years five years Total
Year ended 31 March 2022 £'000 £'000 £'000 £'000 £'000 £'000
Interest-bearing loans and borrowings - 5,329 7,098 276,776 - 289,203
Other payables and accrued expenses 6,159 500 4,875 11,675 - 23,209
Head lease obligations 263 790 1,052 3,159 85,526 90,790
Total 6,422 6,619 13,025 291,610 85,526 403,202
Less Three
than three to 12 One to Two to More than
months months two years five years five years Total
Year ended 31 March 2021 £'000 £'000 £'000 £'000 £'000 £'000
Interest-bearing loans and borrowings - 3,440 4,565 231,418 - 239,423
Other payables and accrued expenses 6,221 1,000 500 16,550 - 24,271
Head lease obligations 258 773 1,052 3,159 86,578 91,820
Total 6,479 5,213 6,117 251,127 86,578 355,514
25. Subsidiaries
Country of Number and class
incorporation of share held Group
Company and operation by the Group holding
Tilstone Holdings Limited UK 63,872 ordinary shares 100%
Tilstone Warehouse Holdco Limited UK 94,400 ordinary shares 100%
Tilstone Property Holdings Limited UK 9,102 ordinary shares 100%
Tilstone Industrial Warehouse Limited(1) UK 23,600 ordinary shares 100%
Tilstone Retail Warehouse Limited(1) UK 20,000 ordinary shares 100%
Tilstone Industrial Limited(1) UK 20,000 ordinary shares 100%
Tilstone Retail Limited(1) UK 200 ordinary shares 100%
Tilstone Trade Limited(1) UK 20,004 ordinary shares 100%
Tilstone Basingstoke Limited(1) UK 1,000 ordinary shares 100%
Tilstone Glasgow Limited(1) UK 1 ordinary share 100%
Tilstone Radway Limited(1) UK 100 ordinary shares 100%
Tilstone Oxford Limited(1) UK 1,000 ordinary shares 100%
Tilstone Liverpool Limited(1) UK 100 ordinary shares 100%
Warehouse 1234 Limited(1) UK 100 ordinary shares 100%
Tilstone Chesterfield Limited(1) UK 15,000,001 ordinary shares 100%
1. Indirect subsidiaries.
The registered office of all subsidiaries is located at Beaufort House,
51 New North Road, Exeter EX4 4EP.
The principal activity of all the subsidiaries relates to property investment.
Accounting policy
Where property is acquired, via corporate acquisitions or otherwise,
management considers the substance of the assets and activities of the
acquired entity in determining whether the acquisition represents the
acquisition of a business.
Under the definition of a business (Amendments to IFRS 3 business
combinations), to be considered a business an acquired set of activities and
assets must include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create outputs. The
optional 'concentration test' is also applied; where substantially all of the
fair value of gross assets acquired is concentrated in a single asset (or a
group of similar assets), the assets acquired would not represent a business.
The Group accounts for an acquisition as a business combination where an
integrated set of activities is acquired in addition to the property. Where an
acquisition is considered to be a business combination the consolidated
financial statements incorporate the results of business combinations using
the acquisition method.
In the Group statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially recognised at
their fair values at the acquisition date. Any excess of the cost of a
business combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities acquired is
treated as goodwill.
Where the fair value of identifiable assets, liabilities and contingent
liabilities acquired exceeds the fair value of the purchase consideration, the
difference is treated as a gain on bargain purchase and credited to the Group
profit or loss.
The results of acquired operations are included in the Group profit or loss
from the date on which control is obtained until the date on which control
ceases.
Where such acquisitions are not judged to be the acquisition of a business,
they are not treated as business combinations. Rather, the cost to acquire the
corporate entity is allocated between the identifiable assets and liabilities
of the entity based upon their relative fair values at the acquisition date.
Accordingly, no goodwill or additional deferred tax arises.
Contingent consideration is deemed to be equity or a liability in accordance
with IAS 32. If the contingent consideration is classified as equity, it is
not remeasured and its subsequent settlement shall be accounted for within
equity. If the contingent consideration is classified as a liability,
subsequent changes to the fair value are recognised either in profit or loss
or as a change to other comprehensive income.
26. Capital management
The Group's capital is represented by share capital, reserves and borrowings.
The primary objective of the Group's capital management is to ensure that it
remains within its quantitative banking covenants and maintains a strong
credit rating. The Group's capital policies are as follows:
· the Group will keep sufficient cash for working capital purposes with
excess cash, should there be any, deposited at the best interest rate
available whilst maintaining flexibility to fund the Group's investment
programme;
· borrowings will be managed in accordance with the loan agreements and
covenants will be tested quarterly and reported to the Directors.
