Tritax Big Box REIT plc
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Delivering
Annual Report 2018
Contents
Strategic Report
Governance
Financial statements
1
Tritax Big Box
Delivering a Compelling
2
Business
4
2018 Highlights
6
Chairman’s Statement
8
Our Achievements in 2018
10
Why Big Boxes?
12
Our Portfolio
A Quality Portfolio
14
The Logistics Property Market 16
Our Business Model
18
Our Objectives and Strategy 20
22
Manager’s Report
– Delivering Growth
22
Delivering Logistics
Development for London
– Implementing the Group’s
28
Investment Policy
Delivering Solutions for our
Customers
30
38
– Delivering the Group’s Asset
Management Strategy
Delivering Growth Through
Asset Management
40
44
– The Group’s Financial
46
Strategy in Action
50
The Manager
Key Performance Indicators 52
EPRA Performance Indicators 53
54
Our Sustainable Approach
58
Our Responsible Business
Our Principal Risks and
Uncertainties
60
Going Concern and Viability 68
Board Approval
of the Strategic Report
69
71
72
Contents
Chairman’s Governance
Overview
Application of the Principles
75
of the 2016 AIC Code
Leadership
77
How we Govern the Company 79
82
The Board of Directors
Effectiveness
84
Nomination Committee Report 86
Accountability
88
Audit & Risk Committee Report 90
Management Engagement
Committee Report
Relations with Shareholders
and Stakeholders
Directors’ Remuneration
99
Report
Directors’ Report
101
Responsibilities Statements 104
Independent
Auditor’s Report
105
94
98
111
112
Contents
Group Statement of
Comprehensive Income
Group Statement
of Financial Position
113
Group Cash Flow Statement 114
Group Statement of
Changes in Equity
Notes to the
Consolidated Accounts
Company Balance Sheet
Company Statement
of Changes in Equity
Notes to the
Company Accounts
116
144
145
146
115
Additional information
157
Contents
Notes to the EPRA and other
Key Performance Indicators 158
161
Glossary of Terms
164
Company Information
165
Financial Calendar
Tritax Big Box REIT plc Annual Report 2018
Who we are
Who we serve
Tritax Big Box REIT is a Real Estate Investment Trust. Our
shares have been listed on the London Stock Exchange since
December 2013 and are included in the FTSE 250 Index.
Our Customers are some of the biggest names in logistics,
manufacturing, consumer products, retail and automotive.
We build long-term, mutually beneficial relationships with
them, to enhance their business and ours.
Our vision
We are the UK’s pre-eminent owner of Big Boxes. We aim to
own and deliver the best logistic assets in the best locations
providing our Customers with premises within which they can
adapt and grow their businesses efficiently, profitably and
sustainably.
Our culture
In our market we have built a reputation of trust and reliability.
We have a forward-thinking, entrepreneurial culture, which
enables us to move rapidly when attractive opportunities
present themselves. We combine this with a rigorous
approach to due diligence, controls and governance,
designed to protect the interests of our Shareholders.
What we do
Tritax Big Box REIT is the UK’s leading investment company
focused on larger scale logistics real estate. We own the
largest and most modern portfolio of these assets in the
UK. We have assembled a portfolio unmatched in quality in
the UK quoted real estate sector. We invest in, and actively
manage, income-producing assets, land suitable for logistics
development and pre-let forward funded developments.
We follow a “core-plus” strategy, in which Foundation assets
provide our core, low-risk income, and Value Add assets,
Growth Covenant assets and strategic land (including limited
speculative development) offer the potential for enhanced
returns. This strategy supports our objective of delivering
secure, attractive and growing dividends whilst capturing
capital growth for our Shareholders.
Why we do it
We invest in real estate that is central to modern logistics.
Our properties are critically important to our Customers’
long-term strategies, helping them to improve their
operational efficiencies, generate cost savings and fulfil
rapidly growing e-commerce sales.
Strong demand driven by structural change and limited
supply, both occupationally and for investment stock, make
our subsector one of the most exciting in UK real estate.
We look to take advantage of these dynamics by applying our
sector-leading expertise, to deliver attractive total returns for
Shareholders.
1
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Delivering a
Compelling Business
We have a number of significant strengths that make
our business difficult to replicate. In a dynamic market,
this makes us a compelling business for the long term.
1 We operate in an attractive
market, benefiting from
profound structural changes
In an era of low economic
growth and pressure on
margins, our Customers
need Big Boxes to generate
cost savings and efficiencies,
so they can grow their
profits. Big Boxes are also
essential for managing the
growth in e-commerce and
the complexities of today’s
omni-channel supply chains.
Occupational demand for
logistics assets exceeds
supply and this imbalance
favours asset owners, creating
powerful features in our
markets. These include long
leases and the potential for
attractive rental growth.
See The Logistics Property Market, pages
16-17 for more
2
Tritax Big Box REIT plc Annual Report 2018
3 The Manager gives us
a competitive advantage
Our Investment Manager
is Tritax Management LLP.
We benefit significantly from
the Manager’s expertise,
knowledge and specialist
subsector focus, which give
us an extensive network of
high-quality industry contacts.
This enables us to source
and acquire off market at
attractive prices and to use
asset management to deliver
outperformance.
See Our Business Model, pages 18-19
2 We are highly selective,
acquiring and managing some
of the UK’s best logistics
assets
We were first movers in this
subsector and our dedication
to it differentiates us from
our peers. We continue to
strengthen the portfolio,
which contains outstanding
assets let to institutional-grade
Customers.
See Our Portfolio, pages 12-13 and the
Manager’s Report, pages 22-49 for more
31.5m sq ft*
Highest ever level of occupational
take up in 2018
86%
Portfolio acquired off market
since IPO
12.8%
Average total return delivered per
annum since IPO
*Source: CBRE – All assets over 100,000 sq ft
Tritax Big Box REIT plc Annual Report 2018
3
5 We are well positioned
for further success
We believe the UK Big Box
market is still in its relative
infancy and there are good
prospects for continued long-
term growth. We see further
opportunities to add standing
investments and forward
funded developments to
our portfolio, and to develop
new assets on strategic land,
particularly following our
acquisition of db symmetry.
This approach is designed to
support dividend growth for
Shareholders and our total
return ambitions.
See Our Achievements in 2018, pages 8-9
and the Manager’s Report, pages 22-49 for more
4 We can deliver attractive
returns for Shareholders
Long leases, growing rental
income, increasing economies
of scale and a largely fixed
cost base allow us to offer
secure and rising dividends
for Shareholders. At the same
time, tenant and investor
demand for Big Boxes and our
asset management programme
help us to protect and grow
capital values.
See the Chairman’s Statement, pages 6-7 and
the Manager’s Report, pages 22-49 for more
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
2018 Highlights
Financial
6.70p
Dividend per share
(2017: 6.40p) +4.7%
152.83p
EPRA NAV
(2017: 142.24p) +7.4%
12.1%
Total return
(2017: 15.2%) -20.3%
6.88p
Adjusted earnings per share
(2017: 6.37p) +8.0%
£3.42bn
Portfolio value
including forward funded
development commitments
(2017: £2.61bn) +31.1%
£113.8m
Operating profit
before changes in fair value
of investment properties
(2017: £93.8m) +21.3%
Dividend declared per share (p)
6.70p (+0.30p)
2018
2017
2016
2015
2014
6.70
+4.7%
6.40
6.20
6.00
4.15
Dividend cover (%)
103%
2018
2017
2016
2015
2014
103
100
105
102
117
4
Tritax Big Box REIT plc Annual Report 2018
Post balance sheet activity
£250m
Equity raised in February 2019 to
fund db symmetry acquisition
db symmetry acquisition
87% economic interest acquired
in a strategic land portfolio, with
the potential to deliver 38.2m sq ft*
of logistics assets
6.85p
2019 dividend target to show
continued progression over 2018
Operational
+8
Big Box assets acquired
(Aggregate purchase price:
£641.5m)
+450,000 sq ft
Detailed planning consent achieved
(Littlebrook, Dartford)
14.4yrs
Portfolio WAULT
(2017: 13.9yrs)
29.8m sq ft1
Portfolio 100% let or pre-let
(2017: 22.7m sq ft)
1 Includes all 54 assets held at 31 December
2018; excludes Littlebrook, Dartford strategic
land.
EPRA NAV per share (p)
152.83p (+10.6p)
Contracted annual rental
income (£m)
£161.12m (+£35.17m)
2018
2017
2016
2015
2014
152.83
+7.4%
142.24
129.00
124.68
2018
2017
2016
2015
68.37
125.95
99.66
161.12
+27.9%
107.57
2014
36.16
* Including DMA, average and profit share.
Tritax Big Box REIT plc Annual Report 2018
5
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Chairman’s Statement
The value of income amidst economic uncertainty
2018 was another successful year for the Group and completed five
years since our IPO. Amidst political and economic uncertainty on
the world stage, Brexit loomed ever larger and the UK Stock Market
ended the year on a downward trajectory. To date, our subsector
has been largely insulated from the impact of these economic
and political uncertainties. Our portfolio provides a high-quality
income stream, supporting our aim of delivering secure and growing
dividends to Shareholders. Over the last five years, the Group has
carefully and deliberately constructed a portfolio of outstanding
assets, let to equally impressive Customers. This allowed us to
declare dividends totalling 6.70 pence per share in respect of 2018,
as we once again met our annual dividend target. The total dividend
for the year was fully covered by the Group’s Adjusted earnings
of 6.88 pence per share. The total return for 2018 was 12.1%,
exceeding our target of at least 9% per annum.
Strengthening the portfolio
Robust investment demand for Big Box assets makes acquiring
at attractive prices more challenging in the current environment.
Nevertheless, during the year, all of our acquisitions were completed
off market and the prices were attractive compared to valuation.
Our first mover advantage has given us an unparalleled track
record that makes us a first port of call for vendors looking to sell.
The Manager’s network of industry contacts, market intelligence
and specialist focus on logistics assets are also key, allowing us to
identify and exploit market imperfections. We also have a strong
balance sheet and a well-developed debt financing platform,
giving us flexibility of funding. Finally, patience and capital discipline
ensure we never compromise on the quality of what we buy.
This approach allowed us to acquire eight assets in the year, of
which seven were forward funded pre-let developments and one
was a standing asset, for a total price of £641.5 million, excluding
purchasing costs. These acquisitions added new Customers to
the portfolio and further deepened our relationships with existing
Customers such as Amazon and Howdens. At 31 December 2018,
the Group owned 54 income-producing assets and 114 acres of
strategic land at Littlebrook, Dartford. At the year end, the portfolio
was independently valued at £3.42 billion including forward funding
development commitments, reflecting a like-for-like annual valuation
uplift of 4.7%.
The forward funded pre-let developments we acquired in 2018
mean that the Group has now forward funded 16 developments,
of which 10 have completed successfully to date, all delivering
substantial valuation uplifts over their acquisition prices. This level
of activity makes us the leading development funder in the sector
and our track record is a significant advantage when developers and
their occupiers are looking for a credible partner.
We are making good progress at Littlebrook, where demolition
of phases 1 and 2 has completed on time and within budget. In
November, we secured a consolidated planning permission for
a 450,000 sq ft logistics facility on phase 1 of the site.
Management focus
The Manager continued to add value through its asset
management programme, including securing rent reviews, lease
re-gears and amendments, re-letting, a new letting as well as physical
enhancements to assets. Customer relationships are at the heart
of the business and the team has worked closely with Customers
throughout the year, including helping a number to plan for the
potential impact of Brexit through additional space or automation.
Positioning the Group for future returns
With increased demand for existing logistics investments we believe
that better value can be captured through the development of
new assets. One of the year’s key events was gaining Shareholder
approval for an amendment to our Investment Policy. This allows
us to increase the maximum exposure to strategic land, provides
for modest speculative development and enables us to develop or
acquire ancillary assets, including smaller distribution warehouses
or “last mile” facilities (
see page 20 for more details).
6
Tritax Big Box REIT plc Annual Report 2018
For Our Investment Policy, see page 20
A substantial part of the development profit can be captured by
sourcing opportunities at an early stage. Our focus will remain
primarily on the pre-let development of large-scale assets which
tend to attract financially strong tenants on long leases, helping to
maintain the modernity, income quality and WAULT of our portfolio.
Securing new financing
Implementing our growth plans requires us to raise an appropriate
balance of equity and debt capital. In April 2018, we raised further
equity funding through a heavily oversubscribed placing, which raised
the maximum gross proceeds of £155.6 million. This equity was
principally used to acquire forward funded pre-let developments.
Our debt financing reflects our growing maturity and scale. During
the year, we built on our flexible, largely unsecured debt platform via
the debut issue of unsecured loan notes in the private placement
market, totalling £400 million. This further diversified our borrowings
and has other attractive features, such as split maturities and a
delayed draw down (
see page 48 for more details).
We have maintained a conservative LTV at 27.3%, while Moody’s
reaffirmed its Baa1 credit rating during the year.
Strong financial results and growing dividends
Our secure income and robust cost control mean that we continued
to deliver a strong and predictable financial performance in 2018.
Operating profit before changes in the fair value of investment
properties increased by 21.3% to £113.76 million (2017:
£93.78 million). This contributed to Adjusted earnings per share of
6.88 pence (2017: 6.37 pence), which fully covered our dividends
in respect of the year. The EPRA NAV per share rose by 10.59 pence
or 7.4%, to 152.83 pence.
The Company has declared four interim dividends of 1.675 pence
per share each in respect of the year. Further details of these
dividends can be found in the Manager’s Report on pages 22-49
The dividend for the three months to 31 December 2018 will be
paid on 28 March 2019, to Shareholders on the register at
15 March 2019.
.
We are targeting a progressive total dividend, paid quarterly,
of 6.85 pence per share for 2019.
Enhancing the Board
We were pleased to welcome Richard Laing to the Board as a
Non-Executive Director on 16 May 2018. Richard has joined both
the Management Engagement and Nomination Committees and
has taken over from Jim Prower as chairman of the Audit & Risk
Committee. Jim remains a member of the Audit & Risk Committee
and I thank him on behalf of the Board for his significant contribution
in his time as committee chairman.
Two further changes to the Board took place after the year end.
Mark Shaw, who is Chairman and Partner of the Manager,
retired from the Board on 1 February 2019. We thank him for his
significant and valuable contribution to the Company’s creation
and development over the last five years, and for his expertise
and guidance.
Alastair Hughes joined the Board as a Non-Executive Director on
1 February 2019. As a result of these changes, all members of the
Board are now independent, including me as Chairman.
Acquisition of db symmetry
Following our year end, the Company announced that it had
completed the acquisition of an 87% economic interest in
db symmetry, which owns one of the UK’s largest strategic land
portfolios for logistics property. This is a transaction that the
Manager had been working on for an extensive period of time.
It is a significant milestone for the Company and a natural extension
following the amendment to our Investment Policy in 2018.
This acquisition includes both consented and strategic land, offering
the Company phased access to deliver a potential 38.2 million sq ft
of logistics assets across key logistics locations in the UK.
Attractive outlook
The quality of the Group’s portfolio and Customer base mean
that we are confident of continuing to deliver secure dividends to
Shareholders, resulting in attractive returns in a low interest rate
environment. While the continued delays and lack of clarity over
Brexit presents a substantial uncertainty for the UK economy, our
market has remained robust. Since the referendum in June 2016,
occupiers have continued to search for space, rents have risen and
yields have hardened. Brexit is also encouraging manufacturers
and retailers to hold additional stock domestically, increasing
occupational requirements for UK warehouse space while supply
constraints continue. This reinforces the favourable dynamics for
landlords. Nonetheless, Brexit does present significant risk for
the UK economy which could impinge upon the current positive
attributes of our market.
We see good opportunities to continue to add assets to the
portfolio at prices that create value at the point of purchase.
Following the db symmetry acquisition, we now have the ability
to bring through our own developments which are expected to
contribute materially to earnings growth and our progressive
dividend policy over the medium term.
Sir Richard Jewson KCVO, JP Chairman
6 March 2019
For The Group’s Financial Strategy in Action – Debt capital, see page 48
For The Manager’s Report, see page 22-49
Tritax Big Box REIT plc Annual Report 2018
7
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Our Achievements in 2018
2018 was another year of significant activity for the Group, as we continued to
enhance the portfolio through acquisitions and asset management.
1
2
Acquisitions
15 January Completed contracts on
the £103.70 million forward funded
development of two distribution
facilities at Warth Park, Raunds,
Northamptonshire, pre-let to Howden
Joinery Group plc.
6 February Exchanged contracts
on a forward funded development
of a logistics facility, pre-let to Eddie
Stobart Limited, at Midlands Logistics
Park, Corby, Northamptonshire, for
£81.80 million.
18 January Acquired the AO World plc
National Distribution Centre at
Weston Road, Crewe, Cheshire for
£36.10 million. 1
29 June Exchanged contracts for
the forward funded development
of a logistics facility for Amazon UK
Services Ltd at Link 66, Darlington.
The total commitment was
£120.26 million.
28 September Exchanged contracts
for the forward funded development
of a logistics facility for Amazon UK
Services Ltd at Haydock, St Helens,
Merseyside, for a total commitment
of £68.71 million. 2
12 October Exchanged contracts
for the forward funded development
of a logistics facility at Corby for
BSH Home Appliances Ltd, for a total
commitment of £89.33 million.
24 December Completed contracts
for the forward funded development
of a logistics facility near Durham
pre-let to Amazon UK Services Ltd,
for a commitment of £141.55 million1.
For more information on financing
see Manager’s Report on pages 22-49
.
1 Commitment based on target build size.
Asset Management
15 March Upon expiry of the
Kellogg’s lease at Trafford Park,
Manchester, we secured a new
10-year lease term with Kellogg’s
which expires in April 2028. 3
26 November Obtained planning
permission for a 450,000 sq ft logistics
facility on the Group’s development
land at Littlebrook, Dartford. 4
29 November Completed a new 15-
year lease to Amazon UK Services Ltd
at the Group’s Chesterfield property,
following successful negotiation of a
lease surrender with Tesco. 5
3
For more information
on Asset Management
see Manager’s Report on
pages 22-49
.
8
Tritax Big Box REIT plc Annual Report 2018
Board
7 March Declared an interim dividend
of 1.60 pence per share, in respect of
the three months to 31 December 2017.
16 May Appointed Richard Laing as a
Non-Executive Director and Chairman
of the Audit & Risk Committee.
17 May Declared an interim dividend
of 1.675 pence per share, in respect
of the three months to March 2018.
12 July Declared an interim dividend
of 1.675 pence per share, in respect
of the three months to 30 June 2018.
For more information on
dividends see Manager’s
Report on pages 22-49
For more information on
Directors see The Board of Directors
on pages 82-83
11 October Declared an interim
dividend of 1.675 pence per share,
in respect of the three months to
30 September 2018.
23 November Shareholder approval
for an amendment to the Company’s
Investment Policy that increases
our maximum potential exposure to
strategic land.
1 February 2019 Appointed Alastair
Hughes as a Non-Executive Director.
Mark Shaw retired from the Board.
6 March 2019 Declared an interim
dividend of 1.675 pence per share,
in respect of the three months to
31 December 2018.
Financing
18 April Raised gross proceeds of
£156 million, through a placing of
109,364,308 new Ordinary Shares at
142.25 pence per share.
1 October Agreed a new, short-term
unsecured banking facility of £250
million.
5 December Signed an agreement with
new institutional investors for a private
placement of £400 million of unsecured
fixed-rate loan notes.
19 December Extended the term of the
Group’s £350 million revolving credit
facility by one year to December 2023.
For more information
on financing see Manager’s
.
Report on pages 22-49
4
5
Tritax Big Box REIT plc Annual Report 2018
9
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Why Big Boxes?
We believe that the Big Box logistics sector is one of the most exciting asset
classes in the UK property market. Here we explain why Big Boxes are highly
attractive to occupiers and investors alike.
Big Boxes are at the heart of modern logistics
Demand for logistics space is strong
Big Boxes are large logistics facilities that can be a strategic
necessity for their occupiers. They are typically located near
motorways or major roads enabling occupiers to deliver efficiently
to several major towns and cities. They are also often near rail freight
hubs, airports or ports and act as the breakdown point for bulk
deliveries arriving by cargo ship. Their locations therefore allow for
efficient stocking and onward distribution.
Big Boxes have increased in size both laterally and vertically. The
consequent increased volume of space provides flexibility, allowing
for the installation of high racking or mezzanine floors which can
double or triple the operational floorspace. The buildings are
also becoming smarter, with occupiers increasingly investing in
advanced technology systems that allow them to stock and retrieve
products rapidly and automatically. This high level of automation
is usually only found in larger modern logistics buildings and the
occupier’s investment can exceed the cost of the building itself.
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 occupiers need Big Boxes for three primary reasons:
1. To improve their operational efficiency, by centralising
dispersed distribution frameworks into fewer, larger facilities. This
allows them to optimise their supply chains, staffing and stock
management, and benefit from economies of scale and automation.
These efficiencies are crucial to protecting profitability in an
increasingly competitive environment.
2. To meet the requirements of a fast-evolving retail market
and in particular to fulfil e-commerce sales, which are growing
relentlessly. The UK is one of the most advanced e-commerce
market in the world. Big Boxes are essential for fulfilling orders,
handling returns, coping with surges in demand (for example, around
events such as “Black Friday”) and meeting consumer expectations
for ever-faster delivery.
3. To meet their sustainability objectives, by occupying assets
that are constructed using state of the art design and materials and
incorporate initiatives such as low carbon technologies that not
only minimise their environmental footprint, but ensure that natural
resources are consumed as efficiently as possible.
10
Tritax Big Box REIT plc Annual Report 2018
For further information, see The Logistics Property Market, pages 16-17
The supply of Big Boxes is constrained
Market dynamics are favourable for landlords
Land which can accommodate Big Boxes is scarce in key locations.
The scale of Big Boxes and the traffic movements they generate can
present planning challenges and it can take years to achieve the
required consents. Big Boxes also require a large local labour pool,
as they can employ more than 3,500 people during peak periods.
They also have substantial power and infrastructure requirements,
adding further complexity to site identification and delivery.
The supply and demand imbalance described adjacent is highly
favourable for asset owners. The scarcity of available units, coupled
with the substantial investment occupiers make in automation
and fitting out, mean that they are willing to sign long leases with
upward-only rent reviews. High demand and constrained supply
have resulted in attractive rental growth in recent years, with rising
labour and construction costs now also feeding into rents. This
provides secure and growing income for us.
These factors mean that Big Box supply remains thin. Occupiers
looking for a suitable building may therefore need to pre-let an
asset either prior to or in the course of development, creating
opportunities for investors to forward fund these developments and
obtain brand new assets on long leases to high-quality tenants.
Big Boxes also tend to be resilient. In the event of a vacancy,
high-quality and well located real estate is likely to let quicker,
to a higher-calibre occupier, at a higher rent, and with lower
incentives
.
18%
51%
61%
UK Online sales represented 18% of
total annual retail sales for the year to
December 20181
51% of UK consumers say that they
prefer to shop online rather than
in store2
Online spending on Black Friday has
grown from 33% in 2014 to 61% of total
sales in 20182
£1.49bn
Online retail sales on “Black Friday”
in 2018 totalled £1.49 billion2
11%
26%
The growth in e-commerce has increased
parcel delivery volumes by 11% in
2017-18 compared to 2016-17, reaching
a total of 2.4 billion items3
E-commerce is expected to grow to 26%
by 20224
1 Source: ONS.
2 Source: EmpathyBroker 26/07/2018.
3 Source: Ofcom Annual monitoring update on the
postal market Financial year 2017-18.
4 Source: eMarketer.
11
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report
Our Portfolio
The right assets in the right locations
We have built a unique, well diversified portfolio of assets which are typically modern, occupy
prime locations and are fully let, typically on long leases to investment-grade Customers
(
see pages 14-15).
Large, well located Big Box warehouses not only hold stock, but
are central to regional, national and international distribution
networks. They often have a port-centric focus for imported goods
and are located in close proximity to major roads and motorways,
maximising geographic coverage optimising the speed and reliability
of deliveries.
Occupiers of logistics properties have generally witnessed
increased competition. Logistics has become an increasingly
important in protecting profitability and consequently the market
is witnessing a significant restructuring of supply chains with
companies seeking larger space that enables more efficient
interface with their suppliers and their customers. Increasingly,
occupiers are targeting locations for Big Boxes that benefit from
lower rents (as a consequence of lower land values and the
use of space volume) and the availability of attractive cost price
labour pools.
Howdens I, Raunds.
B&Q, Worksop.
Euro Car Parts, Tamworth.
Regional breakdown
1
44
2
8
25
18
15
12
52
30
14
54
51
9
11
23
2121
11
537
433
16
North West
52 Amazon; 8 DHL; 12 Tesco; 14 L’Oréal; 15 Argos;
18 Nice-Pak; 25 Matalan; 44 Stobart Group;
30 Kellogg’s
North East
1 Sainsbury’s; 3, 51, 54 Amazon; 5 Next;
9 Wolseley; 11 The Range; 21 Tesco; 16 B&Q;
23 TK Maxx; 37 Unilever; 43 Marks & Spencer
12
Tritax Big Box REIT plc Annual Report 2018
For further information, see the Manager’s Report, pages 22-49
£3.42bn
Portfolio value
4.4% NIY1
Portfolio valuation yield
5.5% NIY
Portfolio average net initial purchase yield
29.8m sq ft2
Portfolio 100% let or pre-let
86%
Portfolio acquired off market since IPO
2
2
Regional breakdown
3
4
5
Portfolio by investment pillar
Foundation asset 77%
Value Add asset 15%
Growth Covenant asset 6%
Pre-let forward funded
development
Strategic land 2%
49
42 41
17
21
7
2
13
28
29
46
27
32
38
35
39
31
47
50
53
33
24
48
40
Midlands
2, 42 Marks & Spencer; 21 Tesco; 7 DHL;
13 Kuehne+Nagel; 17 New Look; 24, 47, 48 Howdens;
26 Brake Bros; 27 Argos; 28 Dixons Carphone;
29 Gestamp; 32 Euro Car Parts; 31 Amazon;
33 Whirlpool; 35 Screwfix; 38 Morrisons;
39, 40 Royal Mail; 41 Dunelm; 46 Unilever;
50 Eddie Stobart; 53 Bosch
South West
26 Brake Bros
26
45
20
34
19
6
4
36
10
South East
4 Tesco; 36 Hachette; 45 Industrial Tool Suppliers
& Wincanton; 20 Brake Bros; 34 The Co-operative
Group; 19 Ocado; 6 Morrisons; 10 Rolls-Royce
Motor Cars
1 Includes Littlebrook, Dartford; 4.5% excluding Littlebrook, Dartford.
2 Includes 54 assets held as at 31 December 2018, excludes strategic land at Littlebrook, Dartford.
Tritax Big Box REIT plc Annual Report 2018
13
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report
A Quality Portfolio
Our portfolio is well positioned to benefit from the structural drivers
at play in our market. The location, scale and modernity of our assets
ensures that they are a necessity for high-calibre occupiers.
Many of our Customers make substantial investment into our Big Boxes by way of high levels of technology and
automation, which is essential to fulfilling their commercial objectives and driving performance for the longer term.
The quality of our occupied, long leased assets underpin the Company’s ability to deliver attractive total returns for
our Shareholders.
Big
69%
of our assets are truly Big Box and
over 500,000 sq ft. Automation is
typically prevalent in larger buildings
.
Hi-tech
51%1
of our properties are highly automated.
Automation is essential when handling
large volumes of complex omni-channel
“real-time” orders and returns
14
Tritax Big Box REIT plc Annual Report 2018
1 By value.
Modern
92%
of our portfolio has been built since
2000, ensuring state-of-the-art
buildings most likely to meet
the requirements of a market-
leading occupier
Well located
100%
of our assets are in the UK and
occupy strategically sought after
logistics locations with good
geographic diversification
Secure
81%
of our high-calibre Customers are
constituents of major quoted indices,
with some of the world’s leading
brands represented
Tritax Big Box REIT plc Annual Report 2018
15
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
The Logistics Property Market
Our market continues to be characterised by several very positive attributes:
Demand is being driven principally by occupiers seeking improved supply chain
efficiency and consumer structural change is providing strong tailwinds in the logistics
market. In larger scale Big Box logistics properties, supply remains constrained.
Thriving demand continues
Supply remains constrained
During 2018, economic and political uncertainty did not dampen
occupational demand for UK Big Box logistics assets, unlike other
commercial property sectors. Occupier demand remains strong
across all the main regional areas in the UK and take-up was at the
highest ever recorded level in 2018.
Demand remains buoyed by companies striving to deliver cost
savings, economies of scale benefits and efficiencies which the
consolidation from disparate older logistics networks to fewer larger
volume, modern facilities can provide. Demand is also supported by
the continued rise of e-commerce which typically requires larger,
modern logistics facilities and commonly employs automation.
Notably “other retail”, which includes high street retail, comprised
only 10% of take-up in 2018.
One indicator of subdued supply is the high level of purpose-
built take-up, indicating a lack of readily available buildings of
appropriate quality in the right locations for occupiers to lease.
The low level of supply encouraged an increase in speculative
development in 2018 but this accounts for only a small percentage
of identified demand. The supply of larger scale buildings is
expected to remain constrained because only a few developers are
willing to take the level of risk in a single location.
The planning system is long-term and naturally controls supply,
particularly in the larger building size categories. There are a
modest number of sites capable of delivering larger scale logistics
buildings now or in the next few years and whilst further sites will
gain planning consent, we expect these to be limited in number.
.
UK logistics take-up by sector, 2018 (%)
UK new/early marketed logistics availability
and prime rental growth
● Prime headline rental growth ● New/early marketed availability
● 3PL/Distribution, 25%
● Other Manufacturing, 5%
● Construction, 2%
● Motor Industry, 2%
● Food Industry, 2%
● Post and Parcels, 4%
● Online – Retail, 32%
● Food – Retail, 10%
● Other – Retail, 10%
● Other, 8%
140
120
100
80
60
40
20
0
Source: CBRE (relates to units of more than 100,000 sq ft)
2009
2011 2012
Source: CBRE (relates to units of more than 100,000 sq ft)
2010
2014
2013
2015 2016
2017
2018
Demand highlights in 2018
Supply highlights in 2018
Highest occupational take-up on record
Occupational take-up of 100,000 sq ft+ units totalled
31.5 million sq ft, according to CBRE.
63% of take-up was purpose built
Occupiers continued to take Big Boxes predominantly on a
purpose built basis over 100,000 sq ft, driven by the lack of readily
available modern, larger scale buildings.
Diverse sector take-up
A diverse range of occupiers took space in 2018; the largest
appetite was from internet retailers who accounted for 32% of
floorspace over 100,000 sq ft.
Big Boxes are getting bigger
Occupier appetite for Big Boxes of more than 500,000 sq ft continues.
In 2018, this comprised 44% of total take-up over 100,000 sq ft.
Demand continues to outstrip standing supply
Available supply of new and early marketed space over
100,000 sq ft currently represents 11.5 months supply (based on
five-year annual average take-up), according to CBRE.
Limited availability of units over 500,000 sq ft
Availability of buildings over 500,000 sq ft remains limited and
represented just two months supply based on total 2018 take-up.
Speculative development increased:
Speculative development is modest in comparison to the last
speculative development cycle of 2005-2008 and remains largely
focused on smaller 100,000-300,000 sq ft buildings.
16
Tritax Big Box REIT plc Annual Report 2018
Rents continue to rise
Investment interest remains keen
Continued strong occupier demand and limited supply of quality
buildings have contributed to attractive levels of rental growth
across all regions in recent years. All regions across the UK have
witnessed different levels of rental growth at different points of the
cycle depending on the supply and demand dynamic at any point in
time, but the trend across all regions has been a positive trajectory
since 2015.
This theme has continued during 2018 but has been most acute
in London, the South East and the South West, which has in part
been due to scarcity of appropriate land supply and increasing land
values and lack of supply. Across the country, rents are expected to
continue to grow in 2019.
Sustained rental growth is a feature of the logistics market that
continues to attract investors, both domestic and overseas
(particularly following the devaluation of the pound in 2016).
With market dynamics favouring asset owners, investors have
continued to allocate capital to logistics property, with total
investment in logistics property during 2018 totalling over
£4 billion which, although lower than 2017, was still one of the
highest recorded volumes on record.
The level of investor demand has continued to put pressure on
logistics property yields. At the end of 2018, CBRE’s Prime Yield
Series reported the prime logistics property yield to be 4.5%,
maintaining the previous lowest reported level, but remaining at an
attractive premium to 10-year government gilt yields.
UK prime logistics headline rental growth
Source: CBRE (relates to units of more than 100,000 sq ft)
Prime distribution yields vs government bonds yields (%)
Region
London/M25
Rest of South East
South West
East Midlands
West Midlands
North West
North East & Yorkshire
Total
Annual
growth rate
+6.7%
+11.1%
+7.4%
+3.8%
+3.8%
+3.8%
+2.4%
+5.6%
● Prime distribution yields ● UK 10-year government bond yields
9
8
7
6
5
4
3
2
1
0
08
09
10
11
12
13
14
15
16
17
18
Source: CBRE (relates to units of more than 100,000 sq ft)
What these market dynamics mean to the Group
A range of businesses are demanding increasingly efficient
supply chains. Set against this, built supply remains low,
particularly for larger scale buildings, and this forces
occupiers to consider purpose-built facilities on a pre-let
basis. Purpose-built facilities are not unduly specialist in
nature – the dynamics of value and rent serve to encourage
a prospective tenant to accept a generically acceptable
building specification that would be appealing to a wide
audience if offered for re-letting.
buildings are not only more efficient, but also more flexible
and we believe will benefit from longer-term resilience
due to higher levels of tenant demand. Our ability to
capture the current attractive levels of rental growth at
rent review will increase as we leave behind the pre-2015
data, prior to which rental growth was unproven. These
positive characteristics of our market continue to attract
a healthy level of investor appetite that is compressing
investment yields.
These dynamics have benefited the Group since we
have captured opportunities to deliver new, long-leased
investments into our portfolio (seven pre-let forward funded
developments acquired in 2018). Larger scale modern
Tritax Big Box REIT plc Annual Report 2018
17
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Our Business Model
Our resources
We use the following resources to create value for
Shareholders and other stakeholders:
We own and manage high-quality
Big Box logistics assets and land across
the UK, using the Manager’s experience
and expertise to assemble and grow a
well diversified portfolio, while prudently
applying leverage to increase returns.
Financial capital
We are funded by
Shareholders’ equity, third-
party debt and recycled funds
How we work
Sourcing investments
Physical assets
We have an outstanding
portfolio of Big Box logistics
assets, as well as strategic
land for development
Relationships
We build mutually beneficial
relationships with our Customers
and draw on the Manager’s
extensive contacts with key
influencers across the subsector
People
We have an experienced Board
and a Manager with a high-
calibre and consistent team
Reputation
Our excellent reputation
and track record make us a
partner of choice for vendors,
developers and Customers
Expertise and knowledge
Our purity of focus makes
us experts in the logistics
subsector
We primarily source investments off market, enabling us to buy at attractive
prices. We undertake thorough due diligence on purchases but move fast and
offer certainty of execution for vendors, making us the obvious choice for asset
owners looking to sell. This also helps us to achieve discounts to market pricing.
Buying and selling for value
see page 20) but we are also
We have a clear Investment Policy (
pragmatic and may acquire smaller properties to diversify by geography,
building size and lot size, or assets with shorter leases if there is opportunity
to create value by re-gearing or re-letting. We seek quality and discount
numerous opportunities that do not offer value for money or meet our
stringent criteria.
We intend to hold assets for the long term but we may sell if we have delivered
the asset’s business plan and have the potential to reinvest the proceeds in a
more attractive opportunity.
Developing
The Manager’s relationships with developers enables us to invest in forward
funded developments, through which we fund the construction of a Big Box
which has been pre-let to a specific tenant, thereby substantially reducing
risk. This results in lower transaction costs and enables us to source brand
new buildings for institutional Customers on long leases.
We can also acquire land which is suitable for development, allowing us
to capture a greater share of the development profit. This is likely to be an
increasingly important source of new assets for our portfolio in the coming
years. We will continue to balance our investment in land carefully with the
need to deliver secure and growing dividends to Shareholders.
Asset management
Our assets are strategically important to our Customers. We work with them to
maximise their operational effectiveness, for example by extending buildings or
adding mezzanine floors. This encourages the signing of longer leases, to secure
their investment in the building which in turn increases our revenue security and
capital values. The process also deepens our relationships with our Customers.
A small number of our assets fall within our Value Add investment pillar
(
we look to turn them into Foundation assets through asset management.
see page 20). Where we buy properties with the potential to add value,
18
Tritax Big Box REIT plc Annual Report 2018
For Our Objectives and Strategy, see pages 20-21
1
Sourcing investments
Buying and selling
for value
3
2 4
Funding developments
Asset management
Our sources of
competitive advantage
The Manager
The Manager is our primary source of competitive advantage.
We draw on its expertise and its extensive agency, developer,
vendor and occupier contacts, built up over many years. In a market
where personnel changes are common, the consistency and high
calibre of the Manager’s team helps us to maintain our relationships
and work on longer-term deals.
Speed and certainty of execution
The Manager’s expertise enables us to move fast by rapidly
assessing opportunities, making decisions, performing thorough
due diligence and completing transactions. We have never
withdrawn from a proposed contract after agreeing terms and
believe that our reputation is unrivalled in our market.
Quality
Our portfolio is weighted towards Foundation assets, which provide
our core income and do not need to be regularly traded. This
supports our returns by reducing our frictional costs, which can be
as high as 8.5% when selling an asset and reinvesting the proceeds.
Scale
As our portfolio grows, we benefit from economies of scale,
increased diversification by geography, tenant and building size, a
larger list of contacts and a deeper pool of available capital, helping
us to source further investments off market. A larger portfolio also
gives us greater insight into market developments, more control
over the evidence for rent reviews and lease renewals, and greater
potential to create multi-asset initiatives with the same Customers.
The benefits of our
business model for
stakeholders
For Shareholders
By acquiring high-quality properties with excellent
tenants and carefully managing our assets, we aim
to deliver a robust, transparent, low-risk and growing
rental stream, which supports a progressive target
dividend. Our asset selection and asset management
add value to our investments, allowing Shareholders to
benefit from attractive total returns.
Our REIT status protects the value we create for
Shareholders, as we are not subject to corporation tax
on profits and gains in respect of our qualifying property
rental business. We also pay dividends that qualify as
a property income distribution where possible, which
offers tax advantages for certain UK investors.
For lenders
Our lenders benefit from having their interest serviced
by regular and stable cash flows which are underpinned
by some of the strongest covenants in logistics,
manufacturing and retail. Our long leases and future
growth in income, through a combination of fixed,
indexed and open market reviews provide protection to
capital values.
For 2019 we are targeting:
6.85p
Progression over the 6.7p dividend per share
achieved in 2018
9%+ pa
Total return
For Customers
Our Customers benefit from occupying
Big Box logistics assets which are owned by a landlord
knowledgeable in and committed to the sector and
strategically important to their businesses, helping
them to achieve cost savings and economies of scale,
and to fulfil their rapidly growing e-commerce sales.
We aim to be our Customers’ preferred provider of
modern Big Boxes.
Tritax Big Box REIT plc Annual Report 2018
19
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Our Objectives and Strategy
Objectives
Our objectives reflect our aim of creating value for Shareholders.
Dividends
The Company intends to maintain its progressive dividend policy during 2019 and
thereafter.
Total returns
Our investment objective is to deliver a total return of at least 9% per annum over the
medium term. Total return is based on dividends paid plus growth in net asset value.
Investment policy and operational strategy
In order to achieve our objectives, we implement the Investment Policy and
operational strategy set out below.
Our Investment Policy
Our Investment Policy is to invest primarily in Big Box assets, which typically:
> are let or pre-let to institutional-grade tenants, ideally businesses with 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
an unexpired lease length on purchase typically 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
features.
We target assets which offer value to our Shareholders and usually have a geared
yield range of approximately 5-7%. 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.
The Investment Policy also allows us to invest in land, either on our own or in a joint
venture with a developer or a prospective Customer, to assemble suitable sites for
developments.
In November 2018, Shareholders approved the following amendments to the Policy:
> the limit on exposure to land and options over land was increased from 10% of
NAV to 15% of gross asset value (GAV), of which up to 5% may be invested in
speculative development activity; and
> while Big Box assets remain our primary investment focus, we may from time to
time develop or acquire other ancillary assets including, but not limited to, smaller
distribution warehouses or urban distribution or “last mile” hubs.
The benefits to Shareholders of these amendments are discussed in the Strategic
Report on pages 1-69.
20
Tritax Big Box REIT plc Annual Report 2018
Our Acquisition Focus
The assets we acquire typically fall under
one or more of our four investment pillars:
Foundation ●
Foundation assets provide the core,
low-risk income that underpins our
business. They are usually let on long
leases to Customers 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
Customers with good covenants
and offer capital value or rental
growth through lease engineering or
improvements to the property. We
do this using our asset management
capabilities and understanding of
Customer requirements. These assets
are usually highly re-lettable.
Growth Covenant ●
These are fundamentally sound assets
in good locations, let to Customers we
perceive to be undervalued at the point
of purchase and who 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.
