URBAN LOGISTICS REIT PLCAnnual Report and Accounts 2023
DRIVING
PERFORMANCE
Urban Logistics REIT plc
ANNUAL REPORT AND ACCOUNTS 2023
CONTENTS OUR PURPOSE
TO ACQUIRE AND MANAGE
HIGH QUALITY, SINGLE LET,
LOGISTICS ASSETS TO
GENERATE BOTH INCOME
AND CAPITAL GROWTH
FOR OUR SHAREHOLDERS.
OUR VISION
TO BE THE LEADING
PROVIDER OF UK URBAN
LOGISTICS WAREHOUSING.
STRATEGIC REPORTpages 1 to 55
At a Glance 1
Our Year 2
Investment Case 4
Chairman’s Statement 5
Q&A with the Investment Manager 7
Strategic Locations 10
Business Model 11
Investment Manager’s Report 12
Chief Executive Offi cer Review 12
Market Report 14
Portfolio Report 16
Financial Report 26
Sustainability Report 31
TCFD Report 39
s172 Statement and Stakeholder Engagement 45
Key Performance Indicators 49
Principal Risks and Uncertainties 50
Viability Statement 55
GOVERNANCEpages 56 to 86
Board of Directors 56
Corporate Governance Statement 58
Nomination Committee Report 68
Audit Committee Report 71
Environmental, Social and Governance (“ESG”)
Committee Report 74
Management Engagement Committee Report 76
Directors’ Remuneration Report 78
Directors’ Report 82
Directors’ Responsibility Statement 86
FINANCIAL STATEMENTSpages 87 to 121
Independent Auditor’s Report 87
Consolidated Statement of
Comprehensive Income 93
Consolidated Statement of Financial Position 94
Company Statement of Financial Position 95
Consolidated Statement of Cash Flows 96
Company Statement of Cash Flows 97
Consolidated Statement of Changes in Equity 98
Company Statement of Changes in Equity 99
Notes to the Financial Statements 100
ADDITIONAL INFORMATIONpages 122 to 140
Supplementary Information 122
Investment Policy 136
Glossary of Terms 137
Company Information 139
Financial Information 140
AT A GLANCE
FTSE 250 UK REIT quoted on the premium segment of
the Main Market of the London Stock Exchange
Our investment thesis
Our underlying belief, at IPO and today, is that
high-quality, single-let logistics properties represent
the most interesting sub-sector of the industrial and
logisticsmarket.
Our commitment to shareholders is to acquire
well-located assets with the correct specification for
occupiers, typically at below replacement cost. Our focus
on tenant covenants, in sectors which have been less
volatile historically, has served us well.
Income and Total Return strategy through active
assetmanagement
Invests in UK mid-box logistics buildings with a sweet
spot in the 20,000 – 200,000 sq ft range
The only London-listed REIT with such a focus
Assets located in key urban “last touch”
and “last mile” locations
A management team with specific logistics experience
within the broader real estate market
A pure play on urban logistics
OUR ESG TARGETS
02 ACHIEVE NET ZERO ON OUR SCOPE 1 AND 2 EMISSIONS
03 ENGAGE WITH OUR TENANTS TO PLAN SCOPE 3 EMISSIONS TARGETS
01 REDUCE THE ENVIRONMENTAL IMPACT OF OUR BUILDINGS
06 PROMOTE TRANSPARENCY INOUR ESG DISCLOSURES
05 MAKE MORE SPACE FOR NATURE ON OUR SITES
04 INCREASE ON-SITE RENEWABLE ENERGY
See more on page 35 to 36
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
1
A record year for leasing activity, with 42 new leases, re-gears, or rent reviews
signed, generating £6.1 million in new rental income.
OUR YEAR
OPERATIONAL HIGHLIGHTS:
PORTFOLIO VALUATION
£1,107m
+9.0% 31 March 2022: £1,015m
CONTRACTED RENT
£59.5m
+26% 31 March 2022: £47.3m
LIKE-FOR-LIKE VALUATION MOVEMENT
(9.8)%
31 March 2022: 25.4%
EPC% OF PORTFOLIO RATED A–B
52%
31 March 2022: 27%
LEASE EVENTS SIGNED
42
31 March 2022: 25
GROSS TO NET RENTAL INCOME RATIO
96.3%
31 March 2022: 97.2%
EPRA VACANCY RATE
1
7.4%
31 March 2022: 6.9%
ADDITIONAL RENTAL INCOME
2
:
£6.1m
31 March 2022: £6.4m
LFL RENTAL INCREASES
2
:
34%
31 March 2022: 16%
1. 1.1% of this 7.4% let post period end.
2. In respect of leasing activity crystallised in the year to 31 March 2023. Further information is provided in the Investment Manager's Report.
3. Further details of Alternative performance measures are given in the Supplementary Information section on pages 132 to 135.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
2
OUR YEAR CONTINUED
FINANCIAL HIGHLIGHTS:
NET RENTAL INCOME
£53.0m
+45.0% 31 March 2022: £36.5m
ADJUSTED EPS
1
6.93p
+3.3% 31 March 2022: 6.71p
IFRS NET ASSETS
£769.8m
-13.8% 31 March 2022: £892.6m
TOTAL ACCOUNTING RETURN
2
(9.9)%
31 March 2022: 28.9%
IFRS LOSS BEFORE TAX
£(82.7)m
31 March 2022: profit of £171.8m
DIVIDEND PER SHARE
7.60p
31 March 2022: 7.60p
EPRA NTA PER SHARE
2
162.44p
-14.0% 31 March 2022: 188.78p
TOTAL COST RATIO
2
21.2%
31 March 2022: 21.8%
1. A full reconciliation between IFRS profit and adjusted earnings can
be found in note 13 of the Financial Statements.
2. A reconciliation of other financial information can be found in the
supplementary information on pages 132 to 135.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
3
Generating an industry-leading return in this market
requires active asset management.
INVESTMENT CASE
EXPERIENCED
MANAGEMENT TEAM
Urban Logistics benefits from a
high-quality investment management
team, complemented by an
experienced and knowledgeable Board.
The experience of our management
team allows us to reliably execute our
strategy.
IDENTIFYING UNIQUE
VALUE OPPORTUNITIES
The Company’s specialist focus on
last mile, single-let logistics properties
exploits a unique value opportunity in
this real estate sector, underpinned by
companies building resilience into their
supply chains.
CONSERVATIVE
CAPITAL STRUCTURE
Underpinning these significant
advantages, the business benefits
from a conservative capital structure
appropriate to its asset base and the
economic climate, with a measured
approach to the use of debt.
We have completed £160 million
(excluding purchaser costs) of property
investments in the year at aweighted
average NIY of 5.2%.
£160M
PROPERTY INVESTMENTS IN THE YEAR
ACTIVE ASSET
MANAGEMENT
We are a value add proposition, buying
properties to which we can apply our
asset management expertise; improving
lease length and rental rates, as well
as the underlying fabric of buildings.
Thisallows us to add value to our
portfolio at the asset level at all stages
inthe property cycle, driving returns
forshareholders.
We have completed 42 lease events
in the year, including 21 new lettings.
Ourasset management activity has
generated an additional £6.1 million in
rental income, with LFL rental increases
of 34%.
£6.1M
IN ADDITIONAL RENTAL INCOME
Post period end the Investment Adviser
was retained by the Company on
improved terms until 2027.
2027
MANAGEMENT CONTRACT EXTENDED
We target a long-term net LTV position of
between 30-40%, but the Board has taken
a decision to keep our LTV at the low-end
of expectations. Our interest expense
at the year end is 85% fixed or hedged
to term, providing certainty against a
significant portion ofour debt cost.
29%
LTV
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
4
CHAIRMAN’S STATEMENT
Despite challenges, the Urban Logistics’
portfolio continued to perform well.
Nigel Rich CBE
Chairman
Overview
Challenges continue to confront the UK economy, particularly
infl ation with the consequences to interest rates, the
expectation of signifi cant wage increases, and a high level of
government debt which the government is combating with
tax increases.
Despite these challenges, Urban Logistics’ portfolio has
continued to perform well in the fi nancial year. We have
successfully completed 42 lease events during the year, have
seen minimal bad debts, and occupancy was 93% at year end.
We have maintained our LTV just below our target range and
are well-hedged against rising interest rates in the medium
term. Our EPRA NTA per share at the end of the year was
162.44 pence, down 14% compared to 2022, driven mainly
by yield shift from 5.2% to 6.2%. Together with our peers,
we trade at a signifi cant discount to NAV, but we believe
the industrial and logistics sector of the property market is
underrated, given the continuing demand for space and the
expectation for further rent increases.
Management
During the year, we initiated discussions with the managers
on the future of the management arrangements, which were
due to expire in April 2024. In May 2023, the shareholders
approved at a general meeting new arrangements which are
now being put into effect and will extend the management
team’s appointment until 2027, on more favourable terms for
the Company. The Pacifi c Group who helped to found the
Company in 2016 will no longer be involved in its affairs. We
are grateful for their part in growing the Company over the
last seven years. Two Pacifi c employees who were already
fully committed to the Company’s business have joined
the management team of the Investment Adviser, which
continues to be successfully led by Richard Moffi tt, with
Christopher Turner still responsible for the asset management.
The management team has been further strengthened by the
appointment of Justin Upton as Chief Investment Offi cer.
ESG
We have performed well against the ESG targets we set the
Company twelve months ago, and have achieved a number of
important milestones, including over half the portfolio holding
an EPC rating of A/B, up from just 27% on 31March2022.
Wealso report in line with the TCFD requirement for the
fi rst time, fulfi lling a commitment we made in our last
AnnualReport.
Financials
During the year, the remaining funds from the December
2021 fundraise were invested at a slower rate than originally
anticipated due to the economic outlook, however rental
income increased signifi cantly as a result of the acquisitions
and asset management activity, from £37.8 million to £55.3
million, an increase of 46%. Adjusted earnings
1
increased
from £23.6 million to £32.7 million, an increase of 39%, while
adjusted EPS rose marginally, due to the additional shares in
issue, from 6.7 pence to 6.9 pence.
The balance sheet remains strong despite the lower valuations
with LTV at 29.0%. The debt has an average maturity of 5.4 years,
with no refi nancing required until 2025. 85% of the interest costs
are hedged at an all in cost of 3.66%.
1. A full reconciliation between IFRS profi t and Adjusted earnings can be found in note 13 of the Financial Statements.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
5
CHAIRMAN’S STATEMENT CONTINUED
Dividends
A first interim dividend of 3.25 pence per share was paid in
December 2022 to shareholders. A second interim dividend
of 4.35 pence per share will be paid on 21 July 2023 to
shareholders on the register at the close of business on
30June 2023. Total dividends declared amount to 7.60 pence
per share, the same as the previous year. The dividends are not
covered by earnings in the year, mainly due to the slower pace
of property acquisitions.
Board
Post period end, a number of changes have been made
to the Board as a consequence of the new management
arrangements. Jonathan Gray and Mark Johnson resigned
following the general meeting in May. We are most grateful
to them for their respective contributions. Jonathan will
continue to be involved with the Company as Chairman of
the Investment Adviser. On 1 May 2023, after an extensive
search, Lynda Heywood joined the Board bringing with
her considerable finance experience. In addition, following
Jonathan Gray’s resignation, Heather Hancock has become the
Senior Independent Director. Heather remains Chairwoman of
the ESG Committee.
With these changes, and following the recent external
review of the Board’s performance, we will be giving further
consideration as to whether we have the appropriate mix of
skills on the Board, and at the same time consider succession
and diversification.
Outlook
The current stock market volatility and the related difficulties,
such as companies being unable to raise money through
follow on fundraises, means that it is unlikely that we will
be able to fund a pipeline of acquisitions in the immediate
future. We will therefore look to recycle assets where we have
maximised the income and replace them with properties
offering lease events, as well as capitalising on the significant
reversionary opportunities in the portfolio. These actions
of recycling and asset management allow us to add to
shareholder value in uncertain times. With a full year of
income from the properties purchased during the last year,
as well as the continuing asset management opportunities,
we would expect to maintain the same level of dividend in
2023/24.
Nigel Rich CBE
Chairman
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
6
Q&A WITH THE INVESTMENT MANAGER
A robust performance in a
challenging year.
Richard Moffi tt
Chief Executive Offi cer of the Investment Manager
How would you summarise
Urban Logistics’ performance
over the year under review?
As you say, it has been a diffi cult year for the commercial
property sector, with a marked decline in share prices for the
listed REITs. How has this affected Urban Logistics?
Investor sentiment around the broad
commercial property sector has indeed
been adversely affected by economic
conditions of which we are all too aware – in
particular, persistent elevated infl ation and
the Bank of England’s decision to increase
interest rates.
The resulting expectation of yield
erosion has caused share prices to
reduce signifi cantly. We believe that
Urban Logistics is different, but we
have been swept up in the general
negative sentiment across the listed real
estatesector.
Why do you think you are
different to the broader
REIT sector?
Because we have established a leading
position in a very important sub-sector of
the market: mid-box, single-let logistics
assets, to fi nancially secure tenants who
are supplying essential goods. Unlike
the challenges faced in some other
parts of the real estate market, our
sector continues to see demand for the
assets we own signifi cantly outstripping
supply which, when combined with our
asset management expertise, allows us
to improve rents, covenants and lease
lengths - all things which can help us
protect values and offset market driven
yield shift.
The portfolio has proved to be reasonably
robust, against a backdrop of challenging
market conditions. Contracted income
has risen by 26% to £59.5 million, and we
have reported a 3% increase in adjusted
EPS. In a diffi cult year for valuations, our
like-for-like portfolio decrease of 9.8%
compares favourably with the market, and
with the indices we track. Our balance
sheet remains strong, with weighted
average debt maturities increasing from
3.7years in March2022 to 5.4years at
the year end. We achieved 34% like-
for-like rental increases across 42 lease
events during the year, and we have an
increased WAULT of 8.2years. We have
also continued to be active acquirers of
high-quality “last touch” logistics assets,
having acquired £160 million (excluding
purchaser costs) of assets during the year
at a blended NIY of 5.2%.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
7
We target assets which offer near-term
opportunities for value enhancement
through rental increase, these
opportunities include re-lettings, lease
re-gears, rent reviews, and physical
enhancements to the properties
themselves, for example by improving
their ESG credentials. During this year,
we completed a further 21new lettings,
13 lease re-gears and eight rent reviews,
which in total generated £6.1 million of
additional rental income, all of which
translates into enhanced shareholder
returns.
It’s also important to note that our
acquisition strategy has continued
robustly this year, albeit we have been
cautious in the deployment of capital
given the economic headwinds. We
acquired 17 assets during the period
for a combined consideration of
£160million (excluding purchaser costs),
with a NIY of 5.2% on a blended basis.
Q&A WITH THE INVESTMENT MANAGER CONTINUED
You’ve talked a lot about
active asset management.
How does that work exactly,
and how does it help to
protect shareholder value?
ESG strategy is clearly becoming increasingly importantto
you; could you give some more detail on thisarea?
The cornerstone of our ESG strategy is that
we seek to make continuous improvement
in the environmental quality of our estate.
Our focus on ESG is not only the right thing
to do for the environment and for society,
but also benefits our shareholders and
is increasingly important for our tenants
in their own ESG commitments. Whilst
there is currently little evidence of green
premiums being paid, tenants are being far
more prescriptive as to what space they can
and will take, in terms of green credentials.
Weaim to acquire assets with an average
or even poor environmental performance
and improve them, rather than simply
buying assets which already have strong
ESG credentials. This not only enables us to
enhance rental income, but also means that
we are improving existing buildings instead
of acquiring ESG ready assets at a market
premium.
This strategy can be seen in our portfolio,
where 52% of assets now have an EPC
of A or B. We also see this work reflected
in improvements to our key ESG ratings
partners in the year - MSCI have recently
upgraded our ESG rating from “CCC” to
“A” and, in addition, we have improved our
GRESB and EPRA sBPR scores this year.
Interms of GRESB, we now have two stars
for standing assets and three stars for
development assets.
We were highlighted as one of the most
improved REITs at the EPRA awards,
moving from no award to silver – a huge
improvement in just twelvemonths.
Our LTV is currently sitting at 29%,
below our 30-40% target range. This
has been discussed at the Board level,
and a conscious decision was made to
keep our LTV low in uncertain times.
The majority of our debt is long-term,
fixed rate debt, with a smaller portion
of debt which will require refinancing
in the second half of 2025. We have no
refinancing required before 2025.
What is the current
headroom on your LTV?
Doyou have any upcoming
refinancing requirements?
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
8
As of 31 March, we are fully deployed
in terms of cash, and clearly, we are
restricted in our ability to raise finance
via the capital markets at the moment.
Our LTV currently sits below the stated
target range, and increasing this LTV
and using the proceeds to acquire
further assets will remain under active
consideration by the Board. Meanwhile,
we believe it is good management to
recycle assets, and post period end
have sold properties for gross sales
price of £15 million, representing a 3.4%
premium to the March 2023 valuation.
The underlying management team has not changed since the Company was founded
in2016.
On 11th May 2023 the Board and shareholders approved some changes to the contractual
relationships within the management arrangements - Logistics Asset Management LLP
formally takes on the role of Investment Adviser to Urban Logistics REIT plc and to G10
Capital Limited (Urban Logistics’ new AIFM).
The result of these changes means that the management team will stay in place until
2027, at a lower cost to shareholders – providing stability and certainty.
Q&A WITH THE INVESTMENT MANAGER CONTINUED
You acquired a lot of assets
last year, where does that
leave your cash position?
Will you consider taking
on more debt or recycling
assets?
Can you describe how the post year end changes to the
management arrangements will affect shareholders?
What’s the outlook for the
rest of2023?
Inflation may be easing, however, I think
we all agree that the outlook is still
uncertain. In this environment, Urban
Logistics remains very well positioned.
We have tenants who supply essential
goods, renting assets which are greatly
needed and in short supply. We manage
those assets intensively to improve
them. Our debt is 85% hedged or fixed
with no refinancings required until 2025.
Given all this, I feel very comfortable
and confident in saying that we are
extremely well positioned to continue
to create and enhance value for our
shareholders.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
9
STRATEGIC LOCATIONS
130
Number of assets (2022: 113)
£1,107M
Portfolio value (2022: £1,015m)
67%
South East and Midlands (2022: 63%)
9.7M SQ FT
Total area (2022: 8.3m sq ft)
OUR LOCATIONS
Midlands
South East
North East
North West
South West
Scotland
38%
29%
11%
11%
6%
Geographic
value
breakdown
5%
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
10
BUSINESS MODEL
OUR PURPOSE
To acquire and manage high-quality,
single-let logistics assets and generate
both income and capital growth for
ourshareholders.
OUR VISION
To be the leading provider of UK
urbanlogistics warehousing.
OUR CULTURE
Strategic decision-making,
diligentinvestigation, close
relationships withstakeholders
andanapproach focusedon
sustainable performance.
WHAT DRIVES US
UNDERPINNED BY...
HOW WE ADD VALUE DELIVERING VALUE FOR OUR STAKEHOLDERS
INCOME RETURN
1
5.1%
Average annual dividend income since IPO
EPRA NTA GROWTH
7.5%
Average annual growth since IPO
TOTAL ACCOUNTING RETURN
12.6%
Average return per annum since IPO
ESG IMPROVEMENTS
52%
EPC ratings: A-B
1
SEE MORE ON PAGE 21
SEE MORE ON PAGE 23
SEE MORE ON PAGE 25
BUY WELL
CASE STUDY
Fox Portfolio: £39.5 million
acquisition at 6.1% NIY
MANAGE WELL
CASE STUDY
Newmarket: 36% rental uplift
with ten years added to term
CREATE VALUE
CASE STUDY
Rochdale: £12.4 million
development at a 7.9% yield
oncost
1. EPC ratings at 31 March 2022, by floor area.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
11
INVESTMENT MANAGER’S REPORT
Overview
The last twelve months have been an important reminder of
the importance in taking a “through the cycle” approach to
real estate. Over the course of the year, the impacts of Russia’s
aggressive and unjustifi ed war in Ukraine, coupled with
short-lived economic experiments by the UK government,
have fed through into global and UK infl ationary pressures that
have defi ned central banks monetary policy, and in turn the
outlook for all sectors of the real estate market.
Throughout this, our strategy of active asset management
allows us to add value to assets whatever stage of the property
market we are in – by moving rents on, improving our tenant
covenants and increasing lease lengths, we are able to protect
against the impact of negative yield shift. We can see this in
our valuation results, only down 9.8%, set against an 18.9%
capital decline in the ‘Distribution Warehouse’ category of the
MSCI index for the year. By holding fi rm to the strategy fi rst
set out in 2016, we aim to mitigate the worst effects of the
economic downturn.
Market and performance
Continued high infl ation and interest rates have led to
a repricing of assets across commercial real estate. Our
like-for-like downward revaluation of just 9.8% outperforms
the wider asset class, and this is down to both the quality
of the assets in the portfolio and the asset management
undertaken. Our last mile, single-let logistics assets are in high
demand given the undersupply of assets of this type, driven by
long-term structural shifts in our economy and a chronic lack
of supply. This supports the occupational market and allows
us to offset yield erosion with rising rental rates, captured in 42
lease events over the year, generating £6.1 million in additional
rentalincome.
Management arrangements and team
The changes in the management arrangements referred to
in the Chairman’s Statement have been completed post year
end. My team and I are pleased to recommit to our roles, and
look forward to continuing to deliver for shareholders.
To help us do this, we continue to add experience and depth
tothe property and fi nance teams, both at junior and more
recently senior levels, with the appointment of Justin Upton
as our Chief Investment Offi cer, as well as Jonathan Gray as
non-executive Chairman. This depth provides sustainability
to the team, and is also key to our ability to further scale the
portfolio and carry out asset management and performance
enhancing initiatives to the benefi t of the underlying
shareholders.
To support our team, we provide training and career
development activities, as well as coaching and support
programmes. Together with competitive pay and bonus
programmes linked to share price to align all staff with the REIT
performance, these measures help us to recruit and retain the
highest quality team members, who are key to our success.
ESG
We fi rmly believe that the global push towards ESG-related
goals represents a signifi cant opportunity for Urban Logistics.
MEES legislation requires huge improvements in EPC ratings,
providing opportunities for an active asset manager like us to
acquire buildings in need of improvement and apply our asset
management expertise – as evidenced by the fact that over
twelvemonths we improved 37 EPCs and 52% of the portfolio
is now rated A or B. We also tend to work with tenants who
care about ESG issues and are willing to invest in the asset
they lease from us to hit their own ESG goals, making it easier
for us to hit our targets. We have a scope 1 and 2 net zero goal,
and are working hard towards hitting it next year, both by
reducing emissions and offsetting where required.
Chief Executive Offi cer Review 12
Market Report 14
Portfolio Report 16
Financial Report 26
Sustainability Report 31
WHAT’S IN THIS SECTION
Richard Moffi tt
CEO Investment Manager
CHIEF EXECUTIVE OFFICER REVIEW
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
12
INVESTMENT MANAGER’S REPORT CONTINUED
Looking ahead
The macroeconomic and geo-political picture for 2023 and
beyond continues to evolve. Given the re-pricing of real estate
assets and land values in 2022, we believe that the equilibrium
level where buyers and vendors will trade has been found
more quickly than witnessed in previous cycles. Investors are
already returning to the market, attracted by re-based higher
yields, rental value growth and the long-term drivers of the
logistics sector.
As the take-up statistics for the last twelve months have borne
out, an emphasis on resilient supply chains continue to be
a key focus of our occupier base, coupled with the fact that
e-commerce remains a fundamental and growing part of
the economy. This provides a sound footing to our business
model of last-touch, mid-sized logistics assets, let to financially
resilient tenants.
The market continues to be characterised by low vacancy
rates in the occupational space, providing confidence to
investors looking to deploy capital. Whilst we are conscious of
the weakening consumer environment (exacerbated by the
cost of living crisis) and the rising occupational costs of labour
and business rates, the fundamentals of the logistics sector
continue to be attractive.
Our core belief is that, irrespective of market driven yield
movements, shareholders are best served by us adding
value to the portfolio through asset management. Our team
is focused on moving rents and tenant covenants forward,
extracting value from mispriced areas of the market and
making physical improvements to the underlying properties
and their surroundings in order to promote enhanced ESG
criteria. Given our long experience in the sector, we are still
able to source assets off market at attractive yields, funded
through portfolio recycling from assets where we have already
added value through asset management.
We continue to take pride in what we have achieved in what
has been a challenging twelve months. We have renewed
leases with existing tenants, built warehouses for new tenants
and welcomed new team members and shareholders into the
Company. We see significant opportunity and value within the
portfolio and look to the future with a mix of caution, ambition
and excitement.
CHIEF EXECUTIVE OFFICER REVIEW CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
13
Yield shift in the capital markets
Macro factors discussed earlier in this report have led to
investors requiring a higher risk premium to hold our asset
class. Theall property total return for 2022, based on MSCI
annual index of £172billion of assets, recorded a -7.6% total
return
1
, while at the industrial sector level, MSCI UK quarterly
data to 31 December2022
1
, which comprises over £54billion
of Industrial assets, suggested a capital decline in industrial
values of -17.0%, with the category ‘Distribution Warehouse’
slightly more impacted at-18.9%, against our own portfolio
revaluation, down 9.8%.
As would be expected, the lowest yielding areas of the market,
such as London and the South East, suffered the greatest yield
shift as there was further to fall; according to Knight Frank
data
2
, the industrial prime equivalent yield sat at 5.5% at year
end compared to 4% recorded twelve months earlier.
This yield shift needs to be set in the context of historically low
rates in recent years, as shown by the graph below.
Investment volumes
Investment in the warehousing sector during the calendar year
has totalled £14 billion, a fi gure which is second only to 2021’s
record year of £18 billion. Whilst this stands as the second
highest year ever recorded, it was skewed towards the fi rst
three quarters with a paltry £1.2 billion transacted in Q4 2022
as investors remained cautious in the face of economic and
political volatility and rising bondyields.
Since the turn of the calendar year, Q1 2023 sentiment and
capital are returning to the logistics sector. Valuation data from
Knight Franks’ March 2023 yield guide suggest prime industrial
yields have experienced yield compression of 25bps or more
over this period as the market stabilises from the declines of
Q4 2022. This is in contrast to the view many commentators
held the start of the year who suggested the combined effects
of continued economic volatility would result in continued
outward movement in yields in the fi rst half of 2023.
INVESTMENT MANAGER’S REPORT CONTINUED
MARKET REPORT
Justin Upton
CIO Investment Manager
1. MSCI UK Annual Data – Full Year 2022.
2. Knight Frank Prime Yield Guide December 2022.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
14
MARKET REPORT CONTINUED
INVESTMENT MANAGER’S REPORT CONTINUED
Occupational market
Despite the significant capital markets headwinds that the sector faced in 2022, the occupier
market continued to prove resilient and robust, with rental growth of +10.4% recorded across
the industrial sector. According to Savills 2023 Big Shed Briefing, UK take-up of industrial and
logistics space (units of 100,000 sq ft +) reached 45.7 million sq ft in 2022
1
, 49% above the
long-term annual average, which pre-COVID sat at 26 million sq ft.
On the supply side, the national vacancy rate now stands at 5.0% across 32.7 million sq ft, a small
increase from the 3.1% on 2021 year-end figures. The development pipeline for 2023 and 2024 is due
to add a further 20.2 million sq ft of speculative development which is likely to take the total supply
upwards, however once this is delivered, development supply is expected to slow, as rising cost
of finance and higher exit yields create a challenging environment for speculative development,
irrespective of the traditional bottlenecks of build cost inflation, planning delays and labour
scarcity. Given the average cost of a new build with land remaining stubbornly above £150 per
sq ft, it is anticipated that these issues will provide constraints to speculative development going
forward, and further reinforces the attractiveness of our portfolio with a current replacement
value at £111 per sq ft. It also explains why CBRE anticipate vacancy rate toremain low.
Despite the positive messaging prevalent in the underlying occupier market, there is the
growing awareness of “grey space” onto the supply side. This is secondary space that is
technically available and being handed back to the market via sub-leasing as a result of over
expansion (think Amazon’s announcement in March 2023 regarding taking too much space
during the pandemic). Given the ultimate aim of sub-leasing is to remove cost and rent liability,
it has the potential to impact rental growth via increased supply side.
From an occupier perspective, Savills notes that Third Party Logistics ("3PLs") accounted for 32%
of all new leases signed in 2022, the highest proportion ever recorded. Diving deeper it shows
86% of these units are considered Grade A, against a long-term average of 60%, illustrating
3PLs need to provide high-quality space to improved staff welfare and ESG-compliant buildings
in order to retain and service their key client contracts.
8
0
12
16
20
£bn
Source: Savills
2000
£2,006b
4
2001
2002
2003
£1,446b
£2,778b
£3,072b
£4,881b
£4,882b
£5,587b
£4,524b
£2,556b
£2,971b
£3,293b
£3,548b
£2,951b
£5,088b
£7,041b
£5,724b
£6,052b
£11,002b
£8,949b
£7,711b
£10,249b
£18,375b
£14,097b
£608b
Industrial Long-term average
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
INVESTMENT VOLUMES
20
40
0
60
80
100
2009 2011 2012 2013 2014 2015
2016 2017 2018 2019 2020 2021 2023
Million sq ft
Source: Savills
5%
10%
0%
15%
20%
25%
vacancy rate
Supply Vacancy rate
2010 2022
94m
79m
86m
42m
34m
25m
29m
30m
29m
35m
31m
17m
47m
25m
33m
UK LOGISTICS AVAILABILITY AND VACANCY RATES
1. Savills UK Logistics: Big Shed Briefing January 2023.
2. CBRE 2023 Market Outlook Industrial & Logistics.
2%
4%
0%
6%
8%
10%
Mar
2008
Mar
2011
Mar
2012
Mar
2013
Mar
2014
Mar
2015
Mar
2023
Mar
2016
Mar
2017
Mar
2018
Mar
2019
Mar
2020
Mar
2021
Mar
2022
Yield
Source: Savills
Industrial
multi-let
Industrial
distribution
("OMR")
Mar
2009
Mar
2010
PRIME INVESTMENT YIELDS
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
15
PORTFOLIO
VALUATION
£1,107M
31 March 2022: £1,015m
PORTFOLIO
VALUATIONNIY
4.9%
31 March 2022: 4.3%
PORTFOLIO
VALUATIONEY
6.2%
31 March 2022: 5.2%
TOTAL PROPERTY
RETURN
(5.0)%
31 March 2022: 30.3%
WAULT
(TO EXPIRY)
8.2 YEARS
31 March 2022: 7.7 years
AVERAGE RENT
PERSQFT
£6.02
31 March 2022: £5.59
Portfolio review
Given the market context, we are very pleased to see the
portfolio valuation holding up well, with valuations on a
like-for-like basis down 9.8%, outperforming the indexes
we track against.
We are a very active asset manager, and have signed
42new leases, rent reviews or re-gears in the period,
driving an additional £6.1 million in rent, at a LFL increase
of 34%.
Thisasset management activity not only protects capital
values, but also increases rental income, which combined
with our near 100% rent collection record, is what allows us
to maintain our dividend and offset the market-driven yield
erosion the asset class has seen in the year.
We aim to manage a balanced portfolio, split between
core assets with secure, long-term income as well as an
active asset management pool where we can drive returns.
Core assets
The foundation of the portfolio, theseassets underpin
the dividend and banking covenants. Core assets are
typically let on long-term leases tolarge-scale tenants
withstrongcovenants.
