Tritax Big Box REIT plc
Standbrook House
4th Floor
2-5 Old Bond Street
Mayfair
London
W1S 4PD
www.tritaxbigbox.co.uk
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Tritax Big Box REIT plc Annual Report 2016
Mission Critical Big Boxes
Tritax Big Box REIT plc
Standbrook House
4th Floor
2-5 Old Bond Street
Mayfair
London
W1S 4PD
www.tritaxbigbox.co.uk
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Tritax Big Box REIT plc Annual Report 2016
Mission Critical Big Boxes
Tritax Big Box REIT plc Annual Report 2016
CONTENTS
OVERVIEW
Tritax Big Box
Our 2016 highlights
Another productive year
What we aim to do
Pure Big Box: a focus on quality and location
1-9
1
2
4
6
8
STRATEGIC REPORT
Chairman’s Statement
Fund Manager’s Q&A
Our Market
Our Business Model
Our Strategy and Objectives
Key Performance Indicators
EPRA Performance Measures
Manager’s Report
The Manager
Responsible Business
Our Principal Risks and Uncertainties
Going Concern and Viability
Board Approval of the Strategic Report
10-60
10
12
14
22
24
26
27
28
50
52
54
60
60
61-102
GOVERNANCE
62
Chairman’s Governance Overview
64
Leadership
67
How we govern the Company
70
The Board of Directors
72
Effectiveness
75
Nomination Committee Report
77
Accountability
Audit Committee Report
80
Management Engagement Committee Report 85
Relations with Shareholders and stakeholders 88
90
Directors’ Remuneration Report
92
Directors’ Report
95
Directors’ Responsibilities Statement
96
Independent Auditor’s Report
FINANCIAL STATEMENTS
103-142
Group Statement of Comprehensive Income 104
105
Group Statement of Financial Position
106
Group Cash Flow Statement
107
Group Statement of Changes in Equity
108
Notes to the Consolidated Accounts
133
Company Balance Sheet
134
Company Statement of Changes in Equity
135
Notes to the Company Accounts
143-149
ADDITIONAL INFORMATION
Notes to the EPRA performance measures
144
Application of the Principles of the AIC Code 146
148
Company information
149
Financial calendar
MISSION CRITICAL BIG BOXES
Our 919,413 sq ft Morrisons
Big Box is their strategic South
East regional distribution
centre for both chilled and
ambient general merchandise,
serving over 85 of their main
supermarket stores ranging
from the Isle of Man to Ipswich.
Tritax Big Box is the UK’s only Real Estate Investment Trust giving
pure exposure to Big Box logistics assets. These properties are
strategically important to tenants, as they offer efficiency savings
and are essential to fulfilling e-commerce sales. Strong demand
and limited supply make Big Box logistics one of the most exciting
asset classes in the UK real estate market.
We invest in and manage both standing assets and pre-let forward
funded developments. Our Big Boxes are some of the most sought-
after in the UK and our tenants include some of the biggest names
in retail, logistics, consumer products and automotive.
We aim to provide an attractive, secure and growing income for our
Shareholders, together with capital appreciation. Our ambition is to
be the UK’s pre-eminent owner of Big Boxes.
1
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OVERVIEW: A COMPELLING BUSINESS
Our 2016 highlights
Financial
DIVIDEND PER SHARE ★
6.20p
Dividends declared in relation to 2016
totalled 6.20 pence per share, in line with
our target. Dividends fully covered by
Adjusted earnings per share of 6.51 pence.
TOTAL RETURN ★
9.6%
Total Return for the year was 9.6%,
compared to our medium-term target
of 9% per annum.
EPRA NAV ★
129.00p (3.5% or 4.7%1)
EPRA net asset value per share increased
by 3.5% or 4.7%1 on a like-for-like basis,
to 129.00 pence as at 31 December 2016
(31 December 2015: 124.68 pence).
MARKET CAPITALISATION £
£1.54 billion
Market capitalisation of £1.54 billion as at
31 December 2016.
PORTFOLIO VALUE £
£1.89 billion2 (+44.4%)
Portfolio independently valued at
£1.89 billion as at 31 December 2016,
which includes all forward funded
commitments.
LOAN TO VALUE (LTV) £
30.0% (-3.2%)
Further diversified our sources of
borrowing, with a new £72 million, long-
term, fixed-rate facility with Canada Life.
The Loan to Value (LTV) as at
31 December 2016 was 30.0%.
1.06%
EPRA COST RATIO TOTAL EXPENSE RATIO
15.8%
A reducing EPRA cost and total expense
ratio of 15.8% and 1.06% respectively,
reflecting the benefits of increased scale.
EQUITY RAISED
£550 million
Raised £550 million of equity during
2016, through two substantially
oversubscribed share issues.
Dividend declared
per share (p)
Adjusted earnings
per share (p)
Operating profit before
changes in fair value of
investment properties (£m)
EPRA NAV per share (p)
129.00p (+3.5%)
129.00
124.68
6.20p (+3.3%)
6.51p (+6.4%)
£62.87m (+75.0%)
6.20
6.00
4.15
7
6
5
4
3
2
1
0
6.51
6.12
4.86
7
6
5
4
3
2
1
0
70
60
50
40
30
20
10
0
35.94
15.00
62.87
120
107.57
90
60
30
0
2014
2015
2016
*
2014
2015
2016
*
2014
2015
2016
*
2014
2015
2016
*
1 Having stripped out the effect of the different timings of dividend payments between
December 2015 and December 2016.
2
2 Excludes Howdens units II and III at Warth Park, Raunds.
* Each year makes reference to 31 December.
Tritax Big Box REIT plc Annual Report 2016
Operational
ASSETS
+10 Big Boxes
Acquired 10 Big Boxes during the year
with an aggregate purchase price of
£524.4 million, further diversifying the
portfolio by geography and tenant.
PORTFOLIO
100% let or pre-let
Portfolio was fully let or pre-let and
income producing during the year.
WAULT
15.3 years (-1.2 years)
At the year end, the weighted average
unexpired lease term was 15.3 years,
against our target of at least 12 years.
CONDITIONAL EXCHANGE
+2 Big Boxes
Acquired two forward funded
developments, both pre-let to Howdens in
December 2016, conditional on planning for
a purchase price of £101.8 million.
PORTFOLIO AREA
c.18.2 million sq ft2
As at the year end our portfolio comprised
35 assets, covering more than
18.2 million sq ft of logistics space.
Post balance sheet activity
DIVIDEND PER SHARE TARGET†
6.40p
Progressive dividend target of
6.40 pence per share announced for 2017.
COMPLETED PRE-LET DEVELOPMENTS
4
Four forward funded pre-let developments
reached practical completion in the year,
with a total valuation of £272.8 million as
at 31 December 2016.
AVERAGE NIY
5.70%
Average net initial yield of the portfolio at
acquisition is 5.70%, against our year-end
valuation of 4.93%.
FURTHER INVESTMENT
£29.2 million
Invested in the forward funded
development pre-let to Hachette UK.
LOAN FACILITY
£90.0 million
Agreed a new 10 year fixed term loan
facility with a fixed rate payable of
2.54% per annum.
PRICE
CHANGE
TOTAL
RETURN
8.8%
15.1%
3.7%
6.7%
(10.3%)
(7.0%)
Total Shareholder Return (p)
■ Tritax Big Box ■ FTSE 250 Index ■ FTSE All-Share REIT Index
150
140
130
120
110
100
90
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016
Source: Bloomberg
† The target dividend is a target and not a profit forecast. There can be no assurances that the target will be met and it should not be taken as an indication of the Company’s
expected or actual future results.
Chairman’s Statement p10-11
Key Performance Indicators p26
EPRA Performance Measures p27
Manager’s Report p28-49
3
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OVERVIEW: A COMPELLING BUSINESS
Another productive year
Since listing, we have acquired approximately one asset each
month while maintaining strong capital discipline in terms of
value and quality. Our ability to complete transactions quickly is
aided by our ready access to attractive finance.
The quality of our assets, the secure income they generate and
our low cost base have enabled us to meet our dividend and
total return targets each year since listing.
2016 in brief
5 February
24 March
Acquired the Brake Bros Ltd
distribution centre at Portbury,
Bristol, for £25.2 million.
29 March
Acquired the Argos National
Distribution Centre at Burton-
upon-Trent, Staffordshire, for
£74.6 million.
Reached practical completion
of the forward funded
development at Stoke-on-
Trent, pre-let to Dunelm.
12 February
Raised gross proceeds of
£200 million through the issue
of 161,290,323 shares at a
price of 124 pence per share.
15 March
Appointed Jim Prower as
Senior Independent Director.
4
Chairman’s Statement p10-11
Manager’s Report p28-49
22 April
Reached practical completion
of the forward funded develop-
ment at Erith, pre-let to Ocado.
24 May
11 May
Passed resolution at the
Annual General Meeting to
allow the Company to invest
in land, limited to 10% of the
net asset value at the time
of investment.
31 May
Achieved practical completion
of the forward funded develop-
ment at Wigan, pre-let to
Nice-Pak.
Acquired the Dixons Carphone
National Distribution Centre
at Newark, Nottinghamshire,
for £77.3 million.
27 June
Achieved practical completion
of the forward funded
development at Raunds,
pre-let to Howdens.
Tritax Big Box REIT plc Annual Report 2016 Co-operative Group distribution facility,
Thurrock
Amazon distribution centre, Peterborough
1 August
Extended the maturity of
£50.9 million loan facility
with Landesbank Hessen-
Thüringen Girozentrale
(“Helaba”) from July 2020
to July 2023.
2 August
10 August
11 October
Acquired the Amazon
distribution centre at
Kingston Park, Peterborough,
for £42.9 million.
Acquired the Whirlpool
logistics facility at Raunds,
Northamptonshire, for
£35.4 million.
Acquired the forward funded
development of a new
logistics facility at Four Ashes,
Wolverhampton, pre-let to
Gestamp, for an investment
price of £56.3 million.
11 August
Declared an interim dividend
of 3.1 pence per share, in
respect of the six months to
30 June 2016.
13 September
Appointed Susanne Given as
a Non-Executive Director.
3 August
Agreed £72 million interest
only, fixed-rate term loan
facility with Canada Life,
repayable in April 2029.
28 September
Declared an interim dividend
of 1.55 pence per share, in
respect of the period from
1 July to 30 September 2016.
9 August
11 October
Acquired the Kellogg’s
distribution facility at
Trafford Park, Manchester,
for £23.5 million.
Acquired the Euro Car Parts
national distribution facility
at Birch Coppice Business
Park, Birmingham, for
£80.1 million.
12 October
Acquired the Co-operative
Group distribution facility
at Oliver Road, Thurrock,
for £56.6 million.
14 October
Raised gross proceeds of
£350 million through the
issuance of 265,151,515
shares at a price of
132 pence per share, after
which Big Box became the
tenth largest UK REIT by
market capitalisation.
8 December
Acquired the forward
funded development of
a new logistics facility
at Prologis Park Fradley,
Staffordshire, pre-let
to Screwfix, for an
investment price
of £52.7 million.
19 December
Agreed a further £50 million of
bank debt from Wells Fargo,
increasing the existing syndicate
secured debt facility from
£500 million to £550 million,
repayable October 2020.
20 December
Amendment of the Investment
Management Agreement,
lowering management fee
percentages for NAV over
£1.25 billion, tightening
conflict provisions and
extending the contract term
to an earliest termination of
31 December 2021.
23 December
Exchanged contracts
(conditional on planning) to
forward fund the develop-
ment of two distribution
warehouses at Warth Park,
Raunds, both pre-let to
Howdens, for a combined
price of £101.8 million.
5
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OVERVIEW: A COMPELLING BUSINESS
What we aim to do
Selectively acquire,
own and manage
the UK’s best
logistics assets that
are mission critical
to our tenants
Utilise the
expertise with
specialist
sub-sector focus
and knowledge
of our Manager
to deliver
out-performance
6
Tritax Big Box REIT plc Annual Report 2016 Deliver attractive,
sustainable and
growing income
together with
capital protection
and growth
Attractive
income...
5.7% ungeared
portfolio
running yield
Sustainable
income...
15.3 years
WAULT
Growing
income...
6.40 pence
progressive
dividend target*
* Dividend per share target for 2017.
7
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OVERVIEW: A COMPELLING BUSINESS
Pure Big Box: a focus
on quality and location
Since our IPO in December 2013, we have rapidly built an outstanding
portfolio of 35 selectively acquired Big Boxes. Our portfolio is well
diversified by size, geography and tenant. The assets are typically modern,
in prime locations and fully let on long leases to institutional-grade tenants
with upward-only rent reviews.
The character of these properties has changed – they are no longer simple
warehouses but are often now the central hub of an occupier’s operation.
Many of our tenants have invested significant amounts in internal fit-out
and sophisticated automation. This investment may well exceed the cost of
constructing the building, demonstrating tenant commitment to the asset.
We believe these factors give us one of the highest-quality portfolios in
the UK quoted real estate sector and underpin our objective of delivering
low-risk and growing income.
£1.89bn
15.3yrs
5.70% NIY
portfolio value
WAULT against our
target of 12 years
average net initial
purchase yield of
portfolio
£99.7m
contracted rental
income
80%
100%
of portfolio acquired
off-market
let or pre-let
8
Tritax Big Box REIT plc Annual Report 2016 3, 4, 12, 21
8
25
20
17
31
12
14
9
1
24
21
11
5
18
3
1
5
9
13
2
6
10
14
16, 26
17, 27
19
23, 36, 37
28
31
34
20
24
29
32
35
7, 8
11
15
18
22
25
30
33
* Note the assets numbered 36 and 37 relate to the conditional exchange of
Howdens units II and III at Warth Park, Raunds. They are excluded from the
portfolio information on pages 8 and 9.
Key
Foundation asset
Value add asset
19
22
29
Growth covenant asset
7
2
13
27
35
32
24 Forward funded
development
Major port
Major M and A roads
28
30
33
36
23
37
4
26
16
1534
6
10
Our five largest tenants,
by contracted rent roll
Tesco
Argos
Morrisons
Ocado
B&Q
as at 31 December 2016
8.72%
6.12%
5.58%
5.51%
5.24%
9
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
CHAIRMAN’S STATEMENT
The Group had another very strong year in 2016,
as we continued to implement our investment
strategy and benefited from the compelling
fundamentals of our market. We met our dividend
target of 6.2 pence per share and delivered a total
return of 9.6%, above our medium-term target of
9% per annum.
The 10 assets we acquired and two assets that were conditionally
exchanged during 2016 further diversified the portfolio by
geography and tenant. We benefited once again from the
Manager’s outstanding network, market intelligence and capital
discipline, to source the majority of these assets off-market and
at attractive yields. This was particularly important in the period
after the EU Referendum, when we acquired five attractively
priced investments from open-ended property funds seeking
liquidity to meet redemption demand. At the year end, the
portfolio was independently valued at £1.89 billion, reflecting
a like-for-like valuation uplift of 3.5%.
During the year, we successfully completed four of our pre-
let forward funded developments, with one further asset
completing after the year end. During the year we acquired two and
conditionally exchanged on a further two pre-let forward funded
developments. These developments can be one of the few ways
for occupiers to secure a suitable building. We see further
opportunities in this area and were pleased that Shareholders
supported an amendment to our Investment Policy at the Annual
General Meeting in May 2016. This allows us to acquire land with
the potential to forward fund a development, with construction only
proceeding once a tenant has been secured via a pre-let.
Share issuance and share price performance £
In uncertain times, investors are often drawn to companies that
can deliver low-risk and growing income. Since our IPO, we have
deliberately constructed a portfolio that offers secure income
from high-quality tenants on long leases that generate an
element of predictable growth through upward-only rent reviews.
Shareholders continued to demonstrate their support for our
approach and confidence in our prospects, subscribing for
a further £550 million of equity in 2016, through two heavily
oversubscribed share issues. This helped to broaden further
our Shareholder base, including new investors from Europe and
the United States.
are essential to their tenants’ businesses and cannot be easily
replicated. Over the course of the year we had a strong price
performance, and delivered a Total Shareholder Return of 15.1%,
as compared to the FTSE 250 Index, the FTSE All-Share REIT
Index and the EPRA NAREIT UK Index which delivered total
returns of 6.7%, (7.0%) and (8.5%) respectively.
Financial results
The Group’s financial performance was strong, with a 75.0%
increase in operating profit before changes in fair value of
investment properties and a 25.2% rise in EPRA earnings per
share (EPS), when calculated under IFRS. The EPRA net asset
value per share grew by 3.5% to 129.00 pence, or 4.7% when
viewed on a like-for-like basis taking into account the timings
of distributions made, against those made in the period to
31 December 2015.
We have a low and transparent cost base and continue to benefit
from economies of scale as we grow. Our total expense ratio for
2016 fell by 3 basis points to 1.06% whilst our EPRA cost ratio also
fell to 15.8%, both of which compares favourably with our peers,
and we expect to deliver further savings as a result of adding two
new lower rate investment management fee bands.
Dividends ❖
During the year, we paid the following interim dividends per share:
• 3.10 pence in August, in respect of the six months to
30 June 2016; and
• 1.55 pence in October, in respect of the three months to
30 September 2016.
On 7 March 2017, the Board declared a third interim dividend
of 1.55 pence per share, in respect of the period from 1 October
to 31 December 2016. This dividend will be paid on or around
3 April 2017, to Shareholders on the register at 17 March 2017.
We also look forward to making quarterly dividend payments to
Shareholders with effect from 1 January 2017.
The total dividend for the year of 6.20 pence per share was fully
covered by Adjusted EPS of 6.51 pence. Adjusted EPS includes
licence fees received from developers on our forward funded
developments and adjusts for other earnings not supported by
cash flows, which are excluded from the EPRA EPS measure.
We consider that Adjusted EPS is the most relevant metric when
considering our dividend policy.
In addition to the demand for income, the Group also benefited
from investors switching their attention to specialist property
investment companies, whose management focus and depth
of knowledge helps them to outperform and whose assets
Loan financing £
The availability of debt for high-quality investments remains
healthy. We have maintained the Group’s low cost of borrowing,
10
Tritax Big Box REIT plc Annual Report 2016 despite banking margins having risen across the market since
the spring of 2016. Borrowing costs remain well below property
yields, making the continued case for modest debt attractive.
Shareholder support to extend the Manager’s contract resulting
in an earliest termination date of 31 December 2021.
We further diversified our borrowing in the year, agreeing a
£72 million facility with Canada Life. The facility is our first with a
fixed interest rate and runs for 13 years, extending and staggering
our debt maturity. We also agreed a further £50 million from
Wells Fargo, extending our existing syndicated debt facility to
£550 million, repayable in October 2020, on a floating interest
rate but with a significant portion subject to hedging.
Board and governance
Strong governance is vital for success in any business. We were
therefore delighted to strengthen the Board in September, with
the appointment of Susanne Given as a Non-Executive Director.
She brings more than 20 years’ experience in the retail industry,
which will prove invaluable to the Board going forward. The
other notable development in 2016 was the appointment of Jim
Prower, an existing Non-Executive Director, as the Company’s
Senior Independent Director.
Outlook
The outlook for the Group remains positive. We are in a strong
financial position and see further opportunities to acquire
high-quality standing investments and to forward fund pre-let
developments.
We consider there to be limited potential for capital growth
through further yield compression and, whilst more challenging,
we have maintained a 9% total return target. Capital growth is
therefore likely to come from steady state capitalisation rates
being applied to growing income. We believe that income will
remain the most important component of total return over the
next 12 months. There are strong drivers to rental growth in the
market, both due to the ongoing imbalance between occupational
supply and demand and the increase in build costs in 2016, which
we expect will feed through to rents. This rental growth will help
to support the Group’s progressive dividend policy. For 2017, we
have increased our dividend target to 6.40 pence per share.
Investment Management Agreement
The Board believes the Manager has delivered outstanding
performance since the IPO. Just prior to the year end, we gained
In summary, our market is resilient and we expect 2017 to be
another positive and stable year for the Group.
Richard Jewson Chairman
7 March 2017
11
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
FUND MANAGER’S Q&A
Colin Godfrey, Fund Manager,
at our Erith Big Box, let to Ocado.
Q UK retailers face volume and margin
pressures, and there is a structural change in
the way consumers shop. Does this concern you,
given your tenant list?
A We typically target investments with tenants that have
strong balance sheets and a track record of performance,
to underpin their rental obligations. From an initial core of
supermarket tenants (recognising that 40p in every £1 spent in
the UK is on food 1 ) we have diversified the portfolio to include
general retail, third-party logistics, wholesalers, automotive
and consumer goods manufacturers. We have also further
diversified our range of tenants. Our largest single tenant
exposure is Tesco at 8.72% of rental income. We expect this to
reduce as the Company grows.
We purchase assets with a long-term view, targeting high-
quality modern buildings, in strong locations, that are intrinsic to
the tenants’ businesses and have the best prospects for rental
growth. These properties are defensive because if they became
vacant, they would attract good occupier demand.
Retail had a better year in 2016, recording non-food store sales
volume growth of 3.6%. The big story, however, is the continued
12
1 Office of National Statistics, Retail sales in Great Britain: January 2017
(2015 latest data available)
2 Office of National Statistics, Retail sales in Great Britain: December 2016
shift to internet retailing, which grew 20.7% in 2016 but still only
represents 14.6% of total retail sales 2.
your tenants?
Q How has the EU Referendum result affected
A It will be some time before we understand how long the
process of leaving the EU will take and what trade deals
the UK can negotiate. Import costs have already increased due
to Sterling’s devaluation and may rise further once we leave
the EU, depending on any trade taxes and tariffs. This could
increase UK inflation. The majority of our tenants are retailers
with domestically focused sales. Those that import from the EU
are likely to experience cost increases, which could squeeze
their profits (at least in the short term) and/or be passed on
to UK consumers. In response, retailers are looking to make
savings. Big Boxes can make a significant contribution, both
directly and through supply chain efficiency.
for capital growth and total returns?
Q Why are you less positive about prospects
A Most commercial property sectors saw significant capital
growth after the recession, as investment demand grew.
Tritax Big Box REIT plc Annual Report 2016 Some sector yields have softened recently, although prime
logistics yields remain resilient. We expect this to persist,
with the imbalance between occupational supply and demand
producing strong rental growth. These attributes have also
led to more domestic and overseas money targeting the
sub-sector, which helps liquidity. However, we do not believe
yields can harden much further and this reduces prospects
for capital growth. Capital growth is likely to come from rental
growth (applied to a steady state capitalisation rate) and value
enhancing asset management. We therefore expect total returns
to be lower in 2017 but the Company is first and foremost income
focused and we have maintained our 9% pa total return target.
interest rates?
increase in Gilt yields and potential for rising
Q Are you concerned about the recent
A We are aware of the attractiveness of our investments
versus other asset classes, on a risk-adjusted basis,
and we continue to monitor rate movements. Ten-year Gilt
yields have been close to historic lows and we are not unduly
concerned by the small recent increase. As for interest rates,
it is difficult to know because the forward yield curve remains
reasonably shallow. Nonetheless, there has been considerable
recent commentary on the potential for rising interest rates
in response to inflationary pressures partially resulting from
the Referendum vote. Increased interest rates would affect all
asset classes and all sectors of the property market but Big Box
logistics is, to some extent, insulated by strong demand from
both occupiers and investors and barriers to entry controlling
supply, so we would expect to be affected to a lesser degree
than other parts of the market.
The timing and type of our upward-only rent reviews provide a
possible hedge against inflation. In addition to capturing current
strong market rental growth through open market rent reviews,
we also enjoy fixed rental increases and inflation indexed uplifts,
most of which are to RPI.
Nonetheless, we are prudent and have hedged c.99.7% of drawn
debt, mostly through interest rate caps. These protect against
rate increases above the cap level (current average capped
rate of borrowing of 2.82% pa as at the year end), yet allow us
to benefit from downward movements. Recently we have also
taken out two longer-term fixed-rate loans, to benefit from
attractive rates, extend our average term to expiry, stagger our
expiry dates and expand our pool of lenders. Our gearing has
been modest during 2016, ending the year at 30% loan to value.
source attractive property investments?
Q Can you continue to grow? Can you still
A Yes, and we should while there are compelling reasons to
do so. We know that retail sales have stabilised and are
growing and that the proportion of online sales is rising rapidly.
For every 1% growth in sales there is a commensurate increase
in the volume of Big Boxes needed, particularly for e-commerce
fulfilment, and we believe that we are well placed to benefit from
this trend.
An enlarged portfolio enables increased diversification at
several levels, including greater market knowledge and
influence. It also offers the potential for lower costs and more
competitively priced debt.
We currently own about 10% of the UK’s quality Big Boxes and
new stock is being developed each year. We expect to be able
to acquire more pre-let forward funded developments and can
purchase land for pre-let development. There are also strong
occupiers we would like to add as tenants. In addition, we have
excellent contacts from whom we source investments. To date
we have bought well, largely off-market, and we do not expect
that to change in the near term. Subject to being able to source
quality investments at attractive prices, there are good reasons
to grow the portfolio.
plans to do so?
Q You have not sold any assets. Are there any
A We are unlikely to regularly trade stock, having assembled
a high-quality portfolio for a longer-term strategy. We keep
our assets under continual review and this includes considering
selective assets for sale. We would sell an asset if we can reinvest
the money into a more attractive investment. To date, that has not
been the case. Some of our investments provide a very attractive
running yield, while others are long-term hold due to the quality of
the real estate and potential for rental growth. Certain assets are
targets for asset management initiatives and we might convert
them from value add to foundation assets, say following a lease
re-gear or re-letting.
The cost of buying and selling an investment can be as much as
8.5%. During the last few years these costs have been eclipsed
by strong yield-shift induced capital growth but with stabilised
yields these costs can significantly affect returns. We believe
that companies such as ours, with high-quality, longer-term
income, will fare better than those which need to trade assets
more regularly.
13
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
OUR MARKET
We continue to believe that the Big Box logistics
sector is one of the most exciting asset classes
in the UK property market. In this section, we
explain why the fundamentals of our market
are so attractive and why Big Boxes are such an
important component of UK logistics.
Big Boxes are mission critical to their tenants
Big Boxes are highly efficient distribution centres and logistics
hubs, which act as both the break down point for goods imported
in bulk and which hold the finished goods for distribution to other
parts of the supply chain or directly to consumers. This large
scale format did not exist in the UK before the early 1990s and
most high-quality Big Boxes are modern facilities constructed
within the past 15 years. This new generation of logistics assets
are often technologically sophisticated and make a significant
contribution to the local and national economy. This makes Big
Boxes an emerging market and we have been at the forefront of
its recent development.
Big Boxes’ unique characteristics
Strategically located
Big Boxes are usually situated close to
major roads, motorways and potentially
to airports, sea ports or rail freight hubs,
allowing efficient stocking and onward
distribution
“...you cannot have a
conversation about logistics
property without mentioning
Amazon or Tritax Big Box... ”
Logistics Report: How Soon is Now?
Addleshaw Goddard, November 2016
Very big
Big Boxes have floor areas generally
between 300,000 and 1,000,000 sq ft,
with eaves heights of between 10m
and 25m allowing for the installation
of racking and mezzanine floors
Modern
Big Boxes are modern facilities
typically constructed within the last
15 years incorporating modern
designs and the latest specifications
Technologically
sophisticated
Big Boxes often benefit from value
enhancing capital investments by
tenants in the form of state of the
art automated handling
Highly sought after
Big Boxes are in demand from
institutional-grade tenants who are
willing to sign up to long leases, with
regular upward-only rent reviews,
and from investors wanting to own
the assets
14
Our Investment Policy p24
Our Strategy and Objectives p30-31
Responsible Business p52-53
Our Principal Risks and Uncertainties p54-59
Tritax Big Box REIT plc Annual Report 2016
These properties are strategically important to tenants,
as they offer efficiency savings and are essential to fulfilling
e-commerce sales.
Our market drivers
Demand for Big Boxes comes from three main sources:
conventional and online retailers, third-party logistics companies
(“3PLs”), and other companies such as manufacturers. These
organisations are responding to structural changes in their
markets, such as the relentless rise of e-commerce (refer
to pages 18-19), weaker economic growth and increased
competition, which means that improving operational efficiency
can be a key factor in determining profits.
Big Boxes offer previously unavailable flexibility, economies
of scale and low cost of use. They are often the nucleus for
distribution at a national level and increasingly at a regional level
and can be the most important component of an occupier’s
supply chain. Many companies use Big Boxes to centralise
previously dispersed distribution into fewer, larger facilities,
helping to optimise staff and stock management and expand
product ranges. This allows retailers to match store or online
offerings in a single warehouse, which is not possible with
smaller buildings. 3PLs are also focusing on Big Box assets to
centralise multiple contracts, providing flexibility and allowing
them to tender more competitively.
Low-bay buildings are typically used for food distribution. For
non-food distribution, a tall building can allow for high racking
and mezzanine floors, which can double or even triple the
floor space. This additional volume can increase efficiency and
flexibility, making Big Boxes even more attractive to tenants, not
least because rents are generally paid on the ground floor area
only, as opposed to the building’s volume.
To drive efficiency, occupiers increasingly invest in advanced
systems that allow them to stock automatically and rapidly
retrieve products, so they can operate on a “just in time” basis.
Technological advances are resulting in Big Boxes becoming
smarter. So called “four-dimensional” automation can pack
complex online deliveries in the most efficient order possible.
When customised to work with state of the art robotics, such
technology drives efficiency savings of up to 20%. The tenant
will typically own the fit-out and their capital investment can be
substantial, sometimes eclipsing the value of our investment.
Such commitment to a location often goes hand-in-hand with
either an initial long-term lease or lease extension. This can be
value enhancing, making the tenant’s inward investment highly
attractive to landlords.
All these characteristics mean that Big Boxes are both
strategically and operationally integral to their occupiers.
Retailers, 3PLs and manufacturers who want to remain
commercially viable regard Big Boxes as a strategic necessity.
The Big Box format is particularly attractive
in the UK
• The UK has mature transport infrastructure, with excellent
road, rail and air links, as well as numerous ports capable of
handling the large container ships that are increasingly used
to import goods;
• The UK’s relatively small size and dense population allows
Big Box users to construct networks of regional distribution
centres that can cover the entire country efficiently and
reliably. This reduces the risk of late or missed deliveries and
cuts costs; and
• The UK has the world’s highest internet shopping spend
per head and is a major adopter of mobile technology, an
increasingly important channel for online sales.
To drive efficiency, occupiers increasingly invest in advanced systems
that allow them to stock automatically and rapidly retrieve products, so
they can operate on a “just in time” basis.
15
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: OUR MARKET
Big Boxes will remain vital as supply chains evolve
Supply chains continue to evolve in response to commercial demands which in turn impact on commercial property.
Big Box evolution
A natural compromise between these two former models saw
the emergence of RDCs which, due to their proximity to stores,
effectively shortened the NDC supply chain and at the same
time delivered cost savings and efficiencies not possible from
the fragmented smaller unit model. Modern RDCs are often
larger than the former NDCs; consequently, high street stores
can hold less stock and dedicate more space to “showroom”
sales. RDCs act as the “break down point” where bulk container
loads of palleted goods (usually from ports) are reduced into
manageable quantities, suitable for onward transportation to
either smaller distribution centres, stores or direct to consumer
households. The scale of RDCs allows them to handle slow,
medium-term and fast moving goods.
Modern supply chains need Big Boxes
Changing consumer habits have placed pressure on retailers,
resulting in the need for swifter and more reliable replenishment
of stock in stores. In tandem there has been an exponential
growth in online retail sales with consumers demanding
ever-faster deliveries. Retailers are increasingly combining
both store and e-retail distribution, holding their full range of
products within an RDC. This and the rising volume of product
“returns” has contributed to the growth in larger buildings
of up to c.1 million sq ft. This scale can provide occupiers
with significant operational efficiencies and cost benefits,
particularly when combined with “real time” ordering systems
and extensive automation often necessary to deal with the
complications of omni-channel supply chains. RDCs can
efficiently cover most of the market, although for major cities
they can also deliver stock to “Last Mile” or Urban Logistics
Centres (ULCs), typically 50,000-100,000 sq ft. ULCs usually
hold only a very small percentage of a retailer’s product line
and these tend to be smaller sized products and those most
consistently ordered.
Fragmented distribution
A major catalyst for change to UK supply chains was the
transition towards the majority of production being outsourced
to overseas, low cost economies, producing an increasing
volume of cheap imports. Prior to this, domestically made
products were held in store rooms on retail premises or in
numerous small, simple and geographically dispersed industrial
properties, each holding specific product line items representing
only a small percentage of the retailer’s total range, thus
requiring multiple journeys. Such logistics frameworks are
outdated and inefficient.
Centralised distribution
Pre-Millennium, some companies recognised the benefits of
larger scale logistics hubs, known as National Distribution
Centres (NDCs), from which a single building could be tasked
with distribution across the UK. These buildings were typically
below 400,000 sq ft in size. Increased road traffic congestion
has made this model challenging and since the turn of the
Millennium the distribution model has evolved. Consequently,
some NDCs have effectively morphed into Regional Distribution
Centres (RDCs).
Big Boxes’ distinguishing features:
• They are port-centric and easy to reach
• They provide a break down point for bulk shipments
• They are very flexible
• They have high barriers to entry and are hard to replicate
• They are often technically sophisticated
• They support dynamic omni-channel frameworks and
customer returns
16
Tritax Big Box REIT plc Annual Report 2016 Pre Big Box supply chains:
small distribution centres
National Distribution Centre (NDC) supply chains:
port to NDC to retailers
National Distribution Centre
Regional Distribution Centre (RDC) supply chains:
port to RDC to retailers/homes
returns
Regional Distribution Centre
RDC supply chains with ULC:
port to RDC to ULCs/retailers/homes
returns
Regional Distribution Centre
Urban Logistics Centre
17
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: OUR MARKET
The relentless rise of e-commerce and
omni-channel retailing
E-commerce sales in the UK have grown rapidly in recent years,
with the result that many Big Boxes have become quasi-retail
outlets. As a relatively small and densely populated nation, the
UK is ideal for e-commerce and the rate of online shopping is
far higher than in other European countries. This is supported
by ubiquitous access to smartphones and Wi-Fi, widespread
availability of 4G and the introduction of new services allowing
consumers to have packages delivered to convenient stores or
lockers, rather than just their homes.
In addition to pure online retailers, growth is being driven
by the expansion of omni-channel retailing. This reflects
consumers’ desires to interact with retailers in different ways
at different points in their transactions. Omni-channel retailers
can therefore have physical, online and mobile stores, apps
and telephone sales, all requiring fulfilment capabilities. New
technology is also creating new channels and changing how
consumers interact with retailers. Amazon’s Dash service,
for instance, allows consumers to order specific products by
pressing a button. Smart appliances such as washing machines
will, for example, be able to reorder detergents automatically.
The rapid growth in e-commerce sales is therefore expected to
continue in the coming years, with forecasters predicting that
e-commerce will account for 22.6% of total retail sales in the
UK by 2020, up from 13.0% in 2014. While the impact of Brexit
on the UK economy remains uncertain, industry analysts expect
that e-commerce will continue to grow, even if the retail sector
as a whole remains flat. E-commerce therefore has resilient
characteristics.
To remain competitive in this environment, retailers need to
have large, highly efficient distribution facilities that can fulfil
orders quickly and accurately. This need is only becoming
more acute as customers demand ever-shorter delivery times.
The importance of data to successful e-commerce operations
means that Big Boxes dedicated to e-commerce increasingly
also house the retailer’s data and intelligence centres.
Information collection has become increasingly important for
retailers. Bar code scanning at tills in store provides sales data
and can trigger automatic re-stocking and the same principles
apply to online sales. Cookies, collected when consumers
“surf” the internet, provide additional intelligence which allows
retailers to know what is being bought by whom, where and
when but also provides trending data that allows them to more
accurately forecast changes in fashion which means they are
able to pre-order product lines that are more likely to sell.
As the complexities of multi-channel retail grow, retailers are
combining the control point for these functions within Big Boxes.
These facilities increasingly fulfil store replenishment alongside
home deliveries, while also dealing with other channels such as
click and collect. If store sales are reducing and e-commerce
sales are increasing, the retailer can adjust for this within a Big Box
far more easily than it can by operating those functions from
smaller and separate single-focus warehouses.
Continuing strong growth forecast
in UK internet sales (£bn and %)
100
95.10
88.14
81.82
74.70
67.91
60.36
52.72
80
60
40
20
0
2015
2014
2016
■ Retail e-commerce sales* (£bn)
* includes products or services ordered using the internet via any device
regardless of the method of payment or fulfilment. Source: eMarketer, June 2016.
2018
■ Retail e-commerce % of total
2020
2017
2019
During 2016
e-commerce sales
via smartphones
increased by
47%†
18
† Source: Business Insider UK, 19 January 2017.
Tritax Big Box REIT plc Annual Report 2016 Big Boxes have a crucial
role to play in supporting
retailers through peak
periods and protecting
their brand reputation.
Growing retail demand in peak periods
Changing consumer shopping habits are also requiring retailers
to cope with surges in demand. According to IMRG, online retail
sales on Black Friday 2016 were up 12.2% on the previous year,
to £1.23 billion. With retailers beginning their offers earlier,
the four days before Black Friday also saw substantial spikes in
demand, with significant sales growth each day against 2015.
Bank holidays and key shopping days before Christmas also
tend to see significant increases in online orders.
The challenges these demand peaks create for online retailers
are being exacerbated by the share of sales coming via
e-commerce. The Black Friday week has seen e-commerce
sales as a percentage of total sales increase from 33% to 48%
in just two years. Those with the quickest, most efficient and
reliable ways of fulfilling consumer demand are best placed to
benefit. At the same time, the ability to provide a trouble-free
service protects retailers’ reputations from the damage caused
by failed deliveries or long delays. Big Boxes have a crucial role
to play in supporting retailers through these peak periods.
Other significant retail trends favour Big Boxes
The retail market is also developing in other ways that favour
Big Boxes. Retailers want to make the most of their expensive
high street store space, so they are carrying less stock in-store
and are focusing more on the consumer experience with the
inclusion of enhancements such as in-store cafés. They also use
computerised sales tracking to automatically re-order stock
and to respond rapidly to changing customer demand in quality
and product type. At the same time, consumers are increasingly
favouring smaller convenience stores for food shopping. These
stores generally have very limited storage capacity. As online
sales have increased, so has the amount of product being
returned. Stores, with limited storage space, are ill-equipped
to cope with the necessary checking and re-stocking of
returned items. Invariably this function is fulfilled by Big Boxes,
some of which have dedicated returns sections. Along with
the rise of click and collect, these factors mean retailers need
much greater control of stock and the timing and efficiency of
deliveries to stores. Speed and reliability are crucial, which is
where Big Boxes come into their own.
The move to online retail continues to drive the demand for logistics properties
c.775,000 sq ft
of Big Box space
is needed for every
€1 billion
spent online1
In the period to
2020
UK & Ireland will require
18 million sq ft
of additional
Big Box space1
3x
as much Big Box
space is required for
online fulfilment
compared with
store-based fulfilment1
8.5 million sq ft
of UK Big Box space
was taken up by
online retailers in
H1 20161
1 Source: Addleshaw Goddard, Logistics Report: How Soon is Now?
19
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: OUR MARKET
Indexed availability and occupier take-up
of units of 50,000 sq ft or more (Q2 2007=100)
160
140
120
100
80
60
7
0
‘
8
0
‘
9
0
‘
0
1
‘
1
1
‘
2
1
‘
3
1
‘
4
1
‘
5
1
‘
2
Q
2
Q
2
Q
2
Q
■ Availability ■ Rolling four quarter total take-up
Source: Gerald Eve
2
Q
2
Q
2
Q
2
Q
2
Q
6
1
‘
2
Q
UK logistics availability of units of
500,000 sq ft (m sq ft)
10
Currently no available units
larger than 500,000 sq ft
8
6
4
2
0
0
1
‘
0
1
‘
0
1
‘
1
1
‘
1
1
‘
1
1
‘
1
1
‘
2
1
‘
2
1
‘
2
0
‘
2
0
‘
3
0
‘
3
1
‘
3
1
‘
3
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
5
0
‘
5
0
‘
5
0
‘
5
1
‘
6
1
‘
6
1
‘
6
1
‘
6
1
‘
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
2
1
Q
Q
■ Second hand ■ New/early marketed
Source: CBRE
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
1
Q
2
Q
3
Q
4
Q
20
Compelling market fundamentals
Strong occupational demand and constrained supply
The strong occupier demand outlined on pages 14-15 has led to
high levels of take-up and there are a shortage of Big Boxes to let.
Take up has, nonetheless, been constrained by low supply levels.
Some key areas of the country currently have no new-build supply
and there is no modern Big Box currently available to let in the UK
of greater than 500,000 sq ft. This creates opportunities for rising
rents and increasing capital values for owners.
Supply is likely to remain constrained in the medium term as there
is a significant lag in the supply of new Big Boxes.
Suitable land which can accommodate Big Boxes is scarce in
key locations, which may not be zoned for employment use, let
alone B8 planning for distribution which can take years to secure.
The scale of Big Boxes and the extent of traffic movements they
generate can present planning challenges. In addition, Big Boxes
require a pool of suitable workers in the local area and have
substantial power and infrastructure requirements, adding further
complexity to site identification and delivery.
Once detailed planning consent has been obtained, however,
the construction of a new Big Box can be relatively quick (typically
6-12 months) from the point where the site is serviced with
suitable infrastructure. Tenant fit-out can then take a further three
to 18 months, depending on the extent and complexity.
Despite the attractions of Big Boxes as an asset class, the
amount of capital a developer would have to invest deters
speculative development. While there is some speculative
development of smaller buildings, we are not aware of any
properties of over 500,000 sq ft that are currently being
speculatively built (ie without a tenant pre-letting). The level
of occupier demand means developers can de-risk their
development upfront by agreeing a pre-let with a tenant,
rather than going down the speculative route.
Building-to-suit on a pre-let basis creates opportunities for
investors such as us to forward fund these developments and
obtain brand new assets on long leases, to high-quality tenants.
Tritax Big Box REIT plc Annual Report 2016
Strong demand and limited supply make Big Box logistics one of the
most exciting asset classes in the UK real estate market.
Rising rents
The combination of strong occupier demand and a shortage
of supply has resulted in robust rental growth in recent years,
which we believe will continue for some time to come. In addition,
build costs for Big Boxes have increased in 2016, as a result of
increased imported material costs, exacerbated by the fall in
Sterling in the second half of the year. While the demand-supply
imbalance has been the main driver of rental growth to date, it is
clear that cost inflation has begun to feed through to rising rents
and we expect this to continue in 2017.
Pre-let deals for Big Boxes can be agreed initially at a premium
to the prevailing market rent. Tenants are keen to secure the
opportunity and developers seek to capture the benefit of
anticipated rental growth between securing the pre-letting and
delivering the completed building, which can be a year or so after
agreeing terms.