Strategic land ●
We will invest in land, primarily with a
view to securing pre-let forward funded
developments, although we may also
undertake a modest amount of speculative
development. The land we acquire can
benefit from extant outline B8 planning
consent over the whole or part of the site
in order to minimise risk, but we may also
acquire land without planning consent
or options over land and undertake
development management on behalf of
third parties. This approach allows us to own
completed assets in locations which might
otherwise attract yields lower than we want
to pay and can also deliver enhanced returns.
See Our Portfolio on pages 12-13
Our Operational Strategy
To help us deliver long-term and sustainable returns to our Shareholders, we focus on the following strategic areas:
Strategic area
Progress in 2018
Priorities for 2019
Link to risk
Manager and its
relationships
Contract with a Manager
who has a knowledgeable
and talented team, excellent
market relationships with
owners, developers and
agents, which all contribute
to delivering value to
Shareholders.
The Manager continued to
strengthen its team during
the year, including expanding its
company secretarial function
and recruiting expertise in
modelling and legal. New owner
and developer relationships
secured in the year.
Operational excellence
Rigorously control costs
and deliver operational
efficiencies, without
compromising growth or
reputation.
We maintained our robust
cost control and benefited
from economies of scale;
our total expense ratio as at
31 December 2018 was 13.7%.
Customers
Develop and maintain a
deep understanding of the
businesses that operate in
our market in order to create
long-term partnerships.
We successfully implemented
a range of asset management
initiatives, as described on
pages 40-45.
Our asset acquisitions deepened
our relationships with a number
of existing Customers.
To ensure a low degree of staff
turnover, with continual staff
training and development.
Also to expand on our market
relationships for the benefit of
the stakeholders.
We rely on the continuance
of the Manager
Continue to place an emphasis
on our robust operational cost
controls, including keeping
our exposure to floating rate
debt to a minimum, all of which
support our policy to grow our
earnings.
To maintain a strong
relationship with our existing
customers, and to progress
any occupier requirements
ensuring value accretion to
shareholders.
Use of floating rate debt
will expose the business
to underlying interest rate
movements
Default of one or more
Customers
Capital risk management
Achieve the right risk and
return balance of equity and
debt, to finance our business
and enhance returns.
We raised £155.6 million of
new equity, obtained a short-
term £250 million debt facility
and issued £400 million of
loan notes through a private
placement (see page 48). This
gave us a conservative LTV of
27.3% at the year end.
To operate within our leverage
policy of up to 40% and to
continue to support any future
growth in the business with
new and attractive capital.
Our use of floating rate debt
will expose the business
to underlying interest rate
movements
A lack of debt funding at
appropriate rates may
restrict our ability to grow
We must be able to operate
within our debt covenants
Corporate responsibility
Strive to meet our
corporate responsibilities
towards society and the
environment, in every part of
our business.
We continued to work with
our Customers and developer
partners to improve property
EPC ratings and achieve
BREEAM “Very Good”. We have
achieved zero waste to landfill
where we have management
responsibility for waste. We have
moved all electricity supplies
where we have responsibility to
“green electricity tariffs”.
None
To formally contribute to
sustainability evaluation
indices, such as GRESB, so as
to demonstrate the Company’s
inclusion of best practice
principles through the active
initiatives of its Manager.
Tritax Big Box REIT plc Annual Report 2018
21
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report
Delivering Growth
Colin Godfrey speaking with
stakeholders at a site visit to
Littlebrook, Dartford.
This was another strong year for the Group as we successfully
delivered the dividend and total return targets set by the Company.
We raised further equity and built upon our established debt
platform, to support the Group’s growth and improve the capital
structure. This was deployed to acquire attractive assets, primarily
forward funded pre-let developments, further diversifying the
portfolio while enhancing the outstanding quality of the Group’s
properties, Customers and rental income stream, allowing us to
increase our dividend target to 6.85p for 2019.
Colin Godfrey Fund Manager
Delivering secure and growing income
The Group’s portfolio produces a diversified, robust, long-term
income stream with opportunity for growth, secured by an
exceptional Customer base. The portfolio comprised 54 income-
producing assets at the year end, let to 39 different Customers.
We added three new Customers during the year and strengthened
our relationships with a number of existing Customers, in particular
Amazon and Howdens, by acquiring further assets that they will
occupy. The calibre of the income stream is demonstrated by 81%
of our Customers or their parent companies being members of
major stock market indices in the UK, Europe or USA, many of which
are well known domestic and worldwide brands.
At 31 December 2018, the WAULT across the portfolio had
increased to 14.4 years (31 December 2017: 13.9 years), ahead of
the Group’s target of at least 12 years. At the year end, just 9.3%
of rents were from leases which are due to expire within five years,
with 49.1% of rents coming from leases with 15 or more years
to run. The Group’s core Foundation assets, which comprise
76.5% of the portfolio (by value) had a WAULT of 16.5 years at
31 December 2018.
The Group is well positioned for further income growth. At the year
end, its contracted annual rent roll was £161.12 million, up 27.9%
on the £125.95 million at 31 December 2017. This compares with
an Estimated Rental Value (ERV) for the portfolio of £169.8 million2,
as independently assessed by CBRE. This implies that the Group’s
rental income would increase by 5.4% if all the properties in the
portfolio were re-let as at 31 December 2018 and were settled at
CBRE’s ERVs. The portfolio ERV increased by 0.6% on a like-for-like
basis during 2018.
Through careful selection, we have ensured that the timings of rent
reviews across the portfolio are balanced, supporting both the
potential for annual income growth and our progressive dividend
policy over the next few years. Rent reviews typically take place
every five years but the Group also benefits from some annual fixed
and inflation-linked reviews. In 2018, 19.5%1 of the Group’s rental
income that was subject to review, was settled. A further 17.7% is
due for review in 2019. Further information on rent reviews can be
found in the Asset Management section on pages 40-45.
1 This includes two outstanding rent reviews from 2017 and 2015: Kuehne+Nagel,
Dove Valley Park outstanding from 2017 and settled in July 2018 and Tesco
Chesterfield outstanding from 2015 and settled in February 2018.
22
2 Includes 54 assets held at 31 December 2018, excludes strategic land at
Littlebrook, Dartford.
39
Customers contracted
£161.12m
Annual rent roll
100%2
Let or pre-let
14.4yrs
Portfolio WAULT
12.1%
Total return in 2018
A diverse portfolio
Our Customers can be identified on the following page. They
operate in a diverse range of sectors, as shown in teh pie chart
below. Notebly our exposure to non-food traditional retail has
decreased whereas online retail representation has increased
significantly over 12 months.
A diverse customer base (%)
Delivering capital growth
The portfolio was independently valued by CBRE as at 31 December
2018 at £3.42 billion including forward funded development
commitments (31 December 2017: £2.61 billion) (“market value” or
“fair value” under IFRS 13) in accordance with the RICS valuation –
Global Standards 2017. This represents the aggregate of individual
property values, with no premium or discount being applied for a
collective portfolio.
During 2018 property values increased by £169.51 million or 5.0%,
inclusive of assets acquired in the year. The like-for-like valuation
increase on assets held throughout the year, comprising 46 income
producing assets and strategic land at Littlebrook, was £121.68
million or 4.7%. The eight assets acquired during the year, which
had an aggregate purchase price of £641.46 million, were valued
at £689.29 million at 31 December 2018. This represented an
increase of £47.83 million or 7.5%, excluding purchasing costs and
other capitalised items. Total capital growth across the portfolio of
£810.97 million or 31.1% during the year, excluding purchasing costs,
was funded by a combination of new equity and debt.
Tritax Big Box REIT plc Annual Report 2018
23
● Food – Retail, 15.16%● Online – Retail, 21.24%● Other – Retail, 8.15%● Fashion – Retail, 7.56%● Homeware & DIY – Retail, 10.07%● Food Production, 1.95%● Automotive – Manufacturing, 3.67%● Consumer Goods – Manufacturing, 4.75%● Electricals – Manufacturing, 4.49%● Other – Manufacturing, 7.04%● Post and Parcels, 2.92%● 3PL/Distribution, 7.61%● Wholesale, 5.37%STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report – Delivering Growth
Our portfolio by investment pillar (by valuation) (%)
2%
6%
15%
77%
Foundation assets
Value Add assets
Growth Covenant assets
Strategic land
Purchase yield vs valuation yield (%)*
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2014
2015
2016
2017
2018
Period purchase yield
Cumulative purchase yield
* Excludes Littlebrook, Dartford
Valuation Yield
Source: Tritax
Our Customers
Building a balanced portfolio
The Group’s portfolio contains a good balance of Foundation assets,
which provide its core low-risk income, Value Add assets which offer
opportunities to add value through asset management and Growth
Covenant assets which provide the opportunity for capital growth
through improving Customer accounts. Strategic land provides the
scope for enhanced capital returns.
At the year end, Foundation assets made up 77% of the portfolio
by valuation, with Value Add and Growth Covenant assets making
up 15% and 6% respectively. Strategic land comprised around 2%
of the year-end valuation.
For more information, please see our Assets Acquired in 2018
section on page 32.
Investment discipline
Our acquisitions have been carefully selected to provide a diversified,
complementary and balanced portfolio. We buy for value; the
story behind our purchases is as much about the assets that we
do not buy as those that we do. Every asset acquired by the Group
is valued higher than the price paid upon acquisition and since
our IPO we have delivered asset capital growth of £607.85 million
excluding costs. Our focus is on quality. This provides resilience and
in our view helps support outperformance. It also helps maintain
some of the key metrics that make up our DNA – enhancing a
naturally depreciating WAULT, maintaining high calibre Customers
to underpin the quality of our rental income and maintaining the
modernity of our real estate. All of these features are inherent within
forward funded pre-let developments and that is why we have
increasingly focused on this area for stock delivery.
A record year for pre-let developments
Our sector relationships, knowledge and ability to appraise
opportunities and make decisions quickly, combined with the
24
Tritax Big Box REIT plc Annual Report 2018
* The logos above represent either the tenant, guarantor, parent or
brand name. Trade marks appearing in this page are the property
of their respective owners.
Group’s strong financial position, have enabled us to build an
unrivalled track record of performance when forward funding
developments. This makes the Group a partner of choice for
developers and occupiers, enabling us to acquire forward funded
pre-let developments for the Group at an attractive discount to
market levels for existing income producing investment properties.
Our expertise in this field and track record of performance are
appealing to both developers and major companies seeking
occupational certainty. We work collaboratively, delivering
real-estate solutions that support the business objectives of our
Customers. In particular we have focused on the highly influential
e-commerce component of the retail sector in 2018 committing
to the delivery of four facilities for Amazon (one existing asset and
three forward funded pre-let developments).
The seven pre-let forward funding projects added to the portfolio in
2018 mean that the Group has now undertaken 16 forward funded
pre-let developments, making it the leading funder in the UK Big
Box market over the last five years. Nine of these developments
had successfully reached practical completion at the year end,
with an average purchase yield of 5.5% and a WAULT at the point
of practical completion of 21 years. This compares to an average
valuation yield for a strong covenant on a 15-year term of 4.5% as
at 31 December 2018 (source: CBRE). On each of these properties
the Company additionally receives income during the construction
period. Since the year end, one further pre-let forward funding
completed on time and budget, let to Eddie Stobart at Midlands
Logistic Park, Corby.
The developments acquired in 2018 are all proceeding well. We
work with experienced developers, who have an established track
record with substantial experience in the market and have delivered
millions of square feet of logistics space.
Strategic land – Littlebrook, Dartford
Littlebrook has the potential to become one of London’s largest Big
Box logistics parks and is in a core “last mile” location on the edge of
London and inside the M25. It has strong road and port connectivity
and can support the potential development of approximately
1.6 million sq ft of logistics buildings, including several Big Boxes
and some smaller urban logistics facilities. By developing buildings
on a pre-let basis we aim to add new high-quality investments and
Customers to the portfolio over the coming years, while minimising
risk. We are targeting a yield on cost for phase 1 of more than 6.5%.
Following receipt of planning consent on phase 1, which comprises
450,000 sq ft, we commenced a marketing campaign for the
proposed development; which is attracting a healthy level of enquiries.
Littlebrook demonstrates our ability to acquire strategic land for
the Group at prices that represent value for Shareholders.
16 pre-let forward funded developments
9 1
5.5%
+23.5%2
21yrs
completed developments
totalling >4.5m sq ft
built to order
average purchase
yield for the nine
completed assets
gross uplift on acquisition
price
weighted average
term at practical completion
Development time line: seven assets under construction
Acquisition price (£m)
Howdens II, Raunds £71.20m
Howdens III, Raunds £32.50m
Eddie Stobart, Corby £81.80m
Amazon, Darlington £120.26m
Amazon, Haydock £68.71m
Bosch, Corby £89.33m
Amazon, Durham £141.55m
2018
2019
2020
2021
1 Excluding Eddie Stobart Limited, Corby which completed in February 2019.
2 23.5% gross uplift prior to deducting purchase costs but inclusive of project
enhancement costs.
25
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report Manager’s Report – Delivering Growth
Including demolition costs, we estimate that the total cost for the
developable area at Littlebrook will be approximately £0.90 million
to £0.95 million per acre. This compares favourably with prices
of approximately £3.00 million per acre in two comparable land
transactions during 2018.
Change in Investment Policy
The change to the Investment Policy, as discussed in the Chairman’s
Statement on pages 6-7 and the Objectives and Strategy section
on pages 20-21, will enable us to acquire further sites for the Group.
We and the Board believe that in order to maintain the quality
of the portfolio and future returns, investment opportunities are
increasingly likely to come from the development of new assets.
At the same time, we will focus on ensuring that the Company has
the potential to continue to reward Shareholders through growth
in the dividend.
Acquisition of db symmetry
In February 2019, we acquired 87% of db symmetry, a specialist
industrial logistics developer which controls one of the UK’s largest
strategic land portfolios. The remaining 13% was retained by
existing management who are incentivised to deliver the Company’s
long-term strategy. This followed a change to our Investment Policy
which was approved by Shareholders in the year.
This acquisition includes both consented and strategic (optioned)
land, offering the Group phased access to deliver a potential
38.2 million sq ft of logistics assets across key locations in the UK
over the course of the next 10 years.
DBS, Biscester, phase 1, comprising 163,130 sq ft.
The Strategic Rationale for db symmetry
In our first full year of trading in 2014 we purchased 12 investments:
one was a forward funded pre-let development and 11 were
existing investments where a tenant was already in occupation
(standing assets). In 2018 we purchased eight investments:
one was a standing asset and seven were forward funded
pre-let developments. Early on we used research, contacts and
knowledge to acquire attractively priced assets and gain an early-
mover advantage. As the market matured, we saw less value in
existing investments and greater value in pre-let forward funded
developments. We therefore concentrated our focus on developer
relationships. These transactions provided some of the strongest
Customer financial covenants, brand new buildings which have
helped maintain the modernity of our portfolio and the longest
market leases, thereby supporting our WAULT. They have also been
the most rewarding financially, delivering 8.64%1 gross annualised
capital growth, compared to our standing assets which have grown
by 7.63%1.
Our team has significant development experience and is well
connected in the development community. In the market, the
development landscape had been changing. Investors, frustrated
at losing out in competition for logistics investments, turned
to development joint ventures (CBREGI with Prologis), or the
acquisition of a developer platform (GLP acquiring Gazeley and
Segro buying out Roxhill). Consequently, very little, if any of the
pre-let stock from those developers will be offered to the market
since the investments will be retained by the investment partner.
This is likely to have the effect of reducing the number of high quality
26
Tritax Big Box REIT plc Annual Report 2018
1 Includes project enhancement costs (excluding purchase costs).
pre-let development opportunities available to purchase in the
future and increasing competition for them.
Our thought process had been similar. Many of the best quality
investments had already been bought and yields continued
to tighten for standing assets, a trend which we know cannot
continue for the longer term. Following extensive research and
debate we decided that the acquisition of land suitable for logistics
development would allow the Group to capture value at the two
major inflection points; i) upon achieving planning and; ii) on securing
a pre-let. Our first land purchase was Littlebrook and to date that
has performed well, is on time and within budget.
Having researched the market we identified db symmetry as the
remaining major logistics developer of scale with a geographically
diverse portfolio in the UK and respected management team.
The rationale was simple: capture a high-quality land bank and
development expertise to internally deliver long-term high-quality
product for the Group, tightly controlling speculative exposure and
limiting this to smaller scale buildings, with a focus on pre-let forward
funded development. This strategy is designed to maximise return
whilst minimising risk.
The construct of the transaction also doesn’t fundamentally change
the DNA of our business: protecting our shareholder dividend yet
providing long-term potential for growth in our earnings. We believe
that this is possible following the db symmetry transaction.
Five sites are owned, two are subject to development management
agreements (providing fees and/or profit share), whilst 19 are
controlled under option agreements and a further three which are
not expected to be for logistics. The attraction of this arrangement
is that the initial purchase price is significantly lower, thereby
reducing cash drag and minimising the impact on our earnings, but
we benefit from control over a much larger land bank than would be
possible given the level of initial investment that we have made.
Of course, in order to acquire sites following receipt of planning
and to fund the construction of pre-let developments, we will need
capital, and, in addition to debt, this is likely to require some equity
raises over the course of the 10-year business plan. We do, however,
expect to fund a significant element of this requirement from sales
of assets and the recycling of proceeds to fund the acquisition of
suitable pre-let investments created by db symmetry. The objective
is to typically sell investments at yields of 4%-5% and reinvest the
proceeds into db symmetry with a target yield on cost of 7%-8%.
db symmetry presents an exceptional and potentially transformational
opportunity when combined with our current business. The sites
are in strong locations and can provide best-in-class investments,
allowing us to maintain the high quality that our portfolio is known for.
It can deliver both significant capital growth and longer-term income
growth to support our aspirations for attractive dividend growth.
Opportunities for the year ahead
2018 was not kind to retail. The pound devalued following the EU
referendum in 2016, making imports more expensive. This pressure
encouraged introspective examination of supply chain efficiency
and the stronger retailers have been reacting by consolidating into
and investing in larger, more efficient logistics facilities. Others,
without such financial muscle or vision, and unable to increase
pricing, had been struggling for some time, and in some instances
have become insolvent. It is likely that others will follow in 2019 –
a good reason for landlords to focus on robust occupier covenants
and quality real estate, characteristics of our portfolio.
Our market is not without risk, however. Brexit is an obvious concern
but we are also keeping a close eye on the muted threat of taxation
of e-commerce and business rates as well as interest rates and
gearing levels. Fearing a Brexit without frictionless trade borders,
there have been recent examples of occupiers planning to hold
more inventory domestically. In my view, our sector proved almost
immune to the negative effects of Brexit during 2018 with CBRE
reporting the highest ever level of logistics lettings in the UK. 2019
may not be as strong, but we do expect occupational demand to
remain robust, supporting a continued level of healthy rental growth.
This in turn should see strong investment interest in the sector
continue, with the potential for further yield compression.
Our business is now well set for the next phase of its life, supported
by a high-calibre Board and Management team. We have a healthy
level of opportunities to asset manage for value creation, particularly
through the conversion of Value Add assets to Foundation assets.
Our pipeline remains strong with attractive opportunities to buy
accretively and off market at attractive pricing, but looking forwards
we expect a lower level of external acquisitions. Littlebrook is now
well placed to secure a pre-let and there will be opportunities from
the newly acquired db symmetry portfolio to internally create high-
quality investments. Our strategic development land will allow us to
offer new hubs to our existing Customers and welcome new tenants
to our portfolio. We are well capitalised and whilst further equity will
be required to maximise value from this strategic land, we expect to
sell some of our assets and recycle the proceeds internally to fund
pre-let development at an attractive yield on cost.
Tritax Big Box REIT plc Annual Report 2018
27
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report
Delivering Logistics
Development for London
“We anticipate being able to provide
additional new high-quality investments
on a pre-let basis to the Company’s
portfolio over the coming years at an
attractive yield on cost. Our continuing
phased capital investment programme
will in time bring new jobs to the site as
well as the wider area.”
Colin Godfrey, Fund Manager
M11
M25
M1
London
M20
M25
M40
M4
M25
28
Tritax Big Box REIT plc Annual Report 2018
RRiverRiver Strategic land – Littlebrook, Dartford
Littlebrook has the potential to become
one of London’s largest Big Box logistics parks,
capable of delivering approximately
1.6 million sq ft of logistics buildings, including
several Big Boxes and some smaller urban
logistics facilities. By developing larger scale
buildings on a pre-let basis we aim to add new
high-quality investments and Customers to
the portfolio over the coming years, while
minimising risk (
see page 20-21).
Assets that satisfy modern
occupiers’ requirements
Location: well placed for logistics
Littlebrook is situated in a core “last mile” location
benefiting from strong road and port connectivity.
It is strategically located inside the M25, close
to the Dartford Crossing, with direct access for
distribution across London and the South East.
Labour: ready and accessible labour supply
Larger, increasingly automated Big Boxes can
still require a large, appropriately skilled and
affordable labour pool, employing several
thousand people during peak periods.
Littlebrook, Dartford benefits from a local
population that includes c.222,900 people
with qualifications relevant to logistics and
distribution1,2.
Power: driving operational efficiency
Modern Big Boxes typically use high levels of
automation and complex technology to achieve
efficiencies that are crucial to protecting the
profitability of occupiers. A Big Box can require
as much as 6Mva at full capacity; the equivalent
power required for up to 3,000 homes. These
large assets require sufficient levels of available
power, increasingly supported by sustainable
onsite generation initiatives.
Highlights
25 mins
Journey time to central London
580,000 people
Active local labour market in Dartford1
11Mva
Potential power capacity on site
Key
Motorway
A-Road
Access road
1 Source: 2011 Census.
2 NVQ Levels 1 and 2, .and other qualifications (incl. apprenticeships).
Tritax Big Box REIT plc Annual Report 2018
29
RRiverRiverRiver ThamesSTRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report Manager’s Report
Implementing the Group’s
Investment Policy
Despite a competitive investment market, we maintained
capital pricing discipline and led the sector in transacting
eight outstanding and attractively priced deals in 2018. These
comprised seven forward funded pre-let developments and
one standing investment. All of these were off market, taking
our overall portfolio acquisitions to 86% off market. Our
unique relationship-driven model continues to deliver value
for our shareholders, with an average uplift on valuation of
7.5% across the eight new assets which were purchased
at a blended NIY of 5.1%. This accretive yield supports the
Company’s ability to grow its dividend.
James Dunlop
Investment Director
Maximising transactional efficiency
Acquiring forward funded developments helps to reduce frictional
costs significantly. Acquisition costs in 2018 were 1.7% of the
aggregate purchase prices, which compares very favourably with
typical direct property purchase costs of c.6.8%. This low level
of acquisition costs maximises value for our Shareholders and
enhances the running yield of the investments.
Forward funded pre-lets compound our relationship
driven model
The common theme across the 2018 pre-let forward fundings is
that they reflect either repeat business with existing developers
or further transactions with established Customers. This has been
a key focus for us and a strong source of capturing off-market
opportunities. We value our relationships, working collaboratively
with our delivery partners and demonstrating to them how our
knowledge and reliability in pre-let forward funded transactions
can provide certainty, ensuring the timely delivery of assets to
meet their business plans. We have actively targeted key Customer
relationships which seek long term, stable, supportive and innovative
investment partners. This has been one of the cornerstones of our
investment strategy in 2018.
Disciplined capital allocation
Each of our 2018 acquisitions has enhanced the quality of the
Company’s portfolio. In addition to broadening and deepening the
Company’s Customer base, our eight acquisitions had an overall
WAULT of 18.9 years at the year end. The seven forward funded
pre-let developments are Foundation assets, with an overall WAULT
at practical completion of 19.6 years, which lengthens the average
WAULT across the portfolio. When buying assets with shorter
income, we target quality assets in good locations with strong
intrinsic value. The standing investment we purchased is let to
a pure-play online retailer; the building is versatile, modern, high-
specification and occupies a strategic North West location.
It falls within our Growth Covenant investment pillar, had an
unexpired lease term of 7.9 years at the year end and offers the
potential for attractive rental growth at the next open market rent
review in May 2021.
The Group’s Investment Highlights in 2018
18.9yrs
WAULT of 2018 acquisitions
+8
Big Box assets
£641.5m successfully invested
100%
of assets acquired
off market
7.0m sq ft
Logistics space acquired in
2018 (GIA)
5.1%
Average NIY of eight Big
Boxes acquired
30
Tritax Big Box REIT plc Annual Report 2018
Strengthening relationships with
our existing Customers
During 2018 our acquisitions continued to diversify our high-calibre
Customer base, but we also strengthened relationships with some of
our existing Customers.
In particular, during the last three months, we focused on the highly
influential e-commerce component of the retail sector committing
to the delivery of three forward funded developments facilities pre-
let to Amazon. Following these acquisitions and the letting of
an existing asset, Amazon now occupies 4.9 m sq ft of high-quality
Big Box logistics space within our portfolio and represent 13.7%
of the total contracted rent roll.
“Many operators still need to right size
to ecommerce. There is a lot of portfolio
engineering still required and this will mean
new take-up”
Logistics Manager, February 2019
“By floorspace pure-play online retailers
accounted for 32% of take-up during 2018” 1
1 Source: CBRE – Assets 100,000 sq ft and above
Five Amazon Big Boxes
4.9m sq ft
High quality logistics space across
the UK
17.1yrs
WAULT across five Amazon assets
Our five largest tenants
by contracted rent roll (%)
Amazon
Morrisons
Howdens
Marks & Spencer
Tesco
4.2
4.2
6.9
5.4
13.7
Tritax Big Box REIT plc Annual Report 2018
31
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report Manager’s Report – Implementing the Group’s Investment Policy
Assets Acquired in 2018
Set out below are key details of the assets acquired in 2018. Further information on all the Group’s assets, including those purchased during
the year, can be found on its website:
https://tritaxbigbox.co.uk/portfolio/properties.
Standing asset
AO World, Crewe, Cheshire
Announced: Jan 2018
Acquisition price: £36.10m
NIY: 5.4%
GIA: 387,666 sq ft
Built: 2006
Lease expiry: Nov 2026
Pre-let forward funded developments
Howdens II & III, Raunds,
Northamptonshire
Announced: Jan 2018
Acquisition price: £103.70m (combined)
NIY: 5.0%
GIA: 657,000 sq ft & 300,000 sq ft
Practical completion: expected Sep 2019
Lease expiries: expected Sep 2049
Amazon, Darlington,
County Durham
Announced: Jun 2018
Acquisition price: £120.261m
NIY: 5.0%
Total GIA: 1,508,367 sq ft (incl. mezzanines);
Ground floor area: 542,060 sq ft
Practical completion: expected Sep 2019
Lease expiry: expected Sep 2039
BSH Home Appliances Limited,
Corby, Northamptonshire
Announced: Oct 2018
Acquisition price: £89.30m
NIY: 5.2%
GIA: 945,375 sq ft
Practical completion: expected Aug 2019
Lease expiry: expected Aug 2029
Eddie Stobart, Corby,
Northamptonshire
Announced: Feb 2018
Acquisition price: £81.80m
NIY: 5.0%
GIA: 847,643 sq ft
Practical completion: Feb 2019
Lease expiry: Jan 2039
Amazon, Haydock,
Merseyside
Announced: Sep 2018
Acquisition price: £68.71m
NIY: 4.9%
GIA: c.361,092 sq ft
Practical completion: expected Jul 2019
Lease expiry: expected Jul 2034
Amazon, Durham,
County Durham
Announced: Dec 2018
Acquisition price: £141.551m
NIY: 5.25%
Total GIA: 1,992,061 sq ft (incl. mezzanines);
Ground floor area: 536,082 sq ft
Practical completion: expected Jul 2020
Lease expiry: expected Jul 2040
32
Tritax Big Box REIT plc Annual Report 2018
1 Based on target commitment amount.
Post year end activity
db symmetry acquisition
Investing for future performance
On 19 February 2019, the Group completed the acquisition of an
initial 87% economic interest in db symmetry Group Ltd (DBS). With
roots dating back to 1996, DBS has evolved to become a leading
specialist logistics development company, with one of the UK’s
largest and geographically most diverse portfolios of strategic land
for the development of Big Box assets and related logistics facilities.
A financially attractive proposition
We are targeting an average yield on cost of between 7% and 8%
for the assets that the Group develops, which compares highly
favourably with the 4.4%3 valuation yield on the Group’s portfolio
at the year end. As such, we expect the DBS portfolio to contribute
materially to the Group’s ability to deliver strong earnings growth
and a progressive dividend, as well as significant valuation gains.
This will enhance the Group’s ability to create value internally, with
the recycling of capital from asset sales and redeploying this into
new developments.
The acquisition gives the Group the opportunity to internally develop
and control the timed delivery of new Big Boxes on a scale it could
not otherwise achieve. It offers phased access to over 2,500 acres
of land or options over land, which is expected to deliver up to
c.38.2 million sq ft of Big Box and related logistic assets, spread
across 26 schemes. We have assumed a build-out rate of
approximately 2.8 million sq ft each year to 2028.
Buildings will be developed primarily on a pre-let, forward funded
basis for large scale logistics facilities. Excluding the initial
acquisition price paid, if the current portfolio is fully built out it is
estimated that the capital requirement would be in the order of
£1.3 billion over a period of 10 years, net of an element of capital
recycling, to be funded by a combination of debt and equity.
Variations of this model could be adopted to reduce the capital
expenditure required.
An exceptional portfolio
The portfolio comprises:
New assets
Number Net acres
Sq ft (m)
Consented developments1
Strategic land (options)2
Total
7
19
26
250
1,700
1,950
3.8
34.4
38.2
The portfolio is concentrated around the core logistics locations
of the M1, the M40 and the North West’s prime M6 and M62
corridors, plus sites in the North East and South West, and was
independently valued by Colliers International at £372.75 million as
at 31 December 2018. This supports the enterprise value attributed
to DBS by the Company of £370 million, subject to certain
adjustments in respect of cash, debt, working capital, tax and other
operational liabilities.
Seven schemes have planning consent. Two of these are
development management agreements (providing fees and/or profit
share). The five remaining schemes that are owned currently have
planning consent. On three of these schemes there are five buildings
under construction, as shown in the table below:
Location
Doncaster
Estimated
completion
date
Estimated
potential rental
income
£m
Size
(sq ft)
150,000
Jan 2019
Bicester phase 1
163,130
Mar 2019
Aston Clinton
Aston Clinton
Aston Clinton
83,000
Jul 2019
55,000
Jul 2019
110,000
Jul 2019
561,130
0.80
1.10
0.60
0.40
0.80
3.70
These buildings are being constructed to institutional specifications
and are being marketed with a view to letting them during
construction or shortly after completion.
The strategic land element of the portfolio primarily relates to
options over land. Land options are legal agreements entered into
between landowners and developers to secure exclusivity. They
are structured to allow the developer to work up planning on the
optioned land before having to acquire the freehold or leasehold
interest. Typically, once planning consent is achieved the developer
has the ability to acquire that land at a 15-20% discount to the
open market value less costs incurred by the developer in securing
planning and associated infrastructure. This should enable the
Group to acquire the land at a significant discount to market value,
once planning consent is secured. Our approach is to optimise the
use of capital by minimising pre-planning capital commitments and
exposure to variable development costs, phase the draw down
of capital, and avoid the impact of holding non-income producing
assets for an extended period.
At Darlington, DBS secured a pre-let with Amazon which the Group
had already purchased as a forward funded development prior to the
DBS transaction.
1 Includes two schemes which are subject to
development management agreements with DBS
benefiting from the right to receive fees and profit
overage on land owned by third parties. One scheme is
subject to a 50:50 joint venture arrangement.
2 Strategic land comprises schemes which are a
combination of options, rights to profit or overage
payments. Five schemes are subject to 50:50 joint
venture arrangements.
3 Including Littlebrook, Dartford; 4.5% NIY
excluding Littlebrook, Dartford.
33
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report – Implementing the Group’s Investment Policy
Our established forward funded model
To minimise development risk, we will look to create high-quality,
income producing investment properties for the Group’s portfolio
by obtaining planning, securing an occupier and developing larger
scale Big Box logistics assets only on a pre-let, forward funded basis.
In doing so, we will seek to leverage the Group’s strong relationships
with its existing Customers, helping to satisfy their demand for
additional logistics space.
Larger scale buildings are typically purpose built for an occupier
following a pre-let, because there is limited supply of speculatively
developed larger facilities. These are usually regular in design
specification such that they are generally appealing to the
occupational market.
Speculative development and smaller format buildings
In November 2018, the Company amended its investment policy to
allow for up to 5% of gross asset value to be invested in speculative
development, without which the Group would have been unable to
acquire an 87% interest in DBS. There are five buildings currently
under construction that have been commenced on a speculative
basis. In the future it is not our intention to speculatively develop
larger format Big Boxes, but from time to time, it may be desirable
to speculatively build smaller buildings. This is an accepted way of
marketing the site and demonstrating to potential occupiers who
can then see the quality of the buildings being constructed and
understand the access, orientation and infrastructure provision.
DBS has master planned the use of each scheme to accommodate
a variety of building sizes in order to appeal to a broad range of
occupiers (sometimes an initial planning requirement). Whilst the
outline planning consent may be for a scheme which incorporates
a varying number of building sizes, this may be amended later,
depending upon demonstrable demand.
An example of this is already evident within the DBS portfolio.
Biggleswade benefits from detailed reserved matters planning
consent for logistics uses in five buildings. Subsequently, the entire
site has been pre-let to The Co-operative Group Limited, on a
new 20-year term. Consequently, a reserved matters planning
application has been submitted for a new 661,000 sq ft regional
distribution centre. Determination of the application is due at
the end of Q1 2019. The site totals 50 acres, is fully serviced and
development ready with new access, utilities and drainage. Subject
to receiving detailed planning consent, we expect the building to
reach practical completion in Q4 2020.
Adding a highly experienced team
In acquiring an 87% interest in DBS, the Group has also secured the
services of a highly experienced team of 17 property professionals
and a further 11 support staff. Its senior management team,
consisting of Richard Bowen, Henry Charman, Andrew Dickman
and Christian Matthews retained a 13% stake in DBS, through the
issuance of B and C shares in Tritax Symmetry Limited, the Group’s
acquiring entity and holding company for DBS (Tritax Symmetry).
The B and C shares are designed to incentivise the wider
Symmetry Park, Biggleswade.
34
Tritax Big Box REIT plc Annual Report 2018
7-8%
Target yield on cost
Attractive target yield on cost across the
DBS development portfolio
87%
Initial economic interest
Purchased interest in db symmetry
38.2m sq ft
Potential delivery of logistics assets
0.7m sq ft
Pre-let
Pre-let secured to an institutional grade
occupier for a 20-year term at Biggleswade
DBS management team by aligning their interests with the rest of
the Group. The Group has acquired 100% of the A shares in Tritax
Symmetry which convey rights to all income.
The team has a track record of successful land promotion and
adding value across the development value chain. They have
delivered 13 million sq ft of commercial projects and achieved
a 100% planning success rate on logistics land promoted.
The DBS land portfolio has been assembled over approximately
a 10-year period.
The Group has experience of working with DBS, having recently
funded the pre-let to Amazon at Darlington in June 2018, where DBS
is acting as the developer.
Tritax Big Box REIT plc Annual Report 2018
35
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report – Implementing the Group’s Investment Policy
Alignment with senior management
The DBS senior management team have retained a 13% economic
interest in Tritax Symmetry, which equates to approximately
£38.1 million as at the point of completion. The DBS senior
management team have also received a further 6% in the form of
share consideration in the Company, representing approximately
£17.56 million, further aligning their interests with the Group’s overall
performance.
There are two forms of lock-in arrangement for DBS senior
management under these two separate share holdings, as follows:
6% share consideration in the Company – Share disposals can be
made equally over a five-year period, by disposing of up to 20% of
the share consideration, on an annual basis, from the end of year
one, through to the end of year five.
13% economic interest – Senior management have an option to
put an element of their B and C shares in Tritax Symmetry to the
Company, equivalent to 1.5% of their shareholding, exercisable on
an annual basis from the end of year three, through to the end of
year eight. This is only on the basis that the DBS portfolio achieves
a total return of 15% per annum on a cumulative basis.
If this return hurdle is not met, then the particular shareholding rolls
to the next year when the test is assessed again. At the end of the
year eight, any shares that have not been put onto the Company by
DBS management can be put automatically by DBS management or
called by the Company.
The B and C shares are realised through either the payment of
cash to DBS management or the issue of shares in the Company to
DBS management, noting that at least 25% is payable in cash. Any
decision in terms of consideration split lies with the Company.
of C Shares. This incentivisation across the broader DBS
management team is designed to provide an alignment of interest
within the wider DBS management and to stimulate succession
planning within DBS management.
Structure and corporate governance
The DBS management team have established a separate external
management company DBS Symmetry Management Ltd (DBS
ManCo), which has contracted with Tritax Symmetry. The DBS
management team will develop the portfolio under an exclusive
Development Management Agreement with Tritax Symmetry. This
means that whilst the Group is able to continue to contract with
multiple other developers, DBS is only permitted to contract with
the Group.
The DBS management team will report directly to the Manager;
the Manager will be responsible for portfolio and risk management.
The Manager will therefore retain control over all key decisions in
respect of the portfolio, such as strategy, construction, letting, land
acquisition and disposals, and further land options. The Manager will
interact and report to the Board in the normal way.
The Manager will also approve the budget that is paid to
DBS ManCo under the Development Management Agreement.
DBS ManCo will receive a fixed management fee of £4.8 million for
the year ending 31 December 2019, payable monthly in arrears.
The Manager has the ability to review the DBS management fee on
an ad hoc basis.
The Manager will take responsibility for the management of
DBS investment assets (and previously developed assets which
have been managed by DBS) once they have reached practical
completion and have been let (including any future asset management
initiatives on these DBS investment assets), including any decision
that is made to sell the DBS Assets into the open market.
The Company has also negotiated a position whereby up to 4% of
the DBS senior management shares (13%) are to be offered to the
wider DBS management team, over time, through the further issue
It is expected that a significant portion of DBS ManCo costs will be
treated as development costs of new assets and capitalised.
“The Group”
Tritax Big Box REIT plc
“The Manager”
Tritax Management LLP
100%
100%
87%
Full oversight
Development
Management Agreement
Existing Group
Completed
developments
suitable for retention
At PC
Tritax Symmetry Ltd
“Tritax Symmetry”
DB Symmetry
Management Ltd
“DBS ManCo”
13%
100%
DBS Management
Team
36
Tritax Big Box REIT plc Annual Report 2018
There are no other fees, ie performance, acquisition, exit or property
management fees, payable by the Group to DBS ManCo under the
Development Management Agreement (although certain benefits
are payable to senior management of DBS ManCo by virtue of the
13% economic interest in Tritax Symmetry).
The Group can decide whether or not to retain any suitable
completed developments. Any asset not suitable for the Group will
be sold to third parties and the capital recycled.
Acquisition consideration and future financing
Acquisition consideration
DBS was owned by DV4 Properties (60%) and DBS Senior
Management and Brit Investments S.A. (40%). A total of
approximately £67.7 million had been advanced to DBS by DV4
Properties by way of deep discounted bonds, which had been
used to fund land acquisitions, construction, developments and
associated costs in relation to the DBS portfolio. Under the terms of
the Share Purchase Agreement, the Group procured the repayment
of the deep discounted bonds at Completion.
Allocation of the consideration for the Acquisition on Completion
was as follows (subject to certain adjustments in respect of cash,
debt, working capital, tax and other operational liabilities):
> approximately £202.4 million in cash paid in respect of 69.1% of
the equity value of DBS, of which approximately £140.9 million
was paid to DV4 Properties and approximately £61.5 million was
paid to DBS Senior Management and their related parties;
> approximately £38.1 million was paid through the issue of B and
C Shares in Tritax Symmetry in respect of 13% of the equity value
of DBS, issued to DBS Senior Management; and
> approximately £52.6 million was paid through the issue of new
Ordinary shares in respect of 17.9% of the equity value of DBS,
of which Consideration Shares representing £35 million were
issued to DV4 Properties and Ordinary Shares representing
approximately £17.6 million were issued to DBS Senior
Management and Brit Investments S.A. These shares were issued
on completion of the acquisition at 130p per share, equivalent to
the issue price of Ordinary Shares issued under the Open Offer
to Shareholders which was used to fund the acquisition and
are subject to lock up restrictions for a period of six months, an
orderly market arrangement for six months thereafter in respect
of the shares issued to DV4, and for a five-year period in respect
of the shares issued to DBS Management.
On 11 February 2019, the Company confirmed the issue of
192,291,313 New Ordinary Shares pursuant to the Open Offer,
which was significantly oversubscribed. Valid applications were
received for 152,562,386 New Ordinary Shares in respect of
Qualifying Shareholders’ Open Offer Entitlements which were
satisfied in full. Valid applications were also received for 204,679,211
Excess Shares under the Excess Application Facility. A scaling
back exercise was undertaken with respect to Excess Applications
received which were allocated pro rata to Qualifying Shareholders’
applications under the Excess Application Facility, in accordance
with the terms set out in the Prospectus.
Financing the business plan
In addition to equity available from the Open Offer, the Group has
available debt capital to draw upon for near term commitments
to fund the development of the DBS portfolio. Thereafter, further
capital requirements will be from a combination of equity and debt.