Active asset management
These assets are typically highly reversionary, where
we have a short-term asset management plan to move
rents on, extend lease term, improve covenant strength
or make signifi cant improvements to the environmental
performance of thebuilding.
Developments
These assets are forward-funded developments typically
ona maximum commitment basis to insulate us frombuild
cost infl ation. They are done either with or without a
pre-lettenancy in place. We target a yield oncost of c.6%
and aim to further enhance the sustainability credentials
ofthe portfolio with these assets.
Christopher Turner
Property Director, Investment Manager
INVESTMENT MANAGER’S REPORT CONTINUED
PORTFOLIO REPORT
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
16
INVESTMENT MANAGER’S REPORT CONTINUED
Over the course of the year we have maintained the weighting in the portfolio at just over 50%
“active asset management”. It is this category where we are able to add value for shareholders.
Thetable below shows that in this category there is considerable room to move the rents
(contracted rent of £31 million against an ERV of £40million). With the WAULT in this category at
just 4.3years, this reversion can be quickly captured. There are other significant asset
management opportunities in this section of the portfolio, including EPC improvements, as
evidenced by the 44% A/B rating against the core portfolio of 63%. As our asset management
improves rents, lengthens WAULTs and improves EPCs, yields on these assets can be expected
to move closer to the yields of our core properties, suggesting a potential valuation uplift.
Active asset
Core management Development
1
Total
Capital Value £499m £592m £16m £1,107m
Percentage of portfolio 45% 54% 1% 100%
Area 3.9m sq ft 5.8m sq ft NA 9.7m sq ft
Contracted rent £28m £31m NA £59m
ERV/Expected rent £33m £40m £1m £74m
WAULT 12.5 years 4.3 years NA 8.2 years
EPC A-B 63% 44% NA 52%
Equivalent yield/yield on cost
2
6.0% 6.4% 7.4% 6.2%
1. Developments are included as valued by CBRE as at 31 March 2023. Further CAPEX spend is required
tocompletion.
2. Equivalent yield from 31 March 2023 valuation is used for core and active asset management. Fordevelopment
assets, a calculated yield on cost is used.
PORTFOLIO REPORT CONTINUED
Received|99.9%
Not received|0.1%
Low risk|6%
Low-moderate
risk|
50%
Moderate risk|31%
Moderate-high
risk|
7%
High risk|6%
RENT COLLECTION TENANT CREDIT RISK RATINGS
1
Tuffnells Parcels Express
5.0%
4.7%
3.8%
3.3%
3.0%
2.8%
2.7%
2.6%
2.6%
DHL
Theo Muller Group
Unipart Group
Delice De France Limited
XPO
Fidens Studios Limited
CEVA Logistics Ltd
Giant Booker Ltd
Delamode PLC
3.3%
TOP 10 TENANTS
2
1. Ratings per Dun & Bradstreet.
2. Top 10 tenants cover 33.8% of contracted rent. The remaining 66.2% is made up of 107 tenants.
3. On 12 June 2023 Tuffnells Parcel Express entered into administration. A rent deposit is held by the Company.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
17
INVESTMENT MANAGER’S REPORT CONTINUED
PORTFOLIO REPORT CONTINUED
2.0%
1.0%
3.0%
4.0%
0.0%
5.0%
6.0%
8.0%
Underlying vacancy Acquired vacant
1
Let post year end Total
2.7%
3.6%
1.1%
7.4%
7.0%
The vacancy rate at the year end was 7.4% (2022: 6.9%). This vacancy can be broken down into
a 2.7% underlying vacancy, one asset (3.6%) which was acquired in March 2022 with less than
twelve months of the lease, as well as three assets which have been let post year end in April
2023 (1.1%). We believe the properties which we acquired vacant give us significant opportunity
to create both income and value through our asset management activities.
1. Acquired vacant includes those properties acquired with less than twelve months on the lease at times
ofacquisition.
VACANCY RATE
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
18
01 02 03
BUY
WELL
FOX PORTFOLIO
Read more on page 21
MANAGE
WELL
NEWMARKET
Read more on page 23
RISK CONTROLLED
DEVELOPMENTS
ROCHDALE
Read more on page 25
£39.5M
Purchase price
6.1%
Acquisition NIY
17%
Reversion to ERV
£42.3M
NBV as at 31 March
2023
7%
Uplift on purchase price
£4.7M
Purchase price
10 YEARS
Term added
36%
Rental uplift
£5.4M
NBV as at 31 March
2023
14%
Uplift on purchase price
£12.4M
Gross development cost
£1.0M
Contracted rent
7.9%
Yield on cost
£15.4M
NBV as at 31 March
2023
24%
Uplift on cost
1. Includes post year end letting.
INVESTMENT MANAGER’S REPORT CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
19
INVESTMENT MANAGER’S REPORT CONTINUED
PORTFOLIO REPORT CONTINUED
Investment activity
During the year to 31 March 2023, the Group acquired assets for a combined consideration
of £160 million (excluding development sites and purchaser costs), representing a weighted
average NIY of 5.2% and 45% South East bias.
Properties acquired in the year ended 31 March 2023
South North Yorkshire
East Midlands West & NE Scotland Total
Purchase price £72m £66m £3m £11m £8m £160m
WA NIY 4.9% 5.3% 6.4% 5.0% 6.2% 5.2%
Area (sq ft) 295,006 565,586 19,664 73,987 83,126 1,037,369
Contracted rent £3.6m £3.6m £0.2m £0.6m £0.6m £8.6m
Rent per sq ft £12.34 £6.42 £10.43 £7.68 £6.71 £8.29
Capital value per sq ft £244 £116 £154 £145 £101 £154
HEADLINE PURCHASE PRICE
£160M
31 March 2022: £282m
WEIGHTED AVERAGE NIY
5.2%
31 March 2022: 5.3%
AVERAGE RENT PER SQ FT
£8.29
31 March 2022: £5.32
South East|45%
Midlands|41%
Yorkshire &
North East|
7%
Scotland|5%
North West|2%
GEOGRAPHICAL LOCATIONS FOR ASSETS ACQUIRED
DURING THE YEAR ENDED 31 MARCH 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
20
INVESTMENT MANAGER’S REPORT CONTINUED
“FOX” PORTFOLIO
CASE STUDY
In January 2023, the Company acquired a portfolio of fourwell located urban logistics
warehouses, with significant opportunities for asset management, for a consideration of
£39.5million, representing a 6.1% net initial yield, with tenants including Volvo, Amazon and
Delamode. Theportfolio is highly reversionary, with a targeted reversionary yield of 7.1%.
ThelowWAULT ofthe portfolio of 3.0 years means our asset management expertise can
beapplied in the near term to add significant value to the portfolio.
The portfolio is located in Redditch, Southampton, Droitwich and Rugby, and all assets are
located close tomajor transport infrastructure. The portfolio generates £2.6 million in rent,
representing £6.35per sq ft, against a current ERV of £7.43 per sq ft.
The assets had EPCs of B through to D. Since acquisition we have put a plan in place for each
toreach a rating of B within 18 months.
The portfolio was acquired off market, and at the year end the units were valued by CBRE at
£42.3million, representing a 7% uplift on purchase price. Given the assets had only been held
for two months, and the significant asset management opportunities within the portfolio, we
believe there is significantly more value to be generated from these assets.
£39.5M
Purchase price
6.1%
Acquisition NIY
£42.3M
March 2023 valuation
7%
Uplift on purchase price
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
21
INVESTMENT MANAGER’S REPORT CONTINUED
PORTFOLIO REPORT CONTINUED
Asset management activity
Resilient occupier demand drives rental growth
In the year, the Group successfully completed 42 deals across 1.6 million sq ft, or 16%, of the
total portfolio gross internal area at the year end. In aggregate, these deals added £6.1million
to annual contracted income and 13.3 years of WAULT.
21 of these deals were new lettings which generated £5.4 million of new contracted rent and
aWAULT of 13.8years. The rental levels achieved across these lettings represent a like-for-like
increase of 57%, reflecting strong occupier demand for high-quality last mile logistics assets.
It is this generation of additional rental income and lease length which allows us to offset
market driven yield expansion, and helps explain why the portfolio valuation has outperformed
the wider market.
No. of Additional LFL rental WAULT
deals rent uplift (years)
New lettings 21 £5.4m 56.7% 13.8
Lease re-gears 13 £0.3m 11.6% 4.6
Rent reviews 8 £0.4m 28.7% n/a
Total 42 £6.1m 33.6% 13.3
AVERAGE LEASE LENGTHS ON
NEWLETTINGS
13.8 YEARS
31 March 2022: 13.6 years
PORTFOLIO CONTRACTED
INCOME
£59.5M
31 March 2022: £47.3m
RENT ROLL GROWTH THROUGH
LEASING ACTIVITY
£6.1M
31 March 2022: £6.4m
PORTFOLIO
ERV
£74.2M
31 March 2022: £54.5m
RENT
COLLECTION
99.9%
31 March 2022: 99.9%
LFL RENTAL
UPLIFT
33.6%
31 March 2022: 16.4%
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
22
INVESTMENT MANAGER’S REPORT CONTINUED
DENMARK HOUSE, NEWMARKET
CASE STUDY
In April 2020, the Group acquired a logistics property let to Hermes Parcelnet, later renamed
Evri, as part of a portfolio for a consideration of £4.7 million. The acquisition represented a net
initial yield of 5.5% and, with a lease which expired in October 2022, was considered highly
reversionary. Evri were paying a rent of £265,000, representing £6.01 per sq ft. The well located
logistics asset, which serves Cambridge and the local area, is situated just off the A14.
Evri vacated at the end of the lease, and we completed a refurbishment for £0.6 million which
was in part funded by dilapidations charged to Evri. The refurbishment included installing LED
lights and replacing the heating systems, resulting in an EPC improvement from C to A.
Within five months of Evri vacating a new lease was in place to McKinley’s Group, for a term of
tenyears at a rent of £360,000, a 36% uplift on previous contracted rent, and 26% ahead of
CBRE’s March 2022 ERV.
At the year end, the property was valued by CBRE at £5.4 million, representing a 14% increase
on acquisition cost.
26%
Rent vs ERV
A
EPC
£5.4M
March 2023 valuation
14%
uplift vs purchase price
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
23
Development activity
During the year to 31 March 2023, the Company invested £28.7 million across five development
properties. In total, we completed 406,546 sq ft of new space during the year, with all of these
projects completing on time and on budget. At 31 March 2023, 86% of the completed units
were let, and post year end this increased to 100%, generating £3.1 million of contracted rent,
representing a 7.1% yield on cost.
The units completed in the year had a gross development cost of £43.7 million, and were valued
by CBRE at 31 March 2023 at £53.6 million, generating a £9.8 million surplus, or a 22.5% uplift
on cost.
Completed in year GDC Yield on cost Area sq ft New rent
Blenheim Park, Nottingham £18.0m 6.7% 166,851 £1.2m
Bridge Street, Golborne £13.3m 7.0% 120,946 £0.9m
Kingsway, Rochdale £12.4m 7.9% 118,749 £1.0m
Total £43.7m 7.1% 406,546 £3.1m
At 31 March 2023, the Company had committed to, or commenced construction on, a further
two development projects totalling 143,566 sq ft of new space, and a gross development cost
of £17.4 million. The remaining cash to be deployed across these projects is £6.6 million and
together they are expected to generate £1.3 million of contracted income once fully let,
representing a 7.4% yield on cost.
Under construction/committed GDC Yield on cost Area sq ft ERV
Newhall Road, Sheffield £13.8m 7.6% 131,500 £1.1m
Unit 100, Colchester £3.6m 6.7% 12,066 £0.2m
Total £17.4m 7.4% 143,566 £1.3m
INVESTMENT MANAGER’S REPORT CONTINUED
PORTFOLIO REPORT CONTINUED
CURRENT YIELD
ON COST
7.2%
31 March 2022: 6.7%
CAPITAL DEPLOYED
IN THE YEAR
£28.7M
31 March 2022: £52.9m
UNDER
CONSTRUCTION
143,566 SQ FT
31 March 2022: 547,304 sq ft
CURRENT
ERV
£4.4M
31 March 2022: £5.8m
EPC
RATING A
100%
31 March 2022: 100%
COMPLETED
IN THE YEAR
406,546 SQ FT
31 March 2022: 172,433 sq ft
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
24
INVESTMENT MANAGER’S REPORT CONTINUED
ROCHDALE
CASE STUDY
In 2021, the Company acquired and agreed to forward fund the development of four units at
Rochdale, near Manchester. The units had a gross development cost of £12.4 million, equating
toabuild cost of £105 per sq ft. From land acquisition through to practical completion, the
Company benefited from a 5.5% interest rate coupon on funding.
Practical completion was achieved in November 2022, and all units achieved an EPC of A,
andBREEAM ‘Very Good’.
During the year, we successfully completed lettings across three of the four units, with the final
unit let post year end in April 2023, for a combined rental income of £1.0 million, representing
ayield on cost of 7.9%.
At 31 March 2023, CBRE valued the properties at £15.4 million, representing a 24% uplift
oncost.
£12.4M
Gross Development
Cost
7.9%
Yield on cost
£15.4M
March 2023 valuation
24%
Uplift on cost
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
25
INVESTMENT MANAGER’S REPORT CONTINUED
Operating profi t
Year ended Year ended
31 March 31 March
2023 2022
£’000 £’000
Revenue 55,305 37,811
Property operating costs (2,313) (1,262)
Net rental income 52,992 36,549
Other operating income 57 1,021
Administrative expenses (9,683) (7,159)
Net fi nance costs (10,680) (6,840)
Adjusted earnings 32,686 23,571
Long-term incentive plan credit/(charge) 4,345 (4,114)
Exceptional items — (459)
Changes in fair value of investment property (121,119) 149,892
Profi t on disposal of investment property — 220
Changes in fair value of interest rate derivatives 1,431 2,663
(Loss)/profi t before taxation (82,657) 171,773
Net rental income
In the fi nancial year to 31 March 2023, the portfolio generated net rental income of
£53.0million, an increase of £16.4 million or 45% compared to the prior year. The increase was
largely driven by the acquisitions made in the year following the July and December2021
equity fundraises.
On a like-for-like basis, EPRA net rental income increased by 3.4% when compared to the prior
year, due to letting activity and capturing of reversion through settling rent reviews. During the
year we successfully completed a number of new lettings across recently developed properties
which generated additional rent of £1.9 million. Together, the additional income generated
from the development properties and like-for-like income growth contributed to a 9.3%
increase in net rental income.
Property operating costs increased by £1.1million, refl ecting the increase in size of the portfolio
held continuously throughout the year. Our gross to net rental income ratio remains high at
96.3% (31 March 2022: 97.2%), illustrating the strength of our core single-let strategy.
£0m
£35m
£55m
March 2022 Acquisitions Disposals LFL net rent Developments March 2023
£36.5m
£13.9m
£(0.3)m
£1.0m
£1.9m
£53.0m
£25m
£45m
£10m
£40m
£50m
£5m
£20m
£15m
£30m
NET RENTAL INCOME BRIDGE
FINANCIAL REPORT
Mike Perkins
CFO Investment Manager
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
26
0.0p
2.0p
5.0p
8.0p
March
2022
Net rental
income
Other
income
Admin
expenses
Net finance
costs
March
2023
0.83p
(0.28)p
(0.02)p
(0.31)p
6.93p
6.71p
3.0p
6.0p
1.0p
4.0p
7.0p
Administrative expenses and total cost ratio
Administrative expenses, which include all operational costs of running the business, increased
by £2.5million to £9.7million. This was primarily due to the increase in the investment
management fee following the July and December2021 equity fundraises, and the
corresponding increase in EPRA Net Tangible Assets (“EPRA NTA”).
We continue to monitor the operational efficiency of the Group through the total cost ratio,
which decreased to 21.2% from 21.8%. The Group’s total cost ratio is expected to reduce in
future periods, where the positive impact on gross rental income from properties acquired part
way through the year will be fully recognised.
Year ended Year ended
31 March 31 March
2023 2022
£’000 £’000
Total costs including vacant property costs 21.2% 21.8%
Total costs excluding vacant property costs 18.3% 20.0%
Net finance costs
The net finance costs for the year, excluding fair value movements of our interest rate
derivatives, were £10.7million (31 March 2022: £6.8 million), an increase of £3.9million
compared to the prior year. Of the total increase in net finance costs, £2.6 million is due to the
higher average drawn debt balance and £1.3 million is due to the c.350bps increase in SONIA
rate over the course of the year.
The weighted average cost of debt for the year was 66bps higher than the previous year at
3.21% (31March2022: 2.55%) and the Group reported an interest cover of 4.5x (31March2022:
4.5x). The weighted average debt maturity is 5.4 years (31March2022: 3.7 years) following the
drawdown of two tranches from our new ten-year loan facility with Aviva Investors, and the
extension of our Barclays facility by one year.
INVESTMENT MANAGER’S REPORT CONTINUED
FINANCIAL REPORT CONTINUED
IFRS profit and adjusted earnings
IFRS loss after tax for the year was £82.7million (31March2022: profit of £171.8million),
representing a basic and diluted earnings per share of -17.51 pence, compared with 48.86
pence for the prior year. The principal driver of the IFRS loss is the unrealised revaluation
deficit (excluding provision for profit share) of £120.4million recognised across the portfolio
as a result of market yield expansion.
Adjusted earnings for the year were £32.7million (31March2022: £23.6 million), which
represents a £9.1million increase when compared to the prior year. Onan adjusted per
share basis this increased by 0.22 pence to 6.93 pence per share. This increase is largely
driven by the full period of rental income from properties acquired part way through the
prioryear.
The Directors consider adjusted earnings a key measure of the Company’s underlying
operating results, and therefore exclude non-cash and exceptional items. A full
reconciliation between IFRS (loss)/profit and adjusted earnings can be found in note 13 of
the Financial Statements.
ADJUSTED EARNINGS PER SHARE
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
27
Dividend
In respect of the financial year ended 31 March 2023, the Company paid and declared the
following interim dividends:
Amount In respect of
pence per financial year Paid/
Declared share ended to be paid
11 November 2022 3.25p 31 March 2023 16 December 2022
22 June 2023 4.35p 31 March 2023 21 July 2023
A second interim dividend of 4.35 pence per share will be paid on 21 July2023 to shareholders
on the register at the close of business on 30 June2023. The total dividend for the year will
therefore be 7.60 pence per share, which is the same as was paid in the prior year.
IFRS net assets
Year ended Year ended
31 March 31 March
2023 2022
£’000 £’000
Investment property
1
1,106,507 1,014,697
Bank and other borrowings (346,774) (242,422)
Cash 30,159 127, 379
Other net liabilities (23,198) (8,672)
EPRA net tangible assets 766,694 890,982
Interest rate derivatives 3,034 1,603
Intangible assets 32 47
IFRS net assets 769,760 892,632
1. Per CBRE independent valuation as at 31 March 2023 and 31 March 2022.
At 31 March 2023, IFRS net assets attributable to Ordinary Shareholders were £769.8million
(31March 2022: £892.6million), representing a basic and diluted net asset value per share of
163.09pence (31March2022: 189.12pence).
The Group considers EPRA net tangible assets (“EPRA NTA”) a key measure of overall
performance. At31March 2023, EPRA NTA were £766.7million (31 March 2022: £891.0million),
representing an EPRA NTA per share of 162.44pence (31March2022: 188.78pence), a decrease
of 14.0%.
INVESTMENT MANAGER’S REPORT CONTINUED
FINANCIAL REPORT CONTINUED
100.0p
140.0p
200.0p
EPRA NTA:
March 2022
Adjusted
earnings
Dividends
paid
Core assets
Asset
management
Developments EPRA NTA:
March 2023
188.78p
6.93p
(7.60)p
(14.50)p
(9.37)p
0.37p
162.44p
180.0p
120.0p
160.0p
(2.17)p
Acquisitions
£121m revaluation deficit: -9.8% LFL
EPRA NTA per share: -14.0% since 31 March 2022
EPRA NTA PER SHARE BRIDGE
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
28
IFRS net assets continued
On a per share basis, both IFRS and EPRA net assets decreased over the financial year to
31March2023, primarily due to revaluation deficit as a result of market yield expansion,
somewhat offset by value created through a combination of asset management initiatives
crystallised in the year and ERV growth.
The total accounting return for the year, which reflects growth in EPRA NTA plus dividends paid
in the year, was -9.9% (31March2022: 28.9%). The average total accounting return since IPO in
2016 has been 12.6%.
Portfolio valuation
The value of the portfolio at 31 March 2023, which includes forward-funded developments, was
£1,107million, an increase of £91.8million, or 9.0% year-on-year. In the year, the Group invested
£166.2million in industrial and logistics properties and advanced £28.7million of funding
across five developments. In addition, the Group incurred capital expenditure of £8.6million in
the year, which principally relates to two properties undergoing extensive refurbishment works,
one of which was completed in the year, and has significantly enhanced capital value.
The Group recognised a valuation deficit (excluding provision for profit share) of £120.4million
(31March2022: surplus of £153.5million) upon revaluation of the portfolio. On a like-for-like
basis, the portfolio generated a valuation deficit of £101.6million, or -9.8% (31March2022:
surplus of £127.2million, or 25.4%).
The portfolio delivered a total property return (“TPR”) of -5.0% (31 March 2022: 30.3%) for
theyear.
INVESTMENT MANAGER’S REPORT CONTINUED
FINANCIAL REPORT CONTINUED
0p
240p
IPO March
2017
March
2018
DividendEPRA NTA
March
2019
March
2020
March
2023
116.1p
122.5p
138.0p 137.9p
152.3p
162.44p
100p
200p
220p
180p
140p
160p
120p
20p
60p
80p
40p
188.8p
45.6p
38.0p
30.4p
23.3p
15.5p
9.3p
March
2021
3.0p
100.0p
March
2022
TOTAL ACCOUNTING RETURN SINCE IPO
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
29
Financing
At 31March2023, the Group had three term loan facilities totalling £361million, of which
£351million was drawn. The £151million loan facility with Barclays, Santander and Lloyds was
entered into in August2020 and had a three-year term with an option to extend for a further
two years. During the year, the Group exercised its option to extend the facility for one year,
pushing out the expiry to August2025.
In May2022, the Group entered into a £46.6million green loan facility with Aviva Investors,
which provided a ten-year term and came at a fixed cost of 3.52%. In August 2022, the Group
agreed a further £75.0million facility with a ten-year term at a fixed rate of 3.99%. This facility
includes, inter alia, margin rate improvement on hitting environmental targets across the
assetscharged.
Loan Drawn at % Fixed/
Maturity Commitment 31 March 2023 Hedged at
Lender Date (£m) (£m) 31 March 2023
Barclays
(syndicate of three banks) Aug 2025 151.0 141.0 63.3%
Aviva Investors
(seven-year term) Mar 2028 88.4 88.4 100.0%
Aviva Investors
(ten-year term) May 2032 121.6 121.6 100.0%
Total 361.0 351.0 85.3%
For the year to 31 March 2023, the weighted average cost of debt across all facilities was 3.21%
(31 March 2022: 2.55%).
The debt is protected against changes in interest rate fluctuations as 85.3% (31 March 2022:
74.2%) is either fixed or hedged until maturity. In addition the maturity profile has moved out
significantly, with a weighted average maturity date of 5.4 years, compared with 3.7 years at
31March 2022.
The longer term debt with Aviva Investors has a weighted average maturity of 7.4 years and is
100% fixed at an all-in-rate of 3.18%.
Cash and net debt
During the year, the Group’s cash balances decreased by £97.2 million, as illustrated in the
tablebelow:
31 March 31 March
2023 2022
£m £m
Cash generated from operations 43.1 57.7
Cash used in investing activities (201.3) (353.4)
Cash generated from financing activities 61.0 362.6
Net (decrease)/increase in cash (97.2) 66.9
Opening cash balance 127.4 60.5
Closing cash balance 30.2 127.4
At 31 March 2023, the Group’s cash balance was £30.2 million, of which £11.1 million is
earmarked for developments or committed capital expenditure projects. Over the financial
year, net debt increased by £205.8 million to £320.8 million, representing a loan to value (“LTV”)
of 29.0%, whichis below our medium-term target of 30-40%.
INVESTMENT MANAGER’S REPORT CONTINUED
FINANCIAL REPORT CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
30
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT
Jamie Waldegrave
COO, Investment Manager
Overview
We believe that in order for the UK as a whole to achieve
decarbonisation targets contained in the UK’s Climate
Change Act, major landlords like ourselves have a signifi cant
role to play. This role is imposed by the “push” ofexisting
and proposed legislation, as well as the “pull” ofour desire
to consider the environment and social impactsacross our
business, strategy and operations.
This “push” and “pull” are important motivators. However, with
our focus on delivering a total property return to shareholders,
we also see the international ESG agenda as an opportunity to
deliver enhanced returns to shareholders. We are expert asset
managers, withsignifi cant experience in the management
team of improving leases and the fabric of buildings. This
ability to improve the effi ciency of our assets ensures the
portfolio isaligned with MEES legislation, as well as to make
them attractive to new tenants who take ESG considerations
as seriously as we do. It also allows us to acquire assets from
owners who don’t have this expertise at attractive prices.
The REIT foundation, a core tenant of our strategy, has been
acquiring assets which had opportunities for us toadd
value through asset management. The increasingly growing
demand from the market for industrial and logistics assets
with ESG considerations gives us a new set ofimprovements
which we can deliver value on. It also ties in with our core
beliefs – that in combating climate change it is more useful
to improve the existing stock of building inthis country than
to simply sell them and own buildings which are already top
performers.
Last year we were pleased to publish our fi rst standalone
Sustainability Report and our fi rst sustainability targets.
We also reported in line with EPRA’s sBPRs for the fi rst
time. This year we are building onthat by delivering on our
commitments made last year to provide an update on our
performance against sustainability targets as well as a full
report aligned to theguidance set out in the Taskforce for
Climate-related Financial Disclosures (“TCFD”), a summary
ofwhich is presented in this report.
Sustainability timeline
CREATION OF ESG COMMITTEE
AUGUST 2021
FIRST ESG TARGETS
JUNE 2022
FIRST TCFD REPORT
JUNE 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
31
20%
30%
0%
40%
50%
60%
March
2021
March
2023
March
2022
10%
22%
27%
52%
EPC improvement
We have focused on improving EPC ratings in the portfolio
and can show consistent growth in the percentage of the
portfolio by floor area with an EPC of A or B. This year we have
improved 37 EPC ratings, meaning 52% of the portfolio has an
EPC rating of A/B.
Our strategy enables us to:
•
reduce carbon emissions through more energy efficient
buildings;
•
attract high-quality tenants who want to occupy buildings
with better energy performance; and
•
align with proposed MEES regulations where a building will
need to be at an EPC of B or above by 2030 for a new lease
to be granted.
During the year, we analysed the portfolio asset by asset, and
have built up an estimate of the capital expenditure required
to bring all buildings up to an EPC of B or above. This cost will
be met over the next eightyears through:
•
tenant contributions – our tenants invest in the buildings on
an ongoing basis;
•
replacement of end-of-life CAPEX – as heating systems,
roofs and lighting come to the end of their natural life; and
•
landlord funded contributions – we will invest the
Company's money into building to improve environmental
performance, and see a return on that investment through
the higher rents those buildings can command.
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT CONTINUED
EPC A/B
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
32
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT CONTINUED
External rating agencies: Charity work
Position in March 2022 Position in March 2023
CCC
MSCI
ESG RATINGS
A
AA
AAA
B
BB
BBB
CCC
MSCI
GRESB
standing
assets
GRESB
development
assets
EPRA
sBPR
A
MSCI
ESG RATINGS
A
AA
AAA
B
BB
BBB
CCC
GRESB rating
No award
We have a large property at the East Midlands
Distribution Hub, near Melton Mowbray, which
we acquired in 2022. We have agreed with local
charity Pablo’s Horse Sanctuary that they can
use some excess land on the site for their work
rehabilitating and caring for horses with no
other home.
Carol Fielding, founder of the charity said: “We’re
so grateful to Urban Logistics for helping us to
save these beautiful animals. As a local charity
this kind of support is incredibly important
tous.”
COMMUNITY ENGAGEMENT: PABLO’S HORSE SANCTUARY
We own a number of properties near
Edinburgh, and as part of our community
engagement there, we were pleased to sponsor
the Corstorphine Cougars rugby club, a local
club who work with men, women, children and
seniors to get active and get involved in sport.
Steve Wright, VP Commercial at Corstorphine
RFC said: “It is brilliant that a company the
size of Urban Logistics is keen to help our club
continue to grow.”
COMMUNITY ENGAGEMENT: CORSTORPHINE COUGARS
GRESB rating
GRESB rating
GRESB rating
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
33
[•]
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY IN ACTION
WELLINGBOROUGH
The asset was acquired in July 2021 for an acquisition price of £3.6 million, with a tenant in
place and a lease due to expire in January 2022. The asset management plan on acquisition
was to improve both the fabric of the building and the quality of the tenant covenant.
In January 2022 the tenant vacated, and within one month the unit was under offer to Print
Data Solutions for a ten-year lease, at a 50% increase to the previous passing rent.
In between tenancies a refurbishment was completed which was partially funded by
dilapidations from the previous tenant. This refurbishment involved upgraded LED lighting,
newheating and cooling in the office and removal of all gas heating in the warehouse.
This resulted in the EPC of the building moving from a D to an A, and significantly reduced
running costs of the asset, both of which were instrumental in getting the new tenant in,
generating both the rental increase and asset value increase.
Next steps include looking at installing solar panels on the roof to further decarbonise
thebuilding.
EPC A
Improved from D
50%
Rental uplift following
asset improvement
£5.2M
Valuation
45%
Uplift vs. purchase price
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
34
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT CONTINUED
REDUCE THE ENVIRONMENTAL
IMPACT OF OURBUILDINGS
OUR ESG TARGETS – PERFORMANCE AND STRATEGY
ACHIEVE NET ZERO IN TERMS
OF SCOPE 1 AND SCOPE 2 BY 2024
ENGAGE WITH OUR TENANTS ON DECARBONISING
OPERATIONS IN OUR BUILDINGS
Last year we introduced six ESG targets to measure ourselves against, below is an update of our position against those targets.
What are we aiming to do?
Improve all buildings to an EPC of B or above by 2028.
How did we do this year?
We have improved 37 EPCs this year, meaning the portfolio
now stands at 52% B or above.
In addition, we have calculated the total cost required to
be spent to improve all assets to a B or above, a cost we
expect to be met over eight years through tenant funded
improvements, end of life CAPEX upgrades and landlord
funded improvements.
What are we aiming to do in the coming years?
We will continue our programme of EPC improvements,
focusing on the very small percentage of buildings with an
EPC of D.
What are we aiming to do?
Reduce usage of energy in our operations and vacant
buildings, and reduce these emissions to net zero.
How did we do this year?
All new energy contracts entered into in the year have been
zero carbon, and all new leases have had green clauses.
Our Scope 1 and 2 emissions are largely driven by our
vacant properties, and the speed with which we can exit
contracts and move to zero carbon tariffs.
What are we aiming to do in the coming years?
We still have legacy contracts to switch to zero carbon,
however we are aware that given the nature of our
operations, there will always be unavoidable emissions.
Therefore, from next year we will be exploring carbon
offsetting. We are aligned with the Oxford Principles for Net
Zero Aligned Carbon offsetting, and only acquire offsets
which meet the VSC or gold standard.
Over the longer term we have ambitions to generate our
own offsets through our own projects, to maintain control,
costs and quality.