Driving investment values
The increased importance of Big Boxes to tenants and
evidence of rental growth have heightened investment demand,
compressing yields.
Historically, prime retail yields of around 4% were the norm.
This low yield reflected limited property fabric obsolescence
and reliable rental growth from strong occupational demand.
Industrial property attracted yields of 6.5% or more, due to
higher perceived obsolescence and abundant land supply,
which suppressed rental growth. More recently, for larger
logistics buildings, land supply has become constrained.
As high street retail has come under pressure and demand for
prime logistics has grown, prime yields in the two sectors have
converged (see graph opposite). We believe that this reflects a
structural long-term yield repositioning.
Although yields have hardened for logistics, investors are still
able to source attractive opportunities. In a low interest rate
environment, property yields remain well above the cost of debt,
maintaining a positive yield gap and a considerable premium to
10 Year Gilts.
UK prime logistics headline rent
(per sq ft) and 2016 annual growth
NORTH WEST
£6.00 (+1.0%)
NORTH EAST & YORKSHIRE
£5.50 (+10.0%)
WEST MIDLANDS
£6.50 (+2.4%)
EAST MIDLANDS
EAST MIDLANDS
£6.50 (+4.0%)
SOUTH WEST
£6.50 (+5.7%)
SOUTH EAST
£11.00 (+6.0%)
Source: CBRE
Regional estimated rental values (%)
14
12
10
8
6
4
2
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
■ M25 West ■ M25 East ■ M25 North ■ M25 South ■ South West
■ East Mid ■ West Mid ■ North East ■ Yorkshire ■ North West
Source: CBRE
Prime UK investment yields: retail versus
distribution (%)
0.08
7
6
5
4
3
3
1
n
a
J
3
1
r
p
A
3
1
l
u
J
3
1
t
c
O
4
1
n
a
J
4
1
r
p
A
4
1
l
u
J
4
1
t
c
O
5
1
n
a
J
5
1
r
p
A
5
1
l
u
J
5
1
t
c
O
6
1
n
a
J
6
1
r
p
A
6
1
l
u
J
6
1
t
c
O
■ Prime shops ■ Prime distribution (15yr lease)
Source: CBRE
21
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
STRATEGIC REPORT
OUR BUSINESS MODEL
Our sources of capital
Our expertise
Our objectives
Financial capital
• Our Shareholders’ equity
• Debt funding, and
• Recycling funds
Asset capital
• High-quality UK logistics assets
• 300,000-1,000,000 sq ft, and
• Institutional-grade tenants
Natural capital
• Strategically located land for
pre-let development
Human capital
• Experienced Board of Directors
• Expertise of the Manager to
grow the portfolio
Team
• High calibre
• Consistency
• Knowledgeable
• Forward thinking
Portfolio assembly
• High-quality
• Diversified
• Low risk
Execution
• Relationship building
• Speed and certainty
of execution
• Buying for value
Progressive
income
High-quality and
transparent growth
from rent reviews and
asset management
Capital preservation
and growth
Preservation and growth from
asset management
Total return
9% pa over the medium term
What we do ❖
We own and manage high-quality Big Box logistics assets
across the UK, using the Manager’s experience and expertise
to assemble and grow a well-diversified asset portfolio while
prudently applying leverage to increase returns.
The value we add
The starting point for value creation is our ability to source
investments. This relies on the Manager’s extensive network
of investment agency, developer and tenant contacts, built up
over many years. The Manager also spends considerable time
researching and developing relationships with asset owners,
while learning of any triggers that might lead them to sell. These
relationships allow us to source most investments off-market,
enabling us to buy at attractive prices. Creating value can also
be as much about the investments we do not buy. Exercising
capital pricing discipline and patience are vital; we discount
numerous opportunities that do not offer value for money or
meet our stringent criteria for investment.
The Manager’s expertise and market knowledge enable us to
assess an investment opportunity rapidly and give vendors a
decision promptly. We can also complete transactions quickly,
but always following thorough due diligence. This speed and
certainty of execution is highly attractive to vendors; the
highest offer is not always deliverable, so price is not the only
consideration. We have never dropped a contract having agreed
terms to purchase an investment and believe that our reputation
is unrivalled in our market.
We have a clear Investment Policy but we are also pragmatic.
We may buy smaller assets in geographic locations where larger
ones are not available or assets with shorter leases, where we
see an opportunity to add value for Shareholders, for example
due to a near-term lease expiry where we believe we can
re-gear the lease or re-let. Smaller properties will be in the
minority within our portfolio but they do help spread lot size risk
and provide building size diversity.
The assets we buy are usually strategically important to our
tenants. We work with them to maximise their operational
effectiveness, for example by extending buildings or adding
mezzanine floors. This encourages tenants to sign longer leases,
increasing the security of our revenues and increasing capital
values. Where we buy properties with the potential to add value,
we look to turn them into foundation assets for our portfolio
through asset management. Our intention is to hold most assets
for the long term but we would consider selling if we have
unlocked value and delivered the asset’s business plan, and we
have the potential to reinvest the proceeds in a more attractive
opportunity.
The Manager’s relationships with developers are increasingly
enabling us to invest in pre-let forward funded developments,
through which we fund the construction of a Big Box which has
been pre-let to a specific tenant. This approach has resulted
in lower transaction costs and delivered strong returns for our
Company.
22
Our Investment Policy p24
Our Strategy and Objectives p24-25
Responsible Business p52-53
Our Principal Risks and Uncertainties p54-59
Tritax Big Box REIT plc Annual Report 2016 FOR MORE INFORMATION
You will see links throughout this Annual Report to related
content within the report or further reading online.
Our source of capital
Our objectives
The value we add
Our expertise
★ Our goals
Related information page
Further reading online
The value we can add
Source
investments
Buy and sell
for value
★
£
Asset
management
Fund
developments
★
Our goals
An attractive total return
Progressive annual dividends
+
Net asset value growth
Our target
6.40 pence†
Annual dividend target for 2017
9%+ pa†
Total return over the medium term
at the AGM in
Following the change in Investment Policy
May 2016, we can also now invest in land, allowing us to acquire
suitable sites for pre-let forward funded developments. We do
not invest in any speculative developments (ie those which are
not pre-let) and any investment in land is restricted to 10% of our
net asset value at the point of investment.
Sustaining our advantage
As a specialist Big Box investor, we have a reputation as one
of the sub-sector’s most knowledgeable, forward-thinking and
pragmatic owners and managers. This makes us the obvious
choice for asset owners looking to sell Big Boxes. The consistency
of the Manager’s team helps us to maintain our relationships, in
a market where personnel changes are common, enabling us to
work on longer-term deals with continuity.
As our portfolio grows, we benefit from economies of scale,
increased diversification by geography, tenant and building
type, and a larger list of contacts, helping us to source further
attractive investments off-market. A larger portfolio also gives us
greater insight into market developments and more control over
the evidence for rent reviews and lease renewals, as well as the
potential to work up multi-asset initiatives with the same tenant.
Delivering returns ★
By acquiring high-quality properties with excellent tenants and
carefully managing our assets, we aim to deliver a robust,
low-risk and growing rental stream, which supports our target
of paying a progressive dividend. Our asset selection and
management approach also adds value to our investments,
allowing our Shareholders to benefit from attractive total returns.
We buy assets directly, but where possible we acquire the special
purpose vehicle that owns the asset, thus reducing our acquisition
costs. Standard direct purchase costs total approximately 6.75%,
of which SDLT is approximately 5.00%. Standard sale costs are
c.1.75%. This means that “frictional costs” – the total standard
costs of selling an asset and reinvesting the sales proceeds –
are therefore c.8.5%. Although our actual transaction costs are
typically lower than outlined above, these frictional costs are
significant and influence investment returns. This is particularly
relevant in times of lower capital growth. Our portfolio is weighted
towards high-quality, long-term leased “foundation assets”
because by their very nature they do not need to be regularly
traded. This reduces our frictional costs, which we believe will be
important in supporting our returns during 2017 and beyond.
In addition, our status as a REIT helps to ensure that the value
we create is not eroded for Shareholders. We are not subject to
corporation tax on profits and gains in respect of our qualifying
property rental business, provided we maintain our REIT
status. We also pay dividends that qualify as a property income
distribution where possible, which offers tax advantages for
certain UK Shareholders.
† The target dividend is a target and not a profit forecast. There can be no assurances that the target will be met and it should not be taken as an indication of the Company’s
expected or actual future results.
23
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
OUR STRATEGY AND OBJECTIVES
Our Investment Policy
We follow a rigorous Investment Policy, targeting assets which
offer value to our Shareholders and which usually have a geared
yield range of approximately 5-7%. These assets typically:
Our acquisition focus
The assets we acquire typically fall under one or more of our
three investment pillars:
• are let or pre-let, as we will not invest in speculative
developments and will only forward fund investments where
a tenant is already contracted;
• have institutional-grade tenants, with sound businesses and
good growth potential;
• are in the right locations in the UK, with good transport
connections and workforce availability;
• are of the right size and age, and possibly with expansion
potential, to meet the requirements of major occupiers;
• have leases to institutional standards, with regular upward-only
rent reviews and unexpired lease length on purchase of at least
12 years, to provide long-term and secure income flows; and
• are strategically important to the tenant, as evidenced by
extensive investment in fitting out the unit or proximity to the
tenant’s market and/or other key assets.
We may make exceptions to our policy, where we see an
opportunity to deliver value for our Shareholders without
significantly increasing the portfolio’s aggregate risk.
At the Annual General Meeting on 11 May 2016, Shareholders
approved an amendment to the Investment Policy so we
can invest in land, either on our own or in joint venture with a
developer or a prospective tenant. This will allow us to assemble
suitable sites for pre-let forward funded developments. We will
not develop speculatively and will only proceed with constructing
a new Big Box after it has been pre-let to an appropriate tenant.
Aggregate land purchases are subject to a limit of 10% of our net
asset value, calculated at the point of investment.
FOUNDATION
The quality and sustainability of our rental income
underpins our business. Foundation assets provide
our core, low-risk income. They are usually let on long
leases to tenants with excellent covenant strength. The
buildings are commonly new or modern and in prime
locations, and the leases have regular upward-only rent
reviews, often either fixed or linked to inflation indices.
VALUE ADD
These assets are typically let to tenants with
strong covenants and offer the chance to grow the
assets’ capital value or rental income, through lease
engineering or physical improvements to the property.
We do this using our asset management capabilities
and understanding of tenant requirements. These
assets are usually highly re-lettable.
GROWTH COVENANT
These are fundamentally sound assets in good
locations, but let to tenants we perceive to be
undervalued and which have the potential to improve
their financial strength, such as young e-retailers or
other companies with growth prospects. These assets
offer value enhancement through yield compression.
Our objectives
The Company’s objectives reflect our aim of creating value for
Shareholders, and assume we are fully invested and geared:
Dividends† ★
For 2017, we are targeting a total dividend of 6.40 pence per
share, with the aim of continued progressive dividend growth
thereafter.
Total return† ★
Our medium-term target is to deliver a total return of 9%+ per
annum. This reflects the dividends paid plus growth in net asset
value. We maintain a 9%+ per annum total return target for
2017 although we expect this to be more challenging given the
slowdown in yield compression.
24
† The target dividend is a target and not a profit forecast. There can be no assurances
that the target will be met and it should not be taken as an indication of the
Company’s expected or actual future results.
Tritax Big Box REIT plc Annual Report 2016
Our operational strategy
To help us deliver long-term and sustainable returns to our Shareholders, we focus on the following strategic areas:
STRATEGIC AREA
IMPLEMENTATION AND BENEFITS
Management team
Recruit and retain a knowledgeable
and talented management team,
committed to delivering value to
Shareholders.
The Manager has a team dedicated to running the Group, comprising highly
experienced and qualified people with a track record of success. We also benefit
from the skills and experience of the Manager’s other employees, including the
market knowledge they gain from working on other investment business and the
cost efficiencies of utilising some of them part-time.
Tenants
Develop and maintain a deep
understanding of the businesses that
use our space, to create long-term
partnerships.
Building relationships with tenants enables us to work with them to deliver asset
management initiatives that meet their business objectives and unlock value for
us. Letting several properties to one tenant also creates opportunities for mutually
beneficial cross-fertilisation, for example by limiting rent increases on one property
in return for extending the lease term on another, while still enhancing the value of
our portfolio.
Operational excellence
Rigorously control costs and
operational efficiencies, without
compromising growth or reputation.
We have a simple and transparent cost base, which largely comprises the
management fee, the Directors’ fees, and accounting, audit, legal, valuation,
compliance and regulatory fees. This helps us to focus on efficiency and achieve
one of the lowest total expense ratios in our peer group.
Our success in building the portfolio, through an average of approximately one
acquisition per month since listing, also demonstrates the quality and efficiency
of the Manager’s operations and its team.
Capital risk management
Achieve the right risk and return
balance of equity and debt, to
finance our business and enhance
returns.
The Group is financed through equity and debt. Using debt can increase shareholder
returns and allows us to further diversify our portfolio. We invest the proceeds of
any equity issuance before drawing down debt, to limit our interest expense and
maximise returns on equity. We are targeting an LTV over the medium term of 40%,
which we believe is conservative given the quality of our investments.
Details of our equity issuances and debt facilities can be found in the Manager’s
Report
.
Corporate responsibility
Strive to assume our corporate
responsibilities towards society and
the environment, in every part of our
business.
As an externally managed business without any employees, the Group’s
opportunities to make a significant impact in this area are limited. Even so, we aim
to work responsibly, including buying buildings with A, B or C Energy Performance
Certificate ratings where possible and working with tenants to help them achieve
their sustainability goals. More information can be found in the Responsible
Business
statement.
Manager’s Report p28-49
Responsible Business p52-53
25
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
Our objective is to deliver attractive, low-risk returns to Shareholders, by executing the Investment Policy
Our Strategy and Objectives. Set out below are the key performance indicators we use to track our progress.
described in
KPI AND DEFINITION
RELEVANCE TO STRATEGY
PERFORMANCE
RESULT
1. Total return (TR) ★
TR measures the change in the EPRA
net asset value over the period plus
dividends paid. We are targeting a
TR in excess of 9% per annum over
the medium term.
TR measures the ultimate outcome
of our strategy, which is to deliver
value to our Shareholders through
our portfolio and to deliver a secure
and growing income stream.
9.6%
for the year to 31 December 2016
(2015: 19.4%).
Ahead of
our medium-term
TR target.
2. Dividend ★
Dividends paid to Shareholders and
declared in relation to the year. Our
target for 2016 was a total dividend
of 6.2 pence per share.
The dividend reflects our ability
to deliver a low risk but growing
income stream from our portfolio
and is a key element of our TR.
6.2 pence per share
for the year to 31 December 2016
(2015: 6.0 pence per share).
We achieved our target dividend in
2016 and have increased our dividend
target to 6.4 pence per share for 2017.
Met a progressive
dividend target
for the last two
financial years
and increased our
target for 2017.
3. EPRA NAV per share*
The value of our assets (based on an
independent valuation) less the book
value of our liabilities, attributable
to Shareholders and calculated in
accordance with EPRA guidelines.
The EPRA NAV reflects our ability to
grow the portfolio and to add value
to it throughout the life cycle of our
assets.
129.00 pence
at 31 December 2016
(2015: 124.68 pence).
Increase in EPRA
NAV per share
over the year by
4.32 pence (3.46%)
or 4.71%† on a
like-for-like basis.
4. Loan to value ratio (LTV)
The proportion of our property
portfolio that is funded by borrowings.
Our medium-term LTV target is 40%.
The LTV measures the prudence
of our financing strategy, balancing
the additional returns and portfolio
diversification that come with using
debt against the need to successfully
manage risk.
30.0%
at 31 December 2016
(2015: 33.2%).
Below our
medium-term LTV
target of 40%.
5. Adjusted earnings per share
Post-tax Adjusted EPS attributable
to Shareholders, which includes
the licence fee receivable on our
forward funded development assets,
plus adjusts for other earnings not
supported by cash flows.
6. Total expense ratio (TER)
The ratio of total administration and
property operating costs expressed
as a percentage of average net asset
value throughout the period. Over
the medium term, we are targeting
a TER of 1% or below per annum.
7. Weighted average unexpired
lease term (WAULT)
The average unexpired lease term of
the property portfolio, weighted by
annual passing rents. Our target is
a WAULT of at least 12 years.
The Adjusted EPS reflects our
ability to generate earnings from our
portfolio, which ultimately underpins
our dividend payments.
6.51 pence per share
for the year to 31 December 2016
(2015: 6.12 pence).
Reflects our
6.2 pence
dividend for 2016,
as fully covered by
Adjusted EPS.
see note 13, page 116
The TER is a key measure of our
operational excellence. Keeping
costs low supports our ability to
pay dividends.
1.06%
for the year to 31 December 2016
(2015: 1.09%).
Our TER is one of the lowest in our
peer group.
Our TER is
expected to
reduce as our
Company grows.
The WAULT is a key measure of the
quality of our portfolio. Long lease
terms underpin the security of our
income stream.
15.3 years
at 31 December 2016
(2015: 16.5 years).
+3.3 years
above our
12 year target.
* EPRA earnings, EPRA NAV and EPRA EPS are calculated in accordance with the Best
Practices Recommendations of the European Public Real Estate Association (EPRA).
We use these alternative metrics as they provide a transparent and consistent basis
to enable comparison between European property companies.
26
† Adjusted for the timing of dividend distribution year on year.
Our Strategy and Objectives – Our Investment Policy p24
Tritax Big Box REIT plc Annual Report 2016 STRATEGIC REPORT
EPRA PERFORMANCE MEASURES
The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations
of the European Public Real Estate Association (EPRA). We provide these measures to aid comparison with other European real
estate businesses.
For a full reconciliation of all EPRA performance measures, please see Notes to the EPRA performance measures
.
KPI AND DEFINITION
PURPOSE
PERFORMANCE
1. EPRA Earnings per share
Earnings from operational activities (which
excludes the licence fee receivable on our
forward funded development assets).
see note 13, page 116
A key measure of a company’s
underlying operating results and
an indication of the extent to which
current dividend payments are
supported by earnings.
£51.53m /5.90 pence per share
for the year to 31 December 2016
(2015: £29.23m/4.70 pence per share).
2. EPRA NAV per share
Net asset value adjusted to include
properties and other investment interests
at fair value and to exclude certain items
not expected to crystallise in a long-term
investment property business.
see note 28, page 130
Makes adjustments to IFRS NAV
to provide stakeholders with the
most relevant information on
the fair value of the assets and
liabilities within a true real estate
investment company with a long-
term investment strategy.
3. EPRA Triple Net Asset Value
(NNNAV)
EPRA NAV adjusted to include the fair
values of:
(i) financial instruments;
(ii) debt and;
(iii) deferred taxes.
Makes adjustments to EPRA NAV
to provide stakeholders with the
most relevant information on the
current fair value of all the assets
and liabilities within a real estate
company.
4.1 EPRA Net Initial Yield (NIY)
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.
This measure should make it
easier for investors to judge for
themselves how the valuation
of one portfolio compares with
another portfolio.
£1.43bn /129.00 pence per share
as at 31 December 2016
(31 December 2015: £845.67m/124.68 pence per share).
£1.42bn /128.12 pence per share*
as at 31 December 2016
(31 December 2015: £0.84bn/124.01 pence per share).
4.70%
at 31 December 2016 (31 December 2015: 4.93%).
4.2 EPRA ‘Topped-Up’ NIY
This measure adjusts the EPRA NIY in
respect of the expiration of rent-free
periods (or other unexpired lease
incentives, such as discounted rent
periods and step rents).
As for the EPRA NIY above.
4.95%
at 31 December 2016 (31 December 2015: 4.95%).
5. EPRA vacancy rate
Estimated market rental value (ERV)
of vacant space divided by the ERV of the
whole portfolio.
A “pure” (%) measure of
investment property space that
is vacant, based on ERV.
0.00%
as at 31 December 2016 (2015: 0.00%).
6. EPRA cost ratio
Administrative and operating costs
(including and excluding costs of direct
vacancy) divided by gross rental income.
A key measure, to enable
meaningful measurement of
the changes in a company’s
operating costs.
15.8%
for the year to 31 December 2016 (2015: 17.9%).
Both the 2016 and 2015 ratios include and exclude
vacancy costs.
* Floating rate debt, as at 31 December 2016, has been valued at par. We believe that all
margins payable would still be achievable is the current market. The fair value of the
fixed-rate loan has been adjusted in the EPRA NNNAV calcualtion.
Notes to the EPRA performance measures p144-145
27
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
MANAGER’S REPORT
Driving the strategy
This was another busy and successful year for
the Group. We have continued to implement our
investment strategy, building a portfolio which
generates attractive, low-risk, income-led returns,
as well as raising further finance to support its
growth. This leaves the Group well placed to
further expand its portfolio and offer transparent,
stable and growing dividends to Shareholders.
Diligently building a portfolio of high-quality UK Big Boxes
Since our IPO in December 2013, we have rapidly built an
outstanding portfolio of 35 Big Boxes. Our portfolio is well
diversified by size, geography and tenant. The assets are
typically modern, in prime locations and fully let on long leases
to institutional-grade tenants.
Portfolio value by investment pillar (%) 1
●
Wolseley 0.78%
The Range 3.39%
Nice-Pak 1.86%
Dunelm 2.37%
Matalan 2.35%
10.75%
13.65%
●
Tesco, Chesterfield 1.98%
Next 3.77%
Tesco, Middleton 1.33%
L’Oréal 1.72%
New Look 1.71%
Kellogg’s 1.26%
Whirlpool 1.88%
To maximise performance our investment strategy is focused on
three investment pillars. Our core, low-risk income is provided
by Foundation assets which by value constituted 75.60% of the
portfolio at the year end (see page 24
Covenant assets represented a combined 24.40% and through
asset management provide the key potential opportunities for
value enhancement.
). Value Add and Growth
80% of our acquisitions since IPO have been off-market.
Drawing upon our industry relationships we have delivered
for Shareholders a prime portfolio at an attractive average
purchase yield of 5.70% compared to the year-end valuation
initial yield of 4.93%. At each stage of our growth, equity has
been raised for investment into a pre-identified pipeline of
complementary opportunities and this has allowed us to act
swiftly whilst exercising capital discipline and applying thorough
due diligence during the acquisition process.
● Foundation assets
Sainsbury’s 3.13%
M&S 5.69%
Tesco, Didcot 1.74%
Morrisons 6.60%
DHL, Skelmersdale 1.85%
DHL, Langley Mill 1.14%
Rolls-Royce Motor Cars 2.25%
Kuehne+Nagel 1.75%
Argos, Heywood 2.01%
B&Q 5.48%
Ocado 6.39%
Brake Bros, Harlow 2.15%
Tesco, Goole 3.01%
T.K. Maxx 3.37%
Howdens 3.79%
Brake Bros, Bristol 1.39%
Argos, Burton-upon-Trent 4.12%
Dixons Carphone 4.24%
Gestamp 2.99%
Amazon 2.31%
Euro Car Parts 4.41%
Co-op 3.00%
Screwfix 2.78%
75.60%
1 Source: CBRE – by valuation as at 31 December 2016.
Our portfolio WAULT: 15.3 years against our target of 12 years
Our investment pillars by weighted average unexpired lease term (WAULT)
Foundation assets
Value Add assets
Growth Covenant assets
17.2 years
5.5 years
16.3 years
WAULT
WAULT
WAULT
28
Our acquisition focus p24
* Referred to herein after in this document by reference to the tenant, guarantor, parent
or brand name.
Tritax Big Box REIT plc Annual Report 2016 Growth Covenant assets Value Add assets Our Big Boxes are among the most sought-after in the UK and
our tenants include some of the biggest names in retail, logistics,
consumer products and automotive.
A portfolio of strategically located, high-quality assets that meet tenants’ needs
Occupational supply and demand is most favourable for landlords of strategically located, large and modern Big Boxes. These
assets offer the potential for strong rental growth and would be highly attractive to new tenants, if they became available to let.
Well located Big Boxes1
1%
Modern Big Boxes1
True “Big” Boxes2
6%
4%
7%
25%
25%
Situated in prime
logistics locations
12%
37%
36%
Satifying occupier
requirements:
90% of portfolio
built since 2000
54%
23%
35%
Highly sought after:
70% of the portfolio
>500,000 sq ft
35%
●
●
North West
South East
●
2000s
●
1980s
●
●
500k-700k sq ft
200k-300k sq ft
We have built a portfolio of assets that is diversified across key logistics locations in England. The properties are modern, with
the large majority having been built since 2000, ensuring they remain efficient and fit for purpose as occupiers’ needs evolve.
The Group’s assets are true Big Boxes, with 70% of the portfolio comprising buildings of 500,000 sq ft or more. As discussed
in the Our Market section, these larger logistics facilities are the hardest to replicate and this has prevented an over-supply of
development in the market.
A portfolio underpinned by financially strong and committed tenants
The Group’s portfolio produces a diversified, robust and long-term income stream, secured by some of the UK’s strongest
omni-channel retailers.
Diversified, but retailer-led1
High-calibre tenants1,3
Long-term income
12%
3%
19%
34%
<9% of GAV for
single tenant
51%
81% of tenants
are constituents
of major
quoted indices
47%
13%
2%
5%
14%
6%
26%
33%
Sector-leading
15.3 years average
WAULT
22%
13%
●
●
General Commercial Retail
Manufacturing
●
●
●
FTSE 250
CAC 40
private
●
15-20yrs
5-10yrs
●
The diversification of the portfolio is one of the Group’s key strengths. The assets are let to 30 different tenants, with eight new
tenants added during 2016. The tenant base is high-calibre, with 84% being members of the major stock market indices in the UK,
Europe and USA.
As at 31 December 2016 the portfolio’s Weighted Average Unexpired Lease Term (WAULT) stood at 15.3 years and remains ahead
of the Group’s target of 12 years. Moreover, a low 6% of our leases are due to expire within the next five years and 48% of the rent
roll does not expire for more than 15 years, giving the Group excellent security of its long-term income.
1 Source: CBRE by value as at 31 December 2016
3 Split based on listed parent company; DHL assets represented by parent Deutsche Post AG, Rolls-Royce Motor Cars asset represented by parent BMW, Argos asset
represented by J Sainsbury plc, B&Q asset represented by parent Kingfisher, T.K. Maxx represented by parent TJX Companies, Kuehne+Nagel represented by lease
guarantor Hays plc, DSG asset represented by Dixons Carphone plc, Euro Car Parts represented by parent LKQ Corporation and Screwfix represented by parent
Kingfisher plc. Note that the aforementioned parent companies may not be guarantors to the respective tenant lease.
2 By floor area
29
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION North East● South West● Midlands● Since 2010● 1990s● >700k sq ft● 300k-500k sq ft● Food Retail● Logistics● FTSE 100● S&P 500● DAX 30● +20yrs● 0-5yrs● 10-15yrs● STRATEGIC REPORT: MANAGER’S REPORT
A portfolio with embedded income growth
The timing of rent review events over the next few years
supports the Group’s ambition to deliver income growth,
thereby underpinning our progressive dividend policy. Rent
reviews typically take place every five years but the Group also
benefits from some annual reviews. In 2016, 23% of our rental
income was subject to review, while in 2017, a further 23% is
subject to review. Through careful selection we have ensured
a balance in the timing of our rent reviews which provides the
opportunity to grow our rental income each year.
As at 31 December 2016 our rental income was £99.7 million pa
compared to the Estimated Rental Value (ERV) of
£104.3 million assessed by the Group’s independent valuer,
CBRE, representing a potential rental reversion of
approximately 4.64% (the level of potential increase in rent if all
properties in the portfolio were to be subject to rent reviews as
at 31 December 2016 and were settled at CBRE’s ERVs).
Of the year-end rent roll (including rents due under agreements
for lease from forward funded developments), the breakdown of
rent reviews by type was as follows:
• Open market rent reviews: 41% track the rents achieved on
new lettings in the market and on rent reviews for comparable
properties. These five yearly rent reviews provide the
opportunity to potentially capture the strong rental growth
currently evident in the market.
• Fixed uplifts: 35% deliver certainty of rental growth, at say
2% or 3% per annum compound.
• RPI and CPI linked rent reviews: 14% providing inflation
protection. One of our leases is to CPI and the others are to RPI.
• Hybrid rent reviews: 10% are a combination of the above. For
instance, rental increases may be linked to the higher of open
market rents or RPI (potentially subject to a cap and collar).
Such arrangements provide us with a significant degree of
income growth certainty.
Completing value enhancing pre-let developments
We do not undertake speculative development (ie develop
buildings without a tenant pre-let). We do, however, use our
knowledge and expertise to forward fund pre-let developments.
This allows us to capture much of the benefit of development
without taking on much of the risk associated with such projects.
Rental income growth and the
revisionary nature of the portfolio (£m)
120
Portfolio rent review frequency
(% of annual rent roll subject to rent reviews)
50
49
100
80
60
40
20
0
36.1
35.0
99.7
104.3
68.4
71.9
40
30
20
10
0
23
23
21
19
20
Dec 2014
Dec 2015
Dec 2016
2016
2017
2018
2019
2020
2021
■ Contracted annual rent ■ Estimated rental value (“ERV”) per
CBRE independent valuation
■ Open market rent review ■ Fixed uplift ■ RPI/CPI ■ Hybrid
30
Portfolio rent roll expiry (%)
35
30
25
20
15
10
5
0
6
0-5
33
13
26
22
5-10
10-15
By annual rent roll as at 31 December 2016
15-20
20+
yrs
Tritax Big Box REIT plc Annual Report 2016
In particular, pre-let forward funded developments provide the
opportunity to acquire new, high specification, institutional calibre
facilities at an attractive entry price, as it is possible to acquire
prime assets at a discount to the price of a completed and income
producing logistics investment. The five developments that have
completed by 31 December 2016 were independently valued at
13% above the original acquisition price.
Construction of these developments was completed on or
close to the target dates, whilst all were delivered on budget.
Our asset pre-let to T.K. Maxx in Knottingly reached practical
completion in January 2017.
Expected practical completion dates for our new
developments are:
During 2016, we made substantial progress with the Group’s
forward funded developments. Having started the year with
five pre-let developments in progress, four reached practical
completion. These were:
• Gestamp, Wolverhampton, July 2017; and
• Screwfix, Fradley, October 2017.
• Dunelm, Stoke-on-Trent, reached practical completion in
February 2016;
• Ocado, Erith, reached practical completion in April 2016;
• Nice-Pak International, Wigan, reached practical completion
in May 2016; and
• Howdens, Raunds, reached practical completion
in June 2016.
Both assets are currently running to budget and timescale.
Just prior to the year-end we conditionally exchanged contracts
to purchase two adjacent forward funded developments,
each pre-let to Howdens on 30-year leases. Subject to full
planning consent being received in May 2017, we expect work
to commence on site in September 2017, with completion
targeted for August 2018. Our funding for the smaller building
depends upon Howdens taking up its option when planning
consent is achieved; Howdens is already legally committed to
the larger building.
Pre-let forward funded portfolio
Each asset income producing
during construction1
No speculative development
Active pipeline of further pre-let
forward funded opportunities
£548 million committed into
forward funded developments
since IPO
2
2
Acquisition price
£m
37.0
101.8
28.7
43.4
67.0
59.0
56.3
52.7
69.8
32.0
Total 547.7
2014 2015
A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2017
2016
2018
● Acquisition date ● Exchange conditional subject to planning permission ● Practical completion ● Target practical completion
1 The developer typically pays a licence fee to Tritax Big Box (equivalent to the rent) during construction.
2 Exchanged conditionally, subject to planning permission.
31
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: MANAGER’S REPORT
Our acquisition strategy in action ❖
The Group acquired 10 assets during the year,
which further diversified our portfolio by size,
geography and tenant. With an aggregate
acquisition price of £524.4 million, the majority
of these assets where acquired off-market and
at attractive yields.
Whilst implementing our investment strategy we
apply strong capital value and quality discipline
and regularly review how we allocate capital
between our three investment pillars: Foundation,
Value Add and Growth Covenant. We also monitor
the market, as well as broader economic and
political conditions, and adjust our acquisition
strategy accordingly.
Against a backdrop of geopolitical and economic
uncertainty, in 2016 we focused the Group’s
acquisitions primarily on Foundation assets, since
these underpin the Company’s long-term income
which supports our dividend.
Colin Godfrey
Fund Manager
Our acquisitions in 2016
according to our investment pillars
Our acquisitions in 2016
STANDING INVESTMENTS
+8 Big Boxes
Acquired eight standing
investments during
2016 with an aggregate
purchase price
of £415.5 million
PRE-LET FORWARD FUNDED
DEVELOPMENTS
+2 Big Boxes
Acquired two pre-let forward
funded developments
during 2016 with an
aggregate purchase price
of £108.09 million
AVERAGE NIY
5.6%1
Average net initial yield of the
10 Big Boxes acquired in 2016
was 5.60% at acquisition
WAULT
14.03 years1
10 assets acquired during
2016, have an weighted
average unexpired lease term
of 14.03 years, against our
target of at least 12 years
PORTFOLIO AREA
c.5.18 million sq ft1
The 10 assets acquired during
2016, cover 5.18 million sq ft
of logistics space
ACQUIRED OFF-MARKET
85%1
of the 10 assets acquired
during 2016 were acquired
off-market
CONDITIONAL EXCHANGE
+2 Big Boxes
Acquired two forward funded
developments, both pre-let
to Howdens in December
2016, conditional on planning
for a purchase price of
£101.8 million
Foundation2
Value Add asset2
Growth Covenant2
89%
11%
0%
32
1 Excludes Howdens units II and III at Warth Park, Raunds.
2 By acquisition value.
Tritax Big Box REIT plc Annual Report 2016 We invest in and manage both standing and pre-let forward
funded developments.
Standing investments acquired in 2016
24 March 2016
£25.20 million
l Brake Bros, Portbury, Bristol
Acquired:
Acquisition price:
Net initial purchase yield: 5.15%
Gross internal area:
Eaves:
Built:
Lease expiry:
On/off-market:
250,763 sq ft
11 metres
1988; refurbished 2016
2046
Off-market
l Argos, Burton-on-Trent, Staffordshire
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
Lease expiry:
On/off market:
29 March 2016
£74.65 million
5.55%
653,670 sq ft
12 and 30 metres
2002
2028
Off market
• The property comprises a purpose-built cold store facility,
with a multi-temperature control system and flexible design
features including cross docking
• Argos’s National Distribution Centre, with modern design
features, ancillary office accommodation and extensive
loading
• Significant capital investment by the tenant, to meet its
growing distribution requirements in the South West
• Tenant has invested significantly in the property, including
substantial internal automation systems
• Well positioned in the key logistics location in the region,
with motorway connectivity at J19 of the M5, seven miles from
the M4
• In a core central UK location, with easy access to the M6 Toll,
M42 and M1, and close proximity to rail and air connections
• Fixed annual rental increases of 3% pa (received annually)
• Acquired with a new unexpired lease term of approximately
30 years, subject to five yearly upward-only rent reviews
indexed to RPI and capped at 5% pa compound
• Site cover of approximately 47%
• The first review is due in February 2021
• Low site cover of 32%
Argos, Burton-on-Trent, Staffordshire.
Interior view of Argos, Burton-on-Trent, Staffordshire.
33
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: MANAGER’S REPORT
l DSG Retail, Newark, Nottinghamshire
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
Lease expiry:
On/off market:
24 May 2016
£77.3 million
5.86%
725,799 sq ft
12.25 metres
2003
2036
Selectively on market
l Kellogg’s, Trafford Park, Manchester
9 August 2016
Acquired:
£23.5 million
Acquisition price:
5.93%
Net initial yield:
311,602 sq ft
Gross internal area:
15 metres
Eaves height:
2007
Built:
April 2018
Lease expiry:
Off-market
On/off market:
• One of Dixons Carphone’s two National Distribution Centres,
• A modern facility located in one of the UK’s and Europe’s
forming part of its principal hub for direct store replenishment,
home deliveries, returns, and its main service repair centre
• Located on Newlink Business Park, with good motorway
connectivity via the A1/A1M and onto the M1
premier industrial parks with road, rail and port connectivity
• Kellogg’s moved to Trafford Park in 1938, where it has two
other distribution facilities along with a production unit and
national HQ
• Good rail services, with Newark North Gate Station less than
• Favourable passing rent in a location constrained by supply
two miles away
and increasing demand
• Five yearly fixed rental increases of 3% pa compound
• Low site cover of c.45%
• Low site cover of c.37%
34
DSG Retail, Newark, acquired May 2016.
Kellogg’s, Trafford Park, Manchester.
Tritax Big Box REIT plc Annual Report 2016 l Amazon, Peterborough, Cambridgeshire
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
Lease expiry:
On/off market:
10 August 2016
£42.9 million
5.60%
549,788 sq ft
15 metres
2006
March 2025
Off-market
l Euro Car Parts, Birmingham, West Midlands
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
Lease expiry:
On/off market:
10 October 2016
£80.135 million
5.04%
780,977 sq ft
18 metres
January 2016
2036
Off market
• One of Amazon’s modern and major distribution facilities,
• Purpose-built to a high specification for Euro Car Parts as its
which has been built to high specification with 15 metre eves
new main National Distribution facility
• In a strong logistics location on the outskirts of one of the UK’s
• Located within the “Golden Triangle” of logistics, on one of
fastest growing cities
• Favourable rent which is subject to five yearly rent reviews to
CPI with a collar of 1.5% and a cap of 2.75% pa compound
• Low site cover of c.42%
the UK’s premier rail connected distribution parks, with direct
access to the Birmingham Intermodal Freight Terminal,
• Excellent airport and motorway connectivity, with close
proximity to the M6, M1, M69 and M6 as well as Birmingham
International and East Midlands airports
• Lease subject to five yearly, upward-only rent reviews indexed
to RPI (collared and capped at 2% pa and 4% pa compound).
Next rent review due in January 2021
Amazon, Peterborough.
Euro Car Parts, Birmingham, acquired
October 2016.
35
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: MANAGER’S REPORT
l Whirlpool, Raunds, Northamptonshire
11 October 2016
Acquired:
£35.35 million
Acquisition price:
6.60%
Net initial yield:
473,263 sq ft
Gross internal area:
11 metres
Eaves height:
2001
Built:
2021
Lease expiry:
Off-market
On/off-market:
l Co-operative Group, Thurrock, Essex
12 October 2016
Acquired:
£56.5 million
Acquisition price:
5.53%
Net initial yield:
322,684 sq ft
Gross internal area:
15 metres
Eaves height:
2005
Built:
March 2025
Lease expiry:
Off-market
On/off-market:
• Benefited from significant capital investment from the tenant,
• One of the Co-op’s six strategic UK distribution hubs and the
including a 150,000 sq ft extension in 2006
only one in the South East
• Site has substantial secure yards, trailer park and extensive
• Built to a high specification in 2005, with ancillary offices,
parking, with a low site cover of approximately 43%
secure yards and extensive decked parking
• Situated in Warth Park, strategically located on the A45
• Adjacent lorry parking facility, which has development
corridor close to J13 of the A14, which provides access to the
ports of Felixstowe and Harwich and directly links to the A1(M)
dual carriageway and the M1 motorway
potential and covers a separate c.4.10 acres, was constructed
in 2012
• This area has five yearly, fixed rent increases of 2.5% pa, with
• Site is also close to established logistics location of
the next rent review due in May 2018
Northampton and Thrapston, with existing major distribution
occupiers including Homebase, Morrisons and Primark
• Strategically located just off J31 of the M25, with excellent
access to the wider motorway network, Central and Greater
London and the South East, as well as the deep sea ports of
London Gateway and the Port of Tilbury
• Distribution warehouse subject to five yearly, upward-only
rent reviews to the higher of either a guaranteed fixed uplift
of 2% per annum or open market rent. Next rent review due in
December 2020
36
Whirlpool, Raunds.
Co-operative Group, Thurrock.
Tritax Big Box REIT plc Annual Report 2016 Pre-let forward funded developments acquired in 2016
All developments have been or will be income producing during construction, by way of a developer’s licence fee.
l Gestamp, Wolverhampton, West Midlands
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
2 August 2016
£56.3 million
5.14%
543,692 sq ft
12 metres
Practical completion targeted for
summer 2017
Expected August 2042
Off-market
Lease expiry:
On/off-market:
l Screwfix, Fradley, Staffordshire
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
8 December 2016
£52.7 million
5.50%
c.561,767 sq ft
15 metres
Practical completion targeted for
October 2017
Expected October 2027
Off-market
Lease expiry:
On/off-market:
• Pre-let to Gestamp Tallent Limited, a leading global designer
and manufacturer of components and assemblies
• Strategically located in the West Midlands, close to J12 of the
M6, providing good access to Birmingham and Nottingham
• This new facility will comprise a GIA of 543,692 sq ft with
• Pre-let to Screwfix Direct Ltd, the UK’s largest multi-channel
retailer of trade tools, accessories and hardware products,
whose ultimate parent is Kingfisher Plc
• High specification distribution facility will be Screwfix’s fourth
UK distribution centre
expansion land to accommodate up to a further 101,139 sq ft
• In a key Midlands logistics location, adjacent to the A38,
• Upon practical completion the property will be let on a 25-year
lease subject to five yearly upward-only rent reviews indexed
to RPI, providing a minimum 2% pa rental growth (capped at
4% pa)
providing connectivity to the M6 Toll, M42 and M1 motorways,
and with close proximity to rail and air connections
• Upon practical completion, targeted for October 2017, the
property will be let on a 10-year lease, subject to five yearly
upward-only open market rent reviews
Above, top: CAD of Gestamp, Woverhampton.
Above: CAD of Screwfix, Fradley.
Our Investment Policy p24
Our Strategy and Objectives p24-25
37
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
What to expect in 2017
Capital growth has slowed but values for prime logistics
assets have remained resilient (our portfolio valuation
grew 2.74% in H1 and 0.76% in H2 2016 on a like-for-like
basis; 3.45% like-for-like for the year) and we expect that
to remain the case in 2017, buoyed by a weight of money
from domestic and overseas investors.
Subject to Shareholder support, we believe that there
remain compelling reasons to grow the Company through
raising further equity and debt. This would allow us to
acquire additional high-quality assets from our strong
identified pipeline of opportunities. The investment
market for prime quality logistics assets is competitive but
we believe that we can continue to acquire off-market and
for value. Pre-let forward funded developments are likely
to feature at a similar level to 2016 in order to capture the
new buildings, long leases and price advantages afforded
by these schemes.
Following the change in Investment Policy at the AGM
in May 2016, we also expect to purchase development
land for pre-let forward funded developments (without
speculative building development) as the longer-term
component of our value-add investment pillar.