Additionally, quarterly lender reporting will be undertaken in line with the
loan agreement; and
· new borrowings are subject to Director approval. Such borrowings
will support the Group's investment programme but be subject to a maximum 50%
LTV. The intention is to maintain borrowings at an LTV of between 30% and 40%.
The Group is subject to banking covenants in regards to its debt facility and
these include a prescribed methodology for interest cover and market value
covenants that are measured at a Group level.
27. Related party transactions
Directors
The Directors (all Non-Executive Directors) of the Company and its
subsidiaries are considered to be the key management personnel of the Group.
Directors' remuneration (including social security costs) for the period
totalled £175,000 (31 March 2021: £150,000) and at 31 March 2022, a balance
of £nil (31 March 2021: £nil) was outstanding. During the year the Directors
who served during the year received £1.5 million in dividend payments (31
March 2021: £0.7 million).
Greenstone Property Holdings Limited ("Greenstone") now trading as Tilstone
Oxford Limited
On 16th November 2020, the Group acquired Greenstone a property company
previously controlled by a member of the Group's key management personnel for
£41.2 million. In March 2021 a further £0.4 million was settled in cash upon
agreement of Greenstone's completion balance sheet and in January 2022 a final
payment was made for £0.3 million for the early letting of a unit and as
provided in the completion balance sheet.
Investment Advisor
The Company is party to an Investment Management Agreement with the Investment
Manager and the Investment Advisor, pursuant to which the Company has
appointed the Investment Advisor to provide investment advisory services
relating to the respective assets on a day-to-day basis in accordance with
their respective investment objectives and policies, subject to the overall
supervision and direction by the Investment Manager and the Board of
Directors.
For its services to the Company, the Investment Advisor receives an annual fee
at the rate of 1.1% of the NAV of the Company up to £500 million and at a
lower rate of 0.9% thereafter.
During the year, the Group incurred £6,484,000 (31 March 2021: £4,393,000)
in respect of investment management fees. As at 31 March 2022, £1,715,000 (31
March 2021: £1,319,000) was outstanding.
28. Ultimate controlling party
It is the view of the Directors that there is no ultimate controlling party.
29. Notes to the statement of cash flows
Reconciliation of changes in liabilities to cash flows generated from
financing activities
Interest-bearing loans and borrowings Head lease liability Total
£'000 £'000 £'000
Balance as at 1 April 2021 219,099 14,897 233,996
Changes from financing cash flows:
Bank loans drawn down 49,000 - 49,000
Bank loans repaid - - -
Loan arrangement fees paid in the year (781) - (781)
Head lease payments - (1,057) (1,058)
Total changes from financing cash flows 48,219 (1,057) 47,161
Amortisation charge for the year 898 - 898
Head lease interest - 1,030 1,030
Additions - - -
Disposals - - -
Accrued head lease expense - 26 27
Balance as at 31 March 2022 268,216 14,896 283,112
Interest-bearing loans and borrowings Head lease liability Total
£'000 £'000 £'000
Balance as at 1 April 2020 183,190 8,807 191,997
Changes from financing cash flows:
Bank loans drawn down 73,300 - 73,300
Bank loans repaid (37,800) - (37,800)
Loan arrangement fees paid in the year (363) - (363)
Head lease payments - (748) (748)
Total changes from financing cash flows 35,137 (748) 34,389
Amortisation charge for the year 772 - 772
Head lease interest - 1,016 1,016
Additions - 6,037 6,037
Disposals - (242) (242)
Accrued head lease expense - 27 27
Balance as at 31 March 2021 219,099 14,897 233,996
30. Post balance sheet event
A third interim dividend in respect of the year ended 31 March 2022 of 1.55
pence per share as paid to shareholders on 1 April 2022.
A fourth interim dividend in respect of the year ended 31 March 2022 of 1.75
pence per share will be payable on to shareholders on the register on 06June
2022. The ex-dividend date will be 1 June 2022.
In April 2022, the Group exchanged contracts to acquire Bradwell Abbey
Industrial Estate, Milton Keynes, for £62.0 million excluding acquisition
costs. During this period, the Group has also completed on the disposal of
Pentagon Retail Park, Ballymena for £1.8 million.
In May 2022, the Group extended the RCF by £25.0 million, the tenure and
applicable interest rate are unchanged from the existing facility.
31. Capital Commitment
In March 2022, the Group exchanged contracts to acquire, via a forward funding
agreement, a 170,000 sq ft multi-let industrial development in Thame,
Oxfordshire. The developers will deliver the scheme under a fixed-price
turn-key contract and the Group's total commitment is £35.0 million.
UNAUDITED SUPPLEMENTARY NOTES NOT PART OF THE CONSOLIDATED FINANCIAL
INFORMATION
For the year ended 31 March 2022
The Group is a member of the European Public Real Estate Association ("EPRA").