What are we aiming to do?
Develop a systematic programme to engage with tenants
to decarbonise.
How did we do this year?
This year for the fi rst time, in addition to our normal programme
of tenant engagement, we initiated a tenant survey.
Results were encouraging, with 90% of respondents
wanting to collaborate further on improving the ESG
performance of buildings, and this is forming the basis of
ongoing conversations.
A signifi cant percentage of the portfolio is covered by a net
zero target, and all new leases have green clauses, which
promote closer engagement on environmental goals.
What are we aiming to do in the coming years?
We have a long-term goal of building up a Scope 3 net zero
plan, as we continue to work with tenants to understand
their own decarbonisation plans.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
35
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT CONTINUED
INCREASE ON-SITE RENEWABLE ENERGY
OUR ESG TARGETS – PERFORMANCE AND STRATEGY CONTINUED
MAKE MORE SPACE FOR NATURE ON OUR SITES PROMOTE TRANSPARENCY ON ESG DISCLOSURES
What are we aiming to do?
Our target is for more than 10% of buildings (weighted by
fl oor area) in the portfolio to have PV cells installed by 2024.
How did we do this year?
This year we moved from 2% of buildings having PV cells
installed to 4%.
What are we aiming to do in the coming years?
In addition to the 4% with PV cells installed, we are also in
conversations with tenants representing an additional 8% of
the portfolio, which would move the total installed capacity
to 12%, if all chose to install PV cells. We will also start to
focus on the installed capacity of the renewable energy,
and report against this in the comingyear.
What are we aiming to do?
Develop a plan for further enhancing the biodiversity of the
sites we operate. This is not only good for nature, but we
know that it will promote wellbeing for the tenants who
occupy our estates.
How did we do this year?
We have performed a survey of our sites, and have
identifi ed 67 acres of land which could be suitable for
treeplanting or other biodiversity schemes.
An initial site is in the process of being converted into
awildfl ower meadow, at the tenant’s expense.
We have also engaged with a number of experts able
toadvise on the incoming Bio-Diversity Net Gain (“BNG”)
regulations, and how we are able to leverage BNG credits
for further performance.
What are we aiming to do in the coming years?
We aim to launch biodiverse sites on land already owned
byus, or closely adjacent to our land.
New biodiverse spaces not only benefi t nature, but also
local communities, and we aim to engage with local
communities as we launch further sites.
What are we aiming to do?
Achieve a GRESB score above 55, and a gold rating on
EPRA sBPRs, as well as produce a TCFD-aligned report
by2023.
How did we do this year?
We have achieved a GRESB score of 69, well in excess of our
target. This year we have also produced our reporting in line with
the TCFD recommendations.
Our EPRA sBPR result was a silver, albeit we did win a “most
improved” award.
In addition to these goals, we also improved our MSCI ESG rating
from CCC to A.
What are we aiming to do in the coming years?
We aim to achieve a gold in our EPRA sBPR reporting.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
36
Greenhouse gas reporting
We report greenhouse gases (“GHG”) as Scope 1 and 2, which are acquired by us, and which we have control over. We have a
netzero target regarding these emissions, which we are aiming to hit in 2024, by reducing emissions as well as the use of
high-qualityoffsets.
Scope 3 GHG is emitted by our tenants through the operation of our buildings, and we work closely with our tenants to
helpthem decarbonise their operations.
SECR reporting: tonnes of CO
2
e for footprint
Performance Measure Unit Source 2023 2022
Total energy consumption kWh Landlord-obtained electricity 1,610,886 674,233
Landlord-obtained natural gas 94,367 63,826
Fuel used in the Manager’s vehicles Unavailable Unavailable
Head office of the Manager 8,301 19,893
Total 1,713,554 757,950
Energy Intensity kWh/m
2
/year Landlord Energy Intensity 17.8 9.3
Total greenhouse gas emissions tCO
2
e Landlord-obtained electricity 312 143
Landlord-obtained natural gas 18 12
Fuel used in the Manager’s vehicles Unavailable Unavailable
Head office of the Manager 2 4
Total 331 159
Greenhouse gas emissions intensity tCO
2
e/m
2
/year Scope 1 & 2 Intensity 3.43 3.42
Where additional prior year data has become available post publication this has been incorporated into prior year figures.
Thevery significant increase in Landlord-obtained electricity is caused by a larger portfolio and vacant property rate, as well as
increased consumption through regular landlord supplies at a number of properties. However, the intensity analysis shows a
falling energy usage per sq meter. The energy intensity is low as would be expected considering the majority of the supply is
tovacant buildings.
Electricity emissions are reported using the location-based methodology. In addition to the EPC improvement works described
elsewhere, we transitioned the electricity (and sole energy supply) of the head office of the Manager to renewable energy. We are
rolling this out across all electricity supplies where we have operational control.
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
37
Greenhouse gas reporting continued
SECR reporting: tonnes of CO2e for footprint continued
Climate change and the associated risks and opportunities are integral to our investment and development strategies. Arecent
example of this is our new development at Rochdale, Kingsway, which was completed in September 2022 and constructed to
the highest environmental standards to attract premium occupiers and surpasses impending regulatory changes. Active asset
management is adopted across our portfolio to efficiently identify risks and opportunities. See the risk management section of this
report for more details.
Scope 3: emissions from tenant emissions
We are aware that tenant operational energy consumption in our portfolio will make up the vast majority of our total footprint.
Therefore, for the first time we have calculated our total emissions for this scope 3 category.
At the time of reporting, we have collected tenant energy data from 88 of our 130 assets and we have estimated greenhouse gas
emissions for all tenant areas where we have not collected data using the PCAF
1
European building emission factor database
methodology and the PCAF Data Quality Score, including for the total weighted by emissions mass, is included in the table below.
PCAF Data
Performance Measure Unit Source 2023-23 Quality Score
Total GHG emissions tCO
2
e GHG Emissions from collected data 11,218 2
Estimated emission for remainder of portfolio 7,450 4
Total Emissions for Downstream Leased Assets 18,668 2.80
Though these emissions are controlled by our tenants, we engage closely with tenants to help them decarbonise their operations.
INVESTMENT MANAGER’S REPORT CONTINUED
SUSTAINABILITY REPORT CONTINUED
1. Partnership for Carbon Accounting Financials.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
38
Describe the Board’s oversight of
climate-related risks and opportunities
The Board takes ultimate responsibility for ESG performance
and climate-related risks and opportunities, including the
implementation of the ESG policy by the Manager, and
compliance with ESG expectations with key stakeholders.
The ESG Committee is the governing body responsible for
oversight of ESG activities. The Committee is chaired by
Heather Hancock and all independent Directors are members.
Heather brings many years of high-level experience in strategy,
governance and leadership.
The ESG Committee advises on and recommends to the
Board its ESG policy and ensures this remains up-to-date
with the Board’s strategic ESG objective – to achieve high
governance standards. The ESG Committee also report
climate related risks into the Audit and Risk Committee,
who have responsibility for risk management, as described
in section 3. The ESG Committee receives briefings on
emerging technologies relevant to the UL portfolio. The ESG
Committee considers climate-related risks and opportunities
with the Board when: reviewing and guiding strategy, major
plans of action as well as monitoring implementation and
performance. The ESG Committee scrutinises performance
across the full suite of ESG commitments that Urban Logistics
places on the Manager, aswell as relevant obligations and
governance requirements falling directly on the Company.
Climate-related risks and opportunities are addressed during
each
full Board meeting, as well as ESG Committee meetings.
Further
information on Board and ESG schedules can be found on
page67.
Describe management’s role in assessing
and managing climate-related risks and
opportunities
The Board and its Investment Manager work closely to monitor
and manage climate-related risks and opportunities. The ESG
Committee, with the support of the Urban Logistics Board,
places a series of ESG-related performance objectives and
expectations on the Company’s Investment Manager, which
align with our published annual sustainability targets, and the
ESG Committee monitors progress against these objectives.
The Investment Manager’s Executive Committee leads on
integrating the climate considerations, risks and opportunities
into operation of the assets, and ensures that all the Manager’s
employees understand their responsibilities for environmental
management and performance, which is also reflected in
the Manager’s annual review processes. TheESG Committee
advise the Audit Committee on specific risks relating to ESG,
which are then considered within the Company’s risk register.
1.0 GOVERNANCE
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”)
1
GOVERNANCE STRUCTURE OF ESG RISKS
ANDOPPORTUNITIES
2
THE
BOARD
PROPERTY TEAM
ESG
COMMITTEE
AUDIT
AND RISK
COMMITTEE
MANAGEMENT
ENGAGEMENT
COMMITTEE
NOMINATION
COMMITTEE
EXECUTIVE COMMITTEE
OF THE MANAGER
1. A fuller version of our TCFD reporting is available for the Company
Website.
2. During the year the Company was managed by PCP2 Ltd. Post
period end the Manager's responsibilities within the governance
structure will be replaced by Logistics Asset Management LLP, the
Investment Adviser, from 12 May.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
39
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium and long term
The Board considers climate-related risks throughout their
strategic decision-making processes. As part of our business
strategy, we have undertaken a climate resilience assessment
in collaboration with CBRE to identify the short, medium and
long-term physical risks to our portfolio. The time horizons
selected fall into three time frames:
In selecting the time horizons, we gave consideration to the
fact that climate-related issues often manifest themselves over
the medium and longer terms. Thetime horizons are based on
the profile of risks associated with real estate asset lifecycles, in
line with the Climate ChangeAct 2008.
Climate-related risks identified
The assessment of risk was based on the probability of the
climate hazard occurring and the vulnerability of the asset
tothe climate event. The assessment determined that flood
risk is considered the most notable risk to the Urban Logistics
portfolio. Sea level rising, precipitation stress, drought stress
and heat stress are considered a lower risk to the business
inthe medium term, although present a long-term risk.
We recognise that although many of the risks identified may
notmaterialise whilst an asset is part of the Urban Logistics
portfolio, various markets’ understanding of how climate risk
can affect asset value is increasing and regulatory pressures,
aswell as landlord and occupier demands, are evolving. As a
result, markets are experiencing a shift in the requirements
towards more sustainable, climate-resilient buildings.
Werecognise our strategy to develop poorly performing
buildings and improve them in line with, or better than,
emerging regulations provides an opportunity to deliver
high-quality assets in line with market demands.
Climate-related opportunities identified
Our climate-related risk assessments have also identified a
greater range of opportunities for Urban Logistics. A selection
is included below and a full list can be found in our full TCFD
disclosure report 2023.
Market Opportunities
•
Assets which are well-located, but not energy efficient,
present an opportunity to active asset managers who
understand how to improve them to meet market
demands. Real estate owners who have not invested to
mitigate in the climate related risk will see reductions in
property values, creating opportunities for experienced
andactive asset managers like us, to acquire assets at
anattractive cost.
Capital Markets
•
Green finance opportunities can help to align investments
with climate change mitigation.
When the opportunity to acquire assets arise, we always
consider a property’s current and potential ability to align
withour strategy to own and operate efficiently. For example,
wereview the possibility for solar PV and quantity of outdoor
space for EV charging stations.
We assessed the impact of physical climate risks across the
Urban Logistics portfolio to 2050, using three scenarios in
accordance with the IPCC’s Representative Concentration
Pathways (“RCPs”). The scenarios used were as follows;
•
RCP8.5: a worst-case scenario, where net zero targets are
not met and characterised by increasing GHG
concentrations and a temperature increase of around 4°C
relative to the pre-industrial period (1850-1900).
Temperatures are projected to increase by 4-5°C by 2100;
2.0 STRATEGY
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
Short term
2023 – 2025
Medium term
2026 – 2030
Long term
2031 – 2050
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
40
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium and long term continued
Climate-related opportunities identified continued
•
RCP4.5: an intermediate emissions scenario which aligns
with the commitments made by countries as part of their
nationally determined contributions (“NDCs”) at Conference
of the Parties (“COP26”). However, that likely overshoots the
Paris Agreement temperature target of 1.5°C/2°C relative to
the pre-industrial period (1850-1900). This is an
intermediate scenario (RCP4.5) which reflects 3°C of
warming by 2100; and
•
RCP2.6: a moderate scenario that sees emissions peak early
on in the 21st century and then decline after. This scenario
assumes a warming of less than 2°C by the end of the
century. This is a moderate emissions scenario where
temperatures increase by 1.5-2°C by 2100.
Our transition risks have been assessed in accordance with the
CRREM 1.5°C scenario, aligned with warming of less than 1.5°C
by the end of 2100. Although this transition risk assessment
tool also offers a 2°C scenario for use, a 1.5°C scenario will
identify the greatest risks and allow for a conservative degree
of planning in this regard.
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning
The Board oversees our business strategy and financial
planning, recognising climate change is a critical risk. The
portfolio-wide risk and opportunity assessments summarised
in the tables below will inform our strategy and financial
planning in the next reporting period. We understand the
importance of repeating these assessments periodically at
regular intervals to ensure risk identification remains current
and can be integrated with our planning processes.
2.0 STRATEGY CONTINUED
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
Climate-related physical risks
CHRONIC/ACUTE CLIMATE HAZARD TIME HORIZON POTENTIAL RISKS TO URBAN LOGISTICS PORTFOLIO FINANCIAL IMPACTS
Acute Flood risk, heavy
rainfall events
Short to medium
term
Damage to building structures and cost of business interruption
reflected in increased insurance costs.
Higher insurance premium
Higher maintenance and repair costs
Impact on asset value
Acute Sea level rise Long term Building damage, and potential inhabitation of assets. Higher insurance premium
Increased risk of assets stranding
Chronic Fire weather and
drought stress
Long term Damage to external areas and reduced air quality locally.
Cost of business interruption.
Higher insurance premium
Higher maintenance and repair costs
Impact on asset value
Chronic Heat stress Long term Increased investment in retrofit measures to reduce overheating risk
in buildings.
Reduced thermal comfort of staff with the potential to impact wellbeing.
Retrofit costs and increased operating costs to ensure thermal
comfort and building performance
Upgrading existing cooling equipment
Chronic Precipitation stress
(heavy rainfall)
Long term Damage to building structures and cost of business interruption
reflected in increased insurance costs.
Higher insurance premium
Higher maintenance and repair costs
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
41
2.0 STRATEGY CONTINUED
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
Climate-related transition risks
TYPE OF RISK CLIMATE RISK POTENTIAL RISKS TO URBAN LOGISTICS PORTFOLIO POTENTIAL FINANCIAL IMPACTS
Policy & Legal Asset performance
compliance
The emerging legislative changes from the Minimum Energy Efficiency Standards (“MEES”)
presents stranding and letting risks.
Regulations on embodied carbon limits could lead to increased costs associated with the
procurement of low-carbon materials for developments and refurbishments.
Increased costs to ensure compliance with additional risk to further
costs for non-compliance
Policy & Legal Biodiversity
requirements
Stricter approach to development land management expected in 2023 under the
EnvironmentAct 2021.
Increased development costs
Policy & Legal Reporting
compliance
Reporting requirements for UK businesses are evolving and becoming stricter.
Anynon-compliant disclosures or incorrect submissions risk enforcement action/fines.
Increased costs to ensure compliance with additional risk to further
costs for non-compliance
Market Policy & Legal Occupier
behaviour
Demands from stakeholder groups for net zero operations are growing and regulations around
energy efficiency are tightening, Occupiers account for 95% of total emissions. This presents
arisk to any future long-term net zero ambitions.
Increased capital expenditure to align with regulatory requirements
and market demands
Market Decarbonisation
oflogistics sector
High transition costs to logistics occupiers increasing pressure on cost of occupation.
Increased localisation of production and distribution of goods to reduce transport emissions.
Reduced revenue
Reduced rental growth
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
42
Describe the organisation’s processes for
identifying and assessing climate-related risks
The Audit Committee have overall responsibility of the
potential risks the Company could face, and ESG Committee
advise the Audit Committee on specific risks relating to ESG,
as outlined in the Governance section above.
All risks identified during acquisition and throughout a
property’s life cycle are recorded on the risk register. Risks are
categorised as either (1) operational, (2) strategic or (3) ESG.
Allrisks are rated based on probability and impact in order to
form a risk hierarchy.
The scoring process is carried out independently by each
Director then pooled to formulate an agreed view.
To identify risks during acquisitions, we commission an
Environmental Due Diligence Report. We also commission EPC
Plus reports for all acquisitions below an EPC B. Additionally,
in 2023 we carried out climate-related risk assessments
across our entire portfolio, in collaboration with CBRE. The
assessment covered physical, transition and stranding risk
across the short, medium and long term.
Describe the organisation’s processes for
managing climate-related risks
The Audit Committee formally considers and assesses the
risks that may be relevant to Urban Logistics on a regular basis.
Each year, the risk register is reviewed by external auditors.
We recognise transitioning our portfolio in line with UK
climate legislation represents a significant transition risk to
the business, as detailed above. We are aware of the financial
investments required to ensure all properties within the
portfolio meet the minimum standards required by current
and emerging legislation. As a result, Urban Logistics have
been primarily focused on climate-related risks as presented
through legislation and compliance, specifically exposure to
the updates to the Minimum Energy Efficiency Standards
(“MEES”) anticipated in 2023, and related costs to reduce
emissions and improve energy efficiency.
In order to minimise the impact of these climate-related
transition risks, the transition risk assessment detailed above
used energy consumption and carbon emission information
for Urban Logistics assets. This assesses the alignment of
the portfolio with the decarbonisation pathways outlined
by the CRREM tool, funded by EU Horizons and the Laudes
Foundation. The assessment has been based on data gathered
for the REIT’s 2022 GRESB submission, with data covering the
2021-2022 financial year.
As outlined in the strategy section above, we adopt an active
asset management approach which enables us to recognise
risks in changing behaviours. We meet with tenants on a
quarterly basis to discuss asset level matters and hear any
issues or concerns. This level of tenant engagement paired
with a CRREM ("Carbon Risk Real Estate Monitor") analysis
helps Urban Logistics to efficiently identify any assets at risk of
stranding. Urban Logistics are developing a fully costed asset
management plan across all buildings currently less than
an EPC B rating, and tracking EPCs to ensure they are well
positioned against the upcoming MEES legislation.
Describe how processes for identifying,
assessing and managing climate-related risks
are integrated into the organisation’s overall
risk management
Urban Logistics operate a risk register, as outlined above,
which ensures climate-related risks are integrated into our risk
management processes. The assessment of climate-related
risks are also embedded within our investment and asset
management strategies for acquisitions and major capital
expenditures. The Audit Committee conducts periodic reviews
for new risks which may impact our business and strategy,
and to ensure our risk management process is robust and
comprehensive to support ongoing operations.
We are also able to manage risk though the various
reporting frameworks we adopt. GRESB, EPRA Best Practice
Recommendations in Sustainability Reporting, MSCI ESG
Benchmarking, Taskforce on Climate-Related Financial
Disclosure (“TCFD”) and other relevant standards such as the
European Union’s Sustainable Finance Disclosure Regulation
(“SFDR”). Environmental compliance obligations are also
identified through the advice of the Company’s legal and
ESGadvisers.
3.0 RISK MANAGEMENT
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
43
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities
in line with its strategy and risk management
process
We aim to promote transparency on ESG disclosures and
inform all our stakeholders about climate-related performance
and reporting. In line with TCFD recommendations, we employ
a holistic set of metrics in order to assess climate-related risks
and opportunities. These metrics can be found on pages 35
and 36 of this 2023 Annual Report.
We also report to GRESB, sBPR and in line with EPRA
Sustainability Best Practices Recommendations, which
includes GHG, energy, certifications, and training metrics.
Ourfull EPRA disclosures are on pages 122 to 135 of this 2023
AnnualReport.
In an attempt to manage the full scope of our emissions, we
also measure our tenants water usage, waste and energy
usage through our annual GRESB submission. However, these
are not publicly reported.
Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 greenhouse gas (“GHG”) emissions and
the related risks
Urban Logistics has collated Scope 1, 2 and 3 emissions,
including the estimation of the complete portfolio footprint.
Details can be found on pages 37 and 38 of this 2023 Annual
Report. Greenhouse gas emissions have been calculated
using UK government conversion factors from BEIS and
the Corporate Greenhouse Gas Protocol location-based
methodology.
We recognise that Scope 3 emissions from the operations
of our tenants is our largest emission source, accounting for
over 95% of our carbon impacts. We view the lack of direct
control over these emissions as the primary challenge in how
we manage climate risks. For this reason, we have engaged
with all tenants to support their decarbonisation activities and
gather data, which will inform our Scope 3 GHG targets in
the coming years. While our Scope 1 and 2 emissions are not
a significant proportion of their footprint, we believe our aim
to be operational net zero (Scopes 1 and 2) by 2024 to be a
significant commitment.
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets
Urban Logistics have committed to a set of targets to manage
the climate-relates risks and seize the opportunities identified
in this report. Details of our targets can be found on pages 35
and 36 of this Annual Report.
4.0 METRICS AND TARGETS
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
44
Companies Act 2006 section 172 statement
In order to comply with section 172 of the Companies Act
2006, the Board is required to take into consideration the
interests of stakeholders and include a statement setting out
the way in which Directors have discharged this duty during
the year.
The Directors of the Company have acted in a way that they
considered, in good faith, to be most likely to promote the
success of the Company for the benefit of its members as a
whole and, in doing so, had regard, amongst other matters,
to those matters set out in section 172(1)(a) to (f) of the
Companies Act 2006, being:
(a) the likely consequences of any decision in the long-term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships
with suppliers, customers and others;
(d) the impact of the Company’s operations on the
community and the environment;
(e) the desirability of the Company maintaining a reputation
for high standards of business conduct; and
(f) the need to act fairly as between members of the
Company.
In doing so, the Directors have considered the interests of the
various stakeholders of the Company, the impact the Company
has on the community and environment, maintained a
reputation for high standards of business conduct and fair
treatment of shareholders, and taken a long-term view on the
consequences of the decisions theytake.
Fulfilling this duty supports the Company in achieving its
investment strategy and helps ensure that all decisions are
made in a responsible and sustainable way.
To ensure that the Directors are aware and understand
their duties, they are provided with all relevant Company
information when they are appointed to the Board and receive
regular updates and training on matters where appropriate.
Directors also have access to the advice and services of
the Company Secretary as well as independent advisers,
should they wish. Directors receive technical updates from
the Company’s advisers, the Company Secretary, and the
Investment Manager as and when appropriate. The Board
has a schedule of matters reserved for its approval which,
alongside the Terms of Reference of all Board Committees,
isreviewed on at least an annual basis.
The Board continues to keep engagement mechanisms under
review so that they remain effective.
Risk management
The Audit Committee has the responsibility for the ongoing
management of the Company’s risk management and
internal controls. To the extent that they are applicable, risks
that are set out in s172 Companies Act 2006 are included in
the Company’s risk register and are subject to regular review
andmonitoring.
Stakeholders
During the period under review, the Board has discussed
which parties should be considered as stakeholders of the
Company. These are detailed in the table opposite. Asan
externally managed Real Estate Investment Trust, the
Company has no employees and outsources its operations
tovarious service providers.
S172 STATEMENT AND STAKEHOLDER ENGAGEMENT
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
45
S172 STATEMENT AND STAKEHOLDER ENGAGEMENT CONTINUED
OUR SHAREHOLDERS OUR COMMUNITIES OUR INVESTMENT MANAGER
Who are they?
Those who own shares in the Company.
Why are they important to us?
Continued shareholder support is critical to the sustainability of the Company and delivery
ofthe Company’s long-term business strategy.
What do they want from us?
Shareholders want a clearly articulated strategy and effective communication of our
progress.
How do we engage with them?
Through the Annual and Interim Reports and announcements to the market. The Company
encourages and welcomes shareholder queries at its Annual General Meeting. The
Board and senior members of the management team also make themselves available to
shareholders at its Annual General Meeting and on an ad hoc basis.
Further information as to how the Company has engaged with its shareholders can be found
on page 65.
Who are they?
Those who live in areas where we work or
have assets. For example, local residents,
businesses, schools and charities.
Why are they important to us?
These are the people who work in our
tenants’ businesses, who are customers of
our tenants, and neighbours to our sites.
It’s important that we have good relations
with them in our mutual commitment
to economically and environmentally
sustainable operations.
What do they want from us?
Our communities want us to be good
neighbours and to engage with the local
community to support a sustainable
economy, jobs and environment.
How do we engage with them?
We engage with communities as
appropriate to our activities on each site.
Particular engagement is carried out
on development sites, to ensure that
developments are carried out in a way
which benefits the local community.
Further information as to how the Company
has engaged with ourcommunities can
befound on page 129.
Who are they?
PCP2 Limited.
Why are they important to us?
The Investment Manager’s performance
iscritical for the Company to successfully
deliver its investment strategy.
What do they want from us?
Our Manager expects the Board to provide
clear direction in terms of overall strategy
and investment policy.
How do we engage with them?
The Board and the Investment Manager
have a close working relationship.
TheManager attends the regular
Board meetings and is required to
seek Board approval for all major
property acquisitions and disposals.
TheManagement Engagement
Committee reviews the contractual
arrangements with the Investment
Manager annually. Furtherinformation
asto how the Company has engaged with
our Investment Manager can be found
onpages 76 and 77.
23 NOVEMBER 2022
Investors were invited to tour a recent
acquisition - an asset in Southall, West
London with Delice de France as tenant.
The day gave investors the opportunity to
not only visit an asset, but also to spend
significant time with the management
team and Board in an informal setting,
before Richard Moffitt, Manager CEO,
gavea presentation and took questions.
CAPITAL MARKETS DAY
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
46
S172 STATEMENT AND STAKEHOLDER ENGAGEMENT CONTINUED
OUR TENANTSOUR BANKERS/CREDITORS OUR PARTNERS
Who are they?
Everyone who uses our buildings, that is our warehouse occupiers, their employees
andguests.
Why are they important to us?
Serving our customers is the reason we exist. Our occupiers provide us with rental income,
soit is essential we serve their needs and the needs of their customers.
What do they want from us?
Customers want us to understand and respond to their changing needs so their businesses
can thrive. That means providing sustainable, efficient space and customer service.
How do we engage with them?
Through regular contact with our warehouse occupiers to understand what is important to
them, and to evaluate the services we provide. Further information as to how the Company
has engaged with its tenants can be found below.
Who are they?
Our principal financing partners are
Barclays, Santander, Lloyds and Aviva.
Why are they important to us?
Gearing is an important part of our strategy
to grow our business and deliver returns to
shareholders.
What do they want from us?
Our financing partners expect us to
purchase appropriate real estate in line
with our investment parameters and
maintain compliance with covenants and
keep them well informed.
How do we engage with them?
We report regularly to our banks
throughout the year and enjoy a good
working relationship with them. Further
information as to how the Company has
engaged with our bankers/creditors can be
found on page 30.
Who are they?
Those who have a direct working or
contractual relationship with the Company.
This includes our external service providers,
such as lawyers, accountants and
CompanySecretary.
Why are they important to us?
As we outsource all our administrative
functions to external service providers,
theyare critical to the administration and
running of our business.
What do they want from us?
Our partners want us to be open and
straightforward in our dealings with them.
How do we engage with them?
We work to find mutually effective ways to
communicate and collaborate with each
group and endeavour to have constructive
relationships. Further information as to how
the Company has engaged with our various
service providers can be found on page 76.
PROACTIVE ENGAGEMENT
Our Manager engages with tenants on an
ongoing basis, and maintains a very high
ratio of asset managers to assets to allow
them to do this.
On-site engagement is key, however we
also formally request feedback on an
annual basis via a tenant engagement
survey, to ensure nothing is missed.
TENANT ENGAGEMENT
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
47
Decision-making
The Board’s principal decisions each year typically include
approving acquisitions, capital expenditure, capital raises
(debt and equity) and dividend payments. Examples of the
key decisions the Board has made during the year under
review can be found in the table below. The importance of
stakeholder considerations in the context of decision-making
is taken into account at every Board meeting.
The Company’s business model is driven by acquiring assets
where we see the opportunity to improve sustainability
and performance. This commitment sits at the heart of the
Company’s business.
KEY BOARD DECISIONS
DURING THE YEAR
STAKEHOLDERS
DECISION TO PAY INTERIM DIVIDENDS OUR SHAREHOLDERS
The Board targets a minimum annual total dividend of 7.60pence
per Ordinary Share. The Company is targeting an annual total return
of between 10% and 15% through a combination of dividends and
growth in NAV. Details on the dividends paid to date can be found
on page 107.
DECISION TO MAKE ACQUISITIONS
ANDDISPOSALS
OUR SHAREHOLDERS, OURCOMMUNITIES
& ENVIRONMENT ANDOUR TENANTS
The Board is responsible for the ongoing review of investment
activity and performance, and the control and supervision of the
Investment Manager. Detail on our acquisitions for the year to
date can be found on pages 108 and 109.
S172 STATEMENT AND STAKEHOLDER ENGAGEMENT CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
48
Our aim is to deliver sustainable earnings and long-term capital growth through the execution of
our strategy. We track our progress against six key performance indicators to monitor the performance
of the Group.
KEY PERFORMANCE INDICATORS
TOTAL ACCOUNTING RETURN (%)
(9.9)
2023
28.9
15.6
5.6
17.7
2022202120202019
TAR measures the movement in EPRA NTA
per share plus dividends paid during the
period, expressed as a percentage of the
EPRA NTA per share at the beginning of the
period. Our objective is to deliver long-term
returns through execution of our strategy.
Performance:
TAR of -9.9% for the year ended
31March2023 (31 March 2022: 28.9%).
LOAN TO VALUE (%)
LTV measures the proportion of our property
assets that are funded by borrowings.
Ourmedium-term target is 30-40% of the
Group’s gross asset value.
Performance:
LTV of 29.0% at 31 March 2023
(31 March 2022: 11.3%).
29.0
27.9
0.0
11.3
33.7
20232022202120202019
WAULT (YEARS)
WAULT is the average unexpired lease term
across the invested portfolio, weighted by
annual passing rents. It is used to determine
the quality of our investment portfolio.
Ourmedium-term target is five to seven years
across the portfolio.
Performance:
WAULT of 8.2 years at 31 March 2023
(31March 2022: 7.7 years).
8.2
7.7
7.4
4.9
5.5
20232022202120202019
EPRA NTA PER SHARE (P)
EPRA NTA per share is the value of our assets
less the book value of our liabilities, calculated
in accordance with EPRA guidelines, that
is attributable to our shareholders. Our aim
is to build on long-term asset value growth
whilst managing liabilities.
Performance:
EPRA NTA per share of 162.44p at
31March2023 (31 March 2022: 188.78p).
162.44
188.78
152.33
137.89
137.96
20232022202120202019
ADJUSTED EARNINGS PER SHARE
1
(P)
Adjusted EPS measures the Group’s underlying
operating results and provides an indication of the
extent to which current dividend payments are
supported by earnings. For further information
see note 13 of the Financial Statements.
Performance:
Adjusted EPS of 6.93 pence per share
fortheyear ended 31 March 2023
(31 March 2022: 6.71pence).
6.93
6.71
6.76
7.66
7.01
20232022202120202019
TOTAL COST RATIO (%)
The ratio of our property operating
and administrative costs expressed
as a percentage of the Group’s gross
rentalincome.
Performance:
Total cost ratio of 21.2% for the year ended
31March 2023 (31 March 2022: 21.8%).