STRATEGIC REPORT: MANAGER’S REPORT
l Howdens, Raunds, Northamptonshire
Acquired:
Acquisition price:
Net initial yield:
Gross internal area:
Eaves height:
Built:
23 December 2016
£101.8 million
5.1%
657,000 and 300,000 sq ft
15 metres
Practical completion targeted for
August 2018
Expected August 2048
Off-market
Lease expiry:
On/off-market:
• Conditionally exchanged the forward funded pre-let of two
adjacent distribution facilities, which will stand alongside the
Company’s other asset in Warth Park, also let to Howdens
• Together, the three facilities will provide Howdens with a
“centre of excellence” for its supply chain operations which
is expected to deliver significant operational and efficiency
benefits
• On practical completion, both properties will be leased under
separate 30-year leases to Howden Joinery Group plc subject
to five yearly, upward only, open market rent reviews. Howdens
have the ability to withdraw from the smaller of the two units
no later than 6 May 2017
• Combined site cover is approximately 53%
38
CAD of Howdens 2 and 3 at Raunds, Northamptonshire.
Tritax Big Box REIT plc Annual Report 2016
Tritax Big Box is the only Real Estate Investment Trust giving pure
exposure to Big Box logistics assets.
The table below summarises the Group’s portfolio at the year end. Assets are listed in the order the Group acquired them.
TENANT
LOCATION
MONTH OF
ACQUISITION
NET PURCHASE
PRICE
£M
PURCHASE
NIY
%
Sainsbury’s Supermarket Ltd
Leeds
December 2013
Marks & Spencer plc
Castle Donington
December 2013
Tesco Stores Ltd
Tesco Stores Ltd
Next Group plc
Chesterfield
Didcot
Doncaster
Wm Morrison Supermarkets Ltd
Sittingbourne
DHL Supply Chain Ltd
DHL Supply Chain Ltd
Wolseley UK Ltd
Langley Mill
Skelmersdale
Ripon
March 2014
April 2014
June 2014
June 2014
August 2014
August 2014
August 2014
Rolls-Royce Motor Cars Ltd
Bognor Regis
October 2014
CDS (Superstores International) Ltd
(trading as The Range)
Thorne
Tesco Stores Ltd
Kuehne+Nagel Ltd *
L’Oréal (UK) Ltd
Argos Ltd
B&Q plc
Middleton
Derby
Manchester
Heywood
Worksop
November 2014
December 2014
December 2014
December 2014
April 2015
April 2015
New Look Retailers Ltd
Newcastle-under-Lyme May 2015
Nice-Pak International Ltd
Ocado Holdings Limited †
Brake Bros Ltd
Tesco Stores Ltd
Wigan
Erith
Harlow
Goole
Dunelm (Soft Furnishings) Ltd
Stoke-on-Trent
TJX UK (trading as T.K. MAXX)
Knottingley
Howden Joinery Group plc
Matalan
Brake Bros Ltd
Argos Ltd**
Raunds
Knowsley
Bristol
Burton-on-Trent
DSG Retail Ltd
(trading as Dixons Carphone)
Newark
May 2015
May 2015
June 2015
June 2015
June 2015
September 2015
October 2015
December 2015
March 2016
March 2016
May 2016
Gestamp
Wolverhampton
August 2016
Kellogg Company of Great Britain
Limited
Amazon UK Services Ltd
Euro Car Parts
Whirlpool
The Co-operative Group Ltd
Screwfix Direct Ltd
Manchester
August 2016
Peterborough
Birmingham
Raunds
Thurrock
Fradley
August 2016
October 2016
October 2016
October 2016
December 2016
48.75
82.58
28.64
27.20
60.00
97.80
17.53
28.87
12.24
36.98
48.50
22.45
29.27
25.83
34.10
89.75
30.05
28.66
101.73
37.18
47.10
43.43
59.00
67.00
42.38
25.20
74.65
77.30
56.30
23.50
42.90
80.14
35.35
56.50
52.70
6.65
5.20
6.60
6.90
6.07
5.20
6.50
6.50
6.73
6.25
6.10
8.25
6.00
7.13
5.31
5.13
5.90
6.42
5.25
5.00
5.67
5.47
5.32
5.03
6.27
5.15
5.55
5.86
5.14
5.93
5.60
5.04
6.60
5.53
5.50
SIZE
SQ FT ¥
NEXT RENT
REVIEW DATE
571,522
May 2018
906,240 December 2016
501,751
May 2020
288,295
755,055
919,443
255,680
August 2019
March 2018
June 2017
August 2019
470,385
August 2019
221,763 September 2016
313,220 September 2020
750,431
October 2017
302,111 December 2017
343,248
April 2017
315,118
August 2017
495,441
March 2018
880,175 November 2021
398,618
April 2017
399,519
563,912
276,213
711,933
526,426
640,759
658,971
578,127
250,763
653,670
May 2021
April 2021
July 2019
October 2017
February 2021
January 2022
July 2021
October 2021
March 2021
February 2017
725,799
March 2021
548,450
311,602
549,788
780,977
July 2021
N/A
April 2020
January 2021
473,263
N/A
322,684 December 2020
October 2022
561,767
Total for assets completed at 31/12/16
Howdens Joinery Group plc#
Howdens Joinery Group plc#
Raunds
Raunds
1,671.55
5.70 18,223,119
December 2016
December 2016
69.90
31.92
5.10
5.10
657,000
September 2023
300,000
September 2023
* Guaranteed by Hays Plc
† Guaranteed by Ocado Group plc
** Guaranteed by Experian Finance plc
‡ Estimate based on target practical completion date of forward funded asset
¥ CBRE measured floor area
# Conditionally exchanged
39
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: MANAGER’S REPORT
The rise of the super asset
Modern Big Boxes are smart and becoming smarter. Sophisticated, innovative and
technologically advanced warehousing can provide distribution solutions that help
our tenants reduce costs and maintain their competitive edge. Occupiers want to
automatically stock and retrieve products, use state of the art robotics to efficiently
pack complex deliveries, and meet customer demand for quicker deliveries. Big Boxes
are the perfect setting for this automation, with the scale necessary to accommodate
the high-level racking and mezzanine floors that maximise use of the space.
Technologically, no part of the property market is evolving faster than logistics.
Whether it is ground-breaking drone deliveries or the rapid advancement of robotics
applications, the technology that is being tried and tested today will shape the future
– the positive influence of Big Boxes is still at an early stage of development.
2
4
7
Technology
in our
Big Boxes
today
1
6
40
3
5
8
Tritax Big Box REIT plc Annual Report 2016 Conveyors and
sortation (1,3,8)
Sortation conveyor systems
generally receive mixed unit
loads and discharge them to
designated locations or outfeed
conveyors, in response to signals
from automatic control systems.
Robots (2)
Robots are already widely used
in modern Big Box facilities for
packing and de-paletting layers.
Ocado’s latest warehouse has
a wireless system that enables
autonomous robots to move
around above a grid, storing and
retrieving crates stacked within it.
The Internet of
Things (IoT)
Think sensors and smart
appliances everywhere, and
all able to communicate, both
by M2M (machine to machine)
and M2H (machine to human).
While the IoT is a vision, it is
increasingly becoming a reality.
Automated storage and
retrieval systems (5,7)
AS/RS systems automatically
place and retrieve loads from
defined storage locations. They
save labour, are very accurate,
do not damage products and can
handle loads of over 3 tons, as
well as standard weight pallets.
Automated vehicles
(AGVs) (2,6)
Today's warehouse activities
include cross-docking, packing
pallets, kitting, tagging, and
identifying products, as well as
storing them in the most time-
and space-efficient manner
possible.
Radio-Frequency
IDentification (RFID) (3)
While barcodes are still widely
used they are being replaced by
RFID. RFID is used at the pallet-,
case-, or unit level and will be
used at the unit level as costs
fall, so every item a consumer
purchases can be tracked.
41
OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONTritax Big Box REIT plc Annual Report 2016 STRATEGIC REPORT: MANAGER’S REPORT
Our asset management strategy in action ❖
Our asset management strategy focuses on
creating value throughout an asset’s life cycle.
The potential to protect and enhance capital value
and to grow income through lease and physical
enhancements are key considerations when
acquiring assets.
We categorise our assets into one of our three
investment pillars and develop business plans.
While there is opportunity to add value on many
of the assets we acquire and across all three
of our investment pillar categories, this is
particularly true of our “Value Add” assets which
comprise 13.65% of our portfolio. These are
typically let to tenants with strong covenants, but
offer the potential, through asset management, to
turn them into foundation assets.
Petrina Austin
Head of Asset Management and Sustainability
The key to unlocking value through asset management
is owning well-located, modern, fit-for-purpose buildings
that tenants want to occupy and which are strategically
important to their business. In such circumstances they will
be committed to the asset. If the occupier is also financially
strong they will often make significant investment to the
property and continue to invest into their occupation of
the location throughout the life of the lease. Changes
which benefit the tenant can often also provide points of
opportunity for the owners of these investments to benefit
from capital value growth.
During 2016 we undertook a number of initiatives including
extending leases on existing assets, negotiating rent reviews
and undertaking proposals to enhance, reconfigure or physically
extend buildings so that they meet tenants’ operational needs.
Portfolios of small or multi-tenanted assets provide frequent
opportunity for asset management due to the number of assets
under management. Contrastingly, our portfolio comprises
a relatively small number of large lot size assets and as a
consequence the incidences of asset management events
will be less frequent but each event will have the potential for
greater value enhancement as a result.
Our tenant-led approach
Our aim is to be an occupier’s landlord of choice for fulfilling
their distribution property network. A key part of our approach
is to develop strong relationships with our tenants, so that
we understand their requirements and future objectives.
We treat our tenants as valued customers since the success
of their business often directly correlates with generating
property opportunities for us. In order to acquire a balanced
understanding we seek to acquire a wide contact base within
our tenants’ companies beyond simply the main property
contacts, extending to the logistics and operations directors,
who are often driving the internal strategy. We work closely
with them to learn about their strategy and their operations,
42
Tritax Big Box REIT plc Annual Report 2016 so we can identify opportunities for mutual benefit. This could
include extensions to buildings, considering strategies to reduce
tenants’ operating costs or helping tenants to comply with
their corporate social responsibility obligations, by progressing
“green” initiatives. This requires us to keep abreast of industry
developments and dynamics, which we do by attending national
distribution focused events and presentations. These events
often showcase the latest advancements in technology and
differing forms of transport, which prompt ideas for practical
enhancements to the properties or generate further discussion
with an occupier. These initiatives may present opportunities
to increase or lengthen income or renegotiate lease terms
to add value. Executing these initiatives is often protracted,
as they typically link to our tenants’ long-term business
plans. Tenants’ plans may also change or be accelerated, for
example, if awarded a specific contract. We look to support
tenants’ commercial tenders, so we can prove to their
potential customers that the property servicing can meet the
requirements of the contract within the anticipated timescale.
Tenant enhancements
Requests for alterations to properties are frequent and because
we manage this process “in house” it creates a regular dialogue
with occupiers. When tenants apply to make alterations, we
review their proposals and respond proactively. As part of this
process, we ensure that alterations will not affect the property’s
structural integrity, invalidate any warranties or limit our ability
to make future changes. The proposals may enable us to
negotiate funding agreements with occupiers, whereby the fit
out cost is rentalised. Alternatively, there may be an opportunity
to extend lease lengths, if the works are of long-term benefit to
the property. This application process enables us to learn more
about the strategic plans of our occupiers and often enables us to
identify further initiatives or opportunities. Through our specialist
knowledge and experience in this sector, we can often suggest
practical solutions to enable occupiers to realise their aims
and share knowledge or improve on previous implementation.
The changing patterns of retail consumerism is a factor strongly
influencing a number of our key tenants. These factors can impact
on property decisions such as improving their e-commerce
platform and customer servicing. The aim is to ensure that our
properties and portfolio are resilient and can adapt or evolve to
meet the future face of logistics and distribution across the UK.
Protecting value
We regularly review the financial status of our tenants, as well
as those of potential new occupiers. This includes monitoring
their trading results and statements and analysing the corporate
strategies disclosed in their annual reports, which could indicate
property opportunities and enable negotiation with the occupier.
Where appropriate, we negotiate guarantor agreements with
tenants’ holding companies, to strengthen the covenant.
We look to “future proof” potential building extension
opportunities by evaluating our ability to acquire land or take out
option agreements that adjoin existing holdings.
Developing pre-let forward funded developments
Monitoring and management of the forward funded
developments is largely outsourced to specialist consultants,
who are overseen by the Manager. Construction timetables
are swift and we work with developers who are committed
to meeting deadlines, without compromising on design, build
quality or sustainability ideals. Contractual terms denote the
staged payment process throughout the development phase and
payments are not released unless key development milestones
are reached and recommended as approved by the independent
Project Monitor. Adherence to the programme is key to meeting
an occupier’s timetable and the developer is suitably motivated
to perform through the inclusion of penalty provisions for late
delivery. We engage at an early stage to ensure that tenant
proposals are not detrimental to the building and that licences for
alterations appropriately document such works. We also either
arrange insurance cover or ensure that the tenant has appropriate
cover in place to protect our investment. During 2016, we have
achieved Practical Completion on four new assets.
43
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: MANAGER’S REPORT
Creating value in 2016
During the year, we undertook a number of asset management
activities:
• The Range UK, Thorne, South Yorkshire
In March the Group entered into a power purchase agreement
with CDS (Superstores International) Limited, which trades as
“The Range”, following the installation of roof-mounted solar
panels. The capital cost was c.£345,000. This has resulted
in an annual income increase of c.£40,000 and capital value
enhancement of £575,000. On reassessment of the property,
we expect that the EPC rating will improve.
• B&Q, Worksop
A five-yearly rent review increase linked to RPI, was settled in
November 2016 reflecting an uplift to passing rent of 11.26%.
• Morrisons, Sittingbourne, Kent
An annual rent review increase linked to RPI, was agreed in
June 2016 at an uplift of 1.62% pa.
• L’Oréal (UK) Limited, Trafford Park, Manchester
The 3% pa annual rent review was implemented in August
2016. In December we successfully extended the lease term
by five years, increasing the valuation by c.£1 million.
• Outstanding Rent Reviews
As at December 2016 five rent reviews remain outstanding.
Two of these, for Kellogg’s, Trafford Park (open market)
and Co-op, Thurrock (higher of open market or 2% pa),
pre-date our purchases. The open market rent review of
Tesco, Chesterfield is in arbitration and we are hopeful of a
settlement producing a rental uplift. Wolseley, at Ripon, is
subject to an open market rent review as at September and
Marks & Spencer, Castle Donington, (open market, capped at
2.5% and collared at 1.5% pa) as at December, both of which
have commenced.
After the period end, terms were agreed with Rolls-Royce
Motor Cars Ltd to extend both buildings at Bognor Regis, creating
an additional 96,875 sq ft and taking the total floor area to
410,075 sq ft. The construction process will commence shortly
and is anticipated to take approximately eight months, with
occupation of the extensions expected this winter. The Company
is funding the extension works and an element of enhancement
works. The rent over both properties will increase by £704,281 pa
as a result of the extensions, with rent reviews remaining at 3% pa
fixed (realised five yearly) and capturing the additional rentalised
area. The lease term will be extended by one year (currently
c.8.5 years unexpired), thereby extending the income commitment.
44
Responsible Business – Sustsainability case study p53
What to expect in 2017
In 2017 we will continue to develop our tenant
relationships, grow our understanding of their businesses
and particularly the integration of our properties within
their supply chain operations. We also expect to see
the results of some initiatives started in 2015 and 2016
including the outcome of the five rent reviews mentioned
above. In addition, we have a further eight rent reviews
to undertake in 2017, four of which are subject to open
market rental values, three are to fixed uplifts of 2% or 3%
per annum and one will benefit from an RPI increase.
Our policy of encouraging and supporting “green”
initiatives will continue and we are hopeful that more
tenants will allow us to fund solar panel installations. We
are currently negotiating the possibility of several building
extensions across our portfolio and, linked to these, the
potential to simultaneously extend the unexpired term
of the lease. We are also working on the potential to
purchase adjacent land for a new building which could link
with an existing portfolio property.
Tesco announced its intention to vacate our property at
Chesterfield this summer. They originally intended to do
so before we acquired the investment but decided to stay.
We purchased the investment in 2014 at an attractive yield
and categorised it as a Value Add asset due to the short
period to lease expiry. The lease has over three years to
run and Tesco has dilapidations responsibilities. We view
the prospect of a potential refurbishment and re-letting
with optimism, given the good location and building size
in the context of an occupational market bereft of vacant
properties of this type available to let.
With yield induced capital returns shrinking, the capital
component of total return will be underpinned by the
quality of our asset management and we expect this to
contribute as an increasingly important component of our
performance in 2017.
Tritax Big Box REIT plc Annual Report 2016
Financial review: growing our income, while managing our cost base £
❖
Our highlights in 2016
DIVIDEND PER SHARE
6.20p
Dividends declared in relation to 2016 totalled 6.20 pence
per share, in line with our target.
ADJUSTED EARNINGS PER SHARE
6.51p
Dividends fully covered by Adjusted earnings per share
of 6.51 pence.
TOTAL RETURN
9.6%
Total Return for the year was 9.6%, compared to our
medium-term target of 9% per annum.
EPRA NAV
129.00p (3.46% or 4.71%2)
EPRA net asset value per share increased by
3.46% or 4.71%1 on a like-for-like basis.
(31 December 2015: 124.68 pence).
PORTFOLIO VALUE
£1.89 billion3 (+44.4%)
Portfolio independently valued at £1.89 billion,
which includes all forward funded commitments.
LOAN TO VALUE (LTV)
30.0%
The Loan to Value (LTV) as at 31 December 2016 was 30.0%.
With a further £150 million of debt commitments available.
EPRA COST RATIO
15.8%
A reducing EPRA cost and total expense ratio of 15.8%.
TOTAL EXPENSE RATIO
1.06%
For 2016, the Group had a dividend target of
6.20 pence per share and a Total Return target
of 9%+. We also set out to extend and stagger
the maturity profile of our borrowings as well as
diversifying our lending group.
The Group declared dividends in relation to 2016
totalling 6.20 pence per share, which was 105%
covered by Adjusted earnings per share of
6.51 pence. Adjusted earnings growth was
generated through growing rents whilst reducing
our cost base; we have an EPRA cost ratio
of 15.8%. The total return achieved, which is
a function of the increase in EPRA NAV plus
dividends paid, was 9.6%.
Over £750 million of funding was raised (inclusive
of the debt facility agreed post the year end) to
finance further investment. £550 million was
raised through equity issues and over £200
million came from the debt capital markets.
Finally, we introduced two new lenders to the
Group in the form of Canada Life and PGIM Real
Estate Finance1 and capitalised on the current
low interest rate environment by securing two
facilities on a 10 and 13-year term respectively.
Frankie Whitehead ACA
Head of Finance
1 This transaction completed in March 2017.
2 Having stripped out the effect of the different timings of dividend payments between
December 2015 and December 2016.
3 Excludes Howdens units II and III at Warth Park, Raunds.
* Each year makes reference to 31 December.
45
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
STRATEGIC REPORT: MANAGER’S REPORT
Strong financial results
The Group’s operating profit before changes in fair value of
investment properties, as reported under IFRS, grew by 75%,
to £62.87 million (2015: £35.94 million). The increase reflects:
with asset purchases during the year and takes into account the
increase in SDLT, an increase from 4% to 5% (on all commercial
properties acquired for more than £250,000) as announced by
the Chancellor of the Exchequer in March 2016.
• the growth of the portfolio, with the contracted rent roll
increasing to £99.66 million across 35 assets (2015: £68.37
million across 25 assets);
• the portfolio’s strong rental income, which equates to a
yield based on book cost of 5.70%. Rents reviews have
increased our income, with an average increase of 6% across
three reviews; in addition we had two reviews which remain
unsettled, both of which are reviewed to open market rental
value. We also have the added contribution from four pre-
let forward funded development assets reaching practical
completion in the year;
• the Group’s low and predominantly fixed cost base, with the
Total Expense Ratio (TER) reducing in 2016 to 1.06% for the
year (2015: 1.09%). This continues to compare very favourably
with the Group’s peers and reflects the amendment to the
Investment Management fee as approved by Shareholders and
taking effect from 20 December 2016.
Administrative and other expenses, which include management
fees and other costs of running the Group, were £11.71 million
(2015: £7.83 million). We expect the amendment to the
Investment Management fee structure, with the inclusion of
the lower fee percentages now payable on net asset value
(less cash) greater than £1.25 billion, to contribute further to a
reduction in the Group’s TER in 2017 and beyond. Please see
Management and Engagement Committee Report
details on the amended management fee structure.
for further
The gain of £47.5 million (2015: £106.75 million) on revaluation
of the Group’s investment properties was recognised in the year.
This was calculated after accounting for all costs associated
Net financing costs (excluding capitalised interest) for the year
were £11.55 million (2015: £6.98 million), excluding the reduction
in the fair value of interest rate derivatives of £7.15 million (2015:
£1.99 million). The increase in net financing costs reflects the
growth in the business and the subsequent increase in average
debt drawn during the year, with the cost of debt remaining
stable throughout the period. Further information on financing
and hedging is provided below.
Tax
The Group is a UK REIT for tax purposes and is exempt from
corporation tax on its property rental business. The tax charge
for 2016 was therefore £nil (2015: £nil).
Earnings
Total profit before tax for the year was £91.90 million
(2015: £133.98 million), which resulted in basic earnings per
share of 10.52 pence (2015: 21.56 pence).
The Group’s EPRA earnings per share for the year were
5.90 pence (2015: 4.70 pence). The EPRA NAV per share at
31 December 2016 was 129.00 pence (31 December 2015:
124.68 pence). Please see EPRA Performance Measures
for the full list of performance.
There was further growth in the Group’s Adjusted earnings
per share for the year, which was 6.51 pence (2015: 6.12 pence).
The Adjusted earnings per share figure takes EPRA earnings
per share, adds the developer’s licence fees received on
forward funded developments and excludes other earnings not
supported by cash flows. We see Adjusted EPS as the most
relevant measure when assessing dividend distributions. Further
information is set out in note 13
to the financial statements.
46
Management Engagement Committee Report p85-87
Notes to the EPRA performance measures p144-145
Notes to the Consolidated Accounts – note 13 p116-117
Tritax Big Box REIT plc Annual Report 2016
Stable and growing dividends ❖ ★
On 7 March 2017, the Board declared a third interim dividend
for the year of 1.55 pence per share. This dividend is payable
on or around 3 April 2017, to Shareholders on the register on
16 March 2017.
This takes the aggregate dividends in respect of 2016 to
6.20 pence per share, as set out in the Chairman’s Statement
of which 1.45 pence was paid as a normal dividend and
4.75 pence as a property income distribution (PID). The total
dividend was fully covered by the Group’s Adjusted EPS of
6.51 pence per share.
As indicated to the market in the Group’s January 2017 trading
update, the Group is looking to target a progressive dividend for
2017 of 6.4 pence per share.
Investment properties ❖
The total value of the portfolio, including forward funded
development commitments, was £1.89 billion across 35 assets
as at the year end (2015: £1.31 billion across 25 assets). A total
£524.6 million was invested during 2016 across 10 assets with
a further £101.8 million committed to two assets, conditional on
receiving planning consent.
The gain recognised on revaluation of the Group’s investment
property portfolio was £47.5 million. The average valuation yield
of the portfolio as at 31 December 2016 was 4.93%. On a like
for like basis compared with assets held at 31 December 2015,
values have increased by 3.45%, excluding any additional capital
costs incurred in the year.
Net assets
During 2016, Shareholder equity increased by £550 million
resulting from two equity raises in February 2016 and
October 2016.
,
EPRA net assets were £1.43 billion (2015: 0.84 billion), or
129.00 pence (2015: 124.68 pence) on a per share basis, which is
an increase of 3.46% or 4.32 pence per share. When considering
the timing of the Company’s dividend distributions, the growth in
EPRA NAV increases to 4.7% on a like-for-like basis.
Total return ★
The Group delivered on its total return target for the year, by
delivering a total return of 9.6% against its medium-term target
of 9% per annum. Total return is a function of movement in
EPRA net asset value per share plus dividends paid.
Robust financing and hedging with strong liquidity
Following the large refinancing that took place in October 2015,
the Group’s primary debt facility is provided by a syndicate of
four lenders: Barclays Bank PLC, Helaba Landesbank Hessen-
Thüringen Girozentrale (“Helaba”), Wells Fargo Bank, N.A. and
ING Real Estate Finance (UK) B.V.
In December 2016, an additional £50 million commitment was
received in respect of this debt facility, which was funded solely
by Wells Fargo Bank, N.A., on the same terms as the existing facility.
The facility now comprises:
• a £450 million term loan; and
The Group has commitments as at the year end totalling
£82.4 million across its three forward funded development
properties which were under construction (2015: £138.96 million).
• a £100 million revolving credit facility, including a £10 million
overdraft component.
The facility is secured against a portfolio of 23 assets as at
31 December 2016, with a cross-collateralised framework and
a guarantee from the Company.
Chairman’s Statement p10-11
Depository Statement p79
47
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: MANAGER’S REPORT
Following the refinancing, the Group has been mindful, during
its next phase of debt financing, of extending the maturities,
staggering the profile of maturity dates across its debt portfolio
and diversifying its basket of lending relationships. Coupled with
this, the economy has seen some of the lowest interest rates
in modern times and therefore longer-term debt financing has
looked appealing, despite there being a general increase across
the marketplace in banking margins, particularly since the spring
of 2016.
In August 2016, the Group agreed a new long-term, interest-
only, fixed-rate term loan of £72 million with Canada Life
Investments. The facility, the Group’s first with a fixed interest
rate, has been drawn in full and sought to take advantage of
the low interest rate environment following the referendum
vote. The loan is repayable in April 2029 and carries a fixed
all-in rate of 2.64% per annum. The amounts drawn down under
the facility are segregated and non-recourse to the Company.
The facility is secured against the assets let to Howdens in
Raunds, Northamptonshire; Dixons Carphone in Newark,
Nottinghamshire; and Brakes in Portbury, Bristol.
In addition, the Group has three facilities with Helaba totalling
£69.5 million, which are secured on the DHL assets in
Skelmersdale and Langley, and Ocado, Erith. Following practical
completion of the Ocado distribution warehouse at Erith,
the Group agreed terms to extend the maturity of its
£50.87 million loan facility secured on the asset by three years,
from July 2020 to July 2023, resulting in an increase in the
margin payable of 6 basis points per annum.
At the year end, the Group therefore had total long-term
bank borrowing commitments of £691.5 million, of which
£541.5 million had been drawn (31 December 2015:
commitments of £569.5 million, with £385.0 million drawn),
with debt available to draw down of £150.0 million. This resulted
in a LTV ratio of 30.0% (31 December 2015: 33.2%). The Group
continues to target a LTV in the medium term of up to 40%,
which we believe is conservative given the quality of the tenants,
real estate, portfolio WAULT and its low-risk nature. As has
historically been the case, whilst we have future commitments
towards pre-let forward funded developments, we are likely
to be running below our medium-term gearing target, as
demonstrated by our 30% LTV ratio at the year end.
LENDER
ASSET
EXPIRY
DATE
AMOUNT
DRAWN AT
31 DECEMBER
2016
£M
£M
Syndicate
Portfolio of 23 assets Oct 20201
550.00
400.00
Helaba
Helaba
Helaba
DHL, Langley Mill
DHL, Skelmersdale
Ocado, Erith
Nov 2019
Nov 2019
Jul 2023
Canada Life Portfolio of three assets Apr 2029
7.01
11.60
50.90
72.00
7.01
11.60
50.90
72.00
Total
691.51
541.51
1 One-year extension option available.
The Group will continue to explore opportunities to bring in
additional longer and alternative term sources of debt finance,
providing these do not compromise its investment objectives.
This is evidenced by the transaction that completed in March
2017 with PGIM Real Estate Finance for a long-term, interest
only fixed-rate loan. The new 10-year loan has a maturity date of
March 2027 and has a fixed rate payable of 2.54%. The loan is
secured against four of the portfolio’s assets.
The Group’s hedging strategy is designed to allow it to benefit
from current low interest rates, while minimising the effect of
a significant rise in underlying interest rates across its variable
rate debt sources. At the year end, the Group had in place
derivative instruments that either fix or cap the interest rates
on 99.7% of its drawn debt. These instruments comprise one
interest rate swap and a number of interest rate caps, each
running coterminous with the respective loan.
48
Notes to the EPRA performance measures p144-145
Tritax Big Box REIT plc Annual Report 2016 What to expect in 2017
For 2017 we are optimistic that the occupational supply
and demand tensions in the market will continue to drive
rental growth. This will assist in continuing to grow our
earnings, which will support our progressive dividend
target of 6.40 pence per share.
We are proud of our financial prudence and will look to
maintain our low ERPA cost ratio, which is one of the most
competitive amongst our peer group.
Our lenders view us as an attractive borrower because
we have prime assets and a solid capital structure with
conservative gearing. As a result we believe we will be
able to command attractive terms when it comes to future
debt financing, and this will support future investment
activity.
Tritax Management LLP Manager
7 March 2017
The Group has a current blended margin payable of 1.43% above
3 month Libor or the referenced Gilt. At 31 December 2016,
the actual average interest rate payable across 87% of the
Group’s drawn debt, which is the total drawn level of floating
rate debt, was 1.80% per annum (31 December 2015: 2.01%),
representing the average margin over 3 month Libor at that
date. The interest rate derivatives give the Group a level of
interest rate protection, which provides the Group with a
weighted average all-in capped rate of borrowing of 2.82%
(2015: 2.94%), across its hedged debt.
The Group has a weighted average term to maturity across
its debt facilities of 4.8 years as at 31 December 2016, which
increases to 5.6 years if extension options are assumed to be
exercised.
The Group has remained compliant with all of its debt
arrangements during the year and subsequent to the year end.
Alternative Investment Fund Manager (“AIFM”)
The Manager is authorised and regulated by the Financial
Conduct Authority as a full-scope AIFM. We are therefore
authorised to provide our services to the Group and the Group
benefits from the rigorous reporting and ongoing compliance
applicable to AIFMs in the UK.
As part of this regulatory process, Langham Hall UK Depositary
LLP (“Langham Hall”) is responsible for cash monitoring, asset
verification and oversight of the Company and the Manager.
In performing its function, Langham Hall conducts a quarterly
review during which it monitors and verifies all new acquisitions,
share issues, loan facilities and other key events, together with
Shareholder distributions, the quarterly management accounts,
bank reconciliations and the Company’s general controls and
processes. Langham Hall provides a written report of its findings
to the Company and to us, and to date it has not identified any
issues. The Company therefore benefits from a continuous “real
time” audit check on its processes and controls.
49
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
THE MANAGER ❖
The Manager provides all management and
advisory services to the Company, under the
Investment Management Agreement. The FCA
authorised the Manager as an AIFM on 1 July 2014.
The Manager is 100% owned by Mark Shaw, Colin Godfrey,
James Dunlop and Henry Franklin. This team of property, legal
and finance professionals have been together for over 10 years.
They have a track record of creating value for their clients
through astute asset purchases and by actively managing them.
The core management team (whose details are set out below)
is supported by a team of other accounting, marketing, public
relations, administrative and support staff.
Colin Godfrey BSc (Hons) MRICS (1)
Partner, Fund Manager
Colin has overall responsibility for providing investment
management and advisory services to the Company and is the
Manager’s lead partner. He began his career with Barclays Bank
before joining Conran Roche in the late 1980s. Following this, he
obtained a degree in Urban Estate Management, before training
with Weatherall Green & Smith (now BNP Paribas Real Estate).
After qualifying as a chartered surveyor, Colin specialised in
portfolio fund management, with particular responsibility for
the £1 billion of assets under management for the British Gas
Staff Pension Scheme and the property assets of the Blue Circle
Pension Fund. In 2000, Colin was a founding director of niche
investment property agent SG Commercial, along with James
Dunlop, in which capacity he worked closely with the Tritax
group. In 2004, Colin became a partner in the Tritax group and is
responsible for investment selection and product development.
Colin is one of the founding partners of Tritax Management LLP.
James Dunlop BSc MRICS (2)
Partner, Property Sourcing
James has overall responsibility for identifying, sourcing and
structuring investment assets for the Company. He read
Property Valuation and Finance at City University, before
joining Weatherall Green & Smith (now BNP Paribas Real
Estate) where, in 1991, he qualified as a chartered surveyor in its
Investment Development and Agency division.
In 2000, James formed SG Commercial with Colin Godfrey, and
became a partner in the Tritax group in 2005. James is regularly
in contact with all the leading firms of agents and is responsible
for identifying sectors and specific properties, negotiating on
approved opportunities and handling the disposal of assets in due
course. Along with Colin, James is one of the founding partners of
Tritax Management LLP.
50
Henry Franklin BA CTA (3)
Partner, Structuring and Legal
Henry is responsible for structuring the Tritax group funds,
providing general legal counsel and overseeing compliance
activities and product development. He is a qualified solicitor,
who completed his articles with Ashurst LLP in 2001,
specialising in taxation, mergers and acquisitions.
Henry also qualified as a chartered tax adviser in 2004 before
moving to Fladgate LLP in 2005, where he became a partner
in 2007. At Fladgate LLP, Henry specialised in structuring
commercial property funds and advised on the formation of
funds in excess of £500 million. Henry joined the Tritax group
as a partner in 2008.
Petrina Austin BSc MRICS (4)
Partner, Asset Management and Sustainability
Petrina is responsible for strategically managing the investment
portfolio, identifying and progressing value enhancing initiatives
to protect and maximise investor returns. She is also responsible
for managing third-party professionals engaged in the process
of property and asset management.
Following a degree in Estate Management from Reading
University, Petrina joined Carter Jonas to continue her
professional training and qualified as a chartered surveyor in
1998. Petrina moved to King Sturge in 1999, to concentrate on
institutional portfolio management. As a partner at Knight Frank
from 2002, she was responsible for the team managing central
London trophy assets. Her remit also included development
consultancy appointments, both in the UK and overseas. Petrina
joined the Tritax group in 2007.
Tritax Big Box REIT plc Annual Report 2016
1
2
3
4
5
6
7
8
Bjorn Hobart MA BSc (Hons) MRICS (5)
Partner, Property
Bjorn is responsible for identifying and sourcing suitable
investments for the Company, then financially modelling and
appraising the returns, to establish their viability within the
context of the portfolio assets. He also manages day-to-day
due diligence during the acquisition process.
After completing a Geography degree from the University of
Leeds in 2001, Bjorn started his career at Faber Maunsell (now
AECOM). Having gained exposure to large scale developments,
Bjorn received an MA in Property Valuation and Law at Cass
Business School, London. He undertook his professional
training at Atisreal (now BNP Real Estate) in London, where he
qualified as a chartered surveyor in 2005. In 2007, Bjorn joined
SG Commercial, where he advised on large scale investment
and development transactions in excess of £500 million. During
this time, Bjorn worked closely with the Tritax group, advising on
its portfolio acquisitions and disposals. Bjorn joined the Tritax
group in 2011.
Edward Plumley MBA MSc MRICS (6)
Assistant Fund Manager
Ed is responsible for assisting the Fund Manager with
acquisitions and disposals, transaction management, financial
modelling and due diligence. He started his career at Knight
Frank on the graduate bursary scheme, after completing an
MSc in Estate Management at London South Bank University.
He qualified as a chartered surveyor in 2010 with Jones Lang
LaSalle (now JLL).
Ed’s investment career began when he joined Ereira Mendoza
in 2011, advising on investment and development transactions.
He joined Tritax in May 2014, having completed an MBA in
Construction & Real Estate from the University of Reading.
Frankie Whitehead ACA (7)
Head of Finance
Frankie joined Tritax in 2014 following the launch of the
Company. When reporting to the Board, he is responsible
for the historical and strategic financial matters in relation to
the Company. This includes interim and year-end reporting,
corporate compliance, budgeting/forecasting, treasury
management, debt origination and the monitoring of internal
financial controls. Frankie also supports the Fund Manager with
the Company’s capital market activity, which includes the recent
equity issuances and debt financings.
Prior to joining Tritax Frankie spent three years as Financial
Controller at Primary Health Properties Plc (PHP), a healthcare
focussed REIT, which had total AUM of just under £1 billion.
He trained and qualified as a Chartered Accountant with PKF
(UK) LLP, which subsequently merged with BDO LLP, where he
acted as Assistant Manager. In all, Frankie has over 10 years’
experience working in the real estate industry.
Olivia Cox non-practising solicitor (8)
Deputy Company Secretary
Olivia joined the Tritax group in March 2015 as deputy company
secretary to the Company. She is a non-practising solicitor who
completed her training contract with Berwin Leighton Paisner
LLP in 2003, specialising in Real Estate. She then joined Clifford
Chance LLP in 2007, where she continued to specialise in Real
Estate with a particular focus on corporate Real Estate and hotel
development and management.
51
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
RESPONSIBLE BUSINESS
Being responsible and sustainable is important
for our long-term financial success. Our approach
helps ensure our properties are suited to current
and future tenants’ needs and continue to meet
evolving legislative requirements. This provides
our properties with defensive qualities, makes
them attractive to the market and therefore
underpins the potential for longer-term income.
As a responsible owner, we want our properties to minimise
their impact on the local and wider environment. We therefore
consider the environmental performance of assets before
we acquire them and encourage a sustainable approach to
new developments and to maintaining and upgrading existing
buildings.
An Energy Performance Certificate (EPC) is a key measure of an
asset’s energy efficiency. An EPC is required by law whenever
a building is bought, sold or rented, and grades the property
from A (most efficient) to G (least efficient). Under the Minimum
Energy Efficiency Standards, it will be unlawful from 1 April 2018
for landlords to grant a new lease on an asset with an EPC rating
below E. By gross internal area our portfolio is rated: “A” 21%,
“B” 24% and “C” 32%. None of our properties are rated “F” or “G”.
The Building Research Establishment Environmental
Assessment Methodology (BREEAM) is a voluntary sustainability
measure. It has six ratings, ranging from Unclassified to
Outstanding. We expect a minimum of a Very Good rating for
our pre-let forward-funded developments, which represents
advanced good practice and puts the buildings in the top
quartile of new builds.
The EPC rating is a key part of our review of potential asset
purchases. We also look at material environmental risks, such as
flood and storm risk, connectivity and circulation, and
planning requirements. In addition, we commission an
environmental survey that includes the sites’ previous uses,
so we can assess the risk of possible site contamination and
any past remediation. For forward funded developments,
we also consider the specification, how it will be built and
the inclusion of environmental elements such as rainwater
harvesting and renewable power.
For all potential asset purchases, we analyse the data we obtain
and record it in a Green Review template. The review may lead
to further enquiries of the vendor, surveying and legal teams,
or could identify opportunities for our initial business plan for
the asset. We also provide key sustainability data to the Board,
when seeking approval to proceed with a purchase.
Our tenants are responsible for an asset’s environmental
performance in use, such as its greenhouse gas emissions
or water consumption. We do not purchase any utilities and
we cannot use the lease terms to influence how the tenant
operates. As a result, we do not submit performance data
to benchmarking indices such as the Global Real Estate
Sustainability Benchmark. However, many of our tenants have
corporate responsibility targets and we therefore encourage
and help them to adopt sustainable business practices.
All of our assets are let to single tenants. We look to develop
strong relationships with them, so we can work together
to understand their property requirements and provide
environmentally efficient Big Boxes which suit their needs. Our
business plan for each asset therefore identifies opportunities
to enhance its environmental attributes. Eight of our properties
harvest rainwater and five have either solar or wind generated
power. By working with our tenants, we expect to increase this
number. Other initiatives include enabling rail connectivity,
installing energy efficient lighting and insulation, and plant
replacement. In addition, we support tenants who want to make
EPC rating of portfolio
3%
18%
21%
32%
● “A”
“E”
“F”
●
“G”
●
52
Tritax Big Box REIT plc Annual Report 2016● “C“●● “B”● “D”24% alterations to assets to support their employees, such as adding
bus stops or staff shops.
Our assets provide important benefits to their local
communities. They help our tenants to create jobs, often in
areas where traditional industries have declined, boosting
the local economy. They also support economic activity more
broadly, by underpinning our tenants’ efficient operation and
helping them succeed.
As an externally managed business, we do not have any
employees or office space. The Board is made up of five Non-
Executive Directors, comprising four men and one woman. Our
business is solely in the UK and we consider there is a low risk of
human rights abuses. It is important to us, and to the continued
service we receive from the Manager, that it has effective
employment practices. The Manager has a bespoke bonus
payment policy and low staff turnover.
EPC’s on all assets
completed: 100% of
assets rated
BREEAM Very Good
certification on
4,543,151 sq ft of
developments
A-E
Solar PVC installed
during 2016
306,072 kWh
valuation, £575,000 of the uplift was attributed to income
from the scheme. The scheme should also increase
the EPC rating to B+, further improving the property’s
credentials.
Sustainability case study: “The Range”, Doncaster
In 2014, we acquired the asset in Doncaster let to CDS
(Superstores International) Limited, trading as The Range.
Our Green Review identified opportunities to financially
benefit the tenant and enhance the asset’s EPC rating of B.
These included adding renewable power generation.
We reviewed the potential for installing roof-mounted
photovoltaic panelling. This would generate income from
selling energy to the tenant and supplying any unused
energy to the national grid. The review showed that we could
increase annual income by £40,000 at a cost of £380,000,
representing an internal rate of return of 8.17% per annum
and a payback of 9.5 years.
The tenant agreed to purchase the energy, resulting in
savings to them of between £250,000 and £1 million over the
life of the lease, with the higher savings depending on a lease
re-gear. The original roofing contractor installed the panels
and we negotiated a 20-year warranty extension for the roof
at the same time. At the asset’s following independent
53
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
OUR PRINCIPAL RISKS AND UNCERTAINTIES
The Board has overall responsibility for our risk
management and internal controls, with the Audit
Committee reviewing the effectiveness of our risk
management process on its behalf.
We aim to operate in a low-risk environment, focusing on
a single sub-sector of the UK real estate market to deliver
an attractive, growing and secure income for Shareholders,
together with the opportunity for capital appreciation. The
Board recognises that effective risk management is key to the
Group’s success. Risk management ensures a defined approach
to decision making that decreases uncertainty surrounding
anticipated outcomes, balanced against the objective of
creating value for Shareholders.
At least twice a year, the Board undertakes a formal risk review
with the assistance of the Audit Committee, to assess the
effectiveness of our risk management and internal control
systems. During these reviews, the Board has not identified
or been advised of any failings or weaknesses which it has
determined to be material.
Risk appetite
Our risk appetite is low, given we do not undertake speculative
development, we have high-quality tenants, with a portfolio of
modern buildings and sector-leading WAULT.
We have a specific Investment Policy
and for which the Board has overall responsibility.
, which we adhere to
Approach to managing risk
Our risk management process is designed to identify, evaluate
and mitigate (rather than eliminate) the significant risks we face.