EPRA has developed and defined performance measures to give transparency,
comparability and relevance of financial reporting across entities which may
use different accounting standards.
The Group presents adjusted earnings per share ("EPS"), dividends per share,
total accounting return, total cost ratio, LTV ratio and EPRA Best Practices
Recommendations, calculated in accordance with EPRA guidance, as Alternative
Performance Measures ("APMs") to assist stakeholders in assessing performance
alongside the Group's statutory results reported under IFRS. APMs are among
the key performance indicators used by the Board to assess the Group's
performance and are used by research analysts covering the Group.
EPRA Best Practices Recommendations have been disclosed to facilitate
comparison with the Group's peers through consistent reporting of key real
estate specific performance measures. Certain other APMs may not be directly
comparable with other companies' adjusted measures and are not intended to be
a substitute for, or superior to, any IFRS measures of performance.
Table 1: EPRA performance measures summary
Notes 2022 2021
EPRA EPS (pence) Table 2 6.4 5.3
EPRA cost ratio (including direct vacancy cost) Table 6 27.1% 29.5%
EPRA cost ratio (excluding direct vacancy cost) Table 6 24.3% 26.6%
EPRA NDV per share (pence) Table 3 173.9 135.1
EPRA NRV per share (pence) Table 3 190.0 147.8
EPRA NTA per share (pence) Table 3 173.8 135.1
EPRA NIY Table 4 4.0% 4.7%
EPRA 'topped-up' net initial yield Table 4 4.4% 5.2%
EPRA vacancy rate Table 5 6.3% 4.4%
Table 2: EPRA income statement
Year ended 31 March 2022 Year ended 31 March 2021
Note £'000 £'000
Total property income 3 51,396 38,828
Less: service charge income (2,682) (3,070)
Less: dilapidation income (3,187) (603)
Less: insurance recharged (1,507) (930)
Rental income 44,020 34,225
Property operating expenses 4 (4,789) (4,247)
Service charge expenses 4 (3,011) (3,435)
Add back: service charge income 2,682 3,070
Add back: dilapidation income 3,187 603
Add back: insurance recharged 1,507 930
Gross profit 43,596 31,146
Administration expenses 4 (8,244) (6,324)
Adjusted operating profit before interest and tax 35,352 24,822
Finance income 7 321 26
Finance expenses 8 (8,154) (6,257)
Less change in fair value of interest rate derivatives (321) 6
Adjusted profit before tax 27,198 18,597
Tax on adjusted profit - -
Adjusted earnings 27,198 18,597
Weighted average number of shares in issue (thousands) 424,862 349,648
Adjusted EPS (pence) 6.4 5.3
Year ended 31 March 2022 Year ended 31 March 2021
£'000 £'000
Adjusted earnings 27,198 18,597
EPRA earnings 27,198 18,597
Weighted average number of shares in issue (thousands) 424,862 349,648
EPRA EPS (pence) 6.4 5.3
Adjusted earnings represents earnings from operational activities. It is a key
measure of the Group's underlying operational results and an indication of the
extent to which current payments are supported by earnings, which ultimately
underpins our dividend payments.
Table 3: EPRA balance sheet and net asset value performance measures
In line with the European Public Real Estate Association ("EPRA") published
Best Practice Recommendations ("BPR") for financial disclosures by public real
estate companies. The Group presents three measures of net asset value: EPRA
net disposal value ("NDV"), EPRA net reinstatement value ("NRV") and EPRA net
tangible assets ("NTA"). EPRA NTA is considered to be the most relevant
measure for Warehouse REIT's operating activities.
EPRA NDV EPRA NRV EPRA NTA
As at 31 March 2022 £'000 £'000 £'000
Total properties(1) 1,011,985 1,011,985 1,011,985
Net borrowings(2) (254,294) (254,294) (254,294)
Other net liabilities (18,737) (18,737) (18,737)
IFRS NAV 738,954 738,954 738,954
Exclude: fair value of interest rate derivatives - (337) (337)
Include: real estate transfer tax(3) - 68,815 -
NAV used in per share calculations 738,954 807,432 738,617
Number of shares in issue (thousands) 424,862 424,862 424,862
NAV per share (pence) 173.9 190.0 173.8
EPRA NDV EPRA NRV EPRA NTA
As at 31 March 2021 £'000 £'000 £'000
Total properties(1) 792,800 792,800 792,800
Net borrowings(2) (194,815) (194,815) (194,815)
Other net liabilities (23,894) (23,894) (23,894)
IFRS NAV 574,091 574,091 574,091
Exclude: fair value of interest rate derivatives - (16) (16)
Include: real estate transfer tax(3) - 53,910 -
NAV used in per share calculations 574,091 627,985 574,075
Number of shares in issue (thousands) 424,862 424,862 424,862
NAV per share (pence) 135.1 147.8 135.1
1. Professional valuation of investment
property.