The Manager estimates that the funding requirement will be in the
order of £100-£200 million pa on the basis of 2.8 million sq ft being
developed each year. This is likely to require the Group raising new
equity, but the Manager intends to additionally fund growth in DBS
from the sale of assets (potentially a combination of existing Group
investments and DBS assets).
Land and speculative development exposure
On an ongoing basis we will closely monitor our exposure to land,
options over land and speculative developments, to ensure that we
remain within our Investment Policy parameters.
Taking the December 2018 Statement of Financial Position, and
adding the effects of the DBS acquisition, the Company’s holdings
in land and options over land (including our site at Littlebrook,
Dartford) represent 9.2% of gross asset value and speculative
development constitutes 1.0%, therefore totalling 10.2% when
combined, against overall gross asset value.
Dilutive impact of the transaction
Whilst we did not want to raise equity at a discount to net asset
value, our share price did suffer in Q4 2018 from the political and
economic uncertainty which affected the UK REIT market more
generally, principally driven by a lack of clarity over Brexit. We
believe the DBS acquisition will add significant value to the Group,
and therefore, concluded with the Board that it was in shareholders’
interests to proceed with the transaction rather than lose this unique
opportunity, notwithstanding the challenging macro environment.
This view was endorsed by Shareholders as evidenced by the
oversubscribed nature of the equity raise.
Open Offer
In order to fund the acquisition, and further investments in
accordance with the Group’s Investment Policy, the Company raised
gross proceeds of approximately £250 million comprising a Placing
and Open Offer, issuing 192,291,313 shares at a price of 130 pence
each. The Open Offer was fully underwritten.
When adjusting for the issue of new shares pursuant to the
fundraising and the acquisition, which were issued at 130 pence per
share, along with the relevant transactional and equity raise costs,
the resultant dilution to the year-end NAV per share is estimated
to represent approximately 3.80p or 2.52%. Management has
identified value within the DBS portfolio which it believes will more
than compensate for this NAV dilution in the near term.
Tritax Big Box REIT plc Annual Report 2018
37
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report
Delivering Solutions
for our Customers
Above and left: Kellogg’s, Trafford Park,
Manchester
Above: aerial view of site
for Howdens II and III with
groundwork underway.
Opposite: Petrina Austin, Tritax Partner
Left: superstructure of buildings
and Head of Asset Management and
with Howdens I in background.
Sustainability at the Amazon, Chesterfield
Big Box where the fit out is underway.
Opposite, above: Howdens I,
completed.
Right: Interior and exterior the Chesterfield
Big Box.
38
Tritax Big Box REIT plc Annual Report 2018
Leading funder in the UK Big Box
market
The seven pre-let forward funding projects added
to the portfolio in 2018, mean that the Group has
now undertaken a total of 16 forward funded pre-
let developments, making it the leading funder in
the UK Big Box market over the last five years.
Securing new high-quality assets
and Customers
By developing buildings on a pre-let basis we aim
to add new modern investments and Customers
to the portfolio. We work collaboratively,
with Customers delivering high quality and
sustainable real-estate solutions that support
their business objectives.
Acquiring prime, attractively
priced assets
We acquire forward funded pre-let developments
at an attractive discount to market levels
when compared to existing income producing
investment properties. As at the year end, nine
pre-let developments had successfully reached
practical completion, with an average purchase
yield of 5.5%. This compares to an average
valuation yield for a strong covenant on a
15-year term of 4.5% as at 31 December 2018
(source: CBRE).
Developing modern
sustainable assets
We work closely with our Developer Partners to
ensure that our assets are constructed using state
of the art design and materials and incorporate
initiatives such as low carbon technologies.
The success of these initiatives are evaluated in
the BREEAM rating achieved. By GIA, 78% the
five forward funded pre-let developments that
became operational during 2018, achieved a
rating of “Very Good”, with the remaining 22%
securing the higher “Excellent” rating.
Benefiting local communities
Once operational, Big Boxes are important for
job creation, with some multi-level facilities
employing several thousand local staff. We also
seek to work with our Customers to actively
support local communities and charities through
volunteering, sponsorship and charitable
donations.
Tritax Big Box REIT plc Annual Report 2018
39
“Following the successful completion
of the first Howdens building, which
the Company agreed to forward fund
in September 2015, we are delighted
to be investing in the second phase
of Howdens' two new distribution
centres. Once completed, these three
high specification facilities totalling
1.6 million sq ft will provide Howdens
with a 'centre of excellence' for its
national supply chain operations.”
Colin Godfrey, Fund Manager
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report
Delivering the Group’s Asset
Management Strategy
We continued to successfully implement the Group’s asset
management strategy in 2018, delivering valuable initiatives
that have helped to strengthen or lengthen the Group’s
income whilst realising significant capital value appreciation.
Key achievements included settling 11 rent reviews,
completing a building extension, a lease surrender and
re-letting, and a lease extension.
Petrina Austin
Partner, Head of Asset Management and Sustainability
Strong Customer relationships
We want the Group to be our Customers’ landlord of choice for
Big Box logistics property. We aim to develop strong relationships
with the Group’s Customers, so we understand their occupational
requirements and commercial objectives. This helps us to identify
asset management opportunities that support our Customers’
businesses, enhance the quality of the Group’s income and increase
capital values.
As we have grown in scale, further acquisitions have allowed us to
welcome new Customers and also strengthen our relationships with
existing Customers, creating the future opportunity to perform asset
management initiatives with one Customer across multiple assets.
Customer engagement – Key themes for 2018
In addition to our regular programme of Customer engagement,
we have been in active discussions with a number of Customers
as they plan for the potential impact of Brexit. This includes
managing Customer applications for alterations to properties,
to accommodate additional temporary storage space for more
domestic inventory or the expansion of automation for improved
efficiencies within existing buildings. These initiatives can help
Customers to mitigate the effects of potential changes to border
controls or delays in their supply chains. The portfolio consists of
assets with the resilience to meet evolving Customer requirements
either on a temporary or permanent basis.
Sustainability is of increasing importance to Customers, as they look
to fulfil their corporate social responsibility (CSR) commitments.
An ongoing priority is working closely with our in-house property
management team and sustainability consultants to review the
potential for “green” initiatives at the Group’s assets. These can
reduce costs for Customers, whilst improving the properties’
environmental credentials. Similarly we have been reviewing the
opportunity to work with our Customers on charitable engagement
to help bring environmental and social benefits to the communities
where the Group owns assets. More information on these initiatives
can be found in Our Sustainable Approach on pages 54-57.
Repositioning our assets from Value Add to Foundation
There are opportunities to add value to assets across all of our
investment pillars (
see page 45), but particularly for Value Add
The Group’s Asset Management Highlights in 2018
11
Rent reviews settled across
4.97m sq ft
£0.91m
Increase in rent from
reviews settled in 2018
+£2.04m
Increase in annual rent1
1 Includes all 2018 asset management initiatives and rent reviews.
40
Tritax Big Box REIT plc Annual Report 2018
For Our Sustainable Approach, see pages 54-57
assets. Such assets comprise good quality buildings which are
typically let to financially sound Customers and offer the potential
for us to apply our asset management expertise in order to enhance
income and/or capital value through lease re-gears (extending
unexpired lease terms), amendments to the existing leases
varying the rent review terms), physical improvements (building
of extensions) or agreeing new lettings. For some assets such
initiatives can change the pillar categorisation from “Value Add” to
“Foundation”.
Amazon, Chesterfield – A new 15-year lease: On acquisition in
March 2014, we had categorised our Chesterfield asset as Value
Add, owing to the lease having a relatively short unexpired term of
approximately six years. Upon acquisition we were aware that the
tenant, Tesco, intended to vacate the property but could not do so
quickly. Tesco operated from the property for a further four years
before vacating, at which time we negotiated a surrender of the
Tesco lease, without premium. This completed at the end of March
2018. We immediately entered into a 12-month occupational licence
with Amazon and subsequently agreed a new lease with Amazon
for a 15-year term from November 2018; the new rent is subject
to legal confidentiality but represents a significant increase over
the previous level, and is reviewed on an indexed-linked five-year
basis. Prior to the re-letting we committed to refurbishment works
to improve the quality of the property. This lease surrender and re-
letting has repositioned this asset from Value Add to Foundation.
Kellogg’s, Trafford Park, Manchester – Lease renewal for a new
10-year term: The Group acquired the asset in August 2016, with an
unexpired lease term of approximately 18 months, as we believed
there was a strong possibility of negotiating a lease re-gear with
Kellogg’s owing to the importance of the building in their supply
chain and the quality of the location. Shortly after our acquisition
of the investment we engaged with Kellogg’s to understand its
future distribution requirements and develop a property solution.
In March 2018, shortly before the expiry of the original lease term,
we completed a new 10-year lease with Kellogg’s. As part of the
negotiation the annual rent was increased by 20% to £1.8 million pa.
Future proofing assets and enhancing value
When acquiring assets for the Group, one of our key considerations is
the potential for physical improvements. We typically acquire assets
that are well configured with low site cover, to allow for occupational
flexibility as a Customer may need to extend a building or alter its
layout as its occupational requirements evolve. Through our specialist
knowledge and experience, we can often suggest practical solutions.
These initiatives aim to grow the Group’s income and ensure that its
assets are resilient and can adapt to Customer demands.
DSG, Newark: During the year, further option agreements were
entered into which provide the Group with the potential to acquire
a substantial area of land adjoining its existing property asset, which
is currently leased to DSG. Master-planned scheme designs have
been drawn up by architects and discussions are progressing with
Our proactive asset
management approach
Our approach to asset management aims to
create value throughout the asset lifecycle.
Sector specialism
We draw on our unique knowledge and
sector insight to identify assets where we
can add value through asset management.
Market intelligence
Our extensive network of relationships
with agents and consultants, plus in-house
research, ensure we have up-to-date market
intelligence.
In-house expertise
We have a team-based approach, combining
dedicated internal asset and property
management and development expertise.
Financial due diligence
We rigorously analyse Customers’ financial
strength before the Group acquires an asset
and continue this scrutiny throughout the life
of the lease.
Business plans
We create asset management plans for
every asset in the portfolio and analyse the
opportunity on an income and capital basis.
Ongoing risk analysis
We conduct a rigorous risk analysis for each
property every year and “health check” it
monthly.
Customer relationships
We regularly meet and build relationships
with local and national Customer contacts.
This is fundamental to unlocking asset
management opportunities.
Tritax Big Box REIT plc Annual Report 2018
41
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report – Delivering the Group’s Asset Management Strategy
the local planning authority in respect of the potential for obtaining
planning permission over the optioned land. Subject to achieving
planning consent, this initiative could offer the opportunity of
developing new buildings on a pre-let basis and/or extending the
Company’s existing property.
Tesco, Middleton: Tesco has substantially refurbished the Group’s
asset at Middleton and is undertaking a marketing exercise, with a
view to assigning the lease or sub-letting the property. We continue
to work closely with this Customer and its agent, and monitor
progress and assist with enquiries proactively.
New Look, Newcastle-under-Lyme: In September 2018, the
78,604 sq ft extension to New Look’s unit at Newcastle-under-
Lyme reached practical completion which led to the rent increasing
by £0.42 million pa. As noted in last year’s report, the lease was
extended by 12 years as part of our negotiation of the property
extension and the rent increased as part of an early settlement of
the rent review by £0.21 million pa. The initiative generated a yield
on cost of 8.4%. The design of the extension is not bespoke to
New Look’s operations and in the event that an alternative occupier
leased the unit, the extended footprint is likely to be beneficial.
New Look remains in occupation and monthly in-advance rents
have been received on time and are up to date. We continue to
work closely with this occupier and regularly meet with New Look’s
finance director.
enabled Royal Mail to introduce a new welfare facility in this
location. The cost of the removal was negotiated as an expense
of the vendor.
Marks & Spencer, Castle Donington: Another notable event during
the year saw us complete a licence with Marks & Spencer at Castle
Donington allowing rail freight operators to begin using the building’s
dedicated rail freight terminal. This facility is now operational,
demonstrating the commitment of M&S to the property and endorses
our original strategy of acquiring a multi-modal property.
Capturing reliable and balanced income growth
The Group’s assets have a balance of rent review types and
timings, providing the opportunity to increase rental income each
year, supporting the Group’s earnings and ambition to provide
shareholders with a progressive dividend.
The rent reviews which were settled in 2018 included; two
outstanding open market rent reviews which were carried over from
2015 and 2017 due to elongated negotiations (as described in more
detail below), and nine rent reviews across a variety of review types
which had review dates during 2018. There were three open market
rent reviews which were not settled and remain outstanding, two of
which had review dates in 2017 and one in 2018. These will continue
to be progressed during 2019, together with the rent reviews which
fall in 2019.
Royal Mail, Atherstone: At the time of our acquisition our surveys
highlighted the existence of underground fuel tanks which we
negotiated to have removed. These works have now been completed,
reducing the potential environmental contamination risk associated
with the continued existence of these redundant vessels. This has
The 11 rent reviews which were settled in 2018, as described above,
reflected 19.5% of the total December 2018 portfolio income
across 4.97 million sq ft of floor area, adding £0.91 million per
annum to the passing rent, which produced a 3.00% increase in
those rents reviewed.
Our portfolio balanced rent reviews by type*
37%
Open market rent reviews
These track the rents achieved
on new lettings and rent reviews
of comparable properties in the
market, offering the potential
to capture the recent and
continued healthy rental growth
of Big Box logistics.
11%
Fixed uplift rent reviews
Fixed rent reviews provide
certainty of income growth and
are set between either 2% pa or
3% pa increases. Fixed uplifts
are reviewed on either an annual
basis, or on a five-yearly basis.
7%
Hybrid
Hybrid rent reviews can be an
amalgam of the other types, for
instance to the higher of open
market rents or RPI (potentially
subject to a cap and collar). Such
arrangements provide enhanced
income growth potential.
45%
RPI/CPI linked
These provide inflation
protection, via to CPI or RPI. They
are all subject to a maximum
“cap”, varying between 2.5%
and 5% pa. Some benefit from
a ‘collar’, varying between 1%
and 2% pa, providing a minimum
level of growth which can be
exceeded by inflation. Most are
reviewed five yearly (annualised
compound growth), but some are
reviewed annually.
* Calculated as a percentage of contracted rental income.
42
Tritax Big Box REIT plc Annual Report 2018
If we were to analyse the rent reviews on an annualised basis the
annual equivalent increase to the passing rent across all the rent
reviews reflects 2.0% pa.
In addition to the rent reviews there were three further asset
management initiatives which increased the income of the Group
by a further £1.12 million. These initiatives related to agreeing a
new lease with Amazon at Chesterfield at a rental level in excess
of the 2015 rent review, agreeing a lease extension with Kellogg’s
at Trafford Park, which was ahead of the previous passing rent
the tenant was paying, and completing the 78,604 sq ft extension
at New Look. Collectively these initiatives increased the previous
passing rent across these three assets by 20.1% and enhanced the
capital value of these assets by £14.97 million.
Across all asset management initiatives (rent reviews, lease
re-gears and building extensions) the annual passing rent increased
by £2.04 million or 1.6% on a like-for-like basis across 46 assets,
during 2018.
Open market rent reviews: Four open market reviews were
completed across 1.9 million sq ft, two of which have been under
negotiation from previous years (Kuehne+Nagel, Dove Valley
Park and Tesco, Chesterfield, outstanding from 2017 and 2015
respectively). Combined, these four reviews resulted in an increase
of 3.4% over a five-year period, adding £0.31 million pa to the
passing rent.
At the year end, there were three unsettled open market rent
reviews (Tesco, Goole; Tesco, Middleton; Next, Doncaster). Once
an open market rent review is agreed, the Customer is responsible
for paying back-rent from the rent review date, together with interest
thereon.
Fixed uplift rent reviews: There were two annual fixed rent reviews
completed across 0.9 million sq ft. which were both subject to a 3%
annual increase. This increased the rent by £0.19 million pa.
There was one five-yearly fixed rent review completed which reflected
a 13.1% increase across this period, increasing the rent by £0.06
million pa which equates to an annual equivalent increase of 2.6%.
RPI/CPI linked: Four rent reviews which are annually reviewed to
inflation indices were conducted during 2018. One was reviewed
to the Consumer Price Index (CPI) capped at 3.5% pa, whilst the
others were pegged to the Retail Price Index (RPI) of which two
were capped at 2% pa and one at 3% pa. The combination of these
inflation-linked rent reviews led to an increase in rental income of
£0.35 million pa equivalent to a 2.44% increase in the rents for
these reviewed properties.
Understanding the five-year cycle of open market rent reviews
Open market rent reviews use comparable
evidence from transactions of other similar
properties in a similar geographic area and
close to the subject rent review date.
Typically, the landlord and tenant will each
appoint a rent review surveyor to negotiate
in line with the clauses set out in the lease.
In a market which is witnessing rising rents
these negotiations can be protracted as
both parties have different agendas. If
the new rent cannot be agreed between
both parties, then the negotiations may
be referred to a third-party arbitrator or
independent expert to determine the new
rent. Having a third-party determine the
appropriate rent can take further time.
The majority of open market rent reviews
take place every five years and are pegged
to the rent prevailing in the market for a
comparable property as at the rent review
date. When assessing rental growth over
the five-year period the reference point
is the passing rent, which will typically
have been set five years earlier. During the
intervening period rents in the market may
have been subject to different dynamics,
ie they may have reduced, increased or
stayed static at different points in time.
For example, the logistics market did not
start to witness clear rental growth until late
2014/early 2015, since then rental growth
has remained positive. Consequently,
a property subject to a rent review in
mid-2017 may have experienced 2.5 years
of no rental growth followed by 2.5 years of
positive rental growth. It follows, therefore,
that prospects for capturing higher levels
of rental growth are likely to improve as we
move towards 2020, assuming that rental
growth remains positive in the interim.
Tritax Big Box REIT plc Annual Report 2018
43
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report Manager’s Report
Delivering Growth
Through Asset Management
“We are delighted to have successfully
completed this strategic asset
management initiative for the Company.
This new 15-year lease to Amazon has
increased and lengthened the income
profile and enhanced the value of this
well located asset. We look forward to
continuing to work closely with this key
customer in order to help them meet
their fulfilment requirements.”
Colin Godfrey, Fund Manager
44
Tritax Big Box REIT plc Annual Report 2018
Repositioning our Value Add assets
to Foundation
During 2018, we delivered two key asset
management initiatives welcoming Amazon to
our Chesterfield asset and retaining Kellogg’s as
valued Customer at our Trafford Park asset.
Together the repositioning of these assets
successfully strengthened and lengthened the
Group’s income stream, increasing the passing
rent by nearly 20% whilst delivering a capital
value increase of over 13%.
A new 15-year lease
During the year, we agreed a new lease with
Amazon for a 15-year term from November 2018;
the new rent represents a significant increase
over the previous level and is reviewed to CPI on
a five-year basis between a cap and collar. Prior
to the re-letting we committed to refurbishment
works to enhance the quality of the property.
The lease surrender from Tesco and reletting to
Amazon successfully repositioned this asset from
Value Add to Foundation.
Lease renewal for a 10-year term
In 2018, we were delighted to retain a valued
Customer by completing a new 10-year lease
with Kellogg’s at our Trafford Park asset. As part
of the negotiation the annual rent was increased
by 20% to £1.8 million pa. This commitment
demonstrates the strategic importance of this
facility to Kellogg’s supply chain and the quality
of the location. The lease renewal successfully
repositioned this asset from Value Add to
Foundation.
Highlights
+2
Key initiatives across c.800,000 sq ft
+£0.70m
Added to the passing rent
+£14.9m
Increase in capital values
Tritax Big Box REIT plc Annual Report 2018
45
Above left: Petrina Austin,
Tritax Partner and Head of Asset
Management and Sustainability
at the Amazon, Chesterfield
Big Box where the fit out is
underway.
Above and right: Kellogg’s,
Trafford Park, Manchester.
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report
The Group’s Financial Strategy
in Action
The Group met its dividend and total return targets for 2018,
declaring dividends totalling 6.70 pence per share, which were
fully covered by Adjusted earnings of 6.88 pence per share.
Our total return was supported by underlying growth in EPRA
NAV of 10.6 pence per share or 7.4%, to 152.83 pence per
share as at 31 December 2018.
In April 2018, we successfully raised £155.56 million of equity
to grow the Company further and partially finance eight
assets. This capital was supplemented by additional, flexible
debt finance consisting of a £250 million commitment,
in the form of a short-term unsecured RCF, from some of our
key relationship banks, and the Group’s debut unsecured loan
notes in the private placement market, raising £400 million,
with an average 9.8 year term.
Frankie Whitehead
Head of Finance
On a like-for-like basis, compared with assets held at 31 December
2017, values increased by 4.7% during the year (excluding any
additional capital costs incurred). The portfolio’s average valuation
yield at 31 December 2018 was 4.4% including the land at
Littlebrook, which currently does not generate any income.
At the year end, the Group had total commitments relating to
forward funded developments and other asset management
initiatives of £365.96 million (31 December 2017: £5.11 million).
The Group had £5.12 million (31 December 2017: £23.51 million)
of outstanding commitments to prepare the Littlebrook site
for construction, where costs remain on budget. This includes
the remaining costs of demolition, remediation, planning and
infrastructure works.
Financial results
Net rental income for the year was £132.78 million (2017: £107.94
million), an increase of £24.83 million or 23.0%. This reflected
continued growth in the portfolio along with the settlement of 11 rent
reviews and uplifts in rent following three strategic asset management
initiatives, as described on pages 40-43. These factors increased
Portfolio growth
At 31 December 2018, the total value of the portfolio, including
forward funded development commitments, was £3.42 billion
across 54 assets and 114 acres of strategic land (31 December
2017: £2.61 billion across 46 assets). The Group invested or
committed a total of £641.45 million (net of purchase costs) in eight
assets during the period, of which £330.52 million, or 51.5%, of
acquisitions by value were pre-let to Amazon, increasing our overall
exposure to the Amazon covenant to 13.7% based on contracted
annual rent.
The IFRS gain recognised on revaluation of the Group’s investment
property portfolio was £162.98 million (2017: £175.98 million),
after accounting for all costs related to asset purchases in the
year. We managed to continue our efficient manner of purchasing
by achieving an average purchase cost of 1.7%, helped by seven
forward funded developments where SDLT is paid on the land value
only, with the other acquisition being a corporate purchase.
The Group’s Financial Highlights in 2018
6.70p
6.88p
152.83p
Dividend per share
Increased by 0.30p or 4.7%
Adjusted earnings per share
Increased by 0.51p or 8.0%
EPRA NAV per share
Increased by 10.6p or 7.4%
13.7%
EPRA Cost Ratio
27.3%
Loan to value
46
Tritax Big Box REIT plc Annual Report 2018
the Group’s annual contracted rent roll to £161.12 million across 54
income producing assets as at 31 December 2018 (31 December
2017: £125.95 million across 46 income producing assets).
measure when assessing dividend distributions. Adjusted EPS fully
covered the total dividend in respect of the year of 6.70 pence per
share, more details of which are set out below. Further information
on the calculation of Adjusted EPS can be found in note 13.
An anomaly during 2018 was the structure of the licence agreement
taken by Amazon at our Chesterfield asset, following the surrender
by Tesco in March 2018. As a result of not having our usual FRI lease
structure in place for six months, we are reflecting irrecoverable
property costs of £0.87 million in relation to this property. To
compensate, we grossed up the total licence fee amount receivable
under the licence agreement as a mitigation against these costs and
therefore there was no actual cost leakage against this property.
Operating profit before changes in the fair value of investment
properties, as reported under IFRS, grew by 21.3% to
£113.76 million (2017: £93.78 million). The increase primarily reflects
the growth in the portfolio but includes the downward ratchet of the
see page 96). Administrative and
investment management fee (
other expenses, which include management fees and other costs
of running the Group, were £18.07 million (2017: £14.16 million).
Elsewhere £0.95 million was incurred in relation to the acquisition of
db symmetry, recognised in accordance with IFRS 3. There will be
further acquisition related costs in 2019 in relation to db symmetry.
The EPRA cost ratio for 2018 was 13.7% (2017: 13.1%). The
calculation of the EPRA cost ratio excludes licence fees from
the Group’s forward funded developments. The slight increase in
EPRA cost ratio is because at the year end we had seven assets
under construction (2017: nil) and therefore these assets did not
contribute any rental income within the EPRA cost ratio.
Net financing costs (excluding capitalised interest) for the year
were £22.93 million (2017: £19.92 million), excluding the reduction
in the fair value of interest rate derivatives of £1.24 million (2017:
£2.04 million). The change in net financing costs in the year reflects
the continued growth in the business and the refinancing in December
2017 to a longer-term, unsecured debt structure. We continue to
maintain a healthy level of Group interest cover of 5.0 times cover.
Further information on financing and hedging is provided on page 48.
Tax
The Group has continued to comply with its obligations as a UK REIT
and is therefore exempt from corporation tax on its property rental
business. The tax charge for the year was therefore £nil (2017: £nil).
Profit and earnings
Profit before tax for the year was £252.57 million (2017:
£247.80 million). This resulted in basic EPS of 17.54 pence (2017:
19.54 pence) and basic EPRA EPS of 6.37 pence (2017: 6.20 pence).
Adjusted EPS for 2018 was 6.88 pence (2017: 6.37 pence),
an increase of 8.0%. Adjusted EPS takes EPRA EPS, adds the
developer’s licence fees the Group receives on forward funded
developments and excludes other earnings not supported by cash
flows. The Board considers Adjusted EPS as the most relevant
Dividends
Since 1 January 2018, the Group has declared the following interim
dividends:
Declared
Amount
per share
In respect of three
months to
Paid/to be paid
7 March 2018
1.60p
31 December 2017
29 March 2018
17 May 2018
12 July 2018
1.675p
1.675p
31 March 2018
11 June 2018
30 June 2018
9 August 2018
11 October 2018
1.675p 30 September 2018 15 November 2018
6 March 2019
1.675p
31 December 2018
28 March 2019
The dividend declared on 6 March 2019 will be paid on 28 March
2019, to Shareholders on the register on 15 March 2019.
Dividends in respect of 2018 therefore totalled 6.70 pence per
share, an increase of 4.7% on the 6.40 pence per share paid in
respect of 2017. This was ahead of inflation and in line with the
Group’s target for the year.
The Group continues to operate a progressive dividend policy with
the intention that dividends are fully covered by Adjusted earnings.
For 2019 the target dividend is 6.85p per share, paid quarterly.
The Company continues to maintain a healthy distributable
reserves position, having previously converted a large part of its
share premium account into the capital reduction reserve, which
is considered distributable under the Companies Act, along with
growing retained earnings. A further £932.37 million was converted
during 2018 and as at the year end, the total distributable reserves
available to the Company were £1.55 billion.
Net assets
The EPRA NAV per share at 31 December 2018 was 152.83 pence
(31 December 2017: 142.24 pence), representing a 10.6 pence
or 7.4% increase across the year. This excludes the fair value
adjustments recognised against our interest rate derivatives, which
are reported under IFRS.
The uplift in the EPRA NAV was largely driven by the performance
of the property portfolio, as well as reflecting our ability to buy well
for the Group and recognise material valuation gains across all assets
purchased in the year. The level of investment demand in the market
was also strong, particularly during the second half of the year, leading
to further yield compression of 13 bps across our portfolio. Elsewhere,
capital growth was assisted by the settlement of 11 rent reviews and
other asset management initiatives which grew our income.
Tritax Big Box REIT plc Annual Report 2018
47
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Manager’s Report – The Group’s Financial Strategy in Action
Trade and other receivables increased to £42.23 million
(2017: £10.23 million). This movement relates to an increase in
forward funded development activity in the year and principally the
licence fee invoiced across seven developments and greater VAT
recoverable in respect of development costs.
Equity capital
On 18 April 2018, we announced the issue of 109,364,308 new
Ordinary Shares through a Placing at an issue price of 142.25 pence
per Ordinary Share. This raised gross proceeds of £155.57 million,
all of which was invested during the second half of the year.
RCF by one year. The maturity of £325 million was therefore
extended to 10 December 2023, with the remaining £25 million
maturing on 10 December 2022. The current margin payable is
unchanged at 1.10% over three-month LIBOR and the facility retains
its uncommitted £200 million accordion option. The Company has a
further one-year extension option available before December 2019.
As a result of these initiatives, at 31 December 2018 the Group had
the following borrowings:
Asset
security
Maturity
Loan
commitment
£m
Amount
drawn at
31 Dec
2018
£m
Debt capital
We continued to diversify the Group’s sources of debt financing as
we built on the flexible, unsecured debt financing platform, following
the significant refinancing event in December 2017.
Lender
Loan notes
The Group’s strong banking relationships provided further support
for its growth plans during the year, as we agreed a short-term and
attractively priced revolving credit facility (RCF). The £250 million
facility was provided by a syndicate of the Group’s relationship
lenders comprising Barclays Bank PLC, The Royal Bank of Scotland
International Limited and Banco Santander, S.A., London Branch.
This facility gave us the flexibility to commit to a number of forward
funded contracts during the second half of the year, whereby
the cash flows are typically drawn down over the 9-12 month
construction period.
Towards the end of the year, we put in place longer-term finance to
suit the lease terms of these particular assets by issuing the Group’s
first, unsecured loan notes sourced from the private placement
market. This market gives the Group a further source of liquidity,
from a market known for its stability. This transaction presents
attractive features, such as split maturities and the ability to fix the
interest rate in November 2018, but delay receipt of the proceeds
until February 2019.
2.625% Bonds 2026
None
Dec 2026
249.12
249.12
2.86% Loan notes
2028
2.98% Loan notes
2030
None
Feb 2028
250.00
None
Feb 2030
150.00
–
–
3.125% Bonds 2031
None
Dec 2031
246.73
246.79
Bank borrowings
RCF (syndicate
of three banks)
RCF (syndicate
of seven banks)
Helaba
PGIM Real Estate
Finance
Canada Life
None
Oct 20191
250.00
–
None
Dec 2023
350.00
121.00
Jul 2025
50.87
50.87
Mar 2027
90.00
90.00
Apr 2029
72.00
72.00
Ocado,
Erith
Portfolio
of four
assets
Portfolio
of three
assets
Total
1,708.72
829.78
The loan notes totalled £400 million split into two tranches, with
a weighted average coupon of 2.91% and a weighted average
maturity of 9.8 years. The two tranches comprise:
In an uncertain political and economic climate, we have continued to
de-risk the Group’s cost of borrowing by increasing the level of fixed-
rate debt available to 72.6%1 of the Group’s debt commitments.
> £250 million at a fixed coupon of 2.86%, maturing in February
2028; and
> £150 million at a fixed coupon of 2.98%, maturing in February 2030.
The loan notes were priced on 15 November 2018 and the funds
were drawn after the year end, on 28 February 2019. On the draw
down date of the loan notes the £250 million short-term RCF was
cancelled in full.
Our hedging strategy for the Group’s variable rate debt is primarily
to use interest rate caps, which allow the Group to benefit from
current historically low interest rates, while minimising the effect
of a significant interest rate increase. The Group therefore holds
derivative instruments which, when combined with the fixed-rate
debt, hedge 99.0%1 of its borrowing commitments. The derivative
instruments comprise one interest rate swap and a number of interest
rate caps, each running coterminous with the respective loan.
On 19 December 2018, the Company announced that it had
extended the termination date of its existing £350 million unsecured
As a consequence of the fixed-rate debt and hedging policy, the
Group has a capped cost of debt of 2.73%1 (31 December 2017:
2.66%). The all-in running cost of borrowing has risen as a result
48
Tritax Big Box REIT plc Annual Report 2018
1 Excluding the £250 million short-term RCF, which was redeemed on
28 February 2019.
of increases to LIBOR and new longer-term debt, to 2.63%1 at the
year end (31 December 2017: 2.38%).
At the year end, the Group’s debt had an average maturity of
8.7 years1 (31 December 2017: 8.9 years).
Loan to value (LTV)
The Group has a conservative leverage policy, with a medium-term
LTV target of 35% and a maximum of 40%. At the year end, the LTV
was 27.3% (31 December 2017: 26.8%).
The Group also has commitments under forward funded
development contracts (see note 32 for details). When taking these
commitments into account, the Company’s LTV would increase to
approximately 35%.
Credit rating
During the year we continued our dialogue with Moody’s which
included our annual review towards the end of the year. In October
2018, Moody’s reaffirmed its Baa1 long-term credit rating and stable
outlook on the Company.
Alternative Investment Fund Manager (AIFM)
The Manager is authorised and regulated by the Financial Conduct
Authority as a full-scope AIFM. The Manager is therefore authorised
to provide 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.
Looking forward
In February 2019 the Group acquired an 87% economic interest in
the db symmetry group. This was a transaction that we had been
working on since the Summer of 2018. To fund this transaction
the Company raised £250 million of equity in February 2019. The
shares were issued at 130p each. When adjusting for the issue of
new shares pursuant to the fundraising and the acquisition, along
with the relevant transaction costs, the resultant dilution to NAV is
estimated to represent approximately 3.80p or 2.52%.
The db symmetry portfolio has the potential to deliver significant
capital value growth to the Company. The Company’s earnings
profile also has the ability to be materially enhanced, particularly
from 2021 onwards.
The development of these assets will require a significant amount of
capital, as we expect to target a delivery of approximately 2.8 million
sq ft of logistics space to the market on an annual basis over the
10 year business plan. We approach this with an efficient and
flexible capital structure, and now with access to various debt
capital markets to support our next phase of growth.
The Company has today announced its dividend target for 2019
of 6.85p per share.
Debt maturity profile extended
December 2017 debt maturity profile (£m) December 2018 debt maturity profile (£m)
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Unsecured RCF
Helaba
Unsecured Loan Notes
PGIM
Canada Life
Unsecured Loan Notes
Unsecured RCF
350.0
Unsecured RCF
Unsecured RCF
50.9
90.0
72.0
250.0
0
50
100
150
200
250.0
250
300
350
Helaba
Unsecured Loan Notes
PGIM
Private placement*
Canada Life
Private placement*
Unsecured Loan Notes
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
25.0
50.9
90.0
72.0
150.0
0
50
100
150
200
250.01
250.0
250.0
250.0
250
325.0
300
350
* Facility arranged in 2018 1 The £250 million short-term unsecured RCF was cancelled on 28 February 2019.
Tritax Big Box REIT plc Annual Report 2018
49
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
The Manager
The Manager provides all management and advisory services to the
Company, under the Investment Management Agreement. The Financial
Conduct Authority authorised the Manager as an AIFM on 1 July 2014.
The Manager is 100% owned by Mark Shaw, Colin
Godfrey, James Dunlop, Henry Franklin, Bjorn Hobart
and Petrina Austin. This team of property, legal and
finance professionals has 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
high-calibre team of other accounting, marketing, public
relations, administrative and support staff.
Above: James Dunlop BSc
(Hons), MRICS, Investment
Director
Right, from left: Colin
Godfrey BSc (Hons), MRICS,
Fund Manager; Charlie
Withers MRICS, Director of
Development.
Right: Henry Franklin BA, CTA,
Structuring and Legal
50
Tritax Big Box REIT plc Annual Report 2018
Left: Petrina Austin BSc (Hons),
MRICS, Asset Management and
Sustainability
Below, from left: Edward Plumley
MBA, MSc, MRICS, Assistant
Fund Manager; Chase French
MSc, AMCT, CAIA, Head of
Analytics; Bjorn Hobart MA BSc
(Hons) MRICS, Property.
Above-left, from left: Hana Beard
ACIS, Company Secretary;
Frankie Whitehead ACA, Head
of Finance.
Above-right: Kirstin Walmsley,
Head of Marketing.
Far-left: Catherine Fry, Head of
Risk and Compliance.
Left: Sally Bruer, Head of
Research.
Tritax Big Box REIT plc Annual Report 2018
51
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Key Performance Indicators
Our objective is to deliver attractive, low-risk returns to shareholders, by executing the Investment Policy and operational strategy described on
pages 20-21. Set out below are the key performance indicators we use to track our progress. For a more detailed explanation of performance,
please refer to the Manager’s Report on pages 22-49.
KPI and Definition
Relevance to strategy
Performance
Result
1. Total return (TR)
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.
12.1%
for the year to
31 December 2018
(2017: 15.2%).
Ahead of
our medium-term
TR target of +9% pa.
2. Dividend*
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.
6.70p
per share for the year
to 31 December 2018
(2017: 6.40p per share).
Achieved our target
in 2018 of a fully
covered dividend
of 6.70p and set our
2019 dividend
target of 6.85p.
3. EPRA NAV per
share†
The EPRA NAV reflects our ability
to grow the portfolio and to add
value to it throughout the lifecycle
of our assets.
152.83p
at 31 December 2018
(2017: 142.24p).
Increase in EPRA
NAV per share
over the year by
10.59p (7.5%).
4. Loan to value
ratio (LTV)
The LTV measures the prudence
of our financing strategy, balancing
the potential amplification of returns
and portfolio diversification that
come with using debt against the
need to successfully manage risk.
27.3%
at 31 December 2018
(2017: 26.8%).
Within our
medium-term LTV
target of up to 40%.
5. Adjusted earnings
per share
The Adjusted EPS reflects our
ability to generate earnings from our
portfolio, which ultimately underpins
our dividend payments.
6.88p
per share for the year
to 31 December 2018
(2017: 6.37p).
See note 13, page 126
Adjusted EPS
substantially covers
the total dividend for
the year.
6. Total expense ratio
(TER)
This is a key measure of our
operational performance. Keeping
costs low supports our ability to
pay dividends.
0.87%
for the year to
31 December 2018
(2017: 0.84%).
Our TER is
expected to reduce
as the Company
grows.
7. Weighted average
unexpired lease
term (WAULT)
The WAULT is a key measure of the
quality of our portfolio. Long lease
terms underpin the security of our
income stream.
14.4 yrs
at 31 December 2018
(2017: 13.9 years).
+2.4 years
above our
12-year target.
* This is a target only and not a profit forecast. There can be no assurances that
the target will be met and it should not be taken as an indicator of the Company’s
expected or actual future result.
† EPRA NAV is 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.
See Notes to the EPRA and Other Key Performance Indicators, pages 158-160
For definitions for all KPIs see Glossary of Terms on pages 161-163
52
EPRA Performance Indicators
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 indicators, please see Notes to the EPRA and other key performance indicators.
KPI and Definition
Purpose
Performance
1. EPRA Earnings
(Diluted)
See note 13, page 126
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.
£91.78m/6.37p
per share for the year to 31 December
2018 (2017: £78.61 million/6.20p per
share).
2. EPRA NAV (Diluted)
See note 28, page 140
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.
£2,253.11m/152.83p
per share as at 31 December 2018
(2017: £1,940.42m/142.24p per share).
3. EPRA Triple Net
Asset Value (NNNAV)
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.
£2,245.15m/152.29p
per share as at 31 December 2018
(2017: £1,939.35m/142.16p per share).
4.1 EPRA Net Initial
Yield (NIY)
This measure should make it easier for
investors to judge for themselves how
the valuations of the two portfolios
compare.
4.37%
at 31 December 2018 (2017: 4.04%).
4.2 EPRA ‘Topped-Up’
NIY
This measure should make it easier for
investors to judge for themselves how
the valuations of the two portfolios
compare.
4.68%
at 31 December 2018 (2017: 4.71%).
5. EPRA Vacancy
A “pure” (%) measure of investment
property space that is vacant, based
on ERV.
0.00%
as at 31 December 2018 (2017: 0.00%).
6. EPRA Cost Ratio
A key measure to enable meaningful
measurement of the changes in a
company’s operating costs.
13.7%
for the year to 31 December 2018
(2017: 13.1%). Both the 2018 and 2017
ratios exclude vacancy costs.
See Notes to the EPRA and Other Key Performance Indicators, pages 158-160
For definitions for all KPIs see Glossary of Terms on pages 161-163
53
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Our Sustainable Approach
.
We understand that our responsibility to society is broader than
simply generating financial returns for Shareholders. We therefore
strive to act responsibly in the areas where we can influence as a
landlord, for example by working with Customers to improve the
environmental performance of our assets and minimise their impact
on climate change. This work is principally implemented by the
Manager. Where appropriate, we also obtain advice and expertise
on sustainability matters from specialist third-party professionals in
order to keep us appraised of developments in best practice. Our
approach is proactive, helping us to prepare for compliance with
future legislative requirements and make sustainable operational
advances.
Driving the sustainability performance of our assets
The portfolio consists predominantly of modern, well designed
properties, built to ensure future flexibility for Customers and
constructed utilising modern, safe working practices and a
sustainable choice of materials.
The Manager adopts a formal “Green Property Review” process,
which begins pre-acquisition with a detailed review of environmental
and building surveys, combined with physical inspections. This
review then directs the individual property’s “Green Action Plan”,
which aims to maximise the potential for initiatives to enhance the
asset’s long-term resilience. Accrediting the assets through EPC
ratings and BREEAM provides a benchmark of their sustainability
performance, with the Group aiming to achieve EPC ratings of “D”
and above for acquired investment properties and for new buildings
BREEAM ratings of “Very Good” or above and EPC ratings of “A”.
The Green Action Plan is then expanded following engagement
with our Customers, which identifies opportunities to help them
meet their corporate responsibility commitments. This may involve
consents for additional welfare facilities, such as staff shops and
break-out areas, or environmental initiatives, such as replacing lights,
boilers or other mechanical and electrical equipment with more
energy efficient systems, potentially powered by renewable sources.
We are in the process of expanding this Green Action Plan to
include initiatives benefiting local communities of a conservational
and educational nature.