21.2
21.8
21.4
18.9
23.5
20232022202120202019
1. A full reconciliation between IFRS earnings per share and adjusted earnings per share can be found in note 13 of the Financial Statements.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
49
Risk appetite statement
The Company’s assets are made up of UK commercial
property. Its principal risks are therefore related to the
commercial property market in general and also to the
particular circumstances of the individual properties and the
tenants within the properties. Taking this into account, the
Company’s risk appetite policies and procedures alongside
the appropriate controls and fi nancial reporting are regularly
reviewed and updated to ensure they remain in line with
regulation, corporate governance and expected industry
practice.
Urban Logistics utilise three lines of defence in terms of risk
management. Line one comprises the management team
at PCP2 Ltd (the “Investment Manager”) who take ownership
of the risk, manage the internal controls to mitigate it, and
report to the Board against the agreed risk matrix. The second
line of defence is built around oversight and challenge, which
is the responsibility of the Board and reported on by the
independent Directors who make up the Audit Committee,
and the third line is the comfort the Directors take from the
independent assurance provided by the external auditor.
The Board has performed a robust assessment of the principal
strategic and operational risks facing the Company as well
as assessing identifi able emerging risks. The Board formally
reviews its risk matrix twice yearly but is made aware of any
risk exposure either as and when it happens or at the quarterly
Board meetings. The Audit Committee, which I chair, will
review the process on how risk is allocated and reported while
also making sure the appropriate discussions are had with the
Investment Manager on their existing concerns or any threats
from the external environment.
Risks are measured based on probability and potential impact
using a scoring matrix. This is populated by each of the
Directors independently, and then collated into a heat map
which seeks to identify the most prescient of risks, which I
then review and propose amendments to, as Chairman of the
Audit Committee. The output from the heat map draws out
ten risks which are detailed here, and the movement from
the prior year. The commentary below discusses both how
the Board sees the potential impact of the risk, as well as the
actions being taken to mitigate it.
Bruce Anderson ACMA FCIOBS
Chairman of the Audit Committee
PRINCIPAL RISKS AND UNCERTAINTIES
Risk heat map
Low Moderate High
Unlikely Likely Very likely
Impact
Probability
4
5
1
9
3
7
8
6
2
10
Existing risk
New risk
The Board is responsible for determining the nature and
extent of the principal risks that the Group is willing to
take in achieving its objectives, and has carried out a
robust assessment of the principal risks facing the Group,
including those that would threaten the business model,
future performance, solvency or liquidity. TheBoard
recognises that its ability to manage risk effectively
throughout the organisation is central to the Company’s
success.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
50
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
RISK POTENTIAL IMPACT CHANGEMITIGATION
01.
Weakening macroeconomic
environment in the UK,
including higher interest rates,
inflationarypressures and
therisk ofrecession
Impact on tenants financial strength and
subsequent potential higher vacancy rates,
lower rents and a fall in ERV and capital
values of our portfolio, as well as the risk of
bad debt
In an individual tenant failure scenario, quality of asset and location
mitigates risk as assets are able to be re-let quickly
In the case of a sector specific downturn scenario, the Group has
adiverse tenant base and is not over-exposed to any one tenant
In a systemic failure scenario, the Group maintains a low LTV and high
fixed debt proportion, allowing headroom in the case of significant
numbers of tenant failures
02.
Insufficient funds and
available credit for operational
requirements of business,
including investing in CAPEX
forthe existing portfolio
Impact on the ability to develop properties
in line with our active asset management
mandate
Cash flow forecasts are prepared and presented to the Board on
aquarterly/ad hoc basis
Loan covenants have sufficient headroom to gain access to additional
capital if required
Barclays facility includes a £51 million RCF, designed to give
operational flexibility in funding CAPEX and other needs, with
£10million undrawn at year end
N/A – New risk
03.
Inability of the Company to
raise new money to develop and
grow the business, due to the
Company share price trading at a
discount to NAV
Impact on ability to execute against
pipeline and grow the business
Increased attractiveness of Company as a
takeover target if discount to NAV remains
significant over an extended period
While we are unable to raise capital we will focus on asset recycling to
retain an ability to execute against pipeline and consider raising the
level of debt to be within our target LTV range of 30-40% to enable
further acquisitions and/or share buybacks to manage the discount.
Increased Decreased No change
N/A – New risk
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
51
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
RISK POTENTIAL IMPACT CHANGEMITIGATION
04.
Risk of higher interest rates
affecting financial performance
and banking covenants
Impact on our ability to meet our
shareholder return targets if higher interest
rates increase our cost of capital
Impact on our interest cover covenants if
interest rates rise materially
Risks are mitigated by use of long-term fixed rate debt and
high-hedging levels
Interest cover is monitored by the Board on a quarterly basis to ensure
adequate headroom is maintained
N/A – New risk
05.
Tenant Default
Impact on financial returns Diversified portfolio
High-quality tenants with strong covenants with a focus on large
corporates
We conduct quarterly credit checks on all tenants
06.
Increased CAPEX spend
connected to hitting MEES
legislation, and potential
reduction in property values if
legislation is not met
Material increase in CAPEX will put
pressure on financial performance
ifcostscannot be passed to tenants
If space cannot be leased to tenants due
to failing MEES legislation, this will reduce
capital values
As an active asset manager, the Company aims to capture the benefit
from increased CAPEX spend in rental rates and property valuations
The Company has had significant success in encouraging tenants to
finance the required upgrades
52% of our portfolio is already an A or B, and our Manager has costed
out the total CAPEX (expected to be paid by a combination of both
the Group and tenants) which is required to improve all EPCs to a B or
above, allowing us to improve in our long-term planning
Increased Decreased No change
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
52
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
RISK POTENTIAL IMPACT CHANGEMITIGATION
07.
Reluctance of tenants to take
leases in buildings with a lower
than average environmental
performance
Impact on rental rates, voids and ultimately
property valuations of a reluctance of
tenants to take space in buildings with an
EPC within the MEES guidelines, but below
A/B grades
The Group has implemented a sustainability improvement
programme aiming to produce more energy efficiency buildings
toimprove EPC ratings
08.
Breach of bank covenants
Financial impacts of a breach in covenants
Reduced access to credit in the future
The Group has three banking covenants that are reviewed quarterly:
1.
Loan to Value;
2.
Historical Interest Cover (“HIC”); and
3.
Projected Interest Cover (“PIC”).
Banking reports are prepared by the Manager, and compliance
certificates are signed by a member of the Board
Continuous monitoring of the property cycle
The Group also maintains the ability to make "cure" payments
toremedy a breach
The Group currently has c.£235 million of unencumbered assets
whichcould be used to remedy a breach
Increased Decreased No change
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
53
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
09.
ESG roadmap not sufficiently
ambitious and detailed
Impact on our ability to raise debt and
equity capital if our ESG strategy and
roadmap is not sufficiently ambitious
anddetailed
The ESG Committee meet twice a year to review ESG strategy,
andensure sufficient ambition related to our peer group
ESG strategy, risks and opportunities are discussed and considered
at the Audit Committee, as well as at the Board strategy day and the
main Board where relevant
10.
Related party risk
Reputational risk with perceived conflict
around the relationship with M1, in which
Richard Moffitt has a financial interest
The Board, with the assistance of the Manager, excluding Richard
Moffitt, review and approve each acquisition or disposal fee payable
toM1 Agency
All related party transactions are reported to the market in a
transparent manner
The board engage in significant shareholder engagement to explain
the benefits to the Company of the arrangement, to mitigate
reputational risk. As a result of this engagement additional restrictions
and requirements have been put in place post period end as part of
the new Investment Advisory Agreement
Increased Decreased No change
RISK POTENTIAL IMPACT CHANGEMITIGATION
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
54
The Board has assessed the prospects of the Group over a period longer than the twelve months required by
the relevant ‘going concern’ provisions. In reviewing the Company’s viability, the Directors have assessed the
viability of the Company for the period to 31 March 2028 (the “Period”).
VIABILITY STATEMENT
The Board believes that the period, being approximately five years, is an appropriate time
horizon over which to assess the viability of the Company, particularly when taking into account
the long-term nature of the Company’s investment strategy, the cyclical nature of property
investment, and the principal risks documents in the Strategic Report on pages 1 to 55.
In making this statement, the Directors have considered and challenged the reports of the
Investment Manager in relation to the resilience of the Group, taking account of its current
position, the principal risks faced in severe but reasonable scenarios, including a stressed
scenario, the effectiveness of any mitigating actions and the Group’s risk appetite.
In addition, the Board also considered a number of other factors when assessing the viability
ofthe Company:
•
strong rent collection rates. 99.9% of all rent due and demanded was collected in the year;
•
the weighted average unexpired lease length was 8.2 years;
•
sufficient liquidity with £30.2 million of cash balances and £10.0 million of available
facilitiesto draw down at the year-end;
•
85% of the Group’s drawn debt facilities are hedged or fixed and at the year end had
aweighted average maturity of 5.4 years; and
•
the Group’s loan to value at 31 March 2023 was 29.0%.
Sensitivity analysis has been undertaken to consider the potential impacts of such risks on
the business model, future performance, solvency and liquidity over the Period, both on an
individual and combined basis. In particular, this has considered:
•
a weakening macro-economic environment leading to a significant fall in property
valuationwhich was sensitised up to 15%;
•
changes in the occupational market impacting lettings; and
•
higher inflation in UK and Global marketed leasing to higher cost of capital and an
additional 5% increase in forecast vacancy rate due to tenant failure.
Reverse stress testing was also undertaken over the Period. In isolation, it would take at least
39% reduction in property values during the Period to breach the loan to value covenant.
Rental income would need to decrease, on average, by approximately 29% prior to any breach
of the interest cover covenants. The Group has assumed the Barclays loan facility is refinanced
in theforecast period.
The Directors have determined that a five-year look forward to March 2028 is an appropriate
period over which to provide it's viability statement. This is consistent with the outlook period
used in medium-term forecasts regularly prepared for the Board by the Investment Manager
and the discussion of any new strategies undertaken by the Board in its normal course of
business.
These reviews consider both the market opportunity and the associated risks, principally
the ability to raise third-party funds and invest capital, or mitigating actions taken, such as
areduction of dividends paid to shareholders or utilisation of additional drawings.
Based on this assessment, the Directors have a reasonable expectation that the Company
will be able to continue to operate and to meet its liabilities as they fall due to the period
to31March 2028.
Approval of Strategic Report
The Strategic Report, including Operational and Financial Highlights, Chairman’s Statements,
Investment Manager’s Report, Key Performance Indicators and Principal Risks and
Uncertainties, was approved by the Board of Directors and signed on its behalf by:
Nigel Rich, CBE
Chairman
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
55
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
56
BOARD OF DIRECTORS
Nigel Rich CBE FCA
Independent Non-Executive Chairman
Richard Moffitt
Non-Independent Director
& CEO of Investment Adviser
Jonathan Gray
Independent Non-Executive Director & Senior
Independent Director (until 11 May 2023)
M
N
E
A
Chairman
N
Nomination Committee
A
Audit Committee
E
ESG Committee Member
Date of appointment: January 2017
External appointments: Nigel is Chairman of Foxtons Group plc,
aDirector of Matheson & Co. Limited and a Director of Chelsea
SquareGarden Limited.
Experience and contribution: Nigel brings a wealth of Board
experience, having operated across the globe in senior positions.
He served as the Group Chief Executive of Trafalgar House plc from 1994
to 1996 and previously spent 20 years with the Jardine Matheson Group
in Asia and Africa, before becoming Managing Director of the Group
from 1989 to 1994.
Nigel has served as the Chairman of the Board of CP Ships, Exel,
Hamptons, Xchanging, as well as Segro. He has been a Director of
Granada, ITV, Harvey Nichols, AVI Global and Pacific Assets. He has also
been a member of the Takeover Panel (UK).
Annual remuneration: £100,000
Employment by the Investment Adviser: None
Other connections with the Company, AIFM or Investment Adviser:
None
Shared external directorships with any other Company Directors:
None
Shareholding in Company: 540,536 Ordinary Shares
Date of appointment: January 2016
External appointments:
Richard is Chairman of ELREP Asset Management LLP and M1 Agency
LLP. Further information can be found in note 32 of the Financial
Statements.
Experience and contribution:
Previously an Executive Director at CBRE, where he was Head of the UK
Industrial team, Richard has over 30 years’ specific real estate logistics
experience.
He has an in-depth understanding of the market dynamics, credibility
with owners and operators of logistics assets, a thorough understanding
of both owner and tenant requirements, and an extensive network of
contacts across the real estate universe.
He is a member of the Chartered Institute of Logistics and Transport.
Annual remuneration: Richard has waived his right to receive any
remuneration as a Director of the Company.
Employment by the Investment Adviser: Richard leads the investment
advisory team as CEO
Other connections with the Company, AIFM or Investment Adviser:
M1Agency LLP
Shared external directorships with any other Company Directors:
None
Shareholding in Company: 1,142,843 Ordinary Shares
Date of appointment: January 2016
Date of resignation: Post year end and following the result of the
General Meeting held on 11 May 2023, Jonathan resigned from the Board.
External appointments: Following Jonathan’s resignation from the
Board, he became non-executive chair of the Investment Adviser.
Jonathan also currently works as a financial consultant to a variety of
international companies and has other non-executive directorships
including Argentex Group PLC.
Experience and contribution: Jonathan has considerable financial
services experience having worked as a corporate financier for over
25years in the City with senior roles at HSBC, UBS and NCB.
He has advised a number of property companies such as Property Fund
Management, Cleveland Trust and CLS Holdings. From 2010-2014 he was
the Non-Executive Chairman of PGF II SA, a London-based £200 million
private property fund.
Annual remuneration: £60,000
Employment by the Investment Adviser: Jonathan became
non-executive chair of the Investment Adviser on 12 May 2023, following
stepping down from the Board
Other connections with the Company, AIFM or Investment Adviser:
Jonathan is a Director of Argentex Group PLC, a listed company in which
Pacific Investments Group, the ultimate holding company of PCP2
Limited (the previous AIFM of the Company), has a shareholding.
Shared external directorships with any other Company Directors: None
Shareholding in Company: 60,000 Ordinary Shares
M
Management Engagement Committee
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
57
BOARD OF DIRECTORS CONTINUED
Bruce Anderson ACMA FCIOBS
Independent Non-Executive Director
Mark Johnson
Non-Independent Director (until 11 May 2023)
Heather Hancock LVO DL
Independent Non-Executive Director and Senior
Independent Director (from 12 May 2023)
Chairman
N
Nomination Committee
A
Audit Committee
E
ESG Committee Member
Date of appointment: January 2016
External appointments: Bruce is currently Chairman of Hire and
Supplies Limited, a plant hire based in Dumfries, and an adviser to the
Housing Growth Partnership Fund. Bruce is a Trustee of Edinburgh
Athletic Club and a former Non-Executive Director of Green Property
Limited.
Experience and contribution: Bruce has considerable real estate and
financial services experience having worked in senior roles at Lloyds,
HBoS and Bank of Scotland with 20 years of investment-led boardroom
positions. He has experience with both real estate companies and REITs
across the UK, Europe and the Far East.
At Lloyds he was Head of Joint Ventures for the Specialist Finance
division, responsible for a mixed portfolio of real estate, including both
equity and debt elements. He is a qualified Accountant.
Annual remuneration: £60,000
Employment by the Investment Adviser: None
Other connections with the Company, AIFM or Investment Adviser:
None
Shared external directorships with any other Company Directors:
None
Shareholding in Company: 50,000 Ordinary Shares
Date of appointment: January 2017
Date of resignation: Post year end and following the result of the
General Meeting held on 11 May 2023, Mark resigned from the Board.
External appointments: Mark is the CEO of the Pacific Investments
Group, having co-founded the business over 25 years ago.
Experience and contribution: After qualifying as a lawyer, Mark worked
in corporate finance at Barclays Merchant Bank and Barclays de Zoete
Wedd before co-founding Pacific Investments Group.
Mark was the CEO of the Riverside Group, and oversaw its successful sale.
Mark is (and was) a founding partner and shareholder/director of
Pacific’s investment portfolio of companies, including Liontrust Asset
Management, Thames River Capital, River & Mercantile Group, Argentex
Group, and Pacific Asset Management.
Annual remuneration: Mark waived his right to receive any
remuneration whilst he was a Director of the Company.
Employment by the Investment Adviser: PCP2 Ltd, the previous AIFM
to the Company, is a wholly owned subsidiary of Pacific Investments
Group, of which Mark is the CEO. On 11 May 2023, PCP2 ceased to be
AIFM to the Company
Other connections with the Company, AIFM or Investment Adviser:
None
Shared external directorships with any other Company Directors:
None
Shareholding in Company: 309,986 Ordinary Shares
Date of appointment: June 2020
External appointments: Heather is Master of St. John’s College,
Cambridge (in which capacity she also serves as a Trustee of the
University of Cambridge), a Director of Amerdale Limited and
Non-Executive Director of Rural Solutions Limited. She is also a Trustee of
the Chatsworth Settlement Trust, chairs the Prince’s Countryside Fund,
and is a Deputy Lieutenant of North Yorkshire.
Experience and contribution: Heather brings to the Board many years
of high-level experience in strategy, governance and leadership, gained
in the real estate sector and wider economy. In her current roles, she
oversees extensive real estate portfolios of investment, development,
strategic site and agricultural property assets across the UK.
Previously, Heather has been Chair of the Food Standards Agency, Managing
Partner at Deloitte and has served as the Executive Director of Yorkshire
Forward, leading on the assembly of a £35 million property portfolio.
Heather served as a trustee for the Prince’s Trust, for which she was
awarded the LVO in 2013.
Annual remuneration: £60,000
Employment by the Investment Adviser: None
Other connections with the Company, AIFM or Investment Adviser:
None
Shared external directorships with any other Company Directors: None
Shareholding in Company: 14,388 Ordinary Shares
M
Management Engagement Committee
A
E
M
N
E
A
M
N
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
58
The Board is committed to the highest standards of corporate
governance and recognises its responsibility to serve the
interests of shareholders by creating sustainable growth and
shareholder value over the medium to long term, whilst also
reducing or mitigating risk.
Compliance with the AIC Code of Corporate
Governance (the “AIC Code”)
The Board considers the practice of good governance to be
anintegral part of the way it manages the Company and is
committed to maintaining the highest standards of fi nancial
reporting, transparency and business integrity.
As Urban Logistics REIT plc is a UK-listed company, the Board’s
principal governance reporting obligation is in relation to the
UK Code of Corporate Governance (the “UK Code”) issued by
the Financial Reporting Council (the “FRC”). However, it is
recognised that investment companies have special
circumstances which have an impact on their governance
arrangements. An investment company typically has no
employees, and as such, the daily functions of the Company
areoutsourced to third parties. The Association of Investment
Companies has therefore set up its own AIC Code, last
updated in February 2019, which recognises the nature of
investment companies by focusing on matters such as board
independence and the review of management and other
third-party contracts.
The AIC Code is endorsed by the FRC and confi rmed that
companies which report against the AIC Code will meet their
obligations in relation to the UK Code and Listing Rule 9.8.6.
The Board has chosen to report against the AIC Code as it
believes that its principles and recommendations will provide
better information to shareholders than reporting against only
the UK Code.
A copy of the AIC Code can be found at www.theaic.co.uk.
A copy of the UK Code can be obtained at www.frc.org.uk.
The UK Code includes provisions relating to:
•
the role of the chief executive;
•
executive directors’ remuneration; and
•
the need for an internal audit function.
The Board considers that these provisions are not relevant to
the position of Urban Logistics, being an externally managed
real estate investment company. In particular, all of the
Company’s daily management and administrative functions
are outsourced to third parties. As a result, the Company has
no Executive Directors, employees, or internal operations such
as an internal audit function. The Company has therefore not
reported further in respect of these provisions, and in the
circumstances do not feel it is necessary to form a
Remuneration Committee.
The need for a separate Remuneration Committee will be
keptunder review but, at present, the functions which a
Remuneration Committee would be responsible for are
overseen by the full Board.
Strategy and business model
The Company has a clear and established strategy and
business model which promotes long-term value for
shareholders. Further detail on the Company’s strategy and
business model can be found in the Investment Manager’s
Report on pages 12 to 38.
CORPORATE GOVERNANCE STATEMENT
The Board is committed to the highest
standards of governance and recognises
itsresponsibility to serve all shareholders.
Nigel Rich CBE
Chairman
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
59
CORPORATE GOVERNANCE STATEMENT CONTINUED
APPLICATION OF AIC CODE PRINCIPLES
The table below outlines the main principles of the AIC Code, provides an overview of compliance and signposts to sections of the report where these principles have been applied.
Board leadership and purpose
Principle
A
A successful company is led by an effective Board, whose role is to
promote the long-term sustainable success of the Company, generating
value for shareholders and contributing to wider society. (Incorporates
relevant content from UK Code Principle A)
In managing the Company, the aim of the Board and of the Investment Adviser is to
ensure the long-term sustainable success of the Company. The Company takes an active
interest in ESG across its portfolio.
Strategic Report, pages 1 to 55
Board of Directors,
pages 56 and 57
Business model, page 11
Principle
B
The Board should establish the Company’s purpose, values and strategy,
and satisfy itself that these and its culture are aligned. All Directors
must act with integrity, lead by example and promote the desired
culture. (UK Code Principle B)
The purpose of the Company is to acquire and manage high-quality, single-let logistics
assets and generate both income and capital growth for our shareholders.
Strategic Report, pages 1 to 55
Our culture, pages 11 and 65
Our purpose, page 11
How we add value, page 11
Principle
C
The Board should ensure that the necessary resources are in place for
the Company to meet its objectives and measure performance against
them. The Board should also establish a framework of prudent and
effective controls, which enable risk to be assessed and managed. (UK
Code Principle C)
The Directors regularly consider the Company’s financial position with reference to the
business model, the balance sheet, cash flow projections, availability of funding and
contractual commitments. The Company’s objective is to deliver total investment returns
through both income, with regular dividends providing shareholders with a sustainable
income stream that will grow over the medium term, and targeted capital growth which
the Company believes will enhance shareholders’ total return over the long term.
In order to effectively assess and manage risk, appropriate controls and policies are in
place and are regularly reviewed and assessed by the Audit Committee. More
information can be found in the Audit Committee Report.
Further information on resources in place for the Company to meet its objectives and
measure performance against them can be found in the Sustainability Report and
Principal Risks and Uncertainties.
Sustainability Report,
pages 31 to 38
Principal risks and uncertainties,
pages 50 to 54
Risk management and
internal control, pages 65 and 66
Principle
D
In order for the Company to meet its responsibilities to shareholders
and stakeholders, the Board should ensure effective engagement with,
and encourage participation from, these parties. (UK Code Principle D)
In our section 172 statement we describe our key stakeholders, the reason they are
important to us and how we engage with them.
Stakeholders, pages 45 to 47
Section 172 statement,
pages 45 to 48
Shareholder engagement,
page 65
Division of responsibilities
Principle
F
The Chairman leads the Board and is responsible for its overall
effectiveness in directing the Company. They should demonstrate
objective judgement throughout their tenure and promote a culture of
openness and debate. In addition, the Chairman facilitates constructive
Board relations and the effective contribution of all Non-Executive
Directors, and ensures that Directors receive accurate, timely and clear
information. (UK Code Principle F)
The Chairman, independent on appointment, leads the Board and ensures that debates
are balanced and open whilst promoting behaviours which make up the Company’s
culture.
The annual evaluation of the Board’s effectiveness always considers the performance of
the Chairman, and whether he has performed his role effectively. The Directors, led by
the SID, have concluded that the Chairman has fulfilled his role and performed well to
support the effective functioning of the Board.
Role of the Chairman, page 63
The Board, page 63
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
60
CORPORATE GOVERNANCE STATEMENT CONTINUED
APPLICATION OF AIC CODE PRINCIPLES CONTINUED
Division of responsibilities continued
Principle
G
The Board should consist of an appropriate combination of Directors
(and, in particular, independent Non-Executive Directors) such that no
one individual orsmall group of individuals dominates the Board’s
decision-making. (Incorporates relevant content from UK Code Principle
G)
During the year under review, the Board consisted of four independent non-executive
Directors and two non-independent non-executive Directors. Mark Johnson (who
stepped down from the Board on 11 May 2023) and Richard Moffitt, are not independent
due to their relationship with the Investment Adviser. In the Board’s opinion, each
Director continues to provide constructive challenge and robust scrutiny of matters that
come before the Board.
The Board also considers the composition of the Board, as well as the longer-term
succession plans.
Board of Directors,
pages 56 and 57
Board Committees, page 66
Principle
H
Non-Executive Directors should have sufficient time to meet their
Board responsibilities. They should provide constructive challenge,
strategic guidance, offer specialist advice and hold third-party service
providers to account. (Incorporates relevant content from UK Code
Principle H)
The Board considers the required time commitment annually and, during the year under
review, the Board concluded that all Directors continued to devote sufficient time to the
business of the Company. Through their contributions in meetings, as well as outside of
the usual meeting cycle, the Directors share their experience and guidance with, as well
as constructively challenge, the AIFM and the Investment Adviser.
The Board, supported by the Management Engagement Committee, regularly assesses
the performance of all third-party service providers.
Board composition and succession,
page 64
Management Engagement
Committee Report, pages 76 and
77
Principle
I
The Board, supported by the Company Secretary, should ensure that it
has the policies, processes, information, time and resources it needs in
order to function effectively and efficiently. (UK Code Principle I)
The Board’s responsibilities are set out in the schedule of matters reserved for the full
Board and certain responsibilities are delegated to its Committees, so that it can operate
effectively and efficiently. Supported by its Committees, the Board has overall
responsibility for the purpose, strategy, business model, performance, framework for risk
management and internal controls and governance matters, as well as engagement with
shareholders and other key stakeholders.
Directors are also provided with any relevant information and have access to the
Company Secretary and independent advisers, if required.
The Board, page 63
Section 172 statement,
pages 45 to 48
Induction of new Directors, page 64
Composition, succession and evaluation
Principle
J
Appointments to the Board should be subject to a formal, rigorous and
transparent procedure, and an effective succession plan should be
maintained. Both appointments and succession plans should be based
on merit and objective criteria and, within this context, should promote
diversity of gender, social and ethnic backgrounds, cognitive and
personal strengths. (Incorporates relevant content from UK Code
Principle J)
The Nomination Committee, comprising independent non-executive Directors, is
responsible for identifying and recommending to the Board the appointment of new
Directors. Any new Board appointment is subject to a formal and rigorous process and
the details of this process are always disclosed in Annual Reports.
The Company’s policy on the tenure of Directors also helps to guide long-term succession
plans, and recognises the need for and value of progressive refreshing of the Board.
Board composition and
succession, page
64
Diversity, page 69
Nomination Committee Report,
pages 68 to 70
Principle
K
The Board and its Committees should have a combination of skills,
experience and knowledge. Consideration should be given to the
length of service of the Board as a whole and membership regularly
refreshed. (UK Code Principle K)
The Nomination Committee is responsible for identifying and recommending to the
Board the appointment of new Directors and considering long-term succession plans.
Board of Directors, pages 56 and 57
Nomination Committee Report,
pages 68 to 70
Board Committees, page 66
Board composition and succession,
page 64
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
61
CORPORATE GOVERNANCE STATEMENT CONTINUED
Composition, succession and evaluation continued
Principle
L
Annual evaluation of the Board should consider its composition,
diversity and how effectively members work together to achieve
objectives. Individual evaluation should demonstrate whether each
Director continues to contribute effectively (UK Code Principle L)
The Directors consider the evaluation of the Board, its Committees and themselves, to be
an important aspect of corporate governance, and evaluations are undertaken annually.
Nomination Committee Report,
pages 68 to 70
Audit, risk and internal control
Principle
M
The Board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of external
audit functions and satisfy itself on the integrity of financial and
narrative statements. (Incorporates relevant content from UK Code
Principle M)
The Audit Committee supports the Board in fulfilling its oversight responsibilities by
reviewing the performance of the external auditor, audit quality, as well as the auditor’s
objectivity and independence. The Committee also reviews the integrity and content of
the Financial Statements, including the ongoing viability of the Company.
Risk management and internal
control, page 65
Audit Committee Report, pages 71
to 73
Notes 3 and 4 to the Financial
Statements, pages 100 to 104
Principle
N
The Board should present a fair, balanced and understandable
assessment of the Company’s position and prospects. (UK Code
Principle N)
The Audit Committee supports the Board in assessing whether the Company’s Annual
Report presents a fair, balanced and understandable assessment of the Company’s
position and prospects.
Strategic Report, pages 1 to 55
Fair, balanced and understandable,
page 73
Audit Committee Report, pages 71
to 73
Independent Auditor’s Report,
pages 87 to 92
Financial Statements, pages 87
to121
Principle
O
The Board should establish procedures to manage risk, oversee the
internal control framework, and determine the nature and extent of the
principal risks the Company is willing to take in order to achieve its
long-term strategic objectives. (UK Code Principle O)
The Audit Committee supports the Board through its independent oversight of the
financial reporting process, including the Financial Statements, the system of internal
control and management of risk, the appointment and ongoing review of the quality of
the work and independence of the Company’s external auditor.
Principal risks and uncertainties,
pages 50 to 54
Viability statement, page 55
Audit Committee Report, pages 71
to 73
Management Engagement
Committee Report, pages 76 and 77
Risk management and internal
control, page 65
Note 24 to the Financial
Statements, pages 115 to 118
APPLICATION OF AIC CODE PRINCIPLES CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
62
CORPORATE GOVERNANCE STATEMENT CONTINUED
Remuneration
Principle
P
Remuneration policies and practices should be designed to support
strategy and promote long-term sustainable success. (Incorporates
relevant content from UK Code Principle P)
The Directors, with the exception of Mark Johnson (who stepped down from the Board
on 11 May 2023) and Richard Moffitt, are all non-executive and independent of the
Investment Adviser. They receive fees and nocomponent of any Director’s remuneration
is subject to performance factors.
Whilst there is no requirement under the Company’s Articles of Association or letters
ofappointment for Directors to hold shares in the Company, the majority of the Directors
do holdshares in the Company.
Strategic Report, pages 1 to 55
Directors’ Remuneration Report,
pages 78 to 81
Directors’ remuneration policy,
pages 80 and 81
Principle
Q
A formal and transparent procedure for developing policy on
remuneration should be established. No Director should be involved in
deciding their own remuneration outcome. (Incorporates relevant
content from UK Code Principle Q)
As the Company has no employees and the Board is comprised wholly of non-executive
Directors, the Board has not established a separate Remuneration Committee. Directors’
remuneration is determined by the Board as a whole, at its discretion within an
aggregate ceiling as set out in the Company’s Articles of Association. Each Director
abstains from voting on their own individual remuneration.
The terms and conditions of the Directors’ appointments are set out in letters of
appointment, which are available for inspection on request at the registered office of
theCompany.
Directors’ Remuneration Report,
pages 78 to 81
Principle
R
Directors should exercise independent judgement and discretion when
authorising remuneration outcomes, taking account of Company and
individual performance, and wider circumstances. (UK Code Principle R)
The process of reviewing the Directors’ fees is described in the Remuneration Report,
although as there are no performance-related elements of the remuneration, there is
very little scope for the exercise of discretion or judgement.
Directors’ Remuneration Report,
pages 78 to 81
APPLICATION OF AIC CODE PRINCIPLES CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
63
CORPORATE GOVERNANCE STATEMENT CONTINUED
Role of the Chairman
As Chairman of the Board, I have overall responsibility for the quality of the corporate
governance arrangements of the Company and the approach that is taken to ensure corporate
governance compliance is achieved. The Board as a whole has the responsibility and a legal
obligation to promote the interests of the Company and is responsible for defining the
Company’s corporate governance arrangements.