2. Comprising interest-bearing loans and borrowings (excluding unamortised
loan arrangement fees) of £271,000,000 (31 March 2021: £222,000,000) net of
cash of £16,706,000 (31 March 2021: £27,185,000).
3. EPRA NTA and EPRA NDV reflect IFRS values which are net of real estate
transfer tax. Real estate transfer tax is added back when calculating EPRA
NRV.
EPRA NDV details the full extent of liabilities and resulting shareholder
value if Company assets are sold and/or if liabilities are not held until
maturity. Deferred tax and financial instruments are calculated as to the full
extent of their liability, including tax exposure not reflected in the
statement of financial position, net of any resulting tax.
EPRA NTA assumes entities buy and sell assets, thereby crystallising certain
levels of deferred tax liability.
EPRA NRV highlights the value of net assets on a long-term basis and reflects
what would be needed to recreate the Company through the investment markets
based on its current capital and financing structure. Assets and liabilities
that are not expected to crystallise in normal circumstances, such as the fair
value movements on financial derivatives and deferred taxes on property
valuation surpluses, are excluded. Costs such as real estate transfer taxes
are included.
Table 4: EPRA net initial yield
31 March 2022 31 March 2021
£'000 £'000
Total properties per external valuer's report 1,011,985 792,800
Less development property and land (98,950) (40,870)
Net valuation of completed investment property 913,035 751,930
Add estimated purchasers' costs(4) 62,086 51,131
Gross valuation of completed property including estimated purchasers' costs 975,121 803,061
(A)
Gross passing rents(5) (annualised) 40,605 38,574
Less irrecoverable property costs(5) (1,478) (1,121)
Net annualised rents (B) 39,127 37,453
Add notional rent on expiry of rent-free periods or other lease incentives(6) 3,376 4,454
'Topped-up' net annualised rents (C) 42,503 41,907
EPRA NIY (B/A) 4.0% 4.7%
EPRA 'topped-up' net initial yield (C/A) 4.4% 5.2%
(4)Estimated purchasers' costs estimated at 6.8%.
(5)Gross passing rents and irrecoverable property costs assessed as at the
balance sheet date for completed investment properties excluding development
property and land.
(6)Adjustment for unexpired lease incentives such as rent-free periods,
discounted rent period and step rents. The adjustment includes the annualised
cash rent that will apply at the expiry of the lease incentive. Rent-frees
expire over a weighted average period of three months.
EPRA NIY represents annualised rental income based on the cash rents 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. It is a comparable measure for portfolio valuations
designed to make it easier for investors to judge themselves how the valuation
of portfolio X compares with portfolio Y.
EPRA 'topped-up' NIY incorporates an adjustment to the EPRA NIY in respect of
the expiration of rent-free periods (or other unexpired lease incentives such
as discounted rent periods and step rents).
NIY as stated in the Investment Advisor's report calculates net initial yield
on topped-up annualised rents but does not deduct non-recoverable property
costs.
Table 5: EPRA vacancy rate
31 March 2022 31 March 2021
£'000 £'000
Annualised ERV of vacant premises (D) 3,241 2,054
Annualised ERV for the investment portfolio (E) 51,479 47,151
EPRA vacancy rate (D/E) 6.3% 4.4%
EPRA vacancy rate represents ERV of vacant space divided by ERV of the
completed investment portfolio, excluding development property and land. It is
a pure measure of investment property space that is vacant, based on ERV.
Table 6: Total cost ratio/EPRA cost ratio
Year ended 31 March 2022 Year ended 31 March 2021
£'000 £'000
Property operating expenses 4,789 4,247
Service charge expenses 3,011 3,435
Add back: service charge income (2,682) (3,070)
Add back: insurance recharged (1,507) (930)
Net property operating expenses 3,611 3,682
Administration expenses 8,244 6,324
Less ground rents(7) (181) (134)
Total cost including direct vacancy cost (F) 11,674 9,872
Direct vacancy cost (1,224) (980)
Total cost excluding direct vacancy cost (G) 10,450 8,892
Rental income 44,020 34,225
Less ground rents paid (1,058) (748)
Gross rental income less ground rents (H) 42,962 33,477
Less direct vacancy cost (1,224) (980)
Net rental income 41,738 32,497
Total cost ratio including direct vacancy cost (F/H) 27.1% 29.5%
Total cost ratio excluding direct vacancy cost (G/H) 24.3% 26.6%
Year ended 31 March 2022 Year ended 31 March 2021
£'000 £'000
Total cost including direct vacancy cost (F) 11,674 9,872
EPRA total cost (I) 11,674 9,872
Direct vacancy cost (1,224) (980)
EPRA total cost excluding direct vacancy cost (J) 10,450 8,892
EPRA cost ratio including direct vacancy cost (I/H) 27.1% 29.5%
EPRA cost ratio excluding direct vacancy cost (J/H) 24.3% 26.6%
EPRA NDV EPRA NRV EPRA NTA
As at 31 March 2021 £'000 £'000 £'000
Total properties(1) 792,800 792,800 792,800
Net borrowings(2) (194,815) (194,815) (194,815)
Other net liabilities (23,894) (23,894) (23,894)
IFRS NAV 574,091 574,091 574,091
Exclude: fair value of interest rate derivatives - (16) (16)
Include: real estate transfer tax(3) - 53,910 -
NAV used in per share calculations 574,091 627,985 574,075
Number of shares in issue (thousands) 424,862 424,862 424,862
NAV per share (pence) 135.1 147.8 135.1
1. Professional valuation of investment
property.