54
Tritax Big Box REIT plc Annual Report 2018
2018 Case study: Enhancing Sustainability
Performance
When we acquired the B&Q, Worksop asset, our Green
Property Review identified the opportunity to install roof-
mounted PV panels. B&Q’s in-house Sustainability team
decided to proceed with the project and supplement this
with the installation of a biomass boiler at the same time.
We worked collaboratively with the Customer to quickly
progress the necessary reports and consents, ensuring
the installation of the equipment was not detrimental to
the building fabric and that it did not limit the potential for
future expansion. The biomass boiler uses waste wood,
such as redundant pallets, to supply the main office with
heat and hot water. It takes priority over the existing gas
heating system, which remains in place as a back-up.
Following completion of the works in 2018, we
commissioned a new EPC rating and were delighted that
in January this year the grading improved from “E” to “A”,
a level of grading usually associated with a new build
property.
If this new and improved EPC certificate is added to
the Group’s EPC rating as at 31 December 2018, the
percentage of the portfolio rated A would increase from
30% to 34%1.
1 By gross internal area
Highlights in 2018
During 2018, we implemented a number of initiatives to improve the
sustainability performance of our assets.
DSG Newark: We agreed to install a roof-mounted PV panel
scheme, which is expected to provide around 15% of the
Customer’s annual consumption, generating substantial cost
savings for the Customer over the remainder of the lease term. DSG
has also decided to replace the original light fittings with passive
infrared (PIR) sensor systems, which switch on when they detect
people moving, thereby reducing energy use. DSG has entered into
a 20-year power purchase agreement with us for the power created
by the PV panels, providing the Group with an additional source
of income. The capital expenditure of c.£626,000 should earn an
internal rate of return of around 9.1% a year over the remainder of
the lease. These changes should improve the asset’s EPC rating
from its current “D” to “C” or better.
Brakes, Harlow: We have committed to a roof-mounted PV scheme
which is expected to be operational in April 2019. The capital
expenditure of c.£728,500 should produce an internal rate of
return over the remaining lease length of c.9.35% per annum. This
is expected to improve the EPC rating for the property from the
current grade of “C” to “B”.
Brakes, Portbury: Together with our Customer Brakes, we
commissioned a sustainability consultant to review the potential
for installing a wind turbine. The initial feasibility study indicated
the potential for substantial power cost savings for Brake Bros
by reducing reliance on the national grid supply. We are currently
negotiating the potential terms of a power purchase agreement.
This project could produce additional income and a valuation
improvement for the asset, whilst also improving the EPC rating for
the property.
Our portfolio (by gross internal area) is rated as follows
(as at 31 December 2018):
Portfolio Energy Performance, 2018 (%)
6%
18%
30%
● “A”, 7,015,078 sq ft
● “B”, 4,748,471 sq ft
● “C”, 6,149,181 sq ft
● “D”, 4,075,868 sq ft
● “E”, 1,223,423 sq ft
26%
20%
None of our properties are rated “F” or “G”.
Tritax Big Box REIT plc Annual Report 2018
55
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Our Sustainable Approach
Building sustainable assets
For new pre-let forward funded developments, the Manager
works closely with the Group’s Developer Partner to ensure that
the contractors’ working practices comply with industry codes
of practice and best practice schemes, such as the Considerate
Constructors Scheme. This includes an emphasis on health and safety
management. As part of the development process choice of materials,
transport methods and recycling opportunities are all appraised and
similarly shape the approach for the future property management.
We strive to ensure that developments protect ecology and
encourage biodiversity, for example through careful landscaping
and incorporating trees and plants that support habitats. We also
look to minimise the impact of construction related traffic on our
neighbours and the public. The success of these methods and
decisions are evaluated in the BREEAM rating achieved.
Highlights in 2018
Five of our completed forward funded pre-let developments totalling
2.5 million sq ft became operational. These included TK Maxx,
Wakefield; Hachette, Didcot; Gestamp, Wolverhampton; Ocado,
Erith; and Screwfix, Fradley.
BREEAM Rating for assets that became operational
during 2018 (by gross internal area) (%)
22%
● Very Good, 78%
● Excellent, 22%
78%
2018 Case study: Developing our
Strategic Land Responsibly
From demolition through to the completion of fully
operational assets, we are focused on delivering
high standards of sustainability performance at our
development site at Littlebrook, in Dartford. To date, we
have recycled more than 98% of waste produced during
the demolition process.
We are targeting BREEAM Very Good as a minimum and
an Energy Performance Certificate “A” Rating.
Our design objectives include the following: ensuring all
elements of design and construction are in accordance
with all relevant “Standards” including “BSRIA”; higher
standards of air tightness than required by Building
Regulations; highly efficient LED lighting; low water usage
WC and shower facilities; thermodynamic panels which
will provide all domestic hot water; and provision for Solar
PV areas.
[Image box]
56
Tritax Big Box REIT plc Annual Report 2018
Monitoring and mitigating risk
Property management is undertaken by the Manager, which involves
the mitigation and identification of risks to the health and safety of
Customers, such as fire. The Manager maintains a comprehensive
schedule detailing construction materials and suppression systems
such as sprinklers and this is regularly reviewed in conjunction with
insurers. A formal programme of re-commissioning reinstatement
valuations is undertaken every three years to ensure accurate levels
of insurance cover are in place. In 2018 the manager extended
the insurance policy terms to enhance cover for the risk of
environmental contamination.
Green facilities management
The Manager appoints third-party facilities managers for properties
requiring a service charge. This enables the agent to apply its
procurement practices and bulk buying abilities over a wider
portfolio, thereby generating economies of scale. Its procurement
strategy recommends contractors based on a large number of
factors including price, health and safety practices, track record
and localism. During 2018, the facilities managers have moved
electricity supplies for common parts onto “green electricity tariffs”,
where the supply is generated by wind and hydro assets matched
to Renewable Energy Guarantees of Origin (REGOs) enabling zero
emission reporting.
Where we have management responsibility for waste as part of
the service charge responsibilities we are achieving zero waste to
landfill. Landscapers are required to use battery powered strimmers
as opposed to petrol equipment when possible and recycle all
waste. P.I.R. light sensors have been fitted to the common parts
lighting at the Company’s asset in Harlow, with a bulb replacement
scheme of switching to LEDs.
Proactive Customer engagement
Building and maintaining close relationships with our Customers
is an important feature of our business model. The Manager holds
regular customer meetings, both at the asset and at the Customer’s
head office. The Manager also engages with current and potential
Customers at industry events, including participation in the
Chartered Institute of Logistics & Transportation events. In addition,
the Group hosts various social events with key Customers, to enable
the Non-Executive Directors and Senior Management team to meet
with key contacts.
During the year the Manager circulated a Tenant Handbook to
Customers, providing useful reference information regarding lease
obligations and responsibilities, insurance cover, how to approach
future projects including sustainability initiatives and full contact
details for the Manager’s team member who can assist and provide
specialist advice. The intention is for this to be supplemented by a
questionnaire, to formally ascertain our Customers’ key objectives
and enable us to consider and review initiatives.
Benefiting local communities
Big Boxes are important for job creation. At Littlebrook, our
development partner seeks to employ construction staff from the
local community. Once up and running, Big Boxes can be major
sources of jobs, with some multi-level facilities employing several
thousand staff.
We often work closely with local authorities to support the
community in other ways, as part of the planning process. For
example, for Amazon Haydock, we paid for major road improvements.
Similarly, at Raunds, the creation of a footpath and park as part of the
development scheme provides the community with a popular dog
walking amenity space.
A number of our Customers are extremely active in supporting
local communities through sponsorship, charitable donations
or volunteering. We are developing some of those links and are
reviewing proposals received from charities with environmental
and educational aims. One such charitable initiative is at our
Trafford property, where our Customer L’Oréal has appointed a
charity to install beehives. The charity supplements the installation
and management of the hives with educational presentations to
local schools. Honey produced from the hives is provided to the
Customer in branded jars. This type of project may be of interest to
other Customers in the portfolio.
Similarly, we are reviewing a proposal to sponsor volunteers who
supplement teachers in primary schools with reading practice. We
are working with this charity to see if we can support this initiative in
all of the areas where we own assets.
The Group supported a charitable training event at Littlebrook,
which saw local firefighters and some of our consultants
undertaking a zip wire challenge from the major tower. This provided
the firefighters with both training and sponsorship, raising money for
the firefighters Charity.
Looking forward
We have reviewed the numerous ESG reporting indexes and
schemes and identified those which we consider to be most relevant
to the Group.
We will build on our public reporting by subscribing to the Global
Real Estate Sustainability Benchmark (GRESB) and expanding
our European Public Real Estate Association (EPRA) reporting to
include its Sustainability module in 2019. These evaluation reporting
schemes require assessment relating to physical, social and
environmental areas, where we will formally demonstrate the range
of objectives, practices and processes in place and in development.
Tritax Big Box REIT plc Annual Report 2018
57
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report
Our Responsible Approach
.
The Group has no employees, however the Manager has 31
employees. The Manager endeavours to provide a professional
and enjoyable place of work, with a strong focus on constructive
team work. The Manager provides and organises professional
training and attendance at industry educational and networking
events. Employees receive an annual appraisal and career review
with their line manager, followed up by a further reflection meeting
with an alternative senior member of staff to their line manager.
Retention levels are high. Employees are encouraged to partake in
industry events, with a number appearing on panels and talking at
conferences in both the UK and overseas.
A number of employees are members of professional bodies, such
as the Royal Institution of Chartered Surveyors, the Investment
Property Forum, the Institute of Chartered Accountants, the
Law Society and the Institute of Chartered Secretaries and
Administrators. Similarly employees make up representation on
sector specific groups, such as the Vice Chair of the British Property
Federation’s Industrial Committee and the Steering Committee of
Women in Industrial Property.
Students are invited for work experience during university
holidays and a programme of involvement, incorporating property
inspections is provided. The Manager has also participated in
graduate research projects.
The Manager regularly organises social events on a formal and
informal basis for its employees and supports individuals who
undertake sponsored events, such as triathlons and marathons.
Slavery and human trafficking policy
The Company is committed to maintaining the highest standards of
ethical behaviour and it expects the same of its business partners.
The use of slavery and human trafficking is unacceptable and
entirely incompatible with our ethics as a business. We believe that
all efforts should be made to eliminate it from our supply chains.
We recognise that real estate and construction are sectors that
are ranked highly in terms of being most prone to exploitation.
However, we seek to mitigate our exposure to any illegal slavery or
human trafficking activity by engaging with reputable third-party
professional service firms based in the United Kingdom who also
adhere to the Modern Slavery Act 2015. We also make regular
requests from our suppliers for formal governance information
to enable ongoing monitoring of business and supply chain risk
and conduct due diligence and risk assessment on potential new
suppliers. We will continue to monitor and collaborate with our
suppliers and Customers to ensure that they continue to adopt
systems and controls that reduce the risk of facilitating modern
slavery and human trafficking.
Sponsorship – Networking Events
The Company sponsored the Industrial Agents Society inaugural
golf event, which was well supported by approximately 100 property
agents, plus employees of the Manager and the Company’s
Development Partner.
The Company sponsored a bespoke British Property Federation
research paper, titled “Which Warehouse Where?”, which included
contributions from the Company’s Customers in respect of
employee engagement and retention initiatives.
58
Tritax Big Box REIT plc Annual Report 2018
Tritax Big Box REIT plc Annual Report 2018
59
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Our Principal Risks and Uncertainties
The Board has overall responsibility for risk management and internal controls,
with the Audit & Risk Committee reviewing the effectiveness of the risk
management process on our behalf.
We aim to operate in a low-risk environment, focusing on a single
subsector 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.
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.
At least twice a year, the Board undertakes a formal risk review,
with the assistance of the Audit & Risk 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 management framework
Risk appetite
We have a specific Investment Policy, which we adhere to and
for which the Board has overall responsibility. In November 2018,
Shareholders approved a change to the Investment Policy the
principal effect of which was to increase the level of exposure the
Company can have to land and options over land and, within that,
to allow for a limited level of speculative development. Our exposure
to land can be up to 15% of gross asset value, of which up to 5%
can be invested in speculative development.
We have a specific Investment Policy
for which the Board has overall responsibility.
, which we adhere to and
. They have the potential to materially affect our
Principal risks and uncertainties
Further details of our principal risks and uncertainties are set out
on pages 61-67
business, either favourably or unfavourably. Some risks are currently
unknown, while others that we currently regard as immaterial, and
have therefore not included here, may turn out to be material in the
future. Most of the principal risks are the same as detailed in the
2017 Annual Report, with the key changes relating to the increase in
development activity following the change to our Investment Policy
in November 2018 and the subsequent acquisition of db symmetry
in February 2019.
The Board
Audit & Risk Committee
Policy procedure and controls
Audit Committee
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 metrics
Risk reporting – to Audit & Risk Committee and Board
60
Tritax Big Box REIT plc Annual Report 2018
For Our Investment Policy, see Our Objectives and Strategy on pages 20-21
Principal risks
Principal risks
h
g
H
i
i
m
u
d
e
M
w
o
L
10
8
11
9
4
2
5
3
7
1
12
6
t
c
a
p
m
I
e
r
a
R
Rare
Probability
Low
Medium
High
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 is
contained within the commentary for each risk category.
Property risks
1 Default of one or more tenants
The Board considers these risks have increased since last year
1 Default of one or more tenants
5 Development activities are likely to involve a higher degree of
risk than investment in standing investments
6 The purchase of land may involve a higher degree of risk than
that associated with existing and built investments or pre-let
development activities
10 We rely on the continuance of the Manager
The Board considers all the other risks to be broadly
unchanged from last year
2 The performance and valuation of the property portfolio
4 Our property performance will depend on the performance
of the UK retail sector, specifically the continued growth of
online retail
9 We must be able to operate within our banking covenants
11 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
12 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 considers these risks have decreased since last year
3 Our ability to grow the portfolio may be affected by competition
for investment properties in the Big Box sector
7 Our use of floating rate debt will expose the business to
underlying interest rate movements
8 A lack of debt funding at appropriate rates may restrict our
ability to grow
Probability:
moderate
See Asset
Management pages 40-45
Impact:
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.
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 Customer. 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, while continuing to monitor the covenant strength
once forming part of the portfolio. 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 that are
strategically important to the tenant’s business. Our maximum
exposure to any one tenant (calculated by contracted rental
income) is less than 13.7% as at 31 December 2018.
Tritax Big Box REIT plc Annual Report 2018
61
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Strategic Report Our Principal Risks and Uncertainties
Property risks continued
2 The performance and valuation of the property portfolio
Probability:
low
See Asset
Management pages 40-45
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
As at 31 December 2018, our property portfolio was 100%
let or pre-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, gearing and interest cover. The level
of headroom is currently significant. The EMTN has less
restrictive covenants.
3 Our ability to grow the portfolio may be affected by competition for investment
properties in the Big Box sector
Probability:
low
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.
See Our Objectives and
Strategy pages 20-21
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. In particular, our acquisition
of db symmetry in February 2019 has secured a pipeline of
development opportunities for the longer term.
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, nor will we commit funds to the development of
a larger scale Big Box on a speculative basis.
62
Tritax Big Box REIT plc Annual Report 2018
4 Our property performance will depend on the performance of the UK retail sector,
specifically the continued growth of online retail
Probability:
low
See The Logistics
Property Market
pages 16-17
Impact:
low
Our focus on the Big Box sector
means we rely directly 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 one of our tenants is low. In addition
to our due diligence on tenants before an acquisition or, in the
case 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.
E-commerce is expected to grow to 25.8% of UK retail sales
by 2021. Which is driving strong occupational demand across
the sector.
5 Development activities are likely to involve a higher degree of risk than investment in
standing investments
Probability:
low to medium
See The Logistics
Property Market
pages 16-17
See Our Objectives and
Strategy pages 20-21
Impact:
medium
Our development activities 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. Inaccurate
assessment of a development
opportunity or a decrease in tenant
demand, particularly in relation to any
speculative developments, could result
in the development remaining vacant.
If any of the risks associated with our
developments materialised, this could
reduce the value of these assets and
our portfolio.
Mitigation
The Company had seven forward funded development
assets, totalling 6.6 million sq ft, under construction as at
31 December 2018. 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 overruns. 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 independent
project monitoring surveyors (see also risk below on land and
development activities). Post the period end, the Company
acquired the db symmetry portfolio of land assets which
included a further five smaller scale logistics assets under
construction, totalling c. 600,000 sq ft, which are being
developed space on a speculative basis. It is not anticipated
that larger scale Big Boxes will be speculatively developed on
any of the other schemes acquired. The vertical construction
of any future developments will be subject to securing
pre-let agreements except where small scale speculative
development is considered appropriate.
Tritax Big Box REIT plc Annual Report 2018
63
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Our Principal Risks and Uncertainties
Property risks continued
6 The purchase of land may involve a higher degree of risk than that associated with
existing and built investments or development activities
Probability:
medium
See The Logistics
Property Market
pages 16-17
See Our Objectives and
Strategy pages 20-21
Impact:
low
The inability to obtain planning consent
means that the land would have to be
held or sold prior to any development.
The value of the land may be reduced
due to the refusal of planning consent
and the costs incurred to that date
could be significant and may be
irrecoverable; this would reduce the
Company NAV. If the Company fails
to attract a suitable pre-let it cannot
proceed with the development of a Big
Box. This would impact on the future
revenues the Company could make
from the land and failure to secure a
pre-let may have a negative effect on
the valuation.
Postponement or cancellation of a
development may result in the Group
holding too much development land
which may dilute returns due to capital
being invested into non-income
producing assets.
The land may be subject to an
environmental risk which requires
significant investment to remediate prior
to commencing the development works.
The costs associated with developing
land may fluctuate over the course
of the development due to market
conditions.
Mitigation
The purchase of land is subject to a maximum level of 15% of
gross assets, at the time of purchase. The Company can also
only undertake limited speculative development of buildings
although it can undertake land preparation works but we will
continue to seek a pre-let prior to commencing the vertical
construction of a larger scale Big Box.
The acquisition of db symmetry in February 2019 has
provided us with access to one of the UK’s largest strategic
land portfolios for the development of Big Box real estate
assets and related logistics facilities, including land and
options over land. The db symmetry assets have been
subjected to due diligence by the Company but prior to the
exercise of any option to acquire any land, the Company
will carry out an extensive due diligence exercise to limit
exposure to environmental risk and other hazards. Once a
pre-let is agreed with a suitable tenant, the Company will
structure the development of the asset as it does its forward
funded development projects, therefore minimising risk
(see risk above on development activities). The Company
also undertakes a significant level of due diligence on the
land, the surrounding power and highways infrastructure,
the surrounding environment and the state of the market
prior to embarking on a land purchase to mitigate any risk
around the viability of the site for development as much
as possible. The Company will usually also work in tandem
with an experienced and respected development partner to
manage any preparatory works and/or development. Upon
completion of the acquisition of db symmetry, the Company
entered into an agreement with db symmetry Management
Limited, which will manage the development of these assets,
in particular.
64
Tritax Big Box REIT plc Annual Report 2018
7 Our use of floating rate debt will expose the business to underlying
interest rate movements
Impact:
Probability:
low
moderate
Interest on our variable rate 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 to 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. During 2018, we agreed a significant amount of
fixed-rate debt further reducing our exposure to Libor,
currently represents only 27% of our committel debt facilities.
Robust financing and
hedging with strong
liquidity pages 46-49
8 A lack of debt funding at appropriate rates may restrict our ability to grow
Probability:
low
Robust financing and
hedging with strong
liquidity pages46-49
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 refinance existing debt, this
will impair our ability to maintain our
targeted level of dividend or impair our
ability to grow.
Mitigation
During the year the Company agreed further long-term
unsecured borrowings. This is in addition to the EMTN which
should enable the Company to raise future debt in a more
efficient and effective manner on an unsecured basis. The
Board keeps our liquidity and gearing levels under review.
We only enter into forward funding or other development
commitments if they are supported by available uncommitted
funds. In December 2018, we agreed a £400m senior
unsecured fixed-rate loan note which was drawn in February
2019. We also extended the maturity of £325 million of our
£350 million unsecured revolving credit facility by one year.
We had headroom of £229 million within the £350 million
credit facility at the year end. Whilst our £250 million short-
term RCF remained undrawn.
9 We must be able to operate within our debt covenants
Probability:
low
Depository Statement
page 89
Impact:
low
If we were unable to operate within
our debt covenants, this could lead
to default and our debt 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 debt 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. During 2018, we moved closer to a predominantly fixed-
rate debt platform through the agreement or issue of further
fixed-rate debt. This will mitigate the effect on the Company
from interest rate rises. We invest in assets let to institutional-
grade tenants and we also seek to maintain a long WAULT,
which should reduce the volatility in our property values.
Tritax Big Box REIT plc Annual Report 2018
65
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report Our Principal Risks and Uncertainties
Property risks continued
10 We rely on the continuance of the Manager
Probability:
low
See Our Objectives and
Strategy pages 20-21
See Management
Engagement Committee
Report pages 94-97
Impact:
moderate to 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 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 Development Management Agreement has a minimum
term of eight years from February 2019 and is terminable
by the Group on 12 months’ written notice thereafter. The
DBS management team is incentivised to progress the
developments through their 13% economic interest in Tritax
Symmetry Limited.
The Management Engagement Committee regularly reviews
and monitors the Manager’s performance and, going forward,
will review the performance of db symmetry Management
Limited in relation to development activities. In addition,
the Board meets regularly with the Manager, to ensure it
maintains a positive working relationship and this relationship
will extend to the DBS management team.
66
Tritax Big Box REIT plc Annual Report 2018
Taxation risk
11 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
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.
See The Logistics
Property Market
pages 16-17
See Our Objectives and
Strategy pages 20-21
Political risk
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.
12 The vote to leave the EU could result in political and/or economic uncertainty that
could have a negative effect on the performance of the Company
Probability:
low
Robust financing
and hedging with strong
liquidity pages 46-49
Impact:
low to moderate
The UK has triggered Article 50,
which sets the expected date of the
UK’s departure from the EU in March
2019. Economic volatility is not a new
risk for the Group; however, until the
terms of Brexit become clearer the
exact outcome for the business is
difficult to predict at this stage.
Mitigation
The Group operates with a sole focus on 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.
Tritax Big Box REIT plc Annual Report 2018
67
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Strategic Report
Going Concern and Viability
The Strategic Report describes the Group financial position, cash
flows, liquidity position and borrowing facilities. The Group currently
has substantial headroom against its borrowing covenants, with a
Group LTV of 27.3% as at 31 December 2018.
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 Group 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 Group’s cash
balance as at 31 December 2018 was £48.33 million, of which
£47.37 million was readily available. It also had undrawn amounts
under its debt facilities of a further £479.00 million excluding
the Private Placement as noted below. The Group had capital
commitments totalling £371.08 million. The Group had seven assets
under construction at the year end.
A significant part of the Group’s borrowings are on an unsecured
basis, providing the Group with a deeper pool of liquidity and with
more flexibility over its arrangements. During the year the Group
issued its debut Loan Notes in the Private Placement market,
totalling £400 million, split across nine-year and 11-year maturities.
The Group also exercised an extension option over its £350 million
unsecured RCF, extending the maturity of this facility by 12 months
to December 2023. This assisted the Group in maintaining its
weighted average maturity across its borrowings of 8.7 years
(excluding the £250 million unsecured RCF which was cancelled
on 28 February 2019) as at 31 December 2018 (2017: 8.9 years).
As a result, the Directors believe that the Group is well placed to
manage its current and future financial commitments and other
business risks.
Following the year end the Group raised £250 million of equity
through a heavily oversubscribed Open Offer. This equity was raised
in order to facilitate the completion of the db symmetry acquisition
which owns one of the UK’s largest strategic land portfolios for the
development of Big Box real estate assets and related logistics
facilities. The total consideration in respect of the 87% economic
interest that the Group has acquired in db symmetry was
£322.72 million, of which £270.13 million was funded with cash and
with the remaining £52.59 million funded via the issue of shares in
the Company.
The Directors believe that there are currently no material
uncertainties in relation to the Company and the Group’s ability to
continue for a period of at least 12 months from the date of approval
of the Company and the Group’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.
The principal risks on pages 62-67 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. Following the recent acquisition of db
symmetry, the Board also paid attention to the impact of either
a delay to the receipt of planning permission or the risk of not
achieving planning consent across a number of schemes. 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 6 March 2024.
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, planning risk, rental growth and yields
were sensitised to reflect reasonably likely levels associated with
an economic downturn.
Restricted availability of finance: Following the extension of the
£350 million RCF by 12 months, and ignoring the £250 million
short-term RCF which was cancelled on 28 February 2019,
the Group does not have a significant refinancing event occurring
until December 2023. This facility does, however, still have a further
one-year extension option, which if exercised and approved by the
lenders would extend the maturity of the facility until December
2024. Regardless of the extension of the facility, 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. Furthermore, the Group has the ability
to make disposals of investment properties to meet the future
financing requirements under the DBS business plan.
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 6 March 2024. 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.
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 6 March 2024.
68
Tritax Big Box REIT plc Annual Report 2018
Board Approval
of the Strategic
Report
Board approval of the Strategic Report
The Strategic Report was approved on behalf of the Board by:
Sir Richard Jewson KCVO, JP Chairman
6 March 2019
Tritax Big Box REIT plc Annual Report 2018
69
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
70
Tritax Big Box REIT plc Annual Report 2018
Governance
Chairman’s Governance Overview
Key Board statements
Statement of Compliance
Application of the Principles of
The 2016 AIC Code
Leadership
The Board
Committees
Our Governance Structure
The Manager
How we Govern the Company
Board Meetings
Attendance at Board meetings and
Committee meetings
The Board of Directors
Effectiveness
Board performance and evaluation
72
73
74
75
77
77
77
78
78
79
79
79
82
84
84
Nomination Committee Report
New appointments
Policy on tenure and succession planning
Board diversity and inclusion
86
87
87
87
Accountability
Internal controls review
AIFM Directive
Depository Statement
88
88
88
89
90
Audit & Risk Committee Report
Committee membership and terms of
91
reference
91
Meetings
Risk management and internal controls
91
Financial reporting and significant judgements 91
92
Valuation of property portfolio
Valuation of interest rate derivatives
92
Fair, balanced and understandable financial
statements
External Auditor
92
93
Management Engagement Committee
Report
Management fee
Terms
Conflict management
Relations with Shareholders and
Stakeholders
Investor relations
Site visits
Annual General Meeting (AGM)
Public communications
Directors’ Remuneration Report
Annual statement
Directors’ Remuneration Policy
External advisers
Annual report on remuneration
Statement of voting at general meetings
Total Shareholder return
Directors’ shareholdings
Other items
Directors’ Report
Responsibilities Statement
Independent Auditor’s Report
94
96
96
97
98
98
98
98
98
99
99
99
99
99
99
100
100
100
101
104
105
Tritax Big Box REIT plc Annual Report 2018
71
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Governance
Chairman’s Governance Overview
The Company’s culture of strong corporate governance is integral to the
Company’s growth, its long-term success and the implementation of its strategy.
Strong performance, underpinned by our belief in effective
corporate governance, has been the foundation of our business
since the Company’s launch in 2013. The Company’s culture
supports open and robust debate, promoting decisions made to
secure the Company’s long-term and continuing success. This
section of the Annual Report focuses on our compliance with the
corporate governance principles and highlights the key governance
events of 2018.
2018 was a busy year filled with new achievements, including: an
oversubscribed equity fundraising of £156 million in April; a change
to our Investment Policy to allow more investment into land assets
and the ability for limited speculative development which received
Shareholder approval in November; a well supported US private
placement which was agreed in November; and the negotiation
of the Company’s acquisition of an 87% economic interest in
db symmetry, enabled by a further equity fundraising of £250 million
which completed in February 2019.
Strong governance
Tritax Management LLP (the “Manager”) acts as the Company’s
Alternative Investment Fund Manager (“AIFM”) for the purposes of
the Alternative Investment Fund Manager Directive (“AIFMD”) and as
such the Board has delegated authority to the Manager to conduct
portfolio and risk management services on behalf of the Company.
Whilst the Manager has the ultimate responsibility to make the final
decision over portfolio and risk management services, the Board
actively discusses potential investments and divestments with the
Manager and ensures ongoing compliance with the Company’s
Investment Policy and Investment Objectives. This complies with
the latest European Securities and Markets Authority (“ESMA”)
guidelines published on 16 November 2016 in respect of the
correct interpretation of the AIFMD and ensures that the Company
continues to adopt best governance practice.
As well as regular Board meetings which consider Company
business in light of its strategy, we continue to meet for dedicated
strategy meetings to consider the Company’s strategy and a
number of ad-hoc meetings to consider specific issues, discuss the
future of the Company, its market and its Customers. Further detail
on the Board and strategy meetings can be found on pages 79-80.
Directors
In line with our structured approach to succession planning, the
Company appointed a new Non-Executive Director, Richard Laing,
formerly of CDC Group plc and De La Rue plc, in May 2018. Richard
has taken over as Chair of the Audit & Risk Committee from Jim
Prower and is also a member of the Management Engagement and
the Nomination Committees. Alastair Hughes, formerly of Jones
Lang LaSalle Inc., was appointed to the Board as a Non-Executive
Director on 1 February 2019. Alastair is a member of the Audit &
Risk, Management Engagement and Nomination Committees. Mark
Shaw retired from the Board on 1 February 2019 having served as
a Non-Executive Director since the Company’s inception over five
years ago. I would like to thank Mark on behalf of the Board for his
valuable contribution over that time. The Board now comprises six
independent Non-Executive Directors. Further details can be found
in the Nomination Committee Report on pages 86-87.
As in 2017, Lintstock Limited (“Lintstock”) conducted the Board
evaluation in 2018. Further information on the 2018 evaluation can
be found on page 84. As a Board, we continue to benefit from our
bespoke professional development programme, further details of
which can be found on page 85.
Shareholder and stakeholder communications
The Company has continued to develop its relationships with
Shareholders and other stakeholders, and I was pleased to run
another series of Chairman’s lunches which were insightful and
beneficial and were well received by attendees. Colin Godfrey,
together with the Company’s Broker, Jefferies International Limited
(“Jefferies”), undertook further extensive international roadshows
this year covering the United States, Continental Europe and South
East Asia in addition to the more regular Shareholder and analyst
72
Tritax Big Box REIT plc Annual Report 2018
Tritax Big Box REIT plc Annual Report 2018
73
Key Board statementsRequirementBoard statementWhere to find further informationGoing concern basis The Board is of the opinion that the going concern basis adopted in the preparation of the Annual Report is appropriate. Further details are set out on page 68 of the Strategic Report.Annual review of systems of risk management and internal controlA 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 Accountability on page 88-89 of this Governance Report.Fair, balanced and understandable The Directors confirm that to the best of their knowledge 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.Further details of the fair, balanced and understandable statement can be found in the Audit & Risk Committee Report on pages 90-93.Appointment of the ManagerThe Directors consider the continuing appointment of the Manager on the terms agreed in the Investment Management Agreement dated 11 September 2017 to be in the interests of the Company’s Shareholders as a whole.Further details are set out in the Management Engagement Committee Report on pages 94-97.Robust assessment of the principalrisks to the business model, future performance, solvency and liquidity of the CompanyThe Audit & Risk Committee and the Board undertake a full risk review twice a year where all the principal risks and uncertainties facing the Company and the Group are considered.Further details can be found in Our Principal Risks and Uncertainties on pages 60-67 of the Strategic Report.STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Chairman’s Governance Overview
engagement following the publication of our financial results and
in respect of the Company’s corporate activity, including both debt
and equity fundraisings. In particular, we consulted with a significant
proportion of our institutional Shareholder base ahead of the
proposal to amend our Investment Policy in order to ensure that this
proposal was supported by Shareholders.
Audit & Risk Committee
Jim Prower stepped down as the Chair of the Audit & Risk
Committee and Richard Laing assumed this role upon his
appointment in May 2018. In line with the Company’s commitment
to managing risk, the Audit Committee has changed its name to the
Audit & Risk Committee
.
Capital markets
The Company undertook a successful equity fundraising in April
2018, raising approximately £156 million through a placing of
Ordinary Shares. In December 2018, the Company entered into an
agreement with a number of new institutional investors for a private
placement of £400 million of new senior unsecured loan notes,
comprising two separate tranches, with £250 million maturing in
February 2028 and £150 million maturing in February 2030. The
funds were drawn down in February 2019 and £250 million was
used to immediately redeem the short-term, unsecured, revolving
credit facility we had secured in October 2018. This allowed the
Company to commit to a number of forward funded investments
towards the end of the year. The Company also exercised an
extension option falling due under the £325 million revolving credit
facility, which extended this facility by 12 months to December 2023.
Moody’s reaffirmed the Company’s investment-grade credit rating
of Baa1 during the year. These debt financing activities helped
maintain the maturity of the Company’s borrowings at 8.7 years1,
as at 31 December 2018.
1 Excluding the £250 million RCF, which was redeemed on 28 February 2019.
Risk
We assessed, through the Audit & Risk Committee, the principal risks
facing the Group, its risk appetite and mitigating factors put in place
in respect of those risks. The Audit & Risk Committee has delegated
responsibility for managing internal risks and for establishing
appropriate procedures in respect of financial and internal risks to
the Manager. The management of these risks is reviewed by the
Board on a half yearly basis. We consider the risks the Group faces
at each Board meeting and the longer-term outlook at the strategy
meetings. The Audit & Risk Committee considers the principal risks
in depth twice a year, along with an assessment of whether the risk
has heightened or reduced during the previous 12 months.
Sir Richard Jewson KCVO, JP Chairman
6 March 2019
Statement of Compliance
The Company is subject to the UK Corporate Governance Code;
however, we, as the Board of the Company, have considered
the principles and recommendations of the 2016 AIC Corporate
Governance Code for Investment Companies (“AIC Code”). The
AIC Code 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.
We believe that reporting against the principles and
recommendations of the AIC Code (which incorporates the
UK Corporate Governance Code), provides better information
to Shareholders.
The Company has complied with the recommendations of the
AIC Code (as set out on pages 75-76) and the relevant provisions
of the UK Corporate Governance Code except where set out in
this section.
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 reasons set out in the AIC Code, and in the UK Corporate
Governance Code, we do not consider these provisions relevant to
the Company. The Company is an externally managed investment
company, with all of the day-to-day management and administrative
functions outsourced to third parties and no executive directors or
employees. We have, therefore, not reported further in respect of
these provisions.
The AIC Code can be found at:
https://www.theaic.co.uk/aic-code-of-corporate-governance-0
74
Tritax Big Box REIT plc Annual Report 2018
For Audit & Risk Committee Report, see pages 90-93
Governance
Application of the Principles of
the 2016 AIC Code
The Company has applied the 21 Principles of the 2016 AIC Code as follows:
The Board
The Chairman should be independent
1.
The Company’s Chairman, Sir Richard Jewson, is independent. In addition, the Senior Independent Director takes the lead in the annual
evaluation of the Chairman and is an alternative contact for Shareholders.
A majority of the Board should be independent of the Manager
2.
The Board currently comprises six Non-Executive Directors, all of whom are independent of the Manager.
Directors should be submitted for re‑election at regular intervals
3.
As the Company is a constituent of the FTSE 250, Sir Richard Jewson, Jim Prower, Susanne Given and Aubrey Adams will retire and stand
for re-election at the AGM in May 2019. Richard Laing and Alastair Hughes will stand for election to the Board at the AGM in May 2019.
The Board should have a policy on tenure
4.
The Company’s practice is to appoint Directors for a minimum two-year term subject to annual re-election.
There should be full disclosure of information about the Board
5.
Full information about the Board, as a whole, and the Directors, as individuals, is set out, inter alia, in this Annual Report.
The Board should aim to have a balance of skills, experience, length of service and knowledge of the Company
6.
The Nomination Committee has undertaken a review of the Board’s composition and appointed Richard Laing and Alastair Hughes as
Non-Executive Directors of the Company and as members of the Audit & Risk, Nomination and Management Engagement Committees.
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 86-87.
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 appointed Lintstock to conduct the Board evaluation. Details are set out on page 84.
Directors’ remuneration should reflect their duties, responsibilities and the value of their time spent
8.
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 fees paid to the Directors are listed on page 99 of this report.
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 pages 86-87.
10. Director Induction Programme
Richard Laing and Alastair Hughes were appointed as Non-Executive Directors of the Company and as members of the Audit & Risk,
Management Engagement and Nomination Committees. Both Directors received bespoke induction training programmes designed
to give them a comprehensive overview of the Company, including its business and strategic aims and its governance structure. The
Company Secretary also provided them with bespoke induction packs of documents and an introduction to the Company.
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 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.
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.
Tritax Big Box REIT plc Annual Report 2018
75
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Application of the Principles of the 2016 AIC Code
Board meetings and relationship with the Manager (continued)
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 2018 are set out in the Management Engagement Committee Report on pages 94-97.
The Board together with the Audit & Risk 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 & Risk Committee, which assists the Board with its
responsibilities in relation to the management of risk, are summarised in the Audit & Risk Committee Report on pages 90-93.
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 pages 77-78.
Langham Hall UK Depositary LLP acts as depositary for the Company and conducts an independent review of the internal controls of the
Company. Further details of the role of Langham Hall UK Depositary LLP are set out on page 89.
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.
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 2018, providing the Board with feedback on Shareholder
views and concerns. Please see Relations with Shareholders and stakeholders for further information on page 98.
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.
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 Interim Report and the Annual
Report including, in particular, the Strategic Report. The Strategic Report is set out on pages 1-69 and this provides information about the
performance of the Company, the Investment Policy, strategy and the risks and uncertainties relating to the Company’s future prospects.
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.
76
Tritax Big Box REIT plc Annual Report 2018
Governance
Leadership
The Board is responsible to Shareholders, Customers and other stakeholders for
promoting the long-term sustainable success of the Company and generating
shareholder value. Good governance is fundamental to the long-term success of
the Company. The Board and the Manager work together to ensure the highest
standards of governance are maintained by the Company and are central to
every Board decision.
We have not established a Remuneration Committee as the
Board 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. Details of the
Directors’ remuneration for the year ended 31 December 2018 are
included in the Directors’ Remuneration Report.
We consider the culture and ethos of the Company to be integral
to the Company’s success. Despite the Company being externally
managed, we believe that the culture within the Manager is
aligned with the Company’s purpose, values and strategy and
it is complementary to the Company. The Senior Independent
Director, Jim Prower, and I meet independently with members of the
Manager regularly outside of Board meetings. In addition, different
representatives from the Manager attend Board meetings as and
when requested and deliver bespoke training sessions to us.
Committees
The Board has delegated some of its responsibilities to its three
formal Committees, the Nomination, Audit & Risk and Management
Engagement Committees, details of which are set out in the diagram
overleaf. The Company ensures that all of the Board Committees
have sufficient resources and skills to carry out their obligations.
These Committees are each chaired by a different Non-Executive
Director and have their own terms of reference which can be found
on the Company’s website (or copies are available on request from
the Company Secretary). The terms of reference are reviewed as
necessary by the Board as a whole. The Company Secretary acts
as secretary to these Committees and each Committee Chairman
reports the outcome of the meetings to the Board.
We also establish further ad hoc operational committees to take
operational responsibility on specific matters either following
“in principle” approval from or with subsequent ratification by the
Board. These operational committees ensure that key matters are
dealt with efficiently by the Director(s) and representatives of the
Manager best qualified for the specific role.
The Board
The Board currently consists of six Non-Executive Directors, all
independent of the Manager. This follows the appointments of
Richard Laing in May 2018 and Alastair Hughes in February 2019,
and the retirement of Mark Shaw in February 2019. Each Director,
other than Richard Laing and Alastair Hughes, will resign and stand
for re-election by Shareholders at the Company’s May 2019 AGM in
accordance with the requirements of the AIC Code. Richard Laing
and Alastair Hughes will be submitting themselves for election at the
scheduled May 2019 AGM, as this will be the first AGM since their
respective appointments.
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, whilst complying with the principles
of good corporate governance.
We believe that the Board is well balanced and possesses sufficient
breadth of skills, variety of backgrounds, relevant experience and
knowledge to ensure it functions effectively and promotes the
long-term sustainable success of the Company, whilst generating
Shareholder value. Biographical information on each Director is set
out on pages 82-83.
The Board has approved a schedule of matters reserved for our
consideration and approval, and we have delegated the operational
aspects of running the Company to the Manager. The matters
reserved for our consideration include:
> reviewing and approving Board composition and powers,
including the appointment of Directors;
> approving and implementing the Company’s strategy;
> approving the budget, financial plans and annual and interim
financial reports;
> approving the dividend policy;
> reviewing property valuations and valuations of its interest rate
derivatives;
> overseeing treasury functions and managing the Company’s
capital structure;
> reviewing and monitoring the Manager’s ongoing compliance with
the Company’s Investment Objectives and Investment Policy;
> overseeing the services provided by the Manager and, in
conjunction with the Manager, the Company’s principal service
providers; and
> reviewing and approving all compliance and governance matters.
Matters reserved for Board consideration can be found at:
https://www.tritaxbigbox.co.uk/about-us/#corporate-governance
Tritax Big Box REIT plc Annual Report 2018
77
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Leadership
Our governance structure
1 Audit & Risk Committee
> Reviewing the integrity of the Group financial
statements and any significant financial
reporting judgements.