The process can therefore only provide reasonable, and not
absolute, assurance. As an investment company, we outsource
key services to the Manager, the Administrator and other
service providers, and rely on their systems and controls.
Principal risks and uncertainties
Further details of our principal risks and uncertainties are set out
on pages 55 to 59. They have the potential to materially affect
our business, either favourably or unfavourably. Some risks may
currently be unknown, while others that we currently regard as
immaterial, and have therefore not been included here, may turn
out to be material in the future. All principal risks are the same
as detailed in the 2015 Annual Report, with the exception of the
Political Risk impact of the EU Referendum on the performance
of the Company.
Risk management framework
Board
Audit Committee
Policy procedure and controls
Review of key performance indicators
and management reports
Risk identification
The Manager
Risk assessment – financial and operational
Risk mitigation – implementation of risk mitigants
Risk monitoring – evaluation and revaluation
of financial and operational mterics
Risk reporting – to Audit Committee and Board
54
Our Investment Policy p24
Going concern and viability p60
Tritax Big Box REIT plc Annual Report 2016 Principal risks
H
G
H
I
I
M
U
D
E
M
W
O
L
I
I
T
N
A
C
F
N
G
S
T
O
N
I
1
4
9
10
8
2
11
5
6 7
3
RARE
PROBABILITY
LOW
MEDIUM
HIGH
T
C
A
P
M
I
The Board considers these risks have increased
since last year
3 Our ability to grow the portfolio may be affected by competition
for investment properties in the Big Box sector
10 We are a UK REIT and have a tax-efficient corporate structure,
with advantageous consequences for UK Shareholders. Any
change to our tax status or in UK tax legislation could affect our
ability to achieve our investment objectives and provide favourable
returns to Shareholders
11 The vote to leave the EU in June 2016 could result in political and/
or economic uncertainty that could have a negative effect on the
performance of the Company.
The Board consider all the other risks to be broadly
unchanged from last year
1 Default of one or more tenants
2 The performance and valuation of the property portfolio
4 Our property performance will depend on the performance of the
UK retail sector and the continued growth of online retail
5 Development activities are likely to involve a higher degree of
risk than associated with standing investments
6 Our use of floating rate debt will expose the business to underlying
interest rate movements
7 A lack of debt funding at appropriate rates may restrict our ability
to grow
The matrix above illustrates our assessment of the impact
and probability of the principal risks identified. The rationale
for perceived increases or decreases in the risks identified
are contained within the commentary for each risk category.
The Board considers these risks have decreased
since last year
8 We must be able to operate within our banking covenants
9 We rely on the continuance of the Manager
Property risks
1 Default of one or more tenants
PROBABILITY: LOW
Change in year:
IMPACT: LOW TO MODERATE
The default of one or more of our
tenants would immediately reduce
revenue from the relevant asset(s).
If the tenant cannot remedy the
default and we have to evict the
tenant, there may be a continuing
reduction in revenues until we are
able to find a suitable replacement
tenant, which may affect our ability
to pay dividends to Shareholders.
Optimising the performance of
our Big Box portfolio p42-44
MITIGATION
Our investment policy limits our exposure
to any one tenant to 20% of gross assets or,
where tenants are members of the FTSE, up to
30% each for two such tenants. This prevents
significant exposure to a single retailer. To
mitigate geographical shifts in tenants’ focus,
we invest in assets in a range of locations, with
easy access to large ports and key motorway
junctions. Before investing, we undertake
thorough due diligence, particularly over the
strength of the underlying covenant. We select
assets with strong property fundamentals
(good location, modern design, sound fabric),
which should be attractive to other tenants
if the current tenant fails. In addition, we
focus on assets let to tenants with strong
financial covenant strength in assets that are
strategically important to the tenant’s business.
55
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
STRATEGIC REPORT: OUR PRINCIPAL RISKS AND UNCERTAINTIES
Property risks (continued)
2 The performance and valuation of the property portfolio
PROBABILITY: LOW
Change in year:
Optimising the performance of
our Big Box portfolio p42-44
IMPACT: MODERATE TO HIGH
An adverse change in our property
valuations may lead to a breach
of our banking covenants. Market
conditions may also reduce the
revenues we earn from our property
assets, which may affect our ability
to pay dividends to Shareholders.
A severe fall in values may result in
us selling assets to repay our loan
commitments, resulting in a fall in
our NAV.
MITIGATION
Our property portfolio is 100% let, with long
unexpired weighted average lease terms and an
institutional-grade tenant base. All the leases
contain upward-only rent reviews, which are
either fixed, RPI/CPI linked or at open market
value. These factors help maintain our asset
values. We have agreed banking covenants
with appropriate headroom and manage our
activities to operate well within these covenants.
We constantly monitor our covenant headroom
on LTV and interest cover. This headroom is
currently substantial.
3 Our ability to grow the portfolio may be affected by competition for investment
properties in the Big Box sector
PROBABILITY:
MODERATE
Change in year:
IMPACT: LOW
Competitors in the sector may be
better placed to secure property
acquisitions, as they may have
greater financial resources, thereby
restricting our ability to grow our NAV.
Our Strategy and Objectives
p24-25
MITIGATION
We have extensive contacts in the sector and
often benefit from off-market transactions. We
also maintain close relationships with a number
of investors and developers in the sector, giving
us the best possible opportunity to secure
future acquisitions. We are not exclusively
reliant on acquisitions to grow the portfolio.
Our leases contain upward-only rent review
clauses and we have a number of current asset
management initiatives within the portfolio,
which means we can generate additional
income and value from the existing portfolio.
We are, however, disciplined in our investment
of capital and will not pay a price which we
believe is above market value, just to secure
a purchase.
56
Tritax Big Box REIT plc Annual Report 2016 Property risks (continued)
4 Our property performance will depend on the performance of the UK retail sector and the continued
growth of online retail
PROBABILITY: LOW
Change in year:
Our Market p14-21
IMPACT: MODERATE
Our focus on the Big Box sector
means we directly rely on the
distribution requirements of UK
retailers. Insolvencies among the
larger retailers and online retailers
could affect our revenues and
property valuations.
MITIGATION
The diversity of our institutional-grade tenant
base means the impact of default of any oneof
our tenants is low. In addition to our due diligence
on tenants before an acquisition or, in thecase of
forward funded developments, before agreeing
the lease terms, we regularly review the
performance of the retail sector, the position of our
tenants against their competitors and, in particular,
the financial performance of our tenants.
5 Development activities are likely to involve a higher degree of risk than that associated with
standing investments
PROBABILITY: LOW
Change in year:
Our Market p14-21
Our Strategy and Objectives
p24-25
IMPACT: LOW
Our forward funded developments
are likely to involve a higher degree
of risk than is associated with
standing investments. This could
include general construction risks,
delays in the development or the
development not being completed,
cost overruns or developer/
contractor default. If any of the risks
associated with our forward funded
developments materialised, this could
reduce the value of these assets and
our portfolio.
MITIGATION
Only three of the Company’s current portfolio
of 35 assets as at 31 December 2016 are forward
funded assets, representing 6.6% of the value
of our portfolio (on a completed basis). All of
these assets are pre-let to institutional-grade
tenants. Any risk of investment into forward
funded projects is minimal, as the developer
takes on a significant amount of construction
risk and the risk of cost over-runs. Funds for
these developments remain with us and are
only released to the developer on a controlled
basis subject to milestones as assessed by our
idependent project monitoring surveyors.
57
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT: OUR PRINCIPAL RISKS AND UNCERTAINTIES
Financial risks
6 Our use of floating rate debt will expose the business to underlying interest rate movements
PROBABILITY: MODERATE
Change in year:
Robust financing and hedging
with strong liquidity p46-48
IMPACT: MODERATE
Interest on our debt facilities is
payable based on a margin over
Libor. Any adverse movements
in Libor could significantly impair
our profitability and ability to pay
dividends to Shareholders.
MITIGATION
The Company has entered into interest rate
derivatives to hedge our direct exposure to
movements in Libor. These derivatives cap our
exposure to the level at which Libor can rise
and have terms coterminous with the loans. We
aim, where reasonable, to minimise the level of
unhedged debt with Libor exposure, by taking
out hedging instruments with a view to keeping
variable rate debt approximately 90%+ hedged.
7 A lack of debt funding at appropriate rates may restrict our ability to grow
PROBABILITY: MODERATE
Change in year:
Robust financing and hedging
with strong liquidity p46-48
IMPACT: MODERATE
Without sufficient debt funding, we
may be unable to pursue suitable
investment opportunities in line
with our investment objectives. If
we cannot source debt funding at
appropriate rates, either to increase
the level of debt or re-finance
existing debt, this will impair our
ability to maintain our targeted level
of dividend.
MITIGATION
Before we contractually commit to buying
an asset, we enter into discussions with our
lenders to get an outline heads of terms on
debt financing. This allows us to ensure that we
can borrow against the asset and maintain our
borrowing policy. The Board keeps our liquidity
and gearing levels under review. We only enter
into forward funding commitments if they are
supported by available funds. In October 2015,
we arranged a £500 million five year secured
debt facility with a syndicate of four lenders.
We had headroom of £150 million within the
facility at the year end. This has created new
banking relationships for us, which helps keep
lending terms competitive.
8 We must be able to operate within our banking covenants
PROBABILITY: LOW
Change in year:
Depositary Statement p79
IMPACT: LOW
If we were unable to operate within
our banking covenants, this could
lead to default and our bank funding
being recalled. This may result
in us selling assets to repay loan
commitments, resulting in a fall in
NAV.
MITIGATION
We continually monitor our banking covenant
compliance, to ensure we have sufficient
headroom and to give us early warning of any
issues that may arise. Our LTV is low and we
enter into interest rate caps to mitigate the risk
of interest rate rises and also invest in assets let
to institutional-grade tenants. We also seek to
maintain a long WAULT.
58
Tritax Big Box REIT plc Annual Report 2016 Corporate risk
9 We rely on the continuance of the Manager
PROBABILITY: LOW
Change in year:
Our Strategy and Objectives
p24-25
Management Engagement
Committee Report p85-87
Taxation risk
IMPACT: HIGH
We continue to rely on the Manager’s
services and its reputation in
the property market. As a result,
the Company’s performance
will, to a large extent, depend
on the Manager’s abilities in the
property market. Termination of the
Investment Management Agreement
would severely affect our ability to
effectively manage our operations
and may have a negative impact on
the share price of the Company.
MITIGATION
Unless there is a default, either party may
terminate the Investment Management
Agreement by giving not less than 24 months’
written notice, which may not be served
before 31 December 2019. The Management
Engagement Committee regularly reviews
and monitors the Manager’s performance.
In addition, the Board meets regularly
with the Manager, to ensure we maintain a
positive working relationship. The Investment
Management Agreement was amended during
the period, see the Management Engagement
Committee Report
.
10 We are a UK REIT and have a tax-efficient corporate structure, with advantageous consequences
for UK Shareholders. Any change to our tax status or in UK tax legislation could affect our ability
to achieve our investment objectives and provide favourable returns to Shareholders
PROBABILITY: LOW
Change in year:
IMPACT: LOW TO MODERATE
If the Company fails to remain a
REIT for UK tax purposes, our profits
and gains will be subject to UK
corporation tax.
MITIGATION
The Board is ultimately responsible for ensuring
we adhere to the UK REIT regime. It monitors
the REIT compliance reports provided by:
• the Manager on potential transactions;
• the Administrator on asset levels; and
• our Registrar and broker on shareholdings.
The Board has also engaged third-party tax
advisers to help monitor REIT compliance
requirements.
Our Market p14-21
Our Strategy and Objectives
p24-25
Political risk
11 The vote to leave the EU in June 2016 could result in political and/or economic
uncertainty that could have a negative effect on the performance of the Company
PROBABILITY: LOW
Change in year:
Robust financing and hedging
with strong liquidity p46-48
IMPACT: LOW TO MODERATE
At present, the UK Government has
communicated very little detail on its
strategy to negotiate the exit from
the EU. The eventual outcome and
the way that policies over an exit
will be negotiated is impossible to
predict at this time.
MITIGATION
The Group operates with a sole focus in the UK
Big Box market which has a significant supply
shortage against current levels of demand, this
will assist in supporting property capital values.
It is currently well positioned with long and
secure leases and a diverse blue-chip tenant
line up, with a focus on tenants with financial
strength, which are well positioned to withstand
any downturn in the UK economy.
59
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION STRATEGIC REPORT
GOING CONCERN AND VIABILITY
The Strategic Report describes the Company financial position,
cash flows, liquidity position and borrowing facilities. The Group
currently has substantial headroom against its borrowing
covenants, with a Group LTV of 30% as at 31 December 2016.
The Company also benefits from a secure income stream from
leases with long average unexpired terms, which are not overly
reliant on any one tenant and present a well-diversified risk.
The Company’s cash balance as at 31 December 2016 was
£170.7 million, of which £165.0 million was readily available. It
also had undrawn amounts under its debt facilities of a further
£150.0 million. The Company did have capital commitments
totalling £82.4 million, plus a contingent liability reflecting
the conditional exchange of contracts on two pre-let forward
funded asset purchases, subject to satisfactory planning
permission with an investment price of £101.8 million.
In March 2017 the Company also agreed terms on a new debt
facility which made available a further £90 million, which was
secured against four of the Group’s assets.
As a result, the Directors believe that the Company is well
placed to manage its financing and other business risks.
The Directors believe that there are currently no material
uncertainties in relation to the Company’s ability to continue for
a period of at least 12 months from the date of the Company’s
financial statements. The Board is, therefore, of the opinion
that the going concern basis adopted in the preparation of the
Annual Report is appropriate.
Assessment of viability
The period over which the Directors consider it feasible and
appropriate to report on the Group’s viability is the five year
period to 7 March 2021. This period has been selected because it
is the period that is used for the Group’s medium-term business
plans and individual asset performance forecasts.
The assumptions underpinning these forecast cash flows and
covenant compliance forecasts were sensitised to explore the
resilience of the Group to the potential impact of the Group’s
significant risks, or a combination of those risks.
The principal risks table on pages 54 to 59 summarises those
matters that could prevent the Group from delivering on its
strategy. A number of these principal risks, because of their
nature or potential impact, could also threaten in the Group’s
ability to continue in business in its current form if they were
to occur.
The Directors paid particular attention to the risk of a
deterioration in economic outlook which would impact property
fundamentals, including investor and occupier demand which
would have a negative impact on valuations, and give rise to a
reduction in the availability of finance. The remaining principal
risks, whilst having an impact on the Group’s business model,
are not considered by the Directors to have a reasonable
likelihood of impacting the Group’s viability over the five year
period to 7 March 2021.
The sensitivities performed were designed to be severe but
plausible; and to take full account of the availability of mitigating
actions that could be taken to avoid or reduce the impact or
occurrence of the underlying risks:
• Downturn in economic outlook: key assumptions including
occupancy, void periods, rental growth and yields were
sensitised to reflect reasonably likely levels associated with
an economic downturn.
• Restricted availability of finance: based on the Group’s
current commitments and available facilities there is a
refinancing event representing 73% of the Group’s current
level of borrowing commitments due in October 2020. In the
normal course of business, financing is arranged in advance
of expected requirements and the Directors have reasonable
confidence that additional or replacement debt facilities will
be put in place.
Viability Statement
Having considered the forecast cash flows and covenant
compliance and the impact of the sensitivities in combination,
the Directors confirm that they have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period ending 7 March 2021.
BOARD APPROVAL OF
THE STRATEGIC REPORT
The Strategic Report was approved on behalf of
the Board by:
Richard Jewson Chairman
7 March 2016
60
Tritax Big Box REIT plc Annual Report 2016 MISSION CRITICAL BIG BOXES
“We have successfully opened
our new warehouse in Stoke,
which doubles our capacity
and provides a purpose-built
platform for reducing costs
over time… Improved efficiency
also enables us to offer better
availability to our customers.”
Andy Harrison, Chairman, Dunelm Group plc
Annual Report and Accounts – July 2016
GOVERNANCE
62
63
63
64
64
65
66
67
67
Chairman’s Overview
Other key statements
Going concern and viability
Leadership
The Board
Our governance structure
Committees
How we govern the Company
Board meetings
Attendance at Board meetings and
68
Committee meetings
68
Anti-bribery and corruption
70
The Board of Directors
72
Effectiveness
72
Board performance and evaluation
Nomination Committee Report
75
Appointment of a new Non-Executive Director 75
76
Director remuneration review
76
Policy on tenure and succession planning
76
Board diversity
77
Accountability
77
77
79
80
AIFM Directive
Depository Statement
Audit Committee Report
Committee membership and terms
81
of reference
81
Meetings
81
External Auditor
Risk management and internal controls
81
Financial reporting and significant judgements 82
83
Valuation of property portfolio
83
Valuation of interest rate derivatives
83
Revenue recognition
Financial Reporting Council letter
84
Fair, balanced and understandable financial
Internal controls review
statements
Management Engagement Committee Report
Management fee
Extension to term
Conflict management
Relations with Shareholders
and stakeholders
Investor relations
Site visits
AGM
Public communications
Directors’ Remuneration Report
Annual statement
Directors’ Remuneration Policy
External advisers
Annual report on remuneration
Statement of voting at general meeting
Total Shareholder return
Director shareholdings
Other items
Directors’ Report
Directors’ Responsibilities Statement
Independent Auditor’s Report
84
85
86
87
87
88
88
88
88
89
90
90
90
90
90
91
91
91
91
92
95
96
61
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
GOVERNANCE
CHAIRMAN’S GOVERNANCE OVERVIEW
Strong Corporate Governance is integral to our
business and our Company’s success. As we
have grown, we have embedded a culture of good
governance into our Company which has enabled
us to support our Company’s growth, to develop
an open and robust working environment and
to encourage dynamic business communications
with our Shareholders.
Richard Jewson
The Board is committed to the highest standards of corporate
governance. Good governance provides the structure for an
open, informed and transparent environment which supports
good decision making and establishes our culture and ethos. In
this section of the Annual Report we report on our compliance
with the principles of corporate governance and highlight the
key governance events which have taken place during 2016.
2016 has been another busy year. We have appointed a new
Non-Executive Director, Susanne Given, who was formerly
COO of SuperGroup PLC, and we have undertaken a review
of the terms of appointment and remuneration for the existing
Non-Executive Directors. More details on both of these initiatives
can be found in my Nomination Committee Report
Directors’ Remuneration Report
and the
.
. As part of this process and as a result of
We have reviewed, with the Manager, the terms of the Investment
Management Agreement and Shareholders approved certain
amendments to the agreement on 20 December 2016, the main
terms of which are set out in the Management Engagement
Committee Report
the Company’s continued rapid growth, we have agreed a Service
Level Agreement with the Manager to streamline our Board
meetings and Board papers in order to make the Board meetings
more efficient whilst continuing to ensure that the Directors
receive all necessary information to enable them to conduct an
open debate and make good decisions. Overall, we see these
changes as further strengthening and embedding a culture of
strong corporate governance in our Company.
The Board has considered the Company’s strategy at a specific
strategy meeting leading to the amendment of the Investment
Policy approved by Shareholders at last year’s AGM in May 2016,
and has scheduled two strategy meetings to be held in 2017.
The Company and the Manager have together established a
Shareholder and stakeholder communications programme,
which has included as some of its highlights a series of Chairman’s
lunches and an international roadshow where Colin Godfrey
from the Manager and key members of the Company’s Broker,
met with many current and prospective Shareholders. More
information on the Shareholder and stakeholder engagement
programme can be found in Relations with Shareholders and
stakeholders
.
The Board has also benefited from a bespoke professional
development programme and it has conducted an internal Board
evaluation to ascertain whether the results from last year’s
external Board evaluation had been implemented effectively
62
Nomination Committee Report p75-76
Directors’ Remuneration Report p90-91
Management Engagement Committee Report p85-87
Relations with Shareholders and stakeholders p88
Tritax Big Box REIT plc Annual Report 2016 and to consider the Board’s thoughts for the future. More
information on the professional development programme
.
the Board evaluation
can be found in Effectiveness
The AIC Code and AIC Guide can be found at:
www.theaic.co.uk/sites/default/files/
and
AICCodeofCorporateGovernanceJul16.pdf
The Audit Committee, led by Jim Prower, has considered the
additional requirements placed upon it by the recent changes to
the AIC Code and EU Regulations and has also considered the
Company’s Viability Statement in light of the recent guidance
received from the Financial Reporting Council as well as the
composition of the Audit Committee. The Audit Committee has
also actively negotiated the scope of the annual Audit and the
statements made by the Auditor. The Audit Committee Report
provides further details.
Statement of Compliance
We, as the Board of the Company, have considered the
principles and recommendations of the AIC Code of Corporate
Governance (AIC Code) by reference to the AIC Corporate
Governance Guide for Investment Companies (AIC Guide).
The AIC Code, as explained by the AIC Guide, addresses all the
principles set out in the UK Corporate Governance Code, as well
as setting out additional principles and recommendations on
issues that are of specific relevance to the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the
AIC Guide (which incorporates the UK Corporate Governance
Code), provides better information to Shareholders.
The Company has complied with the recommendations of the
AIC Code and the relevant provisions of the UK Corporate
Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions
relating to:
• The role of the chief executive;
• Executive directors’ remuneration;
• The need for an internal audit function.
For the reasons set out in the AIC Guide, and as explained in the
UK Corporate Governance Code, the Board considers these
provisions are not relevant to the position of the Company.
The Company is an externally managed investment company.
In particular, all of the Company’s day-to-day management and
administrative functions are outsourced to third parties. As a
result, the Company has no executive directors or employees.
The Company has therefore not reported further in respect of
these provisions.
Other key statements
The Directors confirm that to the best of our knowledge:
• The Company is well placed to manage its financing and other
business risks. The Board is, therefore, of the opinion that the
going concern basis adopted in the preparation of the Annual
Report is appropriate. Further details regarding this opinion
are set out in the Accountability
section of this Corporate
Governance Report;
• Taking into account the Group’s current position and the impact
of the principal risks documented in the Strategic Report, the
Directors have a reasonable expectation that the Company
will remain viable, continuing to operate and meet its liabilities
as they fall due, over the period to 7 March 2020. Further details
of the Board’s assessment of the viability of the Company are set
out in the Accountability
section of this Corporate Governance
Report and also Our Principal Risks and Uncertainties
;
• A continuing process for identifying, evaluating and managing
the risks the Company faces has been established and the
Board has reviewed the effectiveness of the internal control
systems. Further details are set out in the Accountability
section of this Governance Report;
• The Annual Report and accounts taken as a whole are fair,
balanced and understandable and provides the information
necessary for Shareholders to assess the Company’s
performance, business model and strategy. See the Audit
Committee Report
, for further information;
• The continuing appointment of the Manager on the terms
agreed is in the interests of the Company’s Shareholders as a
whole. Further details on the basis for this conclusion are set
out in the Management Engagement Committee Report
; and
• The Company undertakes a full risk review twice a year where
it considers all the principal risks and uncertainties that may
affect the Company. Please refer to Our Principal Risks and
Uncertainties
in the Strategic Report.
Richard Jewson Chairman
7 March 2017
Effectiveness – Director Training Programme p73
Effectiveness – Board performance and evaluation p72
Audit Committee Report p80-84
Accountability p77-79
Our Principal Risks and Uncertainties p54-59
Management Engagement Committee Report p85-87
63
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
GOVERNANCE
LEADERSHIP
The Board is responsible to Shareholders for the
continuing and long-term success of the Company.
Central to this is our dynamic culture and the
robust relationships we have built between the
Board, the committees and the Manager, which
have created an open environment where matters
can be considered and challenged and good
decisions taken.
The Board
The Board consists of five Non-Executive Directors. All the
Directors are independent of the Manager, with the exception of
Mark Shaw, who is a partner and chairman of the Manager. Each
Director will resign and stand for re-election by Shareholders at
the Company’s AGM in accordance with the requirements of the
AIC Code. Susanne Given will be submitting herself for election
as this will be the first AGM since her appointment.
The Board has determined the Company’s Investment
Objectives and Investment Policy and has overall responsibility
for the Company’s activities, including reviewing investment
activity, performance, business conduct and strategy, as well as
developing and complying with the principles of good corporate
governance.
The Directors believe that the Board is well balanced and
possesses sufficient breadth of skills, variety of backgrounds,
relevant experience and knowledge to ensure it functions
correctly and is not dominated by any one person. Biographical
information on each Director is set out in The Board of
Directors
.
The Board has approved a schedule of matters reserved for its
consideration and approval and has delegated the operational
aspects of running the Company to the Manager. The matters
reserved for Board consideration include:
• reviewing and approving Board membership and powers,
including the appointment of Directors;
• approving the budget, financial plans and annual and interim
financial reports;
• discussing, approving and implementing the Company’s strategy;
• reviewing property valuations and valuations of its interest
rate derivatives;
• overseeing treasury functions;
• managing the Company’s capital structure;
• overseeing the services provided by the Manager and, in
conjunction with the Manager, the Company’s principal service
providers;
• approving the dividend policy;
• approving all investment decisions; and
• reviewing and approving all compliance and governance
matters.
The Board has not established a remuneration committee as
it has no executive directors and the Company has no other
employees. The Board as a whole is responsible for reviewing
the scale and structure of the Directors’ remuneration, which
was delegated to the Nomination Committee and overseen by
Jim Prower as the Senior Independent Director. Details of the
Directors’ remuneration for the year ended 31 December 2016
are included in the Directors’ Remuneration Report
.
64
The Board of Directors p70-71
Directors’ Remuneration Report p90-91
Tritax Big Box REIT plc Annual Report 2016 Our governance structure
The Board is responsible collectively for the success of the Company. The table below explains the responsibility of each
Board member and the role of the Manager.
NAME
ROLE
RESPONSIBILITIES
Richard Jewson
Chairman of the
Company and Chair of the
Nomination Committee
• Leads the Board and ensures it functions effectively
• Sets the Board agenda, encourages an open Boardroom and manages the
relationship with the Manager
Jim Prower
Senior Independent
Director and Chair of the
Audit Committee
• As Chair of the Nomination Committee he assesses the composition of the Board
and whether it has the correct balance of skills, experience, knowledge and
independence to operate effectively.
• Available for Shareholders and stakeholders to speak to as an alternative point
of contact to the Chairman or Manager
• Acts as a sounding board for the Chairman
• Serves as a communication channel between the Manager and the Chairman,
and the Board and the Chairman when necessary
• As Chair of the Audit Committee he oversees the Group’s financial reporting, risk
management and internal control procedures and the work of its Auditor.
Stephen Smith
Non-Executive Director
and Chair of the
Management Engagement
Committee
• The Management Engagement Committee oversees the Manager’s and other
service providers’ performance and makes recommendations and proposals for
amendments to the Investment Management Agreement
• The Non-Executive Directors constructively challenge the Manager and,
Susanne Given
Non-Executive Director
Mark Shaw
Non-Executive Director
Tritax Management
LLP
The Manager
together with the Manager, determine the Company’s strategy and ensure that
the Company adheres to that strategy within its risk and control framework and
Investment Policy
• Provide independent judgement and scrutiny to all investment decisions and
review the integrity of financial information and risk management systems.
• Tasked with the day-to-day running of the Company
• Sources the investment assets and manages the Group’s property portfolio
• Shares responsibility with the Board for communications with Shareholders and
stakeholders and investor relations
• Open and regular communication with the Board on the determination
and implementation of the Company’s strategy, risk controls and financial
management of the Company
• Advises on investment decisions and both equity and debt capital markets
activity.
65
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION The Manager
The Board has delegated the day-to-day running of the Company
to the Manager pursuant to the terms of the Investment
Management Agreement. The Investment Management
Agreement is reviewed and amended when necessary to ensure
it reflects the relationship between the Board and the Manager.
As a result of these reviews, changes were proposed by the Board
to the Investment Management Agreement in December 2016
and approved by Shareholders at a general meeting convened
especially for that purpose. The Management Engagement
Committee Report
discusses fully the changes made to
the Investment Management Agreement and how the Board’s
relationship with the Manager is regulated.
GOVERNANCE: LEADERSHIP
Committees
The Board has delegated some of its responsibilities to its three
formal committees:
• the Nomination Committee
, which reviews the Board’s
composition and assesses whether the balance of skills,
experience, knowledge and independence is appropriate to
enable the Board to operate effectively;
• the Audit Committee
, which oversees the Group’s financial
reporting, risk management and internal control procedures
and the work of its external auditors; and
• the Management Engagement Committee
, which
reviews the Manager’s performance, the performance of the
Company’s other key service providers and which reviews and,
where necessary, makes recommendations on any proposed
amendment to the Investment Management Agreement.
These Committees are each chaired by a different Director and
have their own terms of reference which can be found on the
Company’s website
or copies are available from the Company
Secretary. The terms of reference are reviewed as necessary by
the Board at least every three years. The terms of reference for
the Nomination Committee and the Management Engagement
Committee were last reviewed at the end of 2015 and the Audit
Committee terms of reference were reviewed in November 2016.
The Company Secretary acts as company secretary to these
Committees and the Chairman of each committee reports the
outcome of the meetings to the Board.
The Board also establishes further ad hoc committees to take
operational responsibility on specific matters for subsequent
approval by the Board. These operational committees ensure
that key matters are dealt with efficiently by the best qualified
Non-Executive Director and representative of the Manager.
66
Nomination Committee Report p75-76
Audit Committee Report p80-84
Management Engagement Committee Report p85-87
The Board of Directors p70-71
http://tritaxbigbox.co.uk/about/#corporate-governance
Tritax Big Box REIT plc Annual Report 2016 GOVERNANCE
HOW WE GOVERN THE COMPANY
The Board has developed a dynamic culture,
which enables the talented people who work
with it to grow and succeed with our Company.
Board meetings
During 2016 the Board held 10 scheduled meetings and 10
ad hoc meetings to deal with transactional and other specific
events such as equity raises and debt financings. The table
below shows each individual Director’s attendance at the
scheduled Board meetings for which they were eligible to
attend during the year. Attendance at Committee meetings is
incorporated in each Committee report.
The Board meetings follow a formal agenda, which is approved
by the Chairman and circulated by the Company Secretary
in advance of the meeting to all the Non-Executive Directors
and other attendees. A typical agenda includes a review
of investment performance, the progress of investment
opportunities, reviewing asset management initiatives, the
Company’s financial performance to ensure the Company’s
ability to pay its targeted dividend on a fully cash covered
basis, the Company’s anticipated future performance, updates
on investor relations and specific regulatory or compliance
issues, plus any corporate governance. All decisions to invest
in property are made by the Board at the recommendation of
the Manager. The Manager also attends the Board meetings
together with representatives from the Company Secretarial
team. Representatives of the Company’s other advisers are also
invited to attend Board meetings from time to time, particularly
representatives from the Company’s Broker, the Company’s
Financial Advisers and the Company’s Lawyers.
One of the Board meetings was designated as a specific
meeting to review the Company’s strategy. The meeting focused
on setting the Company’s overarching strategy and whether the
management structure enables the Company to carry out its
strategy effectively. As a result of this meeting the Company’s
Investment Policy was amended at the Company’s AGM in May
2016. At each Board meeting every agenda item is considered
against the Company’s strategy and its Investment Objective
and Policy.
The process of Board meetings has been reviewed by the
Board and the Manager as part of the Service Level Agreement
discussions. In 2017 the Manager will report to the Board in
accordance with a pre-agreed calendar to ensure that the
Board continues to have a thorough understanding of the
Company’s business notwithstanding its rapid growth since
IPO. A regular, rolling reporting calendar which allows the Board
and the Manager to review the Company’s portfolio and asset
management initiatives continually against the Company’s
Investment Objectives and Investment Policy and the evolving
market conditions is being implemented. This initiative will
streamline Board procedures and will assist the Directors
to maintain a detailed overview of the Company’s growing
portfolio. The reporting calendar also includes input from key
service providers such as the Company’s Broker and Financial
Advisers to ensure that the Board is kept informed on a regular
basis of how the Company is viewed in the wider market and
more particularly in its direct REIT peer group. The Service
Level Agreement will be reviewed on an annual basis by the
Management Engagement Committee.
The majority of all Board papers are disseminated to the
Non-Executive Directors via a secure online platform for
reasons of efficiency and cyber security.
Attendance at scheduled Board meetings
BOARD MEETINGS
ELIGIBLE TO ATTEND 1
SCHEDULED BOARD
MEETINGS ATTENDED
Meetings held
Richard Jewson
Jim Prower
Stephen Smith
Mark Shaw2
Susanne Given 3
(appointed 13 September 2016)
10
10
10
10
10
2
10
10
10
10
8
2
1 Includes strategy meeting
2 Mark Shaw was unable to attend one meeting for personal reasons and one meeting because he was travelling for business
3 Figures since 13 September 2016
67
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: HOW WE GOVERN THE COMPANY
Attendance at Board meetings and Committee meetings
during the year ended 31 December 2016
All Directors are expected to attend all scheduled meetings
of the Board and of the Committees on which they serve,
and to devote sufficient time to the Company’s affairs to fulfil
their duties as Directors. Where Directors are unable to attend
meetings, Board papers are provided in advance and their
comments are given to the Chairman before the meeting and
shared with the rest of the Board and the Manager.
Due to the significant number of additional meetings during the
year it was not logistically feasible for all the Directors to attend
every meeting. The Nomination Committee is satisfied that all
the Directors, including the Chairman, have sufficient time to
meet their commitments.
Anti-bribery and corruption
The Board has a zero tolerance policy towards bribery and is
committed to carrying out business fairly, honestly and openly.
In considering The Bribery Act 2010, at the date of this report,
the Board had assessed the perceived risks to the Company
arising from bribery and corruption and to identify aspects of
the business, which may be improved to mitigate such risks.
The Manager actively reviews and monitors perceived risks
in order to mitigate them. Responsibility for anti-bribery and
corruption has been assigned to the compliance officer within
the Manager who has sufficient time and seniority to manage
it effectively. The Manager maintains a risk register, where
perceived risks and associated actions are recorded and this is
regularly shared with the Board for approval.
68
Tritax Big Box REIT plc Annual Report 2016 Key activities of the Board during 2016
Q1
Q2
• Approval of the Company’s full year property valuation
• Annual Strategy Review including an analysis of the
for 2015
• Approval of 2015 financial results and final dividend
• Review of the existing debt strategy
• Commencement of the process to recruit a new
Non-Executive Director (see the Nomination Committee
Report
)
performance of the Company’s investment portfolio and
a review of the market and opportunities available to the
Company generally (see Board Meetings, How we govern
the Company
)
• First half-yearly principal risk review and consideration
of risk appetite
• Approval and acquisition of two Big Boxes
• Amendment to the Company’s Investment Policy at the
• Appointment of Jim Prower as the Senior Independent
Director
Company’s AGM
• Appointment of Korn Ferry to recruit a new Non-Executive
• Presentations from the Company’s Broker on Shareholders’
Director
perception of the Company. Consideration of the state
of the equities market and the Big Box market
• Issuance of a trading statement
• Successful equity raise of £200 million
• Quarterly review of corporate governance compliance,
Group company activity and depositary report
• Acquisition of one Big Box
• Quarterly review of corporate governance compliance,
Group company activity and depositary report
Q3
Q4
• Approval of the half-yearly property valuation
• Acquisition of five Big Boxes of which two were pre-let
• Approval of the half-yearly results
• Declaration of two dividend payments – see website
• Change to quarterly dividends from January 2017
announced – see website
• Extension to an existing debt facility
• Agreement of a new fixed rate term loan facility
• Appointment of Susanne Given as a Non-Executive Director
and as a member of the Audit Committee
• Acquisition of two Big Boxes
• Presentations from the Company’s Broker and the
Company’s Financial Advisors on Shareholders’ perception
of the Company
• Launch of the Company’s second equity raise in 2016
• Quarterly review of corporate governance compliance,
Group company activity and depositary report
forward funded developments
• Successful equity raise of £350 million
• £50 million addition to syndicated loan
• The Approval of the amendments to the Investment
Management Agreement at a Shareholders’ general meeting
(see the Management Engagement Committee Report
)
(see How we Govern the Company
)
• Approval of the Service Level Agreement with the Manager
(see How we Govern the Company
)
• Second half-yearly principal risk review and consideration
of risk appetite
• Consideration of the Company’s future debt financing
strategy
• Approval of the updated Financial Prospects, Positions and
Procedures document
• Quarterly review of corporate governance compliance,
Group company activity and depositary report
Nomination Committee Report p75-76
Audit Committee Report p80-84
Management Engagement Committee Report p85-87
69
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE
THE BOARD OF DIRECTORS
Richard Jewson
Chairman
Jim Prower
Senior Independent
Non-Executive Director
Stephen Smith
Non-Executive Director
Appointed: 18 November 2013
Length of service: three years, four months
Independent: Yes
Appointed: 18 November 2013
Length of service: three years, four months
Independent: Yes
Appointed: 18 November 2013
Length of service: three years, four months
Independent: Yes
Committee memberships:
• Chair of the Nomination Committee
• Management Engagement Committee
Committee memberships:
• Chair of the Audit Committee
• Management Engagement Committee
• Nomination Committee
Relevant skills and experience:
• Significant leadership experience
as executive director, non-executive
director and chairman of a number of
public companies
• Long-standing commercial experience
through both executive and non-executive
roles in the construction services,
infrastructure and real estate sectors
• Skilled in guiding companies through
strong growth phases as well as
managing the impact of business cycles
Significant previous external experience:
• Chairman of Meyer International PLC,
holding company of Jewson Limited
• Chairman of Archant Limited for
17 years
• Chairman of Savills plc for 10 years
• Board member of Grafton Group plc for
18 years
• Non-executive director and Deputy
Chairman on Anglian Water Plc for
14 years
Principal external appointments:
• Chairman, Raven Russia Limited. Board
member since June 2007
• Senior non-executive director, Temple
Bar Investment Trust plc. Board member
since May 2001
Relevant skills and experience:
• A chartered accountant having trained
and qualified at Peat, Marwick, Mitchell
& Co, London
• In-depth knowledge of financial matters,
particularly in relation to the real estate
sector through his previous role as finance
director at the Argent Group, which is
undertaking the development of King’s
Cross Central
• Experienced in raising debt financing
for working capital, development and
investment
Significant previous external experience:
Jim has acted as finance director and
company secretary at several public
companies including:
• Minty plc for two years
• Creston Land & Estates plc for six years
• NOBO Group plc for two years
Principal external appointments:
• Senior independent director and
chairman of audit committee, Empiric
Student Property plc since May 2014
Committee memberships:
• Chair of the Management Engagement
Committee
• Audit Committee
• Nomination Committee
Relevant skills and experience:
• Significant experience in real estate
investment, having managed very large
property portfolios on behalf of life funds,
listed property vehicles, unit linked and
closed-end funds
• Responsibility for property and
investment strategy at British Land
Company PLC
Significant previous external experience:
• Chief Investment Officer of British Land
Company PLC for three years
• Global Head of Asset Management
and Transactions at AXA Real Estate
Investment Managers for 11 years
• Managing Director at Sun Life
Properties for five years
Principal external appointments:
• Chairman, Starwood European Real
Estate Finance Limited. Board member
since November 2012
• Non-executive director, Gatehouse
Bank plc, a London based wholesale
investment bank specialising in global
real estate. Board member since
June 2013
• Pollen Estate. Board member since
March 2016
70
Tritax Big Box REIT plc Annual Report 2016
Susanne Given
Non-Executive Director
Mark Shaw
Non-Executive Director
Appointed: 13 September 2016
Length of service: six months
Independent: Yes
Appointed: 8 November 2013
Length of service: three years, four months
Independent: No
Committee memberships:
• Audit Committee
Committee memberships:
• Nomination Committee
Relevant skills and experience:
• Significant experience in running large
Relevant skills and experience:
• Highly experienced in a range of
retail companies
• High profile involvement in investor
presentations as well as previous
membership of risk and audit committees
• Creation of five year strategy plans and
overseeing their implementation
• Significant experience in management
of logistics and property assets
commercial, banking and investment
operations
• Extensive property investment
experience, particularly in developing
and structuring property transactions,
and managing a variety of property
vehicles including property unit trusts,
listed property vehicles and limited
partnerships
Significant previous external experience:
• Chief Operating Officer of SuperGroup
Principal external appointments:
• Chairman, Tritax Management LLP
since March 2007
Plc – three years from April 2012
• John Lewis Department Store Group –
Director, January 2011-April 2012
• T.K. Maxx (UK and Ireland) – Managing
Director, December 2007-December
2010; Senior Vice President, November
2005-October 2007
• Harrods Limited – General Merchandise
Director, December 2001-November 2005
Principal external appointments:
• Chairman of made.com since April 2016
• Mentor and Advisor to Wayra, Telefónica’s
start-up accelerator since March 2016
• Director of Eurostar International
Limited since December 2016
• Director of Al Tayer since January 2016
• Advisor to the Danish Foreign Ministry,
Economic Forum and the Danish
Embassy in the UK
Audit Committee p80-84
Management Engagement Committee
Report p85-87
Nomination Committee p75-76
http://tritaxbigbox.co.uk/
about/#corporate-governance
71
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
GOVERNANCE
EFFECTIVENESS
Good governance is fundamental to our Company.
It allows the Board to deliver its strategic objectives
for the Company and safeguard the Company’s
continued growth and long-term success for the
benefit of Shareholders and other stakeholders.
The Directors were unanimous in the view that the Board and its
committees were operating effectively and were well supported
by the Manager and the Company Secretary, and that the
initiatives implemented in 2015 and 2016 to address the four
areas identified as requiring improvement in the external Board
Evaluation conducted in 2015 had been and continued to be
effective. Those areas were:
Board performance and evaluation
The Board has adopted a policy of undertaking externally
facilitated evaluations every three years and internal evaluations
in each of the intervening two years. The Board commissioned
an external evaluation last year, which was conducted by
the independent corporate advisory firm, Board Evaluation
Limited. The results of this evaluation identified four areas for
improvement and the Board was particularly interested to
evaluate the success of the initiatives implemented since
last year.
In 2016, at the request of the Chairman, the Company Secretary
conducted an internal review of the Board. The Company
Secretary prepared an online questionnaire for completion, on
an anonymous basis, by each Non-Executive Director, which
covered a number of areas:
• Board composition
• Board meetings
• Role of the Chair
• Strategic aims and objectives
• Performance, management and the role of the Manager
• Risk management and controls
• Audit Committee function
• Management Engagement Committee function
• Nomination Committee function
The questionnaire was devised to encourage the Board to
provide written comments as well as a rating for each question.
• Administration of and procedures for Board meetings;
(please refer to How we govern the Company
);
• Board succession planning (please refer to the Nomination
Committee Report
);
• Director training; (please refer to Director Training
Programme
); and
• Composition of the Audit Committee (please refer to the
).