My role as Chairman is to lead the Board and I am responsible for its overall effectiveness in
directing the Company. I strive to promote a culture of openness and debate amongst the
Board and to facilitate effective contribution from all Board members.
The AIC Code requires the Chairman to be independent upon appointment. I have been
considered independent since my appointment in January 2017 and I have no relationships
that may create a conflict of interest with shareholders.
Senior Independent Director
The Company’s Senior Independent Director during the financial year ended 31 March 2023
was Jonathan Gray. At a General Meeting held on 11 May 2023, shareholders approved certain
proposals relating to the management arrangements of the Company. On that date, Heather
Hancock succeeded him in this role. As Senior Independent Director, Heather provides a
channel for any shareholder concerns regarding the Chairman, and will lead future annual
performance evaluations of the Chairman. The performance evaluation of the Chairman for the
year ended 31 March 2023 was led by Jonathan Gray, further information can be found within
the Nomination Committee Report on page 70.
A full description of the responsibilities of the Chairman and the Senior Independent Director
can be found on the Company’s website www.urbanlogisticsreit.com.
The Board
The Board is responsible for determining the Company’s strategy, investment policy and
overseeing the Company’s performance and business conduct. The Board is also responsible for
the continuing appointment and ongoing performance of the AIFM and the Investment
Adviser.
The Board holds formal, scheduled meetings each quarter, with additional ad hoc meetings
arranged as required. The Board (and Board Committees) are provided with high-quality
information in advance of each meeting, which enables proper debate and consideration of all
matters being presented.
The Board has a schedule of matters reserved for its decision-making which is reviewed on an
annual basis, and is available on the Company’s website at www.urbanlogisticsreit.com.
The Board regularly reviews the investment performance of the AIFM and the Investment
Adviser and assesses the progress of new investment opportunities. The Company’s strategy is
regularly reviewed in the context of a broader market outlook and future financial forecasting,
as well as historic financial performance. The Board works closely with the Company’s brokers,
Singer Capital Markets and Panmure Gordon, as well as its other advisers. The Board receives
reports regarding investor relations as well as regular updates from the AIFM, the Investment
Adviser and the Company Secretary on regulatory and compliance matters.
The Board has direct access to the services of its Company Secretary, Link Company Matters
Limited (“Company Matters”), as well as a range of other service providers. Company Matters, in
its role as Company Secretary, is responsible to the Board for ensuring that Board and
governance procedures are followed, and that applicable rules and regulations are complied
with. When deemed necessary, the Board may seek independent professional advice in the
furtherance of their duties, at the Company’s expense.
The Company has arranged a Directors’ and Officers’ liability insurance policy which includes
cover for legal expenses. The policy was reviewed at the time of the Main Market move and
remains in force as at the date of this report.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
64
CORPORATE GOVERNANCE STATEMENT CONTINUED
Board composition and succession
During the financial year ended 31 March 2023, the Board comprised four independent
Non-Executive Directors and two non-independent Non-Executive Directors. There were no
changes to the composition of the Board during the year. However, since the year end there
havebeen several directorate changes as announced to the market on 15 March 2023 and
11May2023.
On 11 May 2023, Jonathan Gray and Mark Johnson stepped down from the Board as a result of
changes to the management arrangements of the Company approved by shareholders on that
date. Jonathan Gray has also stood down from his role as Senior Independent Director with effect
from the same date. From 12 May 2023, the Senior Independent Director of the Company is
Heather Hancock.
Lynda Heywood joined the Board as an independent Non-Executive Director on 1 May 2023.
Shebrings a wealth of experience in guiding FTSE 100 companies to the Board, from her 20-year
tenure at Kingfisher Plc, and six years at Tesco Plc, holding group treasurer roles at both
organisations. Lynda Heywood is a member of all Board committees.
The Board is satisfied that it possesses a sufficient balance of skills, relevant sector experience
and knowledge to ensure that, as a whole, it functions well and that discussions and/or
decisions are not dominated by any one Director. The performance of the Board and of the
Chairman is evaluated annually. Further detail regarding the external evaluation of the Board
and Chairman during the financial year ended 31 March 2023 can be found in the Nomination
Committee Report on page 70.
The collective experience amongst the Board includes senior Board level/chairmanship
positions, financial services experience, and directorships within the property sector, all of which
contribute expertly to the deliberations of the Board.
The majority of Directors are independent from the AIFM and the Investment Adviser. Those
Directors deemed to be independent can be found in the Director biographies on pages 56
and 57.
As the Company is subject to the AIC Code, there is no requirement for a limit on the tenure of
the Chairman or the Company’s Board members. However, the Board recognises the value of
regularly refreshing its composition and remains committed to ensuring that it has the right mix
of skills and experience that are aligned with the evolution of the strategic plans of the
Company, while maintaining its independence of character and judgement. The Board expects
to maintain a tenure of nine years for its Directors, including the Chairman, thus preserving the
cumulative valuable experience and understanding of the Company, while benefiting from
fresh perspectives and helping to promote diversity. Furthermore, all Directors, save for Lynda
Heywood, will be subject to annual re-election at the Company’s forthcoming Annual General
Meeting (“AGM”) in July 2023. Lynda Heywood shall stand for election at the AGM, being her first
AGM post her appointment.
All Directors are expected to attend Board and Committee meetings and to devote sufficient
time to the Company’s affairs to fulfil their duties as Directors. Each Director is satisfied that
they have sufficient time to commit to their individual role and responsibilities on the Board.
The time commitment involved from each Director involves preparation for meetings, meeting
attendance, as well as ad hoc meetings with the AIFM, the Investment Adviser and external
advisers as required. Individual Directors are responsible for their own professional
development and for ensuring their skills and expertise are refreshed in order to support their
role on the Board.
Induction of new Directors
A procedure for the induction of new Directors is in place which includes the provision of an
induction pack containing relevant information about the Company and its processes and
procedures. New Directors appointed to the Board have the opportunity to meet with the
Chairman, the AIFM, the Investment Adviser and the Company Secretary.
Board performance
Every year the Company conducts an extensive Board evaluation process to review the
effectiveness of the Board as a whole. In addition, an evaluation of the performance of the
Chairman is undertaken which is led by the Senior Independent Director. For the year
ended 31March 2023, the Board undertook an external evaluation and engaged
BoardAlpha Limited (“BoardAlpha”) to conduct this on behalf of the Company.
For further detail on this exercise, please refer to the report of the Nomination Committee
on pages 68 to 70.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
65
CORPORATE GOVERNANCE STATEMENT CONTINUED
Culture
The Board acknowledges that it has the responsibility to “set the tone from the top” in terms of
the culture and ethical behaviours of the Company, and strives to promote a culture that is
based on sound ethical values and behaviours, values diversity and is responsive to the views of
shareholders and the Company’s stakeholders. This is achieved by ensuring robust corporate
governance frameworks were in place and ensuring the Investment Adviser is appropriately
challenged and held to account for its performance and behaviours. This culture is consistent
with the Company’s business model and strategy and facilitates the best possible opportunity
to build a high-quality, diversified logistics property portfolio by conducting exceptional asset
management and delivering sector-leading returns to investors.
The Board expects all service providers, including its Investment Adviser, to exhibit high standards
of ethical behaviour and for the employees of the service providers to behave in a professional
and respectful manner. The Board feels that all Directors continue to act with integrity, lead by
example and promote the Company’s culture. Further detail regarding the Management
Engagement Committee’s review of all service providers can be found on page 77.
The Company’s section 172 statement can be found on pages 45 to 48.
Shareholder engagement
The Board is confident in its approach to the Company’s ongoing communication with
shareholders and recognises the value in positive shareholder engagement. The Board strives
tounderstand and meet shareholders’ needs and expectations.
Our website is kept up-to-date with information to help investors keep in touch and to
understand our business.
The Investment Adviser meets with shareholders and investors on behalf of the Board by way of
shareholder roadshows to discuss our results, which have proven to be a popular and effective
way to engage with shareholders and develop our understanding of their needs and
expectations. The Investment Adviser provides feedback to the Board following these
roadshows and also regularly updates the Board with the views of shareholders and analysts.
In addition, the Chairman writes to the largest shareholders, offering meetings after annual
results and prior to the general meeting approving the new management arrangements.
We encourage a two-way communication with both institutional and private investors, and
shareholders are encouraged to write to the Company via the Company Secretary at the
registered office address, should they wish. We endeavour to respond promptly to all enquiries.
Annual General Meeting
Shareholders are encouraged to attend the Company’s AGM on 18 July 2023 at 10.00am. TheAGM
will be held at Buchanan Communications Ltd, 107 Cheapside, London EC2V 6DN, and further
details can be found in the Notice of AGM which has been dispatched to all shareholders.
Anelectronic copy of the Notice of AGM is also available on the Company’s website at
www.urbanlogisticsreit.com.
Any further updates regarding the Annual General Meeting will be made via the
appropriateRegulatory Information Service and on the Company’s website at
www.urbanlogisticsreit.com
. Shareholders will be given the opportunity to ask
questionsduring the AGM and questions can also be sent by email to ir@urbanlogisticsreit.com
in advance of the meeting. These questions will be responded to in writing on the Company’s
website.
In addition, the Investment Adviser seeks to engage directly with major shareholders via regular
meetings, round table events, capital markets days and other outreach. The Chairman
proactively contacts the largest shareholders to make himself available for meetings and
communication.
The voting results of the 18 July 2023 Annual General Meeting will be announced to the market
once it has been held.
Risk management and internal control
The Directors acknowledge that they have overall responsibility for the Company’s risk
management and internal control systems and for reviewing their effectiveness. As such, the
Board, in consultation with the Audit Committee:
•
approves the Company’s/Group’s Risk Appetite Statements;
•
receives reports on, and reviews the effectiveness of, the Group’s risk and control processes
to support its strategy objectives;
•
approves the procedures for the detection of fraud, bribery, tax evasion and money
laundering;
•
reviews quarterly management accounts against budget, full-year forecasts against both
budget and analyst expectations;
•
signs off all investments; and
•
ensures that there is a segregation of duties between the Investment Adviser’s property
team who recommend property investments, and the Investment Adviser’s finance and
operations team who perform duediligence and instruct payments.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
66
CORPORATE GOVERNANCE STATEMENT CONTINUED
Risk management and internal control continued
In addition to the high-level internal controls exercised by the Board, further internal controls
are also in place at the AIFM and the Investment Adviser. These controls, which include those
inrelation to the financial reporting process for the undertakings included in the consolidation,
are reviewed and tested as part of the external audit process and updated as required from
both internal feedback and external feedback from auditors and others.
An ongoing process has been implemented for identifying, evaluating and managing the
principal and emerging strategic and operational risks faced by the Company. This process
hasbeen in place for the year ended 31 March 2023 and is reviewed on an annual basis.
The risk management process and systems of internal control are designed to manage, rather
than eliminate, the risk of failure to achieve the Company’s objectives and it should be
recognised that such systems can only provide reasonable, not absolute, assurance against
material misstatement or loss. Pages 50 to 54 set out the Company’s Principal Risks and
Uncertainties. The Company’s Risk Appetite Statement can be found on page 50.
Board Committees
The Board has delegated a number of responsibilities to its Environmental, Social and
Governance (“ESG”), Audit, Nomination and Management Engagement Committees.
EachCommittee has Terms of Reference in place, which outline the duties of those Committees
thatare delegated from the Board, including their statutory and regulatory responsibilities.
TheTerms of Reference are reviewed on at least an annual basis. The Board accepts that, while
these Committees have the authority to examine particular issues and will report back to the
Board with their decisions and/or recommendations, the ultimate responsibility on all matters
lies with the Board. Details on each Committee, and a report of the activities undertaken during
the year ended 31 March 2023, can be found in the individual Committee Reports.
A copy of each Committee’s Terms of Reference can be found on our website
www.urbanlogisticsreit.com.
The membership of the Board Committees is as follows:
Management
ESG Audit Engagement Nomination
Name Independent Committee Committee Committee Committee
Nigel Rich CBE Y Member Member Chairman Chairman
Bruce Anderson Y Member Chairman Member Member
Heather Hancock
1
Y Chairwoman Member Member Member
Jonathan Gray
2
Y Member Member Member Member
Lynda Heywood
3
Y Member Member Member Member
Richard Moffitt N — — — —
Mark Johnson
4
N — — — —
1. Heather Hancock was appointed as Senior Independent Director with effect from 12 May 2023.
2. Jonathan Gray resigned from the Board and as Senior Independent Director with effect from 11 May 2023.
3. Lynda Heywood joined the Board with effect from 1 May 2023.
4. Mark Johnson resigned from the Board with effect from 11 May 2023.
A Sub-Committee of the Board was created on 25 January 2023, consisting solely of the
independent Directors, which would be authorised to act on behalf of the Company in relation
toany changes to the Company’s management agreement and investment management
arrangements. Jonathan Gray was recused from membership of this Sub-Committee on
1March 2023.
Richard Moffitt is not deemed to be independent due to his existing role at, and interest in,
theInvestment Adviser. Richard excludes himself from voting on matters concerning the
Investment Adviser and during the approval of property sales and acquisitions proposed to
theBoard by the Investment Adviser, or where there is any other perceived potential conflict
ofinterest. Despite his non-independence, the Board considers that Richard remains able to
provide constructive challenge and scrutiny to the Board, as well as valuable and relevant skills
and experience.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
67
Meeting attendance
During the year ended 31 March 2023, there were eight scheduled Board meetings.
TheDirectors also met on an ad hoc basis during the year to discuss and approve matters
relating to the management arrangements of the Company. The Company Secretary attends
allmeetings of the Board and its Committees. Representatives of the AIFM, Investment Adviser,
the external auditor and other advisers are invited to attend as required.
Management
ESG Audit Engagement Nomination
Name Board Committee Committee Committee Committee
Nigel Rich CBE 8/8 1/1 3/3 1/1 1/1
Bruce Anderson 8/8 1/1 3/3 1/1 1/1
Heather Hancock 8/8 1/1 2/3 1/1 1/1
Jonathan Gray 8/8 1/1 3/3 0/1 0/1
Richard Moffitt 8/8 N/A N/A N/A N/A
Mark Johnson 8/8 N/A N/A N/A N/A
Conflicts of interest
The Articles of Association allow the Board to authorise potential conflicts of interest that may
arise, subject to imposing limits or conditions when giving authorisation if this is appropriate.
Only independent Directors (who have no interest in the matter being considered) will be able
to take the relevant decision and, in taking the decision, the Directors must act in a way they
consider will be most likely to promote the Group’s success for the benefit of its shareholders as
a whole. Procedures have been established to monitor actual and potential conflicts of interest
on a regular basis, and the Board is satisfied that these procedures are working effectively.
The Company regularly uses M1 Agency LLP as an agent for its purchase and sale of assets. The
Company incurs fees from M1 Agency LLP, a partnership in which Richard Moffitt is a member.
These fees are incurred in the acquisition of investment properties and sale of investment
properties. The Board, with the assistance of the Investment Adviser, excluding Richard Moffitt,
carefully reviews and scrutinises each fee payable to M1 Agency LLP, and ensures the fees are
inline with market rates and on standard commercial property terms. However due to this
relationship, Richard Moffitt is deemed non-independent as a member of the Board.
CORPORATE GOVERNANCE STATEMENT CONTINUED
Environmental, human rights, employee, social and community issues
The Board recognises the requirement under the Companies Act 2006 to detail information
about employees, human rights, environmental and community issues, including information
about any policies it has in relation to these matters and the effectiveness of these policies.
These requirements do not apply directly to the Company as it has no employees, all the
Directors are Non-Executive and it has outsourced all its functions to third-party service
providers. The Company has therefore not reported further in respect of these provisions,
however information on our commitment to sustainability can be found within the
Sustainability Report on pages 31 to 38.
The Company publishes a Modern Slavery Statement in accordance with the Modern Slavery
Act 2015. This can be found on the Company’s website www.urbanlogisticsreit.com.
During the year, they were six Directors, five male and one female. Further information on the
composition and diversity of the Board is detailed on pages 69 and 70. Following the year end
and as at the date of this report, there are three male Directors and two female Directors on
the Board.
Anti-bribery and corruption
The AIFM and the Investment Adviser have a zero-tolerance anti-bribery and corruption policy
and are committed to carrying out business fairly, honestly and openly. TheInvestment Adviser
undertakes annual regulatory training on anti-money laundering and anti-bribery and
corruption. PCP2 Limited, the previous AIFM to the Company, had a Compliance Officer in place
who monitored adherence to anti-bribery and corruption policies. Post year end, this function
will now be fulfilled by the Company’s new AIFM, G10 Capital Limited.
The Company has a whistleblowing policy with appropriate links to the Chairman and/or Audit
Committee Chairman.
Nigel Rich CBE
Chairman
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
68
NOMINATION COMMITTEE REPORT
Composition
Nigel Rich CBE is Chairman of the Nomination Committee. The Nomination Committee
comprises all of the independent Directors. The Directors deemed to be independent are
shown in the Director biographies on pages 56 and 57 and in the table on page 66.
Responsibilities
The role of the Nomination Committee is to regularly review the structure, size and composition
of the Board and to lead the appointment of new Directors to the Board as and when
appropriate. The Nomination Committee considers resolutions relating to the election and
re-election of Directors at each Annual General Meeting and considers the orderly succession
planning of the Board.
Matters considered during the year
The Committee met once during the year ended 31 March 2023 and considered the structure,
size and composition of the Board as a whole, particularly its balance of skills, knowledge,
experience and diversity, and made recommendations to the Board with regard to any
changes.
The Committee gave consideration to succession planning for the Directors and key members
of the management team, taking into account the challenges and opportunities facing the
Company, and the skills and expertise required on the Board in the future. The Committee also
agreed upon the Board’s performance evaluation process and considered the requirements for
further external performance evaluations to be undertaken in the future, as well as the
recommendations of the review performed in the year by BoardAlpha, discussed in more detail
below.
NED recruitment process
The Board appointed Russell Reynolds Associates to assist with the NED recruitment process
earlier this year. Russell Reynolds Associates is independent of the Board and the Company and
has no connections with any of the individual Directors. The Committee agreed on a person
specifi cation that included the skills and experience required for the proposed appointment,
with a focus on an individual with a senior fi nance background to add depth to the Audit
Committee. As part of this, Russell Reynolds Associates compiled a list of candidates and
scheduled interviews with the Board. Following the Committee’s recommendation, the Board
appointed Lynda Heywood as a Non-Executive Director with effect from 1 May 2023. Lynda
Heywood brings a wealth of experience in guiding FTSE 100 companies from her 20-year
tenure at Kingfi sher and six years at Tesco, holding group treasurer roles at both organisations.
The evaluation confi rmed that all
Directorscontributed to promoting
thesuccess of the Company.
Nigel Rich CBE
Chairman of the Nomination Committee
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
69
NOMINATION COMMITTEE REPORT CONTINUED
Board composition and succession planning
Following the changes to the Board detailed in the Corporate Governance report, the Committee will consider the skills and experiences needed on the Board going forward, and will consider
succession planning for the Chairman.
Diversity
The Board is comprised of a mixture of individuals who have an appropriate balance of skills andexperience to meet the future opportunities and challenges facing the Company.
Appointments to the Board are made primarily on merit, though the Board understands the importance of diversity in corporate governance and takes into consideration a variety of
demographic attributes and characteristics when making decisions on its composition. The Board is aware of the new Listing Rule that is on a ‘comply or explain’ basis, which incorporates
therecommendations of the Parker and Hampton-Alexander Reviews, which considered how ethnic, cultural and gender diversity could be improved on UK boards.
FCA Board diversity target Target met Compliance
At least 40% of the board are
women (including those self-
identifying as women)
No
However, following the year-end
and with effect from 12 May 2023,
this target was met
During the year, 17% of the Board comprised of women. The Nomination Committee regarded Board
diversity of gender as a key consideration when recommending future Board appointments and conducting
succession planning exercises.
The Nomination Committee recommends appointments, and the Board makes appointments, based on
skills, experience and merit. However, equality, diversity and inclusion continue to be key considerations in
all appointment processes.
Lynda Heywood was appointed to the Board on 1 May 2023 and as at the date of this Report, 40% of the
Urban Logistics Board comprise of women.
At least one of the senior board
positions (Chair, Chief Executive
Officer, Senior Independent
Director or Chief Financial Officer)
is a woman (including those
self-identifying as a woman)
No
However, following the year-end
and with effect from 12 May 2023,
this target was met
Following changes to the management arrangements and the resignation of Jonathan Gray as a Director on
11 May 2023, the Committee appointed Heather Hancock as Senior Independent Director with effect from
12 May 2023.
At least one member of the board
is from a non-White ethnic minority
background (as referenced in
categories recommended by the
Office for National Statistics)
No The Board and Nomination Committee will remain mindful of this FCA diversity target where it considers
new appointments and succession planning.
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
70
STRATEGIC REPORT
GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
NOMINATION COMMITTEE REPORT CONTINUED
Diversity continued
The Committee continues to develop succession planning in line with these recommendations.
In accordance with Listing Rule 9 Annex 2.1, the below tables, in prescribed format, show the
gender and ethnic background of the Directors at the date of thisReport.
Number of
Number of Percentage senior positions
Gender identity or sex Board members on the Board on the Board
Men 3 60% 1
Women 2 40% 1
Not specified/prefer not to say — — —
Number of
Number of Percentage senior positions
Ethnic background Board members on the Board on the Board
White British or other White
(including minority white groups) — — —
Mixed/Multiple Ethnic Groups — — —
Asian/Asian British — — —
Black/African/Caribbean/Black British — — —
Other ethnic group, including Arab — — —
Not specified/prefer not to say 5 100% 2
The data in the above tables was collected through self-reporting by the Directors.
Board evaluation
Every year the Company conducts an extensive Board evaluation process to review the
effectiveness of the Board as a whole. In addition, an evaluation of the performance of the
Chairman is undertaken which is led by the Senior Independent Director. For the year ended
31March 2023, the Board engaged BoardAlpha Limited (“BoardAlpha”) to conduct an external
evaluation on behalf of the Company.
The process enabled each Director to evaluate, assess and reflect on the Board’s operations,
individual Director contributions and the Company’s leadership with a view to identify any
shortcomings and address any areas requiring improvement. BoardAlpha interviewed
individual Directors and attended and observed Board meetings in person. BoardAlpha
provided detailed, constructive feedback of various suggested actions which the Board have
considered and will implement going forward. These recommendations included to
•
Consider whether it would be beneficial to conduct longer-term scenario planning to
understand the strategic options for the Company once growth under the current strategy
becomes harder to achieve.
•
Consider how to communicate the newly negotiated management structure and keyman
risk mitigation to shareholders to reassure them that the team behind Richard Moffitt is
strong and well-motivated.
•
Hold a discussion about the planned order of departure of directors from the Board to
ensure that succession planning runs smoothly.
These items, together with all other recommendations will be on Board agendas throughout
the coming year.
Overall the evaluation confirmed that Directors and Committee members continued to work
well collectively and that all Directors contributed to promoting the success of the Company
and advancing its strategy and business model.
Nigel Rich CBE
Chairman of the Nomination Committee
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
71
AUDIT COMMITTEE REPORT
Composition
During the year ended 31 March 2023, the Audit Committee comprised of myself as Chairman,
Nigel Rich CBE, Jonathan Gray and Heather Hancock, all of whom were independent
Non-Executive Directors during the year. Since the year end, Lynda Heywood was appointed as an
independent Non-Executive Director of the Board with effect from 1 May 2023 and she joined the
Audit Committee with effect from the same date. In addition on 11 May 2023, Jonathan Gray
resigned from the Board on this date and ceased to be a member of the Audit Committee as at
the date of this report.
All Audit Committee members consider that, individually and collectively, they are each
independent and have recent and relevant fi nancial experience to fulfi l their role on the Audit
Committee within the sector in which the Company operates. Further detail regarding individual
Director experience can be found within the Director biographies on pages 56 and 57.
The Chairman of the Company, Nigel Rich CBE, is a member of the Audit Committee. The Board
believes his membership of the Audit Committee is appropriate because he has signifi cant
experience in relation to fi nancial matters as a qualifi ed accountant, and has a wealth of
experience in both property and the public markets given his previous chairmanship of SegroPLC.
Responsibilities
The Audit Committee is responsible for ensuring that the fi nancial performance of the
Company is properly reported and monitored. The Audit Committee reviews the annual and
half-year accounts, the accounting policies of the Company and key areas of accounting
judgement, management information statements, fi nancial announcements, internal control
systems, risk management, the processes employed by the AIFM and the auditor to determine
the underlying valuation of the investment portfolio, and the continuing appointment of the
auditors. It also monitors the whistleblowing policy and procedures over fraud and bribery.
Terms of Reference for the Audit Committee have been adopted and are reviewed on a regular
basis by the Board.
The Audit Committee’s Terms of Reference are available on the Company’s website at
www.urbanlogisticsreit.com.
Matters considered during the year
The Committee met on three occasions during the year. Details of the attendance at those
meetings can be found on page 67. At those meetings, the Audit Committee has:
•
reviewed and considered the Company’s property portfolio valuation in conjunction with the
independent valuer at the half-year and year end;
•
reviewed the Company’s Financial Statements for the half-year and year end and made
recommendations to the Board;
•
reviewed the Company’s going concern statement;
•
assisted the Board in its consideration of ESG matters;
•
reviewed the internal controls and risk management procedures of the Company and PCP2
Limited, the Company’s AIFM during the year;
•
recommended the re-appointment of RSM UK Audit LLP (“RSM”) as auditor of the Company
to the Board for approval and for the approval of shareholders at the 2023 Annual General
Meeting;
•
reviewed its Terms of Reference; and
•
had its performance evaluated externally.
I am pleased to present the Audit
Committee Report for the year ended
31March 2023.
Bruce Anderson ACMA FCIOBS
Chairman of the Audit Committee
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
72
AUDIT COMMITTEE REPORT CONTINUED
Matters considered during the year continued
The independent Directors meet in private with the partner of the Company’s auditor on an
annual basis. The Audit Committee Chairman has regular contact with the external auditor
throughout the year and particularly during the preparation of the Annual Report and Financial
Statements.
The significant matters considered by the Audit Committee were:
Valuation process and asset management
The Company uses CBRE as its property valuer, who conduct a valuation of the Company’s
properties on a half-yearly basis. Discussions have been held with the Investment Adviser and
the independent valuer about the property portfolio valuation process, asset management and
the systems in place at the Investment Adviser to ensure the accuracy of the valuation of the
Company’s property portfolio. The Audit Committee has received assurances from the
Investment Adviser about the robustness of their valuation system and asset management
capabilities. To enable a full discussion of the valuation, the valuer attended the Audit
Committee meeting in May 2023. Further information regarding the valuation of the portfolio
can be found below on page 73. In line with other service providers, the Committee feels it is
best practice to regularly put out external services to tender. Following a five-year appointment,
the valuation services were therefore put out to tender in the year, and following a competitive
tender process, CBRE were re-appointed. The appointment of CBRE will be kept under review
on an annual basis.
Internal controls
During the year, the Audit Committee has reviewed and updated, where appropriate, the
Company’s risk matrix. This matrix is considered on an ongoing basis and is in line with the
Company’s Risk Appetite Statement.
The Investment Adviser reports to the Audit Committee and Board on operational and
compliance issues at each meeting, and otherwise as necessary. The Investment Adviser reports
directly to the Audit Committee concerning the internal controls applicable to the Investment
Adviser’s investment and office procedures, including information technology systems.
Going concern and long-term viability of the Company
The Committee considered the Company’s financial requirements for the next twelve months
and concluded that it has sufficient resources to meet its commitments. The Financial
Statements therefore have been prepared on a going concern basis. The Committee also
considered the longer-term viability statement within the Annual Report for the period ended
31 March 2023, covering a five-year period, and the underlying factors and assumptions which
contributed to the Committee deciding that this was an appropriate length of time to consider
the Company’s long-term viability.
The Company’s going concern and viability statement can be found within the Strategic Report
on page 55.
External auditor
RSM was appointed as the Company’s auditor following an external audit tender process
undertaken in 2021. RSM audited the Annual Report and Accounts of the Company for the
financial year ended 31 March 2023. In accordance with the statutory requirements relating to
the appointment of auditors, the Company would need to conduct an audit tender no later
than for the accounting period beginning 1 April 2030.
Following consideration of the performance of RSM, the services provided during the year and
a review of their independence and objectivity, the Committee has recommended to the Board
the re-appointment of RSM as the Company’s auditor. Shareholder approval of the auditor’s
re-appointment will be sought at the Annual General Meeting to be held on 18 July 2023.
Effectiveness of the external audit
The Committee reviews the effectiveness of the external audit carried out by the auditor on an
annual basis. The Chairman of the Audit Committee maintained regular contact with the
Company’s audit partner throughout the year. He also met with them prior to the finalisation of
the audit of the Annual Report and Financial Statements for the year ended 31 March 2023,
without the AIFM or the Investment Adviser present, to discuss how the external audit was
conducted, the findings from the audit and whether any issues had arisen from the auditor’s
interaction with the Company’s various service providers.
The Audit Committee will continue to monitor the performance of the auditor and make any
appropriate recommendations.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
73
AUDIT COMMITTEE REPORT CONTINUED
Audit and non-audit fees and independence and objectivity of
the auditor
The audit fee for the review of the Annual Report, including non-audit fees and related
assurance services, is shown in the table below:
2023 2022
£’000 £’000
Audit fees including related assurance services 230 180
Non-audit fees — 119
Total 230 299
The Audit Committee reviews the scope and nature of all proposed non-audit services before
engagement to ensure that the independence and objectivity of the auditor is safeguarded.
The Board’s policy is that non-audit services may be carried out by the Company’s auditor
unless there is a conflict of interest or someone else is considered to have more experience.
The Committee recognises the importance of auditor objectivity and has reviewed the level of
non-audit fees as noted in the table above to ensure the independence of RSM was not
compromised. In reviewing auditor independence, the Committee has considered the nature of
non-audit services provided, quantum of fees charged, the expectation of fee recurrence, and
the internal controls applied by RSM, to mitigate potential or perceived conflicts.
Euan Banks is the RSM audit partner responsible for the audit of the Financial Statements for
the year ended 31 March 2023. The Committee is satisfied that the auditor has fulfilled its
obligations to the Company and its shareholders.
Internal audit
The Audit Committee considered the need for an internal audit function during the year and
determined that it was not necessary or appropriate given the current size of the Group. The
Group is managed by the AIFM; as such, the Audit Committee internal systems and controls of
the AIFM and the Investment Adviser. During the year, the Finance Director of PCP2 Limited, the
Company’s AIFM, was invited to attend all Board meetings and, in addition, the Chairman of the
Audit Committee had a separate meeting with the Finance Director twice during the year ahead
of the issuance of the Half-Yearly and Annual Reports, and will continue to do so with the CFO of
the Investment Adviser. The Audit Committee will continue to keep this matter under review.
Valuation of property portfolio
The Group has investment properties totalling £1,107 million as at 31 March 2023 (2022:
£1,015m). In accordance with IAS 40: Investment Property, investment property is carried at its
fair value as determined by an external valuer.
This valuation has been conducted by CBRE and has been prepared as at 31 March 2023, in
accordance with the RICS valuation – Professional Standards UK January 2022 (the “Red Book”).
The Committee met with the team from CBRE in May 2023 and discussed the assumptions
underlying the individual property valuations and has concluded that the valuation is appropriate.
Maintenance of REIT status
The UK REIT regime enables the Group, so long as strict criteria are met, to benefit from
favourable income and capital gains tax treatment. The Group must comply with the UK REIT
regulations to continue to benefit from the favourable tax regime. The Investment Adviser
prepares and monitors the REIT tests, which are reported to the Board on a quarterly basis.
During the year ended 31 March 2023, the Audit Committee has monitored the Group’s compliance
status and has considered the requirements for the maintenance of the Group’s REIT status
throughout the year. The Audit Committee is satisfied that there is full compliance with the UK REIT
regulations and notes the significant headroom for the financial year ended 31 March 2023.
Evaluation of the Audit Committee
During the year, a thorough evaluation of the Committee’s performance was carried out as part
of the overall externally facilitated evaluation of the Board. The findings of the evaluation
showed that the Committee continued to work well together as a unit and the cumulative
skills, knowledge and experience of the Committee members remained adequate and
appropriate for the needs of the Company and its obligation to its shareholders.
Recommendations from the evaluation on which the Committee will focus in the coming year
are to increase the detail on the mitigation of risks in the risk register and to keep a materiality
limit for Board approval under consideration. Further information on the evaluation of the
Board’s performance and of its Committees can be found within the Corporate Governance
Statement on pages 64 and 66.
Fair, balanced and understandable
As a result of the work performed, the Audit Committee has concluded that the Annual Report
for the year ended 31 March 2023 is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the Company’s position and performance,
business model and strategy, and has reported on these findings to the Board.
CMA Order
The Company has complied with the provisions of the CMA Order throughout the year ended
31March 2023.
Bruce Anderson ACMA FCIOBS
Chairman of the Audit Committee
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
74
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) COMMITTEE REPORT
Statement from the Chair
The ESG Committee was formed in April 2021 to scrutinise performance across the full suite of
ESG commitments that Urban Logistics places on the Investment Adviser, as well as relevant
obligations and governance requirements falling directly on the Company. It refers and reports,
as appropriate, to the Board, and where appropriate to other Committees of the Board e.g. the
Audit Committee on risk.
Composition
During the fi nancial year ended 31 March 2023, the ESG Committee comprised of myself as
Chairwoman, Nigel Rich CBE, Bruce Anderson and Jonathan Gray, all of whom were independent
Non-Executive Directors. Since the year end, Lynda Heywood joined the Board with effect from
1May 2023 and is also a member of the ESG Committee as at the date of this report. Following
his resignation from the Board on 11 May 2023, Jonathan Gray is no longer a member of the ESG
Committee. All ESG Committee members consider that, individually and collectively, they are
each independent and appropriately experienced to fulfi l their role on the ESG Committee within
the sector in which the Company operates. Further detail regarding individual Director
experience can be found within the Director biographies on pages 56 and 57.
Responsibilities
The ESG Committee advises on and recommends to the Board its ESG policy and ensures this
remains up-to-date with the Board’s strategic objective regarding ESG, which is to achieve high
governance standards and to scrutinise the Investment Adviser’s progress in addressing the
Board’s ESG priorities and targets. The ESG Committee takes a strategic approach and identifi es
and pursues sustainability issues whereby the Company has optimal capacity to make a
meaningful impact.
Terms of Reference for the ESG Committee have been adopted and are reviewed on an annual
basis by the Board.
The ESG Committee’s Terms of Reference are available on the Company’s website at
www.urbanlogisticsreit.com
I am pleased to present the ESG
Committee Report for the year ended
31March 2023.
Heather Hancock LVO DL
Chairwoman of the ESG Committee
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
75
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) COMMITTEE REPORT CONTINUED
Matters considered during the year
The ESG Committee meets at least once a year, or more if required. The Committee met once
during the year ended 31 March 2023.
During that meeting, the ESG Committee has:
•
advised on and recommended to the Board its ESG policy;
•
proposed targets and KPIs to achieve the Board’s policy objectives;
•
scrutinised PCP2 Limited, the Company’s previous AIFM’s progress in addressing the Board’s
ESG priorities and targets;
•
overseen compliance with legal and regulatory requirements relevant to sustainability,
including corporate governance principles and standards;
•
advised the Audit Committee on specific risks relating to ESG for consideration within the
Company’s risk register;
•
monitored the Company’s approach and performance in relation to competitors, relevant
benchmarks and regulator expectations;
•
overseen ESG reporting within the Company’s Annual Report and reporting to ESG Ratings
Agencies as appropriate, ensuring adherence to reporting requirements; and
•
reviewed its own performance as an ESG Committee and its own Terms of Reference.
Further information regarding the Company’s approach to ESG can also be found on pages
35and36.
The Company’s TCFD disclosures can be found on pages 39 to 44.
Heather Hancock LVO DL
Chairwoman of the ESG Committee
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
76
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
Composition
Nigel Rich CBE is Chairman of the Management Engagement Committee, which comprises all
of the independent Directors. During the fi nancial year ended 31 March 2023, the Management
Engagement Committee comprised of Nigel Rich CBE as Chairman, Bruce Anderson, Heather
Hancock and Jonathan Gray, all of whom were independent Non-Executive Directors. Since the
year end, Lynda Heywood joined the Board with effect from 1 May 2023 and is also a member
of the Management Engagement Committee as at the date of this report. Following his
resignation from the Board on 11 May 2023, Jonathan Gray is no longer a member of the
Management Engagement Committee.
Responsibilities
The key responsibility of the Management Engagement Committee is to review the services
and performance of the Company’s AIFM, Investment Adviser and other external service
providers. The Management Engagement Committee has a formal process in place to conduct
an annual review of all third-party service providers and will conduct ad hoc reviews of any
service provider where necessary. The results of the Management Engagement Committee’s
review are shared with individual service providers so that any improvements or changes
required to third-party providers’ service delivery can be implemented and monitored. The
Management Engagement Committee also reports the results of the review to the Board.
Matters considered during the year
The Management Engagement Committee met once during the year ended 31 March 2023
and reviews of all service providers were undertaken.
Proposed amendments to the Company’s management arrangements
As disclosed in the Chairman’s Statement on page 6, the Company held a general meeting on
11May 2023 where shareholders approved changes to the Company’s management
arrangements. The changes that were approved by shareholders were that Logistics Asset
Management LLP, who had provided asset management services to PCP2 Limited, the previous
AIFM to the Company, was appointed as the Investment Adviser to the Company with effect
from 12 May 2023, and G10 Capital Limited was appointed as the Company’s new AIFM with
effect from the same date.
Going forward, the Management Engagement Committee will review the services and
performance of Logistics Asset Management LLP and G10 Capital Limited as well as all other
third-party service providers.
I am pleased to present the report of the
Management Engagement Committee.
Nigel Rich CBE
Chairman of the Management Engagement Committee
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
77
MANAGEMENT ENGAGEMENT COMMITTEE REPORT CONTINUED
The AIFM and the Investment Adviser
Following the changes to the Company’s management arrangements on 12 May 2023 as
disclosed on page 6, the Board has delegated the responsibility for portfolio and risk
management to G10 Capital Limited (the “AIFM”), subject to the Board being kept informed of
all material property acquisitions and disposals, including development projects. The Company
and the AIFM have appointed Logistics Asset Management LLP (the “Investment Adviser”) as
Investment Adviser pursuant to which the Investment Adviser (i) seeks out and evaluates
investment opportunities; (ii) advises the Company and the AIFM in relation to acquisitions and
disposals; and (iii) provides asset management services and, if required, development
management services.
The Management Engagement Committee shall review the contractual relationship and
engagement terms of the AIFM and the Investment Adviser, and their respective performance
on at least an annual basis going forward as it previously undertook for PCP2 Limited, the
previous AIFM to the Company. PCP2 Limited’s performance was considered to be of a high
standard during the year ended 31 March 2023.
Other service providers
The Committee noted that there had been a number of changes to personnel at Link Company
Matters, and assurances have been sought and provided by Link Company Matters that there
would be increased stability in the coming year.
The Management Engagement Committee reviewed the relationship with M1 Agency LLP, of
which Richard Moffitt, a Director of the Company and CEO of the Investment Manager and
ongoing Investment Adviser, is a Partner. No other members of the Investment Adviser have a
financial interest in M1 Agency LLP. As noted in the Corporate Governance Statement, the
Company uses M1 Agency LLP regularly as an agent for the purchase and disposal of assets, but
not exclusively. The Management Engagement Committee was satisfied that M1 Agency LLP
provided a valuable service to the Company and that its fees were market competitive and fully
disclosed to the market as required. The finance team of the PCP2 Limited, the Company’s
previous AIFM, and the independent members of the Board, scrutinised all proposals received
from M1 Agency LLP. Further details of how conflicts of interest are managed can be found on
page67.
All other service providers were reviewed, and their terms of engagement and performances
were considered to be satisfactory and in the best interests of the Company.
Nigel Rich CBE
Chairman of the Management Engagement Committee
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
78
The Board is pleased to present the Directors’ Remuneration Report for the year ended 31 March 2023.
DIRECTORS’ REMUNERATION REPORT
The Board as a whole deals with matters of Directors’ remuneration and fulfils the functions of
a Remuneration Committee and considers any changes to the Directors’ remuneration policy.
No Directors are involved in deciding their own, individual remuneration.
In September 2022, the independent Directors considered the level of Directors’ remuneration
for the year ended 31 March 2023 based on a fee benchmarking exercise undertaken by PCP2
Limited, previous AIFM to the Company which was reviewed in detail by the Board. Following
careful review and consideration by the Board, the following increases were made to Directors’
remuneration which took effect from 1 July 2022:
•
the Chairman’s fee to increase from £85,000 pa to £100,000 pa;
•
the Non-Executive Directors’ fees to increase from £45,000 pa to £50,000 pa;
•
the Senior Independent Director and Committee Chairs’ additional fee to increase from
£5,000 pa to £10,000 pa, excluding the Chairman of the Management Engagement
Committee and the Nomination Committee; and
•
Mark Johnson and Richard Moffitt waived their right to remuneration as Directors of the
Company, as they receive remuneration from Pacific Industrial LLP via the investment
management fee.
Performance of the Company
The Company does not have a specific benchmark against which performance is measured,
and Directors do not receive any performance-related pay. The graph below compares the total
return (assuming all dividends are reinvested) to holders of Ordinary Shares since IPO,
compared to the total shareholder return of the EPRA NAREIT UK Index, which is the closest
broad index against which to measure the Company’s performance.
Review of past performance
100
150
50
200
250
300
Jun
2016
Jun
2019
Jun
2020
Jun
2021
Jun
2022
Jun
2023
EPRA NAREIT Index
SHED
Jun
2017
Jun
2018
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
79
DIRECTORS’ REMUNERATION REPORT CONTINUED
Directors’ remuneration (audited)
The remuneration paid to the Directors during the year ended 31 March 2023 is set out in the table below:
Year ended Year ended
31 March 2023 31 March 2022
£ £
Fees Expenses
1
Total Fees Expenses Total
Nigel Rich CBE (Chairman) 96,250 82 96,332 83,750 27 83,777
Bruce Anderson 57,500 2,319 59,819 48,750 1,832 50,582
Jonathan Gray 57, 500 95 57, 595 48,750 — 48,750
Heather Hancock 57,500 1,999 59,499 48,333 — 48,333
Mark Johnson
2
— — — — — —
Richard Moffitt
2
— 319 319 — — —
Total 268,750 4,814 273,564 229,583 1,859 231,442
1. The Directors are entitled to all reasonable travel, hotel and other expenses incurred in the performance of their duties. As such, Bruce Anderson’s travel from Scotland and overnight stays in London to attend Board meetings have
been paid by the Company.
2. Mark Johnson and Richard Moffitt waived their right to remuneration as Directors of the Company.
The annual percentage change in remuneration paid to the Directors is set out in the table below:
Year ended Year ended Change to Change to Change to Change to
31 March 2023 31 March 2022 2023 2022 2021 2020
£ £ % % % %
Nigel Rich CBE 96,250 83,750 15% 6% 5% 0%
Bruce Anderson 57,500 48,750 18% 15% 21% 0%
Jonathan Gray 57, 500 48,750 18% 15% 21% 0%
Heather Hancock
1
57,500 48,333 19% 52% — —
Mark Johnson
2
— — — — — —
Richard Moffitt
2
— — — — — —
1. Heather Hancock was appointed to the Board with effect from 15 June 2020, and appointed Chair of the ESG Committee with effect from 6 May 2021.
2. Mark Johnson and Richard Moffitt waived their right to remuneration as Directors of the Company.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
80
DIRECTORS’ REMUNERATION REPORT CONTINUED
Relative importance of spend on pay (unaudited)
The table below sets out significant use of profit and cash in respect of the year ended
31March 2023 and 31 March 2022:
Year ended Year ended
31 March 2023 31 March 2022 Change
£ £ %
Directors’ remuneration 268,750 229,583 +17%
Investment management fee 7,592,001 5,431,124 +40%
Dividends paid to shareholders 35,870,131 21,654,282 +66%
Note: the items listed in the table above are as required by The Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 with the
exception of the investment management fee, which has been included because the Directors
believe it will aid shareholders’ understanding of the relative importance of the spend on pay.
Directors’ shareholdings (audited)
The interests of the Directors (and any person closely associated) in the shares of the Company
are set out below.
Percentage
Number of issued
of Ordinary share capital as at
Shares held 31 March 2023 (%)
Nigel Rich CBE (Chairman) 540,536 0.115
Bruce Anderson 50,000 0.011
Jonathan Gray
2
60,000 0.013
Heather Hancock 14,388 0.003
Mark Johnson
3
309,986 0.066
Richard Moffitt
1
1,142,843 0.242
1. The Investment Adviser holds 206,813 Ordinary Shares on trust for Richard Moffitt.
2. Jonathan Gray resigned from the Board with effect from 11 May 2023.
3. Mark Johnson resigned from the Board with effect from 11 May 2023.
The Company has adopted a share dealing code in relation to the Company’s shares, which is
based on the requirements of the Listing Rules and UK MAR.
There is no requirement under the Company’s Articles of Association for Directors to hold
shares in the Company.
None of the independent Directors or any persons connected with them had a material interest
in the Company’s transactions, arrangements or agreements during the year.
There have been no changes to any of the above holdings between 31 March 2023 and the
date of this report.
Remuneration policy
Introduction
The Company is required to seek shareholder approval for its Remuneration Policy every three
years, except in the event that a change to the Policy is proposed or the advisory vote on the
Directors’ Remuneration Report is not passed in any year subsequent to the approval of the
Policy. The Remuneration Policy of the Company was last approved by shareholders at the
Company’s AGM in 2022 and it is therefore not proposed that this be put to shareholders for
approval at the forthcoming AGM on 18 July 2023.
Policy
The Company follows the principles of the AIC Code in that Non-Executive Directors’
remuneration should reflect the time commitment and responsibilities of the role, and that our
remuneration policies and practices support the Company’s strategy and promote its long-term
sustainable success. The Board’s policy is that the remuneration of Non-Executive Directors
should reflect the experience of the Board as a whole and be determined with reference to
comparable organisations and appointments. Furthermore, the Board considers that the level
of remuneration should be sufficient to attract and retain the calibre of Directors required to
implement the Company’s strategy.
Each of the Directors is entitled to receive a fee from the Company at such a rate as may be
determined by the Articles or by ordinary resolution (not exceeding in aggregate £500,000 per
annum or such other sum as the Company in general meeting shall from time-to-time
determine). The fee for any new Director appointed to the Board will be determined on the
same basis. The Directors are also entitled to all reasonable travel, accommodation and other
expenses incurred in the proper performance of their duties. No Director shall be entitled to
any pension or other retirement benefit and there shall be no compensation payable for loss of
office. The Company has not made any loans to the Directors which are outstanding, nor has it
ever provided any guarantees for the benefit of any Director or the Directors collectively. There
are no performance conditions attaching to the remuneration of the Directors as the Board
does not consider such arrangements or benefits necessary or appropriate for Non-Executive
Directors.
Under the Company’s Articles of Association, if by arrangement with the Board, or any
committee authorised by the Board, any Director shall perform or render any special duties or
services outside his or her ordinary duties as a Director and not in his or her capacity as a holder
of employment or executive office, he or she may be paid such reasonable additional
remuneration (whether by way of salary, commission, participation in profits or otherwise) as
the Board, or any committee authorised by the Board, may from time-to-time determine.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
81
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration policy continued
Policy continued
No Director has a service contract with the Company, nor are any such contracts proposed,
each Director having been appointed pursuant to a letter of appointment entered into with
the Company. The terms of their appointment provide that Directors shall resign and be
subject to election at the first AGM after their appointment. Thereafter, they will be subject
to annual re-election. The Directors’ letters of appointment do not provide for compensation
upon termination of employment. The Directors’ appointments can be terminated in
accordance with the Articles. Directors’ appointments may be terminated earlier by either
party giving to the other three months prior written notice. The Articles provide that the
office of Director shall be terminated by, among other things: (i) written resignation; (ii)
unauthorised absences from Board meetings for six consecutive months or more; or (iii)
written request of all of the other Directors.
Directors’ and Officers’ liability insurance cover is maintained by the Company, at its
expense, on behalf of the Directors. The Company has also provided indemnities to the
Directors in respect of costs or other liabilities which they may incur in connection with any
claims relating to their performance or the performance of the Company whilst they are
Directors.
The Company is committed to ongoing shareholder dialogue and any views expressed by
shareholders on the fees being paid to Directors would be taken into consideration by the
Board when reviewing the Directors’ remuneration policy and in the annual review of
Directors’ fees.
An ordinary resolution will be put to shareholders at the Company’s AGM on 18 July 2023
toreceive and approve the Directors’ Remuneration Report.
Voting at AGM
The Directors’ Remuneration Report for the year ended 31 March 2022 and the Directors’
remuneration policy were approved by shareholders at the AGM held on 20 July 2022.
Theresults taken on a poll were as follows:
Number of Percentage of
Remuneration Report 2022 votes cast votes cast (%)
For 293,642,392 99.87
Against 376,217 0.13
Total votes cast 294,018,609 —
Number of votes withheld 2,128,111 —
Number of Percentage of
Remuneration Policy 2022 votes cast votes cast (%)
For 292,878,307 98.94
Against 3,136,082 1.06
Total votes cast 296,014,389 —
Number of votes withheld 132,331 —
On behalf of the Board.
Nigel Rich CBE
Chairman
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
82
The Directors are pleased to present their report for the year ended 31 March 2023.
DIRECTORS’ REPORT
Corporate governance
The Corporate Governance Statement can be found on pages 58 to 67 and forms part of the
Directors’ Report.
Directors
The Directors of the Company who were in office during the whole of the year
ended31March2023 and their biographies can be found on pages 56 and 57. Since the
31March 2023, there have been certain directorate changes. As announced to the market on
15 March 2023, Lynda Heywood was appointed as an independent Non-Executive Director
with effect from 1May 2023. On 11 May 2023, Mark Johnson and Jonathan Gray resigned from
the Board with effect from the close of that meeting. As at the date of this report, there are
two female Directors and three male Directors.
All Directors who are in office as at the date of this report shall stand for re-election at the
Company’s Annual General Meeting on 18 July 2023, apart from Lynda Heywood, who shall
stand for election, this being her first AGM post her appointment to the Board on 1 May 2023.
The rules concerning the appointment and replacement of Directors are governed within the
Company’s Articles of Association and relevant company law.
Share capital
At the Company’s Annual General Meeting on 20 July 2022, the Company was granted
authority to allot Ordinary Shares up to a maximum nominal amount of £943,950.82
(representing approximately 20% of the issued Ordinary Share capital of the Company as at
22June 2022) until the earlier of the conclusion of the Annual General Meeting to be held in
2023 and 30 September 2023.
No shares were allotted during the financial year ended 31 March 2023.
A special resolution was also passed at the Company’s Annual General Meeting on
20July2022, granting the Directors authority to repurchase up to 14.99% of the Company’s
issued Ordinary Share capital during the period, expiring on the conclusion of the Company’s
Annual General Meeting in 2023. Renewal of this buy-back authority will be sought at each
Annual General Meeting of the Company or more frequently if required.
The Company made no purchase of its own shares during the year and the rights attached
tothe Company’s shares are set out in the Company’s Articles of Association.
The Company’s issued share capital as at 31 March 2023 consisted of 471,975,411 Ordinary
Shares of £0.01 pence each. At the date of this report, 471,975,411 Ordinary Shares of £0.01
pence each have been issued, are fully paid-up and are quoted on the London Stock Exchange.
At 31 March 2023 and at the date of this report, the total voting rights of the Company were
471,975,411.
Further details regarding the Company’s issued share capital are set out in note 27 of the
Financial Statements.
Information about securities carrying voting rights
The following information is disclosed in accordance with The Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and DTR
7.2.6of the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules:
the Company’s capital structure and voting rights and details of the substantial shareholders in
the Company are set out in note 27 to the Financial Statements and in the previous paragraph;
•
the giving of powers to issue or buy back the Company’s shares requires an appropriate
resolution to be passed by shareholders; and
•
there are no restrictions concerning the transfer of securities in the Company or on voting
rights, no special rights with regard to control attached to securities, and no agreements
between holders of securities regarding their transfer known to the Company.
Substantial shareholdings
As at 31 March 2023, the Company had received notification of the following disclosable
interests in the voting rights of the Company. This information was correct at the date of
notification, however notification of any further change is not required until the next applicable
threshold is crossed.
Number of Percentage of
Ordinary Shares voting right (%)
Cohen & Steers UK Limited 23,686,373 5.02
Waverton Investment Management Limited 18,974,592 4.02
The Company has not been informed of any changes to the above interests between
31March2023 and the date of this Report.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
83
DIRECTORS’ REPORT CONTINUED
The AIFM and the Investment Adviser
The Company held a General Meeting on 11 May 2023 where shareholders approved
changes to the Company’s management arrangements. The changes that were approved
by shareholders were that Logistics Asset Management LLP (the “Investment Adviser”) was
appointed as the Investment Adviser to the Company with effect from 12 May 2023, and
G10 Capital Limited (the “AIFM”) was appointed as the Company’s new AIFM with effect
from the same date. The Board delegates the responsibility of its portfolio and risk
management to the AIFM, subject to the Board being kept informed of all material property
acquisitions and disposals, including development projects. The Company and the AIFM
have appointed Logistics Asset Management LLP (the “Investment Adviser”) as Investment
Adviser pursuant to which the Investment Adviser (i) seeks out and evaluates investment
opportunities; (ii) advises the Company and the AIFM in relation to acquisitions and
disposals; and (ii) provides asset management services and, if required, development
management services.
The Investment Adviser will, from the date of its appointment, be controlled by Richard
Moffitt who, together with Christopher Turner, has provided investment management
services to the Company since launch, and who reports to the Board at each meeting.
Othermembers of the AIFM team and the investment advisory team attend as required.
The Company regularly uses, as agent for its purchases and sales of assets, M1 Agency LLP, a
limited liability partnership in which Richard Moffitt has an interest. Each transaction is
reviewed by the AIFM and the Investment Adviser (excluding Richard Moffitt) and by the
independent Directors to ensure that the fees payable are in line with market fees and
practice. The total fees paid in the year amounted to £1.6 million (31 March 2022: £2.0
million). For details as to which Directors are independent of the Investment Adviser, please
see the Director biographies on pages 56 and 57 and the table on page 66.
The Management Engagement Committee annually reviews the performance of the AIFM
and the Investment Adviser and makes recommendations to the Board as to their
continuing appointment. Further information can be found in the Management
Engagement Committee Report on page 76.
The Company has a Long-Term Incentive Plan (“LTIP”) which crystallises in September 2023,
accounted for as an equity-settled share-based payment for the Investment Adviser, the
Pacific Group and their respective Affiliates.
No changes to the commercial terms of the LTIP were made as a result of the changes to
the management arrangements described on page 6. Following crystallisation of the current
LTIP in September 2023, the Company will not establish a new long-term incentive plan to
replace the LTIP.
Annual management fee
The Company will pay the Investment Adviser the following fees, payable quarterly in arrears, less
fees due to PCP2 Ltd and G10 Capital Ltd:
•
0.95% per annum of the Group’s EPRA NTA up to and including £250 million;
•
0.90% per annum of the Group’s EPRA NTA in excess of £250 million and up to and including
£500 million; and
•
0.85% per annum of the Group’s EPRA NTA in excess of £500 million.
This fee structure runs until May 2024, when it will be replaced by the following fee structure, paid
quarterly in arrears to Logistics Asset Management, the Investment Adviser appointed post period
end:
•
0.900% per annum of the Group’s EPRA NTA up to and including £250 million;
•
0.825% per annum of the Group’s EPRA NTA in excess of £250 million and up to and including
£500 million;
•
0.775% per annum of the Group’s EPRA NTA in excess of £500 million and up to and including
£1 billion; and
•
0.750% per annum of the Group’s EPRA NTA in excess of £1 billion.
LTIP
The excess return on both elements of the LTIP payable to the Investment Adviser is 5%.
The LTIP is calculated by reference to total value created as follows:
•
the excess EPRA NTA return payable to the Investment Adviser shall be calculated by reference
to the increase in the Company’s EPRA NTA (adjusted for any new issue of shares) rather than
by reference to an increase in the EPRA NTA per Ordinary Share;
•
the excess share price return payable to the Investment Adviser shall be calculated by
reference to the increase in the market capitalisation of the Company (adjusted for any new
issue of shares) rather than by reference to an increase in the market price of an Ordinary
Share; and
•
the LTIP payment shall be capped at three times the average annual management fees paid
from 7 February 2020 to the next calculation date, being September 2023.
For further information, please see note 14 of the Financial Statements on pages 106 and 107.
Related party transactions
Details on related party transactions can be found in note 32 of the Financial Statements on
page 120.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
84
DIRECTORS’ REPORT CONTINUED
Financial results and dividends
IFRS loss after tax for the year was £82.7 million (31 March 2022: £171.8 million profit),
representing a basic and diluted earnings per share of -17.51 pence, compared with 48.86
pence for the prioryear.
Adjusted earnings for the year were £32.7 million, which represents a £9.1 million increase
when compared to the prior year.
The Company is targeting an annual total return of between 10% and 15% through a
combination of dividends and growth in NAV.
The Company pays dividends on the Ordinary Shares on a half-yearly basis with dividends
declared in respect of the six months ending on 30 September and 31 March in each year.
The following interim dividends totalling 7.6 pence have been paid or declared in respect of
the year ended 31 March 2023:
Pence Payment Financial
Description per share date year
Second interim dividend 4.35 21 July 2023 2023
First interim dividend 3.25 16 December 2022 2023
Further information on dividends paid or declared can be found in note 15 to the Financial
Statements and in the Financial Review section on pages 26 to 30.
Financial instruments
Details of the financial instruments used by the Group and financial risk management policies
can be found in note 24 of the Financial Statements and in the Principal Risks and
Uncertainties section on pages 50 to 54.
Going concern and viability statements
The Company’s going concern and viability statements can be found on pages 55 and 100.
The Directors have reviewed the current and projected financial position of the Group,
making reasonable assumptions about future trading performance. As part of the review,
the Group has considered its cash balances, its debt maturity profile, including undrawn
facilities, and the long-term nature of the tenant leases.
Employees
There are no senior management or other employees within the Group at either 31 March 2023
or 31 March 2022.
Political donations
No political donations were made by the Company or its subsidiaries during the year or prioryear.
Significant agreements
In May 2022, the Group entered into a £46.6 million green loan facility with Aviva Investors,
which provided a 10-year term and came at a fixed cost of 3.52%. In August 2022, the Group
agreed a further £75.0 million facility with a 10-year term at a fixed rate of 3.99%. This facility
includes, inter alia, margin rate improvement on hitting environmental targets across the
assets charged.
Further details regarding the principal agreements between the Company and its service
providers, including the Investment Adviser, are set out in note 22 to the Financial
Statements on page 114.
Articles of Association
The Company’s Articles of Association can be found on the Company’s website or by
application to the Company Secretary.
Greenhouse gas emissions and Taskforce on Climate-related Financial
Disclosures (“TCFD”)
Information about the Group’s greenhouse gas emissions and the Company’s voluntary
reporting against the TCFD recommendations is set out in the Strategic Report on pages
37and 38.
Streamlined Energy and Carbon Reporting
Further detail on the Company’s environmental reporting can be found in the Sustainability
Report on pages 31 to 38 and in the Supplementary Information on pages 122 to 135.
Independent auditor
RSM UK Audit LLP has expressed its willingness to continue as auditor for the financial year
ending 31 March 2024. A resolution to re-appoint RSM UK Audit LLP will be put to shareholders
at the 2023 Annual General Meeting.
Audit information
The Directors in office at the date of approval of the Directors’ Report confirm that, so far as they
are aware, there is no relevant audit information of which the Company’s auditor is notaware.
Each Director has taken all reasonable steps that he or she ought to have taken as a Director to
make him or herself aware of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
85
DIRECTORS’ REPORT CONTINUED
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include specified information in a single identifiable
section of the Annual Report or a cross reference table indicating where the information is set
out. The information required under Listing Rule 9.8.4(7) in relation to allotment of shares is set
out on page 82. information required under Listing Rule 9.8.4(4) in relation to the LTIP is set out
on page 83, information required under Listing Rule 9.8.4(5 and 6) in relation to waiving of
emoluments is set out on page 79 and information required under Listing Rule 9.8.4(10) in
relation to management arrangements is set out on pages 76 and 83 one . The Directors
confirm that no additional disclosures are required in relation to Listing Rule 9.8.4,
Annual General Meeting
The Company’s AGM is scheduled to be held on 18 July 2023. A full description of the business
to be conducted at the meeting is set out in the separate notice of AGM.
Future developments
Further information regarding the future developments of the Company can be found within
the Strategic Report on pages 12 to 38.
Post balance sheet events
In May 2023 the Company appointed Logistics Asset Management LLP as Investment Adviser,
and G10 Capital Limited as AIFM, replacing PCP2 Ltd.
On 12 June 2023 the group disposed of two properties, one in Nottingham and one in
Sheffield, for a combined consideration of £15 million. Both assets have been accounted for
as‘Held for Sale’ at year end, in line with the Group’s accounting policy, details of which can
befound within note 2 (on page 100) of this report.
On 12 June 2023 Tuffnells Parcel Express Limited (“Tuffnells”) entered into administration.
Totalrental income from Tuffnells for the year to 31 March 2023 represented 3.5% of the
Group’stotal rental income.
This report was approved by the Board on 21 June 2023.
Nigel Rich CBE
Chairman
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
86
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Strategic Report and the Directors’ Report, the
Directors’ Remuneration Report, the separate Corporate Governance Statement and the
Financial Statements in accordance with applicable law and regulations. Company law requires
the Directors to prepare Group and Company Financial Statements for each financial year. The
Directors have elected under company law and are required under the Listing Rules of the
Financial Conduct Authority to prepare the Group Financial Statements in accordance with
UK-adopted International Accounting Standards. The Directors have elected under company
law to prepare the Company Financial Statements in accordance with UK-adopted
International Accounting Standards.
The Group and Company Financial Statements are required by law and UK-adopted
International Accounting Standards to present fairly the financial position of the Group and the
Company and the financial performance of the Group and the Company; the Companies Act
2006 provides in relation to such Financial Statements that references in the relevant part of
that Act to Financial Statements giving a true and fair view are references to their achieving a
fair presentation.
Under company law the Directors must not approve the Financial Statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Group and the Company
and of the profit or loss of the Group and the Company for that period.