> Reviewing and monitoring the relationship
with the Auditor.
> Reviewing the Manager’s internal controls and
controls embedded in Link Asset Services as
the Company’s Administrator.
> Overseeing the Company’s risk management
process.
> Advising the Board on whether the Annual
Report and Accounts provide a fair, balanced
and understandable view of the Company’s
performance, position and strategy.
> Considering and reviewing the Company’s
Viability Statement and Going Concern
Statement.
See pages 90-93 for further information
1
Audit & Risk
Committee
4
Investment
Committee
2 Nomination Committee
> Reviewing the Board composition and
assessing whether the balance of skills,
experience, knowledge and independence is
appropriate to enable the Board to operate
effectively.
> Managing succession planning and ensuring
that the Directors receive necessary training.
See pages 86-87 for further information
3 Management Engagement Committee
> Reviewing the Company’s main suppliers
including the Manager, the Broker, the Valuer
and the Registrar to ensure that the Company
is receiving a strong level of performance along
with value for money.
> Overseeing re-tenders or new appointments.
See pages 94-97 for further information
2
Nomination
Committee
The Board
Responsible for
maintaining consistent
and progressive
Shareholder
returns
5
Manager
3
Management
Engagement
Committee
6
Company
Secretariat and
Compliance
4 Investment Committee
> Reviewing and recommending investments
and divestments. The Investment Committee is
Chaired by Colin Godfrey, as the Fund Manager
of the Company, and consists of various
members of the Manager.
5 Manager
> Day-to-day running of the Company including
making the final decisions in respect of
investments and divestments, financial
management, asset management and Investor
Relations.
> Colin Godfrey, as the Fund Manager of the
Company, oversees the Manager’s relationship
with the Company.
6 Company Secretariat and Compliance
> Overseeing the Company’s governance
structure and managing the Company’s
regulatory compliance.
> The Company Secretariat also administers the
Group’s subsidiaries. The Company Secretariat
function was re-tendered in 2018; further
information can be found on page 94-97
See pages 50-51 for further 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. Further details of the delegated matters can be found
on the Company’s website. The Investment Management Agreement
was amended and restated on 11 September 2017
to clarify the Manager’s responsibility to make final investment
and divestment decisions in accordance with ESMA guidance.
The Management Engagement Committee Report discusses how
the Company’s relationship with the Manager is regulated.
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Tritax Big Box REIT plc Annual Report 2018
Governance
How we Govern the Company
The Company’s success is based upon the effective implementation of its
strategy by the Manager and third-party providers. The Company’s culture is set
by the leadership of the Board, cascaded down to the Manager.
Board meetings
During 2018 we held nine scheduled Board meetings (of which
one was a strategy meeting) plus further ad hoc meetings to deal
with transactional and other specific events such as equity raises,
debt financing and the db symmetry acquisition. The table below
shows each individual Director’s attendance at the scheduled Board
meetings during the year. Attendance at Committee meetings is
shown in the respective Committee reports.
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 Directors and other attendees. At each Board
meeting every agenda item is considered against the Company’s
strategy, its Investment Objectives and its Investment Policy.
Representatives of the Manager attend the Board meetings together
with the Company Secretary. Representatives of the Company’s
other advisers are also invited to attend Board meetings as required,
particularly representatives from, Jefferies; Financial Advisers, Akur
Limited and Lazard & Co Limited and Legal Advisers, Taylor Wessing LLP.
Attendance at Board meetings and Committee meetings
during the year ended 31 December 2018
All Directors are expected to devote sufficient time to the
Company’s affairs to fulfil their duties as Directors and to attend all
scheduled meetings of the Board and of the Committees on which
they serve. Where Directors are unable to attend a meeting, they will
provide their comments on the Board papers received in advance of
the meeting to the Chairman who will share such input with the rest
of the Board and the Manager.
A typical agenda includes:
> a review of investment performance;
> a review of investments and divestments and asset management
initiatives in progress;
> an update on investment opportunities available in the market and
how they fit within the Company’s strategy;
> a review of the Company’s financial performance;
> a review of the Company’s financial forecast, cash flow and ability
to meet targets;
> a review of the Company’s financial and regulatory compliance;
> updates on Shareholder and stakeholder relations;
> updates on the Company’s capital market activity; and
> specific regulatory, compliance or corporate governance updates.
We are kept fully informed of potential investment opportunities, along
with wider property market intelligence, through the Board papers
prepared by the Manager. Board papers are disseminated to the
Directors via a secure online platform for reasons of efficiency and cyber
security. The online platform is also used to store relevant Company
documentation, as it provides us with quick and secure access.
All decisions to invest in or divest of property are made by the
Manager following a recommendation of the Investment Committee
and discussions with us. The Manager provides a detailed acquisition
paper to us on any selected potential acquisition and notifies us
when an offer is made for and accepted on a site, and also regularly
updates us on the progress of the transaction. An initial development
appraisal is presented to us upon acquisition of development land
and regular updates are provided thereafter.
Due to the significant number of additional ad hoc meetings during
the year it was not necessary for all the Directors to attend each
meeting, provided that such meetings were quorate which was
the case across all meetings held. The Nomination Committee
is satisfied that all the Directors, including the Chairman, have
sufficient time to meet their commitments.
Attendance at scheduled Board meetings during 2018:
Board meetings
eligible to attend
Board meetings
attended
Meetings held
Sir Richard Jewson
Jim Prower
Susanne Given
Aubrey Adams
Richard Laing (appointed 16 May 2018)
Mark Shaw (resigned 1 February 2019)
9
9
9
9
9
6
9
9
9
9
8
9
6
6
A Director has a duty to avoid a situation in which he or she has a
direct or indirect interest that may conflict with the interests of the
Company. The Board may authorise any potential conflicts, where
appropriate, in accordance with the Articles of Association. Where
a potential conflict of interest arises, a Director will declare their
interest and not participate in the decision-making in respect of the
relevant business.
Tritax Big Box REIT plc Annual Report 2018
79
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance How we Govern the Company
Strategy
Our 2018 strategy meeting focused on assessing whether the
Company followed its overarching strategy set in 2017 and reviewed
where changes should be made to ensure the long-term success
of the Company. We believe that the Company is fulfilling its
strategic objectives, as demonstrated by the acquisition of eight
new Big Box investments in 2018 (including seven pre-let forward
funded developments and three new tenant relationships),
with an aggregate purchase price commitment of approximately
£641.5 million funded through a mix of new equity and debt. As
at 31 December 2018, the Company’s property portfolio was let
or pre-let to 39 institutional tenants. There was also progress with
the Company’s prime London distribution development site at
Littlebrook, with detailed planning permission being secured for the
proposed development of a 450,000 sq ft logistics facility across
phase 1 of the site.
We resolved that the Company should continue to aim for growth
and diversification of its property portfolio by tenant, asset and
geography in order to deliver further value to Shareholders. The
Company’s focus remains on the acquisition of let or pre-let Big Box
assets. However, given the current dynamics of the logistics market,
with strong demand but limited supply of suitable assets, we felt
that our strategy would best be achieved through the increased
controlled development of new assets which we expect will
maintain the high quality of our portfolio and support future returns.
Furthermore, the ability to make limited investments in speculative
development activity will give the Company additional flexibility to
either source development opportunities at an earlier stage or allow
us to bring a new development to the market, both of which have the
potential to deliver enhanced returns for Shareholders.
Therefore, in November 2018, the Company sought, and received,
Shareholder approval at a General Meeting to change its Investment
Policy to increase the maximum exposure limit to land or options
over land from 10% of Net Asset Value to 15% of Gross Asset Value
(calculated at the time of investment), of which up to 5% of gross
assets may be invested in speculative development activity.
This change in Investment Policy enabled the Company to acquire
an 87% economic interest in db symmetry in February 2019.
db symmetry owns one of the UK’s largest strategic land portfolios
for the development of Big Box real estate assets and related
logistics facilities. This acquisition will provide the Company with
the potential to add approximately 38.2 million sq ft of new logistics
and Big Box assets to its portfolio over the short to long term.
The acquisition was funded by a fully underwritten equity issue
of £250 million which also completed in February 2019.
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Tritax Big Box REIT plc Annual Report 2018
Key activities of the Board during 2018
Q1
Q3
> Issuance of a Trading Statement;
> Approval of Interim Property valuation;
> Approval of 2017 financial results and fourth interim dividend
> Approval of Interim results;
declaration;
> Consideration of an equity raise for Q2 2018;
> Quarterly review of corporate governance compliance, Group
activity and depositary report;
> Quarterly review of corporate governance compliance, Group
> Dividend declaration in respect of Q2 2018.
activity and depositary report.
Q2
Q4
> Nomination Committee review and appointment of Korn Ferry
to search for a new Non-Executive Director; please refer to the
Nomination Committee Report, pages 86-87;
> Raised gross proceeds of £156 million through a placing;
> AGM;
> Amendment to Company’s Investment Policy;
> Second half yearly principal risk review and consideration of risk
appetite;
> Approval of the updated Financial Prospects, Positions and
Procedures document;
> Dividend declaration in respect of Q1 2018;
> Review of corporate governance compliance, Group activity and
> Principal risk review and consideration of risk appetite;
> Appointment of Richard Laing as Non-Executive Director and
Chair of the Audit & Risk Committee;
depositary report;
> Review of Moody’s confirmation rating of Baa1;
> Dividend declaration in respect of Q3 2018;
> Quarterly review of corporate governance compliance, Group
activity and depositary report.
> Entered into a £250 million short-term unsecured banking facility
with a syndicate of existing relationship lenders;
> Agreement to issue £400 million of unsecured fixed rate loan
notes in US private placement;
> Extension of £350 million of the Company’s revolving credit
facility for one year to December 2023;
> Consideration and due diligence of the db symmetry acquisition;
> Consideration of an equity raise for Q1 2019.
https://tritaxbigbox.co.uk/about/#corporate-governance
https://tritaxbigbox.co.uk/news-media
See Chairman’s Governance Overview, pages 72-74
See Audit & Risk Committee Report, pages 90-93
See Nomination Committee Report, pages 86-87
Tritax Big Box REIT plc Annual Report 2018
81
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
The Board of Directors
Sir Richard Jewson KCVO, JP
Chairman
Jim Prower FCA
Senior Independent Non-Executive Director
Aubrey Adams OBE, FCA, FRICS
Independent Non-Executive Director
Appointed: 18 November 2013
Length of service: five years, four months
Independent: Yes
Appointed: 18 November 2013
Length of service: five years, four months
Independent: Yes
Appointed: 11 September 2017
Length of service: one year, six months
Independent: Yes
Committee memberships:
> Chair of the Nomination Committee
> Member of the Management Engagement
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:
> Chair of Meyer International PLC, holding
company of Jewson Limited
> Chair of Archant Limited for 17 years
> Chair of Savills plc for 10 years
> Board member of Grafton Group plc for
18 years
> Non-Executive Director and Deputy Chairman
of Anglian Water Plc for 14 years
Principal external appointments:
> Chair of Raven Property Group Limited. Board
member since June 2007
> Senior Independent Director of Temple Bar
Investment Trust plc. Board member since
May 2001
Committee memberships:
> Member of the Audit & Risk Committee
> Member of the Nomination Committee
> Member of the Management Engagement
Committee
Committee memberships:
> Member of the Audit & Risk Committee
> Member of the Nomination Committee
> Member of the Management Engagement
Committee
Relevant skills and experience:
> Almost 40 years’ experience at board level
in the real estate industry, most significantly
as the Chief Executive of Savills plc,
a leading global real estate service provider
employing 30,000 people across a network
of 700 offices
> Fellow of the Institute of Chartered
Accountants in England and Wales
> Fellow of the Royal Institution of Chartered
Surveyors
Significant previous external
experience:
> Chief Executive of Savills plc from 1991-2008
> Senior Independent Director of Associated
British Ports PLC
> Chair of Air Partner plc and Max Property
Group plc
> Non-Executive Director of The British Land
Company PLC from 2008-2017
Principal external appointments:
> Group Chair of L&Q, a leading housing
association since September 2015
> Chair of the Board of Trustees of Wigmore Hall
since May 2011
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 roles at Argent Group,
Minty plc and Creston Land and Estates plc
> Experienced in raising funding development
and investment and working capital, having
served as Chief Financial Officer at Argent
Group, and then (until December 2015) as a
representative member of Argent (Property
Development) Services LLP, inter alia the
Developer and Asset Manager of Kings’s Cross
Central
Significant previous external
experience:
> In addition to his roles at Argent, Jim has
significant previous external experience, having
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 Chair of Audit
& Risk Committee of Empiric Student Property
plc since May 2014
> Non-Executive Director of AEW UK Long
Lease REIT PLC since June 2017
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Tritax Big Box REIT plc Annual Report 2018
Richard Laing FCA
Independent Non-Executive Director
Susanne Given
Independent Non-Executive Director
Alastair Hughes FRICS
Independent Non-Executive Director
Appointed: 16 May 2018
Length of service: 10 months
Independent: Yes
Appointed: 13 September 2016
Length of service: two years, six months
Independent: Yes
Appointed: 1 February 2019
Length of service: one month
Independent: Yes
Committee memberships:
> Chair of the Audit & Risk Committee
> Member of the Nomination Committee
> Member of the Management Engagement
Committee
Committee memberships:
> Chair of the Management Engagement
Committee
> Member of the Audit & Risk Committee
> Member of the Nomination Committee
Relevant skills and experience:
> In depth knowledge of financial matters,
through his previous role as Finance
Director and Chief Executive of CDC Group
plc for 11 years; as Finance Director of
De La Rue plc; as a financial analyst and
manager at Bookers; and from five years at
PricewaterhouseCoopers
> Fellow of the Institute of Chartered
Accountants in England and Wales
Significant previous external
experience:
> Chief Executive of CDC Group plc from 2004-
2011, having joined the organisation in 2000 as
Finance Director
> Group Finance Director of De La Rue plc,
where he held a number of positions over
15 years, in the UK and internationally
Principal external appointments:
> Chair of 3i Infrastructure plc since January
2016; Chair of Perpetual Income and Growth
Investment Trust plc since July 2017 having
joined the Board in November 2012; Chair of
Miro Forestry, which operates in Ghana and
Sierra Leone, since May 2014 having joined the
Board in May 2012
> Chair of the Audit & Risk Committee of JP
Morgan Emerging Markets Investment Trust
plc since January 2015
> Member of the Board of Trustees of Leeds
Castle since September 2012, currently
chairing the Audit & Risk and Investment
committees; and Member of the Board
of Trustees of Plan International UK, the
international children’s charity, since February
2010, currently Deputy Chair and chairing the
Audit & Risk Committee
Relevant skills and experience:
> Over 20 years’ experience in managing and
running large retail companies
> High profile involvement in investor
presentations as well as previous membership
of remuneration and risk and audit committees
> Creation of five year strategy plans and
overseeing their implementation
> Significant experience in management of
logistics and property assets
Significant previous external
experience:
> Non-Executive Chair of Made.com Ltd since
April 2016
> Non-Executive Chair of Outfittery GmbH
> Chief Operating Officer of SuperGroup Plc
for three years from April 2012
> Group Director of Fashion & Beauty of
John Lewis & Partners from January 2011 to
April 2012
> Managing Director of TK Maxx UK & Ireland
for three years from December 2007
> General Merchandise Director of Harrods
Limited for four years from December 2001
Principal external appointments:
> Chair of VC-backed Push Doctor Ltd, Europe’s
largest online surgery; and of Made.com since
April 2016
> Non-Executive Director of Eurostar
International Ltd since December 2016 and
Al Tayer Insignia and Chair of Remuneration
Committee at the Middle Eastern luxury group,
a division of Al Tayer Group, since January 2016
> Independent Non-Executive Director of
Deloitte NWE since January 2019
Committee memberships:
> Member of the Nomination Committee
> Member of the Audit & Risk Committee
> Member of the Management Engagement
Committee
Relevant skills and experience:
> 30 years of experience in the UK and
international real estate markets
> Fellow of the Royal Institution of Chartered
Surveyors
Significant previous external
experience:
> Executive Board member and Chief Executive
for Asia Pacific at Jones Lang LaSalle Inc.
for eight years until 2016; previously Chief
Executive for Europe, Middle East and Africa
and more formerly UK Managing Director
of JLL
Principal external appointments:
> Non-Executive Director of The British Land
Company PLC since January 2018 and
Schroder Real Estate Investment Trust Limited
since April 2017
See Audit & Risk Committee Report,
pages 90-93
See Management Engagement Committee
Report, pages 94-97
See Nomination Committee Report,
pages 86-87
https://tritaxbigbox.co.uk/about/#corporate-
governance
Tritax Big Box REIT plc Annual Report 2018
83
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
Effectiveness
Strong governance enables the Board to pursue the Company’s strategic
objectives and helps to safeguard the continued success of the Company for
its Shareholders and other stakeholders.
Board performance and evaluation
We appointed Lintstock to undertake an externally facilitated Board
evaluation for 2017 and again for 2018. Lintstock has no other
connection with the Company apart from conducting the Board
Evaluation. The 2017 Board evaluation provided a benchmark for
the 2018 Board evaluation and enabled Lintstock to understand
the Board, the relationships between the Directors and between
the Board and the Manager, the Company Secretary and other
key stakeholders to the Company, as well as the Company’s
Shareholders.
The 2017 Board evaluation took the form of a questionnaire which
was sent to each of the Directors and one key representative of
the Manager. It contained a section designed specifically as an
appraisal of the Chairman. As a result of the action points from the
2017 Board evaluation, we have recruited two new Non-Executive
Directors (
for more information), and reviewed our strategy, a key product of
which was the change of the Investment Policy in November 2018
see page 20 for more details). The Company Secretary regularly
(
reviews the length of the Board packs to ensure that they are not
too voluminous, while remaining comprehensive.
see the Nomination Committee Report on pages 86-87
The 2018 Board evaluation was more comprehensive than the
2017 Board review, starting with questionnaires sent to all the
Directors and three key representatives of the Manager. This was
followed by individual interviews with the Directors and the Manager
representatives. We were asked to consider: Board composition and
Expertise; Board Dynamics; Management and Focus of Meetings;
Board Support; Board Committees; Strategic Oversight; Risk
Management and Internal Control; and Succession Planning.
The outcome of the 2018 Board evaluation was positive, displaying
a strong working relationship with the Manager. The Board is
undergoing a transition in its membership which is expected to bring
a fresh perspective to the oversight of our fast growing business.
The Board met in February 2019 to discuss Lintstock’s 2018 Board
Evaluation Report and the following top priorities for change over
2019 were identified.
1. Board refreshment, including the Chairman’s succession –
to determine the process for identifying a suitable candidate to
take over the role of Chairman, in anticipation of the eventual
retirement of Sir Richard Jewson KCVO, JP.
2. Developing Director engagement and dynamics – to clarify
the expectation for meeting attendance in a period of high
activity, especially during transactions, and to maintain and
encourage open and robust debate in meetings.
3. Meeting management – to review the structure and timing
of Board meetings with the potential of transitioning to a
cycle of fewer meetings, with the allocation of more time to
each meeting.
4. Strategic Oversight – to monitor closely the Company’s
strategic position in the market, particularly in light of the
recent change in Investment Policy and the acquisition of
db symmetry Ltd in February 2019 and the delivery of the
Littlebrook project.
Led by Jim Prower, the Senior Independent Director, the Non-
Executive Directors met without the Chairman present to appraise
the Chairman’s performance. The Chairman’s review was very
positive and the other Directors appreciated that he had played
an influential role during a period of significant expansion of the
Company and concluded that he had continued to chair the Board
of the Company effectively.
We considered succession planning for the Company and felt that
a focus for 2019 will be to determine the timing of the appointment
of a new Chairman and the process for identifying a successor
to the role in order to facilitate an orderly transition to take place.
We will also continue to monitor and evaluate Board composition to
ensure we have a diverse and relevant range of skills and expertise,
particularly in the fast evolving technology sector.
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Tritax Big Box REIT plc Annual Report 2018
For the Nomination Committee Report, see pages 86-87
For Our Investment Policy, see Our Objectives and Strategy on pages 20-21
Director training programme
We recognise that it is essential to keep abreast of regulatory and
compliance changes. Accordingly, a bespoke training programme is
agreed with the Chairman and arranged for us each year. In 2018,
the training programme included a site visit to the Littlebrook
site in May and a session on the changes in the 2018 Corporate
Governance Code, provided by the Company’s lawyers, Taylor
Wessing LLP. We also received formal training sessions from some
of the Company’s external service providers as well as the Manager’s
Head of Compliance and the Head of Research. The 2018 Board
evaluation confirmed that the training programme is well structured
and highly informative and a valuable asset to the Directors.
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 the advice and services of
the Company Secretary, who manages the Company’s governance
procedures, and the Manager.
The Directors are also entitled to take independent advice at the
Company’s reasonable expense at any time.
The Company maintains Directors and Officers’ Liability Insurance,
which gives appropriate cover for legal action brought against its
Directors.
Tritax Big Box REIT plc Annual Report 2018
85
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Nomination Committee Report
Nomination Committee Report
“Dear Shareholders,
I was delighted to welcome Richard Laing to the Board
in May 2018 and Alastair Hughes in February 2019.
Richard has spent 11 years as the Finance Director and
more recently as the CEO at CDC Group plc and
15 years at De La Rue plc. He currently holds a number
of non-executive appointments, including chairing
3i Infrastructure plc and Perpectual Income and Growth
Investment Trust plc. Alastair has 30 years’ experience
in the real estate markets, gained at Jones Lang LaSalle
Inc, and currently serves as a Non-Executive Director
on the board of Schroders Real Estate Investment Trust
and The British Land Company PLC. Both appointments
bring a significant breadth of industry knowledge and
experience and will be great assets to the Company.
Mark Shaw retired from the Board on 1 February 2019.
On behalf of the Board, I would like to thank Mark for his
valuable contribution to the Company over his five year
tenure and wish him every success in the future. Mark
will remain Chairman of the Manager.
2019 will see the Nomination Committee focus on
succession planning, and particularly with regard to a
future Chairman over the medium term, and ensuring
that the Board continues to have the right balance of
skills, experience and knowledge to carry out its duties
independently.”
Sir Richard Jewson, Chair of the Nomination Committee
Membership
Sir Richard Jewson Chair
Jim Prower, Susanne Given, Aubrey Adams, Richard Laing,
Alastair Hughes
Key areas of focus for 2018
> The size, structure and composition of the Board;
> The appointment of two Non-Executive Directors to the Board;
and
> The proposal for re-election of the Directors and the election of
Richard Laing and Alastair Hughes as Non-Executive Directors
at the AGM in May 2019.
Meeting attendance register
Person
Meetings eligible to attend
Meetings attended
Sir Richard Jewson
Jim Prower
Susanne Given
Mark Shaw
Aubrey Adams
Richard Laing
3
3
3
3
3
3
3
2
3
2
3
3
Alastair Hughes joined the Board and became a member of the Nomination
Committee on 1 February 2019.
See Audit & Risk Committee Report, pages 90-93
See Management Engagement Committee Report, pages 94-97
See Nomination Committee Report, pages 86-87
https://tritaxbigbox.co.uk/about/#corporate-governance
86
Tritax Big Box REIT plc Annual Report 2018
activities of the Company. Following the advice of the Committee
and in line with the AIC Code, the Board will recommend the
election and re-election of each Director at the forthcoming AGM.
Directors are appointed for an initial period of two years. It is the
Company’s policy of tenure to review individual appointments after
seven years of service to consider whether the Director remains
independent and continues to fulfil his or her role. However, in
accordance with the principles of the AIC Code, we do not consider
it necessary to mandatorily replace a Director after a predetermined
period of tenure. We are, however, mindful of the circumstances of
each Director and implement succession planning accordingly.
Under the Articles of Association (“Articles”) of the Company, at
every AGM of the Company, one third of the Directors who are
subject to the requirement of retiring by rotation (not including any
Director who was appointed by the Board since the last AGM 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 any new
Director being appointed, are able to vote at the AGM.
Board diversity and inclusion
The Company does not have any employees. In respect of appointments
to the Board, we consider that each candidate should be appointed
on merit to make sure that the best candidate for the role is appointed
every time. We support diversity and inclusion at Board level and
encourage candidates from all educational backgrounds and walks
of life. What is important to us is professional achievement and the
ability to be a successful director based on the individual’s skill set
and experience.
Qualifications are considered when necessary to ensure compliance
with regulation such as in relation to appointments to the Audit & Risk
Committee. We regularly review the Company’s policy on diversity and
we believe that the Board has a balance of skills, qualifications and
experience which are relevant to the Company. As at the date of this
report the Board consisted of five male and one female members. We
support the recommendations of the Hampton-Alexander and Parker
Reports and recognise the value and importance of diversity in the
boardroom but we do not consider it appropriate, or in the interests of
the Company and its Shareholders, to set prescriptive diversity targets
for the Board.
Sir Richard Jewson KCVO, JP Chair of the Nomination Committee
6 March 2019
The Committee’s role is to review the size, structure and
composition of the Board, including succession planning, and to
ensure that it 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.
New appointments
The Nomination Committee evaluated the skills and experience
considered necessary to complement the existing Board composition.
We identified the need to appoint a suitably experienced, independent
Non-Executive Director to take over the chairmanship of the Audit &
Risk Committee in light of Jim Prower’s other commitments as well as
a further independent Non-Executive Director to replace Mark Shaw
who, as Chairman of the Manager, was not considered independent.
In terms of the first role, it was essential that the successful candidate
was suitably qualified and had a strong background in finance
at a board level, particularly in a public company environment.
The second candidate needed both significant real estate sector
experience and public company experience. We were clear that both
candidates had to be able to devote sufficient time to their positions
and that we wanted the best candidate for the respective roles.
We instructed Korn Ferry who had successfully worked with us on
the recruitment of Susanne Given and Aubrey Adams. Korn Ferry
has no other connection with the Company, apart from the provision
of non-executive recruitment services.
Korn Ferry presented us 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. A series
of interviews was arranged with the Board as well as Colin Godfrey,
James Dunlop and Henry Franklin of the Manager. We considered
the candidates’ skills and experience, as well as their ability to
devote enough time to the position. Following our recommendation,
the Board decided to appoint Richard Laing as a Non-Executive
Director of the Company and Chair of the Audit & Risk Committee
with effect from 16 May 2018 and Alastair Hughes with effect from
1 February 2019. Both Directors will hold office until the Company’s
AGM on 15 May 2019 when they will be submitted for election by
the Shareholders as Non-Executive Directors of the Company. Both
Non-Executive Directors will sit on the Audit & Risk, Nomination and
Management Engagement Committees.
Policy on tenure and succession planning
We considered the ongoing independence of each of the Directors,
their respective skills, experience and time commitment, as well as
any other external appointments held by the Directors. We believe
that each Director has contributed a significant amount over a
particularly active year which has seen the Company conduct
an equity raise and prepare for another in early 2019, agree two
additional debt facilities and extend the existing revolving credit
facility and prepare for the acquisition of db symmetry which
completed in February 2019, in addition to the ordinary course of
Tritax Big Box REIT plc Annual Report 2018
87
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
Accountability
The Board is responsible for delivering robust and sustainable value to its
Shareholders by setting strategic objectives and working to achieve them.
Undertaking robust assessments of the risks which the Group faces and
effectively managing those risks is a key responsibility of the Board. The main
risks identified as the most relevant to the Company are set out on pages 62-67
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 processes are designed to identify, manage and mitigate
the financial, operational and compliance risks that are inherent to
the Group. 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, Link Asset Services (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
Strategic Report.
We have contractually delegated responsibility for administrative
and 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 we have
reviewed as part of the Company’s Financial Position and Prospects
Procedures document, which was reviewed, updated and approved
in December 2018 to better reflect the operations of the Company.
The Financial Position and Prospects Procedures document is
reviewed, updated and approved by the Audit & Risk Committee
annually.
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 Auditor (details of which are included
in the Audit & Risk Committee Report), regular reports from the
Company Secretary (outlining corporate activity within the Group
and outlining the Company’s compliance with the AIC Code) and
proposed future initiatives relating to the Company’s governance
and compliance framework. We also receive quarterly compliance
reports prepared by Langham Hall UK Depositary LLP (
page 89 for further information) and review the formal risk
assessment conducted by the Audit & Risk Committee twice
a year. Further, we actively consider investment opportunities,
asset management initiatives, debt and equity fundraisings and
other financial matters against the requirements of the Company’s
Investment Objectives and Investment Policy.
see
The Board confirms that, in accordance with the AIC Code, 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.
Robust assessment of risks
The Board also confirms that it conducts a robust assessment of
the risks to the business model, future performance, solvency and
liquidity of the Company twice a year. The Manager is asked to
analyse and report on the risks which the Company may encounter
on specific transactions including, for example, an adverse decision
regarding the development of a forward funded asset at the
planning stages or a sudden change in market conditions before the
launch of an equity raise or debt issue. We then consider each risk in
turn, probing the Manager’s assumptions and analysing whether the
risk factors attributed to each individual risk are fair and accurate,
and the effect of any mitigating factors. We also consider this as
part of our biannual risk review and at each strategy meeting and
challenge the Manager to review actively the risks it includes.
AIFM Directive
The AIFMD became part of UK law in 2013. It regulates AIFMs
and imposes obligations on managers who manage alternative
investment funds (“AIFs”) 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. The Manager is responsible for making
investment and divestment decisions in respect of the Company’s
assets as part of its regulatory responsibility for the overall portfolio
and risk management of the Company. This is in line with published
ESMA guidance on the application of the AIFMD.
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 its 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
88
Tritax Big Box REIT plc Annual Report 2018
Depository 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 entity
represents net assets of US$50 billion and we deploy our services
to over 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 the requirements
of the AIFMD.
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 Company,
and shareholding of special purpose vehicles 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 out our work performed and the
corresponding findings for the period.
In the year ended 31 December 2018 our work included the review
of one equity and two management share issues, seven investment
property acquisitions, three third-party financing arrangements and
four 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, UK
6 March 2019
Langham Hall UK Depositary LLP is a limited liability partnership
registered in England and Wales (with registered number OC388007).
allocate a proportion of the Management Shares to key members of
staff, which it has once again done in respect of both management
share issues in 2018.
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 identified aspects of the business,
which may be improved to mitigate such risks. The Manager actively
reviews and monitors perceived risks. Responsibility for anti-bribery
and corruption has been assigned to the Head of Compliance within
the Manager.
The Manager maintains a risk register, where perceived risks and
associated actions are recorded and this is regularly shared with the
Board for approval.
years, awarded a discretionary bonus from a bonus pool worth, in
aggregate, at least 5% of the Manager’s profits. The discretionary
bonus may consist of cash or Ordinary Shares in the Company
allocated to certain members of staff out of the Management
Shares which form part of the management fee payable to the
Manager (see below). This means that staff remuneration is
predominantly fixed and the variable element is determined by the
Manager’s overall 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 are 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 overall profitability, rather than the
performance of any AIF. This ensures that the Partners have a
vested interest in ensuring the Manager remains financially sound.
The annual fee paid by the Company is based on a percentage of
its NAV, as set out in the Management Engagement Committee
Report, pages 94-97. In addition, the Manager’s Partners are
required to invest 25% of that fee (net of tax and certain other
costs, as described on page 96) in the Company’s Ordinary Shares
(“Management 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 and its
Shareholders. The Manager’s Partners are within their rights to
See Our Principal Risks and Uncertainties, pages 60-67
See Management Engagement Committee Report, pages 94-97
Tritax Big Box REIT plc Annual Report 2018
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STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
Audit & Risk Committee Report
“Dear Shareholders,
This year we have changed the membership of the
Audit & Risk Committee with my appointment on
15 May 2018 and that of Alastair Hughes on 1 February
2019. I succeeded Jim Prower as the Chairman upon
appointment; however, Jim remains a member of the Audit
& Risk Committee. It is the Committee’s role to undertake
a robust review and assessment of the accuracy and
quality of the yearly audit and half yearly review of the
Company’s financial results, to challenge and consider the
biannual property valuations undertaken by the Valuer
and evaluate the Company’s risk management, financial
reporting and financial management functions which are
undertaken by the Manager and Administrator.”
Richard Laing, Chair of the Audit & Risk Committee
Membership
Richard Laing Chair1
Jim Prower2, Susanne Given3, Aubrey Adams4, Alastair Hughes5
Key areas of focus for 2018
> Recommended to the Board that the Annual Report and
Accounts for 2017, taken as whole, was fair, balanced
and understandable and that it provided the information
necessary for Shareholders to assess the Company’s
position and performance, business model and strategy;
> Reviewed the Interim Report 2018 and recommended it to
the Board for approval;
> 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 robustness of the Company’s internal financial
controls and reviewed the efficacy of the internal control and
risk management systems used by the Company;
> Assessed the quality of the annual and interim property
valuations prepared by the Company’s independent Valuers
and challenged the assumptions used by the Valuers in
preparing the valuation;
> Reviewed and considered the basis of the Viability and Going
Concern Statements made by the Directors; and
> Reviewed and monitored the Company’s relationship with
its Auditor.
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Tritax Big Box REIT plc Annual Report 2018
Meeting attendance register
Person
Meetings eligible to attend
Meetings attended
Richard Laing
Jim Prower
Susanne Given
Aubrey Adams
3
5
5
5
3
5
5
5
1. Richard Laing, who was appointed to the Board on 16 May 2018, is considered
to possess recent and relevant financial experience for the purpose of the AIC
Code. Richard is a Chartered Accountant with significant financial expertise and
listed investment company experience. He is also a member of the Management
Engagement and Nomination Committees.
2. Jim Prower is a Chartered Accountant with significant financial experience,
having held a number of Financial Director roles. Jim serves as a member of the
Management Engagement and Nomination Committees.
3. Susanne Given has previous experience of attending Audit & Risk Committee
meetings in her role as COO of SuperGroup Plc. Susanne chairs the
Management Engagement Committee and is a member of the Nomination
Committee.
4. Aubrey Adams is a Chartered Accountant and was the pro-tem Chair of the
Audit & Risk Committee at The British Land Company PLC. Aubrey is also a
member of the Management Engagement and Nomination Committees.
5. Alastair Hughes, who joined the Board and became a member of the Audit
& Risk Committee on 1 February 2019, is a member of the Audit & Risk
Committees of The British Land Company PLC and Schroder Real Estate
Investment Trust Limited. Alastair is also a member of the Management
Engagement and Nomination Committees.
Sir Richard Jewson is not a member of the Audit & Risk Committee; however,
he attends by invitation when required.
Further details of each Directors’ experience can be found in the biography on
pages 82-83.
See The Board of Directors, pages 82-83
See Viability Statement, page 68
See Our Principal Risks and Uncertainties, pages 60-67
For further information on Langham Hall UK Depositary LLP,
see Depository Statement, page 89
The Audit & Risk 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 and on request from the Company
Secretary. The terms of reference were reviewed and approved by
the Board in March 2018.
The membership of the Audit & Risk Committee has changed over
the course of the year with my appointment as the Chair of the
Committee on 16 May 2018 and Alastair Hughes on 1 February
2019. All of the current Audit & Risk Committee members are
independent Non-Executive Directors of the Company and not
connected to the Manager or the Auditor.
I am a Fellow of the Institute of Chartered Accountants in England
and Wales and have extensive financial experience gained in my
previous roles as the CEO and Finance Director of CDC Group plc
and a number of other listed organisations. Aubrey Adams is also
a Fellow of the Institute of Chartered Accountants and has chaired
an audit committee previously; Susanne Given has experience of
being a member of an audit committee in a previous role. Jim Prower,
the former Chair of the Audit & Risk Committee, is a Chartered
Accountant and acted as Finance Director at Argent Group and
several other listed companies. Alastair Hughes is a member of
the audit committee of two other real estate companies. The
biographies of the members can be found on pages 82-83 of this
Annual Report.
Meetings
We met five times during 2018, 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 important matters 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, BDO LLP, and, on occasion,
the Company’s Chairman. We also met with the Auditor without
any representative of the Manager present. The Committee also
met with the Company’s independent Valuer, CBRE, in January
2018, June 2018 and January 2019 as part of the interim and
year-end audit process. As the Committee Chair, I have had regular
meetings with the Company Secretary and the Head of Finance of
the Manager (as did Jim Prower prior to my appointment), and the
Committee regularly has discussions throughout the year outside of
the formal Committee meetings.
the Group’s future performance, liquidity and solvency as well as
any risks relating to specific investments or proposed investments
and specific tenants or initiatives relating to specific assets. To
facilitate this process the Manager produces financial reports, which
include the latest management accounts, a review and report on
the Company’s financial forecast, a report on proposed and existing
investment and asset management initiatives, substantiation of any
dividend payments and a general update on the financial health of
the Company.
The Committee reviewed the principal business risks of the
Company on 1 August, 12 December 2018 and 27 February 2019.
The Company’s principal risks are found on pages 61-67.
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.
Please refer to page 89 for a description of Langham Hall UK
Depository LLP’s role.
The Manager also employs a Compliance Officer and Head of Risk
to assist the regulatory team with the discharge of the Manager’s
obligations in accordance with the AIFMD.
The Company does not have an internal audit function and, following
an internal risk review, we do not consider it necessary for the
Company to have one. The Company is managed externally by the
Manager. All payments of Company funds are authorised by the
Manager in accordance with the duties delegated to it pursuant
to the terms of the IMA and in accordance with the provisions of
the AIFMD. The Manager instructs the Administrator to make the
duly authorised payment and Langham Hall UK Depositary LLP,
as part of its role as Depositary, reviews each material payment
in relation to the specific test areas as mentioned in the report on
page 89. We consider that the internal controls in place and the
function undertaken by Langham Hall UK Depositary LLP make it
unnecessary for the Company to employ an internal audit function.
In addition to this, the Administrator has its own internal audit
performed on an annual basis by KPMG, from which the Company
reviews any findings. The 2018 audit did not raise any significant
findings.
Financial reporting and significant judgements
We monitor the integrity of the financial information published
in the Interim Report and Annual Report 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 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.
Risk management and internal controls
As part of each Board meeting and each Audit & Risk Committee
meeting, the Board reviews the financial position of the Company
and assesses any risks in relation to the Company’s business model,
A variety of financial information and reports were prepared by
the Manager and provided to the Board and to the Audit & Risk
Committee over the course of the year. These included budgets,
Tritax Big Box REIT plc Annual Report 2018
91
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION
Governance Audit & Risk Committee Report
periodic re-forecasting following acquisitions or corporate activity
and specific papers to assess the impact of transactions including:
The Board has also considered the following items:
> the issuance of further equity in April 2018
> the proposed equity issue in February 2019
> the proposed acquisition of db symmetry, and
> the US private placement of loan notes agreed in
December 2018.
We also regularly review the Company’s ability to continue to pay a
progressive dividend. This financial information was fully reviewed
and debated both at Committee and Board level across a number of
meetings. This was of particular focus upon consideration of the db
symmetry acquisition and the potential growth in earnings that the
transaction allows the Company over the long term.
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 developments as well as 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 an
acquisition is judged not to be the acquisition of a business, it is not
treated as a business combination. Of the eight acquisitions in the
year, all were considered to be property acquisitions.
Valuation of property portfolio
The property portfolio is independently valued by CBRE biannually.
Following production of the draft valuation by CBRE, the Manager
meets with CBRE to discuss and challenge various elements of the
property valuation, if necessary. The Auditor, in fulfilling its function
as independent auditor to the Company, also meets with CBRE to
discuss, and where necessary, challenges the property valuations.
The Board receives a copy of the property valuation for the portfolio
once it has been tested by the Manager and after the Auditor has
met with the Valuer. The performance of CBRE is assessed on an
annual basis by the Management Engagement Committee in its
report on pages 94-97.
The Group had property assets valued at £3.42 billion at
31 December 2018, as detailed on the Group Statement of Financial
Position. As explained in note 15 to the financial statements, CBRE
independently valued the properties in accordance with IAS 40:
Investment Property. We have reviewed the assumptions underlying
the property valuations and discussed these with the Manager and
CBRE, and have concluded that the valuation is appropriate.
The Board also meets with the Valuer to discuss and challenge the
valuation and to ensure it was conducted properly, independently
and could be fully supported.
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 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 IFRS 9 and makes additional
required disclosures under IFRS 7 Financial Instruments Disclosures
and IFRS 13 Fair Value Measurement.
The valuations are provided by the relevant counterparties of the
interest rate derivatives. The Board has reviewed and approved
these valuations.
Management have reviewed the requirements of IFRS 9 and
IFRS 15, which were effective from 1 January 2018. The impact
on the Group and Company is not considered material. Further
information can be found on page 122.
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
Annual Report is fair, balanced and understandable, as required
under the AIC Code, the Board has requested that the Audit & Risk
Committee advise on whether it considers that the Annual Report
fulfils these requirements. In outlining our advice, we as the Audit &
Risk Committee 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
Adviser, Auditor and the Audit & Risk 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 2018, 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 2018
and that all internal controls in place at the time of the last review
remain active.
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Tritax Big Box REIT plc Annual Report 2018
See Management Engagement Committee Report, pages 94-97
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 2018, 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 Chairman’s Governance Overview on pages 72-74.
External Auditor
In line with the European Union Audit Reform Legislation which
came into effect in 2016, and applied by the Company for years’
ended 31 December 2017 onwards, as the Company’s Auditor, BDO
LLP (“BDO”) were unable to continue to provide the Company with
audit services along with non-audit services including corporate
finance services and tax advisory work. The position of Auditor
to the Company was re-tendered in April 2017. As a result of this
rigorous process the Audit & Risk Committee recommended that
BDO be re-appointed. The period of total uninterrupted engagement
is five years, covering the years ended 31 December 2014 to
31 December 2018.
views over significant risk areas and why they consider these to
be risk areas. The Audit & Risk Committee, where appropriate,
continue to challenge and seek comfort from the Auditor over
those areas which drive audit quality. The timescale for the delivery
of the audit or review is also set at this meeting. We meet with the
Auditor again just prior to the conclusion of the review or audit to
consider, challenge and evaluate findings in depth. As an example,
we questioned the Auditor in depth on the process it adopted to
challenge the 2018 property valuation to ensure it was effective.
Neither the audit nor the interim review uncovered any significant
findings.
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 as reporting
accountants on the Company’s secondary issues of equity capital
in the normal course of the Company’s business. Following the audit
tender, PwC LLP were appointed to assist with financial and tax
due diligence on corporate acquisitions and to provide specific tax
compliance advice.
BDO have agreed, subject to no significant changes of scope, a
fixed fee for this audit of the Annual Report and review of the Interim
Report up to and including 2019.
The Company paid £90,000 in fees to the Auditor for non-audit
services during 2018. These fees are set out in the table below.
Work undertaken
Rationale for using the external auditor
Fee (£)
£90,000
Reporting accountant
on the Company’s
secondary offerings
and public debt
issuance
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.
The ratio of audit to non-audit services received in the year was
54% (2017: 56%).
Richard Laing Chair of the Audit & Risk Committee
6 March 2019
Richard Levy, the lead Audit Partner for the past five years, is due
for rotation following the 2018 year-end audit. It is intended that
Geraint Jones, whom we met as part of the audit tender process,
takes over the position as Lead Audit Partner. The Committee has
met with the key members of the Audit team over the course of the
year and BDO have formally confirmed its independence as part of
the reporting process as well as during the re-tender process. 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 also considered BDO’s
internal quality control procedures and found them to be sufficient.
The Committee is satisfied that the Audit process is transparent and
of good quality.
Please refer to note 8 in the financial statements for a summary of
fees paid to the Auditor.
The Company confirms that it has complied with the provisions of
the CMA’s statutory audit services order for the financial year under
review.
Audit process
We meet with the Auditor and the Manager before the preparation
of each of the interim and annual results begins, to plan and discuss
the scope of the audit or review as appropriate, and challenge
where necessary to ensure its rigour. At these meetings the
Auditors prepare a detailed audit or review plan which is discussed
and questioned by us and the Manager to ensure that all areas of
the business are appropriately reviewed and that the materiality
thresholds are set at the appropriate level which varies depending
on the matter in question. We also discuss with the Auditor their
See Chairman’s Governance Overview, pages 72-74
Tritax Big Box REIT plc Annual Report 2018
93
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
Management Engagement Committee Report
“Dear Shareholders,
In 2018 the Committee focussed on conducting
a detailed review of the services provided by the
Company’s key suppliers and recommending which
suppliers are to be re-tendered. The Committee also
continued to monitor and evaluate the performance
of the Manager.”
Susanne Given, Chair of the Management Engagement
Committee
Membership
Susanne Given Chair
Sir Richard Jewson, Jim Prower, Aubrey Adams, Richard Laing1,
Alastair Hughes2
Key areas of focus for 2018
> Implementation of the re-tender schedule commencing with
the re-tender of the Company Secretarial function and CBRE.
> Annual review of each service provider to ensure the quality
of service and value for money for Shareholders.
Meeting attendance register
Person
Meetings eligible to attend
Meetings attended
Susanne Given
Sir Richard Jewson
Jim Prower
Aubrey Adams
Richard Laing1
1
1
1
1
1
1
1
1
1
1
1 Richard Laing was appointed to the Management Engagement Committee
on 16 May 2018.
2 Alastair Hughes was appointed to the Management Engagement Committee
on 1 February 2019.
The Management Engagement Committee’s role is to review the
performance of the Manager and the Company’s main service
providers and to recommend the re-tender of their appointments
for consideration by the Board. The Committee is also responsible
for overseeing any amendments to the Investment Management
Agreement (“IMA”).
We met once in the year ending 31 December 2018 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. I also
met independently with representatives of the Manager to discuss
the re-tender process and management of suppliers.
We reviewed the performance of the Manager and, together with the
Manager and the Company Secretary, 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 12-month period ended 30 June
2018, thereby allowing the Committee to refer to figures reviewed by
the Auditor in its assessment of performance.
Under the terms of the IMA, 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, responsibility for investment and divestment
decisions made in accordance 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. All of the Company’s subsidiaries and therefore all of
its assets are wholly owned and controlled by the Company as at
31 December 2018 and the Board exercises direct control in
respect of the Group’s holdings.
The IMA establishes that responsibility for investment and divestment
decisions is delegated to the Manager in accordance with ESMA
guidance as to the interpretation of the rules under the AIFMD.
Investment and divestment decisions must be made in accordance with
the Company’s Investment Policy and the Board remains responsible for
ensuring this is the case. The Board continues to review all investment
and divestment decisions as well as the Asset Management Policy
established by the Manager.
94
Tritax Big Box REIT plc Annual Report 2018
Management Engagement Committee Report
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 discuss
the general market conditions and the financial performance and
strategy of the Company. Details of the Company’s performance in
2018 have been set out in the Strategic Report on pages 1-69.
The Manager
The Manager has adopted a focused approach to investing, with
the Company acquiring eight new Big Box investments in 2018
(including seven pre-let forward funded developments), with an
aggregate purchase price commitment of £641.5 million. At the end
of March 2018, the Manager negotiated a surrender of the Tesco
lease, without premium, and immediately entered into a 12-month
occupational licence with Amazon. A new lease with Amazon was
subsequently arranged for a 15-year term from November 2018.
evaluation of the various CSR initiatives which it is progressing
and developing.
Suppliers
Following an extensive review and full analysis, we agreed with the
Manager that the performance of the Company’s current service
providers for the past year continued to be satisfactory, and in
several cases exceptional, and, in accordance with the Manager’s
recommendation, that each, other than the Registrar, Link Asset
Services (see below), be retained until the next review. We did not
suggest any material changes to the engagement terms of the
remaining advisers or service providers.
Our review did not reveal any material weaknesses in the advice and
support provided to the Group. We are satisfied that the Company
is benefiting from added value in respect of the services it procures.
The Manager further engaged with Kellogg’s US-based property
team to understand its future distribution requirements and develop
a property solution at our asset in Manchester. In March 2018, shortly
before the expiry of the original lease term, a new 10-year lease with
Kellogg’s was completed, repositioning this asset from Value Add to
Foundation. For further information please refer to page 45.
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 Manager also secured planning permission for phase 1 of
the Company’s prime London distribution development site at
Littlebrook, Dartford, comprising the proposed development of
a 450,000 sq ft logistics facility.
The Company is currently seeking an occupier for this unit. In the
second half of the year, the Manager started negotiations with
the owners and management of db symmetry to acquire an 87%
economic interest in the company. db symmetry owns one of
the UK’s largest strategic land portfolios for the development
of Big Box real estate assets and related logistics facilities and is
independently valued at £372.75 million. The acquisition completed
in February 2019.
The Committee also reviews the Manager’s culture and resourcing.
The Manager increased the number of employees in 2018 to ensure
that the Company is well serviced, including the appointment of
a Legal Counsel, a Company Secretary, an Assistant Company
Secretary and a Head of Financial Modelling and Portfolio Analytics.
We are confident following our review that the Manager continues
to provide excellent service to the Company which represents fair
value for money to the Company’s Shareholders.
This year we asked the Manager to review its cyber security
systems and controls. The Manager commissioned PwC to perform
a cyber security review and risk assessment. PwC engaged with
the Manager to map out potential risks and vulnerabilities together
with benchmarking good practice recommendations. Following
the review, the Manager implemented the recommendations
and conducted site visits to critical suppliers to the Company to
test physical and data security. The Manager also improved its
IT security by introducing multi-factor authentication and regular
security testing. As part of its commitment to cyber security, the
Manager is re-tendering its IT function with a particular focus on
cyber security and encryption technology. For the year 2019,
we will be asking the Manager to focus on the formal and public
The Committee recommended to the Board that the Company
Secretarial function be re-tendered in 2018 to ensure that the
Company follows best practice corporate governance at all times.
Following consideration of a number of third-party service providers,
it was concluded that the Company Secretarial role would remain
with the Manager but that the Manager would seek to appoint a
full time company secretarial team. A number of candidates for the
role were interviewed by the representatives of the Manager and
the Board with the appointment of a Company Secretary and an
Assistant Company Secretary being made in October 2018. DMJ
Recruitment assisted the Manager in the recruitment process.
DMJ Recruitment does not have any existing relationship with the
Company or the Manager.
CBRE, the Company’s valuer, was also re-tendered in 2018. As part
of the re-tender exercise we invited CBRE, Savills PLC, Cushman
Wakefield Inc. and BNP Paribas Real Estate S.A. to submit proposals
to undertake the Company’s bi-annual portfolio and acquisition
valuations. All providers were requested to submit proposals on
the same scope of appointment including, amongst other items:
example template reports to be provided to the Company; the
number of property inspections to be carried out per annum;
the cost of building survey measurements; the cost of access to
in-house research; the ability to rely on information provided by
third parties (such as: Reports on Title, Building and Environmental
surveys, Plans and Agent particulars); and the CVs of personnel
regularly involved. All of these factors were assessed together with
the fees proposed.
The Manager completed a SWOT analysis on all four providers and
selected CBRE as the most suitable candidate, on the basis that
they have the most focussed and detailed knowledge of the Big
Box logistics subsector with a highly experienced and dedicated
valuation team. Although their annual fee scored higher than the
others, it was not significantly out of line with the other providers,
who were regarded as having significantly less experience in the
subsector. Importantly for the Company, the retender exercise
Tritax Big Box REIT plc Annual Report 2018
95
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Management Engagement Committee Report
allowed the Company to re-negotiate and reduce the fee basis
originally agreed with CBRE at the Company’s IPO in December
2013 when the scale of the Company was an unknown factor.
Following the Committee’s recommendation, the Manager invited
Computershare Investor Services Plc, Link Asset Services and Equiniti
Group plc to tender in April 2018 for the role of the Company’s Registrar.
Following a rigorous assessment of services offered, experience,
efficiency and pricing, Computershare Investor Services plc were
appointed and a letter of termination served on Link Asset Services.
Following a successful migration process, the shareholder register
was transferred to Computershare in February 2019.
Management fee
Under the terms of the IMA, 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. The fee is payable in arrears. 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 while remaining
capped at NAV.
The management fee as a percentage of NAV is as set out below:
On 29 March 2018, the Company issued 594,559 Ordinary Shares
in respect of the net cash amount, relating to the six months to
31 December 2017. The issue price was 139.90 pence per Ordinary
Share, equivalent to the prevailing and latest published audited basic
NAV of 141.50 pence per Ordinary Share less the interim dividend of
1.60 pence per Ordinary Share, for which the shares did not qualify,
paid to Shareholders on 29 March 2018 for the period between
1 October to 31 December 2017.
On 8 October 2018, the Company issued 676,451 Ordinary Shares
in respect of the net cash amount, relating to the reinvestment and
the management fee for six months to 30 June 2018. The issue price
was 143.815 pence per Ordinary Share, equivalent to the latest
prevailing unaudited basic NAV of 145.49 pence per Ordinary Share
less the interim dividend of 1.675 pence per Ordinary Share, for
which the shares did not qualify, paid to Shareholders on 9 August
2018 in respect of the period from 1 April to 30 June 2018.
Following these issues of Ordinary Shares and the Open Offer of
Ordinary Shares in February 2019 in which the Manager and some
members of its staff participated, the Manager had the following
beneficial interests as at the date of this report:
Tritax Partner or
person closely associated
Number of
Ordinary Shares
Percentage of issued
share capital as at
6 March 2019
NAV
Relevant percentage
Mark Shaw
Up to and including £500 million
1.0%
Colin Godfrey
Above £500 million up to and including £750 million
0.9%
James Dunlop
Above £750 million up to and including £1 billion
0.8%
Henry Franklin
Above £1 billion up to and including £1.25 billion
0.7%
Bjorn Hobart
Above £1.25 billion up to and including £1.5 billion
Above £1.5 billion
0.6%
0.5%
Petrina Austin
Tritax Management LLP
1,197,897
1,163,760
1,101,399
825,200
120,610
100,523
94,008
200,137
4,803,534
0.070%
0.068%
0,065%
0.048%
0.007%
0.006%
0.006%
0.012%
0.282%
During specified periods after publication of the Company’s Annual
or Interim Results the members of the Manager and relevant
employees (and/or their connected parties) are obliged to 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 (“Management Shares”). 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 being issued at a price above the prevailing share
price, the Company’s Broker will be instructed to acquire Ordinary
Shares in the market for those persons, to the value as near as
possible equal to the net cash amount. The Management Shares
may be issued to any members of the Manager or, at the discretion
of the Manager, to any employee of the Manager.
Staff of Tritax Management LLP*
Total
* This figure comprises Ordinary Shares issued to staff 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 any staff members.
Term
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.
96
Tritax Big Box REIT plc Annual Report 2018
See Strategic Report, pages 1-69
See Audit & Risk Committee Report, pages 90-93
Conflict management
The IMA contains restrictive conflict provisions and 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 UK distribution
or 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.
Susanne Given Chair of the Management Engagement Committee
6 March 2019
Tritax Big Box REIT plc Annual Report 2018
97
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
Relations with Shareholders and
Stakeholders
As a Board, we recognise the importance of maintaining strong relationships
with the Company’s Shareholders and stakeholders and an understanding of
their priorities and concerns. In 2018 we have focussed on developing strong
relationships with our Customers.
The Chairman and the Senior Independent Director, alongside Colin
Godfrey of the Manager, are the Company’s principal spokesmen who
regularly communicate with the Company’s Shareholders, the press,
analysts, investors and other stakeholders. All Directors are available to
speak to Shareholders on any matters relating to the Company.
Investor relations
During the year, the Manager together with the Company’s Broker,
Jefferies, devoted time to meeting with existing Shareholders and
prospective new investors in the UK, Continental Europe, South East
Asia and the USA. The roadshows, together with a series of ongoing
ad hoc meetings with Shareholders and stakeholders, enabled the
Manager to listen to and understand the views of Shareholders
and stakeholders and report those views to the Board so it could
consider and appreciate these opinions. On the whole, feedback
from the roadshows and other meetings has been positive and
constructive over the year.
The Manager has a dedicated investor relations team who liaise with
the Company’s public relations advisor and provide regular investor
relations reports to us, which include major press coverage, analyst
reports and Shareholder feedback. In January 2019, the Company
changed advisors from Newgate Communications plc to Maitland
AMO. The Company’s Broker provides a bespoke quarterly report,
which has a section dedicated to investor relations. The Manager
also produces a quarterly fact sheet on behalf of the Company
which can be viewed on the Company’s website.
The Chairman and Colin Godfrey, together with other Directors,
are planning to hold a series of lunches in March 2019 with several
Shareholders to discuss, informally, the Company and its business
strategy in the present economic climate. In the past, 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 generally highly supportive of the Company.
The salient themes to emerge included, a desire for the Company
to maintain its focus on the progressive dividend and on the quality
of its tenants and real estate. Some Shareholders were also keen to
explore how and when the Company might become more organic in
its growth. These themes were reported to the Board and have proven
useful to the Company in the formulation of its strategy in 2018.
As well as the Chairman’s lunches, the Company hosted a private event
for Customers and other key stakeholders during the summer of 2018.
As well as the Board, representatives from the Manager were also
present. This event enabled us and the Manager to better understand
the main concerns and development points for our Customers which
should enable the Company to partner with its Customers more
effectively, as well as promoting a more open discussion for future
asset management and other property initiatives.
Site visits
The Manager has undertaken several “Big Box” site visits for existing
Shareholders and lenders, prospective investors and analysts during
the year, notably to the Company’s development site at Littlebrook
in May. In November, the Manager arranged a tour of a number of
sites for US based prospective subscribers to the private placement
of loan notes as part of their due diligence process on the Company.
We will continue the initiative in 2019 as we believe that such site
visits provide Shareholders and other stakeholders with a better
insight into the nature of the assets we invest in and our strategy.
Annual General Meeting (“AGM”)
Shareholders are encouraged to attend and vote at the Company’s
general meetings so they can discuss governance and strategy with
the Directors and the Manager. This enables us to better understand
Shareholders’ views. All the Directors usually attend the AGM and
we make ourselves available to answer Shareholders’ questions at
all the general meetings of the Company and are contactable as
necessary. 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.
Various Directors also regularly attend the biannual financial results
presentations to analysts.
The Company held a General Meeting on 23 November 2018 to seek
shareholder approval for the amendment of the Company’s existing
Investment Policy to increase the exposure limit to land and options
over land from 10% Net Asset Value to 15% of Gross Asset Value
of which 5% could be invested in speculative developments (the
development of buildings where no tenants are in place). The change
to the Investment Policy was duly approved at the General Meeting.
The Chairman and the Senior Independent Director as well as other
Directors 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 at the Company’s registered office.
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. The website also holds the quarterly fact sheets,
share price information, investor presentations, the Key Information
Document required by PRIIPS regulations 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.
98
Tritax Big Box REIT plc Annual Report 2018
https://tritaxbigbox.co.uk/investors/shareholder-information
Governance
Directors’ Remuneration Report
Director. Directors’ expenses for the year to 31 December 2018 totalled
£4,046 (2017: £4,163). No other remuneration was paid or payable
during the year to any Director.
Director
Annual fee
£
2018 total
£
2017 total
£
Sir Richard Jewson, Chairman
£100,000
£100,000
£100,000
Jim Prower
Susanne Given
Aubrey Adams
Richard Laing1
Mark Shaw2
£50,000
£50,000
£50,000
£50,000
£50,000
£50,000
£50,000
£50,000
£15,385
£50,000
£31,474
N/A
N/A
N/A
N/A
1 Richard Laing was appointed on 16 May 2018.
2 As Chairman of the Company’s Manager, Mark Shaw was not entitled to receive
a fee. He retired from the Board on 1 February 2019.
Alastair Hughes was appointed on 1 February 2019, after the end of the reporting
period, and is therefore not included in the table above.
Statement of voting at general meeting
The Company is committed to ongoing Shareholder dialogue and
takes an active interest in voting outcomes. If 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 and the Directors’ Remuneration Policy
were approved by Shareholders at the Company’s AGM held on
16 May 2018. The voting on the respective resolutions was as shown
below.
Resolution
Votes cast
For
%
Against
%
Votes
withheld
Directors’
Remuneration Policy
Directors’
Remuneration Report
1,005,099,223
99.93
0.02
566,224
1,005,099,222
95.59
3.92 5,121,638
Annual statement
As the Board has no Executive Directors, it does not consider it
necessary to establish a separate Remuneration Committee. The
Directors’ remuneration is disclosed later in this Remuneration Report.
The Remuneration Report will be presented at the 2019 AGM for
Shareholder consideration and approval.
No changes have been made to the remuneration of the Directors
during the review period and we are not planning to make any changes
in 2019.
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 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, all Directors are entitled to the
remuneration determined from time to time by the Board.
External advisers
The Board and its Committees have access to sufficient resources
to discharge their duties, which, in the past have included access to
independent remuneration experts Deloitte LLP. The Board has not
required any advice from Deloitte LLP during 2018. Deloitte LLP has no
other connection with the Company.
Annual report on remuneration
Director
Sir Richard Jewson
– appointment letter updated and reissued
Jim Prower
Susanne Given
Aubrey Adams
Richard Laing
Alastair Hughes
Letter of
appointment dated
18 November 2013
13 September 2016
18 November 2013
13 September 2016
11 September 2017
16 May 2018
1 February 2019
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 of Association and without compensation.
Each Director 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, Sir Richard
Jewson, who is paid a fee of £100,000 pa.
The fees paid to the past and current Directors (other than Alastair
Hughes who was appointed post the year end) in the year to
31 December 2018, which have been audited, are set out in the table
below. In addition, each Director is entitled to recover all reasonable
expenses incurred in connection with performing his or her duties as a
See Company Information, page 164
Tritax Big Box REIT plc Annual Report 2018
99
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Directors’ Remuneration Report
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.
Director*
Number of
shares held
as at 6 Mar
2019
Percentage
of issued
share capital
as at 6 Mar
2019
Dividends
received
31 Dec
2018
£
Total Shareholder return (p)
● Tritax Big Box ● FTSE 250² ● FTSE All-Share REIT¹
160
150
140
130
120
110
100
90
Price
Change
TSR
31.3%
68.1%
13.7%
30.8%
6.8%
28.3%
80
Dec 13
Dec 16
1 Source: Bloomberg and Capital IQ. 2 Rebased to Tritax Big Box as of 9 December 2013.
Dec 17
Dec 15
Dec 18
Dec 14
Total Shareholder return is the measure of returns provided by a
Company to Shareholders reflecting share price movements and
assuming reinvestment of dividends.
Sir Richard Jewson, Chairman
87,249
0.005%
£5,113
Jim Prower
Aubrey Adams
Susanne Given
Richard Laing
26,859
0.02%
£1,574
113,043
0.007%
£6,625
0
0.00%
£0
45,828
0.002%
£2,212
Alastair Hughes
0
0.00%
£0
* Includes Directors and persons closely associated (as defined by the EU Market
Abuse Regulation) shareholdings. Includes Ordinary Shares issued under the Open
Offer in February 2019.
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.
Relative importance of spending on pay
Directors’ shareholdings (audited)
There is no requirement for the Directors of the Company to own
shares in the Company. As at 6 March 2019, the Directors and their
persons closely associated had the shareholdings listed below.
Directors’ remuneration
Investment management fees
Dividends paid to Shareholders
2018
£m
0.32
15.31
95.88
2017
£m
0.27
11.84
78.45
Change
17%
29%
22%
Sir Richard Jewson KCVO, JP Chairman
6 March 2019
100
Tritax Big Box REIT plc Annual Report 2018
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 2018.
Directors
The names of the Directors currently serving the Company are set
out in The Board of Directors, together with their biographical details
on pages 82-83. Mark Shaw served as a Director of the Company
until his resignation on 1 February 2019.
The Directors’ Report, together with the Strategic Report, comprise
the “Management Report” for the purposes of Disclosure Guidance
and Transparency Rule 4.1.5R.
The Company maintains Directors’ and Officers’ liability insurance
cover, at its expense, on the Directors’ behalf.
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 Report (pages 72-98 of this Annual Report and
Accounts for the year ended 31 December 2018) is incorporated
by reference into this Directors’ Report.
Directors’ interests in shares
The Directors’ interests in the Company’s shares are disclosed in the
Directors’ Remuneration Report on page 99.
Future developments
An indication of the likely future developments of the Company’s
business is set out in the Strategic Report.
Political donations
No political donations were made during the year.
Financial results and dividends
The financial results for the year can be found in the Group
Statement of Comprehensive Income.
Employees
The Group has no employees and therefore no employee share
scheme or policies on equal opportunities and disability.
During the year, the following interim dividends amounting to, in
aggregate, 6.70 pence per share were declared:
On 17 May 2018, we declared an interim dividend in respect of
the period from 1 January 2018 to 31 March 2018 of 1.675 pence
per Ordinary Share. This dividend was paid on 11 June 2018 to
Shareholders on the register on 24 May 2018;
On 12 July 2018, we declared a second interim dividend in respect
of the period from 1 April 2018 to 30 June 2018 of 1.675 pence
per Ordinary Share. This dividend was paid on 9 August 2018 to
Shareholders on the register on 20 July 2018;
On 11 October 2018, we declared a third interim dividend in respect
of the period from 1 July 2018 to 30 September 2018 of 1.675
pence per Ordinary Share. This dividend was paid on 15 November
2018 to Shareholders on the register on 19 October 2018;
A fourth interim dividend in respect of the three months ended
31 December 2018, of 1.675 pence per share, was declared on
6 March 2019. This dividend is payable on or around 28 March 2019,
to Shareholders on the register on 15 March 2019. This takes the total
dividend in respect of the 2018 financial year to 6.70 pence per share.
Post balance sheet events
For full disclosure of post balance sheet events including
db symmetry acquisition please refer to note 33 on page 143.
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 April 2018, the Company issued 109,364,308 Ordinary Shares at
a price of 142.25 pence pursuant to a Placing, Open Offer and Offer
for Subscription. In March and October 2018 the Company issued
594,559 Ordinary Shares and 676,451 Ordinary Shares respectively
pursuant to the IMA.
As at 31 December 2018, there were 1,474,233,401 Ordinary
Shares in issue.
Ordinary Shares
Balance at start
Shares issued in March 2018
Shares issued in April 2018
Shares issued in October 2018
Number
Gross proceeds
£m
1,363,598,083
594,559
109,364,308
676,451
N/A
N/A
155.57
N/A
155.57
Balance at the year end
1,474,233,401
In February 2019 we also issued 192,291,313 shares as part
of an Open Offer to Shareholders, at a price of 130.00p. Later
in the month we issued a further 40,450,234 shares in part
consideration of the Company acquiring an 87% economic
interest in db symmetry, also at 130.00p.
On 6 March there were 1,706,974,948 Ordinary Shares in issue.
See The Board of Directors, pages 82-83
Tritax Big Box REIT plc Annual Report 2018
101
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Directors’ Report
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:
Amendment of Articles of Association
The Articles may be amended by a special resolution of the
Company’s Shareholders.
> 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.
Greenhouse gas emissions reporting
The Board has considered the requirement to disclose the Company’s
measured carbon emissions as follows.
During the year ended 31 December 2018:
> 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;
> 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 2018.
Substantial shareholdings
As at 28 February 2019, 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.
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.
Powers in relation to the Company issuing its shares
At the AGM held on 16 May 2018, 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 £9,094,617. Of those Ordinary Shares, the Directors were
granted authority to issue up to an aggregate nominal amount of
£682,096 (which is equivalent to 5% of the Company’s issued share
capital as at that date) non pre-emptively and wholly for cash and
authority to issue up to an aggregate nominal amount of £682,096
to be used only for the purpose of financing (or refinancing, if the
authority is to be used within six months after the original transaction),
a transaction which the Directors determine to be an acquisition or
other capital investment of a kind contemplated by the Statement of
Principles on Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of the Notice of the AGM.
These authorities replaced the equivalent authorities given to the
Directors at the AGM held on 16 May 2018. These authorities expire
at the next AGM on 15 May 2019.
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 or institutions.
In certain facilities including the issue of recent loan notes, the
change of control provisions also include a change of control at the
ultimate Parent Company level.
Appointment and replacement of Directors
Details of the process by which Directors can be appointed or replaced
are included in the Nomination Committee Report on page 87.
Events subsequent to the year‑end date
For details of events since the year-end date, please refer to note 33
to the consolidated financial statements.
Investor
BlackRock
Aviva plc
Brewin Dolphin Limited
The Vanguard Group, Inc.
State Street Global Advisers
Number of
Ordinary Shares
131,059,104
115,052,007
83,762,893
66,741,702
54,404,657
Legal & General Investment Management Ltd
53,132,055
PGGM Listed Real Estate PF Fund
51,468,503
Percentage
holding of
issued share
capital
Independent Auditor
BDO LLP has expressed it willingness to continue as Auditor for the
financial year ending 31 December 2019.
7.68%
6.74%
4.91%
3.91%
3.19%
3.11%
3.02%
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.
The Company’s administration was delegated to Link Asset
Services Limited.
102
Tritax Big Box REIT plc Annual Report 2018
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 disclosure of
capitalised interest, which is disclosed in note 11, page 124.
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 15 May 2019.
This report was approved by the Board on 6 March 2019.
Tritax Management LLP Company Secretary
6 March 2019
Company Registration Number: 08215888
Tritax Big Box REIT plc Annual Report 2018
103
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance
Responsibilities Statements
The Directors are responsible for preparing the Annual Report and the Group
and Parent Company financial statements in accordance with applicable law
and regulations.
Directors’ responsibilities statement
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 and
Company for that year.
with that law and those regulations. These can be found at the pages
detailed in the footnotes below (or using the embedded link in the PDF).
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.
In preparing the financial statements, the Directors are required to:
> select suitable accounting policies and then apply them
consistently;
Directors’ responsibilities pursuant to DTR4
We confirm that to the best of our knowledge:
> 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;
> the Group 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 Group and the
undertakings included in the consolidation as a whole;
> for the Company financial statements, state whether they have
been prepared in accordance with 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 Annual Report includes a fair review of the development and
performance of the business and the financial position of the
Group and Company, 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.
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.
They have 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.
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:
> 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.
Under applicable law and regulations, the Directors are also responsible
for preparing a Directors’ Report, a Strategic Report, a Directors’
Remuneration Report and a Corporate Governance Statement that comply
Signed on behalf of the Board by:
Sir Richard Jewson KCVO, JP Chairman
6 March 2019
See Directors’ Report, pages 101-102
See Strategic Report, pages 1-69
104
See Directors’ Remuneration Report, pages 99-100
See Chairman’s Governance Overview, pages 72-74
Governance
Independent Auditor’s Report
to the members of Tritax Big Box REIT plc
Opinion
We have audited the financial statements of Tritax Big Box REIT
plc (the “Parent Company”) and its subsidiaries (the “Group”) for
the year ended 31 December 2018 which comprise the Group
Statement of Comprehensive Income, the Group Statement of
Financial Position, the Group Cash Flow Statement, the Group
Statement of Changes in Equity, Notes to the Consolidated
Accounts, the Company Balance Sheet, the Company Statement
of Changes in Equity and the Notes to the Company Accounts,
including a summary of significant accounting policies. 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, as applied in accordance with the provisions of the
Companies Act 2006. The financial reporting framework that has
been applied in preparing the Parent Company financial statements
is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 The Financial Reporting
Standard applicable in the UK and Republic of Ireland (United
Kingdom Generally Accepted Accounting Practice).
In our opinion:
> the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at 31
December 2018 and of the Group’s profit for the year then ended;
> the Group financial statements have been properly prepared in
accordance with IFRSs as 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.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section
of our report. We are independent of the Group and the Parent
Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to principal risks, going concern and
viability statement
We have nothing to report in respect of the following information
in the Annual Report, in relation to which the ISAs (UK) require us
to report to you whether we have anything material to add or draw
attention to:
> the disclosures in the Annual Report set out on pages 60-67
that describe the principal risks and explain how they are being
managed or mitigated;
> the Directors’ confirmation set out on page 88 in the Annual
Report that they have carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten its business model, future performance, solvency or
liquidity;
> the Directors’ statement set out on page 68 in the financial
statements about whether the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing
the financial statements and the Directors’ identification of any
material uncertainties to the Group and the Parent Company’s
ability to continue to do so over a period of at least 12 months
from the date of approval of the financial statements;
> whether the Directors’ statement relating to going concern
required under the Listing Rules in accordance with Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained in
the audit; or
> the Directors’ explanation set out on page 68 in the Annual
Report 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.
Tritax Big Box REIT plc Annual Report 2018
105
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Independent Auditor’s Report
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in
the audit, and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
How the scope of our audit addressed
the key audit matter
Experience of Valuer and relevance of its work
We read the Valuer’s report and confirmed that the approaches
used were consistent with the requirements of IFRSs as adopted
by the European Union. We assessed the Valuer’s competence
and capabilities and read their terms of engagement with the
Group, determining that there were no matters that affected their
independence and objectivity or imposed scope limitations upon
them.
Data provided to the Valuer
We validated the data provided to the Valuer by the Manager and
found that it was consistent with the information we audited. This
data included inputs such as current rents and lease terms, which
we have agreed on a sample basis to executed lease agreements
as part of our audit work.
Assumptions and estimates used by the Valuer
We met with the Valuer and gained an understanding of the
valuation methods and assumptions used. We have considered
the assumptions utilised by the Valuer within the valuation and
benchmarked the valuation to our expectations developed using
independent data around the period end.
For properties under construction we assessed the project costs
and progress of developments and verified the forecast costs to
complete included in the valuations to third party costs to complete
information.
Our testing indicated that the estimates and assumptions used were
appropriate in the context of the Group’s property portfolio.
Key audit matter
Valuation of investment property portfolio, including
properties under construction (forward funded assets)
Refer to note 1 in relation to accounting policies over significant
estimates and judgements
Refer to note 15 in relation to investment property.
The valuation of investment property requires significant judgement
and estimates by the Directors 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:
> Standing assets: these are existing properties that are currently
let. They are valued using the income capitalisation method.
> Properties under construction: these are properties being built
under forward funded agreements with developers and which
have agreed pre lets with tenants. Such assets have a different
risk and investment profile to the standing assets. 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 the Directors may influence the significant
judgements and estimates in respect of property valuations in order
to achieve property valuation and other performance targets to
meet market expectations.
Additionally, properties under construction may involve 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 assets.
106
Tritax Big Box REIT plc Annual Report 2018
Our application of materiality
We apply the concept of materiality both in planning and performing
our audit, and in the evaluation of the effect of misstatements on
the audit and in forming our audit opinion. Materiality is assessed on
both quantitative and qualitative grounds.
We determined that the same measure as the Group was
appropriate for the Parent Company, and the performance
materiality and specific performance materiality applied were
£16.5 million and £3.08 million (2017: £15.75 million and
£2.7 million) respectively.
Materiality
Performance materiality
Specific materiality
Specific performance materiality
Reporting threshold
£30 million
£22.5 million
£4.5 million
£3.375 million
£0.6 million
Reporting threshold
We agreed with the Audit & Risk Committee that we would report
to the Committee all individual audit differences in excess of
£0.60 million (2017: £0.50 million) as well as differences below
this threshold that, in our view, warranted reporting on qualitative
grounds.
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 £30 million (2017: £25 million), which was set at 1% of
Group total assets (2017: 1%). 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.
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.
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 £4.5 million
(2017: £3.75 million), which was set at 5% (2017: 4.8%) of European
Public Real Estate Association (“EPRA”) earnings. EPRA earnings
excludes the impact of the net surplus on revaluation of investment
properties and interest rate derivatives.
We determined that the same measures as the Group were
appropriate for the Parent Company, and the materiality and
specific materiality applied were £22 million and £4.1 million
(2017: £21 million and £3.7 million) respectively.
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% (2017:
75%) of materiality, namely £22.5 million (2017: £18.75 million).
We agreed that the reporting threshold for the Parent Company
would be £0.44 million (2017: £0.42 million).
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 our audit
Our audit of the Group was scoped by obtaining an understanding
of the Group and its environment, including the Group’s system of
internal control, applicable legal and regulatory framework and the
industry in which it operates, and assessing the risks of material
misstatement at the Group and Parent Company level. This included
consideration of the risk that the Group was acting contrary to
applicable laws and regulations, including fraud.
The Group operates solely in the United Kingdom and operates
through one segment, investment property, structured through 76
subsidiary Special Purpose Vehicle (“SPV”) companies. The Group
audit team performed all the work necessary to issue the Group
and Parent Company audit opinions. None of the subsidiary SPVs
were considered to be significant components, and as such the
audit approach included undertaking audit work on the key risks
of material misstatement identified for the Group across the SPV
subsidiaries.
We undertook audit procedures to respond to the risk of non-
compliance with laws and regulations, focussing on those that
could give rise to a material misstatement in the Group and Parent
Company financial statements, including, but not limited to, the
Companies Act 2006, the UK Listing Rules, the REIT regime
requirements and legislation relevant to the rental of properties.
We made enquiries of management to obtain further understanding
of risks of non-compliance. There are inherent limitations in the
audit procedures described above and the further removed
non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we
would become aware of it.
We addressed the risk of management override of internal controls,
by undertaking procedures to review journal entries processed
during and subsequent to the year end and evaluate whether
there was evidence of bias that represented a risk of material
misstatement due to fraud.
Tritax Big Box REIT plc Annual Report 2018
107
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION Governance Independent Auditor’s Report
We consider that the audit procedures we planned and performed
in accordance with ISAs (UK) have provided us with reasonable
assurance that irregularities, including fraud, would have been
detected to the extent that they could have resulted in material
misstatements in the financial statements. Our audit was not
designed to identify misstatements or other irregularities that would
not be considered to be material to the financial statements.
Other information
The other information comprises the information included in
the Annual Report, other than the financial statements and our
Auditor’s report thereon. The Directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon. In connection with our audit of the financial
statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of the
other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of
the other information where we conclude that those items meet the
following conditions:
> Fair, balanced and understandable set out on page 92 – the
statement given by the Directors that they consider the Annual
Report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Group’s performance, business
model and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
> Audit & Risk Committee reporting set out on pages 90-93 – the
section describing the work of the Audit & Risk Committee does
not appropriately address matters communicated by us to the
Audit & Risk Committee; or
> Directors’ statement of compliance with the UK Corporate
Governance Code set out on page 74– the parts of the Directors’
statement required under the Listing Rules relating to the
Company’s compliance with the UK Corporate Governance
Code containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose
a departure from a relevant provision of the UK Corporate
Governance Code.
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
> the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
> the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic
Report or the Directors’ Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
> adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
> the Parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
> certain disclosures of Directors’ remuneration specified by law are
not made; or
> we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement
set out on page 104, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group
or the Parent Company or to cease operations, or have no realistic
alternative but to do so.
108
Tritax Big Box REIT plc Annual Report 2018
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
Auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our Auditor’s report.
Other matters which we are required to address
We were initially appointed in November 2013 to audit the financial
statements of the Company for the period ended 31 December
2014. In respect of subsequent periods we have been reappointed
annually by the members at the Annual General Meeting. Following
a competitive re-tender in May 2017 we were reappointed to audit
the financial statements for the year ended 31 December 2017
and subsequent financial periods. The period of total uninterrupted
engagement is five years, covering the years ended 31 December
2014 to 31 December 2018.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company and we
remain independent of the Group and the Parent Company in
conducting our audit.
Our audit opinion is consistent with the additional report to the
Audit & Risk Committee.
Use of our report
This report is made solely to the Parent 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 Parent 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
Parent Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Richard Levy (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
6 March 2019
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
Tritax Big Box REIT plc Annual Report 2018
109
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCEADDITIONAL INFORMATION 110
Tritax Big Box REIT plc Annual Report 2018
Financial Statements Financial Statements
Group Statement of
Comprehensive Income
Group Statement of Financial Position
Group Cash Flow Statement
Group Statement of Changes in Equity
Notes to the Consolidated Accounts
1. Corporate information
2. Basis of preparation
3. Significant accounting judgements,
estimates and assumptions
4. Summary of significant
accounting policies
5. Standards issued and effective from
1 January 2018
112
113
114
115
116
116
116
116
117
122
6. Total property income
7. Service charge expenses
8. Administrative and other expenses
9. Directors’ remuneration
10. Finance income
11. Finance expense
12. Taxation
13. Earnings per share
14. Dividends paid
15. Investment property
16. Investments
17. Trade and other receivables
18. Cash held at bank
19. Trade and other payables
20. Borrowings
21. Interest rate derivatives
22. Financial risk management
23. Capital management
24. Share capital
25. Share premium
26. Capital reduction reserve
27. Retained earnings
28. Net asset value (NAV) per share
29. Operating leases
30. Transactions with related parties
31. Reconciliation of liabilities to
cash flows from financing activities
32. Capital commitments
33. Subsequent events
Company Balance Sheet
122
123
123
124
124
124
125
126
127
128
130
132
132
133
133
135
136
138
139
139
139
140
140
140
141
142
142
143
144
Company Statement of Changes in Equity 145
Notes to the Company Accounts
1. Accounting policies
2. Standards issued and effective from
1 January 2018
3. Taxation
4. Dividends paid
5. Investments
6. Trade and other receivables
7. Cash held at bank
8. Trade and other payables
9. Loan notes
10. Share capital
11. Share premium
12. Capital reduction reserve
13. Net asset value (NAV) per share
14. Related party transactions
15. Directors’ remuneration
16. Subsequent events
146
146
148
148
149
149
151
151
152
152
153
153
154
154
155
155
155
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Tritax Big Box REIT plc Annual Report 2018
111
Financial Statements
Group Statement of
Comprehensive Income
For the year ended 31 December 2018
Gross rental income
Service charge income
Service charge expense
Net rental income
Administrative and other expenses
Acquisition related costs
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
2018
£m
Year ended
31 December
2017
£m
133.85
3.88
(4.95)
132.78
(18.07)
(0.95)
113.76
162.98
276.74
0.21
(23.14)
(1.24)
252.57
–
252.57
17.54p
17.54p
107.96
2.94
(2.96)
107.94
(14.16)
–
93.78
175.98
269.76
0.40
(20.32)
(2.04)
247.80
–
247.80
19.54p
19.53p
Note
6
6
7
8
8
15
10
11
21
12
13
13
112
Tritax Big Box REIT plc Annual Report 2018
Financial Statements
Group Statement of Financial Position
As at 31 December 2018
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
Loan notes
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
Note
15
21
17
18
19
20
24
25
26
27
28
28
28
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Year ended
31 December
2018
£m
3,038.31
5.20
3,043.51
42.23
48.33
90.56
Year ended
31 December
2017
£m
2,599.21
1.97
2,601.18
10.23
78.04
88.27
3,134.07
2,689.45
(30.23)
(42.50)
(72.73)
(27.62)
(23.44)
(51.06)
(327.78)
(492.67)
(820.45)
(893.18)
2,240.89
14.74
153.63
1,304.43
768.09
2,240.89
152.00p
152.00p
152.83p
(216.76)
(492.17)
(708.93)
(759.99)
1,929.46
13.64
932.37
467.93
515.52
1,929.46
141.50p
141.44p
142.24p
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These financial statements were approved by the Board of Directors on 6 March 2019 and signed on its behalf by:
Sir Richard Jewson KCVO, JP Chairman
Tritax Big Box REIT plc Annual Report 2018
113
Financial Statements
Group Cash Flow Statement
For the year ended 31 December 2018
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
252.57
(162.98)
1.24
(0.21)
23.14
(11.13)
(14.13)
2.61
3.31
(0.07)
94.35
(0.40)
93.95
(283.17)
16.53
0.18
–
5.17
(261.29)
157.36
(2.63)
180.28
(69.28)
–
(1.20)
(21.76)
(4.47)
–
(95.50)
142.80
(24.54)
71.91
47.37
247.80
(175.98)
2.04
(0.40)
20.32
(12.52)
(3.00)
7.16
0.02
1.62
87.06
(0.28)
86.78
(607.92)
5.84
0.39
(5.26)
4.78
(602.17)
351.40
(5.83)
164.00
(482.66)
495.54
(7.85)
(14.21)
(1.07)
0.24
(77.31)
422.25
(93.14)
165.05
71.91
Note
15
21
10
11
6
18
18
24
25
20
20
18
18
Cash flows from operating activities
Profit for the year (attributable to equity Shareholders)
Changes in fair value of investment properties
Changes in fair value of interest rate derivatives
Finance income
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
Amounts received on issue of loan notes
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 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
114
Tritax Big Box REIT plc Annual Report 2018
Financial Statements
Group Statement of Changes in Equity
Share capital
£m
Share premium
£m
Capital reduction
reserve
£m
Retained earnings
£m
31 December 2018
14.74
153.63
1,304.43
768.09
2,240.89
589.39
546.38
1 January 2018
Total Comprehensive Income
Issue of Ordinary Shares
Cancellation of share premium account
Shares issued in relation to further equity
issue (April 2018)
Associated share issue costs
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 2017 at 1.60 pence per Ordinary Share
First interim dividend in respect of year ended
31 December 2018 at 1.675 pence per Ordinary Share
Second interim dividend in respect of year ended
31 December 2018 at 1.675 pence per Ordinary Share
Third interim dividend in respect of period ended
31 December 2018 at 1.675 pence per Ordinary Share
13.64
932.37
467.93
–
–
1.09
–
0.01
–
–
–
–
–
–
–
–
(932.37)
932.37
154.47
(2.63)
1.79
–
–
–
–
–
–
–
–
–
–
–
(21.82)
(24.68)
(24.68)
(24.69)
1 January 2017
Total Comprehensive Income
Issue of Ordinary Shares
Shares issued in relation to further equity
issue (May 2017)
Associated share issue costs
Shares issued in relation to management contract
Share based payments
Transfer of share based payments to liabilities
to reflect settlement
Dividends paid:
Third interim dividend in respect of period ended
31 December 2016 at 1.55 pence per Ordinary Share
First interim dividend in respect of year ended
31 December 2017 at 1.60 pence per Ordinary Share
Second interim dividend in respect of year ended –
31 December 2017 at 1.60 pence per Ordinary Share
Third interim dividend in respect of period ended
31 December 2017 at 1.60 pence per Ordinary Share
11.05
–
2.58
0.01
–
–
–
–
–
–
–
347.42
(5.83)
1.39
–
–
–
–
–
–
31 December 2017
13.64
932.37
–
–
–
–
–
Total
£m
1,929.46
252.57
–
155.56
(2.63)
1.80
2.02
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515.52
252.57
–
–
–
–
2.02
(2.02)
(2.02)
–
–
–
–
(21.82)
(24.68)
(24.68)
(24.69)
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267.72
247.80
1,414.54
247.80
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1.56
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350.00
(5.83)
1.40
1.56
(1.56)
(1.56)
(17.13)
(17.69)
(21.81)
(21.82)
467.93
–
–
–
–
(17.13)
(17.69)
(21.81)
(21.82)
515.52
1,929.46
Tritax Big Box REIT plc Annual Report 2018
115
Financial Statements
Notes to the Consolidated Accounts
1. Corporate information
The consolidated financial statements of the Group for the year ended 31 December 2018 comprise the results of Tritax Big Box REIT plc
(“the Company”) and its subsidiaries and were approved by the Board for issue on 6 March 2019. The Company is a public limited 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 relates to the year ended 31 December 2017.
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 million (£m), except where otherwise indicated.
The Group has chosen to adopt EPRA (European Public Real Estate Association) best practice guidelines for calculating key metrics such
as net asset value and earnings per share (www.epra.com/finance/financial-reporting/guidelines).
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:
116
Tritax Big Box REIT plc Annual Report 2018
For Company Information, see page 164
For Strategic Report, see pages 1-69
For Accountability, see pages 88-89
Financial Statements 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. Under IFRS 3, a business is defined as an integrated set of activities
and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or
other economic benefits directly to investors or other owners, members or participants. A business will usually consist of inputs, processes
and outputs. Therefore, the Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in
addition to the property.
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.
In the current and preceding year all acquisitions were accounted for as asset acquisitions as none of the acquisitions included the
acquisition of an integrated set of activities.
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 – Global Standards
July 2017 (“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.
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.
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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.
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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. The Directors consider that these properties have similar economic characteristics and as a result these individual properties
have been aggregated into a single reportable operating element.
Tritax Big Box REIT plc Annual Report 2018
117
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 4.9.1.
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 year 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. It does, however, undertake certain works including demolition, remediation and
other site preparatory works to bring a site to the condition ready for construction of an asset. 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 expensed 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.
118
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts 4.5. Financial Instruments
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.
4.5.1. Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The Group’s accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value
(see “Financial liabilities” section for out-of-money derivatives classified as liabilities). They are carried in the Statement of Financial Position
at fair value with changes in fair value recognised in the Group Statement of Comprehensive Income in the finance income or expense line.
Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any assets held for
trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and services to customers (eg trade receivables), but also incorporate other
types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and contractual cash flows
are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at amortised cost being the effective interest rate method, less provision
for impairment.
Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using
a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of
the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine
the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised within cost of sales in the consolidated statement of comprehensive
income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
The Group’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original
maturities of three months or less.
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119
4. Summary of significant accounting policies (continued)
4.5.2. Financial Liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.
The Group’s accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises out-of-the-money derivatives where the time value does not offset the negative intrinsic value (see “Financial
assets” for in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value). They
are carried in the Group Statement of Financial Position at fair value with changes in fair value recognised in the Group Statement of
Comprehensive Income. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it
designated any financial liabilities as being at fair value through profit or loss.
Other financial liabilities
Other financial liabilities include the following items:
Bank borrowings and the Group’s loan notes are initially recognised at fair value net of any transaction costs directly attributable to the
issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate
method, which ensure that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in
the Group Statement of Financial Position. For the purposes of each financial liability, interest expense includes initial transaction costs and
any premium payable on redemption, as well as any interest or coupon payment while the liability is outstanding.
4.6. Forward funded pre‑let investments
The Group enters into forward funding development agreements for pre-let investments. The Group will enter into a forward funding
agreement with a developer and simultaneously enter into an agreement for lease with a prospective tenant willing to occupy the building
once complete.
4.6.1. Licence fees receivable
During the period between initial investment in a forward funded agreement and the rent commencement date under the lease, 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.
4.7. Share based payments
The expense relating to share based payments is accrued over the year 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.
120
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts 4.8. 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.
4.9. Property income
4.9.1. 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, either monthly or quarterly 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.
4.9.2. Service charges, insurances and other expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognised in the year 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.
4.10. 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.
4.11. 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 to the Group Statement of Comprehensive Income in the
period in which they occur.
4.12. 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.
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5. Standards issued and effective from 1 January 2018
The following new standards are effective and have been adopted for the year ended 31 December 2018.
5.1. Standards in issue and effective from 1 January 2018
IFRS 9: Financial Instruments
IFRS 9 has replaced IAS 39 Financial lnstruments: Recognition and Measurement (lAS 39).
Management have reviewed the requirements of IFRS 9. The Group’s principal financial assets comprise interest rate derivatives which will
continue to be measured at fair value, and trade receivables, which will continue to be measured at amortised cost. The following changes
have been identified.
a) The Group adopted the expected credit loss model when calculating impairment losses on its financial assets measured at amortised
costs (such as trade and other receivables (both current and non-current)). This resulted in greater judgement due to the need to factor
in forward looking information when estimating the appropriate amount of provisions. To measure expected credit losses the Group
considered the probability of a default occurring over the contractual life of its trade receivables. Historically the Group has not had to
provide or write off any debt from tenants. The specific situation of each tenant has been evaluated using a provision matrix as allowed
under IFRS 9. Based on this assessment the impact is not material.
b) ln 2017, the Group renegotiated some of the terms and conditions of a long-term loan, but that did not result in derecognition of the
loan as the revised terms were neither qualitatively nor quantitatively different from the original terms. Therefore this was considered
a modification rather than an extinguishment. Under IAS 39, the effective interest rate was updated so as to amortise the revised expected
cash flows over the revised term. In accordance with IFRS 9 it is not appropriate to revise the original effective interest rate. The impact of
this change was not material.
IFRS 15: Revenue from Contracts with Customers
IFRS 15 has replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’. The majority of the Group’s revenue is derived from leases that
are outside the scope of IFRS 15 and accordingly the adoption has not had a material impact.
5.2. Standards issued but not yet effective
IFRS 16: Leases (effective 1 January 2019)
The Directors are currently assessing the impact on the financial statements of this standard; however, at present they do not anticipate
that the adoption of this will have a material impact on the Group’s financial statements as the Group does not hold any material operating
leases as lessee.
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
2018
£m
Year ended
31 December
2017
£m
93.66
29.04
11.13
0.02
73.02
22.40
12.52
0.02
133.85
107.96
2.92
0.96
3.88
2.43
0.51
2.94
137.73
110.90
There were no individual tenants representing more than 10% of gross rental income present during either years.
122
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
7. Service charge expenses
Property insurance expense
Service charge expense
Total property expenses
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
Total Auditor’s fee
Corporate administration fees
Regulatory fees
Legal and professional fees
Marketing and promotional fees
Other administrative costs
Acquisition related costs1
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
4.08
0.87
4.95
2.94
0.02
2.96
Year ended
31 December
2018
£m
15.31
0.31
Year ended
31 December
2017
£m
11.84
0.27
0.14
0.04
0.06
0.24
0.46
0.06
1.12
0.14
0.43
18.07
0.95
0.14
0.03
0.05
0.22
0.38
0.04
0.91
0.14
0.36
14.16
–
The Auditor has also received £0.09 million (2017: £0.08 million) in respect of providing reporting accountant services in connection with
the equity issuance and bond issuance occurring during the year.
Fees relating to the share issuances have been treated as share issue expenses and offset against share premium. The fees related to the
bond issuance have been treated as part of the arrangement fees for issuing the bond. The fees in relation to the acquisition of assets have
been capitalised in to the cost of the respective assets.
1 Acquisition related costs have been removed from the total of administrative and other costs incurred in the year, due to the one-off nature of these costs which have been
expensed in accordance with IFRS 3: Business combinations.
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Tritax Big Box REIT plc Annual Report 2018
123
9. Directors’ remuneration
Directors’ fees
Employer’s National Insurance
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
0.28
0.03
0.31
0.24
0.03
0.27
A summary of the Directors’ emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors’
Remuneration Report
. As Chairman of the Company’s Manager, Mark Shaw is not entitled to receive a fee.
10. Finance income
Interest received on bank deposits
11. Finance expense
Interest payable on bank borrowings
Interest payable on loan notes
Commitment fees payable on bank borrowings
Swap interest payable
One-off cost of extinguishment of bank loans
Amortisation of loan arrangement fees
Year ended
31 December
2018
£m
0.21
0.21
Year ended
31 December
2017
£m
0.40
0.40
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
5.97
14.37
1.37
0.08
–
1.35
23.14
12.29
0.67
0.63
0.11
4.75
1.87
20.32
The total interest payable on financial liabilities carried at amortised cost comprises interest and commitment fees payable on bank
borrowings and loan notes of £21.71 million (2017: £13.91 million) of which £nil was capitalised in the year (2017: £0.32 million) and
amortisation of loan arrangement fees of £1.36 million (2017: £6.69 million) of which £nil (2017: £0.08 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 year.
124
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
12. Taxation
a) Tax charge in the Group Statement of Comprehensive Income
UK corporation tax
Year ended
31 December
2018
£m
–
Year ended
31 December
2017
£m
–
The Government announced its intention to further reduce the UK corporation tax rates from 20% to 19% from 1 April 2017 and 17% from
1 April 2020. Accordingly, these rates have been applied in the measurement of the Group’s tax liability at 31 December 2018.
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:
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Profit on ordinary activities before taxation
Theoretical tax at UK corporation tax rate of 19.00% (31 December 2017: 19.25%)
REIT exempt income
Non-taxable items
Transfer pricing adjustment
Residual losses
Total tax credit
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
252.57
47.99
(17.28)
(33.05)
1.10
1.24
–
247.80
47.70
(14.48)
(33.49)
0.65
(0.38)
–
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.
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Tritax Big Box REIT plc Annual Report 2018
125
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:
Net profit
attributable to
Ordinary
Shareholders
£m
Weighted average
number of
Ordinary
Shares 1
Number
252.57 1,440,012,547
–
252.57 1,440,012,547
Earnings
per share
Pence
17.54p
17.54p
(162.98)
1.24
0.95
91.78 1,440,012,547
91.78 1,440,012,547
6.37p
6.37p
10.27
(4.34)
1.34
–
99.05 1,440,012,547
99.05 1,440,012,547
247.80 1,268,540,113
590,881
247.80 1,269,130,994
6.88p
6.88p
19.54p
19.53p
(175.98)
2.04
4.75
78.61 1,268,540,113
78.61 1,269,130,994
6.20p
6.20p
5.31
(4.65)
1.87
(0.32)
80.82 1,268,540,113
80.82 1,269,130,994
6.37p
6.37p
For the year ended 31 December 2018
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)
Costs associated with a business combination (note 8)
EPRA2 basic earnings per share
EPRA2 diluted earnings per share
Adjustments to include/(exclude):
Licence fee receivable on forward funded developments
Rental income recognised in respect of fixed uplifts
Loan amortisation
Interest capitalised
Adjusted basic earnings per share
Adjusted diluted earnings per share
For the year ended 31 December 2017
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)
One-off cost of extinguishment of bank loans (note 11)
EPRA2 basic earnings per share
EPRA2 diluted earnings per share
Adjustments to include/(exclude):
Licence fee receivable on forward funded developments
Rental income recognised in respect of fixed uplifts
Loan amortisation
Interest capitalised
Adjusted basic earnings per share
Adjusted diluted earnings per share
1 Based on the weighted average number of Ordinary Shares in issue throughout the year.
2 European Public Real Estate Association.
126
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
Adjusted earnings is a performance measure used by the Board to assess the level of 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 year 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.
The adjustment for licence fees receivable is calculated by reference to the fraction of the total period of completed construction during
the year, multiplied by the total licence fee receivable on a given forward funded asset. Licence fees will convert into rental income once
practical completion has occurred and therefore the rental income will flow into Adjusted earnings from this point.
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 and therefore not supported
by cash flows during the early term of the lease, but this reverses towards the end of the lease.
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14. Dividends paid
Fourth interim dividend in respect of period ended 31 December 2017 at 1.60 pence per
Ordinary Share (Third interim for 31 December 2016 at 1.55 pence per Ordinary Share)
First interim dividend in respect of year ended 31 December 2018 at 1.675 pence per
Ordinary Share (31 December 2017: 1.60 pence)
Second interim dividend in respect of year ended 31 December 2018 at 1.675 pence per
Ordinary Share (31 December 2017: 1.60 pence)
Third interim dividend in respect of year ended 31 December 2018 at 1.675 pence per
Ordinary Share (31 December 2017: 1.60 pence)
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
2018
£m
Year ended
31 December
2017
£m
21.82
24.68
24.68
24.69
95.87
5.025p
1.675p
6.70p
17.13
17.69
21.81
21.82
78.45
4.80p
1.60p
6.40p
On 17 May 2018, the Company announced the declaration of a first interim dividend in respect of the period from 1 January 2018 to
31 March 2018 of 1.675 pence per Ordinary Share, which was payable on 11 June 2018 to Ordinary Shareholders on the register on
25 May 2018.
On 12 July 2018, the Company announced the declaration of a second interim dividend in respect of the period 1 April 2018 to
30 June 2018 of 1.675 pence per Ordinary Share, which was payable on 9 August 2018 to Shareholders on the register on 20 July 2018.
On 11 October 2018, the Company announced the declaration of a third interim dividend in respect of the period 1 July 2018 to
30 September 2018 of 1.675 pence per Ordinary Share, which was payable on 15 November 2018 to Shareholders on the register on
19 October 2018.
On 6 March 2019, the Company announced the declaration of a fourth interim dividend in respect of the period 1 October 2018 to
31 December 2018 of 1.675 pence per Ordinary Share, which will be payable on or around 28 March 2019 to Shareholders on the register
on 15 March 2019.
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Tritax Big Box REIT plc Annual Report 2018
127
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 – Global Standards July 2017 (“the Red Book”) and incorporate the recommendations of the International Valuation Standards
and the RICS valuation – Professional Standards UK January 2014 (Revised April 2015) 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.
As at 1 January 2018
Property additions1
Fixed rental uplift and tenant lease incentives2
Transfer of completed property to investment property
Change in fair value during the year
As at 31 December 2018
As at 1 January 2017
Property additions1
Fixed rental uplift and tenant lease incentives2
Transfer of completed property to investment property
Change in fair value during the year
As at 31 December 2017
Investment
property
freehold
£m
1,924.33
42.53
9.35
–
77.55
2,053.76
1,278.13
307.45
7.70
209.75
121.30
1,924.33
Investment
property
long leasehold
£m
Investment
property under
construction
£m
612.38
0.02
1.78
–
21.37
635.55
436.84
121.83
4.82
–
48.89
612.38
62.50
222.44
–
–
64.06
349.00
88.14
178.32
–
(209.75)
5.79
62.50
Total
£m
2,599.21
264.99
11.13
–
162.98
3,038.31
1,803.11
607.60
12.52
–
175.98
2,599.21
1 Licence fees deducted from the cost of investment property under construction totalled £35.03 million in the year (2017: £0.70 million).
2 Included within the carrying value of investment property is £37.03 million (2017: £25.89 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.
Investment property at fair value per Group Statement of Financial Position
Licence fee receivable
Capital commitments
Ring fenced cash (note 18)
Total portfolio valuation*
* Including costs to complete on forward funded development assets.
31 December
2018
£m
3,038.31
18.34
361.56
0.03
3,418.24
31 December
2017
£m
2,599.21
–
5.12
2.95
2,607.28
Capital commitments represent costs to bring the asset to completion under the developer’s funding agreements which include the
developer’s margin. These commitments could also represent commitments made in respect of asset management initiatives and
development land. These costs are not provided for in the Statement of Financial Position; refer to note 32.
128
Tritax Big Box REIT plc Annual Report 2018
For note 32, see page 142
Financial Statements: Notes to the Consolidated Accounts
Cash received in respect of future rent-free periods represents amounts that 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 that 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.
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
Quoted prices
in active markets
(Level 1)
£m
Significant
observable inputs
(Level 2)
£m
Significant
unobservable inputs
(Level 3)
£m
Total
£m
Assets measured at fair value:
Investment properties
Investment properties
31 December 2018
31 December 2017
3,038.31
2,599.21
–
–
–
–
3,038.31
2,599.21
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:
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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 per square foot at which space could be let in the market conditions prevailing at the date of valuation (range: £4.05-£10.75
per annum).
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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.
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: 3.75%-6.47%).
For Strategic Report, see pages 1-69
Tritax Big Box REIT plc Annual Report 2018
129
15. Investment property (continued)
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 2018
(Decrease)/increase in the fair value of investment
properties as at 31 December 2017
16. Investments
–5% in
passing rent
£m
+5% in
passing rent
£m
+0.25% in
initial yield
£m
–0.25%
net initial yield
£m
(170.91)
170.91
(183.24)
205.25
(130.36)
130.36
(136.56)
152.41
The Group comprises a number of companies, all subsidiaries included within these financial statements are noted below:
TBBR Holdings 1 Limited
TBBR Holdings 2 Limited
Baljean Properties Limited
Tritax Acquisition 2 Limited
Tritax Acquisition 2 (SPV) Limited
The Sherburn RDC Unit Trust
Tritax REIT Acquisition 3 Limited
Tritax Acquisition 4 Limited
Tritax Acquisition 5 Limited
Sonoma Ventures Limited
Tritax Ripon Limited
Tritax REIT Acquisition 8 Limited
Tritax Acquisition 8 Limited
Tritax REIT Acquisition 9 Limited
Tritax Acquisition 9 Limited
Tritax Acquisition 10 Limited
Tritax Acquisition 11 Limited
Tritax Acquisition 12 Limited
Tritax Acquisition 13 Limited
Tritax Acquisition 14 Limited
Tritax Worksop Limited
Tritax REIT Acquisition 16 Limited
Tritax Acquisition 16 Limited
Tritax Acquisition 17 Limited
Tritax Acquisition 18 Limited
Tritax Harlow Limited
Tritax Lymedale Limited
Tritax Acquisition 21 Limited
Tritax Acquisition 22 Limited
Tritax Acquisition 23 Limited
Tritax Acquisition 24 Limited
Tritax Knowsley Limited
Tritax Burton Upon Trent Limited
Tritax Acquisition 28 Limited
Tritax Peterborough Limited
Tritax Littlebrook 2 Limited
Tritax Littlebrook 4 Limited
Tritax Atherstone (UK) Limited
130
Tritax Big Box REIT plc Annual Report 2018
Principal activity
Investment Holding Company
Investment Holding Company
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Country of incorporation
Jersey
Jersey
Isle of Man
Jersey
Jersey
Jersey
UK
Jersey
Jersey
BVI
Guernsey
UK
Jersey
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
BVI
UK
Jersey
Jersey
Jersey
Guernsey
Guernsey
Jersey
Jersey
Jersey
Jersey
Isle of Man
BVI
Jersey
Jersey
Jersey
Jersey
UK
Ownership %
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%
Financial Statements: Notes to the Consolidated Accounts
Tritax Stoke DC1&2 Limited
Tritax Stoke DC3 Limited
Tritax Holdings CL Debt Limited
Tritax Portbury Limited
Tritax Newark Limited
Tritax Carlisle Limited
Tritax Worksop 18 Limited
Tritax Edinburgh Way Harlow (Luxembourg) Limited
Tritax Stoke Management Limited
Tritax Holdings PGIM Debt 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
Tritax Acquisition 37 Limited
Tritax Acquisition 38 Limited
Tritax Acquisition 39 Limited
Tritax Acquisition 40 Limited
Tritax Acquisition 41 Limited
Tritax Littlebrook 1 Limited
Tritax Littlebrook 3 Limited
Tritax Atherstone Limited
Tritax Acquisition 42 Limited
Tritax Luxembourg DC1&2 Limited
Tritax Luxembourg DC3 Limited
Tritax Acquisition 43 Limited
Tritax Carlisle UK Limited
Tritax Edinburgh Way Harlow Limited
Tritax Crewe Limited
Tritax Crewe (Luxembourg) Limited
Tritax Acquisition 44 Limited
Tritax Acquisition 45 Limited
Tritax Acquisition 46 Limited
Tritax Acquisition 47 Limited
Tritax Acquisition 48 Limited
Tritax Symmetry Limited
Principal activity
Investment Holding Company
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Investment Holding Company
Property Investment
Property Investment
Management Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Country of incorporation
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Luxembourg
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Luxembourg
Luxembourg
Jersey
UK
Jersey
Jersey
Luxembourg
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Ownership %
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%
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: Standbrook House, 2-5 Old Bond Street, London W1S 4PD
Luxembourg entities: 9 Allée Scheffer, Luxembourg, L-2520.
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Tritax Big Box REIT plc Annual Report 2018
131
17. Trade and other receivables
Trade receivables
Licence fee receivable
Prepayments, accrued income and other receivables
VAT
The following table sets out the ageing of trade receivables as at 31 December 2018.
Past due but not impaired
<30 days
30-60 days
60-90 days
90 days+
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
7.00
18.34
3.97
12.92
42.23
5.93
0.02
0.99
0.06
7.00
5.27
0.45
0.92
3.59
10.23
3.27
1.74
–
0.26
5.27
The carrying value of trade and other receivables classified at amortised cost approximates fair value.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for
trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk
and ageing.
The expected loss rates are based on the Group’s historical credit losses experienced over the three-year period prior to the period
end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the
Group’s customers. Both the expected credit loss provision and the incurred loss provision in the current and prior year are immaterial.
No reasonably possible changes in the assumptions underpinning the expected credit loss provision would give rise to a material expected
credit loss.
18. Cash held at bank
Cash and cash equivalents to agree with cash flow
Restricted cash
Year ended
31 December
2018
£m
47.37
0.96
48.33
Year ended
31 December
2017
£m
71.91
6.13
78.04
Ring fenced cash of £0.03 million (2017: £2.95 million) included with cash and cash equivalents 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 a ring fenced bank account.
Restricted cash is cash where there is a legal restriction to specify its type of use, ie this may be where there is a joint arrangement with
a tenant under an asset management initiative.
Cash and cash equivalents reported in the Consolidated Statement of Cash Flows totalled £47.37 million (2017: £71.91 million) as at the
year end, which excludes long-term restricted and ring fenced cash deposits totalling £0.96 million (2017: £6.13 million). Total cash held at
bank as reported in the Group Statement of Financial Position is £48.33 million (2017: £78.04 million).
132
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
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19. Trade and other payables
Trade and other payables
Bank loan interest payable
Accruals
Tax liability
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
32.57
2.01
7.86
0.06
42.50
16.81
1.69
4.43
0.51
23.44
The tax liability arises from the acquisition of a number of special purpose vehicles (SPVs) during the current and prior year. 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.
The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.
20. Borrowings
A summary of the drawn and undrawn bank borrowings in the year is shown below:
Bank borrowings
As at 1 January 2018
New bank borrowings agreed in the year
Bank borrowings drawn in the year under existing facilities
Bank borrowings repaid in the year under existing facilities
As at 31 December 2018
As at 1 January 2017
New bank borrowings agreed in the year
Bank borrowings drawn in the year under existing facilities
Bank borrowings repaid in the year under existing facilities
As at 31 December 2017
Loan notes
Bonds
2.625% Bonds 2026
3.125% Bonds 2031
Bank borrowings
drawn
£m
Bank borrowings
undrawn
£m
222.87
–
180.28
(69.28)
333.87
541.53
100.00
64.00
(482.66)
222.87
340.00
650.00
(180.28)
69.28
879.00
150.00
340.00
(64.00)
(86.00)
340.00
Total
£m
562.87
650.00
–
–
1,212.87
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691.53
440.00
–
(568.66)
562.87
31 December
2018
£m
249.12
246.79
495.91
31 December
2017
£m
249.01
246.55
495.56
On 2 October 2018, the Company announced it had entered into a new £250 million senior, short-term, unsecured banking facility
with a syndicate of its relationship lenders comprising Barclays Bank PLC, The Royal Bank of Scotland International Limited and Banco
Santander, S.A., London Branch. The new facility was for a term of 12 months, with an option to extend by a further six months.
This facility was cancelled upon receipt of the Loan Note proceeds on 28 February 2019 (see below).
Tritax Big Box REIT plc Annual Report 2018
133
On 5 December 2018, the Company announced that it had agreed a private placement of £400 million new senior unsecured loan notes
with a number of new institutional investors (the “Loan Notes”). The Loan Notes comprised two tranches with a weighted average coupon
of the fixed rate notes equating to 2.91% and a weighted average maturity of 9.8 years.
The Loan Notes were priced on 15 November 2018 and the loan note purchase agreement was signed on 4 December 2018. The funds
were drawn on 28 February 2019.
The two tranches comprise:
• £250 million at a fixed coupon of 2.86%. maturing in February 2028; and
• £150 million at a fixed coupon of 2.98%. maturing in February 2030.
Santander Investment Securities Inc., and NatWest Markets Plc acted as joint placement agents and Barclays Bank PLC and BNP Paribas
Securities Corp. acted as passive agents on the Loan Notes.
A large part of the Group’s borrowings are unsecured financing arrangements. The Group has a £350 million revolving credit facility, which
provides the Group with a significant level of operational flexibility. The syndicate for the unsecured revolving credit facility comprises
Barclays Bank PLC, BNP Paribas London Branch, HSBC Bank plc, ING Bank N.V. London Branch, The Royal Bank of Scotland plc, Santander
UK plc and Wells Fargo Bank N.A. London Branch.
On 19 December 2018, the Company announced that it had agreed to extend the termination date of £325 million of the £350 million
revolving credit facility from 10 December 2022, to 10 December 2023.
As at 31 December 2018, 73%1 (2017: 62%) of the Group’s debt facility commitments are fixed term, with 27%1 floating term (2017: 38%).
As at 31 December 2018, the weighted average running cost of debt was 2.63% (2017: 2.38%), and the Group’s average capped cost of
debt was 2.73% (2017: 2.66%).
The Group has been in compliance with all of the financial covenants of the Group’s bank facilities as applicable throughout the year
covered by these financial statements.
Any associated fees in arranging the bank borrowings and loan notes that are unamortised as at the year end are offset against amounts
drawn on the facilities as shown in the table below:
Bank borrowings drawn: due in more than one year
Loan notes drawn: due in more than one year
Less: unamortised costs on bank borrowings
Less: unamortised costs on loan notes
Non-current liabilities: borrowings
Maturity of borrowings
Repayable between 1 and 2 years
Repayable between 2 and 5 years
Repayable in over 5 years
31 December
2018
£m
31 December
2017
£m
333.87
495.91
(6.09)
(3.24)
820.45
222.87
495.56
(6.11)
(3.39)
708.93
31 December
2018
£m
31 December
2017
£m
–
121.00
708.78
829.78
–
10.00
708.43
718.43
Following the financing activity as noted above, the weighted average term to maturity of the Group’s debt as at the year end is 8.7 years1
(31 December 2017: 8.9 years), when excluding the £250 million short-term loan which was cancelled on 28 February 2019. The
£350 million syndicated facility has a one-year extension option remaining, exercisable on the second anniversary of the facility. This option
requires lender consent, although when looking at the weighted average term to maturity for the Group, assuming this option is exercised,
this would increase to 8.9 years1 (31 December 2017: 9.6 years).
1 Excluding the £250 million RCF which was cancelled on 28 February 2019.
134
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
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. A number of interest rate caps and one interest rate swap have been taken out in respect of the Group’s variable rate debt
to fix or cap the rate to which 3 month Libor can rise. Each runs coterminous to the initial term of the respective loans.
The weighted average capped rate, excluding any margin payable, for the Group as at the year end was 1.26% (2017: 1.26%), 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 2.63% (2017: 2.66%).
The total premium payable in the year towards securing the interest rate caps was £4.47 million (2017: £1.07 million).
Non-current assets: interest rate derivatives
31 December
2018
£m
5.20
31 December
2017
£m
1.97
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The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis in accordance with IFRS 9. Any
movement in the mark to market values of the derivatives are taken to the Group Statement of Comprehensive Income.
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
2018
£m
31 December
2017
£m
1.97
4.47
–
(1.24)
5.20
3.18
1.07
(0.24)
(2.04)
1.97
It is the Group’s target to hedge at least 90% of the total debt portfolio either using interest rate derivatives or entering fixed rate loan
arrangements. As at the year-end date the total proportion of debt either hedged via interest rate derivatives or subject to fixed rate loan
agreements equated to 98.9%, as shown below.
Total borrowings drawn (note 20)
Notional value of effective interest rate derivatives and fixed rate loans
Proportion of hedged debt
31 December
2018
Drawn
£m
829.78
828.25
31 December
2017
Drawn
£m
718.43
716.90
99.81%
99.78%
As at the year end the Group had notional value of interest rate caps of £337.50 million to act as a hedge against the £350.00 million
revolving credit facility.
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Tritax Big Box REIT plc Annual Report 2018
135
21. Interest rate derivatives (continued)
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
Date of
valuation
31 December 2018
31 December 2017
Total
£m
5.20
1.97
Quoted prices in
active markets
(Level 1)
£m
Significant
observable inputs
(Level 2)
£m
Significant
unobservable inputs
(Level 3)
£m
–
–
5.20
1.97
–
–
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 years, nor have there been any transfers between Level 2 and
Level 3 during any of the years.
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:
Financial assets
Interest rate derivatives
Trade and other receivables1
Cash held at bank
Financial liabilities
Trade and other payables2
Borrowings
1 Excludes certain VAT prepayments and other debtors.
2 Excludes tax and VAT liabilities.
Book value
31 December
2018
£m
Fair value
31 December
2018
£m
Book value
31 December
2017
£m
Fair value
31 December
2017
£m
5.20
25.34
48.33
42.44
829.78
5.20
25.34
48.33
42.44
854.01
1.97
9.31
78.04
22.93
718.43
1.97
9.31
78.04
22.93
712.98
136
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
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Interest rate derivatives are the only financial instruments measured at fair value through profit and loss. All other financial assets
and all financial liabilities are measured at amortised cost. All financial instruments were designated in their current categories upon
initial recognition.
The following table sets out the fair value of those financial liabilities measured at amortised cost where there is a difference between book
value and fair value.
Borrowings
Borrowings
Date of
valuation
31 December 2018
31 December 2017
Total
£m
682.15
652.11
Quoted prices in
active markets
(Level 1)
£m
Significant
observable inputs
(Level 2)
£m
Significant
unobservable inputs
(Level 3)
£m
520.97
491.46
161.18
160.65
–
–
The Group has two fixed rate loans totalling £162 million, provided by PGIM (£90 million) and Canada Life (£72 million). The fair value is
determined by comparing the discounted future cash flows using the contracted yields with the reference gilts plus the margin implied.
The reference Gilts used were the Treasury 4.25% 2027 Gilt and Treasury 4.75% 2030 Gilt respectively, with an implied margin that is
unchanged since the date of fixing. The loans are 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.
The fair value of financial liabilities traded on active liquid markets, including the 2.625% Bonds 2026 and 3.125% Bonds 2031, is
determined with reference to the quoted market prices. These financial liabilities are considered to be a Level 1 fair value measure.
The fair value of the financial liabilities at Level 1 fair value measure were £520.97 million (2017: £491.46) and the financial liabilities at
Level 2 fair value measure were £161.18 million (2017: £160.65 million).
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 the Group
Statement of Comprehensive Income and net assets of a 50 basis point shift in interest rates would result in an increase of £0.59 million
(2017: £0.30 million) or a decrease of £0.86 million (2017: £0.30 million). The difference between the increase and decrease absolute
figure is due to the interest rate caps in place.
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 mitigated 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 Group Statement of Financial Position 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 and on an ongoing annual basis. Please refer to note 17 for details
regarding credit risk management of trade receivables.
Tritax Big Box REIT plc Annual Report 2018
137
22. Financial risk management (continued)
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:
On demand
£m
<3 months
£m
3-12 months
£m
1-5 years
£m
>5 years
£m
Total
£m
31 December 2018
Borrowings
Trade and other payables
31 December 2017
Borrowings
Trade and other payables
–
–
–
–
–
–
5.58
42.50
48.08
4.99
23.44
28.43
16.73
–
16.73
14.87
–
14.87
260.41
–
260.41
89.38
–
89.38
760.96
–
760.96
830.98
–
830.98
1,043.68
42.50
1,086.18
940.22
23.44
963.66
Included within the contracted payments is £209.80 million (2017: £217.32 million) of loan interest payable up to the point of maturity
across the facilities.
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 limit 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 27.3% (2017: 26.8%).
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.
138
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
24. Share capital
The share capital relates to amounts subscribed for share capital at its nominal value:
31 December
2018
Number
31 December
2018
£m
31 December
2017
Number
31 December
2017
£m
Issued and fully paid at 1 pence each
1,474,233,401
14.74
1,363,598,083
Balance at beginning of year – £0.01 Ordinary Shares
1,363,598,083
13.64
1,105,159,529
Shares issued in relation to further Equity issuance
Shares issued in relation to management contract
109,364,308
1,271,010
1.09
0.01
257,352,941
1,085,613
Balance at end of year
1,474,233,401
14.74
1,363,598,083
13.64
11.05
2.58
0.01
13.64
On 29 March 2018, 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 594,559 Ordinary Shares at an issue price per
Ordinary Share of 139.90 pence.
On 18 April 2018, the Company announced that it intended to proceed with a proposed Placing of new Ordinary Shares at a price of
142.25 pence per share to raise £155.6 million. As a result, a total of 109,364,308 Ordinary Shares were issued at a price of 142.25 pence
per Ordinary Share.
On 8 October 2018, 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 676,451 Ordinary Shares at an issue price per
Ordinary Share of 143.815 pence.
25. Share premium
The share premium relates to amounts subscribed for share capital in excess of nominal value:
31 December
2018
£m
31 December
2017
£m
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Balance at the beginning of year
Transfer to capital reduction reserve (see note 26)
Share premium on Ordinary Shares issued in relation to further Equity Issuance
Share issue expenses in relation to further Equity issuance
Share premium on Ordinary Shares issued to management
26. Capital reduction reserve
Balance at beginning of year
Transfer from share premium
Fourth interim dividend for the period ended 31 December 2017
First interim dividend for the year ended 31 December 2018
Second interim dividend for the year ended 31 December 2018
Third interim dividend for the year ended 31 December 2018
Balance at end of year
Please refer to note 14 for details of the declaration of dividends to Shareholders.
932.37
(932.37)
154.47
(2.63)
1.79
153.63
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589.39
–
347.42
(5.83)
1.39
932.37
31 December
2018
£m
31 December
2017
£m
467.93
932.37
(21.82)
(24.68)
(24.68)
(24.69)
1,304.43
546.38
–
(17.13)
(17.69)
(21.81)
(21.82)
467.93
Tritax Big Box REIT plc Annual Report 2018
139
27. Retained earnings
Balance at beginning of year
Retained profit for the year
Balance at end of year
31 December
2018
£m
31 December
2017
£m
515.52
252.57
768.09
267.72
247.80
515.52
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 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
2018
£m
2,240.89
2,253.09
31 December
2017
£m
1,929.46
1,940.42
1,474,233,401
152.00p
–
1,363,598,083
141.50p
590,881
152.00p
152.83p
–
152.83p
141.44p
142.30p
590,881
142.24p
EPRA NAV is calculated as net assets per the Consolidated Statement of Financial Position excluding cumulative fair value adjustments for
debt-related derivatives.
29. Operating leases
The future minimum lease payments under non-cancellable operating leases receivable by the Group are as follows:
31 December 2018
31 December 2017
<1 year
£m
129.02
119.50
2-5 years
£m
504.36
484.28
>5 years
£m
1,201.92
1,239.05
Total
£m
1,835.30
1,842.83
The Group’s investment properties are leased to single tenants, with the exception of one asset which is leased to two separate tenants,
some of which have guarantees attached, under the terms of a commercial property lease. Each has upward only rent reviews that are
linked to either RPI/CPI, open market or with fixed uplifts.
140
Tritax Big Box REIT plc Annual Report 2018
For Additional Information – Notes to the EPRA and
Other Key Performance Indicators, see pages 158-160
Financial Statements: Notes to the Consolidated Accounts
30. Transactions with related parties
For the year ended 31 December 2018, 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
Details of the amount paid for services provided by Tritax Management LLP (“the Manager”) are provided in note 8.
.
The total amount outstanding at the year end relating to the Investment Management Agreement was £3.96 million (2017: £3.29 million).
The total expense recognised in the Statement of Comprehensive Income relating to share based payments under the Investment
Management Agreement was £2.02 million (2017: £1.56 million), of which £1.05 million (2017: £0.84 million) was outstanding at the
year end.
Details of amounts paid to Directors for their services can be found within the Directors’ Remuneration Report
SG Commercial LLP (“SG Commercial”) has provided general property agency services to the Group. SG Commercial has been paid fees
totalling £0.34 million (2017: £0.68 million) in respect of agency services for the year; this represents a total of 7% (2017: 20%) of agency
fees paid by the Group during the year. There were £0.34 million (2017: £nil) 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 year
Mark Shaw did 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.
During the year the Directors received the following dividends; Richard Jewson: £5,113 (2017: £4,588), Jim Prower: £1,574 (2017: £1,508),
Aubrey Adams: £6,625 (2017: £nil), Susanne Given: £nil (2017: £nil), Mark Shaw: £63,870 (2017: £37,351) and Richard Laing
£2,212 (2017: £nil).
During the year the four controlling Members of the Manager received the following dividends; Mark Shaw as above, Colin Godfrey:
£58,552 (2017: £37,700), James Dunlop: £55,176 (2017: £35,688) and Henry Franklin: £41,256 (2017: £28,289).
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For Directors’ Remuneration Report, see pages 99-100
Tritax Big Box REIT plc Annual Report 2018
141
31. Reconciliation of liabilities to cash flows from financing activities
Balance on the 1 January 2018
Cash flows from financing activities:
Bank borrowings advanced
Bank borrowings repaid
Interest rate cap premium paid
Loan arrangement fees paid
Non-cash movements:
Change in creditors for loan arrangement fees payable
Amortisation of loan arrangement fees
Fair value movement
Borrowings
£
216.76
180.28
(69.28)
–
(0.80)
0.16
0.66
–
Derivative
financial
instruments
£
(1.97)
–
–
(4.48)
–
–
–
1.24
Loan notes
£
492.17
–
–
–
(0.39)
0.21
0.69
–
Total
£
706.96
180.28
(69.28)
(4.48)
(1.19)
0.37
1.35
1.24
Balance on the 31 December 2018
327.78
(5.21)
492.68
815.25
Balance on the 1 January 2017
Cash flows from financing activities:
Bank borrowings advanced
Bank borrowings repaid
Amounts received on the issue of loan notes
Interest rate cap premium paid
Loan arrangement fees paid
Non-cash movements:
Change in creditors for loan arrangement fees payable
Amortisation of loan arrangement fees
Fair value movement
Amortisation of loan arrangement fees on the repayment of loans
533.50
(3.17)
–
530.33
164.00
(482.66)
–
–
(4.66)
(0.04)
1.87
–
4.75
–
–
(0.83)
–
–
–
2.03
–
–
–
495.54
–
(3.19)
(0.21)
0.03
–
–
164.00
(482.66)
495.54
(0.83)
(7.85)
(0.25)
1.90
2.03
4.75
Balance on the 31 December 2017
216.76
(1.97)
492.17
706.96
32. Capital commitments
The Group had capital commitments of £371.08 million in relation to its forward funded pre-let development assets, asset management
initiatives and commitments under development land, outstanding as at 31 December 2018 (31 December 2017: £28.6 million). All
commitments fall due within one year from the date of this report.
142
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Consolidated Accounts
33. Subsequent events
On 2 October 2018 the Group agreed a £250 million short-term facility which was a revolving credit facility with a term of 12 months. The
purpose of the bridge facility was to provide liquidity whilst the Group arranged longer-term finance. The short-term facility was cancelled
on 28 February 2019, upon drawn on the unsecured Loan Notes (see below).
On 5 December 2018, the Company announced that it had agreed to issue £400 million of new unsecured Loan Notes. Please refer to
Note 20 for further details. The proceeds from the Loan Notes were drawn in full on 28 February 2019.
On 24 January 2019, the Company announced that it had conditionally agreed to acquire an 87% economic interest in db symmetry. The
portfolio of new assets includes both consented and strategic land, offering the Company phased access to a total new land portfolio of
over 2,500 acres. The acquisition completed on 19 February 2019.
The consideration for the 87% economic interest in db symmetry (the “Acquisition”) was £202.4 million in cash (in respect of 69.1%. of the
equity value of db symmetry) and £52.6 million in Consideration Shares (in respect of 17.9%. of the equity value of db symmetry) issued
to DV4 Properties and DBS Senior Management following completion of the Acquisition at a price per share equal to the Issue Price. The
Company also procured the repayment of £67.7 million of deep discounted bonds owed by db symmetry to DV4 Properties, which have
been used to fund land acquisitions, construction, developments and associated costs in relation to the portfolio of new assets to date.
To ensure long-term alignment between DBS Senior Management and the Company, DBS Senior Management has retained a 13%
economic interest in db symmetry following completion of the Acquisition which was satisfied by the issuance of B Shares and C Shares in
a subsidiary of the Company, representing consideration for the Acquisition of £38.1 million.
In order to fund the Acquisition and further investments in accordance with its Investment Policy, the Company has raised £250 million
(before expenses) through a share issue.
On 11 February 2019, the Company announced that it had successfully raised approximately £250 million (before expenses) through
the issue of 192,291,313 new Ordinary Shares at the Issue Price of 130 pence per share. The net proceeds of the Issue were used by the
Company to fund the Acquisition and further investments in accordance with its Investment Policy. 192,291,313 new Ordinary Shares were
issued pursuant to the Open Offer, which was significantly over-subscribed. Valid applications were received for 152,562,386 new Ordinary
Shares in respect of Qualifying Shareholders’ Open Offer Entitlements which were satisfied in full. Valid applications were also received
for 204,679,211 excess shares under the excess application Facility. A scaling back exercise has been undertaken with respect to excess
applications received which have been allocated pro rata to qualifying Shareholders’ applications under the excess application Facility, in
accordance with the terms set out in the Prospectus dated January 2019.
During the year costs of £0.95 million were incurred in relation to this acquisition. See note 8 for further details.
At the date of authorising the accounts the Company is still assessing the initial accounting for the acquisition of db symmetry, as
prescribed by IFRS 3 Business Combinations. Accordingly the Company has not disclosed the information that would be impacted by the
assessment of various accounting estimates and assumptions.
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Tritax Big Box REIT plc Annual Report 2018
143
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
Non‑current liabilities
Loan notes
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
2018
£m
At 31 December
2017
£m
Note
5
6
7
8
9
10
11
12
13
13
13
1,319.25
1,319.25
946.83
9.61
956.44
1,028.22
1,028.22
1,075.17
21.25
1,096.42
2,275.69
2,124.64
(10.69)
(58.81)
(69.50)
(7.85)
(52.19)
(60.04)
(492.67)
(492.67)
(492.17)
(492.17)
(562.17)
1,713.52
(552.21)
1,572.43
14.74
153.63
1,304.43
240.72
1,713.52
116.23p
116.23p
116.23p
13.64
932.37
467.93
158.49
1,572.43
115.31p
115.26p
115.26p
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 2018 amounted to £82.23 million (31 December 2017: £75.58 million).
These financial statements were approved by the Board of Directors on 6 March 2019 and signed on its behalf by:
Sir Richard Jewson KCVO, JP Chairman
144
Tritax Big Box REIT plc Annual Report 2018
Financial Statements
Company Statement
of Changes in Equity
31 December 2018
14.74
153.63
1,304.43
240.72
1,713.52
1 January 2018
Total comprehensive income
Issue of Ordinary Shares
Cancellation of share premium account
Shares issued in relation to further Equity issue
Share issue expenses in relation to Equity issue
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 2017 at 1.60 pence per Ordinary Share
First interim dividend in respect of year ended
31 December 2018 at 1.675 pence per Ordinary Share
Second interim dividend in respect of year ended
31 December 2018 at 1.675 pence per Ordinary Share
Third interim dividend in respect of year ended
31 December 2018 at 1.675 pence per Ordinary Share
–
–
–
–
1 January 2017
Total comprehensive income
Issue of Ordinary Shares
Shares issued in relation to further Equity
issue (May 2017)
Share issue expenses in relation to Equity
issue (May 2017)
Shares issued in relation to management contract
Share based payments
Transfer of share based payments to liabilities
to reflect settlement
Dividends paid:
Third interim dividend in respect of period ended
31 December 2016 at 1.55 pence per Ordinary Share
First interim dividend in respect of year ended
31 December 2017 at 1.60 pence per Ordinary Share
Second interim dividend in respect of year ended
31 December 2017 at 1.60 pence per Ordinary Share
Third interim dividend in respect of year ended
31 December 2017 at 1.60 pence per Ordinary share
11.05
–
2.58
–
0.01
–
–
–
–
–
–
Undistributable reserves
Distributable reserves
Share
capital
£m
13.64
–
–
1.09
–
0.01
–
Share
premium
£m
932.37
–
Capital reduction
reserve
£m
467.93
–
(932.37)
154.47
(2.63)
1.79
–
932.37
–
–
–
–
Retained
earnings
£m
158.49
82.23
–
–
–
–
2.02
Total
£m
1,572.43
82.23
–
155.56
(2.63)
1.80
2.02
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–
–
–
–
–
–
(2.02)
(2.02)
(21.82)
(24.68)
(24.68)
(24.69)
–
–
–
–
(21.82)
(24.68)
(24.68)
(24.69)
589.39
546.38
–
347.42
(5.83)
1.39
–
–
–
–
–
–
–
–
–
–
–
–
(17.13)
(17.69)
(21.81)
(21.82)
467.93
82.91
75.58
1,229.73
75.58
–
350.00
–
–
1.56
(1.56)
–
–
–
–
(5.83)
1.40
1.56
(1.56)
(17.13)
(17.69)
(21.81)
(21.82)
158.49
1,572.43
Tritax Big Box REIT plc Annual Report 2018
145
31 December 2017
13.64
932.37
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 million (£m), except where otherwise indicated.
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.
146
Tritax Big Box REIT plc Annual Report 2018
Financial Statements 1.1. Financial assets
The Company classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The Company’s accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value
(see “Financial liabilities” section for out-of-money derivatives classified as liabilities). They are carried in the statement of financial position
at fair value with changes in fair value recognised in the statement of comprehensive income in the finance income or expense line. Other
than derivative financial instruments which are not designated as hedging instruments, the Company does not have any assets held for
trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and services to customers (eg trade receivables), but also incorporate other
types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and contractual cash flows
are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at amortised cost being the effective interest rate method, less provision
for impairment.
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Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using
a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment
of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to
determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions
are recorded in a separate provision account with the loss being recognised within cost of sales in the statement of comprehensive
income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected
credit loss model. The methodology used to determine the amount of provision is based on whether there has been a significant increase
in credit risk since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are
recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income
are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net
basis are recognised.
The Company’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the
Company Balance Sheet.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original
maturities of three months or less.
Investments in subsidiaries
The investments in subsidiary companies are included in the Company’s Balance Sheet at cost less provision for impairment.
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Tritax Big Box REIT plc Annual Report 2018
147
1. Accounting policies (continued)
Share based payments
The expense relating to share based payments is accrued over the year 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 year-end, 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 years. There were no significant accounting judgements, estimates or assumptions in preparing these
financial statements.
2. Standards issued and effective from 1 January 2018
The following new standards are effective and have been adopted for the year ended 31 December 2018.
2.1. Standards in issue and effective from 1 January 2018
IFRS 9: Financial Instruments
IFRS 9 has replaced IAS 39 Financial lnstruments: Recognition and Measurement (lAS 39).
Management have reviewed the requirements of IFRS 9. The Group’s principal financial assets comprise interest rate derivatives which will
continue to be measured at fair value, and trade receivables, which will continue to be measured at amortised cost. The following changes
have been identified.
a) The Company adopted the expected credit loss model when calculating impairment losses on its financial assets measured at amortised
costs (such as loans to group companies (both current and non-current)). This resulted in increased judgement being required in order
to assess the requirement for an impairment provision due to the need to factor in forward looking information when estimating the
appropriate amount of provisions. No material impairment provisions were recognised as a result of the adoption of IFRS 9.
IFRS 15: Revenue from Contracts with Customers
IFRS 15 has replaced IAS 18 ‘Revenue’ and IAS 11 ‘Construction Contracts’. The Company’s revenue is derived from income from
subsidiaries that is outside the scope of IFRS 15 and accordingly the adoption has not had a material impact.
3. Taxation
UK corporation tax
Year ended
31 December
2018
£m
–
Year ended
31 December
2017
£m
–
The Government announced its intention to further reduce the UK corporation tax rates from 20% to 19% from 1 April 2017 and 17% from
1 April 2020. Accordingly, these rates have been applied in the measurement of the Company’s tax liability at 31 December 2018.
148
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Company Accounts
4. Dividends paid
Fourth interim dividend in respect of period ended 31 December 2017 at 1.60 pence per
Ordinary Share (Third interim for 31 December 2016 at 1.55 pence per Ordinary Share)
First interim dividend in respect of year ended 31 December 2018 at 1.675 pence per
Ordinary Share (31 December 2017: 1.60 pence)
Second interim dividend in respect of year ended 31 December 2018
at 1.675 pence per Ordinary Share (31 December 2017: 1.60 pence)
Third interim dividend in respect of year ended 31 December 2018 at 1.675 pence per
Ordinary Share (31 December 2017: 1.60 pence)
Total dividends paid
Total dividends paid for the year
Total dividends unpaid but declared for the year
Total dividends declared for the year
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Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
21.82
24.68
24.68
24.69
95.87
5.025p
1.675p
6.70p
17.13
17.69
21.81
21.82
78.45
4.80p
1.60p
6.40p
On 17 May 2018, the Company announced the declaration of a first interim dividend in respect of the period from 1 January 2018 to
31 March 2018 of 1.675 pence per Ordinary Share, which was payable on 11 June 2018 to Ordinary Shareholders on the register on
25 May 2018.
On 12 July 2018, the Company announced the declaration of a second interim dividend in respect of the period 1 April 2018 to
30 June 2018 of 1.675 pence per Ordinary Share, which was payable on 9 August 2018 to Shareholders on the register on 20 July 2018.
On 11 October 2018, the Company announced the declaration of a third interim dividend in respect of the period 1 July 2018 to
30 September 2018 of 1.675 pence per Ordinary Share, which was payable on 15 November 2018 to Shareholders on the register on
19 October 2018.
On 6 March 2019, the Company announced the declaration of a fourth interim dividend in respect of the period 1 October 2018 to
31 December 2018 of 1.675 pence per Ordinary Share, which will be payable on or around 28 March 2019 to Shareholders on the register
on 15 March 2019.
5. Investments
As at 1 January 2018
Increase in investments via share purchase
As at 31 December 2018
As at 1 January 2017
Increase in investments via share purchase
As at 31 December 2017
Shares
£m
1,028.22
291.03
1,319.25
812.67
215.55
1,028.22
Loan
£m
–
–
–
–
–
–
Total
£m
1,028.22
291.03
1,319.25
812.67
215.55
1,028.22
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Tritax Big Box REIT plc Annual Report 2018
149
5. Investments (continued)
The Company has the following subsidiary undertakings as at 31 December 2018:
TBBR Holdings 1 Limited
TBBR Holdings 2 Limited
Baljean Properties Limited
Tritax Acquisition 2 Limited
Tritax Acquisition 2 (SPV) Limited
The Sherburn RDC Unit Trust
Tritax REIT Acquisition 3 Limited
Tritax Acquisition 4 Limited
Tritax Acquisition 5 Limited
Sonoma Ventures Limited
Tritax Ripon Limited
Tritax REIT Acquisition 8 Limited
Tritax Acquisition 8 Limited
Tritax REIT Acquisition 9 Limited
Tritax Acquisition 9 Limited
Tritax Acquisition 10 Limited
Tritax Acquisition 11 Limited
Tritax Acquisition 12 Limited
Tritax Acquisition 13 Limited
Tritax Acquisition 14 Limited
Tritax Worksop Limited
Tritax REIT Acquisition 16 Limited
Tritax Acquisition 16 Limited
Tritax Acquisition 17 Limited
Tritax Acquisition 18 Limited
Tritax Harlow Limited
Tritax Lymedale Limited
Tritax Acquisition 21 Limited
Tritax Acquisition 22 Limited
Tritax Acquisition 23 Limited
Tritax Acquisition 24 Limited
Tritax Knowsley Limited
Tritax Burton Upon Trent Limited
Tritax Acquisition 28 Limited
Tritax Peterborough Limited
Tritax Littlebrook 2 Limited
Tritax Littlebrook 4 Limited
Tritax Atherstone (UK) Limited
Tritax Stoke DC1&2 Limited
Tritax Stoke DC3 Limited
Tritax Holdings CL Debt Limited
Tritax Portbury Limited
Tritax Newark Limited
Tritax Carlisle Limited
Tritax Worksop 18 Limited
Tritax Edinburgh Way Harlow (Luxembourg) Limited
Tritax Stoke Management Limited
Tritax Holdings PGIM Debt 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
Tritax Acquisition 37 Limited
Principal activity
Investment Holding Company
Investment Holding Company
Property Investment
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Investment Holding Company
Investment Holding Company
Property Investment
Property Investment
Investment Holding Company
Property Investment
Property Investment
Management Company
Investment Holding Company
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
150
Tritax Big Box REIT plc Annual Report 2018
Country of incorporation
Jersey
Jersey
Isle of Man
Jersey
Jersey
Jersey
UK
Jersey
Jersey
BVI
Guernsey
UK
Jersey
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
BVI
UK
Jersey
Jersey
Jersey
Guernsey
Guernsey
Jersey
Jersey
Jersey
Jersey
Isle of Man
BVI
Jersey
Jersey
Jersey
Jersey
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Luxembourg
UK
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Ownership %
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%
100%
100%
100%
100%
100%
Financial Statements: Notes to the Company Accounts I
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Tritax Acquisition 38 Limited
Tritax Acquisition 39 Limited
Tritax Acquisition 40 Limited
Tritax Acquisition 41 Limited
Tritax Littlebrook 1 Limited
Tritax Littlebrook 3 Limited
Tritax Atherstone Limited
Tritax Acquisition 42 Limited
Tritax Luxembourg DC1&2 Limited
Tritax Luxembourg DC3 Limited
Tritax Acquisition 43 Limited
Tritax Carlisle UK Limited
Tritax Edinburgh Way Harlow Limited
Tritax Crewe Limited
Tritax Crewe (Luxembourg) Limited
Tritax Acquisition 44 Limited
Tritax Acquisition 45 Limited
Tritax Acquisition 46 Limited
Tritax Acquisition 47 Limited
Tritax Acquisition 48 Limited
Tritax Symmetry Limited
Principal activity
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investment Holding Company
Property Investment
Property Investment
Property Investment
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
Country of incorporation
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Luxembourg
Luxembourg
Jersey
UK
Jersey
Jersey
Luxembourg
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Ownership %
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 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: Standbrook House, 2-5 Old Bond Street, London W1S 4PD
Luxembourg entities: 9 Allée Scheffer, Luxembourg, L-2520.
6. Trade and other receivables
Amounts receivable from Group companies
Prepayments
Other receivables
All amounts fall due for repayment within one year.
7. Cash held at bank
Cash held at bank
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31 December
2018
£m
943.60
2.09
1.14
946.83
31 December
2017
£m
1,073.90
0.14
1.13
1,075.17
31 December
2018
£m
9.61
9.61
31 December
2017
£m
21.25
21.25
Tritax Big Box REIT plc Annual Report 2018
151
8. Trade and other payables
Trade and other payables
Accruals
9. Loan notes
Bonds
2.625% Bonds 2026
3.125% Bonds 2031
Less: unamortised costs on loan notes
Non-current liabilities: net borrowings
Maturity of borrowings
Repayable between 1 and 2 years
Repayable between 2 and 5 years
Repayable in over 5 years
31 December
2018
£m
31 December
2017
£m
3.25
7.44
10.69
3.84
4.01
7.85
31 December
2018
£m
31 December
2017
£m
249.12
246.79
(3.24)
492.67
249.01
246.55
(3.39)
492.17
31 December
2018
£m
31 December
2017
£m
–
–
495.91
495.91
–
–
495.56
495.56
On 2 October 2018, the Company announced it had entered into a new £250 million senior, short-term, unsecured banking facility
with a syndicate of its relationship lenders comprising Barclays Bank PLC, The Royal Bank of Scotland International Limited and Banco
Santander, S.A., London Branch. The new facility was for a term of 12 months, with an option to extend by a further six months.
On 5 December 2018, the Company announced that it had agreed a private placement of £400 million new senior unsecured loan notes
with a number of new institutional investors (the “Loan Notes”). The Loan Notes comprise two tranches with a weighted average coupon of
the fixed rate notes equating to 2.91% and a weighted average maturity of 9.8 years.
The Loan Notes were priced on 15 November 2018 and the loan note purchase agreement was signed on 4 December 2018. The funds
were drawn on 28 February 2019.
The two tranches comprise:
• £250 million at a fixed coupon of 2.86%. maturing in February 2028; and
• £150 million at a fixed coupon of 2.98%. maturing in February 2030.
Santander Investment Securities Inc., and NatWest Markets Plc acted as joint placement agents and Barclays Bank PLC and BNP Paribas
Securities Corp. acted as passive agents on the Loan Notes.
152
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Company Accounts
10. Share capital
The share capital relates to amounts subscribed for share capital at its nominal value:
31 December
2018
Number
31 December
2018
£m
31 December
2017
Number
31 December
2017
£m
Issued and fully paid at 1 pence each
1,474,233,401
14.74
1,363,598,083
At beginning of year – £0.01 Ordinary Shares
1,363,598,083
13.64
1,105,159,529
Shares issued in relation to further equity issuance
Shares issued in relation to management contract
109,364,308
1,271,010
1.09
0.01
257,352,941
1,085,613
Balance at end of year
1,474,233,401
14.74
1,363,598,083
13.64
11.05
2.58
0.01
13.64
On 29 March 2018, 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 594,559 Ordinary Shares at an issue price per
Ordinary Share of 139.90 pence.
On 18 April 2018, the Company announced that it intended to proceed with a proposed Placing of new Ordinary Shares at a price of
142.25 pence per share to raise £155.6 million. As a result, a total of 109,364,308 Ordinary Shares were issued at a price of 142.25 pence
per Ordinary Share.
On 8 October 2018, 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 676,451 Ordinary Shares at an issue price per
Ordinary Share of 143.815 pence.
11. Share premium
The share premium relates to amounts subscribed for share capital in excess of nominal value:
Balance at beginning of year
Transfer to capital reduction reserve (see note 26 of Group accounts)
Share premium on Ordinary Shares issued in relation to further equity issuance
Share issue expenses in relation to further equity issuance
Share premium on Ordinary Shares issued to management
Balance at end of year
31 December
2018
£m
31 December
2017
£m
932.37
(932.37)
154.47
(2.63)
1.79
153.63
589.39
–
347.42
(5.83)
1.39
932.37
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Tritax Big Box REIT plc Annual Report 2018
153
12. Capital reduction reserve
Balance at beginning of year
Transfer from share premium
Fourth interim dividend for the period ended 31 December 2017
First interim dividend for the year ended 31 December 2018
Second interim dividend for the year ended 31 December 2018
Third interim dividend for the year ended 31 December 2018
Balance at end of year
Please refer to note 4.
13. Net asset value (NAV) per share
31 December
2018
£m
31 December
2017
£m
467.93
932.37
(21.82)
(24.68)
(24.68)
(24.69)
1,304.43
546.38
–
(17.13)
(17.69)
(21.81)
(21.82)
467.93
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 year. As there are dilutive instruments outstanding, both basic
and diluted NAV per share are shown below.
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
2018
£m
1,713.52
1,713.52
31 December
2017
£m
1,572.43
1,572.43
1,474,233,401
1,363,598,083
116.23p
–
116.23p
116.23p
115.31p
590.881
115.26p
115.26p
EPRA NAV is calculated as net assets per the Company Balance Sheet excluding fair value adjustments for debt-related derivatives.
154
Tritax Big Box REIT plc Annual Report 2018
Financial Statements: Notes to the Company Accounts
14. 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 refer to note 30 of the Group accounts.
15. Directors’ remuneration
Directors’ fees
Employer’s National Insurance
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
0.28
0.03
0.31
0.24
0.03
0.27
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A summary of the Directors’ emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors’
Remuneration Report
. As Chairman of the Company’s Manager, Mark Shaw is not entitled to receive a fee.
16. Subsequent events
Please refer to note 33 of the Group accounts.
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For note 33, see page 143
For Directors’ Remuneration Report, see pages 99-100
Tritax Big Box REIT plc Annual Report 2018
155
156
Tritax Big Box REIT plc Annual Report 2018
Financial Statements
Additional Information (unaudited)
Notes to the EPRA and other
Key performance indicators
1. EPRA earnings per share
2. EPRA NAV per share
3. EPRA NNNAV
4. EPRA net initial yield (NIY)
and EPRA “topped up” NIY
5. EPRA vacancy rate
6. EPRA cost ratio
7. Total return
8. Total expense ratio
Glossary of Terms
Company Information
Financial Calendar
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158
158
158
159
159
160
160
160
160
161
164
165
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Tritax Big Box REIT plc Annual Report 2018
157
Additional Information
Notes to the EPRA and Other
Key Performance Indicators
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
One-off cost of extinguishment of bank loans (note 11 of Group accounts)
Costs associated with a business combination
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 – 2018
Changes in fair value of interest rate derivatives – 2017
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 2018
Dilutive shares in issue
Year ended
31 December
2018
£m
252.57
Year ended
31 December
2017
£m
247.80
(162.98)
1.24
–
0.95
91.78
(175.98)
2.04
4.75
–
78.61
1,440,012,547
1,268,540,113
6.37p
–
6.37p
6.20p
590,881
6.20p
Year ended
31 December
2018
£m
2,240.89
Year ended
31 December
2017
£m
1,929.46
1.24
(0.69)
7.08
1.99
2.58
–
(0.69)
7.08
1.99
2.58
2,253.09
1,940.42
1,474,233,401
–
1,363,598,083
590,881
1,474,233,401
1,364,188,964
Dilutive EPRA NAV per share
152.83p
142.24p
158
Tritax Big Box REIT plc Annual Report 2018
Additional Information
3. EPRA NNNAV
EPRA net assets
Include:
Fair value of financial instruments
Fair value of debt1
EPRA NNNAV
Shares in issue at 31 December 2018
Dilutive shares in issue
EPRA NNNAV per share
Year ended
31 December
2018
£m
2,253.09
Year ended
31 December
2017
£m
1,940.42
12.21
(20.15)
(10.96)
9.89
2,245.15
1,939.35
1,474,233,401
–
1,363,598,083
590,881
1,474,233,401
1,364,188,964
152.29p
142.16p
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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.
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 passing rental income
Less: contracted rental income in respect of development properties
Property outgoings
Less: contracted rent under rent free period
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
Year ended
31 December
2018
£m
3,418.24
(729.97)
2,688.27
182.26
2,870.53
161.12
(31.22)
(0.87)
(3.53)
125.50
8.88
134.38
Year ended
31 December
2017
£m
2,607.28
–
2,607.28
176.77
2,784.05
112.56
–
(0.02)
–
112.54
18.52
131.06
4.37%
4.68%
4.04%
4.71%
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Additional Information: Notes to the EPRA and Other Key Performance Indicators
5. EPRA vacancy rate
Annualised estimated rental value of vacant premises
Portfolio estimated rental value1
EPRA vacancy rate
1 Excludes land held for development.
6. EPRA cost ratio
Property operating costs
Administration expenses
Service charge costs recovered through rents but not separately invoiced
Total costs including and excluding vacant property costs (A)/(B)
Gross rental income – per IFRS
Less: Service charge cost components of gross rental income
Gross rental income (C)
Year ended
31 December
2018
£m
–
169.87
0%
Year ended
31 December
2017
£m
–
135.23
0%
Year ended
31 December
2018
£m
Year ended
31 December
2017
£m
1.07
18.07
(0.87)
18.27
133.85
(0.87)
132.98
0.02
14.16
–
14.18
108.54
–
108.54
Total EPRA cost ratio (including and excluding vacant property costs)
13.7%
13.1%
7. Total return
Opening EPRA NAV
Closing EPRA NAV
Growth in EPRA NAV
Dividends Paid
Total growth in EPRA NAV plus dividends paid
Total return
8. Total expense ratio
Total operating costs
Average net assets over the period
Total expense ratio
160
Tritax Big Box REIT plc Annual Report 2018
Year ended
31 December
2018
Year ended
31 December
2017
142.24p
152.83p
10.59p
6.63p
17.22p
12.1%
129.00p
142.24p
13.24p
6.35p
19.59p
15.2%
Year ended
31 December
2018
£m
18.27
2,093.86
Year ended
31 December
2017
£m
14.18
1,683.81
0.87%
0.84%
Additional Information: Notes to the EPRA and Other Key Performance Indicators
Glossary of Terms
“Adjusted Earnings” post tax earnings attributable to Shareholders,
adjusted to include licence fees receivable on forward funded
development assets and adjusts for other earnings not supported
by cash flows.
“Development pipeline” The Group’s current programme of
developments authorised or in the course of construction at
the balance sheet date, together with potential schemes not yet
commenced on land owned or controlled by the Group.
“Big Box” a “Big Box” property or asset refers to a specific sub-
segment of the logistics sector of the real estate market, relating
to very large logistics warehouses (each with typically over
500,000 sg ft of floor area) with the primary function of holding
and distributing finished goods, either downstream in the supply
chain or direct to consumers, and typically having the following
characteristics: generally a modern constructed building with eaves
height exceeding 12 metres; let on long leases with institutional-
grade tenants; with regular, upward only rental reviews; having
a prime geographical position to allow both efficient stocking
(generally with close links to sea ports or rail freight hubs) and
efficient downstream distribution; and typically with sophisticated
automation systems or a highly bespoke fit out.
“Board” the directors of the Company.
“BREEAM” Building Research Establishment’s Environmental
Assessment Method is a recognised environmental assessment
method and rating system for best practice in sustainable building
design, construction and operation measuring a building’s
environmental performance. A BREEAM assessment evaluates
a building’s specification, design, construction and use, such
as energy and water use, the internal environment (health and
well-being), pollution, transport, materials, waste, ecology and
management processes.
“Bridge Facility” the £250 million single currency revolving credit
facility agreement dated 1 October 2018.
“Company” Tritax Big Box REIT plc (company number 8215888).
“Company Secretary” the Manager.
“CPI” consumer price index, a measure that examines the weighted
average of prices of a basket of consumer goods and services,
such as transportation, food and medical care as calculated on
a monthly basis by the Office of National Statistics.
“CREST” the computerised settlement system operated by
Euroclear which facilitates the transfer of title to shares in
uncertified form.
“CTA 2010” the Corporation Tax Act 2010 and any statutory
modification or re-enactment thereof for the time being in force.
“db symmetry” or “DBS Group” db symmetry Group Ltd and
db symmetry BVI Limited, together with their subsidiary
undertakings and joint venture interests which are the subject
of the Share Purchase Agreement.
“DBS Senior Management” the senior management team of
db symmetry, namely, Richard Bowen, Christian Matthews, Henry
Chapman and Andrew Dickman.
“Directors” the Directors of the Company as of the date of this
report being Sir Richard Jewson, Jim Prower, Aubrey Adams,
Susanne Given, Richard Laing and Alastair Hughes.
“Development Management Agreement” the development
management agreement between Tritax Symmetry and the DBS
Management Company.
“EPRA” European Public Real Estate Association.
“EPRA Earnings” Earnings from operational activities (which
excludes the licence fees receivable on our forward funded
development assets).
“EPRA NAV” or “EPRA Net Asset Value” the Basic Net Asset
Value adjusted to meet EPRA Best Practices Recommendations
Guidelines (2016) requirements by excluding the impact of any
fair value adjustments to debt and related derivatives and other
adjustments and reflecting the diluted number of Ordinary Shares
in issue.
“EPRA Triple Net Asset Value (NNNAV)” EPRA NAV adjusted to
include the fair values of financial instruments, debt and, deferred
taxes.
“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.
“EPRA ‘Topped-Up’ NIY” This measure incorporates an adjustment
to the EPRA NIY in respect of the expiration of rent-free periods (or
other unexpired lease incentives, such as discounted rent periods
and step rents).
“EPRA Vacancy” Estimated market rental value (ERV) of vacant
space divided by the ERV of the whole portfolio.
“EPRA Cost Ratio” Administrative and operating costs (including
and excluding costs of direct vacancy) divided by gross rental
income.
“Estimated cost to completion” Costs still to be expended on
a development or redevelopment to practical completion, including
attributable interest.
“Estimated rental value (ERV)” The estimated annual market rental
value of lettable space as determined biannually by the Group’s
valuers. This will normally be different from the rent being paid.
“Existing Shares” Ordinary Shares existing at the Record Date.
“FATCA” the U.S. Foreign Account Tax Compliance Act.
“FCA” the United Kingdom Financial Conduct Authority (or any
successor entity or entities).
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Additional Information
“Forward Funded Developments” a pre-let forward funded
development of a Big Box.
“Foundation Asset” provide the core, low-risk income that
underpins our business. They are usually let on long leases to
Customers with excellent covenant strength. Then 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.
“FTSE Tenant” any tenant which is, or whose parent company is,
at the time of investment, included in the FTSE 350 or within the
top 350 companies included in any non-UK index which is, in the
reasonable opinion of the Board, comparable to FTSE.
“FRI Lease” – Full Repairing and Insuring Lease. The tenant is
responsible for all repairs and decoration to the property, inside and
out. And the building insurance premium is recoverable from the
tenant.
“Gearing” Net borrowings divided by total shareholders’ equity
excluding intangible assets and deferred tax provision.
“GIA” Under the RICS Code of Measuring Practice (6th Edition)
the Gross Internal Area (GIA) is the basis of measurement for
valuation of industrial buildings (including ancillary offices) and
warehouses. The area of a building measured to the internal face
of the perimeter walls at each floor level (including the thickness
of any internal walls).
“Gross rental income” Contracted rental income recognised in
the period, in the income statement, including surrender premiums
and interest receivable on finance leases. Lease incentives, initial
costs and any contracted future rental increases are amortised on
a straight-line basis over the lease term.
“Growth Covenant Asset” These are fundamentally sound assets
in good locations, let to Customers we perceive to be undervalued
at the point of purchase and who 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.
“Institutional‑Grade Tenants” tenants of sufficient size and stature
that they merit attention by large national or international investors.
“Investment property” Completed land and buildings held for
rental income return and/or capital appreciation.
“LIBOR” London Interbank Offered Rate.
“Link” or “Link Asset Services” a trading name of Link Market
Services Limited (company number 2605568).
“Listing Rules” the listing rules made by the UK Listing Authority
under section 73A of FSMA.
“Loan Notes” the loan notes issued by the Company on
4 December 2018.
“Loan to Value (LTV)” The proportion of our gross asset value
(including cash) that is funded by borrowings.
“London Stock Exchange” London Stock Exchange plc.
“Manager” Tritax Management LLP (partnership number
0C326500).
“Net equivalent yield” The internal rate of return from an
investment property, based on the value of the property assuming
the current passing rent reverts to ERV and assuming the property
becomes fully occupied over time.
“Net Initial Yield” the annual rent from a property divided by the
combined total of its acquisition price and expenses.
“Net rental income” Gross Rental Income less ground rents paid,
net service charge expenses and property operating expenses.
“Non‑PID Dividend” a dividend received by a shareholder of the
principal company that is not a PID.
“Ordinary Shares” Ordinary Shares of £0.01 each in the capital of
the Company.
“Passing rent” The annual rental income currently receivable on
a property as at the balance sheet date (which may be more or less
than the ERV). Excludes rental income where a rent free period is
in operation. Excludes service charge income (which is netted off
against service charge expenses).
“PID” or “Property Income Distribution” a dividend received by
a shareholder of the principal company in respect of profits and
gains of the Property Rental Business of the UK resident members
of the REIT Group or in respect of the profits or gains of a non-UK
resident member of the REIT Group insofar as they derive from their
UK Property Rental Business.
“Portfolio” the investment portfolio of the Company.
“Pre‑let” A lease signed with an occupier prior to completion of
a development.
“REIT” A qualifying entity which has elected to be treated as
a Real Estate Investment Trust for tax purposes. In the UK, such
entities must be listed on a recognised stock exchange, must be
predominantly engaged in property investment activities and must
meet certain ongoing qualifications.
“REIT Group” the Company and all of its subsidiary undertakings.
“Rent Roll” see Passing Rent.
“RPI” retail price index, an inflationary indicator that measures the
change in the cost of a fixed basket of retail goods as calculated on
a monthly basis by the Office of National Statistics.
“SDLT” Stamp Duty Land Tax – the tax imposed by the UK
Government on the purchase of land and properties with values
over a certain threshold.
“Shareholders” the holders of Ordinary Shares.
“Speculative development” Where a development has
commenced prior to a lease agreement being signed in relation to
that development.
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Tritax Big Box REIT plc Annual Report 2018
Additional Information: Glossary of Terms “sq ft” square foot or square feet, as the context may require.
“Strategic Land” Opportunities identified in strategic land which
the Manager believes will enable the Company to secure, typically,
pre-let forward funded developments in locations which might
otherwise attract lower yields than the Company would want to
pay, delivering enhanced returns but controlling risk.
“Topped up net initial yield” Net initial yield adjusted to include
notional rent in respect of let properties which are subject to a rent-
free period at the valuation date. This is in accordance with EPRA’s
Best Practices Recommendations.
“Total Expense Ratio” or “TER” The ratio of total administration
and property operating costs expressed as a percentage of
average net asset value throughout the period.
“Total Return” net total shareholder return, being the change in
EPRA NAV over the relevant period plus dividends paid.
“Total Shareholder Return” A measure of the return based upon
share price movement over the period and assuming reinvestment
of dividends.
“UK AIFMD Rules” the laws, rules and regulations implementing
AIFMD in the UK, including without limitation, the Alternative
Investment Fund Managers Regulations 2013 and the Investment
Funds sourcebook of the FCA.
“UKLA” or “UK Listing Authority” the FCA acting in its capacity
as the UK Listing Authority.
“Value Add Asset” These assets ae typically let to Customers
with good 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 customer
requirements. These are usually highly re-lettable.
“WAULT” or “Weighted Average Unexpired Lease Term” the
average remaining life of the leases within the portfolio. In respect
of forward funded developments, the unexpired term from lease
start date.
“Yield on Cost” The expected gross yield based on the estimated
current market rental value (ERV) of the developments when fully
let, divided by the book value of the developments at the earlier
of commencement of the development or the balance sheet
date plus future development costs and estimated finance costs
to completion.
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Additional Information: Glossary of Terms
Company Information
Company Registration Number: 08215888 Incorporated in the United Kingdom
Directors, Management and Advisers
Directors
Sir Richard Jewson KCVO, JP
Non-Executive Chairman
Aubrey Adams OBE, FCA, FRICS
Non-Executive Director
Susanne Given
Non-Executive Director
Alastair Hughes FRICS
Non-Exective Director
appointed 1 February 2019
Richard Laing FCA
Non-Executive Director
appointed 16 May 2018
Jim Prower FCA
Senior Independent
Non-Executive Director
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
Akur Limited
66 St James’s Street
London
SW1A 1NE
Joint Financial Adviser and
Corporate Broker
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
Legal Advisers to the Company
as to English law
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
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
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Administrator
Link Asset Services
Beaufort House
51 New North Road
Exeter
EX4 4EP
Depositary
Langham Hall UK Depositary LLP
5 Old Bailey
London
EC4M 7BA
Valuer
CBRE Limited
Henrietta House
Henrietta Place
London
W1G 0NB
Bankers
Barclays Bank PLC
PO Box 3333
One Snowhill
Snow Hill Queensway
Birmingham
B3 2WN
BNP Paribas
10 Harewood Avenue
London
NW1 6AA
Canada Life Investments
1-6 Lombard Street
London
EC3V 9JU
Helaba Landesbank Hessen‑Thüringen
Girozentrale
3rd Floor
95 Queen Victoria Street
London
EC4V 4HN
HSBC Bank plc
Level 2, 8 Canada Square
Canary Wharf
London
E14 5HQ
ING Bank N.V. London Branch
8-10 Moorgate
London
EC2R 6DA
PGIM Real Estate Finance
8th Floor
One London Bridge
London
SE1 9BG
Royal Bank of Scotland
250 Bishopsgate
London
EC2M 4AA
Santander
2 Triton Square
Regent’s Place
London
NW1 3AN
UK
Wells Fargo Bank, N.A.
90 Long Acre
London
WC2E 9RA
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Tritax Big Box REIT plc Annual Report 2018
Additional Information Financial Calendar
6 March 2019
Announcement of Full Year Results
15 May 2019
Annual General Meeting
30 June 2019
Half Year End
August 2019
Announcement of Half Year Results
31 December 2019 Full Year End
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Cautionary Statement
This Annual Report and the Tritax Big Box REIT plc website may contain certain ‘forward-looking statements’ with respect to Tritax Big
Box REIT plc’s (“Company”) financial condition, results of its operations and business, and certain plans, strategy, objectives, goals and
expectations with respect to these items and the economies and markets in which the Company operates. Forward-looking statements are
sometimes, but not always, identified by their use of a date in the future or such words as ‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘should’, ‘will’,
‘would’, ‘expects’, ‘believes’, ‘intends’, ‘plans’, ‘targets’, ‘goal’ or ‘estimates’ or, in each case, their negative or other variations or comparable
terminology. Forward-looking statements are not guarantees of future performance. By their very nature forward-looking statements are
inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will
occur in the future. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Company’s ability to control
or estimate precisely. There are a number of such factors that could cause actual results and developments to differ materially from those
expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the economies and
markets in which the Company operates; changes in the legal, regulatory and competition frameworks in which the Company operates;
changes in the markets from which the Company raises finance; the impact of legal or other proceedings against or which affect the
Company; changes in accounting practices and interpretation of accounting standards under IFRS, and changes in interest and exchange
rates. Any forward-looking statements made in this Annual Report or Tritax Big Box REIT plc website, or made subsequently, which are
attributable to the Company, or persons acting on their behalf, are expressly qualified in their entirety by the factors referred to above.
Each forward-looking statement speaks only as of the date it is made. Except as required by its legal or statutory obligations, the Company
does not intend to update any forward-looking statements. Nothing in this Annual Report or the Tritax Big Box REIT plc website should be
construed as a profit forecast or an invitation to deal in the securities of the Company.
Designed and produced by Bruce Associates
Printed in England by Cousin
Both paper mill and printer have ISO14001 Environmental accreditation.
Tritax Big Box REIT plc Annual Report 2018
165
Additional Information
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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