Audit Committee Report
It was clear from the responses to the evaluation
that the Board operates in an open and effective manner,
which encourages robust debate of matters tabled at Board
meetings enabling the Board to make fully informed and good
decisions. It was also clear that the Board information is clearly
presented by the Manager and the Company Secretary and
is delivered in a timely manner, and that the Board feels that it
enjoys a strong working relationship with them. In light of the
Company’s growth, the Board decided to revise the way Board
meetings are managed to ensure the continued efficacy of the
Board. Please refer to How we govern the Company
, which
provides more detail on this.
Each of the three Committees is also performing effectively and
is well supported by the Manager and the Company Secretary.
72
Leadership, Our governance structure p65
Nomination Committee Report p75-76
Director Training Programme p73-74
Audit Committee Report p80-84
Tritax Big Box REIT plc Annual Report 2016 The Board agreed, following the evaluation process, to continue
with the initiatives started after the external Board Evaluation
in 2015 and to expand upon the same. In 2017 the Board will
hold half-yearly strategy meetings; the Board and the Manager
will fully implement the Service Level Agreement and it intends
to expand the Director Training Programme. The Board also
recognised that the size of the Company and the number
of its assets now requires a more regimented reporting
calendar and this, amongst other items, formed the basis of the
new Service Level Agreement with the Manager (see “Board
Meetings”, How we govern the Company
).
INITIATIVES IMPLEMENTED AND DEVELOPED SINCE 2015
1. Annual Strategy Review
2.
Implementation of the Service Level Agreement
3. Expansion of the Director Training Programme
4. Succession policy review – appointment of Susanne Given to the
Board and to the Audit Committee
5. Directors’ Remuneration Review
The Board also determined to continue to improve the
administration and Board meeting procedures, particularly
in relation to larger projects and to consider the inclusion of
the Manager as a respondent to the internally generated 2017
evaluation. The 2017 evaluation will focus more on the written
comments of the respondents rather than the ratings and will
include, as part of the process, an appraisal of the Chairman
whereby the Senior Independent Director will formally meet
with the Non-Executive Directors and the Manager to discuss
the performance of the Chairman.
Director Induction Programme
Susanne Given was appointed as a Non-Executive Director of
the Company and as a member of the Audit Committee in 2016.
Susanne received a bespoke induction training programme
which was spread over two months from her appointment
and was designed to give her a comprehensive overview of
the Company, including its business and strategic aims and
its governance structure. The Manager also provided a series
of meetings with the property sourcing, asset management,
finance and Company Secretarial teams within the Manager.
The Company’s Brokers, Joint Financial Advisers and Lawyers
also met with Susanne Given and she will visit some of the
Company’s assets in early 2017.
Director Training Programme
The Board recognised as part of the Board evaluation in 2015
that a training programme to ensure that it is kept abreast of
both governance and statutory updates as well as commercial
matters should be implemented. Accordingly, a bespoke
training programme was implemented in January 2016 following
consultation between the Manager and the Board. In 2016 the
Board received the following formal training sessions from some
of the Company’s external service providers:
MONTH
PRESENTER
SESSION
January
Taylor Wessing
June
Taylor Wessing
Directors duties and corporate
governance
Directors duties Part II, anti-bribery
and corruption, and the Modern
Slavery Act
November
Jefferies
M&A considerations
In addition to the bespoke training programme, each Director
is expected to maintain their individual professional skills and is
responsible for identifying any individual training needs to help
them ensure that they maintain the requisite knowledge to be
able to consider and understand the Company’s responsibilities,
business and strategy. All Directors have access to advice
and services from the Company Secretary, who manages
the Company’s governance procedures, or the Manager.
Management Engagement Committee Report p85-87
73
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: EFFECTIVENESS
The Directors are also entitled to take independent advice at the
Company’s reasonable expense at any time.
The Company will continue with the Director Training
Programme and the Manager is arranging training with logistics
and retail specialists to take place in 2017.
The Company maintains directors and offices’ liability insurance,
which gives appropriate cover for legal action brought against
its Directors.
Asset tour
In order to increase its understanding of how its tenants utilise
the Big Boxes owned by the Company, the Directors went on an
asset tour on 18 May 2016 accompanied by the Manager. The
Board visited properties at Marks & Spencer, Castle Donington;
Kuehne+Nagel, Derby; Dunelm, Stoke-on-Trent; and New Look
in Newcastle-under-Lyme. The Directors also visited Ocado,
Erith in February 2017. It was an informative tour and the Board
found it very interesting and useful to see these mechanised
Big Boxes first hand and to be able to discuss the requirements
of our tenants on site, often directly with the site managers.
74
Tritax Big Box REIT plc Annual Report 2016 GOVERNANCE
NOMINATION COMMITTEE REPORT
The Committee’s role is to review the size,
structure and composition of the Board; to
ensure that the Board has the right mix of
skills, experience and knowledge to enable
the Company to fulfil its strategic objectives.
The Committee is also responsible for making
recommendations for new appointments to the
Board and for reviewing the performance and
terms of engagement for the existing Directors.
The Committee operates within defined terms of
reference which are available on the Company’s
website
or from the Company Secretary.
Appointment of a new Non-Executive Director
In late 2015, two years after the Company’s IPO and following
the Company’s admission to the FTSE 250, the Nomination
Committee identified the need to appoint a further independent
Non-Executive Director to the Board, and to appoint a new
director to the Audit Committee to replace me following my
retirement from the Audit Committee in order to comply with
best governance practice. The recruitment process began in
early 2016.
The Nomination Committee’s first task was to appoint a suitable
recruitment consultant for the role and the Committee asked
Colin Godfrey and the Company Secretary to undertake this.
Quotes were obtained from four recruitment consultancy firms
and three recruitment consultancy firms were interviewed.
Following the feedback to the Committee from Colin Godfrey and
the Company Secretary, Korn Ferry was appointed. Korn Ferry
is independent from the Company and the Manager and, as far
as the Company and the Manager are aware, there is no other
connection between the Company or the Manager and Korn Ferry.
The Nomination Committee then evaluated the skills and
experience considered necessary to complement the existing
Board composition. We particularly wanted the new candidate
to have strong experience in the logistical requirements of
online retailers as well as strong general retail sales experience.
We were also amenable to considering a candidate for whom
this would be their first experience as a member of a FTSE 250
Board, provided that the candidate could devote sufficient
time to the role and we were mindful of the recommendations
of the Davies Report and our commitment as a Company to
diversity. We met with Korn Ferry to discuss the appointment,
the Company and its strategy in May 2016.
“Dear Shareholders,
2016 has been busy for the Nomination Committee,
the highlight of which was the appointment of
Susanne Given to the Board in September 2016.
Susanne brings with her a wealth of general and
online retail experience and provides an insight
for the existing Directors into the needs of and
the challenges faced by many of our tenants.
We are very pleased with her appointment and
look forward to a fruitful exchange of ideas at
Board meetings.”
Membership
Richard Jewson (Chairman)
Jim Prower, Stephen Smith, Mark Shaw
Priorities for 2016
• The appointment of a Non-Executive Director to the
Board and to the Audit Committee
• A formal review of the remuneration of the full Board
• A formal review of the terms of appointment for the
Non-Executive Directors
• The proposal for re-appointment of the Non-Executive
Directors and the appointment of Susanne Given as a
Non-Executive Director at the AGM in 2017
Meeting attendance register
PERSON
Richard Jewson
Jim Prower
Stephen Smith
Mark Shaw
MEETINGS
ELIGIBLE TO
ATTENDED
MEETINGS
ATTENDED
4
4
4
4
4
4
4
4
http://tritaxbigbox.co.uk/about/#corporate-governance
Audit Committee Report p80-84
75
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: NOMINATION COMMITTEE REPORT
Korn Ferry presented to the Committee a list of candidates
who had expressed an interest in the role. We reviewed the list,
identifying those candidates who appeared to hold the correct
blend of skills, and requested interviews.
the Directors. The Board, following the advice of the Committee,
will recommend the election and re-election of each Director at
the forthcoming AGM.
The first round of interviews was conducted by a sub-committee
of myself, representing the Board, and Colin Godfrey and Henry
Franklin, representing the Manager. We selected one candidate,
Susanne Given, to proceed to the next stage. As the Company has
a relatively small Board of Directors and is externally managed,
the other Board members as well as the partners of the Manager
were keen to meet with Susanne Given before a final decision was
taken. Over the course of the summer of 2016, Susanne Given
met with the Board as well as the key members of the Manager.
The Committee considered her skills and experience, as well
as her ability to devote enough time to the position, before we
recommended her appointment to the Board. The Board appointed
Susanne Given as a new Non-Executive Director of the Company
on 13 September 2016. She will hold office until the Company’s
AGM on 17 May 2017 when she will be submitted for election by the
Shareholders as a Director of the Company.
Director remuneration review
As the Company does not have any executive directors it
does not have a remuneration committee. Further to feedback
received from last year’s Board evaluation and to coincide with
the Company’s third anniversary, the Committee decided to
review the terms of appointment of each Director. As we reviewed
the terms of appointment of the Directors it was considered
sensible for us to also review the level of fees to be awarded
to the Board, particularly given the Company’s considerable
growth since IPO in December 2013. Jim Prower as the Senior
Independent Director led the Remuneration Review
.
Policy on tenure and succession planning
We considered the ongoing independence of each of the
Directors as well as their respective skills and experience and
whether each Director is able to commit sufficient time to the
Company, as well as any other external appointments held by
The Company’s Lawyers also reviewed and updated the
Directors’ letters and terms of appointment. Specifically we
sought to revise the notice periods to be given should a Director
wish to resign in order to prevent more than one Director
resigning at any one time (except in extenuating circumstances).
Richard Jewson, Stephen Smith and Jim Prower were all initially
appointed on 18 November 2013 for a term of two years. Mark
Shaw was appointed on 8 November 2013 for a term of one year.
Susanne Given was appointed for an initial term of two years
commencing on 13 September 2016 subject to election by the
Shareholders at the forthcoming AGM and re-election at each
AGM thereafter. Please refer to the Directors’ Remuneration
Report
for more information.
Pursuant to the Articles of Association of the Company, at
every AGM of the Company, one third of the Directors who are
subject to the requirement to retire by rotation (not including
any Director who was appointed by the Board and is standing
for election) will retire from office and may offer themselves
for re-election. However, notwithstanding the provisions of the
Articles, all the Directors will offer themselves for re-election at
each AGM in accordance with the provisions of the AIC Code
.
When renewing current appointments, all Directors except the
individual in question are able to vote at the Annual General
Meeting.
Board diversity
We regularly review the Company’s policy on diversity and
consider that the Directors have a balance of skills, qualifications
and experience which are relevant to the Company. We support
the recommendations of the Davies Report and believe in the
value and importance of diversity in the Boardroom but we do not
consider it appropriate, or in the interest of the Company and its
Shareholders, to set prescriptive diversity targets on the Board.
Richard Jewson Chairman of the Nomination Committee
7 March 2017
76
Directors’ Remuneration Report p90-91
www.theaic.co.uk/sites/default/files/
AICCodeofCorporateGovernanceJul16.pdf
Tritax Big Box REIT plc Annual Report 2016 GOVERNANCE
ACCOUNTABILITY
For our Company to achieve its strategic
objectives, the risks to its future growth and
success need to be identified and effectively
managed. The Board recognises that this principle
is central to the continued performance of the
Company. The main risks identified as the
most relevant to the Company are set out on
pages 54-59 of the Strategic Report
.
Internal controls review
The Directors acknowledge their responsibility for maintaining
the Company’s system of internal control and risk management
in order to safeguard the Company’s assets. The Company’s
internal control safeguards are designed to identify, manage and
mitigate the financial, operational and compliance risks that are
inherent to the Company. The safeguards and systems in place
are designed to manage rather than eliminate the risk of failure
to achieve business objectives and can only provide reasonable,
but not absolute, assurance against material misstatement or loss.
The Board and the Manager have together reviewed all financial
performance and results notifications. Non-financial internal
controls include the systems of operational and compliance
controls maintained by the Company’s administrator, Capita
Sinclair Henderson Limited (the “Administrator”), and by the
Manager in relation to the Company’s business, as well as the
management of key risks referred to in the Directors’ Report.
The Board has contractually delegated responsibility for
accounting services to the Administrator and for company
secretarial services to the Manager. These entities have their
own internal control systems relating to these matters, which
the Board has reviewed as part of its Financial Position and
Prospects Procedures memorandum, which was reviewed and
updated in November 2016 to better reflect the operations of
the Company. The Financial Position, Prospects and Procedures
memorandum is reviewed and updated annually and the next
review will be 2017.
Internal control assessment process
The Board regularly monitors the effectiveness of the
Company’s internal controls and ensures their adequacy.
This includes reviewing reports from the external Auditor
(details of which are included in the Audit Committee Report),
quarterly reports from the Company Secretary (outlining
corporate activity within the Group and outlining the Company’s
compliance with the AIC Code and Guide) and proposed
future initiatives relating to the Company’s governance and
compliance framework. The Board also receives quarterly
compliance reports prepared by Langham Hall UK Depositary
LLP (see page 79
reviews the formal bi-annual risk assessment conducted by
the Audit Committee. Further, the Board actively considers
investment opportunities, asset management initiatives, debt
and equity fundraisings and other financial matters against
the requirements of the Company’s Investment Policy and risk
spectrum.
for further information). The Board
The Board confirms that, in accordance with the AIC Code and
Guide, it has established a continuing process for identifying,
evaluating and managing the risks the Company faces and has
reviewed the effectiveness of the internal control systems.
AIFM Directive
The Alternative Investment Fund Managers Directive (“AIFMD”)
became part of UK law in 2013. It regulates Alternative
Investment Fund Managers (“AIFMs”) and imposes obligations
on managers who manage alternative investment funds (“AIF”)
in the EU or who market shares in AIFs to EU investors. Under
the AIFMD, the AIFM must comply with various organisational,
operational and transparency obligations.
The Manager is authorised by the FCA as an AIFM and provides
all relevant management and advisory services to the Company,
including regulated activities.
Our Principal Risks and Uncertainties p54-59
Depositary Statement p79
77
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: ACCOUNTABILITY
AIFM remuneration policy applied by the Manager
As a full scope AIFM, the Manager must apply a remuneration
policy in line with its business strategy, objectives, values
and interests, as well as those of the AIFs it manages or their
investors. The policy must include measures to avoid conflicts
of interest.
The Manager’s partnership board therefore meets at least
twice a year to discuss the remuneration of its entire staff. Staff
are remunerated in accordance with their seniority, expertise,
professional qualifications, responsibilities and performance.
They are paid salaries in line with market rates and, in profitable
years, awarded a discretionary bonus from a bonus pool of at
least 5% of the Manager’s profits. The discretionary bonus may
consist of cash or shares in the Company which form part of the
management fee payable to the Manager’s Partners but which
the Manager’s Partners elect to allocate to certain members
of staff as part of the annual bonus. Please refer to page 87
for further information. This means that staff remuneration is
predominantly fixed and the variable element is determined by
the Manager’s profitability, rather than the performance of a
particular AIF.
The Manager’s Partners are entitled to their partnership share
of its profits and losses. None of the Partners is entitled to
additional partnership drawings that depend on the performance
of any AIF managed by the partnership. The Partner’s
remuneration therefore depends on the Manager’s profitability,
rather than the performance of the AIF. This ensures that the
partners have a vested interest in ensuring the Manager remains
financially sound.
Shares”). Management Shares are subject to a 12 month lock-in
period. This aligns the interests of the Manager’s Partners with
the strategy and interests of the Company.
Going concern and viability
The Board is required to consider whether the Group has
adequate reserves to continue in operation for the “foreseeable
future”, typically considered 12 months from the date of this
report for the purposes of going concern.
The Committee also reviewed the work of the Investment
Manager, along with its financial adviser to support the Viability
Statement
which is included in the Strategic Report.
The annual fee paid by the Company is based on a percentage
of NAV, as set out in the Management Engagement Committee
Report
invest 25% of that fee (net of tax and certain other costs, as
described on page 87
. In addition, the Manager’s Partners are required to
) in the Company’s shares (“Management
78
Management Engagement Committee Report p85-87
Viability Statement p60
Tritax Big Box REIT plc Annual Report 2016 DEPOSITARY STATEMENT
Established in 2013, Langham Hall UK Depositary LLP is
an FCA regulated firm that works in conjunction with the
Manager and the Company to act as depositary. Consisting
exclusively of qualified and trainee accountants and
alternative specialists, the group represents net assets of
US $80 billion and we deploy our services to 90 alternative
investment funds across various jurisdictions worldwide.
Our role as depositary primarily involves oversight of
the control environment of the Company, in line with UK
regulatory requirements.
Our cash monitoring activity provides oversight of all the
Company held bank accounts with specific testing of bank
transactions triggered by share issues, property income
distributions via dividend payments, acquisitions and third-
party financing. We review whether cash transactions are
appropriately authorised and timely. The objective of our
asset verification process is to perform a review of the legal
title of all properties held by the Group and shareholding of
holding companies beneath the Company. We test whether
on an ongoing basis the Company is being operated by the
Manager in line with the Company’s prospectus and the
internal control environment of the Manager. This includes
a review of the Company’s and its subsidiaries’ decision
papers and minutes.
We work with the Manager in discharging our duties,
holding formal meetings with senior staff on a quarterly
basis and submit quarterly reports to the Manager
and the Company, which are then presented to the
Board of Directors, setting our work performed and the
corresponding findings for the period.
In the year ended 31 December 2016 our work included
the review of two equity and two management share
issues, ten acquisitions, three third-party financing
arrangements and three property income distributions.
Based on the work performed during this period, we
confirm that no issues came to our attention to indicate
that controls are not operating appropriately.
Joe Hime Head of Depositary
For and on behalf of
Langham Hall UK Depositary LLP, London, United Kingdom
7 March 2017
Langham Hall UK Depositary LLP is a limited partnership
registered in England and Wales (with registered number
OC388007).
79
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE
AUDIT COMMITTEE REPORT
“Dear Shareholders
This year we have changed the membership of the
Audit Committee with Richard Jewson stepping
down and Susanne Given having been appointed in
his place. As well as overseeing the yearly audit and
half-yearly review, the bi-annual valuations and the
Company’s risk management, financial reporting
and financial management functions, we have
also thoroughly reviewed the Committee’s terms
of reference and other areas of compliance and
legislation within the Committee’s responsibility.”
Membership
Jim Prower (Chairman)*
Richard Jewson†, Stephen Smith, Susanne Given**
* Jim Prower, is considered to possess recent and relevant financial
experience for the purpose of the AIC Code. Details of Jim Prower’s
experience can be found in his biography on page 70.
† Richard Jewson, the Chairman of the Board, sat on the Audit
Committee to enable his greater understanding of the issues facing
the Company; he resigned as a member of the Audit Committee on
13 September 2016 however he is still invited to Audit Committee
meetings.
** Susanne Given was appointed to the Audit Committee on
13 September 2016.
Key focus for 2016
• Recommended to the Board that the Annual Report and
Accounts for 2015, taken as whole, were fair, balanced and
understandable and provide the information necessary
for Shareholders to assess the Company’s position and
performance, business model and strategy;
• Reviewed the Interim Report 2016 and recommended the
same to the Board;
• Monitored the integrity of the financial statements of
the Company and any formal announcements relating to
the Company’s financial performance and reviewed any
significant financial reporting judgements contained in them;
• Reviewed the Company’s internal financial controls
and reviewed the Company’s internal control and risk
management systems as well as those of the Manager
which relate to the Company;
• Reviewed and monitored the independence and objectivity
of the Auditor and the effectiveness of the audit process;
• Reviewed and considered the basis of the Viability
made by the Directors;
Statement
• Developed a policy on the engagement of the Auditor to
supply non-audit services including the safeguarding of the
Auditor’s objectivity and independence; and
• Responded to the letter of 1 July 2016 from the Financial
Reporting Council (“FRC”) following review of the Company’s
2015 Annual Report and Accounts. The FRC deemed all
enquiries closed following the response.
Meeting attendance register
PERSON
Jim Prower
Stephen Smith
Richard Jewson1
Susanne Given2
MEETINGS
ELIGIBLE TO
ATTEND
MEETINGS
ATTENDED
4
4
3
1
4
4
3
1
1 Member until 13 September 2016
2 Member from 13 September 2016
80
Viability Statement p60
Tritax Big Box REIT plc Annual Report 2016 The Audit Committee’s role is to oversee the
Company’s financial reporting process including
the risk management and internal financial
controls in place within the Manager, the valuation
of the property portfolio, the Group’s compliance
with accepted accounting standards and other
regulatory requirements as well as the activities
of the Auditors.
Committee membership and terms of reference
We operate within defined terms of reference, which are
available on the Company’s website
the Company Secretary. The terms of reference were reviewed
and amended during the year to reflect the changes made to
the AIC Code and Guide, legislation and best practice.
and on request from
The membership of the Committee changed over the course
of the year. From 1 January to 13 September 2016, Richard
Jewson, the Company’s Chairman, was a member together
with me and Stephen Smith. Richard Jewson is an independent
Director so the Company was compliant with Principle 9 of
the AIC Code. However the Committee did not consider that it
was following best practice and Richard elected to stand down
upon the appointment of Susanne Given to the Committee.
Susanne Given has experience of sitting on audit committees in
her previous roles. None of the members of the Committee are
connected to the Manager or to the Auditor. The biographies
of the members can be found on pages 70-71
of this Annual
Report.
Meetings
We met four times during 2016, following the Company’s
corporate calendar, which ensures that the meetings are aligned
to the Company’s financial reporting timetable. The Company
Secretary ensures that the meetings are of sufficient length to
allow the Committee to consider all the matters of importance
and the Committee is satisfied that it receives full information
in a timely manner to allow it to fulfil its obligations. These
meetings are attended by the Committee members, as well
as representatives of the Manager, the Company Secretary
and the Auditor. The Committee also met with the Company’s
independent Valuer, CBRE, at the beginning of January 2017
as part of the annual auditing process. I, as the Committee
Chairman, have regular meetings with the Company Secretary
and the Head of Finance for the Company and additional Audit
Committee meetings are convened by the Company Secretary
at my request when necessary.
External Auditor
During the year we considered at length the appointment,
compensation, performance and independence of the
Company’s external Auditor, BDO LLP (“BDO”).
BDO was appointed as the Company’s Auditor following a formal
tender process as part of the IPO in 2013. Richard Levy has been
the lead audit partner since BDO’s appointment. During the
year we met key members of the audit team and BDO formally
confirmed its independence as part of the annual reporting
process. We liaise regularly with the lead audit partner to discuss
any issues arising from the audit as well as its cost-effectiveness
and actively challenge and negotiate the fees payable to the
Auditor as well as fees payable to BDO for non-audit services.
We meet with the Auditor before the interim and annual results
are prepared, to plan and discuss the scope of the audit or review
as appropriate, to ensure its rigour. We then meet with the Auditor
to discuss the details of the external audit or review and consider
and evaluate any findings in depth.
In assessing the performance of the Auditor we consider both
the qualifications and expertise of the team proposed by BDO
as well as the quality of the work produced and whether it was
carried out on time and in accordance with the agreed audit
plan. We consider that the Audit team assigned to the Company
by BDO has a good understanding of the Company’s business
which enables it to produce a detailed, high quality in depth
audit and permits the team to scrutinise and challenge the
Company’s financial procedures and significant judgements.
We continue to believe that, in some circumstances, the
external Auditor’s understanding of the Company’s business
can be beneficial in improving the efficiency and effectiveness
of advisory work. For this reason we continue to engage BDO
for the provision of non-audit services, such as routine tax
compliance, financial due diligence and reporting accountants
services in relation to asset acquisitions and equity raises in the
normal course of the Company’s business.
We initiated a review of the Company’s policy in respect of
the engagement of the Auditor for the provision of non-audit
services in light of recent changes to legislation made by the EU
and the guidance issued by the FRC in respect of the same.
We were satisfied that the Auditor should continue to provide
these services for financial year ended 2016. The Auditor
prepared a matrix at the request of the Audit Committee
to allow us to assess the split between audit and non-audit
services, as provided by BDO over the past three years. We used
this to review the procurement of non-audit services regularly
http://tritaxbigbox.co.uk/about/#corporate-governance
The Board of Directors p70-71
Group Statement of Financial Position p105
For further information on Langham Hall UK Depositary LLP,
see Depositary Statement p79
Note 15, Notes to the Consolidated Accounts p118
81
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
GOVERNANCE: AUDIT COMMITTEE REPORT
in light of the EU Regulation. In developing this policy, we have
considered the Financial Reporting Council’s Ethical Standard.
We have reviewed the terms under which BDO is able to provide
non-audit services and are satisfied with the measures put in
place by BDO to preserve the Audit team’s independence and
to protect the confidentiality of the Company’s business. Most
notably, tax advice and corporate due diligence are provided
by separate teams within BDO and all documents and other
information relating to the Company is securely stored and
protected. The Board has accepted our proposals relating
to the provision of non-audit services by the Auditor. We are
therefore satisfied that the Audit is independent, objective
and effective.
Since the year end, the Auditor has written to the Company
confirming that the provision of any tax compliance services by
the Auditor is likely to infringe the EU Directive. The Company
will therefore seek to engage separate service providers for audit
and tax compliance work in respect of the year commencing
1 January 2017. However the Audit Committee has recommended
that a resolution to appoint BDO is proposed to Shareholders at
the next AGM.
financial reports, which include the latest management
accounts, a review and report on the Company’s financial model,
substantiation of any dividend payments and a general update
on the financial health of the Company.
A review of the principal business risks of the Company is
typically performed bi-annually. A full review of the Company’s
principal business risks was performed on 30 June 2016 and
6 November 2016. The Company’s principal risks can be found
on pages 54-59
of the Annual Report.
As the Company’s AIFM, the Manager is subject to reporting and
ongoing compliance under the AIFMD. As part of this regulatory
process, Langham Hall UK Depositary LLP has been retained
by the Company and is responsible for cash monitoring, asset
verification and oversight of the Company and the Manager.
Langham Hall UK Depositary LLP report quarterly to the Board
and the Manager. The Manager has, during 2016, appointed a
new compliance officer to assist the existing regulatory team
with the discharge of the Manager’s obligations in accordance
with the AIFMD. Please refer to page 79
for a description of
Langham Hall UK Depository LLPs role.
Of the £424,000 non-audit fees paid to BDO, the expenditure
that was authorised in the year is outlined in the table below.
Risk management and internal controls
As part of each Board meeting and each Audit Committee
meeting, the Directors review the financial position of the
Company and assess any risks in relation to the Company’s
business model and the Group’s future performance, liquidity
and solvency. To facilitate this process the Manager produces
The Board considered carefully whether the Company should
employ an internal audit function during 2016 and concluded
that due to the Company’s structure, the nature of its activities
and taking into account the controls already in place and,
more particularly, the external service already provided by
Langham Hall UK Depositary LLP, an internal audit function is
not necessary. As part of the internal risk review we identified
that whilst the Administrator has its own internal audit
performed on an annual basis, from which the Company
WORK UNDERTAKEN
RATIONALE FOR USING THE EXTERNAL AUDITOR
Reporting accountant on the Company’s
secondary offerings
Financial and tax due diligence on corporate
acquisitions
Tax advisory and compliance
Detailed knowledge and understanding of the business and the
requirements of the exercise, having acted as reporting accountant
on previous equity fundraisings for the Company. Low risk of self-
interest and self-review threat, as the work is not used in the audit
of the financial statements.
Detailed knowledge and understanding of the business and the
requirements of the exercises. The work was performed by a team
independent of the audit team. The audit team places no reliance on
these procedures.
Detailed knowledge and understanding of the business and the
requirements of the exercises. The work was performed by a team
independent of the audit team. The audit team places no reliance on
these procedures.
FEE (£)
£140,000
£86,000
£198,000
82
Our Principal Risks and Uncertainties p54-59
Depositary Statement p79
Tritax Big Box REIT plc Annual Report 2016 reviews any findings and takes particular comfort, the
Company should also independently assess whether these
controls are sufficient and if they operate effectively. To this
end, we have recommended to the Board that an independent
internal audit is performed to review the processes and
procedures in place at the Administrator and this will be
undertaken during 2017.
Financial reporting and significant judgements
We monitor the integrity of the financial information published
in the interim and annual financial statements and consider
whether the Manager has made suitable and appropriate
estimates and judgements in respect of areas which could
have a material impact on the financial statements. We seek
support from the external Auditor to assess these significant
judgements. We also consider the processes undertaken by
the Manager to ensure that the financial statements are fair,
balanced and understandable.
A variety of financial information and reports were prepared
by the Manager and provided to the Board and to the Audit
Committee, over the course of the year. These included,
budgets, periodic re-forecasting and specific papers on the
change in dividend policy from bi-annual to quarterly; a review
as to the Company’s ability to continue to pay a progressive
dividend and a review of the Company’s debt arrangements.
This financial information was fully reviewed and debated both
at Committee and Board level.
The Manager and the Auditor update us on changes to
accounting policies, legislation and best practice and areas
of significant judgement by the Manager. They pay particular
attention to transactions which they deem important due to size
or complexity. The main areas where a significant judgement is
required include the assessment over fair values of investment
property and interest rate derivatives, business combinations,
and operating lease contracts.
Business combinations
At the time of acquiring a subsidiary that owns investment
properties, the Group considers whether each acquisition
represents the acquisition of a business or the acquisition of an
asset. Where the acquisitions are not judged to be the acquisition
of a business, they are not treated as business combinations.
Operating lease contracts
The Group has determined, based on an evaluation of the terms
and conditions of the arrangements, that it retains all significant
risks and rewards of ownership of its properties and so accounts
for the leases as operating leases.
Valuation of property portfolio
Following production of the draft valuation by CBRE, the Manager
meets with CBRE to discuss and challenge various elements of
the property valuation. The Auditor, in fulfilling its function as
independent auditor to the Company, also meets with CBRE to
discuss and where necessary challenge the property valuations.
The Board receives a copy of the valuation once it has been tested
by the Manager and after the Auditor has met with the Valuer.
The Board also met with the Valuer in January 2017 to discuss
and challenge the valuation and to ensure it was conducted
properly and could be fully supported. The property portfolio is
valued by CBRE bi-annually. The performance of CBRE is assessed
on an annual basis by the Management Engagement Committee
in their report on page 85
.
. As explained in note 15 to the financial
The Group had property assets of £1.80 billion at
31 December 2016, as detailed on the Group Statement of
Financial Position
statements, CBRE independently valued the properties in
accordance with IAS 40: Investment Property. The total portfolio
valuation including forward funded commitments at the year
end was £1.89 billion. We have reviewed the assumptions
underlying the property valuations and discussed these with the
Manager, and have concluded that the valuation is appropriate.
Management Engagement Committee Report p85-87
Group Statement of Financial Position p105
83
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: AUDIT COMMITTEE REPORT
Valuation of interest rate derivatives
The Group mitigates its exposure to interest rate risk by
entering into interest rate hedging arrangements. The Group
accounts for these instruments in accordance with IAS 39 and
makes additional required disclosures under IFRS 7 Financial
Instruments Disclosures and IFRS 13 Fair Value Measurement.
The valuations are provided by the relevant institutions to which
the loans are hedged. The Board has reviewed and approved
these valuations.
Financial Reporting Council letter of 1 July 2016
I received a letter from the FRC on 1 July 2016 raising enquiries
into the way in which the Company reported certain financial
information in its Annual Report and Accounts for the year
ended 31 December 2015. We answered these queries in a
letter on 27 July 2016 to the satisfaction of the FRC and all
enquiries into the Company’s Annual Report and Accounts for
the year ended 31 December 2015 are closed although we have
subsequently improved certain disclosures.
Scope and limitations of the FRC review
The FRC’s review was based upon the 2015 Annual Report and
Accounts and does not benefit from a detailed knowledge of
our business or understanding of the underlying transactions
entered into. The correspondence does not indicate that the
Annual Report and Accounts are correct in all material respects.
Annual Report fulfils these requirements. In outlining our advice,
we have considered the following:
• the comprehensive documentation that outlines the controls
in place for the production of the Annual Report, including the
verification processes to confirm the factual content;
• the detailed reviews undertaken at various stages of the
production process by the Manager, Administrator, Joint
Financial Advisers, Auditor and the Audit Committee, which
are intended to ensure consistency and overall balance;
• controls enforced by the Manager, Administrator and other
third-party service providers, to ensure complete and accurate
financial records and security of the Company’s assets;
• the satisfactory ISAE 3402 control report produced by the
Administrator for the year ended 31 December 2016, which
has been reviewed and reported upon by the Administrator’s
external auditor, to verify the effectiveness of the
Administrator’s internal controls; and
• a letter provided by the Administrator that there have been no
changes to its control environment since 31 December 2016
and that all internal controls in place a at the time of the last
review remain active.
Fair, balanced and understandable financial statements
The production and audit of the Company’s Annual Report is
a comprehensive process, requiring input from a number of
contributors. To reach a conclusion on whether the Company’s
financial statements are fair, balanced and understandable, as
required under the AIC Code, the Board has requested that the
Audit Committee advise on whether we consider that the
As a result of the work performed, we have concluded and
reported to the Board that the Annual Report for the year
ended 31 December 2016, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
Shareholders to assess the Company’s performance, business
model and strategy. The Board’s conclusions in this respect are
set out in the Directors’ Responsibilities Statement.
Jim Prower Chairman of the Audit Committee
7 March 2017
84
Tritax Big Box REIT plc Annual Report 2016 GOVERNANCE
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
The Management Engagement Committee’s role
is to review the performance of the Manager and the
Company’s other main service providers over the
year and to recommend to the Board a schedule of
re-tender for each appointment. The Committee is
also responsible for overseeing any amendments to
the Investment Management Agreement.
We met twice in the year to 31 December 2016, to review the
Company’s relationships with its main service providers, their
performance and the terms of their appointment, and to review
the Company’s relationship with the Manager, the Manager’s
performance and the terms of the Manager’s appointment.
We conducted a comprehensive review of the performance
of the Manager and, together with the Manager, all of the
Company’s corporate advisers and principal service providers.
This included an assessment of the ongoing requirement for the
provision of such services, the fees paid to and the performance
of such advisers and service providers and additional added
value given by the Manager and the Company’s service
providers and advisers, and whether additional services were
required. The review was for the period ending 30 June 2016
thereby allowing the Committee to refer to figures reviewed by
the Auditor in its assessment of performance.
Under the terms of the Investment Management Agreement,
the Board has delegated day-to-day responsibility for running
the Company to the Manager, including sourcing of investment
opportunities in line with the Company’s Investment Policy,
asset management of the existing portfolio, negotiation of
debt facilities within the parameters of the Company’s policy
on gearing and liaising with the Company’s advisers on
equity fundraisings. As all of the Company’s subsidiaries and
therefore all of its assets are wholly owned and controlled by
the Company, the Board exercises direct control in respect of
the Group’s holdings and the Manager is not required to vote on
behalf of the Company.
To ensure open and regular communication between the
Manager and the Board, the Manager is invited to attend
all Board meetings to update the Board on the Company’s
investments and to discuss the market generally and the
financial performance and strategy of the Company. Details
of the Company’s performance in 2016 have been set out in
the Strategic Report
. The Manager has adopted a focused
approach to investing, acquiring 10 Big Boxes during the year,
which offer opportunities for capital appreciation through
“Dear Shareholders,
The Committee’s main focus this year has been the
review of the Investment Management Agreement
and the subsequent changes which were approved
at the general meeting on 20 December 2016. As
part of this process, we entered into a Service Level
Agreement with the Manager to formalise the Board
reporting provided by the Manager in light of the
Company’s established position in the FTSE 250
and its substantial growth since IPO. The enhanced
Board reporting procedures are designed to
maintain the quality and frequency of Board reports
throughout the year thereby ensuring that the Board
is kept well informed. We have also considered the
service provided to the Company by each principal
service provider and, as the Company has now
celebrated its third anniversary, we have established
a re-tender schedule in line with best practice.”
Membership
Stephen Smith (Chairman)
Richard Jewson, Jim Prower, Mark Shaw*
Priorities for 2016
• Establish a schedule for re-tender of each principal
service provider to the Company.
• Full review of the Investment Management Agreement
and the Implementation of the Service Level Agreement
to reflect the Company’s considerable growth since IPO
in December 2013.
• Consider whether every service provider is performing well for
the Company and whether the Company receives best value.
Meeting attendance register
PERSON
Stephen Smith
Richard Jewson
Jim Prower
Mark Shaw1
MEETINGS
ELIGIBLE TO
ATTENDED
MEETINGS
ATTENDED
2
2
2
0
2
2
2
0
* Until 11 May 2016
1 Resigned on 11 May 2016, in accordance with AIC Code provisions 15.
No meetings were held during 2016 whilst Mark Shaw was still a
member of this Committee.
See Strategic Report p10-60
85
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: MANAGEMENT ENGAGEMENT COMMITTEE REPORT
income growth and asset management initiatives. As a result
of acquisitions sourced and executed by the Manager, the
Company has diversified its portfolio by tenant and geography
whilst providing a high level of income security. 48% of our rent
roll is underpinned by leases of more than 15 years unexpired
term.
The Manager increased the number of people it employs
to ensure that the Company is well serviced and in 2016 it
expanded the asset management team and the compliance
team. A new property researcher will join the market research
team in May 2017. The Company also agreed a new Service
Level Agreement with the Manager to formalise and streamline
the procedures which were already in place and to ensure that
the service levels provided by the Manager remain at the highest
level in response to the Company’s continued and significant
growth since IPO.
In addition, following an extensive review and full analysis, we
agreed with the Manager that the performance of all of the
Company’s current service providers for the past year continued
to be satisfactory, and in several cases exceptional, and, with
the Manager’s recommendation, that each be retained until the
next review. We were also pleased to note that improvements
identified as needing to be made were carried out over the course
of 2016. The Committee also determined to include the review
of the non-audit services and the implementation of the Service
Level Agreement within its remit in 2017. We did not suggest any
material changes to the engagement terms of any
of the advisers or service providers. Our review did not reveal any
material weaknesses in the advice and support provided to the
Group and we are satisfied that the Company is benefiting from
added value in respect of the services it procures.
However, in order to ensure that the Company continues
to receive the very best service and value from its service
providers, the Management Engagement Committee has
recommended a schedule of re-tendering to the Board which
sets out a timetable for each professional appointment to be
re-tendered. The re-tendering programme will start next year.
The re-tender process will then continue on a three year rolling
basis thereafter such that the Company is regularly reviewing its
long-term contractual arrangements with its service providers
to ensure it continues to receive high quality service at an
affordable and competitive price.
The Investment Management Agreement was reviewed by the
Manager and the Board and the proposed amendments were
passed at a general meeting of the Shareholders held on
20 December 2016. The main amendments are:
• the introduction of two new upper-tier fee bands will result in
lower investment management fees being charged on NAV
above £1.25 billion (details overleaf). This recognises the
significant growth of the Company and the increasing value of
the portfolio. The adjustments to the fee bands above the NAV
threshold should have a beneficial effect on the total expense
ratio of the Company and an improvement in the dividend
cover level;
• an extension to the term which will provide additional
security not only to the Manger and its employees but also
to the Company and its Shareholders and stakeholders. The
extension will also allow the Manager to continue to build long-
term relationships with occupiers, developers and financing
partners, thereby improving transaction opportunities for the
Company and further aligning the interests of the Manager
with the Company;
• changes to the conflict management undertakings requiring
even greater focus from the Manager which should provide
additional benefits to both company and investors.
A copy of the Circular detailing these amendments is available
on the Company’s website
.
Management fee
Under the Investment Management Agreement, as amended
on 20 December 2016, the Manager is entitled to a management
fee in consideration for its services. This is payable in cash by
the Company each quarter and is calculated as a percentage
of the Company’s Net Asset Value (“NAV”), disregarding cash
or cash equivalents, announced before the end of the relevant
quarter. 25% (net of associated costs) of the management fee
is reinvested in shares of the Company within 60 days following
the release of the Company’s financial results to the market. If
the Group buys or sells any assets after the date at which the
relevant NAV is calculated, the NAV is adjusted pro rata for the net
purchase or sale price, less any third-party debt drawn or repaid.
86
http://.tritaxbigbox.co.uk/investors/#company-documents
Tritax Big Box REIT plc Annual Report 2016 The management fee as a percentage of NAV is as set
out below:
TRITAX PARTNER OR
PERSON CLOSELY
ASSOCIATED
NUMBER OF
MANAGEMENT
SHARES HELD
PERCENTAGE OF ISSUED
SHARE CAPITAL AS AT
31 DECEMBER 2016
NAV
RELEVANT PERCENTAGE
Mark Shaw
Up to and including £500 million
Above £500 million and up to and
including £750 million
Above £750 million and up to and
including £1 billion
Above £1 billion up to and including
£1.25 billion
Above £1.25 billion up to and including
£1.5 billion
Above £1.5 billion
1.0%
0.9%
0.8%
0.7%
0.6%
0.5%
During specified periods after publication of the Company’s
annual or half year results the members of the Manager and
relevant employees (and/or their connected parties) will use
25% of the management fee (net of any VAT, personal taxation
liabilities and dealing costs, including stamp duty or stamp duty
reserve tax) (the “net cash amount”), to subscribe for Ordinary
Shares in the Company. The price will be equivalent to the
prevailing NAV per share, adjusted for any dividend declared
after the NAV per share is announced. Where this would result in
Ordinary Shares to be issued at a price below the NAV per share,
the Company’s Broker will be instructed to acquire Ordinary
Shares in the market for those persons, to the value as near a
possible equal to the net cash amount. The Ordinary Shares may
be issued to any members of the Manager or, at the discretion of
the Manager, to any employee of the Manager.
On 27 May 2016, the Company issued 410,729 Ordinary Shares
in respect of the net cash amount, relating to the six months
to 31 December 2015. The issue price was 121.09 pence per
Ordinary Share, equivalent to the prevailing NAV of 124.09 pence
per Ordinary Share less the interim dividend of 3.0 pence per
Ordinary Share, for which the shares did not qualify, paid to
Shareholders on or around 9 March 2016. On 26 September 2016,
the Company issued 466,874 Ordinary Shares in respect of the
net cash amount, relating to the six months to 30 June 2016. The
issue price was 124.48 pence per Ordinary Share, equivalent
to the prevailing unaudited NAV of 127.58 pence per Ordinary
Share less the interim dividend of 3.10 pence per Ordinary Share,
paid to Shareholders on or around 25 August 2016 in respect of
the period from 1 January 2016 to 30 June 2016. Following these
issues of Ordinary Shares, the Manager as at the year end had
the following beneficial interests:
Colin Godfrey
James Dunlop
Henry Franklin
523,924
431,862
431,862
333,572
Tritax Management LLP
83,161
Staff of Tritax
Management LLP*
86,822
0.05%
0.04%
0.04%
0.03%
0.007%
0.007%
* This figure comprises Ordinary Shares issued to staff and Partners at Tritax
Management LLP under the terms of the Investment Management Agreement and
at IPO, and does not include other shares that may have otherwise been acquired by
such staff members.