In preparing each of the Group and Company Financial Statements, the Directors are
requiredto:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with UK-adopted International
Accounting Standards; and
d. prepare the Financial Statements on the going concern basis unless it is inappropriate
topresume 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 Group’s and the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and the Company and enable them to
ensure that the Financial Statements and the Directors’ Remuneration Report comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Group and
the Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Directors’ statement pursuant to the Disclosure and Transparency Rules
Each of the Directors, whose names and functions are listed on pages 56 and 57, confirms
that, to the best of each person’s knowledge:
a. the Financial Statements, prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities, financial position and profit of the
Company and the undertakings included in the consolidation taken as a whole; and
b. the Strategic Report and the Directors’ Report include a fair review of the development and
performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Urban Logistics REIT plc website.
Legislation in the United Kingdom governing the preparation and dissemination of Financial
Statements may differ from legislation in other jurisdictions.
Nigel Rich CBE
Chairman
21 June 2023
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
87
Opinion
We have audited the financial statements of Urban Logistics REIT plc (the ‘parent company’)
and its subsidiaries (the ‘Group’) for the year ended 31 March 2023 which comprise the
Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial
Position, Company Statement of Financial Position, Consolidated Statement of Cash Flows,
Company Statement of Cash Flows, Consolidated Statement of Changes in Equity and
Company Statement of Changes in Equity and notes to the financial statements, including
significant accounting policies. The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and UK-adopted International
Accounting Standards. The financial reporting framework that has been applied in the
preparation of the parent company financial statements is applicable law and UK-adopted
International Accounting Standards and, as regards the parent company financial statements,
as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and of the
parent company’s affairs as at 31 March 2023 and of the group’s loss for the year then
ended;
•
the group financial statements have been properly prepared in accordance with
UK-adopted International Accounting Standards;
•
the parent company financial statements have been properly prepared in accordance with
UK-adopted International Accounting Standards and as applied in accordance with the
Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in
the Auditor’s responsibilities for the audit of the financial statements section of our report.
Weare independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including
theFRC’s Ethical Standard as applied to listed public interest entities and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters Group
•
Valuation of Investment Property
Parent company
•
No key audit matters
Materiality Group
•
Overall materiality: £11,570,000 (2022: £11,790,000)
•
Performance materiality: £8,670,000 (2022: £8,800,000)
Parent company
•
Overall materiality: £6,890,000 (2022: £6,890,000)
•
Performance materiality: £5,170,000 (2022: £5,170,000)
Scope
Our audit procedures covered 98% of revenue, 100% of total
assets and 98% of EPRA earnings.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the group financial statements of the current period and include
the most significant assessed risks of material misstatement (whether or not due to fraud) we
identified, including those which had the greatest effect on the overall audit strategy, the
allocation of resources in the audit and directing the efforts of the engagement team.
Thesematters were addressed in the context of our audit of the group financial statements
asa whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
We have determined that there are no key audit matters to communicate in our report in
relation to the parent company.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF URBAN LOGISTICS REIT PLC
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
88
Key audit matters continued
Valuation of Investment Property
Key audit
matter
description
This is detailed in the Audit Committee report on pages 71 to 73; the
significant accounting judgements and estimates on page 100; significant
accounting policies on page 101 and notes to the Financial Statements on
pages 107 to 110.
The Group owns a portfolio of investment properties located across the UK
and the total value of the portfolio at 31 March 2023 was £1,107 million.
The Directors’ assessment of the value of the investment properties at year
end date, is considered a key audit matter due to the magnitude of the
total amount, the potential impact of the movement in value on the
reported results, and the subjectivity and complexity of the valuation
process. The valuation is carried out by external valuers, CBRE, in line with
the methodology set out in note 16. There is an associated fraud risk that
the fee payable to the property manager may be manipulated through
misstatement of the property valuation.
How the
matter was
addressed in
the audit
We audited the independent valuations of investment properties to ensure
that where appropriate they had been prepared on a consistent basis for all
properties and correctly recorded in the Financial Statements and in line with
the Accounting Standards.
We assessed the external valuers qualifications and expertise and considered
their terms of engagement, we also considered their objectivity and any other
existing relationships with the Group and concluded that there was no
evidence that the valuers objectivity had been compromised.
We engaged a property valuation specialist as our auditor expert to assist in
the review and challenge a sample of the valuations. In addition, we selected
a sample of thirteen sites that had valuation or yield movements that were
higher or lower than expected from our overall review of the portfolio and
requested they complete a detailed assessment of each valuation.
We discussed with the Manager and the valuer the overall movement in
property values and also challenged them on any properties whose
movement was not consistent with overall movements of the entire portfolio,
to gain an understanding of why these exceptions were reasonable.
We tested a sample of inputs provided by the Manager to the valuer to ensure
these reflected the key observable inputs for each property and considered
whether market data for a sample of properties was consistent with the
valuation report.
Key
observations
We concluded that the fair values of the investment properties being
adopted by the Group were appropriate.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to
determine the nature, timing and extent of our audit procedures. When evaluating whether
the effects of misstatements, both individually and on the financial statements as a whole,
could reasonably influence the economic decisions of the users we take into account the
qualitative nature and the size of the misstatements. Based on our professional judgement,
wedetermined materiality as follows:
Group Parent company
Overall
materiality
£11,570,000 (2022: £11,790,000) £6,890,000 (2022: £6,890,000)
Basis for
determining
overall
materiality
1% of total assets 1% of total assets
Rationale for
benchmark
applied
Total assets used as a benchmark
as assessed that the shareholders
will be primarily interested in the
growth in the value of property,
represented by the property
valuation.
Total assets used as a benchmark
as assessed that the shareholders
will be primarily interested in the
growth in the value of property,
represented by the property
valuation.
Performance
materiality
£8,670,000 (2022: £8,800,000) £5,170,000 (2022: £5,170,000)
Basis for
determining
performance
materiality
75% of overall materiality 75% of overall materiality
Materiality
levels for
transactions
where
materiality
levels are lower
than overall
materiality
The income statement values that
impact EPRA earnings (see note 13
to the financial statements on page
106) were tested using a
performance materiality of 75% of
a specific materiality of £1,850,000
which was calculated at 5% of
EPRA earnings as these income
statement values are significantly
lower than overall materiality.
The income statement values that
impact profit before dividends
received from subsidiaries were
tested using a performance
materiality of 75% of a specific
materiality of £242,000 which was
calculated at 5% of profit before
dividends received as these income
statement values are significantly
lower than overall materiality.
Reporting of
misstatements
to the Audit
Committee
Misstatements in excess of
£583,000 and misstatements
below that threshold that, in our
view, warranted reporting on
qualitative grounds.
Misstatements in excess of
£344,000 and misstatements
below that threshold that, in our
view, warranted reporting on
qualitative grounds.
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF URBAN LOGISTICS REIT PLC
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
89
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF URBAN LOGISTICS REIT PLC
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate. Our
evaluation of the directors’ assessment of the group’s and parent company’s ability to continue
to adopt the going concern basis of accounting included review of sensitivity analysis and
forecast compliance with covenants. We concluded that the Directors’ assessment was
appropriate in the circumstances.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the group’s or the parent company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In relation to the entity reporting on how they have applied the UK Corporate Governance
Code, we have nothing material to add or draw attention to in relation to the directors’
statement in the financial statements about whether the directors considered it appropriate
toadopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the
financial statements and our auditor’s report thereon. The directors are responsible for the
other information contained within the annual report. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained
in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
An overview of the scope of our audit
The group consists of 19 components, all of which are based in the UK, Guernsey and Jersey.
Full scope audits were performed for 17 components, specific scope audit for one component
and analytical procedures at group level for the remaining one component.
All work was performed by RSM UK Audit LLP.
The coverage achieved by our audit procedures was:
Number of
components Revenue
Total
assets
EPRA
earnings
Full scope audit 17 98% 99% 98%
Specific scope audit 1 — 1% —
Total 18 98% 100% 98%
Analytical review procedures were performed on 1 component which has not been included
in the table above.
The impact of climate change on the audit
In planning our audit, we considered the potential impact of the possible risks arising from
climate change on the Group’s financial statements and obtained an understanding of how
management identifies and responds to climate-related risks. Further information on
management’s risk assessment, progress and commitments is provided in the Group’s
climate-related risk disclosures on pages 39 to 44 of the annual report.
We performed risk assessment procedures including making enquiries of management,
reading board minutes and applying our knowledge of the Group and the sector within which
it operates, to assess the potential impact on the financial statements.
Taking account of the nature of the business, the Group continues to develop its assessment
ofclimate-related risks and resilience of the Group and its properties under different climate
scenarios, as explained in the Strategic Report on pages 39 and 44, we have not assessed
climate-related risk to be significant to our audit. There was also no impact on our key
auditmatters.
In accordance with our obligations with regards to other information, we have read the Group’s
climate-related risk disclosures on pages 39 to 44 of the annual report and in doing so have
considered whether those disclosures are materially inconsistent with the financial statements
or our knowledge obtained during the course of the audit, or otherwise appear to be materially
misstated.
We have not been engaged to provide assurance over the accuracy of the climate-related risk
disclosures set out on pages 39 to 44 in the Annual Report.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
90
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF URBAN LOGISTICS REIT PLC
•
Directors’ explanation as to their assessment of the group’s prospects, the period this
assessment covers and why the period is appropriate set out on page 55;
•
Director’s statement on whether it has a reasonable expectation that the group will be able
to continue in operation and meets its liabilities set out on page 55;
•
Directors’ statement on fair, balanced and understandable set out on page 73;
•
Board’s confirmation that it has carried out a robust assessment of the emerging and
principal risks set out on pages 50 to 54;
•
Section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on pages 65 to 66; and,
•
Section describing the work of the audit committee set out on pages 71 to 73.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 86, the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s
and the parent company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and the Directors’ Report for the financial
yearfor which the financial statements are prepared is consistent with the financial
statements; and
•
the Strategic Report and the Directors’ Report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and
their environment obtained in the course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
•
the parent company financial statements and the part of the directors’ remuneration report
to be audited are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Corporate governance statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability
and that part of the Corporate Governance Statement relating to the parent company’s
compliance with the provisions of the UK Corporate Governance Code specified for our review
by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the Corporate Governance Statement is materially consistent with the
financial statements and our knowledge obtained during the audit:
•
Directors’ statement with regards to the appropriateness of adopting the going concern
basis of accounting and any material uncertainties identified set out on pages 55 and 84;
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
91
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF URBAN LOGISTICS REIT PLC
REIT status
compliance
regulations
Input from a tax specialist was obtained regarding the Group’s
compliance with the REIT requirements.
Consideration of whether any matter identified during the audit
required reporting to an appropriate authority outside the entity.
In addition to the valuation of investment property which is set out in the key audit matters
section above, the other areas that we identified as being susceptible to material misstatement
due to fraud were:
Risk
Audit procedures performed by the audit
engagement team:
Management
override of controls
Testing the appropriateness of journal entries and other
adjustments;
Assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and
Evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
Related parties’
transactions
We obtained an understanding of the procedures adopted by the
Board to ensure all related party transactions are identified and
checked that the procedures adopted have been followed.
We confirmed that the group has maintained an up-to-date
record of all its related parties.
We tested a sample of related party transactions and checked
they are in line with the underlying agreements and are on an
arm’s length basis.
We audited the accounting treatment of the LTIP and ensured
that valuation and terms are disclosed appropriately in the
financial statements.
We confirmed that related party transactions are appropriately
disclosed in the financial statements.
A further description of our responsibilities for the audit of the financial statements is located on
the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
The extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our
audit are to obtain sufficient appropriate audit evidence regarding compliance with laws and
regulations that have a direct effect on the determination of material amounts and disclosures in
the financial statements, to perform audit procedures to help identify instances of non-compliance
with other laws and regulations that may have a material effect on the financial statements, and to
respond appropriately to identified or suspected non-compliance with laws and regulations
identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material
misstatement of the financial statements due to fraud, to obtain sufficient appropriate audit
evidence regarding the assessed risks of material misstatement due to fraud through designing
and implementing appropriate responses and to respond appropriately to fraud or suspected
fraud identified during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with
governance, to ensure that the entity's operations are conducted in accordance with the provisions
of laws and regulations and for the prevention and detection of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including
fraud, the group audit engagement team:
•
obtained an understanding of the nature of the industry and sector, including the legal and
regulatory framework that the group and parent company operate in and how the group and
parent company are complying with the legal and regulatory framework;
•
inquired of management, and those charged with governance, about their own identification
and assessment of the risks of irregularities, including any known actual, suspected or alleged
instances of fraud;
•
discussed matters about non-compliance with laws and regulations and how fraud might occur
including assessment of how and where the financial statements may be susceptible to fraud
having obtained an understanding of the effectiveness of the control environment.
The most significant laws and regulations were determined as follows:
Legislation/
Regulation
Additional audit procedures performed by the
Group audit engagement team included:
IFRS/UK-adopted
International
Accounting
Standards and
Companies Act 2006
Review of the financial statement disclosures and testing to
supporting documentation.
Completion of disclosure checklists to identify areas of non-
compliance.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
92
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF URBAN LOGISTICS REIT PLC
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3
of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
In due course, as required by the Financial Conduct Authority (FCA) Disclosure Guidance and
Transparency Rule (DTR) 4.1.14R, these financial statements will form part of the European
Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National
Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual financial
report has been prepared using the single electronic format specified in the ESEF RTS.
EUAN BANKS (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
21 June 2023
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were appointed by the Board
on15 February 2021 to audit the financial statements for the year ending 31 March 2021 and
subsequent financial periods.
The period of total uninterrupted consecutive appointment is 3 years, covering the years
ending 31 March 2021 to 31 March 2023.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
group or the parent company and we remain independent of the group and the parent
company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee in
accordance with ISAs (UK).
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
93
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note
Year ended
31 March
2023
£’000
Year ended
31 March
2022
£’000
Continuing operations
Revenue 5
Property operating expenses 7
(2 , 3 13 )
(1, 26 2 )
Net rental income 52 ,9 92
Administrative and other expenses
(9,68 3 )
(7, 1 5 9 )
Other income
Long-term incentive plan credit/(charge) 14
(4,1 14 )
Operating profit before changes in fair value of investment properties and interest rate derivatives 4 7,7 1 1
Changes in fair value of investment property 6, 16
(121 ,119 )
Profit on disposal of investment property
Operating (loss)/profit
8
(73,408 )
Finance income
Finance expense 10
(1 0,7 5 2 )
(6 ,8 98 )
Changes in fair value of interest rate derivatives 23
Exceptional items 12
(4 59 )
(Loss)/profit before taxation (82 ,6 57 )
Tax charge 11
(Loss)/profit and total comprehensive income (attributable to the shareholders) (82 ,6 57 )
(Loss)/Earnings per share – basic
13
(1 7. 5 1 )p
(Loss)/Earnings per share – diluted
13
(1 7. 5 1 )p
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
94
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note
31 March
2023
£’000
31 March
2022
£’000
Non-current assets
Investment property 16
Intangible assets
Interest rate derivatives 23
Total non-current assets 1, 103,4 98
Current assets
Assets held for sale 16
Trade and other receivables 19
Interest rate derivatives 23
Cash and cash equivalents 20
Total current assets 53, 816
Total assets 1 , 1 5 7, 3 1 4
Current liabilities
Trade and other payables 21
(1 3, 2 33 )
(2 3 ,7 5 2 )
Deferred rental income
(11 , 59 6 )
(9, 065 )
Total current liabilities (2 4 ,8 2 9 )
(32 , 817 )
Non-current liabilities
Long-term rental deposits
(6 , 50 4 )
(5, 698 )
Lease liability
(9,4 47 )
(8 ,7 2 0 )
Other borrowings
(3,058 )
Bank borrowings 22
(3 4 6 ,7 74 )
(2 3 6 ,14 0 )
Total non-current liabilities (36 2 ,7 2 5 )
(2 5 3, 61 6 )
Total liabilities (3 8 7, 5 5 4 )
(28 6 ,43 3 )
Total net assets 76 9,76 0
Note
31 March
2023
£’000
31 March
2022
£’000
Equity
Share capital 27
Share premium 28
Capital reduction reserve 29
Other reserves 14
Retained earnings 31
Total equity 76 9,76 0
Net asset value per share – basic
33
Net asset value per share – diluted
33
The Financial Statements of Urban Logistics REIT plc (registered number 09907096) were
approved by the Board of Directors and authorised for issue on 21 June 2023 and signed
onitsbehalf by:
Nigel Rich CBE
Chairman
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
95
COMPANY STATEMENT OF FINANCIAL POSITION
Note
31 March
2023
£’000
31 March
2022
£’000
Non-current assets
Investment subsidiaries 18
685,766
552,766
Intangible assets
32
47
Total non-current assets 685,798
552,813
Current assets
Trade and other receivables 19
3,449
109,374
Cash and cash equivalents 20
22
27,695
Total current assets 3,471
137,069
Total assets 689,269
689,882
Current liabilities
Trade and other payables 21
(2,583)
(4,426)
Total current liabilities (2,583)
(4,426)
Total liabilities (2,583)
(4,426)
Total net assets 686,686
685,456
Equity
Share capital 27
4,720
4,720
Share premium 28
438,418
438,418
Capital reduction reserve 29
228,760
228,760
Other reserves 14
120
4,465
Retained earnings 31
14,668
9,093
Total equity 686,686
685,456
The Company has not presented its own Statement of Comprehensive Income, as permitted
by section 408 of the Companies Act 2006. The Company made a profit of £41.4 million
(31March 2022: £19.3 million).
The Financial Statements of Urban Logistics REIT plc (registered number 09907096) were
approved by the Board of Directors and authorised for issue on 21 June 2023 and signed
onitsbehalf by:
Nigel Rich CBE
Chairman
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
96
CONSOLIDATED STATEMENT OF CASH FLOWS
Note
31 March
2023
£’000
31 March
2022
£’000
Cash flows from operating activities
(Loss)/profit for the year (attributable to equity
shareholders)
(82 ,6 57 )
Add: amortisation and depreciation
Add/(less): changes in fair value of investment
property
6, 16
(149, 8 92 )
Less: changes in fair value of interest rates swaps
(1,431 )
(2 ,66 3 )
Less: profit on disposal of investment property
(2 20 )
Add: finance expense 10, 22
(Less)/add: long-term incentive plan 14
(4 , 34 5 )
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
(9,111 )
Cash generated from operations 43 ,11 9
Net cash flow generated from
operatingactivities 43 ,1 19 57 , 7 67
Investing activities
Purchase of investment properties 16
(86,112 )
(3 1 5 ,78 8 )
Capital expenditure on investment properties 16
(34 ,7 9 6 )
(4 4 ,7 5 4 )
Disposal of investment properties 16
Acquisition of subsidiary, net of cash acquired 17
(80, 391 )
(1,270 )
Net cash flow used in investing activities (2 01, 29 9 )
(3 5 3 , 4 32 )
Note
31 March
2023
£’000
31 March
2022
£’000
Financing activities
Proceeds from issue of Ordinary Share capital 27
Cost of share issue 28
(7,356 )
Bank borrowings drawn 22
Bank borrowings repaid 22
(10,000 )
Loan arrangement fees paid 22
(2 ,0 58 )
(1 , 30 0 )
Other borrowings repaid
(3 ,05 8 )
Interest paid 10
(9, 34 6 )
(5 ,4 05 )
Finance lease payments
(30 8 )
Dividends paid to equity holders 15
(3 5 , 8 70 )
(2 1, 6 5 4 )
Net cash flow generated from
financingactivities 60,960 362,5 85
Net (decrease)/increase in cash and cash
equivalents for the period (97 ,220 ) 6 6 ,920
Cash and cash equivalents at start of period 1 2 7, 3 7 9
Cash and cash equivalents at end of period 3 0,1 59
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
97
COMPANY STATEMENT OF CASH FLOWS
Note
Year ended
31 March
2023
£’000
Year ended
31 March
2022
£’000
Cash flows from operating activities
Profit for the period (attributable to equity shareholders)
41,445
19,323
Add: amortisation
15
13
Less: dividends received from subsidiaries
(36,600)
(23,040)
(Less)/add: long-term incentive plan (credit)/charge 14
(4,345)
4,114
(Decrease)/increase in trade and other receivables
74
(203)
(Decrease)/increase in trade and other payables
(388)
2
Cash generated from operations 201
209
Net cash flow generated from operating activities 201
209
Investing activities
Decrease/(increase) in loan due from Group undertakings
7,996
(50,147)
Investment in subsidiary
—
(253,400)
Purchase of intangible assets
—
(48)
Net cash flow generated from/(used in) investing activities 7,996
(303,595)
Financing activities
Proceeds from issue of Ordinary Share capital 27
—
358,300
Cost of share issue 28
—
(7,356)
Dividends paid to equity holders 15
(35,870)
(21,654)
Net cash flow (used in)/generated from financing activities (35,870)
329,290
Net (decrease)/increase in cash and cash equivalents for the period (27,673)
25,904
Cash and cash equivalents at start of period 27,695
1,791
Cash and cash equivalents at end of period 22
27,695
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
98
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2023
Share
capital
£’000
Share
premium
£’000
Capital
reduction
reserves
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
1 April 2022
Loss for the period — — — — (82,657 ) (82,657 )
Total comprehensive expense — — — — (82 ,6 57 ) (82 ,6 57 )
Dividends to shareholders
Long-term incentive plan credit
31 March 2023 4 ,7 2 0 4 3 8 , 418 228, 760 120 9 7, 74 2 76 9,76 0
1 April 2021
Profit for the period — — — — 1 7 1 ,7 7 3 1 7 1 ,7 7 3
Total comprehensive income
Dividends to shareholders — — — — (21 ,6 5 4 ) (2 1, 6 5 4 )
Long-term incentive plan charge — — — 4,1 14 — 4 ,114
Issue of Ordinary Shares 2 ,170 348, 77 4 — — — 350 ,94 4
31 March 2022
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
99
COMPANY STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2023
Share
capital
£’000
Share
premium
£’000
Capital
reduction
reserves
£’000
Other
reserves
£’000
Retained
earnings
£’000
Total
£’000
1 April 2022
4,720 438,418 228,760 4,465 9,093 685,456
Profit for the period — — — — 41,445 41,445
Total comprehensive income — — — — 41,445 41,445
Dividends to shareholders
— — — — (35,870) (35,870)
Long-term incentive plan
— — — (4,345) — (4,345)
31 March 2023 4,720 438,418 228,760 120 14,668 686,686
1 April 2021
2,550 89,644 228,760 351 11,424 332,729
Profit for the period — — — — 19,323 19,323
Total comprehensive income
— — — — 19,323 19,323
Dividends to shareholders — — — — (21,654) (21,654)
Long-term incentive plan — — — 4,114 — 4,114
Issue of Ordinary Shares 2,170 348,774 — — — 350,944
31 March 2022
4,720 438,418 228,760 4,465 9,093 685,456
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
100
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
101
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting judgements, estimates and assumptions continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
102
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4. Principal accounting policies continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
103
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4. Principal accounting policies continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
104
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4. Principal accounting policies continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
105
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
106
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
107
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. Long-term incentive plan (“LTIP”) continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
108
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
109
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. Investment properties continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
110
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. Investment properties continued
Investment property – level 3 continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
111
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. Investment properties continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
112
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
18. Investments continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
113
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
114
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
115
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
116
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Financial risk management continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
117
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Financial risk management continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
118
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Financial risk management continued
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
119
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
120
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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SUPPLEMENTARY INFORMATION
Coverage
We state the data coverage by number of assets included in reporting for each absolute
Performance Measure within table 1. We have reported 100% of data for all landlord-obtained
metrics in the table on page 125. Landlord obtained and consumed supplies exist at three
assets, and the remaining landlord-obtained data is from vacant properties of which there
were 13 during the reporting year. All landlord data is produced from invoice records and
collected by the asset manager for each asset.
Where assets are subject to tenant control, data is reported where tenants have responded to
data sharing requests. These assets are included in the total number of applicable properties
for each performance measure in the table on pages 125 to 127. We aim to achieve as high
coverage as possible but since the assets are not in our operational control, we are reliant on
tenant responses. The reliability of data from tenant-controlled assets is also subject to tenant
data management practices.
Like-for-like performance measures are reported for properties for which we have collected
consistent data for a period of two years, excluding properties sold, acquired or under
development during 2021/22 and 2022/23.
The type and number of sustainably certified assets is reported with respect to all assets in our
portfolio.
Estimation of landlord and tenant utility consumption
Landlord obtained data has been estimated at 0 units, representing 0% of the portfolio by floor
area. No like-for-like landlord-obtained energy performance measures have been estimated.
All tenant-obtained data included in our reporting is as reported to us by tenants and
therefore subject to the reliability of each tenants’ data management practices estimates have
been produced using known consumption as either between:
a) Between last invoice and tenant taking occupation; or
b) Last invoice and year end.
Tenant data has been estimated for the following proportion of tenant-controlled assets for
theperiod ended March 2023:
•
electricity 2%;
•
fuels 4%; and
•
water 5%.
Head office energy for 2022 was estimated using floor areas and the Better Building
Partnership’s Real Estate Environmental Benchmark (REEB) Typical Conditioned Office
Benchmark 2020. For 2023, actual data was available for six months of the year and so this
wasused to estimate for the six months before the data was available.
EPRA Aligned Supplementary Sustainability Information and Index
ofIndicators
We have chosen to report our material environmental, social and governance data in
alignment with EPRA Sustainability Best Practices Recommendations (“sBPR”). We describe
our assessment of materiality in the “Our Material Impacts” section below. This will enable a
comparison against our peers and help set clear benchmarks for the Company moving
forwards.
Our reporting response has been split into three sections:
•
overarching recommendations;
•
environmental performance measures; and
•
social and governance performance measures.
Material Impacts
Our targets and objectives have been established based on the following sustainability themes
which we consider to be the most pressing to Urban Logistics, the key themes when
considering risks to property value, and the needs of our tenants and other stakeholders:
energy performance;
•
climate change mitigation;
•
climate adaptation;
•
on-site energy generation; and
•
promoting nature on our sites.
EPRA overarching recommendations
Organisational boundaries
Our EPRA reporting covers the properties owned by the Group, which at 31 March 2023
included a portfolio of 130 mid-box logistics warehouse assets. An operational control
approach has been adopted for greenhouse gas footprinting as it reflects the REITs ability to
effect change and implement operating policies.
Urban Logistics REIT has no direct employees and at 31 March 2023 was externally managed
by the investment management team from PCP2 Ltd. The PCP2 Ltd investment management
team received instructions from the Board of the REIT to establish and implement policies
including for ESG issues, and as such, has been included for this reporting within the
operational control approach.
In 2021/22, Urban Logistics reported absolute performance for GHG emissions. 2021/22 is the
base year for reporting on GHG emissions and is used for like-for-like data comparison.
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EPRA overarching recommendations continued
EPRA Index
EPRA code Indicator
Page
Reference
Elec-Abs Total electricity consumption 125
Elec-LfL Like-for-like total electricity consumption 125
DH&C-Abs Total district heating and cooling consumption 124
DH&C-LfL Like-for-like total district heating and cooling consumption 124
Fuels-Abs Total fuel consumption 125
Fuels-LfL Like-for-like total fuel consumption 125
Energy-Int Building energy intensity 125
GHG-Dir-Abs Total direct greenhouse gas (“GHG”) emissions 126
GHG-Indir-Abs Total indirect greenhouse gas (“GHG”) emissions 127
GHG-Int Greenhouse gas (“GHG”) emissions intensity from building energy consumption 127
Water-Abs Total water consumption 127
Water-LfL Like-for-like total water consumption 127
Water-Int Building water intensity 127
Waste-Abs Total weight of waste by disposal route 125 and 126
Waste-LfL Like-for-like total weight of waste by disposal route 125 and 126
Cert-Tot Type and number of sustainably certified assets 128 and 129
Diversity-Emp Employee gender diversity 130
Diversity-Pay Gender pay ratio 130
Emp-Training Employee training and development 130
Emp-Dev Employee performance appraisals 130
Emp-Turnover New hires and turnover 130
H&S-Emp Employee health and safety 130
H&S-Asset Asset health and safety assessments 130
H&S-Comp Asset health and safety compliance 130
Comty-Eng Community engagement, impact assessments and development programmes 130
Gov-Board Composition of the highest governance body 130
Gov-Selec Process for nominating and selecting the highest governance body 130
Gov-Col Process for managing conflicts of interest 130
SUPPLEMENTARY INFORMATION CONTINUED
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SUPPLEMENTARY INFORMATION CONTINUED
EPRA overarching recommendations continued
Third-party assurance
All data is subject to external checking and review by our ESG consultants, CBRE’s Investor ESG
team. However, our sustainability data has not undergone third party assurance.
Boundaries – reporting on landlord and occupier consumption
Performance measures referred to as landlord-obtained are within the organisational
boundary, relates to assets where we procure utilities for tenant areas and those properties
that are vacant. There are no landlord-obtained supplies relating to common areas. Utility
supplies were provided to tenant areas in three occupied assets within the portfolio covering
247,774 sq m (2%) of the total floor area of the REIT, all other landlord-obtained utilities were
provided to vacant units.
All other properties are leased to single occupiers which obtain their water and waste supplies
independent of the landlord. The Manager of Urban Logistics actively engages with tenants on
ESG-matters, and we disclose tenant-obtained consumption from these FRI sites where
tenants have replied to data sharing requests. We recognise that the reporting of tenant
obtained performance measures is additional to EPRA’s core requirements. We recognise that
the reporting of tenant obtained performance measures is additional to EPRA's core
requirements, but we disclose tenant obtained consumption in keeping with good practice as
tenant-obtained emissions are the most significant to the environmental performance of the
buildings in the portfolio. We will continue to work collaboratively with tenants on ESG issues,
as this remains fundamental to improving environmental performance data coverage and to
identifying key ESG-related challenges and opportunities to minimise our environmental
impact in tenant-controlled assets .
In 2022/23, Urban Logistics has reported absolute performance for energy and water
consumption for areas under the landlord’s operational control. 2021/22 is the base year for
reporting on energy and water consumption and is used for like-for-like data comparison.
Normalisation
We normalise all environmental intensity data by floor area, using the square metre (m
2
) area
for the whole building at unit level as this is considered most appropriate for the portfolio. As
most landlord-controlled properties are vacant units, whole building floor area is used for
normalisation. Water and Energy Intensities are normalised to data availability using
consumption start and end dates where the consumption is not full year. this is to ensure the
numerator and denominator are as aligned as possible.
Employee related Social Performance Measures are normalised using full-time equivalent
numbers of employees.
Segmental analysis – by property type, geography
Urban Logistics operate in a single geographical and business segment. Our portfolio is
located entirely in the United Kingdom, and the property classification used in our financial
reporting defines our investment portfolio as small logistics warehouse assets. For this reason,
additional analysis by geography and property type is not applicable.
Disclosure on own offices
Urban Logistics is an externally managed REIT – managed in the year by PCP2 Limited (the
Investment Manager) – and therefore does not have a Head Office or direct employees.
However, UrbanLogistics has a high degree of influence over the Investment Manager’s
operations andso Urban Logistics REIT plc has instructed the Investment Manager to provide
data on itsHeadOffice and Employee Performance Measures for those employees who are
engaged on working for the Investment Manager. “Head Office” in the data tables, refers to the
Head Office of the Investment Manager.
Narrative on performance
We provide commentary on past performance and plans for managing future performance
throughout this report. We explain additional factors affecting consumption trends where
appropriate including in the “Commentary” sections in the Environmental and Social
Performance Measure tables below.
Location of EPRA Sustainability Performance Measures
See EPRA Index on page 123.
Reporting period
The reporting period is from 1 April 2022 to 31 March 2023, and we refer to this as our 2023
reporting year. Like-for-like performance measures are reported for the two most recent years
that we are able to collect consumption data (2023 and 2022).
Data materiality
We have excluded a number of metrics from our reporting, where a review has shown them
tobe wholly immaterial. The following have been excluded:
•
district heating or cooling (“DH&C”) absolute and DH&C-like-for-like: no DH&C is procured
across our portfolio;
•
H&S-Asset and H&S-Comp – due to the nature of our lease arrangements, all health and
safety assessments are conducted by our tenants and Urban Logistics REIT does not have
operational oversight; and
•
Waste-LFL – no landlord waste supplies exist. All landlord generated waste is generated
though development activities and is excluded from the scope of the EPRA sBPR. Tenant
Waste LFL is reported where we have been able to collect waste data from the tenant.
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EPRA overarching recommendations continued
Environmental performance measures
Absolute like-for-like
EPRA code Performance measure Unit Scope 2023 2022 2023 2022
% change
like-for-like
Elec-Abs; Elec-LfL Total electricity consumption kWh Landlord-obtained electricity
1,610,886
674,233
496,077
445,258 11.4%
Tenant-obtained electricity
36,823,659
35,127,016
Proportion of tenant obtained
electricity from renewable sources 23% 11%
Number of applicable properties
88 of 130
assets
77 of 113
assets
39 of 71
assets
Head Office
8,301
14,792
N/A
N/A N/A
Number of applicable properties
1 of 1
1 of 1
Total
38,442,846
35,816,041
496,077
445,258 -7.6%
Fuels-Abs; Fuels-LfL Total fuel consumption kWh Landlord-obtained fuels
94,367
63,826
26,427
23,145 14.2%
Tenant-obtained fuels
22,442,417
14,630,536
7,534,861
10,353,614 -27.2%
Number of applicable
properties
88 of 130
assets
72 of 113
assets
39 of 71
assets
Head Office
—
5,356
N/A
N/A N/A
Number of applicable
properties 1 of 1 1 of 1
Total
22,536,784
14,699,718
7,561,288
10.376,759 -27.1%
Waste-Abs; Waste-LfL Landlord waste hazardous
0
0
N/A
N/A N/A
tonnes
Landlord waste
non-hazardous 0 0 N/A N/A N/A
Non Hazardous Tenant Waste:
Landfill
80 (0.1%)
145 (2.3%)
27 (0.9%)
22 (0.8%) 23%
Incineration
225 (0.2%)
52 (0.8%)
28 (1.0%)
22 (0.8%) 29%
Waste to energy
19,095
(16%) 3,020 (49%) 122 (4.2%) 118 (4.2%) 3%
Recycling
91,925
(76%) 2,814 (46%) 2,674 (93%) 2,537 (91%) 5%
SUPPLEMENTARY INFORMATION CONTINUED
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Absolute like-for-like
EPRA code Performance measure Unit Scope 2023 2022 2023 2022
% change
like-for-like
tonnes Disposed (unspecified)
9,870 (8%)
83 (1.3%) 25 (0.9%) 83 (3.0%) -70%
Total
121,195
6,114 2,876 2,782 3%
Hazardous Tenant Waste:
Landfill
26 (7%)
4.8 (6%)
25 (9%) 5 (6%) 434%
Incineration
40 (11%) 5.5 (7%)
21 (85) 6 (7%) 285%
Waste to energy
0 (0%)
53.0 (68%)
0 (0%) 53 (68%) -100%
Recycling
88 (23%)
14.3 (18%)
0 (0%) 14 (18%) -100%
tonnes Disposed (unspecified)
226 (60%)
0.8 (1%)
223 (83%) 1 (1%) 28,490%
Total
380
78
269 79 245%
Number of applicable properties
50 of 130
16 of 113
10 of 71 assets
Non Hazardous Head Office Waste :
Landfill
0
Incineration
0
Waste to energy
0
N/A
N/A N/A N/A
Recycling
575
Disposed (unspecified)
575
Total
1,150
Hazardous Head
Office Waste : N/A N/A N/A N/A N/A
Number of
applicable properties 1 of 1 1 of 1
Total
122,725
6,193
3,145 2,861 10%
Energy-Int Energy Intensity kWh/m
2
/year
Energy Intensity of
landlord obtained energy 17.8 18.4
Energy Intensity of
tenant obtained energy 108 101 4.8 4.2
GHG-Dir-Abs
Total direct greenhouse gas
emissions (Scope 1) tCO
2
e
Scope 1
Number of
applicable properties
17.23
8 of 8
12.67
6 of 6
4.8 4.2
4 of 4
13.8%
EPRA overarching recommendations continued
Environmental performance measures continued
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Absolute like-for-like
EPRA code Performance measure Unit Scope 2023 2022 2023 2022
% change
like-for-like
GHG-Indir-Abs
Total indirect greenhouse gas
emissions from landlord-obtained
electricity (Scope 2) tCO
2
e
Scope 2
Number of applicable properties
324
15 of 15
163
13 of 13
96 95
1 of 1
1.5%
GHG-Indir-Abs
Total indirect greenhouse gas
emissions from tenant-obtained
energy (Scope 3)
tCO
2
e
Scope 3
Number of applicable properties
11,218
82 of 130
assets
10,138
72 of 113
GHG-Int
Greenhouse gas (“GHG”) emissions
Intensity from landlord-obtained
energy
tCO
2
e
m
2
/year
GHG Intensity of landlord
obtained energy
GHG Intensity of tenant
obtained energy
3.43
20.4
3.42
20.5
Water-Abs; Water-LfL Total water consumption m
3
Landlord-obtained water 4,796 1,193 504 478 5.4%
m
3
Tenant-obtained water 693,198 75,840
Number of
applicable properties 53 of 130 36 of 113 1 of 71
m
3
Head office of the Manager N/A 2,890
Total m
3
Total 697,994 79,923 504 478 -100%
Water-Int Water intensity m
3
/m
2
/year Water Intensity of landlord
obtained water
Water Intensity of tenant
obtained water
0.19
0.40
0.16
0.39
EPRA overarching recommendations continued
Environmental performance measures continued
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SUPPLEMENTARY INFORMATION CONTINUED
EPRA overarching recommendations continued
Environmental performance measures continued
Data notes
•
Previously published data for the year to 31 March 2022 has been updated, including
associated intensity metrics, as additional data was obtained since the publishing of the
previous report.
•
No off-site renewable sources have been identified for landlord-obtained energy
performance measures. Solar panels have been installed at 8 of our sites and reduce
tenant-obtained electricity impacts.
•
There is no Hazardous Head Office waste, and no landlord waste.
•
Greenhouse gas emissions have been calculated using UK government conversion factors
and the Corporate Greenhouse Gas Protocol location-based methodology.
•
Scope 3 reporting is constrained to energy related emissions from downstream leased
assets, no other scope 3 emissions sources are included in the table.
•
All reported water consumption is from municipal water sources. No landlord or tenant
abstraction from ground or surface water, or rain or grey water use takes place within the
portfolio.
•
The following waste disposal routes are not used within the portfolio: Reuse and
Composting. Materials Recovery Facility (MRF) may be used as part of recycling processing.
•
Water and Energy Intensities are normalised to data availability using consumption start
and end dates where the consumption is not a full year. This is to ensure that the numerator
and denominator are aligned as possible.
•
In this disclosure estimation refers to filling invoice gaps, not to whether invoices are based
on estimated or actual readings.
Commentary
The increase in absolute landlord-obtained fuels and water is predominantly due to expansion
of the portfolio and there being a higher number of sites with vacancies, which account for
most landlord-obtained energy.
Total landlord (Scope 1 & 2) GHG emissions have increased because of the increased number
of sites with landlord electricity supply, this is caused by an increased vacancy rate.
No landlord-obtained waste supplies exist within the portfolio. The increase in absolute waste
production results from increased data availability from tenants.
Head office waste data was previously unavailable. However in the reporting year the
Investment Manager has changed the waste contract in order to have better visibility of
thisdata.
The increase in tenant-obtained absolute electricity, fuels, water and waste consumption is
predominantly caused by receiving data from a higher proportion of tenants as well as the
expansion of the portfolio through acquisition. This is the same for Scope 3 GHG emissions,
and will continue to increase as we aim for full coverage on tenant controlled areas and an
understanding of our full Scope 3 emissions. There are new tenants within the portfolio that
operate their main manufacturing facility for the whole country from one of our assets, and
therefore produce very high quantities of waste on the site.
The like-for like decrease in fuels and electricity, is likely down to energy price increases in the
year and tenants’ own commitment to sustainability, and it may also have been supported by
our EPC improvement and solar PV programmes. However, as the tenant reported data is out
of our operational control, it is not possible to understand all the variations in their
consumption data.
We are committed to reducing our energy consumption and GHG emissions through a
combination of EPC aligned retrofits, development of high performing new assets and the
installation of solar photovoltaic panels at our sites.
Building certifications
BREAAM Green certificates for new developments are an important performance indicator for
us, but are only applicable for new developments. All three completed developments have
been BREEAM certified and so the number of certifications has increased by the same number
compared to 2022 developments have been BREEAM certified, this is an increase of 43%
compared to 2022. As developments are a small part of our total portfolio, the majority of the
portfolio does not have BREAAM certification.
cert-tot: BREEAM Rating Excellent Very Good
Number of certificates 1 9
Floor area coverage 0.2m sq ft 0.7m sq ft
Percentage of portfolio by floor area 2% 7%
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SUPPLEMENTARY INFORMATION CONTINUED
EPRA overarching recommendations continued
EPC ratings by band
The below table provides an overview of the EPC ratings of the portfolio. All reporting is based on lodged and valid ratings. The portfolio includes some assets in Scotland, which are reported
using the EPC Band they would have achieved if assessed using the EPC methodology for England and Wales. The EPC totals sum to more than the number of assets in the portfolio as some
sites require multiple EPCs per asset.
cert-tot: EPC
Count
(March-23)
Count
(March-22)
Floor area
(sq ft
2
)
(March-23)
Floor area
(m2)
(March-22)
% of
Floor area
(March-23)
% of
Floor area
(March-22)
LFL Count
% changeMarch-23 March-22
A
32
15
1,205,435
55,062
12%
7%
19
11 73%
B
41
24
3,836,952
1,670,934
39%
20%
36
24 50%
C
66
70
3,314,446
4,042,017
34%
49%
57
70 -19%
D
26
45
1,362,912
1,933,229
14%
23%
23
28 -18%
E
1
2
13,437
50,300
0%
1%
0
2 -100%
F
—
—
—
—
—
—
—
—
G
—
—
—
—
—
—
—
—
Unknown
—
—
—
—
—
—
—
—
Social and governance performance measures
Urban Logistics REIT considers good governance to be fundamental to its business and so discloses here with the aim of providing transparency on its specific processes.
In the near term, Urban Logistics REIT plc assesses social performance on a monitor and report basis. This follows our materiality review and the nature of our assets.
In line with Urban Logistics REIT plc's ability to control operating policies of the Investment Manager, we disclose the Manager’s Social Performance Measures for all EPRA sBPR Employee Social
Performance Measures.
Urban Logistics REIT plc does not have direct employees. Instead, all employees and partners of the Investment Manager who work wholly on the REIT are considered as employees for the
disclosure of Social Performance Measures. This means that the employee related Performance Measures are based on the 18 employees of the Investment Manager who dedicate 100% of the
time they are contracted to working on the REIT.
Community engagement
We ensure that key decisions relating to the portfolio consider our impact on local communities. Due to the FRI nature of the portfolio, assets are not under Urban Logistics operational control
and therefore any community engagement is performed by the tenants. Comty-Eng below is therefore only applicable for development projects which are under landlord control. The
community is consulted at 100% of development projects. The requirements and impacts are assessed, proposed plans publicly displayed and feedback integrated into the final design.
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SUPPLEMENTARY INFORMATION CONTINUED
EPRA overarching recommendations continued
Social and governance performance measures continued
EPRA code Performance measure Unit Result
Diversity-Emp Board gender diversity % Male: 83%
Female: 17%
Investment Manager employee gender diversity % Male: 53%
Female: 47%
Diversity-Pay Salary ratio of men to women, reported by median basic
salary
Gender pay gap of the Board
Gender pay gap of the Investment Manager
22%
137%
Emp-Training Employee training and development average hours/year/employee 19
Emp-Dev Employees with performance appraisals % 100%
Emp-Turnover New hires and turnover Total number of new employee hires
Rate of new employee hire
4
22%
Total number of employee turnover 0
Rate of employee turnover 0%
H&S-Emp Employee health and safety - reported for all direct
employees
Absentee rate (days lost relative to scheduled work days)
Injury Rate (per 100,000 hours worked)
Lost Day Rate (lost days relative to scheduled work days)
Fatalities (total number in the reporting period)
0.3
0
0
0
H&S-Asset Asset health and safety assessments % of assets N/A
H&S-Comp Asset health and safety compliance Number N/A
Comty-Eng Community engagement, impact assessments and
development programmes
% 100% of developments
Gov-Board Composition of highest governance body Number of executive Board members 0
Number of non-executive Board members 6
Average tenure on the governance body (years) 6.2
Number of non-executive Board members with competencies
relatingtoESG topics
1
Gov-Select Process for nominating and selecting the highest
governance body
Please refer to page 68 in
the Annual Report
Gov-Col Process for managing conflicts of interest Please refer to page 67 in
the Annual Report
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SUPPLEMENTARY INFORMATION CONTINUED
EPRA overarching recommendations continued
Social and governance performance measures continued
Data notes
•
All employee related performance measures are reported for all direct employees and
Partners of the Investment Manager.
•
Gender pay gap is expressed as a percentage of the difference between average (median)
basic salary or drawings of men and women, showing the percentage that men earn more
than women.
Narrative on Performance
The board has undergone significant changes in May 2023, as detailed in the Nomination
Committee Report on page 69, and post period end the board comprises 40% female
Directors.
The Manager is 47% female, but has a high gender pay gap. caused by a gender imbalance in
the senior management team. Due to the small size of the team, no further segregation of
employee categories is considered appropriate.
Employee turnover and absence remains very low.
Injury Rate, Lost Day Rate and Fatalities in the Investment Manager are reported for the first
time. However, due to the nature of our lease arrangements, all health and safety assessments
and compliance checks are conducted by our tenants and Urban Logistics REIT does not have
operational oversight.
Reconciliations between the non-GAAP financial information disclosed in the Annual Report
to the nearest comparable. IFRS measurement, where appropriate, are disclosed. The definition
of each of the non-GAAP financial information can be found in the Glossary of Terms.
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SUPPLEMENTARY INFORMATION CONTINUED
III. Balance sheet
31 March
2023
£’000
31 March
2022
£’000
Investment properties
1,101,583
1,029,071
Other net assets
14,951
99,701
Net borrowings
(346,774)
(236,140)
Total shareholders’ equity 769,760
892,632
Adjustments to calculate EPRA NTA:
Fair value of interest rate derivative
(3,034)
(1,603)
Intangible assets
(32)
(47)
EPRA net tangible assets 766,694
890,982
Ordinary Shares in issue at year end
471,975,411
471,975,411
Dilutive shares in issue at year end
—
—
471,975,411
471,975,411
EPRA NTA per share 162.44p
188.78p
I. EPRA performance measures summary
Note
31 March
2023
31 March
2022
EPRA earnings per share II
7.85p
5.40p
EPRA net tangible asset value III
162.44p
188.78p
EPRA net reinstatement value III
178.16p
203.19p
EPRA net disposal value III
163.09p
189.12p
EPRA net initial yield IV
5.0%
4.4%
EPRA “topped up” net initial yield IV
5.1%
4.5%
EPRA vacancy rate V
7.4%
6.9%
EPRA cost ratio (including vacant property costs) VI
21.2%
21.8%
EPRA cost ratio (excluding vacant property costs) VI
18.3%
20.0%
EPRA LTV VII
29.3%
12.4%
II. Income statement
31 March
2023
£’000
31 March
2022
£’000
Gross revenue
55,305
37,811
Property operating costs
(2,313)
(1,262)
Net rental income 52,992 36,549
Administrative expense
(9,683)
(7,159)
Other income
57
1,021
Long-term incentive plan charge
4,345
(4,114)
Operating profit before interest and tax 47,711
26,297
Net finance costs
(10,680)
(6,840)
Exceptional items
—
(459)
Profit before tax 37,031
18,998
Tax on EPRA earnings
—
—
EPRA earnings 37,031
18,998
Weighted average number of Ordinary Shares
471,975,411
351,533,233
EPRA earnings per share 7.85p
5.40p
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Annual Report and Accounts 2023
133
SUPPLEMENTARY INFORMATION CONTINUED
IV. EPRA net initial yield and “topped up” net initial yield
31 March
2023
£’000
31 March
2022
£’000
Total properties per Financial Statements 1,101,583
1,029,071
Less head lease right-of-use asset
(9,576)
(8,953)
Less development properties
(17,905)
(34,735)
Completed property portfolio 1,074,102
985,383
Add: notional purchasers’ costs
71,965
66,021
Gross up completed property portfolio valuation (A) 1,146,067
1,051,404
Annualised passing rent
1
59,307
46,315
Less irrecoverable property outgoings
(2,181)
(390)
Annualised net rents (B) 57,126
45,925
Contractual rental increases for rent-free period
989
936
“Topped up” annualised net rent (C) 58,115
46,861
EPRA net initial yield (B/A) 5.0%
4.4%
EPRA “topped up” net initial yield (C/A) 5.1%
4.5%
1. Annualised passing rent excludes short-term lettings and licences.
III. Balance sheet continued
The Group has adopted EPRA NTA as its primary measure of net asset value, as it considers it
to be the most relevant measure for its operating activities. A reconciliation of the three EPRA
net asset value measurements from IFRS NAV is provided in the table below.
31 March 2023
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS equity attributable to shareholders
769,760 769,760 769,760
Fair value of interest rate derivatives
(3,034) (3,034) —
Intangible assets
(32) — —
Real estate transfer tax
— 74,136 —
EPRA net asset value
766,694 840,862 769,760
Diluted shares (number)
471,975,411 471,975,411 471,975,411
EPRA net asset value per share 162.44p 178.16p 163.09p
31 March 2022
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS equity attributable to shareholders 892,632 892,632 892,632
Fair value of interest rate derivatives (1,603) (1,603) —
Intangible assets (47) — —
Real estate transfer tax — 67,985 —
EPRA net asset value
890,982 959,014 892,632
Diluted shares (number) 471,975,411 471,975,411 471,975,411
EPRA net asset value per share 188.78p 203.19p 189.12p
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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Annual Report and Accounts 2023
134
SUPPLEMENTARY INFORMATION CONTINUED
EPRA cost ratio
31 March
2023
£’000
31 March
2022
£’000
Total costs (A) 11,633
8,145
Long-term incentive plan crystallisation
—
—
EPRA total costs including vacant property costs (D) 11,633
8,145
Vacant property costs
(1,566)
(685)
EPRA total costs excluding vacant property costs (E) 10,067
7,460
EPRA cost ratio (including vacant property costs) (D/C) 21.2%
21.8%
EPRA cost ratio (excluding vacant property costs) (E/C) 18.3%
20.0%
VII. EPRA LTV
31 March
2023
£’000
31 March
2022
£’000
Gross drawn debt
350,964
242,422
Net payables
1,474
12,490
Cash and cash equivalents
(30,159)
(127, 379)
Net debt (A) 322,279
127,533
Investment property (excluding ROU asset)
1,092,007
1,020,118
Head lease ROU asset
9,576
8,953
Intangible assets
32
47
Total property value (B) 1,101,615
1,029,118
EPRA LTV (A/B) 29.3%
12.4%
V. EPRA vacancy rate
31 March
2023
£’000
31 March
2022
£’000
Estimated rental value of vacant space
5,517
3,753
Estimated rental value of the whole portfolio
74,176
54,529
EPRA vacancy rate 7.4%
6.9%
VI. Total cost ratio/EPRA cost ratio
Total cost ratio
31 March
2023
£’000
31 March
2022
£’000
Costs
Property operating expenses
2,313
1,262
Administrative expenses
9,683
7,159
Less: service charge income
(251)
(193)
Less: ground rents
(112)
(83)
Total costs including vacant property costs (A) 11,633
8,145
Group vacant property costs
(1,566)
(685)
Total costs excluding vacant property costs (B) 10,067
7,460
Gross rental income
Gross rental income
55,305
37,811
Less: ground rents paid
(112)
(229)
Less: service charge income
(251)
(193)
Total gross rental income (C) 54,942
37,389
Total cost including vacant property costs (A/C) 21.2%
21.8%
Total cost excluding vacant property costs (B/C) 18.3%
20.0%
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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Annual Report and Accounts 2023
135
SUPPLEMENTARY INFORMATION CONTINUED
VIII. EPRA capital expenditure analysis
31 March
2023
£’000
31 March
2022
£’000
Acquisitions
166,205
301,875
Development
28,697
52,935
Capital expenditure:
– no incremental lettable space
8,616
7,002
Total 203,518
361,812
IX. EPRA like-for-like net rental income
31 March
2023
£’000
31 March
2022
£’000 Change
Like-for-like net rental income
29,515
28,924 2.0%
Other
394
—
Like-for-like net rental income (and other) 29,909
28,924 3.4%
Development lettings
4,113
2,197
Like-for-like net rental income plus
developments 34,022 31,121 9.3%
Properties acquired
18,970
5,025
Properties sold
—
403
Net rental income 52,992
36,549 45.0%
X. Total accounting return
31 March
2023
£’000
31 March
2022
£’000
Opening EPRA NTA
188.78p
152.33p
Closing EPRA NTA
162.44p
188.78p
Change in EPRA NTA (26.34)p
36.45p
Dividends paid
7.60p
7.60p
Total growth in EPRA NTA plus dividends (18.74)p
44.05p
Total return -9.9%
28.9%
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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136
INVESTMENT POLICY
Investment objectives and policy
Urban Logistics’ investment objectives and policy, as adopted in December 2021, is as follows:
Asset selection is central to the successful implementation of ourstrategy
Our acquisition criteria balance a range of factors to ensure we buy the right assets at the right
price; and that there are opportunities for us to add value through our active asset
management approach.
Investment objective
The Investment Objective is to deliver total investment returns through both income, with
regular dividends providing shareholders with a sustainable income stream that will grow over
the medium term, and targeted capital growth which the Company believes will enhance
shareholders’ total return over the long term.
Portfolio
The Company intends to achieve the investment objective by investing in and growing a
diversified portfolio of primary and secondary grade industrial and logistics properties within
the UK, and by engaging in active asset management to leverage and enhance returns.
The Company will invest in assets that comprise an interest in freehold or leasehold property
(other than by way of security), which meet the following criteria:
•
UK industrial or logistics properties (typically single let);
•
modern (typically post-1980) constructions; and
•
representing average lot value across the portfolio at acquisition of up to £15 million
(increased by RPI from admission).
The Company will seek to invest in strategically-located, single-let, last mile industrial and
logistics properties that have good underlying features, including:
•
the opportunity for rental growth and out-performance;
•
strong tenant financial covenant;
•
lease terms focusing on duration and rental growth; and
•
positive geographical characteristics, including age and repair, location, building quality,
sitecover, transportation links, workforce availability, environmental performance and
internal operational efficiencies.
The properties will be located in established logistics regions, such as the Midlands’
“GoldenTriangle”, and in locations where the Company sees medium and long-term potential.
The Company may acquire properties directly or through holdings in SPVs and properties may
be held through limited partnerships, trusts or other vehicles with third-party co-investors.
Borrowing and gearing policy
The Company will seek to use gearing to enhance returns over the long-term and, in addition, will
seek to fix its borrowing rates. Gearing, represented by borrowings as a percentage of gross assets,
will not exceed 57.5% at the time of investment. It is the Directors’ intention to target gearing of
30% to 40% of gross asset value in the medium term and to comply with the REIT condition
relating to the ratio between the Group’s “property profits” and “property finance costs”.
Use of derivatives
The Company may enter derivative contracts for efficient portfolio management. In particular,
the Company may engage in interest rate hedging or similar instruments to mitigate the risk of
interest rate increases.
Investment restrictions
The Company will invest and manage its assets with an objective of spreading risk through the
following investment restrictions which, in each case, apply at the time of investment:
(I) the Company will derive its rental income from a portfolio of no less than ten properties;
(II) the Company will have a maximum exposure of 25% of its rental income derived from any
single tenant;
(III) the Company may invest up to 10% of its gross asset value in non-income producing
properties with pre-let tenancies (or otherwise guaranteed income) in place, but which are
requiring development or re-development (such as extending, reconfiguring and refurbishing
existing assets), to realise that income, with the intention of holding any completed
development as an investment. The investments in this category will not be undertaken
speculatively, although the Company may take options over adjacent land/property. The
Company may finance these assets using, inter alia, forward-funding arrangements;
(IV) the Company may invest up to 10% of its gross asset value in assets (including
development assets), which are not producing income at the time of acquisition, including
assets that do not have pre-let tenancies (or otherwise guaranteed income) in place;
(V) at least 90% by value of the properties directly or indirectly owned by the Company shall
be in the form of freehold or long leasehold (over 60 years remaining at the time of
acquisition) properties or the equivalent; and
(VI) the Company will not invest in closed-ended investment companies.
The Directors currently intend, at all times, to conduct the affairs of the Group so as to enable it
to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made
thereunder).
In the event of a breach of the investment guidelines and restrictions set out above, a
notification will be made to a Regulatory Information Service if the Directors consider the
breach to be material.
No material change will be made to the investment objective or the investment policy without
the approval of the FCA and shareholders by ordinary resolution at any general meeting, which
will also be notified by a RIS announcement.
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Annual Report and Accounts 2023
137
GLOSSARY OF TERMS
Energy performance certificate (“EPC”)
A measure of the energy efficiency of a property on a scale of A (most efficient) to G (least
efficient) and is a legal requirement for a building to be sold, let or constructed. Once obtained,
an EPC is valid for ten years.
EPRA cost ratio
Administrative and operating costs (including and excluding costs of direct vacancy) divided
by gross rental income.
EPRA earnings per share (“EPS”)
Earnings from continuing operational activities divided by weighted average number of shares
in issue during the year.
EPRA LTV
EPRA LTV represents debt divided by market value of the property.
EPRA net disposal value (“NDV”)
Represents the shareholders’ value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the full extent of the liability,
netof any resulting tax.
EPRA net initial yield
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.
EPRA net reinstatement value (“NRV”)
Assumes that entities never sell assets and aims to represent the value required to rebuild
theentity.
EPRA net tangible assets (“NTA”)
Assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA topped-up net initial yield
EPRA net initial yield adjusted for expiration of rent-free periods or other unexpired lease
incentives such as discounted rent periods and step rents.
EPRA vacancy rate
Estimated market rental value (“ERV”) of vacant space divided by ERV of the whole portfolio.
Estimated rental value (“ERV”)
The estimated annual market rental value of lettable space as assessed by the external valuer.
European Public Real Estate Association (“EPRA”)
The European Public Real Estate Association (“EPRA”) is the industry body for European Real
Estate Investment Trusts (“REITs”).
Gross to net rental income ratio
Net property operating expenses expressed as a percentage of rental income.
Investment Adviser
Logistics Asset Management LLP (formerly known as Pacific Industrial LLP) is the partnership
led by Richard Moffitt which was appointed Investment Adviser in May 2023.
Investment Manager
PCP2 Ltd was the AIFM and Investment Manager until May 2023. Post May 2023 G10 Capital
Limited took on the role of AIFM to the Company.
Loan to value (“LTV”)
The Group’s net debt expressed as a percentage of the investment property portfolio.
Net debt
The Group’s bank loans net of cash balances at the period end.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
138
GLOSSARY OF TERMS CONTINUED
Net initial yield (“NIY”)
Annual rents on investment properties as a percentage of the investment property portfolio
valuation having added notional purchaser's costs.
NTA
Net tangible assets.
Occupancy rate
The ERV of the let units as a percentage of the total ERV of the investment property portfolio.
Property income distribution (“PID”)
Dividends from the Group’s tax-exempt property business.
REIT
UK Real Estate Investment Trust.
SONIA
Sterling Overnight Index Average.
Total Accounting Return (“TAR”)
Represents the movement in EPRA NTA per share plus dividends paid during the period
expressed as a percentage of EPRA NTA per share at the beginning of the period.
Total Property Return (“TPR”)
Capital growth in the portfolio, plus net rental income and profit or loss on the sale of
investment properties expressed as a percentage return on the capital employed during
theyear; however, this excludes acquisitions.
Weighted average unexpired lease term (“WAULT”)
The average lease term remaining to expiry across the portfolio weighted by contracted
rentalincome.
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
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Annual Report and Accounts 2023
139
COMPANY INFORMATION
Directors
Nigel Rich CBE FCA Chairman
Jonathan Gray Director – resigned 11 May 2023
Heather Hancock Director
Richard Moffitt Director
Bruce Anderson Director
ACMA FCIOBS
Mark Johnson Director – resigned 11 May 2023
Lynda Heywood Director – appointed 1 May 2023
Company Secretary
Link Company Matters Limited
Central Square, 10th Floor
29 Wellington Street
Leeds
LS1 4DL
Registered Office
6th Floor, 65 Gresham Street
London
EC2V 7NQ
Manager and AIFM (until 11th May 2023)
PCP2 Ltd
124 Sloane Street
London
SW1X 9BW
Manager and AIFM (post 11th May 2023)
G10 Capital Limited
4th Floor 3 More London Riverside,
London
SE1 2AQ
Investment Adviser (post 11th May 2023)
Logistics Asset Management LLP
Bond House, 19/20 Woodstock Street
London
W1C 2AN
Joint Brokers
Singer Capital Markets LLP
One Bartholomew Lane
London
EC2N 2AX
Panmure Gordon (UK) Limited
40 Gracechurch Street,
London
EC3V 0BT
Legal Advisers to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Financial Adviser
Kinmont Limited
5 Clifford Street
London
W1S 2LG
Depositary
Indos Financial Limited
The Scalpel, 18th Floor, 52 Lime Street
London
EC3M 7AF
Auditor and Reporting Accountant
RSM UK Audit LLP
25 Farringdon Street
London
EC4A 4AB
Commercial Property Valuer
CBRE Limited
Henrietta House, Henrietta Place
London
W1G 0NB
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Bankers
Santander UK PLC
2 Triton Square
Regent’s Place
London
NW1 3AN
Barclays Bank PLC
1 Churchill Place
London
E14 5HP
Lloyds Bank PLC
25 Gresham Street
London
EC2V 7HN
Aviva PLC
St Helen’s, 1 Undershaft
London
EC3P 3DQ
STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION
URBAN LOGISTICS REIT PLC
Annual Report and Accounts 2023
140
Website
www.urbanlogisticsreit.com
21 July 2023 Interim dividend
18 July 2023 Annual General Meeting
30 September 2023 Half year end
November 2023 Announcement of half-year results
31 March 2024 Year end
FINANCIAL INFORMATION
www.lyonsbennett.com
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URBAN LOGISTICS REIT PLCAnnual Report and Accounts 2023
2nd Floor, Bond House
19-20 Woodstock Street
London W1C 2AN
+44(0)20 7591 1600
www.urbanlogisticsreit.com