2. Comprising interest-bearing loans and borrowings (excluding unamortised
loan arrangement fees) of £271,000,000 (31 March 2021: £222,000,000) net of
cash of £16,706,000 (31 March 2021: £27,185,000).
3. EPRA NTA and EPRA NDV reflect IFRS values which are net of real estate
transfer tax. Real estate transfer tax is added back when calculating EPRA
NRV.
EPRA NDV details the full extent of liabilities and resulting shareholder
value if Company assets are sold and/or if liabilities are not held until
maturity. Deferred tax and financial instruments are calculated as to the full
extent of their liability, including tax exposure not reflected in the
statement of financial position, net of any resulting tax.
EPRA NTA assumes entities buy and sell assets, thereby crystallising certain
levels of deferred tax liability.
EPRA NRV highlights the value of net assets on a long-term basis and reflects
what would be needed to recreate the Company through the investment markets
based on its current capital and financing structure. Assets and liabilities
that are not expected to crystallise in normal circumstances, such as the fair
value movements on financial derivatives and deferred taxes on property
valuation surpluses, are excluded. Costs such as real estate transfer taxes
are included.
Table 4: EPRA net initial yield
31 March 2022
31 March 2021
£'000
£'000
Total properties per external valuer's report
1,011,985
792,800
Less development property and land
(98,950)
(40,870)
Net valuation of completed investment property
913,035
751,930
Add estimated purchasers' costs(4)
62,086
51,131
Gross valuation of completed property including estimated purchasers' costs
(A)
975,121
803,061
Gross passing rents(5) (annualised)
40,605
38,574
Less irrecoverable property costs(5)
(1,478)
(1,121)
Net annualised rents (B)
39,127
37,453
Add notional rent on expiry of rent-free periods or other lease incentives(6)
3,376
4,454
'Topped-up' net annualised rents (C)
42,503
41,907
EPRA NIY (B/A)
4.0%
4.7%
EPRA 'topped-up' net initial yield (C/A)
4.4%
5.2%
(4)Estimated purchasers' costs estimated at 6.8%.
(5)Gross passing rents and irrecoverable property costs assessed as at the
balance sheet date for completed investment properties excluding development
property and land.
(6)Adjustment for unexpired lease incentives such as rent-free periods,
discounted rent period and step rents. The adjustment includes the annualised
cash rent that will apply at the expiry of the lease incentive. Rent-frees
expire over a weighted average period of three months.
EPRA NIY represents annualised rental income based on the cash rents 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. It is a comparable measure for portfolio valuations
designed to make it easier for investors to judge themselves how the valuation
of portfolio X compares with portfolio Y.
EPRA 'topped-up' NIY incorporates an adjustment to the EPRA NIY in respect of
the expiration of rent-free periods (or other unexpired lease incentives such
as discounted rent periods and step rents).
NIY as stated in the Investment Advisor's report calculates net initial yield
on topped-up annualised rents but does not deduct non-recoverable property
costs.
Table 5: EPRA vacancy rate
31 March 2022
31 March 2021
£'000
£'000
Annualised ERV of vacant premises (D)
3,241
2,054
Annualised ERV for the investment portfolio (E)
51,479
47,151
EPRA vacancy rate (D/E)
6.3%
4.4%
EPRA vacancy rate represents ERV of vacant space divided by ERV of the
completed investment portfolio, excluding development property and land. It is
a pure measure of investment property space that is vacant, based on ERV.
Table 6: Total cost ratio/EPRA cost ratio
Year ended 31 March 2022
Year ended 31 March 2021
£'000
£'000
Property operating expenses
4,789
4,247
Service charge expenses
3,011
3,435
Add back: service charge income
(2,682)
(3,070)
Add back: insurance recharged
(1,507)
(930)
Net property operating expenses
3,611
3,682
Administration expenses
8,244
6,324
Less ground rents(7)
(181)
(134)
Total cost including direct vacancy cost (F)
11,674
9,872
Direct vacancy cost
(1,224)
(980)
Total cost excluding direct vacancy cost (G)
10,450
8,892
Rental income
44,020
34,225
Less ground rents paid
(1,058)
(748)
Gross rental income less ground rents (H)
42,962
33,477
Less direct vacancy cost
(1,224)
(980)
Net rental income
41,738
32,497
Total cost ratio including direct vacancy cost (F/H)
27.1%
29.5%
Total cost ratio excluding direct vacancy cost (G/H)
24.3%
26.6%
Year ended 31 March 2022
Year ended 31 March 2021
£'000
£'000
Total cost including direct vacancy cost (F)
11,674
9,872
EPRA total cost (I)
11,674
9,872
Direct vacancy cost
(1,224)
(980)
EPRA total cost excluding direct vacancy cost (J)
10,450
8,892
EPRA cost ratio including direct vacancy cost (I/H)
27.1%
29.5%
EPRA cost ratio excluding direct vacancy cost (J/H)
24.3%
26.6%
(7)Ground rent expenses included within administration expenses such as
depreciation of head lease assets.
EPRA cost ratios represent administrative and operating costs (including and
excluding costs of direct vacancy) divided by gross rental income less ground
rents. They are a key measure to enable meaningful measurement of the changes
in the Group's operating costs.
It is the Group's policy not to capitalise overheads or operating expenses and
no such costs were capitalised in either the year ended 31 March 2022 or the
year ended 31 March 2021.
Table 7: Lease data
Year 1 Year 2 Years Year 10+ Head rents payable Total
3 - 10
As at 31 March 2022 £'000 £'000 £'000 £'000 £'000 £'000
Passing rent of leases expiring in: 2,725 5,380 28,818 4,873 40,605
(1,191)
ERV of leases expiring in: 10,529 6,018 30,600 5,523 (1,191) 51,479
Passing rent subject to review in: 5,960 5,176 25,828 4,832 40,605
(1,191)
ERV subject to review in: 10,529 6,018 30,600 5,523 (1,191) 51,479
WAULT to expiry is 5.6 years and to break is 4.5 years.
Year 1 Year 2 Years Year 10+ Head rents payable Total
3 - 10
As at 31 March 2021 £'000 £'000 £'000 £'000 £'000 £'000
Passing rent of leases expiring in: 5,327 2,450 26,064 5,859 38,574
(1,126)
ERV of leases expiring in: 7,754 2,597 31,115 6,876 (1,191) 47,151
Passing rent subject to review in: 7,036 4,664 23,496 4,504 38,574
(1,126)
ERV subject to review in: 9,467 5,066 28,507 5,302 (1,191) 47,151
WAULT to expiry is 5.8 years and to break is 4.7 years.
Table 8: EPRA capital expenditure
Year ended 31 March 2022 Year ended 31 March 2021
£'000 £'000
Acquisitions(8) 43,391 246,565
Development spend(9) 1,103 625
Completed investment properties:(10)
No incremental lettable space - like-for-like portfolio 6,467 1,493
No incremental lettable space - other - 82
Occupier incentives - 363
Total capital expenditure 50,961 249,128
Conversion from accruals to cash basis 2,886 (21,916)
Total capital expenditure on a cash basis 53,847 227,212
(8) Acquisitions include £30,027,000 completed investment property and
£13,364,000 development property and land (2021: £229,272,000 and
£17,293,000 respectively).
(9) Expenditure on development property and land.
(10) Expenditure on completed investment properties.
Table 9: EPRA like-for-like rental income
Year ended 31 March 2022 Year ended 31 March 2021
Note £'000 £'000 % Change
EPRA like-for-like rental income(11) 28,891 27,817 3.9%
Other(12) (38) -
Adjusted like-for-like rental income 28,853 27,817 3.7%
Development lettings 483 591
Properties acquired 14,684 5,334
Properties sold - 483
Rental income 44,020 34,225
Service charge income 2,682 3,070
Dilapidation income 3,187 603
Insurance recharged 1,507 930
Total property income 2 51,396 38,828
(11) Like-for-like portfolio valuation as at 31 March 2022: £586.2 million
(31 March 2021: £493.5 million)
(12) Includes rent surrender premiums, back rent and other items
Table 10: Loan-to-value ("LTV") ratio
Gross debt less cash, short-term deposits and liquid investments, divided by
the aggregate value of properties and investments.
Year ended Year ended
31 March 31 March
2022 2021
Note £000 £000
Interest-bearing loans and borrowings 16 271,000 222,000
Cash 14 (16,706) (27,185)
Net debt (A) 254,294 194,815
Total portfolio valuation per valuer's report (B) 13 1,011,985 792,800
LTV ratio (A/B) 25.1% 24.6%
Table 11: Total accounting return
The movement in EPRA NTA over a period plus dividends paid in the period,
expressed as a percentage of the EPRA NTA at the start of the period.
Year ended Year ended
31 March 31 March
2022 2021
Pence per share Pence per share
Note
Opening EPRA NTA (A) 135.1 109.5
Movement (B) 38.7 25.6
Closing EPRA NTA 22 173.8 135.1
Dividends per share (C) 11 6.2 4.7
Total Accounting Return (B+C) / A 33.2% 27.7%
Table 12: Interest cover
Adjusted operating profit before gains on investment properties, interest and
tax divided by the underlying net interest expense
Year ended Year ended
31 March 31 March
2022 2021
Note £'000 £'000
Adjusted operating profit before gains on investment properties (A) 35,352 24,822
Loan interest (B) 8 5,816 4,512
Interest cover (A/B) 607.8% 550.1%
Table 13: Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT as a percentage
of NAV as prescribed by the Association of Investment Companies
Year ended Year ended
31 March 31 March
2022 2021
Note £'000 £'000
Administration expenses 4 8,244 6,324
Less head lease asset depreciation (181) (134)
Annualised ongoing charges (A) 8,063 6,190
Opening NAV as at 1 April 574,091 263,118
NAV as at 30 September 647,366 450,699
Closing NAV as at 31 March 738,954 574,091
Average undiluted NAV during the period (B) 653,470 429,303
Ongoing charges ratio (A/B) 1.2% 1.5%
GLOSSARY
Adjusted earnings per share ("Adjusted EPS")
EPRA EPS adjusted to exclude one-off costs, divided by the weighted average
number of shares in issue during the year which ultimately underpins our
dividend payments.
Admission
The admission of Warehouse REIT plc onto the AIM of the London Stock
Exchange on 20 September 2017
AGM
Annual General Meeting
AIC
The Association of Investment Companies
AIFM
Alternative Investment Fund Manager
AIFMD
The Alternative Investment Fund Managers Regulations 2013 (as amended by The
Alternative
Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2019) and the
Investment Funds
Sourcebook forming part of the FCA Handbook
AIM
A market operated by the London Stock Exchange
APM
An Alternative Performance Measure is a numerical measure of the Company's
current, historical or future financial performance, financial position or
cash flows, other than a financial measure defined or specified in the
applicable financial framework. In selecting these APM's, the Directors
considered the key objectives and expectations of typical investors
Company
Warehouse REIT plc
Contracted rent
Gross annual rental income currently receivable on a property plus rent
contracted from expiry of rent-free periods and uplifts agreed at the balance
sheet date less any ground rents payable under head leases
Development property and land
Whole or a material part of an estate identified as having potential for
development. Such assets are classified as development property and land until
development is completed and they have the potential to be fully income
generating
Effective occupancy
Total open market rental value of the units leased divided by total open
market rental value excluding assets under development, units undergoing
refurbishment and units under offer to let
EPRA
The European Public Real Estate Association, the industry body for European
REITs
EPRA cost ratio
The sum of property expenses and administration expenses as a percentage of
gross rental income less ground rents calculated both including and excluding
direct vacancy cost
EPRA earnings
IFRS profit after tax excluding movements relating to changes in fair value of
investment properties, gains/losses on property disposals, changes in fair
value of financial instruments and the related tax effects
EPRA earnings per share ("EPRA EPS")
A measure of EPS on EPRA earnings designed to present underlying earnings from
core operating activities based on the weighted average number of shares in
issue during the year
EPRA guidelines
The EPRA Best Practices Recommendations Guidelines October 2019
EPRA like-for-like rental income growth
The growth in rental income on properties owned throughout the current and
previous year under review. This growth rate includes revenue recognition and
lease accounting adjustments but excludes development property and land in
either year and properties acquired or disposed of in either year
EPRA NDV/ EPRA NRV/ EPRA NTA per share
The EPRA net asset value measures figures divided by the number of shares
outstanding at the balance sheet date
EPRA net disposal value ("EPRA NDV")
The net asset value measure detailing the full extent of liabilities and
resulting shareholder value if company assets are sold and/or if liabilities
are not held until maturity. Deferred tax and financial instruments are
calculated as to the full extent of their liability, including tax exposure
not reflected in the statement of financial position, net of any resulting tax
EPRA net initial yield ("EPRA NIY")
The annualised passing rent generated by the portfolio, less estimated
non-recoverable property operating expenses, expressed as a percentage of the
portfolio valuation (adding notional purchasers' costs), excluding development
property and land
EPRA net reinstatement value ("EPRA NRV")
The net asset value measure to highlight the value of net assets on a
long-term basis and reflect what would be needed to recreate the Company
through the investment markets based on its current capital and financing
structure. Assets and liabilities that are not expected to crystallise in
normal circumstances, such as the fair value movements on financial
derivatives and deferred taxes on property valuation surpluses, are excluded.
Costs such as real estate transfer taxes are included
EPRA net tangible assets ("EPRA NTA")
The net asset value measure assuming entities buy and sell assets, thereby
crystallising certain levels of deferred tax liability
EPRA 'topped-up' net initial yield
The annualised passing rent generated by the portfolio, topped up for
contracted uplifts, less estimated non-recoverable property operating
expenses, expressed as a percentage of the portfolio valuation (adding
notional purchasers' costs), excluding development property and land
EPRA vacancy rate
Total open market rental value of vacant units divided by total open market
rental value of the portfolio excluding development property and land
EPS
Earnings per share
Equivalent yield
The weighted average rental income return expressed as a percentage of the
investment property valuation, plus purchasers' costs, excluding development
property and land
ERV
The estimated annual open market rental value of lettable space as assessed by
the external valuer
FCA
Financial Conduct Authority
GAV
Gross asset value
Group
Warehouse REIT plc and its subsidiaries
IASB
International Accounting Standards Board
IFRS
International Financial Reporting Standards
IFRS earnings per share ("EPS")
IFRS earnings after tax for the year divided by the weighted average number of
shares in issue during the year
IFRS NAV per share
IFRS net asset value divided by the number of shares outstanding at the
balance sheet date
Interest cover
Adjusted operating profit before gains on investment properties, interest and
tax divided by the underlying net interest expense
Investment portfolio
Completed buildings and excluding development property and land
IPO
Initial public offering
LIBOR
The basic rate of interest used in lending between banks on the London
interbank market and also used as a reference for setting the interest rate on
other loans
Like-for-like rental income growth
The increase in contracted rent of properties owned throughout the period
under review, expressed as a percentage of the contracted rent at the start of
the period, excluding development property and land and units undergoing
refurbishment
Like-for-like valuation increase
The increase in the valuation of properties owned throughout the period under
review, expressed as a percentage of the valuation at the start of the period,
net of capital expenditure
Loan to value ratio ("LTV")
Gross debt less cash, short-term deposits and liquid investments, divided by
the aggregate value of properties and investments
Main Market
The premium segment of the London Stock Exchange's Main Market
NAV
Net asset value
Net initial yield ("NIY")
Contracted rent at the balance sheet date, expressed as a percentage of the
investment property valuation, plus purchasers' costs, excluding development
property and land
Net rental income
Gross annual rental income receivable after deduction of ground rents and
other net property outgoings including void costs and net service charge
expenses
Net reversionary yield ("NRY")
The anticipated yield to which the net initial yield will rise (or fall) once
the rent reaches the ERV
Occupancy
Total open market rental value of the units leased divided by total open
market rental value excluding development property and land, equivalent to one
minus the EPRA vacancy rate
Ongoing charges ratio
Ongoing charges ratio represents the costs of running the REIT as a percentage
of NAV as prescribed by the Association of Investment Companies
Passing rent
Gross annual rental income currently receivable on a property as at the
balance sheet date less any ground rents payable under head leases
Property income distribution ("PID")
Profits distributed to shareholders which are subject to tax in the hands of
the shareholders as property income. PIDs are usually paid net of withholding
tax (except for certain types of tax-exempt shareholders). REITs also pay out
normal dividends called non-PIDs
RCF
Revolving credit facility
Real Estate Investment Trust ("REIT")
A listed property company which qualifies for, and has elected into, a tax
regime which is exempt from corporation tax on profits from property rental
income and UK capital gains on the sale of investment properties
RPI
Retail price index
SONIA
Sterling Overnight Index Average
Total accounting return
The movement in EPRA NTA over a period plus dividends paid in the period,
expressed as a percentage of the EPRA NTA at the start of the period
Total cost ratio
EPRA cost ratio excluding one-off costs calculated both including and
excluding vacant property costs
Weighted average unexpired lease term ("WAULT")
Average unexpired lease term to first break or expiry weighted by contracted
rent across the portfolio, excluding development property and land
The Annual Report can be accessed via the Company's website at
www.warehousereit.co.uk (http://www.warehousereit.co.uk)
Neither the contents of Warehouse REIT plc's website nor the contents of any
website accessible from hyperlinks on the website (or any website) is
incorporated into, or forms part of this announcement.
ENDS
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accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
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