Extension to term
The term of the Investment Management Agreement (“IMA”)
was extended on 20 December 2016 so that the earliest
termination date of the IMA is 31 December 2021. In order
to terminate on that date, 24 months’ notice of termination
would need to be given by either party by 31 December 2019.
Thereafter either party can terminate the IMA by giving at
least 24 months’ notice. The provisions allowing the parties to
terminate without notice in certain circumstances, including
material breach and/or loss of key personnel, remain in place.
Conflict management
The restrictive conflict provisions contained in the IMA were
tightened on 20 December 2016 so that the Manager is not
permitted in any circumstance to manage another fund with
an exclusive investment strategy focusing on distribution or
logistics assets in excess of 300,000 sq ft located within the UK.
The Manager is permitted to acquire and manage distribution
of logistics assets which provide less than 300,000 sq ft of
accommodation on behalf of other funds subject to certain
caveats designed to ensure that any assets which may be of
interest to the Company are offered to the Company in priority
to other funds managed by the Manager.
We will review the continuing appointment of all of the
Company’s principal service providers and the performance of
the Manager on an annual basis and ensure they are in the best
interests of Shareholders as a whole.
Stephen Smith Chairman of the Management
Engagement Committee
7 March 2017
http://tritaxbigbox.co.uk/investors/#company-documents
87
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE
RELATIONS WITH SHAREHOLDERS AND STAKEHOLDERS
The Board is committed to fostering and
maintaining strong relationships with the
Company’s Shareholders and stakeholders
and recognises the importance of good
communications. In 2016 the Board has
continued to expand the Company’s
communications policy with current and
future Shareholders.
The Chairman and the Senior Independent Director, alongside
Colin Godfrey from the Manager, are the Company’s principal
spokesmen who speak with the Company’s Shareholders,
the press, analysts, investors, debt finance providers and
other stakeholders regularly. The Chairman and the Senior
Independent Director are available to speak to any Shareholders
to discuss any matters relating to the Company whether
they concern the Company’s corporate governance or the
Company’s strategy or anything else of concern.
Investor relations
During the year, the Manager devoted time to meeting with
existing Shareholders and prospective new Investors in the
UK, the US, Canada and certain Nordic countries. In 2016, the
Company’s broker, Jefferies International Limited (“Jefferies”),
together with Colin Godfrey, undertook a specific programme of
consultation with some of the Company’s largest Shareholders,
in order to gauge their views on the Company’s performance
to date and ascertain what, if any, concerns they had in relation
to the Company’s future. Formal reports were prepared and
delivered to the Board on the feedback received from these
Shareholders. The feedback, which was very supportive overall,
has been taken into account by the Board in determining the
Company’s strategy. The Broker has held frequent ad hoc
meetings with investors over the course of the year on behalf of
the Company and reported the same to the Board.
The Manager also has a dedicated Investor Relations team and
provides regular Investor Relations reports to the Board, which
includes major press coverage, analyst reports and Shareholder
feedback. The Company’s Broker has also started to provide
a bespoke quarterly report, which has a section dedicated to
investor relations.
The Chairman and Colin Godfrey, together with Stephen
Smith and Jim Prower, held a series of lunches in October and
November 2016 with several Shareholders to discuss informally
the Company and its business strategy in the present economic
climate. The lunches proved informative for the Board and the
Manager and were well received by those Shareholders who
were able to attend. The feedback received was again generally
highly supportive of the Company and has been presented to
the Board. Following the success of these informal lunches,
the Board has resolved to schedule similar lunches with
Shareholders in 2017.
As well as the Chairman’s lunches, the Company hosted a
private event for major investors during the summer. As well as
the Board, representatives from the Manager and the Company
Secretarial team, the Company’s Joint Financial Advisers and
the Company’s Lawyers were also present. This full attendance
of the Board and its advisers enabled the investors to gain an
understanding as to the people who work with the Company
on a day-to-day basis as well as being able to discuss different
points of view on the Company’s strategy in an open and
informal manner. This event was well received by investors who
found the relaxed environment to be conducive to full and open
discussions with a range of people who were knowledgeable
about the Company.
Site visits
The Manager has undertaken several “Big Box” site visits for
existing Shareholders and prospective investors during the
year. We will continue the initiative in 2017 as we believe that
88
Tritax Big Box REIT plc Annual Report 2016 it provides Shareholders and other stakeholders with a better
insight into the nature of the assets we invest in.
AGM
Shareholders are encouraged to attend and vote at the
Company’s general meetings so they can discuss governance
and strategy with the Board and the Manager. This enables the
Board to better understand Shareholders’ views. The full Board
usually attends the Annual General Meeting and the Directors
make themselves available to answer Shareholder questions at
all the general meetings of the Company. The Chairman makes
himself available, as necessary, outside of these meetings to
speak to Shareholders. The Senior Independent Director is
also available for Shareholders to contact if other channels
of communication with the Company are not available or are
inappropriate. Members of the Board also regularly attend the
bi-annual financial results presentations to analysts.
The Chairman and the Senior Independent Director can be
contacted by emailing the Company Secretary, on
cosec@tritaxbigbox.co.uk, who will pass the communication
directly to the relevant person, or by post.
Public communications
The Company ensures that any price sensitive information is
released to all Shareholders at the same time and in accordance
with regulatory requirements. All Company announcements
which are released through the London Stock Exchange are also
made available on the Company’s website
holds the quarterly fact sheets, share price information, investor
presentations and the Annual and Interim Reports which are
available for download. The Company’s Annual Report and
Interim Report are also dispatched to Shareholders by mail.
. The website also
http://tritaxbigbox.co.uk/investors/#regulatory-news
89
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Annual statement
As the Board has no executive directors, it does not consider
it necessary to establish a separate remuneration committee.
The Nomination Committee considered the pay awards for
the Directors. Jim Prower, the Senior Independent Director,
led this process (see the Nomination Committee Report
). The Directors’ remuneration is disclosed later in this
Remuneration Report
the Remuneration Policy) will be presented at the AGM for
Shareholder consideration for approval.
. The Remuneration Report (excluding
Jim Prower Senior Independent Director
7 March 2017
Directors’ Remuneration Policy
The Company’s policy is to determine the level of Directors’
fees with regard to those payable to Non-Executive Directors
of comparable REITs generally and the time each Director
dedicates to the Company’s affairs.
The Directors are entitled only to their annual fee and
their reasonable expenses. No element of the Directors’
remuneration is performance related, nor does any Director
have any entitlement to pensions, share options or any long-
term incentive plans from the Company.
Under the Company’s Articles of Association, all Directors are
entitled to the remuneration determined from time to time by
the Board.
The Nomination Committee obtained two quotes from
independent remuneration consultants to undertake the review
of the Non-Executive Director remuneration and decided to
appoint Deloitte LLP (“Deloitte”). The Nomination Committee
appointed Deloitte to provide a report on Non-Executive Director
remuneration during 2016. Deloitte is a founding member of
the Remuneration Consultants Group and adheres to its code
of conduct in its dealings with the Company. The Company
is satisfied that advice provided by Deloitte is objective and
independent and does not create any conflicts of interest. The
Company is also satisfied that the Deloitte team who provided the
report do not have connections with the Group that may impair
Deloitte’s independence. Total fees paid to Deloitte in relation to
the report amounted to £4,000 plus VAT.
Deloitte’s report compared the remuneration of the Directors
with two comparator groups, the first being the FTSE All-Share
peer group with companies of a similar market capitalisation
to the Company and the second being a peer group of FTSE
All-Share REITs of broadly similar size and in the same sector as
the Company. Deloitte’s report showed that the remuneration
received by the Non-Executive Directors in the two comparator
groups was higher than that of the Company. Deloitte suggested
an increase in the Chairman’s fee and an increase in the Directors’
fees together with supplementary fees for chairing committees.
The Nomination Committee considered Deloitte’s advice and,
taking into account the governance structure of the Company,
determined that the Directors’ fees should be increased to
£50,000 pa for each Director including new Directors and
to £100,000 pa for the Chairman (irrespective of any other
Board Committee chairmanships or roles). This proposal was
then presented to the Board who resolved to adopt it. The
remuneration increases bring the Directors’ fees in line with its
peers and will be presented at the AGM for the Shareholders’
consideration and approval.
External advisers
The Board and its Committees have access to sufficient
resources to discharge its duties, which include access to
independent remuneration experts, the Company Secretarial
team and the Manager and other advisers as required.
Deloitte have not been appointed as remuneration advisers to
the Company as it does not have any employees.
Annual report on remuneration
Richard Jewson and Stephen Smith were appointed to the
Board by a letter of appointment dated 18 November 2013 which
was updated and re-issued on 13 September 2016. Jim Prower
was appointed by a letter of appointment dated 18 November
2013; an updated letter of appointment has been issued to
him and is yet to be signed. Mark Shaw was appointed by a
letter of appointment dated 8 November 2013. A new letter of
appointment has been issued to him and is yet to be signed.
Susanne Given was appointed by a letter dated 13 September
2016. No Director has a service contract with the Company, nor
are any such contracts proposed. The Directors’ appointments
can be terminated in accordance with the Articles and without
compensation.
Each Director, other than Mark Shaw, is entitled to receive
a fee from the Company at a rate determined in accordance
with the Articles. The Directors are each paid an annual fee of
£50,000 pa, other than the Chairman (Richard Jewson) who is
paid a fee of £100,000 pa.
90
Nomination Committee Report p75-76
Directors’ Remuneration Report p90-91
Tritax Big Box REIT plc Annual Report 2016 The fees paid to the current Directors in the year to
31 December 2016, which have been audited, are set out in
the table below.
In addition, each Director is entitled to recover all reasonable
expenses properly incurred in connection with performing his
or her duties as a Director. Directors’ expenses for the year
to 31 December 2016 totalled £2,725 (2015: £1,877). No other
remuneration was paid or payable during the year to any
Director.
DIRECTOR*
ANNUAL FEE
£
TOTAL TO
2016
£
2015
TOTAL
£
Richard Jewson Chairman
£100,000
£79,000
£70,000
Jim Prower
Stephen Smith
Susanne Given
Total
£50,000
£46,500
£45,000
£50,000
£43,000
£40,000
£50,000
£15,000
N/A
Total Shareholder return
The graph below shows the total Shareholder return (as required
by company law) of the Company’s Ordinary Shares relative to
a return on a hypothetical holding over the same period in the
FTSE All-Share Index and the FTSE All-Share REIT Index.
Total Shareholder return is the measure of returns provided by
a Company to Shareholders reflecting share price movements
and assuming reinvestment of dividends.
Total Shareholder Return (p)
150
140
130
120
110
100
90
PRICE
CHANGE
TOTAL
RETURN
46.1%
67.6%
23.3%
32.5%
19.7%
34.0%
* As Chairman of the Company’s Manager, Mark Shaw is not entitled to receive a fee
■ Tritax Big Box ■ FTSE 250 ■ FTSE All-Share REIT Index
Source: Bloomberg
£183,500 £155,000
3
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Statement of voting at general meeting
The Company is committed to ongoing Shareholder dialogue
and takes an active interest in voting outcomes. Where there
are substantial votes against resolutions in relation to Directors’
remuneration, the Company will seek the reasons for any
such vote and will detail any resulting actions in the Directors’
Remuneration Report. The Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy) was approved
by Shareholders at the Company’s AGM held on 11 May 2016.
The Directors’ Remuneration Policy (as set out in the financial
statements of the Company for the financial year ended
31 December 2014) was approved at the Company’s AGM on
15 April 2015. The next time that the Shareholders will be asked
to approve the Directors’ Remuneration Policy will be at the
Company’s AGM in 2018. The voting on the respective resolutions
was as follows:
RESOLUTION
VOTES CAST
FOR
%
AGAINST
%
VOTES
WITHHELD
337,092,585
100
0
2,260,800
Directors’ shareholdings (audited)
There is no requirement for the Directors of the Company to
own shares in the Company. As at the year end, the Directors
and their persons closely associated had the shareholdings
listed below. Mark Shaw’s shareholding is listed on page 87:
DIRECTOR*
Richard Jewson Chairman
Jim Prower
Stephen Smith
Susanne Given
NUMBER
OF SHARES
HELD
PERCENTAGE OF ISSUED
SHARE CAPITAL AS AT
31 DECEMBER 2016
70,752
23,760
7,000
0
0.006%
0.002%
0.0006%
0
* Includes Directors and persons closely associated (as defined by the EU Market
Abuse Regulation) Shareholdings.
The shareholdings of these Directors are not significant and, therefore, do not
compromise their independence.
Other items
The Company maintains Directors’ and Officers’ liability
insurance cover, at its expense, on the Directors’ behalf.
Directors’
Remuneration Policy
Directors’
Remuneration Report
446,233,464 98.79
1.21 33,864,917
Richard Jewson Chairman
7 March 2017
91
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
GOVERNANCE
DIRECTORS’ REPORT
Introduction
The Directors are pleased to present the Annual Report,
including the Company’s audited financial statements as at,
and for the year ended, 31 December 2016.
An additional interim dividend in respect of the three months
ended 31 December 2016 of 1.55 pence per share was declared
on 7 March 2017. This takes the total dividend in respect of the
2016 financial year to 6.20 pence.
The Directors’ Report, together with the Strategic Report
comprise the “Management Report”, for the purposes of
Disclosure and Transparency Rule 4.1.5R.
Statutory information contained elsewhere in the
Annual Report
Information required to be part of this Directors’ Report can be
found elsewhere in the Annual Report and is incorporated into
this report by reference, as indicated in the relevant section.
Incorporation by reference
The Governance section (pages 61-95 of this Annual Report
and Accounts for the year ended 31 December 2016) excluding
the Directors’ Remuneration Report (pages 90-91) which is
incorporated by reference into this Directors’ Report.
Directors
The names of the Directors who served during the year are set
out in Board of Directors
details.
, together with their biographical
The Company maintains Directors’ and Officers’ liability
insurance cover, at its expense, on the Directors’ behalf.
Directors’ interests in shares
The Directors’ interests in the Company’s shares are disclosed in
the Directors’ Remuneration Report.
Future developments
An indication of the likely future developments of the Company’s
business is set out in the Strategic Report.
Financial results and dividends
The financial results for the year can be found in the Group
Statement of Comprehensive Income.
Political donations
No political donations were made during the year.
During the year, the following interim dividends amounting to,
in aggregate, 4.65 pence per share were declared:
Employees
The Group has no employees and therefore no employee share
scheme.
• on 11 August 2016 an interim dividend was declared in
respect of the period from 1 January 2016 to 30 June 2016
of 3.10 pence per Ordinary Share and paid on or around
25 August 2016 to Shareholders on the register on 19 August
2016;
• on 28 September 2016 an interim dividend was declared in
respect of the period from 1 July 2016 to 30 September 2016
of 1.55 pence per Ordinary Share and paid on or around
27 October 2016 to Shareholders on the register on
14 October 2016.
Financial instruments
Details of the Group’s financial risk management objectives and
policies, together with its exposure to material financial risks,
are set out in note 22 to the consolidated financial statements.
Share capital
In February 2016, the Company issued 161,290,323 Ordinary
Shares pursuant to a Placing, Open Offer and Offer for
Subscription and further Tap issue. In May and September 2016
the Company issued 410,729 Ordinary Shares and 466,874
Ordinary Shares respectively pursuant to the Investment
Management Agreement. In October 2016 the Company issued
265,151,515 Ordinary Shares pursuant to a Placing, Open Offer
and Offer for Subscription and Tap issue.
92
Board of Directors p70-71
Tritax Big Box REIT plc Annual Report 2016 As at 31 December 2016, there were 1,105,159,529 Ordinary
Shares in issue.
ORDINARY SHARES
NUMBER
GROSS
PROCEEDS (£)
Balance at start of the year
677,840,088
N/A
Shares issued in February 2016
161,290,323 £200,000,000
Greenhouse gas emissions reporting
The Board has considered the requirement to disclose the
Company’s measured carbon emissions sources under the
Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013.
During the year ended 31 December 2016:
Shares issued in May 2016
Shares issued in September 2016
410,729
466,874
N/A
N/A
• any emissions from the Group’s properties have been the
tenants’ responsibility rather than the Group’s, so the principle
of operational control has been applied;
Shares issued in October 2016
265,151,515 £350,000,000
Balance at end of the year
1,105,159,529 £550,000,000
Restrictions on transfer of securities in the Company
There are no restrictions on the transfer of securities in the
Company, except as a result of:
• the FCA’s Listing Rules, which require certain individuals to
have approval to deal in the Company’s shares; and
• the Company’s Articles of Association, which allow the
Board to decline to register a transfer of shares or otherwise
impose a restriction on shares, to prevent the Company or the
Manager breaching any law or regulation.
The Company is not aware of any agreements between holders
of securities that may result in restrictions on transferring
securities in the Company.
Securities carrying special rights
No person holds securities in the Company carrying special
rights with regard to control of the Company.
Going concern
The Directors believe that the Company is well placed to
manage its financing and other business risks. The Board is,
therefore, of the opinion that the going concern basis adopted
in the preparation of the Annual Report is appropriate.
Please refer to the Accountability
Governance
for greater detail.
section as covered within
• any emissions that are either produced from the Company’s
registered office or from offices used to provide administrative
support are deemed to fall under the Manager’s responsibility;
and
• the Group has not leased or owned any vehicles which fall
under the requirements of Mandatory Emissions Reporting.
As such, the Board believes that the Company has no reportable
emissions for the year ended 31 December 2016. The Board
considered that it had no reportable emissions for the year
ended 31 December 2015.
Substantial shareholdings
As at 28 February 2017, the Company is aware of the following
substantial shareholdings, which were directly or indirectly
interested in 3% or more of the total voting rights in the
Company’s issued share capital:
INVESTOR
Aviva plc
BlackRock, Inc
NUMBER OF
ORDINARY
SHARES
PERCENTAGE HOLDING
OF ISSUED SHARE
CAPITAL
87,646,540
74,001,852
7.93%
6.70%
3.88%
Quilter Cheviot Limited
42,851,816
Amendment of Articles of Association
The Articles may be amended by a special resolution of the
Company’s Shareholders.
Accountability p77-79
93
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: DIRECTORS’ REPORT
Powers of the Directors
The Board will manage the Company’s business and may
exercise all the Company’s powers, subject to the Articles, the
Companies Act and any directions given by the Company by
special resolution.
Manager and service providers
The Manager during the year was Tritax Management LLP.
Details of the Manager and the Investment Management
Agreement are set out in the Management Engagement
Committee Report
.
Powers in relation to the Company issuing its shares
At the Extraordinary General Meeting held on 17 October 2016,
the Directors were granted a renewed general authority to
allot Ordinary Shares in accordance with section 551 of the
Companies Act 2006 up to an aggregate nominal amount of
£6,862,680. Of those Ordinary Shares, the Directors were granted
authority to issue up to an aggregate nominal amount of
£1,029,402 (which is equivalent to 10% of the Company’s issued
share capital as at that date) non pre-emptively and wholly for
cash. These authorities replaced the equivalent authorities
given to the Directors at the Annual General Meeting held on
11 May 2016. These authorities expire at the earlier of the next
AGM on 17 May 2017 or 17 January 2018.
The Company’s administration was delegated to Capita Sinclair
Henderson Limited.
Additional information
In accordance with Listing Rule (LR) 9.8.4C R, the only
disclosure requirement required under LR 9.8.4 R is the
dislcosure of capitalised interest, which is disclosed in note 11,
page 115.
Disclosure of information to the Auditor
The Directors who were members of the Board at the time
of approving the Directors’ Report have confirmed that:
Change of control
Under the Group’s financing facilities, any change of control at
the borrower or immediate parent company level may trigger
a repayment of the outstanding amounts to the lending banks.
In certain facilities, the change of control provisions also include
a change of control at the ultimate parent company level.
• so far as each Director is aware, there is no relevant audit
information of which the Company’s Auditor is not aware; and
• each Director has taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company’s
Auditor is aware of that information.
Appointment and replacement of Directors
Details of the process by which Directors can be appointed or
replaced are included in the Nomination Committee Report
.
Annual General Meeting
The Company’s AGM will be held at the offices of
Taylor Wessing LLP, 5 New Street Square, London, EC4A 3TW
at 10:00 am on 17 May 2017.
Events subsequent to the year end date
For details of events since the year end date, please refer to
note 32
.
This report was approved by the Board on 7 March 2017.
Independent Auditor
BDO LLP has expressed it willingness to continue as Auditor for
the financial year ending 31 December 2017.
Tritax Management LLP Company Secretary
7 March 2017
Company Registration Number: 08215888
94
Nomination Committee Report, Appointment process p75-76
Note 32, Subsequent events p132
Management Engagement Committee Report p85-87
Tritax Big Box REIT plc Annual Report 2016 GOVERNANCE
DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Annual Report
and the Group and parent company financial statements in
accordance with applicable law and regulations.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group
and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Company law requires the Directors to prepare the Group and
Company financial statements for each financial year. The Group
financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) as adopted
by the European Union and the Company financial statements
have been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law, the Directors
must not approve the financial statements unless they are satisfied
they give a true and fair view of the state of affairs of the Group and
Company and of the profit or loss for the Group for that year.
In preparing the financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and
prudent;
• for the Group financial statements, state whether they have
been prepared in accordance with IFRS’s as adopted by the
European Union, subject to any material departures disclosed
and explained in the Group financial statements;
• for the Company financial statements, state whether
they have been prepared in accordance with Financial
Reporting Standard 100 Applications of Financial Reporting
Requirements (“FRS 100”) and Financial Reporting Standard
101 Reduced Disclosure Framework (“FRS 101”), subject
to any material departures disclosed and explained in the
Company financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company and
enable them to ensure that its financial statements comply with
the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
Directors’ Report p92-94
Strategic Report p10-60
Directors’ Remuneration Report p90-91
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors’ Report
, a Strategic
and a Corporate
, a Directors’ Remuneration Report
Report
Governance Statement
regulations. These can be found at the pages detailed in the
footnotes below (or using the embedded link
in the PDF).
that comply with that law and those
Website publication
The Directors are responsible for ensuring the Annual Report,
including the financial statements, is made available on a
website. Financial statements are published on the Company’s
website
in accordance with legislation in the United
Kingdom governing the preparation and dissemination of
financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Directors’ responsibility statement
We confirm that to the best of our knowledge:
• the financial statements have been prepared in accordance
with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union and Article 4 of the
IAS Regulation and, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation as a whole;
• the Strategic Report includes a fair review of the development
and performance of the business and the financial 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; and
• the Annual Report and accounts taken as a whole is fair,
balanced and understandable and provides the information
necessary for Shareholders to assess the Company’s
performance, business model and strategy.
Signed on behalf of the Board by:
Richard Jewson Chairman
7 March 2017
Governance p62-63
http://tritaxbigbox.co.uk/investors/#company-documents
95
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE
INDEPENDENT AUDITOR’S REPORT
to the members of Tritax Big Box REIT plc
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of
the Group’s and the parent company’s affairs as at 31 December
2016 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(IFRS’s) adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Accounting
Standards; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and,
as regards the Group financial statements, Article 4 of the
IAS Regulation.
Overview
Materiality Overall Group materiality is £20 million which
represents 1% of total assets.
Audit scope The whole Group was subject to a full audit.
We have obtained an understanding of the controls
of the Group which assisted us in identifying
and assessing risks of material misstatement
due to fraud or error, as well as assisting us in
determining the most appropriate audit strategy.
, the Directors are responsible for the
Respective responsibilities of Directors and Auditors
As explained more fully in the Statement of Directors’
Responsibilities
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to
audit and express an opinion on the financial statements in
accordance with applicable law and International Standards
on Auditing (UK and Ireland). Those standards require us to
comply with the Financial Reporting Council’s (“FRC’s”) Ethical
Standards for Auditors.
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.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of misstatements
on the audit and in forming our audit opinion. Materiality is assessed
on both quantitative and qualitative grounds. With respect to
disclosure and presentational matters, amounts in excess of the
quantitative thresholds below may not be adjusted if their effect
is not considered to be material on a qualitative basis.
Areas of risk Valuation of the investment property portfolio
and in particular property in the course of
construction (forward funded assets).
Materiality
Performance materiality
Specific materiality
Reporting threshold
£20 million
£15 million
£3.0 million
£0.4 million
What we have audited
We have audited the financial statements of Tritax Big Box REIT
plc (the Company) for the year ended 31 December 2016 which
comprise the Group Statement of Comprehensive Income,
the Group Statement of Financial Position and parent company
Balance Sheet, the Group and parent company Statements of
Changes in Equity, the Group Cash Flow Statement and the
related notes. The financial reporting framework that has been
applied in the preparation of the Group financial statements is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in preparing the
parent company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements.
We determined materiality for the Group financial statements
as a whole to be £20 million (2015: £10 million), which was set
at 1% of Group total assets (2015: 0.8%). This provides a basis
for determining the nature and extent of our risk assessment
procedures, identifying and assessing the risk of material
misstatement and determining the nature and extent of further
audit procedures.
96
Tritax Big Box REIT plc Annual Report 2016
We determined that total assets would be the most appropriate
basis for determining overall materiality as we consider it to be
one of the principal considerations for members of the Company
in assessing the financial performance of the Group.
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement whether caused by fraud or error.
This includes an assessment of:
We determined that for other account balances, classes
of transactions and disclosures not related to investment
properties a misstatement of less than materiality for the
financial statements as a whole could influence the economic
decisions of users. We determined that materiality for these
areas should be £3.0 million (2015: £1.5 million), which was set
at 5.8% (2015: 5.1%) of EPRA adjusted earnings. EPRA adjusted
earnings excludes the impact of the net surplus on revaluation
of investment properties and interest rate derivatives.
Performance materiality
The application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessment, together with our
assessment of the Group’s overall control environment, our
judgement was that overall performance materiality for the
Group should be 75% (2015: 75%) of materiality, namely
£15 million (2015: £7.5 million).
Reporting threshold
An amount below which identified misstatements are considered
as being clearly trivial.
We agreed with the Audit Committee that we would report
to the Committee all individual audit differences in excess of
£400,000 (2015: £100,000) as well as differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in
the light of other relevant qualitative considerations.
An overview of the scope of an audit of the financial
statements
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (ISAs UK & Ireland).
• whether the accounting policies are appropriate to the
Group’s and parent company’s circumstances and have been
consistently applied and adequately disclosed;
• the reasonableness of significant estimates made by the
Directors; and
• the overall presentation in the financial statements.
In addition we read all the financial and non-financial information
in the annual report to identify material inconsistencies with
the audited financial statements and to identify any information
that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge we acquired in the course
of performing our audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Tailoring the scope of our audit and our areas of focus
We designed our audit by determining materiality and assessing
the risks of material misstatements in the financial statements.
In particular we looked at where the Directors make subjective
judgements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud.
The Group operates solely in the United Kingdom and operates
through one segment, investment property. The Group audit
team performed all the work necessary to issue the Group and
parent company audit opinions, including undertaking all of the
audit work on the key risks of material misstatement.
Our assessment of risk of material misstatement and
response to that risk
The table overleaf shows the risks we identified that had the
greatest effect on the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the
engagement team, together with our audit response to the risks.
This is not a complete list of all risks identified by our audit.
97
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: INDEPENDENT AUDITOR’S REPORT
RISK AREA
HOW THE SCOPE OF OUR AUDIT ADDRESSED THE RISK
Valuation of investment property portfolio, including
properties under construction (forwarded funded
assets)
Refer to Audit Committee Report
and judgements
; investment property
, (significant estimates
)
The valuation of investment property requires significant
judgement and estimates by management and the
independent valuer and is therefore considered a
significant risk due to the subjective nature of certain
assumptions inherent in each valuation.
The Group’s investment property portfolio includes:
We obtained an understanding of the approach to the
valuation of both investment properties and properties in
the course of construction.
We met with the Group’s independent valuer, who valued
all of the Group’s investment properties, to understand
the assumptions and methodologies used in valuing these
properties, the market evidence supporting the valuation
assumptions and the valuation movements in the year.
We used our knowledge and experience to evaluate and
challenge the valuation assumptions, methodologies and
the unobservable inputs used.
• Standing investments: these are existing properties
that are currently let. They are valued using the income
capitalisation method.
We agreed the accuracy of the key observable valuation
inputs supplied to and used by the independent valuer and
directors as appropriate.
We assessed the competency, independence and
objectivity of the independent valuer.
For properties under construction we assessed project
costs and progress of development and verified the
forecast costs to complete included in the valuations
through cost analysis.
For such forward funded assets we also reviewed the
accounting treatment of licence fees receivable from the
developer during the construction phase as well as the
treatment of any lease incentives with the tenant which
has signed an agreement for lease.
• Properties under construction: these are properties
being built under forward funded agreements with
developers and which have agreed agreements for
lease with tenants. Such assets have a different risk and
investment profile to the standing investments. They
are valued using the residual method (ie by estimating
the fair value of the completed project using the
income capitalisation method less estimated costs to
completion and an appropriate developer’s margin).
Any input inaccuracies or unreasonable bases used in
the valuation judgements (such as in respect of estimated
rental value and yield profile applied) could result in a
material misstatement of the income statement and
balance sheet.
There is also a risk that management may influence
the significant judgements and estimates in respect of
property valuations in order to achieve performance
targets to meet market expectations.
Additionally, properties under construction may include
licence fees receivable from the developer during the
construction phase and lease incentives to the pre-let
tenant. Accounting for such assets is typically more
complex than for standing investments.
98
Audit Committee Report p80-84
Audit Committee Report – significant estimates and judgements p83
Audit Committee Report – investment property p83
Tritax Big Box REIT plc Annual Report 2016 Opinion 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.
Matters on which we are required to report by exception
ISAs (UK and Ireland) reporting
We are required to report to you if, in our opinion, financial and
non-financial information in the Annual Report is:
• materially inconsistent with the information in the audited
In our opinion based on the work undertaken in the course of
the audit:
financial statements; or
• the information given in the Strategic Report and Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in the
course of performing our audit; or
• the Strategic Report and Directors’ Report have been
prepared in accordance with applicable legal requirement.
In particular, we are required to consider:
• is otherwise misleading.
• whether we have identified any inconsistencies between
our knowledge acquired during the audit and the Directors’
statement on page 63, in accordance with provision C1.1
of the UK Corporate Governance Code (the “Code”), that
they consider the annual report taken as a whole to be fair,
balanced and understandable and provides the information
necessary for members to assess the Group’s and Company’s
position and performance, business model and strategy; and
• whether the section of the Annual Report on pages 80-84, as
required by provision C.3.8 of the Code, describing the work
of the Audit Committee appropriately discloses those matters
that we communicated to the Audit Committee which we
consider should have been disclosed.
We have no exceptions to report.
99
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GOVERNANCE: INDEPENDENT AUDITOR’S REPORT
Matters on which we are required to report by exception
(continued)
Companies Act 2006 reporting
We are required to report to you whether we have identified any
material misstatements in the Strategic Report and Directors’
Report.
In the light of the knowledge and understanding of the Group and
the parent company and its environment obtained in the course
of the audit, we have not identified any material misstatements.
Companies Act 2006 reporting
We are required 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.
We have no exceptions to report.
Listing rules review requirements
We are required to review:
• the Directors’ statements, set out on page 60, in relation to
going concern and longer term viability
; and
• the part of the Corporate Governance Statement relating to
the Company’s compliance with the provisions of the Code
specified for our review by the Listing Rules of the Financial
Conduct Authority.
We have nothing to report from our review.
100
Our Principal Risks and Uncertainties p52-57
Viability Statement p60
Tritax Big Box REIT plc Annual Report 2016 Statement regarding the Directors’ assessment of principal
risks, going concern and longer term viability of the Group
ISAs (UK and Ireland) reporting
We are required to give a statement as to whether we have
anything material to add or draw attention to in relation to:
• the Directors’ confirmation on page 54 of the Annual Report,
in accordance with provision C.2.1 of the Code, that they have
carried out a robust assessment of the principal risks facing
the entity, including those that would threaten its business
model, future performance, solvency or liquidity;
• the disclosures on pages 54-59 of the Annual Report that
describe those risks and explain how they are being managed
or mitigated;
• the Directors’ statement on page 60 about whether they
considered it appropriate to adopt the going concern basis of
accounting in preparing them and their identification of any
material uncertainties to the entity’s ability to continue to do so
over a period of at least 12 months from the date of approval of
the financial statements; or
• the Directors’ explanation on page 60 of the Annual Report,
in accordance with provision C.2.2 of the Code, as to how
they have assessed the prospects of the Group, over what
period they have done so and why they consider that period
to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We have nothing material to add or to draw attention to.
Richard Levy (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
7 March 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Our Principal Risks and Uncertainties p52-57
Directors’ Responsibilities Statement p95
101
Tritax Big Box REIT plc Annual Report 2016OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION MISSION CRITICAL BIG BOXES
Big Boxes are essential to fulfilling
e-commerce sales and have a
crucial role to play in supporting
retailers through peak periods.
On Black Friday 2016 there were
500,000 visits to the Argos’s
website in the first hour of online
trading -between midnight and
1pm – up 50% on last year.
Source: The Guardian – Friday 25 November 2016
102
Tritax Big Box REIT plc Annual Report 2016
FINANCIAL
STATEMENTS
Group Statement of Comprehensive Income 104
105
Group Statement of Financial Position
106
Group Cash Flow Statement
107
Group Statement of Changes in Equity
108
Notes to the Consolidated Accounts
108
1. Corporate information
108
2. Basis of preparation
3. Significant accounting judgements,
estimates and assumptions
108
4. Summary of significant accounting policies 109
113
5. Standards issued but not yet effective
113
6. Total property income
113
7. Service charge expenses
114
8. Administrative and other expenses
114
9. Directors’ remuneration
114
10. Finance income
115
11. Finance expense
115
12. Taxation
116
13. Earnings per share
117
14. Dividends paid
118
15. Investment property
119
16. Investments
122
17. Trade and other receivables
122
18. Cash held at bank
122
19. Trade and other payables
123
20. Bank borrowings
124
21. Interest rate derivatives
126
22. Financial risk management
128
23. Capital management
129
24. Share capital
129
25. Share premium
130
26. Capital reduction reserve
130
27. Retained earnings
130
28. Net asset value (NAV) per share
131
29. Operating leases
131
30. Transactions with related parties
131
31. Capital commitments
132
32. Subsequent events
132
33. Contingent liabilities
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Accounts
1. Accounting policies
2. Taxation
3. Dividends paid
4. Investments
5. Trade and other receivables
6. Cash held at bank
7. Trade and other payables
8. Share capital
9. Share premium
10. Capital reduction reserve
11. Net asset value (NAV) per share
12. Related party transactions
13. Guarantees
14. Subsequent events
133
134
135
135
137
137
137
139
140
140
140
141
141
141
142
142
142
103
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
Gross rental income
Service charge income
Service charge expense
Net rental income
Administrative and other expenses
Operating profit before changes in fair value of investment properties
Changes in fair value of investment properties
Operating profit
Finance income
Finance expense
Changes in fair value of interest rate derivatives
Profit before taxation
Tax charge on profit for the year
Total comprehensive income (attributable to the Shareholders)
Earnings per share – basic
Earnings per share – diluted
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
74,656
2,248
(2,323)
74,581
(11,708)
62,873
47,514
110,387
216
(11,555)
(7,153)
91,895
43,784
1,415
(1,431)
43,768
(7,830)
35,938
106,751
142,689
272
(6,983)
(1,994)
133,984
–
–
91,895
133,984
10.52p
10.51p
21.56p
21.54p
Note
6
6
7
8
15
10
11
21
12
13
13
104
Tritax Big Box REIT plc Annual Report 2016 FINANCIAL STATEMENTS
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
Non-current assets
Investment property
Interest rate derivatives
Total non-current assets
Current assets
Trade and other receivables
Cash held at bank
Total current assets
Total assets
Current liabilities
Deferred rental income
Trade and other payables
Total current liabilities
Non-current liabilities
Bank borrowings
Total non-current liabilities
Total liabilities
Total net assets
Equity
Share capital
Share premium reserve
Capital reduction reserve
Retained earnings
Total equity
Net asset value per share – basic
Net asset value per share – diluted
EPRA net asset value per share
At
31 December
2016
£’000
1,803,111
3,173
1,806,284
9,157
170,693
179,850
At
31 December
2015
£’000
1,157,854
8,635
1,166,489
19,733
68,586
88,319
1,986,134
1,254,808
(19,464)
(18,635)
(38,099)
(533,500)
(533,500)
(11,828)
(24,243)
(36,071)
(377,635)
(377,635)
(571,599)
(413,706)
1,414,535
841,102
11,051
589,384
546,377
267,723
1,414,535
128.00p
127.93p
129.00p
6,778
52,738
605,758
175,828
841,102
124.09p
124.01p
124.68p
Note
15
21
17
18
19
20
24
25
26
27
28
28
28
These financial statements were approved by the Board of Directors on 7 March 2017 and signed on its behalf by:
Richard Jewson Chairman
105
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2016
Cash flows from operating activities
Profit for the year (attributable to equity Shareholders)
Less: changes in fair value of investment properties
Add: changes in fair value of interest rate derivatives
Less: finance income
Add: finance expense
Accretion of tenant lease incentive
Increase in trade and other receivables
Increase in deferred income
Increase in trade and other payables
Cash received as part of corporate acquisitions
Cash generated from operations
Tax paid
Net cash flow generated from operating activities
Investing activities
Purchase of investment properties
Licence fees received
Interest received
Amounts transferred into restricted cash deposits
Amounts transferred out of restricted cash deposits
Net cash flow used in investing activities
Financing activities
Proceeds from issue of Ordinary Share capital
Cost of share issues
Bank borrowings drawn
Bank borrowings repaid
Loan arrangement fees paid
Bank interest paid
Interest rate cap premium paid
Proceeds from disposal of interest rate cap
Dividends paid to equity holders
Net cash flow generated from financing activities
Net increase/(decrease) in cash and cash equivalents for the year
Cash and cash equivalents at start of the year
Cash and cash equivalents at end of the year
106
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
91,895
(47,514)
7,153
(216)
11,555
(10,230)
9,740
5,470
393
2,045
70,291
(21)
70,270
(600,761)
6,694
257
(538)
4,268
(590,080)
551,078
(10,159)
311,485
(155,000)
(2,276)
(9,994)
(1,691)
–
(57,796)
625,647
105,837
59,208
165,045
133,984
(106,751)
1,994
(272)
6,983
(2,206)
(12,135)
3,597
162
1,283
26,639
(112)
26,527
(437,607)
16,590
289
(5,851)
783
(425,796)
229,520
(4,726)
186,897
(5,500)
(6,080)
(5,663)
(8,324)
74
(22,027)
364,171
(35,098)
94,306
59,208
Note
15
21
10
11
18
18
20
20
18
18
Tritax Big Box REIT plc Annual Report 2016 FINANCIAL STATEMENTS
GROUP STATEMENT OF CHANGES IN EQUITY
1 January 2016
Total comprehensive income
Issue of Ordinary Shares
Shares issued in relation to further Equity issue (February 2016)
Share issue expenses in relation to Equity issue (February 2016)
Shares issued in relation to further Equity issue (October 2016)
Share issue expenses in relation to Equity issue (October 2016)
Shares issued in relation to management contract
Share based payments
Transfer of share based payments to liabilities to reflect
settlement
Dividends paid:
Fourth interim dividend in respect of period ended
31 December 2015 at 3.00 pence per Ordinary Share
First interim dividend in respect of year ended
31 December 2016 at 3.10 pence per Ordinary Share
Second interim dividend in respect of year ended
31 December 2015 at 1.50 pence per Ordinary Share
31 December 2016
1 January 2015
Issue of Ordinary Shares
Shares issued in relation to further Equity issue (March 2015)
Share issue expenses in relation to Equity issue (March 2015)
Shares issued in relation to further Equity issue (June 2015)
Share issue expenses in relation to Equity issue (June 2015)
Shares issued in relation to management contract
Share based payments
Transfer of share based payments to liabilities to
reflect settlement
Cancellation of share premium account
Dividends paid:
Third interim dividend for the period ended 31 December
2014 (0.80 pence)
First interim dividend for the year ended 31 December 2015
(1.00 pence)
Second interim dividend for the year ended 31 December
2015 (1.50 pence)
Third interim dividend for the year ended 31 December 2015
(0.50 pence)
Share
premium
£’000
52,738
–
198,387
(3,896)
347,348
(6,263)
1,070
–
–
Share
capital
£’000
6,778
–
1,613
–
2,652
–
8
–
–
–
–
–
1,591
–
477
–
5
–
173,409
(3,547)
53,522
(1,078)
515
–
Capital reduction
reserve
£’000
Retained
earnings
£’000
Total
£’000
605,758
175,828
841,102
–
–
–
–
–
–
–
–
91,895
91,895
–
–
–
–
–
1,250
(1,250)
–
_
–
200,000
(3,896)
350,000
(6,263)
1,078
1,250
(1,250)
(20,335)
(26,026)
(13,020)
–
–
–
–
–
–
–
133,984
133,984
–
–
–
–
–
836
175,000
(3,547)
53,999
(1,078)
520
836
–
–
–
(20,335)
(26,026)
(13,020)
–
–
–
–
–
–
–
(442,619)
–
442,619
(836)
–
(836)
–
–
–
–
–
(3,764)
(4,707)
(9,446)
(3,388)
–
–
–
–
(3,764)
(4,707)
(9,446)
(3,388)
Total comprehensive income
–
–
11,051
589,384
546,377
267,723
1,414,535
4,705
272,536
184,444
41,844
503,529
31 December 2015
6,778
52,738
605,758
175,828
841,102
107
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED ACCOUNTS
1. CORPORATE INFORMATION
The consolidated financial statements of the Group for the year ended 31 December 2016 comprise the results of Tritax Big Box
REIT plc (“the Company”) and its subsidiaries and were approved by the Board for issue on 7 March 2016. The Company is a public
listed company incorporated and domiciled in England and Wales. The Company’s Ordinary Shares are admitted to the official list
of the UK Listing Authority, a division of the Financial Conduct Authority, and traded on the London Stock Exchange. The registered
address of the Company is disclosed in the Company Information
.
The nature of the Group’s operations and its principal activities are set out in the Strategic Report
.
ACCOUNTING POLICIES
2. BASIS OF PREPARATION
The consolidated financial information has been prepared in accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB) as adopted by the European Union and in accordance with the
Companies Act 2006 and Article 4 of the IAS Regulations.
The comparative information disclosed in the Group Statement of Comprehensive Income relates to the year ended 31 December 2015.
The Group’s financial information has been prepared on a historical cost basis, as modified for the Group’s investment properties
and interest rate derivatives, which have been measured at fair value through the Group Statement of Comprehensive Income.
The consolidated financial information is presented in Sterling, which is also the Group’s functional currency, and all values are
rounded to the nearest thousand (£’000), except where otherwise indicated.
The Group has chosen to adopt EPRA best practice guidelines for calculating key metrics such as net asset value and earnings
per share.
2.1. Going concern
The consolidated financial statements are prepared on a going concern basis as explained within Accountability
.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s financial information requires management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the reporting
date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to
the carrying amount of the asset or liability affected in future periods.
3.1. Judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated financial information:
Business combinations
The Group acquires subsidiaries that own investment properties. At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts for an acquisition as a
business combination where an integrated set of activities is acquired in addition to the property.
108
Company Information p148
Strategic Report p10-60
Accountability p77-79
Tritax Big Box REIT plc Annual Report 2016 Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their
relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.
Operating lease contracts – the Group as lessor
The Group has acquired investment properties that are subject to commercial property leases with tenants. The Group has
determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms
and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
3.2. Estimates
Fair valuation of investment property
The fair value of investment property is determined, by independent property valuation experts, to be the estimated amount for
which a property should exchange on the date of the valuation in an arm’s length transaction. Properties have been valued on an
individual basis. The valuation experts use recognised valuation techniques, applying the principles of both IAS 40 and IFRS 13.
The valuations have been prepared in accordance with the Royal Institution of Chartered Surveyors (“RICS”) Valuation –
Professional Standards January 2014 (“the Red Book”). Factors reflected include current market conditions, annual rentals, lease
lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment property
are set out in note 15.
Fair valuation of interest rate derivatives
In accordance with IAS 39, the Group values its interest rate derivatives at fair value. The fair values are estimated by the loan
counterparty with revaluation occurring on a quarterly basis. The counterparties will use a number of assumptions in determining
the fair values including estimations over future interest rates and therefore future cash flows. The fair value represents the net
present value of the difference between the cash flows produced by the contracted rate and the valuation rate.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1. Basis of consolidation
The consolidated financial statements incorporate the audited financial statements of the Company and its subsidiaries, as at the
year-end date.
4.2. Subsidiaries
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee, exposure to variable returns from the investee and the ability of the
investor to use its power to affect those variable returns. Control is reassessed wherever facts and circumstances indicate that
there may be a change in any of these elements of control.
4.3. Segmental information
The Directors are of the opinion that the Group is engaged in a single segment business, being the investment in the United
Kingdom in Big Box assets.
109
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.4. Investment property and investment property under construction
Investment property comprises completed property that is held to earn rentals or for capital appreciation, or both. Property held
under a lease is classified as investment property when it is held to earn rentals or for capital appreciation or both, rather than for
sale in the ordinary course of business or for use in production or administrative functions.
The corresponding entry upon recognising lease incentives or fixed/minimum rental uplifts is made to investment property. For
further details please see Accounting Policy note 4.14.1.
Investment property is recognised when the risks and rewards of ownership have been transferred and is measured initially at cost
including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and other costs incurred in
order to bring the property to the condition necessary for it to be capable of operating. Subsequent to initial recognition, investment
property is stated at fair value. Gains or losses arising from changes in the fair values are included in the Group Statement of
Comprehensive Income in the period in which they arise under IAS 40 Investment Property.
Investment properties under construction are financed by the Group where the Group enters into contracts for the development
of a pre-let property under a funding agreement. All such contracts specify a fixed amount of consideration. The Group does not
expose itself to any speculative development risk as the proposed building is pre-let to a tenant under an agreement for lease and
the Group enters into a fixed price development agreement with the developer. Investment properties under construction are initially
recognised at cost (including any associated costs), which reflect the Group’s investment in the assets. Subsequently, the assets are
remeasured to fair value at each reporting date. The fair value of investment properties under construction is estimated as the fair
value of the completed asset less any costs still payable in order to complete, which include an appropriate developer’s margin.
Additions to properties include costs of a capital nature only. Expenditure is classified as capital when it results in identifiable future
economic benefits, which are expected to accrue to the Group. All other property expenditure is written off in the Group Statement
of Comprehensive Income as incurred.
Investment properties cease to be recognised when they have been disposed of or withdrawn permanently from use and no future
economic benefit is expected from disposal. The difference between the net disposal proceeds and the carrying amount of the
asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognised
in the Group Statement of Comprehensive Income in the year of retirement or disposal.
4.5. Derivative financial instruments
Derivative financial instruments, comprising interest rate caps and swaps for hedging purposes, are initially recognised at cost
and are subsequently measured at fair value being the estimated amount that the Group would receive or pay to terminate the
agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the
Company and its counterparties. The gain or loss at each fair value remeasurement date is recognised in the Group Statement of
Comprehensive Income. Premiums payable under such arrangements are initially capitalised into the Group Statement of Financial
Position; subsequently they are remeasured and held at their fair values.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair
value measurement as a whole.
110
Tritax Big Box REIT plc Annual Report 2016 4.6. Fair value hierarchy
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period.
4.7. Trade and other receivables
Trade and other receivables are recognised and carried at the lower of their original invoiced value and recoverable amount.
Where the time value of money is material, receivables are initially recognised at fair value and subsequently measured at amortised
cost. A provision for impairment is made when there is objective evidence that the Group will not be able to recover balances in full.
Balances are written off when the probability of recovery is assessed as being remote.
4.8. Forward funded pre-let investments
The Group enters into forward funding agreements for pre-let investments.
4.8.1. Forward funded prepayments
Under the terms of certain Development Funding Agreements, the Group may choose to pay the total fixed price construction
cost to the developer upon entering into the Agreement, which is to be held in a restricted bank account. This will be classified as
a forward funded prepayment on the Group Statement of Financial Position. As construction costs are incurred, funds are released
subject to the authorisation of the Group’s subsidiary that has contracted the development, along with appropriate monitoring
surveyor sign off. Accordingly, the initial amount paid into the restricted bank account shown as a forward funded prepayment,
will reduce as construction costs are incurred and funds are released from the restricted account and capitalised accordingly.
4.8.2. Licence fees receivable
During the period between initial investment in a forward funded agreement and the rent commencement date, the Group receives
licence fee income. This is payable by the developer to the Group throughout this period and typically reflects the approximate level
of rental income that is expected to be payable under the lease, as and when practical completion is reached. IAS 40.20 states that
investment property should be recognised initially at cost, being the consideration paid to acquire the asset, therefore such licence fees
are deducted from the cost of the investment and are shown as a receivable. Any economic benefit of the licence fee is reflected within
the Group Statement of Comprehensive Income as a movement in the fair value of investment property and not within gross rental
income. In addition, IAS 16.21 indicates that income and expenses from operations that are not to bring an asset to the location and
condition necessary for it to be capable of operating in the manner intended, should be recognised in profit or loss.
4.9. Cash held at bank
Cash and cash equivalents comprises cash in hand, deposits held at call with banks, other short-term highly liquid investments with
original maturities of three months or less. Cash held at bank also includes amounts held in restricted or ringfenced accounts to
cover future rent- free periods; this is not available for everyday use.
4.10. Trade payables
Trade payables are initially recognised at their fair value, being at their invoiced value inclusive of any VAT that may be applicable.
Payables are subsequently measured at cost.
4.11 Bank borrowings
All bank borrowings are initially recognised at fair value net of attributable transaction costs. After initial recognition, all bank
borrowings are measured at amortised cost, using the effective interest method. The effective interest rate is calculated to include
all associated transaction costs.
111
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
4.12. Share based payments
The expense relating to share based payments is accrued over the period in which the service is received and is measured at the
fair value of those services received. The extent to which the expense is not settled at the reporting period end is transferred to a
liability with a view that there is an expectation that the payment will be settled in cash. Contingently issuable shares are treated as
dilutive to the extent that based on market factors prevalent at the reporting period date the shares would be issuable.
4.13. Dividends payable to Shareholders
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity
dividends are recognised when approved by the Shareholders at an Annual General Meeting.
4.14. Property income
4.14.1. Rental income
Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease term and
is included in gross rental income in the Group Statement of Comprehensive Income. A rental adjustment is recognised from the
rent review date in relation to unsettled rent reviews, where the Directors are reasonably certain that the rental uplift will be agreed.
Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the
same basis as the lease income. Rental income is invoiced in advance and for all rental income that relates to a future period; this is
deferred and appears within current liabilities on the Group Statement of Financial Position.
For leases, which contain fixed or minimum uplifts, the rental income arising from such uplifts is recognised on a straight-line basis
over the lease term.
Tenant lease incentives are recognised as a reduction of rental revenue on a straight-line basis over the term of the lease. The lease
term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the
lease where, at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.
Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the Group Statement
of Comprehensive Income when the right to receive them arises.
When the Group enters into a forward funded transaction, the future tenant signs an Agreement for Lease. No rental income is
recognised under the agreement for lease, but once practical completion has taken place the formal lease is signed at which point
rental income commences to be recognised in the Group Statement of Comprehensive Income.
4.14.2. Service charges, insurances and other expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognised in the period in which the compensation becomes receivable.
Service and insurance charges and other such receipts are included in net rental income gross of the related costs, as the Directors
consider that the Group acts as principal in this respect.
4.15. Finance income
Finance income is recognised as interest accrues on cash balances held by the Group. Interest charged to a tenant on any overdue
rental income is also recognised within finance income.
4.16. Finance costs
Finance costs consist of interest and other costs that an entity incurs in connection with bank and other borrowings. Any finance costs
that are separately identifiable and directly attributable to the acquisition or construction of an asset that takes a period of time to
complete are capitalised as part of the cost of the asset. All other finance costs are expensed in the period in which they occur.
112
Tritax Big Box REIT plc Annual Report 2016 4.17. Taxation
Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Current tax is
expected tax payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the period
end date, and any adjustment to tax payable in respect of previous years.
5. STANDARDS ISSUED BUT NOT YET EFFECTIVE
The following are new standards, interpretations and amendments, which are not yet effective and have not been early adopted in
this financial information, that will or may have an effect on the Group’s future financial statements:
IFRS 9: Financial Instruments (effective 1 January 2018);
IFRS 15: Revenue from Contracts with Customers (effective 1 January 2018); and
IFRS 16: Leases (effective 1 January 2019 subject to EU endorsement).
The Directors are currently assessing the impact on the financial statements of the standards listed above; however at present
they do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s financial
statements in the period of initial application, other than on presentation and disclosure.
6. TOTAL PROPERTY INCOME
Rental income – freehold property
Rental income – long leasehold property
Spreading of tenant incentives and guaranteed rental uplifts
Lease premiums
Gross rental income
Property insurance recoverable
Service charges recoverable
Total insurance/service charge income
Total property income
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
49,559
14,853
10,230
14
74,656
1,830
418
2,248
76,904
32,893
8,685
2,206
–
43,784
1,234
181
1,415
45,199
There were no individual tenants representing more than 10% of gross rental income present during the year. In 2015 there were
three tenants representing £4.9 million, £5.5 million and £5.7 million respectively of gross rental income, each representing more
than 10% of gross rental income.
7. SERVICE CHARGE EXPENSES
Property insurance expense
Service charge expense
Total property expenses
Year ended
31 December
2016
£’000
2,259
64
2,323
Year ended
31 December
2015
£’000
1,250
181
1,431
113
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
8. ADMINISTRATIVE AND OTHER EXPENSES
Investment management fees
Directors’ remuneration (note 9)
Auditor’s fees
– Fees payable for the audit of the Company’s annual accounts
– Fees payable for the review of the Company’s interim accounts
– Fees payable for the audit of the Company’s subsidiaries
– Fees payable for taxation compliance services
Total Auditor’s fee
Corporate administration fees
Regulatory fees
Legal and professional fees
Marketing and promotional fees
Other administrative costs
Year ended
31 December
2016
£’000
9,502
205
Year ended
31 December
2015
£’000
6,310
173
171
26
40
198
435
374
39
702
121
330
129
20
32
75
256
358
25
448
94
166
11,708
7,830
The Auditor has also received £140,000 (2015: £67,000) in respect of providing reporting accountant services in connection
with the two equity issuances occurring during the year. A total of £86,000 (2015: £132,000) has been incurred in respect of due
diligence services provided in connection with the acquisition of Group assets. The fees relating to the share issuances have been
treated as share issue expenses and offset against share premium. The fees in relation to the acquisition of assets have been
capitalised in to the cost of the respective assets.
9. DIRECTORS’ REMUNERATION
Directors’ fees
Employer’s National Insurance
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
184
21
205
155
18
173
A summary of the Directors’ emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors’
. As Chairman of the Company’s Manager, Mark Shaw is not entitled to receive a fee.
Remuneration Report
10. FINANCE INCOME
Interest received on bank deposits
114
Directors’ Remuneration Report p90-91
Year ended
31 December
2016
£’000
216
216
Year ended
31 December
2015
£’000
272
272
Tritax Big Box REIT plc Annual Report 2016
11. FINANCE EXPENSE
Interest payable on bank borrowings
Commitment fees payable on bank borrowings
Swap interest payable
Amortisation of loan arrangement fees
Year ended
31 December
2016
£’000
9,366
536
89
1,564
11,555
Year ended
31 December
2015
£’000
5,843
118
76
946
6,983
The total interest payable on financial liabilities carried at amortised cost comprises interest and commitment fees payable on
bank borrowings of £10.48 million (2015: £6.48 million) of which £0.58 million was capitalised in the year (2015: £0.52 million)
and amortisation of loan arrangement fees of £1.68 million (2015: £1.08 million) of which £0.11 million (2015: £0.13 million) was
capitalised in the year. The total interest payable on bank borrowings specifically drawn to finance the construction of investment
properties was capitalised in the current and preceding period.
12. TAXATION
a) Tax charge in the Group Statement of Comprehensive Income
UK corporation tax
Year ended
31 December
2016
£’000
–
Year ended
31 December
2015
£’000
–
The Government announced its intention to further reduce the UK corporation tax rates from 19% to 17% from 1 April 2017.
Accordingly, these rates have been applied in the measurement of the Group’s tax liability at 31 December 2016.
b) Factors affecting the tax credit for the year
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below:
Profit on ordinary activities before taxation
Theoretical tax at UK corporation tax rate of 20.00% (31 December 2015: 20.25%)
REIT exempt income
Non-taxable items
Transfer pricing adjustment
Residual losses
Total tax credit
Year ended
31 December
2016
£’000
91,895
18,379
(10,487)
(8,072)
534
(354)
–
Year ended
31 December
2015
£’000
133,984
27,131
(5,927)
(21,114)
343
(433)
–
Non-taxable items include income and gains that are not taxable for corporation tax purposes other than property rental income
exempt from UK corporation tax in accordance with Part 12 of CTA 2010.
REIT exempt income includes property rental income that is exempt from UK Corporation Tax in accordance with Part 12
of CTA 2010.
115
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
13. EARNINGS PER SHARE
Earnings per share (EPS) amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the
Company by the weighted average number of Ordinary Shares in issue during the year. As there are dilutive instruments
outstanding, both basic and diluted earnings per share are quoted below.
The calculation of basic and diluted earnings per share is based on the following:
For the year ended 31 December 2016
Basic earnings per share
Adjustment for dilutive shares to be issued
Diluted earnings per share
Adjustments to remove:
Changes in fair value of investment properties (note 15)
Changes in fair value of interest rate derivatives (note 21)
EPRA2 basic earnings per share
EPRA2 diluted earnings per share
Adjustments to include:
Licence fee receivable on forward funded developments
Rental income recognised in respect of fixed uplifts
Loan amortisation
Interest capitalised on forward funded developments
Adjusted basic earnings per share
Adjusted diluted earnings per share
For the year ended 31 December 2015
Basic earnings per share
Adjustment for dilutive shares to be issued
Diluted earnings per share
Adjustments to remove:
Changes in fair value of investment properties (note 15)
Changes in fair value of interest rate derivatives (note 21)
EPRA2 basic earnings per share
EPRA2 diluted earnings per share
Adjustments to include:
Licence fee receivable on forward funded developments
Interest capitalised on forward funded developments
Adjusted basic earnings per share
Adjusted diluted earnings per share
Weighted average
number of
Ordinary
Shares 1
Number
873,562,775
533,132
874,095,907
Earnings
per share
Pence
10.52p
10.51p
873,562,775
874,095,907
5.90p
5.90p
Net profit
attributable to
Ordinary
Shareholders
£’000
91,895
91,895
(47,514)
7,153
51,534
51,534
7,956
(3,571)
1,564
(581)
56,902
56,902
873,562,775
874,095,907
6.51p
6.51p
133,984
133,984
621,514,696
415,179
621,929,875
21.56p
21.54p
(106,751)
1,994
29,227
29,227
9,519
(708)
38,038
38,038
621,514,696
621,929,875
621,514,696
621,929,875
4.70p
4.70p
6.12p
6.12p
1 Based on the weighted average number of Ordinary Shares in issue throughout the year.
2 European Public Real Estate Association.
Adjusted earnings is a performance measure used by the Board to assess the Group’s dividend payments. The metric reduces
EPRA earnings by interest paid to service debt that was capitalised and removes other non-cash items credited or charged to the
Statement of Comprehensive Income. Licence fees receivable during the period are added to earnings on the basis noted below as
the Board sees these cash flows as supportive of dividend payments. The Board compares the Adjusted earnings to the available
distributable reserves when considering the level of dividend to pay.
116
Tritax Big Box REIT plc Annual Report 2016
The adjustment for licence fee receivable is calculated by reference to the fraction of the total period of completed construction
during the period, multiplied by the total licence fee receivable on a given forward funded asset.
Fixed rental uplift adjustments relate to adjustments to net rental income on leases with fixed or minimum uplifts embedded within their
review profiles. The total minimum income recognised over the lease term is recognised on a straight line basis.
Adjusted earning have historically been reconciled to include material cash flows received in respect of developers licence fee and paid
in respect of interest capitalised. The Board has decided to align this fully with earnings supported by net cash inflows. This also included
adjustments for other items such as fixed rentals and loan arrangements fees. These adjustments have historically been insignificant.
14. DIVIDENDS PAID
Fourth interim dividend in respect of period ended 31 December 2015 at 3.00 pence per
Ordinary Share (Third interim for 31 December 2014 at 0.80 pence per Ordinary Share)
First interim dividend in respect of year ended 31 December 2016 at 3.10 pence per
Ordinary Share (31 December 2015: 1.00 pence)
Second interim dividend in respect of year ended 31 December 2016 at 1.55 pence per
Ordinary Share (31 December 2015: 1.50 pence)
Third interim dividend in respect of year ended 31 December 2015 at 0.50 pence per
Ordinary Share
Total dividends paid
Total dividends paid for the year
Total dividends unpaid but declared for the year
Total dividends declared for the year
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
20,335
26,026
13,020
–
59,381
4.65p
1.55p
6.20p
3,764
4,707
9,446
3,388
21,305
3.00p
3.00p
6.00p
On 1 August 2016, the Company announced the declaration of a first interim dividend in respect of the period from 1 January 2016
to 30 June 2016 of 3.10 pence per Ordinary Share, which was payable on 25 August 2016 to Ordinary Shareholders on the register
on 18 August 2016.
On 28 September 2016, the Company announced the declaration of a second interim dividend in respect of the period 1 July 2016
to 30 September 2016 of 1.55 pence per Ordinary Share which was payable on 27 October 2016 to Shareholders on the register on
14 October 2016.
On 7 March 2017, the Company announced the declaration of a third interim dividend in respect of the period 1 September 2016
to 31 December 2016 of 1.55 pence per Ordinary Share which will be payable on or around 3 April 2017 to Shareholders on the
register on 16 March 2017.
117
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
15. INVESTMENT PROPERTY
In accordance with IAS 40: Investment Property, the investment property has been independently valued at fair value by
CBRE Limited (“CBRE”), an accredited independent valuer with a recognised and relevant professional qualification and
with recent experience in the locations and categories of the investment properties being valued. The valuations have been
prepared in accordance with the RICS Valuation – Professional Standards January 2014 (“the Red Book”) and incorporate the
recommendations of the International Valuation Standards Committee which are consistent with the principles set out in IFRS 13.
The Valuer in forming its opinion make a series of assumptions, which are typically market related, such as net initial yields and
expected rental values and are based on the Valuer’s professional judgement. The Valuer has sufficient current local and national
knowledge of the particular property markets involved and has the skills and understanding to undertake the valuations competently.
The valuations are the ultimate responsibility of the Directors. Accordingly, the critical assumptions used in establishing the
independent valuation are reviewed by the Board.
All corporate acquisitions during the year have been treated as asset purchases rather than business combinations because they
are considered to be acquisitions of properties rather than businesses.
Investment
property
long leasehold
£’000
Investment
property
under construction
£’000
As at 1 January 2016
Property additions2
Fixed rental uplift and tenant lease incentives1
Transfer of completed property to investment property
Change in fair value during the year
Investment
property
freehold
£’000
720,891
268,265
7,752
259,281
21,939
260,695
158,881
2,478
–
14,790
As at 31 December 2016
1,278,128
436,844
As at 1 January 2015
Property additions
Fixed rental uplift and tenant lease incentives1
Transfer of completed property to investment property
Change in fair value during the year
467,320
152,983
2,132
41,191
57,265
110,150
133,363
74
–
17,108
176,268
160,367
–
(259,281)
10,785
88,139
8,709
176,372
–
(41,191)
32,378
Total
£’000
1,157,854
587,513
10,230
–
47,514
1,803,111
586,179
462,718
2,206
–
106,751
As at 31 December 2015
720,891
260,695
176,268
1,157,854
1 Included within the carrying value of investment property is £13.37 million (2015: £3.14 million) in respect of accrued contracted rental uplift income. This balance
arises as a result of the IFRS treatment of leases with fixed or minimum rental uplifts and rent-free periods, which requires the recognition of rental income on a
straight-line basis over the lease term. The difference between this and cash receipts change the carrying value of the property against which revaluations are
measured. Also see note 6.
2 Licence fees deducted from the cost of investment property under construction totalled £4.83 million in the year (2015: £21.42 million).
Investment property at fair value per Group Statement of Financial Position
Licence fee receivable
Capital commitments
Restricted cash (note 18)
Total portfolio valuation*
* Including costs to complete on forward funded development assets.
31 December
2016
£’000
1,803,111
2,520
82,401
5,648
31 December
2015
£’000
1,157,854
4,602
139,221
9,378
1,893,680
1,311,055
Capital commitments represent costs to bring the asset to completion under the developer’s funding agreements which include the
developer’s margin. These costs are not provided for in the Statement of Financial Position; refer to note 31
.
118
note 31 p131
Tritax Big Box REIT plc Annual Report 2016
Cash received in respect of future rent-free periods represents amounts which were topped up by the vendor on acquisition of the
property to cover future rent-free periods on the lease. The valuation assumes the property to be income generating throughout the
lease and therefore includes this cash in the value.
Licence fees which have been billed but not received from the developer in relation to the property are included within trade and
other receivables. The valuation assumes the property to be income generating and therefore includes this receivable in the value.
Forward funded prepayments represent costs to bring the asset to completion under the Development Funding Agreement which
includes the developer’s margin and were paid to the developer in advance.
The valuation summary is set out in the Strategic Report
.
Fair value hierarchy
The following table provides the fair value measurement hierarchy for investment property:
Date of
valuation
Total
£’000
Quoted prices in
active markets
(Level 1)
£’000
Significant
observable inputs
(Level 2)
£’000
Significant
unobservable inputs
(Level 3)
£’000
Assets measured at fair value:
Investment properties
Investment properties
31 December 2016
31 December 2015
1,803,111
1,157,854
–
–
–
–
1,803,111
1,157,854
There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between
Level 2 and Level 3 during any of the periods.
The valuations have been prepared on the basis of Market Value (MV), which is defined in the RICS Valuation Standards, as:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an
arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”
Market Value as defined in the RICS Valuation Standards is the equivalent of fair value under IFRS.
The following descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair
values are as follows:
Valuation techniques: market comparable method
Under the market comparable method (or market comparable approach), a property’s fair value is estimated based on comparable
transactions in the market.
Unobservable input: passing rent
The rent at which space could be let in the market conditions prevailing at the date of valuation (range: £838,500-£5,563,733 per annum).
Passing rents are dependent upon a number of variables in relation to the Group’s property. These include: size, location, tenant
covenant strength and terms of the lease.
Unobservable input: rental growth
The estimated average increase in rent based on both market estimations and contractual arrangements. A reduction of the
estimated future rental growth in the valuation model would lead to a decrease in the fair value of the investment property and an
inflation of the estimated future rental growth would lead to an increase in the fair value. No quantitative sensitivity analysis has
been provided for estimated rental growth as a reasonable range would not result in a significant movement in fair value.
Strategic Report p10-60
119
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
15. INVESTMENT PROPERTY (CONTINUED)
Unobservable input: net initial yield
The net initial yield is defined as the initial gross income as a percentage of the market value (or purchase price as appropriate) plus
standard costs of purchase (range: 4.15%-6.93%).
Sensitivities of measurement of significant unobservable inputs
As set out within significant accounting estimates and judgements above, the Group’s property portfolio valuation is open to
judgements and is inherently subjective by nature.
As a result the following sensitivity analysis has been prepared:
(Decrease)/increase in the fair value of investment
properties as at 31 December 2016
(Decrease)/increase in the fair value of investment
properties as at 31 December 2015
-5% in
passing rent
£’000
+5% in
passing rent
£’000
+0.25% in
net initial yield
£’000
-0.25% in
net initial yield
£’000
(94,684)
94,684
(91,394)
101,158
(65,553)
65,553
(63,563)
69,716
16. INVESTMENTS
The Group comprises a number of companies, all subsidiaries included within these financial statements are noted below:
Principal activity
Country of incorporation
Ownership %
TBBR Holdings 1 Limited
TBBR Holdings 2 Limited
Tritax Acquisition 1 Limited
Baljean Properties Limited
Tritax Acquisition 2 Limited
Tritax Acquisition 2 (SPV) Limited
The Sherburn RDC Unit Trust
Tritax REIT Acquisition 3 Limited
Tritax REIT Acquisition 4 Limited
Tritax Acquisition 4 Limited
Tritax REIT Acquisition 5 Limited
Tritax Acquisition 5 Limited
Tritax Acquisition 6 Limited
Sonoma Ventures Limited
Tritax Acquisition 7 Limited
Tritax Ripon Limited
Tritax REIT Acquisition 8 Limited
Tritax Acquisition 8 Limited
Tritax REIT Acquisition 9 Limited
Tritax Acquisition 9 Limited
Tritax REIT Acquisition 10 Limited
Tritax Acquisition 10 Limited
Tritax REIT Acquisition 11 Limited
Tritax Acquisition 11 Limited
Tritax REIT Acquisition 12 Limited
Tritax Acquisition 12 Limited
Tritax REIT Acquisition 13 Limited
Tritax Acquisition 13 Limited
120
Investment Holding Company
Investment Holding Company
Investment Holding Company
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Jersey
Jersey
Jersey
Isle of Man
Jersey
Jersey
Jersey
UK
UK
Jersey
UK
Jersey
Jersey
BVI
Jersey
Guernsey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Tritax Big Box REIT plc Annual Report 2016 Principal activity
Country of incorporation
Ownership %
Tritax REIT Acquisition 14 Limited
Tritax Acquisition 14 Limited
Tritax Acquisition 15 Limited
Tritax Worksop Limited
Tritax REIT Acquisition 16 Limited
Tritax Acquisition 16 Limited
Tritax REIT Acquisition 17 Limited
Tritax Acquisition 17 Limited
Tritax REIT Acquisition 18 Limited
Tritax Acquisition 18 Limited
Tritax Acquisition 19 Limited
Tritax Harlow Limited
Tritax Acquisition 20 Limited
Tritax Lymedale Limited
Tritax REIT Acquisition 21 Limited
Tritax Acquisition 21 Limited
Tritax REIT Acquisition 22 Limited
Tritax Acquisition 22 Limited
Tritax REIT Acquisition 23 Limited
Tritax Acquisition 23 Limited
Tritax Acquisition 24 Limited
Tritax Knowsley Limited
Tritax Burton Upon Trent Limited
Tritax Acquisition 28 Limited
Tritax Peterborough Limited
Click Peterborough SARL
Tritax Holdings CL Debt Limited
Tritax Portbury Limited
Tritax Newark Limited
Wellzone Limited
Sportdale Limited
Tritax Merlin 310 Trafford Park Limited
Tritax West Thurrock Limited
Tritax Tamworth Limited
Tritax Acquisition 34 Limited
Tritax Acquisition 35 Limited
Tritax Acquisition 36 Limited
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
UK
Jersey
Jersey
BVI
UK
Jersey
UK
Jersey
UK
Jersey
Jersey
Guernsey
Jersey
Guernsey
UK
Jersey
UK
Jersey
UK
Jersey
Jersey
Isle of Man
BVI
Jersey
Jersey
Luxembourg
Jersey
Jersey
Jersey
UK
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The registered addresses for the subsidiaries across the Group are consistent based on their country of incorporation and are
as follows:
Jersey entities: 13-14 Esplanade, St Helier, Jersey JE1 1EE
Guernsey entities: PO Box 25, Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3AP
Isle of Man entities: 33-37 Athol Street, Douglas, Isle of Man IM1 1LB
BVI entities: Jayla Place, Wickhams Cay 1, PO Box 3190, Road Town, Tortola, BVI VG1110
UK entities: Aberdeen House, South Road, Haywards Heath, West Sussex RH16 4NG
Luxemburg entity: 46A Avenue J F Kennedy L-1885, Grand Duchy of Luxembourg.
121
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
17. TRADE AND OTHER RECEIVABLES
Trade receivables
Licence fee receivable
Prepayments and other receivables
VAT
As at 31 December 2016, some trade receivables were past due but not impaired, as set out below.
Past due but not impaired
<30 days
30-60 days
60-90 days
90 days+
18. CASH HELD AT BANK
Cash and cash equivalents to agree with cash flow
Restricted cash
31 December
2016
£’000
31 December
2015
£’000
5,418
2,520
1,219
–
9,157
4,522
147
640
109
5,418
2,110
4,602
98
12,923
19,733
1,202
–
853
55
2,110
31 December
2016
£’000
165,045
5,648
170,693
31 December
2015
£’000
59,208
9,378
68,586
Restricted cash represents amounts relating to future rent-free periods on certain assets within the portfolio or rental top-up
amounts, where a cash deduction against the net purchase price was agreed with the vendor. Currently the cash is held in an
account at the bank that has debt security over the asset to cover the periods of cash shortfall as set out in the lease. The restricted
cash is not readily convertible to cash available on demand.
Cash and cash equivalents reported in the Consolidated Statement of Cash Flows totalled £165.05 million (2015: £59.21 million) as
at the year end, which excludes long-term restricted and ringfenced cash deposits totalling £5.65 million (2015: £9.38 million). Total
cash held at bank as reported in the Group Statement of Financial Position is £170.69 million (2015: £68.59 million).
19. TRADE AND OTHER PAYABLES
Trade and other payables
Bank loan interest payable
Accruals
VAT
Tax liability
31 December
2016
£’000
31 December
2015
£’000
12,679
1,903
3,574
195
284
18,635
19,969
1,326
2,881
–
67
24,243
The tax liability arises from the acquisition of a number of special purpose vehicles (SPV’s) during the current and prior period. The
tax liability wholly relates to the period prior to Group ownership. Any tax liability was fully accrued for within the take on accounts
of the SPV.
122
Tritax Big Box REIT plc Annual Report 2016 20. BANK BORROWINGS
A summary of the drawn and undrawn bank borrowings in the year is shown below:
As at 1 January 2016
New bank borrowings agreed in the year
Bank borrowings drawn in the year under existing facilities
Bank borrowings repaid in the year
Increase in Syndicated bank borrowings agreed in the year
As at 31 December 2016
As at 1 January 2015
Bilateral bank borrowings agreed in the year
Bank borrowings refinanced in the year
Syndicated bank borrowings agreed in the year
As at 31 December 2015
Bank
borrowings
drawn
£’000
385,041
72,000
239,485
(155,000)
–
541,526
203,644
84,740
(253,343)
350,000
385,041
Bank
borrowings
undrawn
£’000
184,485
–
(84,485)
–
50,000
150,000
13,172
21,313
–
150,000
184,485
Total
£’000
569,526
72,000
155,000
(155,000)
50,000
691,526
216,816
106,053
(253,343)
500,000
569,526
On 3 August 2016, the Group announced that it had agreed a new long-term, interest only, fixed rate term loan facility of
£72 million with Canada Life Investments, secured against a portfolio of three standing assets. The facility, which was drawn in full
immediately, is repayable on 30 April 2029 and has a fixed all-in rate payable of 2.64% per annum. The amounts drawn down under
the facility will be segregated and non-recourse to the Company.
Each of the Group’s debt facilities has either a floating or fixed interest charge which is payable quarterly. The weighted average
margin payable by the Group on its debt portfolio as at the year end was 1.43% (2015: 1.42%) above 3 month Libor or the
referenced Gilt rate.
The Group has been in compliance with all of the financial covenants of the above facilities as applicable throughout the year
covered by these financial statements.
Any associated fees in arranging the bank borrowings unamortised as at the period end are offset against amounts drawn on the
facilities as shown in the table below:
Bank borrowings drawn: due in more than one year
Less: unamortised costs
Non-current liabilities: bank borrowings
31 December
2016
£’000
541,526
(8,026)
533,500
31 December
2015
£’000
385,041
(7,406)
377,635
123
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
20. BANK BORROWINGS (CONTINUED)
Maturity of bank borrowings
Repayable between 1 and 2 years
Repayable between 2 and 5 years
Repayable in over 5 years
31 December
2016
£’000
–
418,660
122,866
541,526
31 December
2015
£’000
–
385,041
–
385,041
On 1 August 2016, following completion of the Ocado distribution warehouse at Erith, the Group announced that it had agreed
terms to extend the maturity of its £50.87 million loan facility secured on the asset with Landesbank Hessen-Thüringen Girozentrale
(“Helaba”) from July 2020 to July 2023.
The weighted average term to maturity of the Group’s debt as at the year end is 4.8 years. The syndicated facility has a one-year
extension option remaining, exercisable on the second anniversary of the facility. This option requires lender consent, although
when taking these into account the weighted average term to maturity, for the Group, assuming all options were exercised, would
increase to 5.6 years.
21. INTEREST RATE DERIVATIVES
To mitigate the interest rate risk that arises as a result of entering into variable rate loans, the Group has entered into a number of
interest rate derivatives. Interest rate caps and an interest rate swap have been taken out in respect of each loan drawn to fix or cap
the rate to which 3 month Libor can rise, with each running coterminous to the initial term of the respective loans.
The weighted average capped rate for the Group as at the year end was 1.39% (2015: 1.52%), which effectively caps the level to
which Libor can rise to, therefore limiting any effect on the Group of an interest rate rise. The interest rate derivatives mean that the
Group’s borrowing facilities at the year end have an all-inclusive interest rate payable of 2.82% (2015: 2.94%). The total premium
payable in the year towards securing the interest rate caps was £1.69 million (2015: £8.33 million).
Non-current assets: Interest rate derivatives
31 December
2016
Drawn
£’000
3,173
31 December
2015
Drawn
£’000
8,635
The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis in accordance with IAS 39.
Any movement in the mark to market values of the derivatives are taken to the Group Statement of Comprehensive Income. Due to
a flattening of the yield curve stimulated by a reduction in medium-term interest rates during the course of 2016, the interest rate
derivative valuations have reduced in comparison to the previous year.
Interest rate derivative valuation brought forward
Interest rate cap premium paid
Disposal of interest rate cap
Changes in fair value of interest rate derivatives
31 December
2016
Drawn
£’000
31 December
2015
Drawn
£’000
8,635
1,691
–
(7,153)
3,173
2,379
8,325
(75)
(1,994)
8,635
As part of the Group refinancing in 2015, on repayment of the borrowings to Santander, the Group disposed of one interest rate cap
held against the loan. The Group received proceeds of £0.08 million on disposal.
124
Tritax Big Box REIT plc Annual Report 2016 21. INTEREST RATE DERIVATIVES (CONTINUED)
It is the Group’s target to hedge at least 90% of the total debt portfolio either using interest rate derivatives or entering fixed term
loan arrangements. As at the year-end date the total proportion of debt either hedged via interest rate derivatives or subject to fixed
term loan agreements equated to 99.68%, as shown below.
31 December
2016
Drawn
£’000
31 December
2015
Drawn
£’000
Total bank borrowings (note 20)
Notional value of interest rate derivatives
Proportion of hedged debt
541,526
539,813
99.68%
385,041
384,854
99.95%
Fair value hierarchy
The following table provides the fair value measurement hierarchy for interest rate derivatives:
Assets measured at fair value:
Interest rate derivatives
Interest rate derivatives
31 December 2016
31 December 2015
Date of
valuation
Quoted prices in
active markets
(Level 1)
£’000
Significant
observable inputs
(Level 2)
£’000
Significant
unobservable inputs
(Level 3)
£’000
–
–
3,173
8,635
–
–
Total
£’000
3,173
8,635
The fair value of these contracts are recorded in the Group Statement of Financial Position and is determined by forming an expectation
that interest rates will exceed strike rates and discounting these future cash flows at the prevailing market rates as at the year end.
There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between
Level 2 and Level 3 during any of the periods.
125
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
22. FINANCIAL RISK MANAGEMENT
Financial instruments
The Group’s principal financial assets and liabilities are those that arise directly from its operations: trade and other receivables,
trade and other payables and cash held at bank. The Group’s other principal financial assets and liabilities are bank borrowings
and interest rate derivatives, the main purpose of which is to finance the acquisition and development of the Group’s investment
property portfolio and hedge against the interest rate risk arising.
Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are carried in
the financial information:
Book value
31 December
2016
£’000
Fair value
31 December
2016
£’000
Book value
31 December
2015
£’000
Fair value
31 December
2015
£’000
Financial assets
Interest rate derivatives
Trade and other receivables1
Cash held at bank
Financial liabilities
Trade and other payables2
Bank borrowings
3,173
7,970
170,693
18,351
543,620
3,173
7,970
170,693
18,351
541,526
8,635
6,786
68,586
24,176
385,041
8,635
6,786
68,586
24,176
385,041
1 Excludes certain VAT certain prepayments, other debtors and forward funded prepayments.
2 Excludes tax and VAT liabilities.
Interest rate derivatives are the only financial classified at fair value through profit and loss. All other financial assets
are classified as loans and receivables and all financial liabilities are measured at amortised cost. All financial instruments were
designated in their current categories upon initial recognition.
Liabilities measured at fair value:
Bank borrowings
Bank borrowings
31 December 2016
31 December 2015
Date of
valuation
Quoted prices in
active markets
(Level 1)
£’000
Significant
observable inputs
(Level 2)
£’000
Significant
unobservable inputs
(Level 3)
£’000
–
–
69,906
–
–
–
Total
£’000
69,906
–
In August 2016, the Group arranged a fixed rate loan totalling £72 million for 13 years. The fair value is determined by comparing the
discounted future cash flows using the contracted yields with those reference gilts plus the margin implied. The reference was the
Treasury 6% 2028 Gilt, with an implied margin which is unchanged since the date of fixing. The loan is considered to be a level 2 fair
value measurement. For all other bank loans there is considered no other difference between fair value and carrying value.
Risk management
The Group is exposed to market risk (including interest rate risk), credit risk and liquidity risk. The Board of Directors oversees
the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks that are
summarised below.
Market risk
Market risk is the risk that the fair values of financial instruments will fluctuate because of changes in market prices. The financial
instruments held by the Group that are affected by market risk are principally the Group’s cash balances, bank borrowings along
with a number of interest rate derivatives entered into to mitigate interest rate risk.
The Group monitors its interest rate exposure on a regular basis. A sensitivity analysis performed to ascertain the impact on
profit or loss and net assets of a 50 basis point shift in interest rates would result in an increase of £2.71 million (2015: £1.53 million)
or a decrease of £2.71 million (2015: £1.53 million).
126
Tritax Big Box REIT plc Annual Report 2016 22. FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading
to a financial loss. The Group is exposed to credit risks from both its leasing activities and financing activities, including deposits
with banks and financial institutions. Credit risk is assisted by tenants being required to pay rentals in advance under their lease
obligations. The credit quality of the tenant is assessed based on an extensive credit rating scorecard at the time of entering into
a lease agreement.
Outstanding trade receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying
value of each class of financial asset.
Trade receivables
Trade receivables, primarily tenant rentals, are presented in the balance sheet net of allowances for doubtful receivables and are
monitored on a case by case basis. Credit risk is primarily managed by requiring tenants to pay rentals in advance and performing
tests around strength of covenant prior to acquisition. Any rentals past due as at the period end were received shortly after the
year end.
Credit risk related to financial instruments and cash deposits
One of the principal credit risks of the Group arises with the banks and financial institutions. The Board of Directors believes that
the credit risk on short-term deposits and current account cash balances is limited because the counterparties are banks, who
are committed lenders to the Group, with high credit ratings assigned by international credit-rating agencies.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital and, going forward, the finance charges, principal
repayments on its borrowings and its commitments under forward funded development arrangements. It is the risk that the
Group will encounter difficulty in meeting its financial obligations as they fall due, as the majority of the Group’s assets are property
investments and are therefore not readily realisable. The Group’s objective is to ensure it has sufficient available funds for its
operations and to fund its capital expenditure. This is achieved by continuous monitoring of forecast and actual cash flows by
management ensuring it has appropriate levels of cash and available drawings to meet liabilities as they fall due.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
31 December 2016
Bank borrowings
Trade and other payables
31 December 2015
Bank borrowings
Trade and other payables
On demand
£’000
<3 months
£’000
3-12 months
£’000
1-5 years
£’000
–
–
–
–
–
–
2,656
18,351
21,007
1,947
24,176
26,123
7,967
–
7,967
5,842
–
5,842
499,861
–
499,861
413,599
–
413,599
>5 years
£’000
85,940
–
85,940
–
–
–
Total
£’000
596,424
18,351
614,775
421,388
24,176
445,564
Included within the contracted payments is £54.90 million (2015: £36.35 million) of bank interest payable up to the point
of maturity across the facilities.
127
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
23. CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it remains a going concern and continues to qualify for
UK REIT status.
The Board, with the assistance of the Investment Manager, monitors and reviews the Group’s capital so as to promote the long-term
success of the business, facilitate expansion and to maintain sustainable returns for Shareholders. The Group considers proceeds
from share issuances, bank borrowings and retained earnings as capital. The Group’s policy on borrowings is as set out below:
The level of borrowing will be on a prudent basis for the asset class, and will seek to achieve a low cost of funds, while maintaining
flexibility in the underlying security requirements, and the structure of both the portfolio and the REIT Group.
The Directors intend that the Group will maintain a conservative level of aggregate borrowings with a medium-term target of 40%
of the Group’s gross assets.
The Group has complied with all covenants on its borrowings up to the date of this report. All of the targets mentioned above sit
comfortably within the Group’s covenant levels which include loan to value (“LTV”), interest cover ratio and loan to projected project
cost ratio. The Group LTV at the year end was 30.0% (2015: 33.2%).
Debt is secured at the asset and corporate level, subject to the assessment of the optimal financing structure for the Group and
having consideration to key metrics including lender diversity, debt type and maturity profiles.
128
Tritax Big Box REIT plc Annual Report 2016 24. SHARE CAPITAL
The share capital relates to amounts subscribed for share capital at its nominal value:
31 December
2016
Number
31 December
2016
£’000
31 December
2015
Number
31 December
2015
£’000
Issued and fully paid at 1 pence each
1,105,159,529
11,051
677,840,088
At beginning of year – £0.01 Ordinary Shares
Shares issued in relation to further Equity issuance
Shares issued in relation to management contract
At end of year
677,840,088
426,441,838
877,603
6,778
4,265
8
470,495,220
206,878,516
466,352
1,105,159,529
11,051
677,840,088
6,778
4,705
2,068
5
6,778
On 27 January 2016, the Company announced that it intended to proceed with a proposed Open Offer, institutional Placing and
Offer for Subscription of new Ordinary Shares at a price of 124 pence per share. Following this on 12 February 2016 the Company
announced it had exercised its right to increase the size of the issue, due to excess demand, to £200 million. As a result, a total of
161,290,323 Ordinary Shares were issued at a price of 124 pence per Ordinary Share, of which 53,513,170 Ordinary Shares were
issued pursuant to the Open Offer, 7,435,906 Ordinary Shares were issued pursuant to the Offer for Subscription, 60,018,666
Ordinary Shares were issued under the Placing and 40,322,581 Ordinary Shares were issued under the Tap Issue.
On 27 May 2016 the Company announced that, in accordance with the terms of the management fee arrangements with the
Manager pursuant to which 25% of the management fee is payable in new Ordinary Shares, it issued 410,710 Ordinary Shares at an
issue price per Ordinary Share of 121.09 pence.
On 26 September 2016 the Company announced that, in accordance with the terms of the management fee arrangements with the
Manager pursuant to which 25% of the management fee is payable in new Ordinary Shares, it issued 466,874 Ordinary Shares at an
issue price per Ordinary Share of 124.48 pence.
On 28 September 2016, the Company announced that it intended to proceed with a proposed Open Offer, institutional Placing and
Offer for Subscription of new Ordinary Shares at a price of 132 pence per share. Following this on 14 October 2016, the Company
announced it had exercised its right to increase the size of the issue, due to demand significantly exceeding the target level, to
£350 million. As a result, a total of 265,151,515 Ordinary Shares were issued at a price of 132 pence per Ordinary Share, of which
76,364,364 Ordinary Shares were issued pursuant to the Open Offer, 29,628,265 Ordinary Shares were issued pursuant to the Offer
for Subscription, 83,401,310 Ordinary Shares were issued under the Placing and 75,757,576 Ordinary Shares were issued under the
Tap Issue.
25. SHARE PREMIUM
The share premium relates to amounts subscribed for share capital in excess of nominal value:
Balance at beginning of year
Share premium on Ordinary Shares issued in relation to further equity issuance
Share issue expenses in relation to further Equity issuance
Transfer to capital reduction reserve (see note 26)
Share premium on Ordinary Shares issued to management
Balance at end of year
31 December
2016
£’000
52,738
545,735
(10,159)
–
1,070
589,384
31 December
2015
£’000
272,536
226,931
(4,625)
(442,619)
515
52,738
129
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
26. CAPITAL REDUCTION RESERVE
Balance at beginning of year
Transfer from share premium
Fourth interim dividend for the period ended 31 December 2015
First interim dividend for the year ended 31 December 2016
Second interim dividend for the year ended 31 December 2016
Third interim dividend for the year ended 31 December 2015
Balance at end of year
Please refer to note 14 for details of the declaration of dividends to Shareholders.
27. RETAINED EARNINGS
Balance at beginning of year
Retained profit for the year
Balance at end of year
31 December
2016
£’000
31 December
2015
£’000
605,758
–
(20,335)
(26,026)
(13,020)
–
546,377
184,444
442,619
(3,764)
(4,707)
(9,446)
(3,388)
605,758
31 December
2016
£’000
175,828
91,895
267,723
31 December
2015
£’000
41,844
133,984
175,828
Retained earnings relates to all net gains and losses not recognised elsewhere.
28. NET ASSET VALUE (NAV) PER SHARE
Basic NAV per share is calculated by dividing net assets in the Group Statement of Financial Position attributable to ordinary
equity holders of the parent by the number of Ordinary Shares outstanding at the end of the year. As there are dilutive instruments
outstanding, both basic and diluted NAV per share are shown below.
Net asset values have been calculated as follows:
Net assets per Group Statement of Financial Position
EPRA NAV (see Additional Information
)
Ordinary Shares:
Issued share capital (number)
Basic net asset value per share
Dilutive shares in issue (number)
Diluted net asset value per share
Basic EPRA NAV per share
Dilutive shares in issue (number)
Diluted EPRA NAV per share
31 December
2016
£’000
1,414,535
1,426,185
31 December
2015
£’000
841,102
845,673
1,105,159,529
677,840,088
128.00p
533,132
127.93p
129.05p
533,132
129.00p
124.09p
415,179
124.01p
124.76p
415,179
124.68p
EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding fair value adjustments for
debt-related derivatives.
130
Additional Information – Notes to the EPRA Performance
Measures p144-145
Tritax Big Box REIT plc Annual Report 2016 29. OPERATING LEASES
The future minimum lease payments under non-cancellable operating leases receivable by the Group are as follows:
31 December 2016
31 December 2015
<1 year
£’000
84,654
49,828
2-5 years
£’000
354,073
194,416
>5 years
£’000
Total
£’000
1,014,435
1,453,162
476,899
721,143
The Group’s investment properties are leased to single tenants, some of which have guarantees attached, under the terms of a
commercial property lease. Each has upward only rent reviews which are linked to either RPI/CPI, open market or with fixed uplifts.
Please refer to table on page 39 which presents each level of passing rent currently payable under the operating leases.
30. TRANSACTIONS WITH RELATED PARTIES
For the year ended 31 December 2016 all Directors and the Partners of the Manager are considered key management personnel.
The terms and conditions of the Investment Management Agreement are described in the Management Engagement Committee
Report
The total amount outstanding at the year end relating to the Investment Management Agreement was £2.74 million (2015:
£2.34 million).
. Details of the amount paid for services provided by Tritax Management LLP (“the Manager”) are provided in note 8.
The total expense recognised in the Statement of Comprehensive Income relating to share based payments under the Investment
Management Agreement was £1.25 million (2015: £0.84 million), of which £0.67 million (2015: £0.50 million) was outstanding at the
year end.
Details of amounts paid to Directors for their services can be found within the Directors’ Remuneration Report
year SG Commercial LLP (“SG Commercial”) has provided general property agency services to the Group. SG Commercial has
been paid fees totalling £1.55 million (2015: £0.72 million) in respect of agency services for the year; this represents a total of 36%
(2015: 31%) of agency fees paid by the Group during the year. There were £0.04 million (2015: £0.07 million) of fees outstanding
as at the year end. Of the four controlling Members of the Manager, namely Mark Shaw, Colin Godfrey, James Dunlop and Henry
Franklin, all except Henry Franklin are also the controlling Members of SG Commercial. While there are currently no existing
contractual arrangements between the Company and SG Commercial, the Company may choose to appoint SG Commercial in the
future from time to time on either a sole or joint agency basis. Any such appointments have been and will continue to be made on
normal market-based contractual terms. In the event that any such appointment is proposed by the Manager, the Board has and
shall continue to be consulted and asked for its approval.
. Throughout the
Mark Shaw does not vote at any meeting of the Board relating to contractual terms to be agreed between the Company, the
Manager and SG Commercial, nor with respect to any investment decision where SG Commercial is acting as agent in any capacity.
31. CAPITAL COMMITMENTS
The Group had capital commitments of £82.4 million in relation to its forward funded pre-let development assets outstanding as at
31 December 2016 (31 December 2015: £138.96 million). All commitments fall due within one year from the date of this report.
Management Engagement Committee Report p85-87
Directors’ Remuneration Report p90-91
131
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE CONSOLIDATED ACCOUNTS
32. SUBSEQUENT EVENTS
On 22 February 2017, the Company announced that it has completed on the land and exchanged contracts to provide forward
funding for the development of a new distribution centre at Sigma Park, Didcot, Oxfordshire, pre-let to Hachette UK Ltd. The
Development represents an investment of £29.24 million.
On 1 March 2017, the Company announced that it had completed and drawn down on a new 10 year loan facility with PGIM.
The new loan was for a total of £90 million has a fixed interest rate payable of 2.54%.
33. CONTINGENT LIABILITIES
On 23 December 2016 the Group exchanged contracts, conditional on receiving planning consent, to provide forward funding for
the development of two new distribution warehouse facilities at Warth Park, Raunds, pre-let in their entirety under two separate
leases to Howden Joinery Group Plc. The investment price was £101.8 million.
132
Tritax Big Box REIT plc Annual Report 2016 FINANCIAL STATEMENTS
COMPANY BALANCE SHEET
Company Registration Number: 08215888
Non-current assets
Investment in subsidiaries
Total non-current assets
Current assets
Trade and other receivables
Cash held at bank
Total current assets
Total assets
Current liabilities
Trade and other payables
Loans from Group companies
Total current liabilities
Total liabilities
Total net assets
Equity
Share capital
Share premium reserve
Capital reduction reserve
Retained earnings
Total equity
Net asset value per share – basic
Net asset value per share – diluted
EPRA net asset value per share
At
31 December
2016
£’000
At
31 December
2015
£’000
Note
4
5
6
7
8
9
10
11
11
11
812,666
812,666
363,488
109,813
473,301
547,810
547,810
186,507
22,381
208,888
1,285,967
756,698
(5,007)
(51,233)
(56,240)
(2,903)
(53,224)
(56,127)
(56,240)
(56,127)
1,229,727
700,571
11,051
589,384
546,377
82,915
1,229,727
111.27p
111.22p
111.22p
6,778
52,738
605,758
35,297
700,571
103.35p
103.29p
103.29p
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not
presented its own profit and loss account in these financial statements. The profit attributable to the Parent Company for the
year ended 31 December 2016 amounted to £47.62 million (31 December 2015: £27.01 million).
These financial statements were approved by the Board of Directors on 7 March 2017 and signed on its behalf by:
Richard Jewson Chairman
133
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
1 January 2016
Total comprehensive income
Issue of Ordinary Shares
Shares issued in relation to further Equity issue (February 2016)
Shares issue expenses in relation to Equity issue (February 2016)
Shares issued in relation to further Equity issue (October 2016)
Share issue expenses in relation to Equity issue (October 2016)
Shares issued in relation to management contract
Share based payments
Transfer of share based payments to liabilities to reflect settlement
Dividends paid:
Fourth interim dividend in respect of period ended
31 December 2015 at 3.00 pence per Ordinary Share
First interim dividend in respect of year ended
31 December 2016 at 3.10 pence per Ordinary Share
Second interim dividend in respect of year ended
31 December 2015 at 1.50 pence per Ordinary Share
31 December 2016
1 January 2015
Total comprehensive income
Issue of Ordinary Shares
Shares issued in relation to further Equity issue (March 2015)
Share issue expenses in relation to Equity issue (March 2015)
Shares issued in relation to further Equity issue (June 2015)
Share issue expenses in relation to Equity issue (June 2015)
Shares issued in relation to management contract
Share based payments
Transfer of share based payments to liabilities to
reflect settlement
Cancellation of share premium account
Dividends paid:
Third interim dividend for the period ended 31 December 2014
(0.80 pence)
First interim dividend for the year ended 31 December 2015
(1.00 pence)
Second interim dividend for the year ended 31 December 2015
(1.50 pence)
Third interim dividend for the year ended 31 December 2015
(0.50 pence)
Undistributable reserves
Distributable reserves
Share
capital
£’000
6,778
–
1,613
–
2,652
–
8
–
–
–
–
–
Share
premium
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
£’000
52,738
605,758
35,297
700,571
–
198,387
(3,896)
347,348
(6,263)
1,070
–
–
–
–
–
–
–
–
–
–
47,618
47,618
–
–
–
–
–
1,250
(1,250)
200,000
(3,896)
350,000
(6,263)
1,078
1,250
(1,250)
–
–
–
(20,335)
(26,026)
(13,020)
–
–
–
(20,335)
(26,026)
(13,020)
11,051
589,384
546,377
82,915
1,229,727
4,705
272,536
184,444
8,285
469,970
–
–
1,591
–
477
–
5
–
173,409
(3,547)
53,522
(1,078)
515
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(442,619)
–
442,619
–
–
–
–
(3,764)
(4,707)
(9,446)
(3,388)
27,012
27,012
–
–
–
–
–
836
(836)
–
–
–
–
–
175,000
(3,547)
53,999
(1,078)
520
836
(836)
–
(3,764)
(4,707)
(9,446)
(3,388)
31 December 2015
6,778
52,738
605,758
35,297
700,571
134
Tritax Big Box REIT plc Annual Report 2016 FINANCIAL STATEMENTS
NOTES TO THE COMPANY ACCOUNTS
1. ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 100 Application of Financial
Reporting Requirements (“FRS 100”) and Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
• Certain comparative information as otherwise required by EU endorsed IFRS;
• Certain disclosures regarding the Company’s capital;
• A statement of cash flows;
• The effect of future accounting standards not yet adopted;
• The disclosure of the remuneration of key management personnel; and
• Disclosure of related party transactions with other wholly owned members of Tritax Big Box REIT plc.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures
are included in the Company’s consolidated financial statements. These financial statements do not include certain disclosures in
respect of:
• Share based payments;
• Financial instruments;
• Fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value.
Principal accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated.
Basis of accounting
These financial statements have been presented as required by the Companies Act 2006 and have been prepared under the historical
cost convention and in accordance with applicable Accounting Standards and policies in the United Kingdom (“UK GAAP”).
Currency
The Company financial information is presented in Sterling which is also the Company’s functional currency and all values are
rounded to the nearest thousand (£’000), except where otherwise indicated.
135
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS: NOTES TO THE COMPANY ACCOUNTS
1. ACCOUNTING POLICIES (CONTINUED)
Other income
Other income represents dividend income which has been declared by its subsidiaries and is recognised when it is received.
Dividends payable for shareholders
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final
equity dividends are recognised when approved by the shareholders at an annual general meeting.
Financial instruments
Financial assets and financial liabilities are recognised in the balance sheet when the Company becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently at amortised cost or their recoverable amount.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that the Company will be unable to collect all of the amounts due
under the terms receivable. The amount of such a provision is the difference between the net carrying amount and the present
value of the future expected cash flows associated with the impaired receivable. For trade debtors, which are reported net,
such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses.
On confirmation that the trade debtor will not be collectable the gross carrying value of the asset is written off against the
associated provision.
Financial liabilities
Financial liabilities including trade payables, other payables, accruals and amounts due to Group undertakings are originally
recorded at fair value and subsequently stated at amortised cost under the effective interest method.
Investments in subsidiaries
The investments in subsidiary companies are included in the Company’s balance sheet at cost less provision for impairment.
Share based payments
The expense relating to share based payments is accrued over the period in which the service is received and is measured at the
fair value of those services received. The extent to which the expense is not settled at the reporting period end is recognised as a
liability as any shares outstanding remain contingently issuable. Contingently issuable shares are treated as dilutive to the extent
that, based on market factors prevalent at the reporting period date, the shares would be issuable.
Significant accounting judgements, estimates and assumptions
The preparation of the Company’s financial information requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability affected in future periods. There were no significant accounting
judgements, estimates or assumptions in preparing these financial statements.
136
Tritax Big Box REIT plc Annual Report 2016 2. TAXATION
UK corporation tax
3. DIVIDENDS PAID
Fourth interim dividend in respect of period ended 31 December 2015 at 3.00 pence per
Ordinary Share (Third interim for 31 December 2014 at 0.80 pence per Ordinary Share)
First interim dividend in respect of year ended 31 December 2016 at 3.10 pence per
Ordinary Share (31 December 2015: 1.00 pence)
Second interim dividend in respect of year ended 31 December 2016 at 1.55 pence per
Ordinary Share (31 December 2015: 1.50 pence)
Third interim dividend in respect of year ended 31 December 2015 at 0.50 pence per
Ordinary Share
Total dividends paid
Total dividends paid for the year
Total dividends unpaid but declared for the year
Total dividends declared for the year
Year ended
31 December
2016
£’000
–
Year ended
31 December
2015
£’000
–
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
20,335
26,026
13,020
–
59,381
4.65p
1.55p
6.20p
3,764
4,707
9,446
3,388
21,305
3.00p
3.00p
6.00p
On 1 August 2016, the Company announced the declaration of a first interim dividend in respect of the period from 1 January
2016 to 30 June 2016 of 3.10 pence per Ordinary Share, which was payable on 25 August 2016 to Ordinary Shareholders on the
register on 18 August 2016.
On 28 September 2016, the Company announced the declaration of a second interim dividend in respect of the period 1 July
2016 to 30 September 2016 of 1.55 pence per Ordinary Share which was payable on 27 October 2016 to Shareholders on the
register on 14 October 2016.
On 7 March 2017, the Company announced the declaration of a third interim dividend in respect of the period 1 September 2016
to 31 December 2016 of 1.55 pence per Ordinary Share will be payable on or around 3 April 2017 to Shareholders on the register
on 16 March 2017.
4. INVESTMENTS
As at 1 January 2016
Increase in investments via share purchase
As at 31 December 2016
As at 1 January 2015
Increase in investments via share purchase
Decrease in investments via loan
As at 31 December 2015
Shares
£’000
547,810
264,856
812,666
254,424
293,386
–
547,810
Loan
£’000
–
–
–
30,270
–
(30,270)
–
Total
£’000
547,810
264,856
812,666
284,694
293,386
(30,270)
547,810
137
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
FINANCIAL STATEMENTS: NOTES TO THE COMPANY ACCOUNTS
4. INVESTMENTS (CONTINUED)
The Company has the following subsidiary undertakings as at 31 December 2016:
Principal activity
Country of incorporation
Ownership %
TBBR Holdings 1 Limited
TBBR Holdings 2 Limited
Tritax Acquisition 1 Limited
Baljean Properties Limited
Tritax Acquisition 2 Limited
Tritax Acquisition 2 (SPV) Limited
The Sherburn RDC Unit Trust
Tritax REIT Acquisition 3 Limited
Tritax REIT Acquisition 4 Limited
Tritax Acquisition 4 Limited
Tritax REIT Acquisition 5 Limited
Tritax Acquisition 5 Limited
Tritax Acquisition 6 Limited
Sonoma Ventures Limited
Tritax Acquisition 7 Limited
Tritax Ripon Limited
Tritax REIT Acquisition 8 Limited
Tritax Acquisition 8 Limited
Tritax REIT Acquisition 9 Limited
Tritax Acquisition 9 Limited
Tritax REIT Acquisition 10 Limited
Tritax Acquisition 10 Limited
Tritax REIT Acquisition 11 Limited
Tritax Acquisition 11 Limited
Tritax REIT Acquisition 12 Limited
Tritax Acquisition 12 Limited
Tritax REIT Acquisition 13 Limited
Tritax Acquisition 13 Limited
Tritax REIT Acquisition 14 Limited
Tritax Acquisition 14 Limited
Tritax Acquisition 15 Limited
Tritax Worksop Limited
Tritax REIT Acquisition 16 Limited
Tritax Acquisition 16 Limited
Tritax REIT Acquisition 17 Limited
Tritax Acquisition 17 Limited
Tritax REIT Acquisition 18 Limited
Tritax Acquisition 18 Limited
Tritax Acquisition 19 Limited
Tritax Harlow Limited
Tritax Acquisition 20 Limited
Tritax Lymedale Limited
Tritax REIT Acquisition 21 Limited
Tritax Acquisition 21 Limited
Tritax REIT Acquisition 22 Limited
Tritax Acquisition 22 Limited
Tritax REIT Acquisition 23 Limited
Tritax Acquisition 23 Limited
Tritax Acquisition 24 Limited
Tritax Knowsley Limited
138
Investment Holding Company
Investment Holding Company
Investment Holding Company
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Jersey
Jersey
Jersey
Isle of Man
Jersey
Jersey
Jersey
UK
UK
Jersey
UK
Jersey
Jersey
BVI
Jersey
Guernsey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
UK
Jersey
Jersey
BVI
UK
Jersey
UK
Jersey
UK
Jersey
Jersey
Guernsey
Jersey
Guernsey
UK
Jersey
UK
Jersey
UK
Jersey
Jersey
Isle of Man
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Tritax Big Box REIT plc Annual Report 2016 Tritax Burton Upon Trent Limited
Tritax Acquisition 28 Limited
Tritax Peterborough Limited
Click Peterborough SARL
Tritax Holdings CL Debt Limited
Tritax Portbury Limited
Tritax Newark Limited
Wellzone Limited
Sportdale Limited
Tritax Merlin 310 Trafford Park Limited
Tritax West Thurrock Limited
Tritax Tamworth Limited
Tritax Acquisition 34 Limited
Tritax Acquisition 35 Limited
Tritax Acquisition 36 Limited
Principal activity
Property Investment
Property Investment
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Country of incorporation
Ownership %
BVI
Jersey
Jersey
Luxembourg
Jersey
Jersey
Jersey
UK
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
The registered addresses for subsidiaries across the Group are consistent based on their country of incorporation and are
as follows:
Jersey entities: 13-14 Esplanade, St Helier, Jersey JE1 1EE
Guernsey entities: PO Box 25, Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3AP
Isle of Man entities: 33-37 Athol Street, Douglas, Isle of Man IM1 1LB
BVI entities: Jayla Place, Wickhams Cay 1, PO Box 3190, Road Town, Tortola, BVI VG1110
UK entities: Aberdeen House, South Road, Haywards Heath, West Sussex RH16 4NG
Luxemburg entity: 46A Avenue J F Kennedy L-1885, Grand Duchy of Luxembourg.
5. TRADE AND OTHER RECEIVABLES
Amounts receivable from Group companies
Prepayments
Other receivables
All amounts fall due for repayment within one year.
31 December
2016
£’000
362,796
40
652
363,488
31 December
2015
£’000
186,346
18
143
186,507
139
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS: NOTES TO THE COMPANY ACCOUNTS
6. CASH HELD AT BANK
Cash held at bank
7. TRADE AND OTHER PAYABLES
Trade and other payables
Accruals
31 December
2016
£’000
109,813
109,813
31 December
2015
£’000
22,381
22,381
31 December
2016
£’000
31 December
2015
£’000
1,585
3,422
5,007
140
2,763
2,903
8. SHARE CAPITAL
The share capital relates to amounts subscribed for share capital at its nominal value:
31 December
2016
Number
31 December
2016
£’000
31 December
2015
Number
31 December
2015
£’000
Issued and fully paid at 1 pence each
1,105,159,529
11,051
677,840,088
At beginning of year – £0.01 Ordinary Shares
Shares issued in relation to further Equity issuance
Shares issued in relation to management contract
At end of year
677,840,088
426,441,838
877,603
6,778
4,265
8
470,495,220
206,878,516
466,352
1,105,159,529
11,051
677,840,088
6,778
4,705
2,068
5
6,778
On 27 January 2016, the Company announced that it intended to proceed with a proposed Open Offer, institutional Placing and
Offer for Subscription of new Ordinary Shares at a price of 124 pence per share. Following this on 12 February 2016 the Company
announced it has exercised its right to increase the size of the issue, due to excess demand, to £200 million. As a result, a total of
161,290,323 Ordinary Shares were issued at a price of 124 pence per Ordinary Share, of which 53,513,170 Ordinary Shares were
issued pursuant to the Open Offer, 7,435,906 Ordinary Shares were issued pursuant to the Offer for Subscription, 60,018,666
Ordinary Shares were issued under the Placing and 40,322,581 Ordinary Shares were issued under the Tap Issue.
On 27 May 2016 the Company announced that, in accordance with the terms of the management fee arrangements with the
Manager pursuant to which 25% of the management fee is payable in new Ordinary Shares, it issued 410,710 Ordinary Shares at an
issue price per Ordinary Share of 121.09 pence.
On 26 September 2016 the Company announced that, in accordance with the terms of the management fee arrangements with the
Manager pursuant to which 25% of the management fee is payable in new Ordinary Shares, it issued 466,874 Ordinary Shares at an
issue price per Ordinary Share of 124.48 pence.
On 28 September 2016, the Company announced that it intended to proceed with a proposed Open Offer, institutional Placing and
Offer for Subscription of new Ordinary Shares at a price of 132 pence per share. Following this on 14 October 2016, the Company
announced it had exercised its right to increase the size of the issue, due to demand significantly exceeding the target level, to
£350 million. As a result, a total of 265,151,515 Ordinary Shares were issued at a price of 132 pence per Ordinary Share, of which
76,364,364 Ordinary Shares were issued pursuant to the Open Offer, 29,628,265 Ordinary Shares were issued pursuant to the
Offer for Subscription, 83,401,310 Ordinary Shares were issued under the Placing and 75,757,576 Ordinary Shares were issued
under the Tap Issue.
140
Tritax Big Box REIT plc Annual Report 2016
9. SHARE PREMIUM
The share premium relates to amounts subscribed for share capital in excess of nominal value:
Balance at beginning of year
Share premium on Ordinary Shares issued in relation to further equity issuance
Share issue expenses in relation to further Equity issuance
Transfer to capital reduction reserve (see note 26)
Share premium on Ordinary Shares issued to management
Balance at end of year
10. CAPITAL REDUCTION RESERVE
Balance at beginning of year
Transfer from share premium
Fourth interim dividend for the period ended 31 December 2015
First interim dividend for the year ended 31 December 2016
Second interim dividend for the year ended 31 December 2016
Third interim dividend for the year ended 31 December 2015
Balance at end of year
31 December
2016
£’000
52,738
545,735
(10,159)
–
1,070
589,384
31 December
2015
£’000
272,536
226,931
(4,625)
(442,619)
515
52,738
31 December
2016
£’000
31 December
2015
£’000
605,758
–
(20,335)
(26,026)
(13,020)
–
546,377
184,444
442,619
(3,764)
(4,707)
(9,446)
(3,388)
605,758
Please refer to note 13 for details of the declaration of dividends to Shareholders.
11. NET ASSET VALUE (NAV) PER SHARE
Basic NAV per share amounts are calculated by dividing net assets in the Company Balance Sheet attributable to ordinary equity
holders of the parent by the number of Ordinary Shares outstanding at the end of the period. As there are dilutive instruments
outstanding, both basic and diluted NAV per share are shown below.
Net asset values have been calculated as follows:
Net assets per Company Balance Sheet
EPRA NAV
Ordinary Shares:
Issued share capital (number)
Net asset value per Share – Basic
Potentially issuable dilutive shares (number)
Net asset value per Share – Diluted
EPRA net asset value per Share – Diluted
31 December
2016
£’000
1,229,727
1,229,727
31 December
2015
£’000
700,571
700,571
1,105,159,529
677,840,088
111.27p
533,132
111.22p
111.22p
103.35p
415,179
103.29p
103.29p
EPRA NAV is calculated as net assets per the Company Balance Sheet excluding fair value adjustments for debt-related derivatives.
141
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL STATEMENTS: NOTES TO THE COMPANY ACCOUNTS
12. RELATED PARTY TRANSACTIONS
The Company has taken advantage of the exemption not to disclose transactions with other members of the Group as the Company’s
own financial statements are presented together with its consolidated financial statements.
For all other related party transactions please make reference to note 31 of the Group accounts
.
13. GUARANTEES
The Company provides a full guarantee on behalf of each obligation in respect of each and every lender with regards to the Group
£550 million syndicated debt facility, as signed on 2 October 2015.
14. SUBSEQUENT EVENTS
The Company has capitalised £76.0 million of its intercompany receivable from TBBR Holdings 1 Limited and therefore increasing the
carrying value of its investment in subsidiaries and reduces the amounts receivable from Group companies.
142
note 31 p131
Tritax Big Box REIT plc Annual Report 2016 ADDITIONAL
INFORMATION
Notes to the EPRA performance measures
1. EPRA earnings per share
2. EPRA NAV per share
3. EPRA NNNAV
4. EPRA Net Initial Yield (NIY) and
144
108
108
108
EPRA ‘Topped up’ NIY
109
109
5. EPRA vacancy rate
109
4. EPRA cost ratio
Application of the principles of the AIC Code 146
148
Company information
149
Financial calendar
MISSION CRITICAL BIG BOXES
Big Boxes are essential to fulfilling
e-commerce sales and have a
crucial role to play in supporting
retailers through peak periods.
On Black Friday 2016 Currys
PC World reported more than
500,000 shoppers had visited its
website before 6am with orders
up 40% on 2015.
Source: The Guardian – Friday 25 November 2016
143
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
ADDITIONAL INFORMATION
NOTES TO THE EPRA PERFORMANCE MEASURES
1. EPRA EARNINGS PER SHARE
Total comprehensive income (attributable to Shareholders)
Adjustments to remove:
Changes in fair value of investment properties
Changes in fair value of interest rate derivatives
Profits to calculate EPRA Earnings per share
Weighted average number of Ordinary Shares
EPRA earnings per share – basic
Dilutive shares to be issued
EPRA earnings per share – diluted
2. EPRA NAV PER SHARE
Net assets at end of period
Adjustments to calculate EPRA NAV:
Changes in fair value of interest rate derivatives – 2016
Changes in fair value of interest rate derivatives – 2015
Changes in fair value of interest rate derivatives – 2014
EPRA Net assets
Shares in issue at 31 December 2016
Dilutive shares in issue
Dilutive EPRA NAV per share
3. EPRA NNNAV
EPRA Net assets
Include:
Fair value of financial instruments
Fair value of debt1
EPRA NNNAV
Shares in issue at 31 December 2016
Dilutive shares in issue
Year ended
31 December
2016
£’000
91,895
(47,514)
7,153
51,534
Year ended
31 December
2015
£’000
133,984
(106,751)
1,994
29,227
873,562,775
621,514,696
5.90p
4.70p
533,132
5.90p
415,179
4.70p
Year ended
31 December
2016
£’000
1,414,535
7,079
1,994
2,577
Year ended
31 December
2015
£’000
841,102
–
1,994
2,577
1,426,185
845,673
1,105,159,529
533,132
677,840,088
415,179
1,105,692,661
678,255,267
129.00p
124.68p
Year ended
31 December
2016
£’000
1,426,185
(11,650)
2,094
Year ended
31 December
2015
£’000
845,673
(4,571)
–
1,416,629
841,102
1,105,159,529
533,132
677,840,088
415,179
1,105,692,661
678,255,267
EPRA NNNAV per share
128.12p
124.01p
144
1 Difference between interest-bearing loans and borrowings included in balance sheet at amortised cost, and the fair value of interest bearing loans and borrowings.
Tritax Big Box REIT plc Annual Report 2016 4. EPRA NET INITIAL YIELD (NIY) and EPRA ‘TOPPED UP’ NIY
Investment Property – wholly owned
Less: development properties
Completed property portfolio
Allowance for estimated purchasers’ costs
Gross up completed property portfolio valuation (B)
Annualised contracted rental income
Less: contracted rental income in respect of development properties
Property outgoings
Annualised net rents (A)
Contractual increases for fixed uplifts
Topped up annualised net rents (C)
EPRA Net Initial Yield (A/B)
EPRA Topped Up Net Initial Yield
5. EPRA VACANCY RATE
Annualised estimated rental value of vacant premises
Portfolio estimated rental value1
EPRA vacancy rate
1 Excludes development properties
6. EPRA COST RATIO
Property operating costs
Administration expenses
Total costs including and excluding vacant property costs (A)
Total gross rental income
Total EPRA cost ratio (including and excluding vacant property costs)
Year ended
31 December
2016
£’000
1,803,111
(88,139)
1,714,972
116,618
1,831,590
99,664
(9,110)
(75)
86,128
4,351
90,479
4.70%
4.95%
Year ended
31 December
2016
£’000
–
97,945
0%
Year ended
31 December
2015
£’000
1,157,854
(176,268)
981,586
66,748
1,048,334
68,368
(16,432)
(16)
51,847
73
51,920
4.95%
4.95%
Year ended
31 December
2015
£’000
–
54,821
0%
Year ended
31 December
2016
£’000
Year ended
31 December
2015
£’000
75
11,708
11,783
74,656
15.8%
16
7,830
7,846
43,784
17.9%
145
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION ADDITIONAL INFORMATION
APPLICATION OF THE PRINCIPLES OF THE AIC CODE
The Company has applied the 21 Principles of the AIC Code as follows:
THE BOARD
1. The Chairman should be independent
The Company’s Chairman, Richard Jewson, is independent. In addition, the Board has appointed a Senior Independent Director who, among
other things, will take the lead in the annual evaluation of the Chairman and will be an alternative contact for Shareholders.
2. A majority of the Board should be independent of the Manager
The Board currently comprises five Non-Executive Directors of which the Chairman, Richard Jewson, Jim Prower, Stephen Smith and Susanne Given are
independent of the Manager. Mark Shaw, who is a partner and chairman of the Manager, Tritax Management LLP, is not considered to be independent.
3. Directors should be submitted for re-election at regular intervals
As the Company is a constituent of the FTSE 250, each of the Directors will retire and stand for re-election at the AGM in May 2017.
4. The Board should have a policy on tenure
The Company’s practice is to appoint Directors for a minimum two year term subject to annual re-election.
5. There should be full disclosure of information about the Board
Full information about the Board, as a whole, and the Directors, as individuals, is set out, inter alia, in this Annual Report.
6. The Board should aim to have a balance of skills, experience, length of service and knowledge of the Company
The Nomination Committee has undertaken a review of the Board’s composition and appointed Susanne Given as a Non-Executive Director
and member of the Audit Committee. In making appointments to the Board, the Committee considers the wide range of skills, knowledge and
experience required to maintain an effective Board. The Nomination Committee Report
is on pages 75-76.
7. The Board should undertake a formal and rigorous annual evaluation of its own performance and
that of its Committees and individual Directors
The Board conducted an internal Board Evaluation
. Details of the evaluation are set out on page 72.
8. Directors’ remuneration should reflect their duties, responsibilities and the value of their time spent
The Board as a whole is responsible for reviewing the scale and structure of the Directors’ remuneration and sets remuneration appropriately,
so as to attract, retain and motivate Board members. The Directors each received an increase to their annual fee in September 2016. This review was
undertaken by the Nomination Committee and was overseen by Jim Prower the Senior Independent Director. Please see page 90
.
9. The independent Directors should take the lead in the appointment of new Directors and the process should be disclosed in the
Annual Report
The appointment of new Directors to the Board is led by the Nomination Committee. Further details of the activities of the Nomination
Committee
can be found on page 75-76.
10. Directors should be offered relevant training and induction
All Directors receive an induction on joining the Board. Please see page 73
the Director Training Programme
can be found on page 73.
for further details of Susanne Given’s induction training. Details of
11. The Chairman (and the Board) should be brought into the process of a new launch at an early stage
The Company operates a single fund and has no plans to launch further funds. However, whenever the Company carries out equity fundraisings
the Chairman and the Board are always involved and are integral to the process from an early stage.
BOARD MEETINGS AND THE RELATIONSHIP WITH THE MANAGER
12. Boards and Managers should operate in a supportive, co-operative and open environment
The Chairman promotes an open and constructive environment in the boardroom and actively invites the Non-Executive Directors’ views. The
Non-Executive Directors provide objective, rigorous and constructive challenge to the Manager and communicate regularly among themselves.
13. The primary focus at regular Board meetings should be a review of investment performance and associated matters such as gearing,
asset allocation, marketing/investor relations, peer group information and industry issues
The Chairman sets the agendas for the meetings, manages the meeting timetable and facilitates open and constructive dialogue during the
meetings. The Board has a schedule of matters specifically reserved for its decision which include the approval of budgets, setting investment and
performance objectives and policies, the approval of the Company’s financial statements and published reports, the approval of equity and debt
fundraising and the approval of all investments.
Prior to each meeting, the Directors are provided with a comprehensive set of papers providing information on the Company’s proposed
investments, its financial position and performance, an update on relevant sectors including the commercial property and retail sectors,
a monthly Shareholder analysis and a report on regulatory and governance matters.
146
Tritax Big Box REIT plc Annual Report 2016 14. Boards should give sufficient attention to overall strategy
The Board, together with the Manager, regularly considers the overall strategy of the Company in light of its performance and the sector overall.
15. The Board should regularly review both the performance of, and contractual arrangements with, the Manager
The performance of the Manager is assessed on a regular basis by the Management Engagement Committee. Further details of the review in
2016 are set out in the Management Engagement Committee Report
The Board together with the Audit Committee sets the Group’s risk appetite and annually reviews the effectiveness of the Group’s risk
management and internal control systems. The activities of the Audit Committee, which assists the Board with its responsibilities in relation to
the management of risk, are summarised in the Audit Committee Report
see pages 85-86.
on pages 80-84.
16. The Board should agree policies with the Manager covering key operational issues
The Board has an agreed set of policies with the Manager covering key operational areas and the implementation of such policies is subject
to a regular, independent review. Further details of this review of internal controls are set out in Leadership
on page 82. Langham Hall UK
Depositary LLP acts as depositary for the Company and conducts an independent review of the internal controls of the Company. Further
are set out on page 79.
details of the role of Langham Hall UK Depositary LLP
17. The Board should monitor the level of the share price discount or premium (if any) and, if desirable, take action to reduce it
The Board monitors the performance on the Company’s share price both on an absolute level and relative to the prevailing Net Asset Value per
Ordinary Share. The Directors have at their disposal the authority to buy back or issue Ordinary Shares (within certain parameters) which would
allow them to address anomalies in the performance of the Ordinary Shares, if necessary. The Board works with the Company’s joint financial
advisers and corporate broker to maintain regular contact with the investors and monitor investor sentiment.
18. The Board should monitor and evaluate other service providers
The Management Engagement Committee together with the Manager reviews the continuing appointment of its service providers to ensure that terms
remain competitive and in the best interests of Shareholders, through an annual review of the relevant contracts.
The Board has access to independent professional advisers at the Company’s expense as noted on page 74
.
SHAREHOLDER COMMUNICATIONS
19. The Board should regularly monitor the Shareholder profile of the Company and put in place a system for canvassing Shareholder
views and for communicating the Board’s views to Shareholders
Representatives of the Manager met regularly with Shareholders throughout 2016, providing the Board with feedback on Shareholder views
and concerns. Please see Relations with Shareholders and stakeholders
The Directors make themselves available at general meetings to address Shareholder queries and the Annual General Meeting, in particular,
provides the Board with an important opportunity to meet with Shareholders, who are invited to meet the Board following the formal business
of the meeting.
for further information on pages 88-89.
20. The Board should normally take responsibility for, and have direct involvement in, the content of communications regarding major
corporate issues even if the Manager is asked to act as spokesperson
All communications with Shareholders are subject to sign off by one or more of the Directors, as appropriate. Any communications regarding
major corporate issues are approved by the Board prior to release.
21. The Board should ensure that Shareholders are provided with sufficient information for them to understand the risk:reward balance
to which they are exposed by holding the shares
The Board places great importance on communication with Shareholders. It aims to provide Shareholders with a full understanding of the
Company’s activities and performance and reports formally to Shareholders twice a year by way of the Half Yearly Report and the Annual
Report, including in particular, the Strategic Report. The Strategic Report
performance of the Company, the Investment Policy, strategy and the risks and uncertainties relating to the Company’s future prospects.
is set out on pages 10-60 and this provides information about the
This is supplemented by frequent notifications via a regulatory information service on developments such as asset acquisitions, debt financings
and fundraising activities, and the Company’s Website is regularly updated.
147
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION ADDITIONAL INFORMATION
COMPANY INFORMATION
Company Registration Number: 08215888
Incorporated in the United Kingdom
Directors, Management and Advisers
Directors
Richard Jewson Non-Executive Chairman
Jim Prower Senior Independent
Non-Executive Director
Stephen Smith Non-Executive Director
Susanne Given Non-Executive Director
Mark Shaw Non-Executive Director
Legal Advisers to
the Company
as to English law
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Registered office
Standbrook House
4th Floor
2-5 Old Bond Street
Mayfair
London
W1S 4PD
Manager
Tritax Management LLP
2-5 Old Bond Street
Mayfair
London
W1S 4PD
Joint Financial Adviser and
Corporate Broker
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
Joint Financial Adviser
Akur Limited
66 St James’s Street
London
SW1A 1NE
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Company Secretary
Tritax Management LLP
Standbrook House
4th Floor
2-5 Old Bond Street
Mayfair
London
W1S 4PD
Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Administrator
Capita Sinclair Henderson Limited
Beaufort House
51 New North Road Exeter
EX4 4EP
Depositary
Langham Hall UK Depositary LLP
5 Old Bailey
London
EC4M 7BA
Bankers
Barclays Bank PLC
PO Box 3333
One Snowhill
Snow Hill Queensway
Birmingham
B3 2WN
Helaba Landesbank
Hessen-Thüringen Girozentrale
3rd Floor
95 Queen Victoria Street
London
EC4V 4HN
Wells Fargo Bank, N.A.
90 Long Acre
London
WC2E 9RA
ING Real Estate
Finance (UK) B.V.
60 London Wall
London
EC2M 3JQ
PGIM Real Estate Finance
8th Floor
One London Bridge
London
SE1 9BG
Valuer
CBRE Limited
Henrietta House
Henrietta Place
London
W1G 0NB
148
Tritax Big Box REIT plc Annual Report 2016 ADDITIONAL INFORMATION
FINANCIAL CALENDAR
7 March 2017
Announcement of Full Year Results
17 May 2017
Annual General Meeting
30 June 2017
Half Year End
10 August 2017
Announcement of Half Year Results
31 December 2017
Full Year End
MISSION CRITICAL BIG BOXES
Our Marks & Spencer, Big Box
receives 1.4 million electronically
tagged items from suppliers every
week. The heavily automated
facility includes an 82 ft high
automated storage shed, a cross
sorting conveyor belt, boxed
picking and hanging picking.
Some 1,200 people work at the
site during peak times.
Source: http://www.logisticsmanager.com/how-
ms-is-improving-the-multi-channel-process/
Designed and produced by Bruce Associates www.bruceassociates.co.uk
in association with Richard Hollins with principal photography by Andrew Molyneuw
Printed in England by Cousin
149
Tritax Big Box REIT plc Annual Report 2016 OVERVIEWGOVERNANCESTRATEGIC REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION