TIDMEBOX TIDMBOXE
RNS Number : 2977U
Tritax EuroBox PLC
28 March 2019
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE
INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU)
NO. 596/2014.
28 March 2019
Tritax EuroBox plc
(the "Company")
RESULTS FOR THE PERIOD FROM 1 JULY 2018 TO 31 DECEMBER 2018
Tritax EuroBox plc (tickers: EBOX (Sterling), BOXE (Euro)),
which invests in Continental European logistics real estate assets,
is today reporting its results for the period from 1 July 2018 to
31 December 2018.
Financial highlights
-- Successfully raised gross proceeds of EUR339.3 million or
GBP300 million, through significantly oversubscribed IPO in July
2018. The Company's shares were admitted to trading on the
specialist fund segment of the main market of the London Stock
Exchange on 9 July 2018.
-- Basic net asset value ("NAV"): EUR326.0 million
-- EPRA NAV(1) : EUR326.3 million
-- EPRA NAV(1) per share: EUR1.09
-- Basic earnings per share(1) : -2.3 cents
-- Adjusted earning per share(1) : 0.5 cents
-- Adjusted Total Return for the period(1) : 1.0%
-- Unsecured revolving credit facility agreed of EUR300 million
-- Loan to value ("LTV") of 37%, against the Company's medium-term target of 45% LTV(1)
-- The Portfolio had a contracted annualised passing rent of
EUR24.5 million as at 31 December 2018
Operational highlights
-- Acquired six prime Big Box logistics assets during the period
for a combined net purchase price EUR475.9 million
-- 58% acquired off market by value
-- The weighted average purchase yield of the portfolio is 5.1%
-- Independent valuation of the six assets acquired of EUR475.7 million
-- Portfolio weighted average unsecured lease term(1) of 12.2 years
Post period activity
-- Completed on two pre-let forwarded funded developments
-- EUR82.5m total capital commitment for these two further
investments located in Germany and Poland
-- Two units acquired with the benefit of rental income cover have been let
-- Interim dividend declared of 0.4 cents per ordinary share for
the period from IPO until 31 December 2018. Future dividends will
be paid quarterly
Robert Orr, Chairman of Tritax EuroBox, commented:
"The portfolio is well positioned for income growth, through a
combination of embedded annual indexation, growth in market rents
and income improvements created through asset management. This
supports our objective of delivering secure and growing income and
attractive capital returns for shareholders.
There are good prospects for further portfolio growth in 2019.
The Continental European logistics market has strong fundamentals,
driven by growth in e-commerce and occupiers optimising their
supply chains. By leveraging the long-established relationships of
Tritax Group and our local asset managers, we see an attractive
pipeline of off-market investment opportunities. Our unsecured
revolving credit facility will provide a flexible source of
committed capital, helping us to build and diversify the
portfolio."
Note:
1 See Key Performance Indicators
FOR FURTHER INFORMATION, PLEASE CONTACT:
Tritax Group
Nick Preston
James Dunlop +44 (0) 20 7290 1616
Jefferies International Limited
Gary Gould
Stuart Klein +44 (0) 20 7029 8000
Kempen & Co N.V.
Dick Boer
Thomas ten Hoedt +31 (0) 20 348 8500
Maitland/AMO (Communications Adviser) +44 (0) 20 7379 5151
James Benjamin tritax-maitland@maitland.co.uk
NOTES:
Tritax EuroBox plc invests and manages a well-diversified
portfolio of well-located Continental European logistics real
estate assets that are expected to deliver an attractive capital
return and secure income to shareholders. These assets fulfil key
roles in the logistics and distribution supply-chain focused on the
most established logistics markets and on the major population
centres across core Continental European countries.
Occupier demand for Continental European logistics assets is in
the midst of a major long-term structural change principally driven
by the growth of e-commerce. This is evidenced by technological
advancements, increased automation and supply-chain optimisation,
set against a backdrop of resurgent economic growth across much of
Continental Europe.
The Company's Manager, Tritax Management LLP, has assembled a
full-service European logistics asset management capability
including specialist "on the ground" asset and property managers
with strong market standings in the Continental European logistics
sector. The appointed asset managers Logistics Capital Partners
("LCP") and Dietz AG ("Dietz") are logistics specialists and offer
the Company exposure to high quality asset management expertise and
access to their respective development pipelines, providing
acquisition opportunities across Continental Europe.
The Company is targeting, on a fully invested and geared basis,
an initial Ordinary Share dividend yield of 4.75% p.a.(1) , which
is expected to increase progressively through regular indexation
events inherent in underlying lease agreements, and a total return
on the Ordinary Shares of 9.0% p.a.(1) over the medium-term. The
Company intends to pay dividends on a quarterly basis with
shareholders able to receive dividends in Sterling or Euro.
Further information on Tritax EuroBox plc is available at
www.tritaxeurobox.co.uk
1. Euro denominated returns, by reference to IPO issue price, on
a fully invested and geared basis. These are targets only and not
profit forecasts. There can be no assurances that these targets
will be met and they should not be taken as indications of the
Company's expected or actual future results. Accordingly, investors
should not place any reliance on the targets in deciding whether or
not to invest in the Company and should not assume that the Company
will make any distributions at all and should decide themselves
whether or not the targets are reasonable or achievable
Meeting for investors and analysts and audio recording and
webcast of results available
A meeting for investors and analysts will be held at 8.45am
today at:
Maitland
Havas Building
3 Pancras Square
London
N1C 4AG
The presentation will also be accessible via a live conference
call and on-demand via the Company website:
https://www.tritaxeurobox.co.uk/investors/.
The Interim Report 2018will be available on the Company's
website at www.tritaxeurobox.co.uk. In accordance with Listing Rule
9.6.1, copies of these documents will also be submitted today to
the UK Listing Authority via the National Storage Mechanism and
will be available for viewing shortly at
www.morningstar.co.uk/uk/NSM.
Hard copies of the Interim Report 2018 will be sent to
Shareholders.
CHAIRMAN'S STATEMENT
This was a highly successful and active first period for the
Group. Following our oversubscribed IPO, we invested the proceeds
ahead of schedule and have created a high-quality and
well-diversified portfolio in key logistics locations in
Europe.
Implementing the investment strategy
The Company's IPO was significantly oversubscribed and raised
gross proceeds of approximately EUR339.3 million or GBP300 million.
We were able to invest these proceeds ahead of our planned timeline
of six to nine months, acquiring six prime Big Box logistics assets
and exchanging conditional contracts on two further assets by the
period end, with all eight assets totalling EUR558.4 million, net
of purchase costs. This portfolio comprises six standing assets and
two pre-let forward funded investments, in key logistics hubs
across Germany, Spain, Italy, Belgium and Poland, within or close
to densely populated areas. The weighted average purchase yield of
the portfolio of the eight assets is 5.1% and they were acquired at
a low blended acquisition cost of just 1.7%. The portfolio,
including the two further assets acquired post period end, has a
contracted annual rental income of EUR29.1 million. The weighted
average unexpired lease term was 12.0 years across all eight
assets, ahead of our target of more than five years.
Our progress in this initial period demonstrates the strength of
the platform created by our Manager. Their relationship-driven
acquisition model draws on the Manager's extensive connections with
key developers, occupiers and owners, and the on-the-ground
intelligence of our specialist asset managers. This has enabled us
to secure value for shareholders at the point of acquisition, in
part through a number of off-market transactions.
At the period end, the six standing assets acquired were
independently valued at EUR475.7 million net of transaction costs
with the underlying assets valued at EUR485.4 million excluding
Real Estate Transfer Tax ("RETT"), representing an uplift of 2.0%
over the aggregate net purchase price, on a like-for-like purchase
structure basis. In addition, we entered into conditional contracts
totalling EUR82.5 million, net of acquisition costs, on two forward
funded developments, which are currently under construction.
Attractive debt financing
The Company was able to take advantage of favourable debt market
conditions during the period, with logistics property yields
continuing to offer a significant premium over the risk-free rate.
In October 2018, we passed a significant milestone for the Company
as we agreed a EUR200 million unsecured revolving credit facility
with HSBC Bank plc and BNP Paribas, London Branch, for an initial
term of five years. This offers us a highly attractive cost of debt
and, significantly, is unsecured. This structure provides
operational flexibility, scope for expansion and underlines our
banking syndicate's support for our strategy and the strong sector
fundamentals. In December 2018, we announced that Bank of America
Merrill Lynch had agreed to provide an additional EUR100 million
commitment, alongside HSBC and BNP Paribas, giving us a total
unsecured facility at the period end of EUR300 million.
At 31 December 2018, we had drawn EUR174 million against the
facility, giving us an LTV ratio of 37%. This compares with our
medium-term LTV target of 45%. When the loan is drawn further to
fund the development of two post period end acquisitions the LTV
ratio will rise to 48%.
Financial results
At the period end, the basic NAV attributable to owners of the
Company was EUR326.0 million with an EPRA NAV of EUR326.3 million,
both of which equated to EUR1.09 per share. The adjusted NAV
excluding transfer taxes was EUR1.12 per share. IFRS earnings per
share ("EPS") reflected a loss of cents due to transaction costs
incurred on purchase. While EPRA EPS was 0.6 cents, the adjusted
EPS was slightly lower at 0.5 cents, reflecting adjustments for
non-cash items in the profit and loss.
Dividends and total returns
At IPO, we set an initial dividend target of 4.75% per annum, on
a fully invested and geared basis. On 7 March 2019, we declared the
Company's first interim dividend for the period from admission to
31 December 2018, of 0.4 cents per share. The dividend will be paid
on Friday 29 March 2019, to shareholders on the register at 15
March 2019. The dividend is 1.2x covered by adjusted earnings.
Looking forward, we intend to pay dividends quarterly and expect to
increase the dividend progressively, supported by growing income
and the regular indexation events in the underlying lease
agreements. Shareholders can elect whether to receive dividends in
Sterling or Euro.
The dividend is an important component of our medium- term total
return target of 9.0% per annum.
Move to the premium segment to of the Main Market
The Company con rms its intention to apply to the FCA for the
Company's Ordinary Shares to be admitted to the premium segment of
the Of cial List of the UK Listing Authority and to the London
Stock Exchange for the Ordinary Shares to be admitted to the
premium segment of the Main Market, anticipated in the second
quarter of 2019. In this regard, the Company intends to prepare a
property valuation and an unaudited NAV per share as at 31 March
2019, for publication by no later than 28 June 2019. The move to
the premium segment is expected to facilitate the Company's
eligibility for inclusion in the FTSE UK and the FTSE EPRA NAREIT
Index Series.
Corporate governance
We believe that good corporate governance is integral to the
Company's success and its continued growth and development. The
Company has a strong and fully independent Board, comprising me as
Chairman and two further Non-Executive Directors. Between us we
have a diverse range of skills, including extensive European real
estate experience. The Directors work well together, and we look
forward to continuing to develop and embed the Company's governance
processes.
The Manager
Our Manager, Tritax Management LLP, is part of the Tritax Group,
a leading real estate fund management house with particular
specialism in acquiring and managing logistics property portfolios.
The Manager has put in place an experienced team, with the
capability and capacity to build up and manage a substantial
portfolio of logistics assets across Continental Europe. We have
already benefited from the Manager's extensive network of contacts,
which has helped us to access off-market transactions at attractive
valuations in diverse key European locations.
Outlook
The portfolio is well positioned for income growth, through a
combination of embedded annual indexation, growth in market rents
and income improvements created through asset management. This
supports our objective of delivering secure and growing income and
attractive capital returns for shareholders.
There are good prospects for further portfolio growth in 2019.
The Continental European logistics market has strong fundamentals,
driven by growth in e-commerce and occupiers optimising their
supply chains. By leveraging the long-established relationships of
Tritax Group and our local asset managers, we see an attractive
pipeline of off-market investment opportunities. Our unsecured
revolving credit facility will provide a flexible source of
committed capital, helping us to build and diversify the
portfolio.
Robert Orr Chairman 28 March 2019
Who we are and what we do
We invest in and manage a well-diversified portfolio of large
Continental European logistics real estate assets, which fulfil key
roles in the logistics and distribution supply chain.
Our assets are focused on the most- established logistics
markets and major population centres, across core Continental
European countries. This focus differentiates us from other
UK-listed real estate companies.
Potential for attractive returns
We aim to deliver an attractive, secure and growing level of
income along with capital growth. On a fully invested and geared
basis we are targeting a dividend of 4.75%(1) per annum, which is
expected to increase progressively, and a total return of 9.0% per
annum over the medium term. Our expertise in mitigating risk and
managing properties helps to maximise the return on our assets.
2 Euro denominated returns, by reference to IPO issue price, on
a fully invested and geared basis. These are targets only and not
profit forecasts. There can be no assurances that these targets
will be met and they should not be taken as indications of the
Company's expected or actual future results. Accordingly, investors
should not place any reliance on the targets in deciding whether or
not to invest in the Company and should not assume that the Company
will make any distributions at all and should decide themselves
whether or not the targets are reasonable or achievable.
A long-term growth opportunity
Occupier demand for Continental European logistics assets is
undergoing a major long- term structural change, principally driven
by the need to optimise supply chains and technological innovation;
the growth and spread of e-commerce across Europe is leading these
changes. At the same time, supply is constrained, with limited
availability of suitable land in key logistics locations.
Our Manager, Tritax Management LLP, has assembled a full-service
European capability. This combines the Manager's outstanding
stock-picking intelligence and portfolio management expertise with
dedicated on-the-ground asset and property managers, with strong
market standings.
Our Strategically Located Portfolio
We are assembling a portfolio that delivers performance for
Shareholders, by exploiting the Manager's logistics real estate
expertise and our dedicated European platform. Together, these give
us a deep understanding of market dynamics and the ability to
implement our strategy.
Value creation requires us to own the right assets, in the right
locations. We therefore target the most-established logistics
markets in Continental Europe. Within those markets, we target key
logistics hubs, close to major population centres, which are
supported by strong transport links and sufficient labour supply.
We then acquire large, modern, simple and flexible properties,
which are appealing to occupiers, and as they are located in areas
of constrained supply are likely to deliver rental growth.
"We focus on key logistics hubs, well positioned for regional,
national and global distribution occupiers, in areas of constrained
supply providing the best platform for rental growth to help secure
strong future returns."
Nick Preston, Fund Manager
A High-Quality and Growing Portfolio
We acquire strategically located, large, simple, modern assets
that provide highly flexible warehouse space. This makes them
attractive to a wide range of occupiers, allowing them to configure
the space to their needs and to adjust how they use it as their
requirements change. This can include significant investment in
sophisticated automated stocking systems.
Big
59% of our assets are over 150,000sq m. The average size of our
assets is 94,000sq m(1)
Highly specified
61% of our portfolio is automated, with the remaining 44% being
high quality, flexible distribution space(2)
Modern
84% of our portfolio has been built since 2016. The average age
of our assets is 2.8 years(1)
Well located
100% of our portfolio is located in key logistics locations
within our target investment markets throughout Continental
Europe.
1 Split by Gross Internal Area
2 Split by Investment Volume
MANAGER'S REPORT
During the period, we made good progress towards the Group's
objective of building a portfolio to deliver attractive, secure and
growing income, underpinned by sound property fundamentals and
financially strong tenants.
STRONG MARKET FUNDAMENTALS
Significant occupier demand and constrained supply means that
market conditions are favourable for owners of large prime
logistics properties.
Structural change is driving occupational demand
Supply chain optimisation: Occupiers are strategically moving to
fewer, larger and more modern distribution assets. This provides
them with economies of scale and the opportunity to automate
processes which would not be possible in smaller properties,
helping them to improve their systems and reduce costs. Larger
units also tend to be higher, allowing for mezzanine floors and
more efficient automated racking and storage systems.
Meeting the needs of the modern consumer: Occupier demand for
Continental European logistics assets is undergoing major long-term
structural growth. Changes in the retail market and the move to
online shopping are one of the key drivers of this. Faced with high
costs of occupying shops and rising online retail spending,
retailers are looking to consolidate their operations and have a
combined in-store and online presence. Big Boxes are fundamental to
this, enabling retailers to offer consumers access to their entire
product range and then quickly, flexibly and cheaply deliver those
orders and manage returns.
Online sales are now increasing rapidly in many Continental
European countries, following the trend seen in the UK, which began
a similar growth trajectory around five years ago.
The need for sustainable assets: Modern Big Boxes help our
Tenant Partners meet their sustainability objectives. By occupying
assets built with state-of-the-art design and materials, and which
incorporate initiatives such as low-carbon technologies and energy
efficiency, they can minimise their environmental footprint and
optimise their use of natural resources.
Supply remains constrained
Unlike the UK market, where Big Boxes are located along
logistics 'corridors' created by major motorways, in Continental
Europe the prime logistics locations are typically close to densely
populated conurbations. There are comparatively few sites in these
locations which can accommodate very large Big Box facilities,
which have a suitable and affordable labour supply, and which can
also meet the requirements for power and transport links. In our
experience, municipalities are often reluctant to zone for the
largest properties, due to the associated traffic disruption,
impact on local infrastructure and relatively lower level of job
creation due to automation, instead preferring development of
smaller units.
More generally, the amount of available land zoned for
industrial uses has decreased, particularly around major urban
centres, as developers have preferred to convert ageing industrial
properties to higher-value uses such as residential. This, combined
with a lack of speculative development over the last decade, is
forcing occupiers to pursue pre-let or build-to-suit solutions. The
consequence is that logistics vacancies in Continental Europe are
at, or near, all-time lows.
Rental growth is expected
The basic economics of the combination of strong occupational
demand in areas of limited supply and inflating build costs would
normally be expected to lead to rents rising. We have observed that
historically the European industrial and logistics development
market has been able to create supply through zoning more land for
logistics use, thereby suppressing any rent rises. However, looking
forward, we believe that the situation is likely to be different,
particularly when considering the very largest buildings, and the
sites on which they are built. The supply of these very large
sites, in the locations where occupiers typically want to be, is
extremely limited. Hence the developers who source these land
parcels are having to pay ever higher prices.
In addition to land price inflation, the other key component of
the development cost is the rising cost of construction. This is
being caused by raw materials and labour costs inflating.
The combination of both of these factors is already leading to
upward pressure on rents. It is worth noting that until recently
these increasing input costs have not led to strong rental growth.
The principal reason being that the values at which developers can
sell the finished property have been rising, due to the falling
investment yields in the sector. This has meant that developers
have not needed to increase rents, as the higher costs have been
offset by higher sale prices. However, investment yields in the
sector are plateauing which means that developers are being forced
to demand higher rents from occupiers to maintain their
profitability on projects and cover the increased input costs.
Increasingly institutional lease terms
The other important effect that is now evident in some European
logistics markets is the improvement of lease terms in favour of
the property owner.
In most European markets it is usual for there to be a number of
occupier-friendly lease clauses, such as restricted indexation
provisions, certain expenditure which has to be paid for by the
landlord as well as options to renew leases on favourable terms to
the occupier.
Leases in Continental Europe have typically been for five to ten
years. However, occupiers are increasingly keen to retain control
of strategically important assets, particularly given their often
substantial investment in fitting out and automation. They are
therefore signing longer leases to secure their occupation and
amortise costs over a longer period.
This change is part due to the number of large international
companies wanting to harmonise their lease obligations across
different geographies and also, more importantly, the balance of
the market dynamic now shifting in favour of the landowner granting
the lease. As a result lease terms mentioned above and the length
of the leases are being improved in favour of the owner.
Investment demand is robust
The attractions of the market for investors mean that investment
demand is universally strong and looks set to remain so. Hence
competition is fierce for openly marketed opportunities.
Effectively sourcing investment opportunities at favourable
prices therefore requires a different strategy. The Manager has
broad network of strong pan-European relationships spanning
occupiers, developers and other investors. The Manager has built a
long-term reputation for providing security, reliability and speed
in transacting and this provides the opportunity to acquire
suitable assets directly from sellers, without properties being
openly marketed. The evidence of this approach is that five out of
the eight assets acquired to date have been secured in this off-
market manner.
The Manager will continue to maintain and develop relationships
to ensure a continuing high-quality pipeline of assets to support
future portfolio expansion particularly with top quality European
development companies. These long-term relationships are
particularly fruitful with developers who are keen to generate
repeat business with reliable counterparties.
IMPLEMENTING OUR INVESTMENT POLICY AND PHILOSOPHY
We understand that the European logistics market is not a single
market. There is a considerable variation between the different
geographical markets, as well as the type and quality of logistics
properties.
We aim to deliver superior investment performance through
applying our logistics expertise and local insight to ensure strong
stock selection and effective portfolio management.
Strong stock selection
In our search for high-quality investments, as part of our due
diligence process we appraise each potential investment's long-term
prospects. The Group's focused investment policy therefore focuses
on logistics assets which are typically:
-- well located in established distribution hubs, within or
close to densely populated areas, and should fulfil a key part of
the occupiers' logistics and distribution supply chain.
-- large and modern, in locations with limited supply that are
likely to benefit from structural changes in occupational
demand.
-- benefit from index-linked leases.
-- maintain a weighted average unexpired lease term of more than five years.
A proportion of the portfolio may offer exposure to urban
distribution hubs, which help fulfil the final mile part of the
distribution chain.
Our four pillar investment policy
When implementing this policy, the Group follows a clear
investment philosophy in which Foundation assets provide our core,
low-risk income, and Value Add assets and Growth Covenant assets
offer the potential for enhancing returns. This strategy supports
our objective of delivering secure, attractive and growing
dividends whilst capturing capital growth for our Shareholders.
Our four pillar investment philosophy:
-- Foundation assets. These are modern buildings in prime
locations, let on long leases to institutional grade tenants. They
provide the Group's core rental income.
-- Value Add assets. These are let to strong tenant covenants
and offer opportunities to add value through asset management
initiatives.
-- Growth Covenant assets. These are undervalued due to the
financial strength of the occupier, but are fully let and
well-located assets. Asset value is expected to be driven by an
improvement in tenant credit quality.
-- Strategic land. The Group can invest in land zoned for
logistics use, with the opportunity to deliver enhanced returns
through pre-let forward funded developments. The Group will not
speculatively develop buildings.
A focus on quality and capital discipline
Since our IPO, in line with the Group's investment policy, we
have diligently deployed cash of EUR478.3 million into assets, with
commitments to a further EUR82.5 million in two assets which will
be completed in April 2019, demonstrating our capacity to deploy
and execute a pan- European strategy. Five of the eight assets were
secured on an off-market basis through one on one relationships
with the vendors.
During the period, of the six assets acquired three were
Foundation, two were Value Add and one was a Growth Covenant. The
two pre-let forward funded developments acquired post-period end
will be Foundation assets on practical completion (see page 26 of
Interim Report).
The portfolio of six assets is well-diversified by tenant and
has high-quality occupiers, with 86% of the tenants being
multi-billion Euro businesses. All leases within the portfolio
benefit from indexation. Unexpired lease terms at the period end
range from 3.0 years to 17.2 years, with a weighted average of 12.2
years.
The Group has benefited from our expertise in structuring
transactions, in order to reduce costs, mitigate risk and preserve
long-term income. This requires a detailed understanding of
Europe's disparate legal and taxation regimes, as we look to
minimise tax and income leakage.
Capturing embedded value
There are opportunities to add value to assets across the
portfolio. Prior to acquisition we had identified a number of
additional opportunities to add value across the wider portfolio,
which offers the potential to improve both the income generated and
also the capital value of the portfolio. On purchase we had
expected these opportunities to materialise over the medium to
longer term; however we have been surprised by the acceleration of
a number of these projects. These have been driven by the fast
moving nature of our occupiers businesses and their need to adapt
their logistics operations.
While a number of these initiatives are still evolving, we can
give an indication of the nature and scale of them.
Leasing opportunities
The portfolio has three units totalling 34,633 sq m which were
bought unoccupied, but with the benefit of rental guarantees from
the vendors. Two of the units are situated in Germany's industrial
heartland Bochum, with the third unit located in the prime
logistics corridor in Belgium between Antwerp and Brussels.
Upon acquisition, noting the strong occupier demand and
constrained supply in these sought-after logistics locations, we
were confident of letting these units quickly, delivering the
identified business plans to produce further value from these
assets.
Following the period end, we have successfully let two of these
units, both ahead of the timescale expected at acquisition, and on
terms which have exceeded our expectations.
At Unit 1, Bochum we have signed a five-year lease with Gruber
Logistics GmbH and are in active discussions in relation to the
remaining unlet unit. The vacant unit in the Bornem property has
been let to BD myShopi NV within just over four months of
acquisition.
Expansion opportunities
Extensions to existing properties: We are currently in detailed
discussions with the occupiers of two properties to build
extensions to their existing buildings. In total these extensions
comprise approximately 71,000 sq m, and we are proposing to fund
these extensions at an attractive yield on cost.
Adjacent expansion land: There are a number of plots of land
situated adjacent to the properties in Bornem and Rumst which
together could accommodate the construction of 28,000 sq m of
logistics space. There are three vacant plots of land at the Bornem
site, totalling 4.5 hectares, along with two unutilised plots of
land at the Rumst site, totalling c.3.4 hectares that offer
attractive development potential. These projects are currently
being appraised, with the expectation of delivering value enhancing
opportunities in the medium term.
Valuation
The portfolio was independently valued by JLL as at 31 December
2018, in accordance with the RICS Valuation - Global Standards
2017.
The six standing assets owned at the period end were
collectively valued at EUR475.7 million. This includes an
assumption of EUR9.7 million of real estate transaction tax
("RETT") that would arise if sold as assets outside a corporate
structure. The Group bought five out of six of its assets in
corporate structures. The prevailing European market practice is to
transact assets such as these within SPV structures, to reduce RETT
costs for the seller and the purchaser. For this reason, the Group
adjusts the EPRA NAV of EUR1.09 to exclude these RETT costs in its
calculation of the adjusted Net Asset Value. The valuation
excluding these costs would be EUR485.4 million, representing an
uplift of c.EUR10 million or 2.0% between the relevant acquisition
date and the valuation date. This is an encouraging performance,
given the limited time the Group has owned these assets. The Group
has also made binding commitments of EUR82.5 million to acquire two
further assets in Wunstorf and Lodz after the period end, giving a
total capital commitment, net of costs, for the portfolio of
EUR558.4 million.
Equity and debt financing
On IPO, the Group issued 300 million Ordinary Shares at a price
of 113.11 cents (or 100 pence per share), through a placing, offer
for subscription and intermediaries offer. This raised gross
proceeds of EUR339.3 million (or GBP300 million). The issue was
significantly oversubscribed.
On 22 October 2018, the Group announced that it had agreed a
debt facility, with HSBC Bank plc and BNP Paribas, London Branch.
The EUR200 million revolving credit facility had an opening margin
over the higher of zero or Euribor of 1.55%. This increases up to
2.2% depending on the loan to value ratio. The loan has an initial
maturity of five years, which can be extended for a further two
years with lender support. Importantly, the facility is unsecured,
providing operational flexibility for the Group.
On 17 December 2018, the Group announced that Bank of America
Merrill Lynch had agreed to provide a further EUR100 million
commitment alongside HSBC and BNP Paribas, increasing the unsecured
revolving credit facility to EUR300 million.
At 31 December 2018, EUR174 million had been drawn against the
facility. This resulted in an LTV ratio of 37% at that date.
The Group has a hedging strategy for its variable-rate debt,
which includes the use of interest rate caps to allow it to benefit
from current low interest rates, while minimising the effect of a
significant rise in underlying interest rates. The Group therefore
holds derivative instruments, which hedge 100% of all Group
borrowing commitments. The derivative instruments comprise two
interest rate caps running coterminous with the debt facilities,
with a total weighted average cap of 0.67%.
Financial results
Rental income for the period was EUR4.9 million. The Group's
operating and administrative costs were EUR1.8 million. These costs
primarily comprise the Asset Management fee payable to the Manager
of EUR0.9 million, a fee for running an SGR structure in Italy, the
Administration fee and the Directors' fees. The loss before tax was
EUR6.4 million; after adding back the property revaluation loss of
EUR8.0 million, the profit was EUR1.6 million. The one-off costs
associated with the IPO have been written off the share premium
account. EUR0.6 million was paid to SG Commercial LLP in the period
comprising acquisition agency fees.(1)
The taxation charge for the period was 3.8% of the net property
income.
The Basic EPS, which reflects the reduced valuation after
including RETT and transaction costs, was a loss of 2.3 cents. The
basic EPRA EPS, which excludes this revaluation movement was,
showed a profit of 0.6 cents. Given the income-focused nature of
the Company, the Board have adopted adjusted EPS as a key
performance measure. This adjusts the income shown in the
consolidated income statement to reflect the underlying cash
movements. The adjusted EPS was 0.5 cents per ordinary share for
the period.
Dividend
Information on the Company's initial interim dividend of 0.4
cents, which was declared on 7 March 2019, can be found in the
Chairman's Statement.
Tritax Management LLP Manager 28 March 2019
1 See note 21 to the Condensed consolidated financial
statements
ACQUISITION HIGHLIGHTS
SIX STANDING ASSETS ACQUIRED IN THE PERIOD
Barcelona, Spain
Tenant partner: Mango
Acquisition price: EUR150.0 million
Net initial yield: 5.0%
-- Well located to the north east of Barcelona, close to major road infrastructure.
-- High specification, purpose-built, logistics facility with maximum eaves height of 40m.
-- Constrained logistics/industrial land supply in the Barcelona region.
-- Long lease to established instore/online retailer Mango.
-- Significant capital commitment from the tenant.
-- Embedded expansion land allowing extension.
-- EPC rating of A, sustainable re-use of excavation land and
forest biomass, sustainable management of rainwater.
Rome, Italy
Tenant partner: Amazon
Acquisition price: EUR118.0 million
Net initial yield: 5.0%
-- Highly specified new logistics building.
-- Significant capital investment by tenant in automation and robotics.
-- Tenant's principal 'small items' fulfilment centre in Italy.
-- Long lease to Amazon, institutional grade covenant.
-- On-site expansion potential, internal and external.
-- BREEAM "Very Good" certification.
Bornem, Antwerp, Belgium
Tenant partners: Alcon-Couvreur and Pharma-Distri Center
Acquisition price: EUR26.0 million
Net initial yield: 5.3%
-- Positioned between Antwerp, Europe's second largest port, and Brussels.
-- Two modern, well-specified logistics warehouses.
-- The vacant building was acquired with the benefit of a
12-month income cover from the vendor.
-- Three development plots provide the opportunity to create
additional value and grow income return.
-- Solar panels providing a sustainable source of energy to the warehouse.
Post period event: The Company signed a nine-year lease with BD
myShopi on the vacant unit.
Rumst, Antwerp, Belgium
Tenant partner: Cummins
Acquisition price: EUR58.2 million
Net initial yield: 5.70%
-- Positioned between Antwerp, Europe's second largest port, and Brussels.
-- Two modern, well-specified logistics warehouses with 10m eaves plus an office building.
-- Buildings entirely let to the substantial covenant of Cummins NV for over seven years.
-- Building functions as a principal EMEA distribution hub for the tenant.
-- Two plots of development land included totalling >35,000 sq m.
-- Solar panels providing a sustainable source of energy to the warehouse.
Peine, Hannover, Germany
Tenant partner: Action
Acquisition price: EUR86.0 million(1)
Net initial yield: 4.8%
-- Established logistics location close to Hannover with excellent road and rail connectivity.
-- Central location between Hamburg, Berlin and the Ruhr.
-- Newly built, well-specified, purpose-built asset.
-- Let to Action, the fastest growing non-food discount retailer
in Europe, on a long index-linked lease.
-- Building fulfils a key part of the logistics and distribution supply chain for occupier.
-- Expected to achieve DGNB Gold standard, offices heated and cooled by heat exchange pumps.
Bochum, Rhine-Ruhr, Germany
Tenant partners: SVH Handels and WM Group
Acquisition price: EUR37.8 million(1)
Net initial yield: 4.9%
-- Located in the Rhine-Ruhr region, a core logistics location with excellent transport links.
-- 37,000 sq m newly built logistics warehouse comprising four
units, one of which is let to SVH Handels for a fixed term of seven
years and the other to WM Group GmbH for a fixed term of five
years.
-- The two vacant units each benefited from a five-year rental guarantee from acquisition.
-- Strong potential to capture rental growth.
-- The energy usage of the warehouse is approximately 20% below the EPC requirement.
Post period event: Signed a five-year lease with Gruber
Logistics GmbH (see page 25 of Interim Report). Advanced
discussions with potential occupiers for the one unit still
available to let.
1 Purchase price corresponds to 100% of the shares in the SPV
holding the assets and excludes a non-controlling interest.
POST PERIOD EVENTS
CAPTURING EMBEDDED VALUE
"We are delighted that we have been able to lease these units so
swiftly following acquisition, and on terms exceeding our
expectations. These new lettings demonstrate not only the strength
of these prime logistics locations, but also the benefits of our
strategy of working closely with our market-leading asset managers,
Dietz and LCP. Their deep local knowledge, when coupled with our
in-house expertise, helps to ensure we move quickly to find
occupiers and deliver on the Company's strategy. We look forward to
a long and productive relationship with our new tenant partners, BD
myShopi NV in Bornem and Gruber Logistics at Bochum."
Nick Preston, Fund Manager
Bornem, Antwerp, Belgium
Within approximately four months from acquisition, the Group
successfully let the vacant unit, ahead of the timescale expected
at acquisition, and on terms which exceeded our expectations. The
unit, which has a gross internal area of 16,835 sq m had been
vacant for over 18 months prior to the Group's acquisition of the
property.
The tenant, Belgische Distributiedienst NV ("BD NV"), is part of
the BD myShopi NV group, who will act as guarantor to the lease.
The lease has been agreed for a nine-year term from 1 July 2019 at
an initial annual headline rent in line with our expected rental
value and 30% above the level of the income cover secured at
acquisition. The new rent is indexed from 1 July 2019 and will
compound annually at 100% of the Belgian Health Index. Works are
ongoing to facilitate the tenant's extensive fit out plans in
advance of the lease commencement date.
Bochum, Rhine-Ruhr, Germany
Within approximately four months of acquisition, the Group
secured the letting of the vacant unit to Gruber Logistics GmbH
("Gruber Logistics"), an established transportation and logistics
service provider in the German market and a subsidiary of Gruber
Logistics.
The lease has been agreed for a five-year term commencing on 1
April 2019. The initial rent is in line with the level of the
rental guarantee provided by Dietz AG at acquisition and is subject
to annual CPI uplifts reflecting 100% of the German Consumer Price
Index with a hurdle of 2%.
Gruber Logistics will occupy the property alongside the two
existing tenants, SVH Handels GmbH and WM Group GmbH. Advanced
discussions with potential occupiers for the one unit still
available to let on the property are ongoing.
POST PERIOD EVENTS
ACQUISITIONS
Wunstorf, Hannover, Germany
Tenant partner: HAVI Logistics
Acquisition price: EUR27.5 million
Net initial yield: 4.9%
Practical completion expected: January 2020
-- Established urban logistic location, 20km from the centre of Hannover.
-- Forward funding of a new cold store facility to complete in December 2019.
-- Let to Havi Logistics with security from the parent company.
-- Well-specified, with only 25% site cover and opportunity to
extend the building by c.10,000 sq m.
Lodz, Poland
Tenant partner: Castorama
Acquired: 24 December 2018 (conditional contract)
Acquisition price: EUR55.0 million
Net initial yield: 5.7%
Practical completion expected: May 2019
-- Optimum location in Central Poland adjacent to A2 and A1 motorway intersection.
-- Poland provides competitive labour supply and property costs compared to Western Europe.
-- Good growth prospects from low rent per sq m with annual indexation.
-- New, well specified 50,000 sq m building which is doubling in
size as a result of the development work undertaken between
exchange and completion.
-- Let to strong Castorama covenant with just under nine years remaining on the lease term.
-- Second warehouse in Lodz for tenant that has consolidated
distribution functions to this location, therefore critical to
supply chain.
Key Highlights
Purchase Size Contracted
Investment price sq m annual
Location Tenant(s) pillar net of passing
costs rent
EURm EUR000
==================== ===================== ======================= =============== ============= ================
Barcelona,
Spain Mango Foundation 150 186,138 7,553
==================== ===================== ======================= =============== ============= ================
Rome, Italy Amazon Foundation 118 158,373 6,182
==================== ===================== ======================= =============== ============= ================
Alcon-Couvreur and
Pharma-Distri
Bornem, Belgium Center Value Add 26 30,914 1,384
==================== ===================== ======================= =============== ============= ================
Rumst, Belgium Cummins Value Add 58 61,568 3,337
==================== ===================== ======================= =============== ============= ================
Peine, Germany Action Growth 86 92,693 4,184
==================== ===================== ======================= =============== ============= ================
SVH Handels and WM
Bochum, Germany Group Foundation 38 37,037 1,886
==================== ===================== ======================= =============== ============= ================
Total for assets completed at
period end 476 566,723 24,526
=========================================== ======================= =============== ============= ================
Post period
end
==================== ===================== ======================= =============== ============= ================
Wunstorf, Germany1 HAVI Foundation 27 16,423 1,353
==================== ===================== ======================= =============== ============= ================
Lodz, Poland2 Castorama Foundation 55 101,556 3,195
==================== ===================== ======================= =============== ============= ================
82 117,979 4,548
================================================================== =============== ============= ================
Total 558 684,702 29,074
==================================================================== =============== ============= ================
1 Exchanged contracts to forward fund a cold store and primary
distribution facility in Wunstorf near Hannover, Germany,
conditional on receiving a building permit.
2 Exchanged contracts to forward fund a new logistics facility
in Lodz, Poland, conditional on receiving tax clearance.
Post period events:
1 A building permit has been received for our asset at Wunstorf,
Germany. This triggered the acquisition of the building for EUR27.5
million under the conditional contract. Construction has now
started.
2 Polish tax authorities granted tax clearance in relation to
the purchase distribution centre in Lodz, Poland, which resulted in
the purchase becoming unconditional and the contract is now legally
binding.
KEY PERFORMANCE INDICATORS
Set out below are the key performance indicators we use to track
our strategic progress.
KPI Relevance to strategy Performance
1. Dividend The dividend reflects 0.4 cents per share
Dividends paid to our ability to deliver for the period to
shareholders and declared a growing income stream 31 December 2018
in relation to the from our portfolio
period. and is a key element
of our TR.
------------------------------- --------------------------
2. EPRA NAV The EPRA NAV reflects EUR326.3m /
Basic NAV adjusted our ability to grow EUR1.09 / share
for mark-to-market the portfolio and at 31 December 2018
valuation of derivatives. to add value to it
throughout the lifecycle
of our assets.
------------------------------- --------------------------
3. Total return (TR) TR measures the ultimate 1.0% for the period
TR measures the change outcome of our strategy, to 31 December 2018
in the adjusted net which is to create
asset value over the value for our shareholders
period plus dividends through our portfolio
paid. and to deliver a secure
and growing income
stream.
------------------------------- --------------------------
4. EPRA earnings A key measure of the EUR1.819m /
Earnings from operational Group's underlying 0.6 cents / share
activities. results and an indication for the period to
of the extent to which 31 December 2018
current dividend payments
are supported by earnings.
------------------------------- --------------------------
5. Adjusted earnings Adjusted EPS reflects EUR1.385m/
Post-tax adjusted our ability to generate 0.5 cents / share
EPS attributable to earnings from our for the period to
shareholders adjusting portfolio, which ultimately 31 December 2018
for other earnings underpins our dividend
not supported by cash payments.
flows.
See note 14 for reconciliation.
------------------------------- --------------------------
6. Total expense ratio This is a key measure 1.4% for the period
(TER) of our operational to 31 December 2018
The ratio of total performance. Keeping
administration and costs low supports
property operating our ability to pay
costs expressed as dividends.
a percentage of average
net asset value on
an annualised basis.
------------------------------- --------------------------
7. Loan to value ratio The LTV measures the 37% at 31 December
(LTV) prudence of our financing 2018
The proportion of strategy, balancing
our gross asset value the additional returns
(including cash) that and portfolio diversification
is funded by borrowings. that come with using
debt against the need
to successfully manage
risk.
------------------------------- --------------------------
8. Weighted average The WAULT is a key 12.2 years at 31 December
unexpired lease term measure of the quality 2018
(WAULT) of our portfolio.
The average unexpired Long lease terms underpin
lease term of the the security of our
property portfolio, income stream.
weighted by annual
passing rents.
------------------------------- --------------------------
9. Adjusted NAV Makes adjustments EUR336.0m/
EPRA NAV adjusted to EPRA NAV to provide EUR1.12/share
to include the impact stkeholders with the As at 31 December
of transfer taxes most relevant information 2018
estimation. on the current fair
value of the property
assets assuming a
corporate sale and
saving of real estate
transfer taxes.
------------------------------- --------------------------
PRINCIPAL RISKS
The principal risks that are specific to the Company's and its
industry are set out on pages 23-44 of the Company's prospectus. In
summary, the principal risks include the following:
Property Risk
Increasing competition for investment properties in the European
logistics real estate market may adversely affect the Company's
performance.
Property valuation is inherently subjective and uncertain and
the appraised value of the Group's properties may not accurately
reflect the current or future value of the Group's assets. This may
have a material adverse effect on the Group's financial condition,
business, prospects and results of operations.
The Group's due diligence may not identify all risks and
liabilities in respect of an acquisition.
A default by a major tenant could result in a significant loss
of letting income, void costs, a reduction in asset value and
increased bad debts, and may affect the Group's income and its
ability to meet its banking covenants.
The Investment Policy does not restrict the Company's exposure
to individual assets or tenants and includes only limited
restrictions on its exposure to individual geographies.
Concentration risk could make the Company's performance more
sensitive to the returns on individual investments, tenants and
countries than might otherwise be the case.
Any forward funded projects will be subject to the hazards and
risks normally associated with constructing and developing
commercial real estate, any of which could result in increased
costs and/or damage to persons or property.
Corporate Risk
The Company is dependent on the performance and expertise of the
Manager, the Investment Committee and the investment team.
As an externally managed company, the Company relies on the
services and reputations of the Manager, or any asset managers
appointed by the Group.
The Group will be dependent on the performance of third-party
contractors and sub-contractors, who may fail to perform their
contractual obligations.
Taxation Risk
A change in the Company's tax status or in taxation legislation
could adversely affect the Company's profits and portfolio value
and/or returns to shareholders.
If the Company fails to receive or maintain approval as an
investment trust, its income and gains will be subject to UK
corporation tax and it will be unable to designate dividends as
interest distributions to minimise UK corporation tax on interest
and other taxable income.
Political/Economic Risk
Adverse developments in general economic and political
conditions (whether globally, in the Targeted Countries, in the UK
or resulting from instability in the Eurozone), may adversely
affect the Group.
Financial Risk
The Company's investment strategy includes the use of leverage,
which will expose the Group to risks associated with borrowing.
The Company must be able to operate within its banking covenants
and failure to do so could lead to default and the Company's bank
funding being recalled.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
-- the consolidated set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted
by the EU;
-- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred
during the first six months of the year and their impact
on the consolidated set of financial statements; and a description
of the principal risks and uncertainties for the remaining
nine months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in
the first six months of the year and that have materially
affected the financial position or performance of the entity
during that period; and any changes in the related party
transactions that could do so.
Approved by the Board on 28 March 2019 and signed on its behalf
by:
Robert Orr
Director
CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE PERIOD FROM 1
JULY 2018 TO 31 DECEMBER 2018
Unaudited
From 1 July From 17 May
2018 to 2018 to
31 December 30 June
2018 2018
Note EUR 000 EUR 000
Rental income 4,936 -
Service charge income 462 -
------------ -----------
Gross property income 5,398 -
Direct property costs (511) -
------------ -----------
Net property income 4,887 -
Fair value loss on investment property 8 (8,036) -
Administrative expenses (1,806) -
------------ -----------
Operating loss 6 (4,955) -
Finance costs 7 (1,133) -
Change in fair value of interest rate
caps (349) -
------------ -----------
Loss before tax (6,437) -
Income tax expense (186) -
------------ -----------
Total comprehensive loss for the period (6,623) -
============ ===========
Total comprehensive loss attributable
to:
Shareholders of the Company (6,566) -
Non-controlling interests (57) -
------------ -----------
(6,623) -
============ ===========
Basic (and Diluted) Loss Per Share
(Cents) 14 (2.3) -
EPRA Earnings per share 14 0.6 -
Adjusted Earnings per share 14 0.5 -
=====
There are no items of comprehensive income other than the loss
for the year and therefore, no condensed consolidated statement of
comprehensive income is presented.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2018
Unaudited
31 December 30 June
2018 2018
Note EUR 000 EUR 000
Assets
Non-current assets
Investment properties 8 475,730 -
Derivative financial instruments 20 1,497 -
Trade and other receivables 9 6,617 -
----------- --------
483,844 -
----------- --------
Current assets
Trade and other receivables 9 18,591 57
Cash and cash equivalents 10 17,916 -
----------- --------
36,507 57
----------- --------
Total assets 520,351 57
----------- --------
Current liabilities
Trade and other payables 11 (19,141) -
Income tax liability (948) -
(20,089) -
----------- --------
Non-current liabilities
Loans and borrowings 12 (171,489) -
Tenant deposit 13 (1,167) -
----------- --------
(172,656) -
----------- --------
Total liabilities (192,745) -
----------- --------
Net assets 327,606 57
=========== ========
Equity
Share capital 16 3,000 57
Retained earnings 322,977 -
----------- --------
Equity attributable to owners of the
company 325,977 57
Non-controlling interests 18 1,629 -
----------- --------
Total equity 327,606 57
=========== ========
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2018 (CONTINUED)
Net Asset Value per share (expressed
in cents per share)
Basic NAV 15 1.09 -
EPRA NAV 15 1.09 -
Adjusted NAV 15 1.12 -
====
Approved by the Board on 28 March 2019 and signed on its behalf
by:
Robert Orr
Director
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
PERIOD FROM 1 JULY 2018 TO 31 DECEMBER 2018 (UNAUDITED)
Non-controlling
Share capital Share premium Retained earnings interests Total equity
EUR 000 EUR 000 EUR 000 EUR 000 EUR 000
At incorporation - - - - -
------------- ------------- ----------------- --------------- ------------
Profit for the period - - - - -
------------- ------------- ----------------- --------------- ------------
Total comprehensive income - - - - -
New preference shares subscribed 57 - - - 57
------------- ------------- ----------------- --------------- ------------
At 30 June 2018 57 - - - 57
============= ============= ================= =============== ============
Non- controlling
Share capital Share premium Retained earnings interests Total equity
EUR 000 EUR 000 EUR 000 EUR 000 EUR 000
At 1 July 2018 57 - - - 57
------------- ------------- ----------------- ---------------- ------------
Loss for the period - - (6,566) (57) (6,623)
------------- ------------- ----------------- ---------------- ------------
Total comprehensive loss - - (6,566) (57) (6,623)
New share capital subscribed 3,000 336,330 - - 339,330
Share issue costs - (6,787) - - (6,787)
Cancellation of preference shares (57) - - - (57)
Share premium cancelled by special
resolution - (329,543) 329,543 - -
Non-controlling interest in
acquisition
of subsidiary - - - 1,686 1,686
------------- ------------- ----------------- ---------------- ------------
At 31 December 2018 3,000 - 322,977 1,629 327,606
============= ============= ================= ================ ============
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD
FROM 1 JULY 2018 TO 31 DECEMBER 2018
Unaudited
Notes From 1 July From 17 May
2018 to 2018 to
31 December 30 June
2018 2018
EUR 000 EUR 000
Loss for the period (6,623) -
Adjustments for
Fair value adjustments - investment
property 8 8,036 -
Financing Costs 7 1,121 -
Fair value adjustments - financial
assets 20 349 -
Income tax expense 186 -
----- ------------ -----------
Cash generated from operating activities
before working capital changes 3,069 -
Receivables and prepayments (27,507) -
Payables and accrued expenses 17,463 -
----- ------------ -----------
Cash used in operating activities (6,975) -
Tax paid (215) -
Interest paid (398) -
----- ------------ -----------
Net cash used in operating activities (7,588) -
Cash flows from investing activities
Purchase of investment property 8 (478,279) -
Net cash used in investing activities (478,279) -
Cash flows from financing activities
IPO costs 17 (6,787) -
Investment in caps 20 (1,846) -
Loan issue costs 12 (2,601) -
Shares issued in the year 17 339,330 -
Loans received 12 174,001 -
Minority interest 18 1,686 -
----- ------------ -----------
Net cash generated from financing
activities 503,783 -
----- ------------ -----------
Net movement in cash and cash equivalents 17,916 -
Cash and cash equivalents at beginning
of period - -
----- ------------ -----------
Cash and cash equivalents at end
of period 17,916 -
===== ============ ===========
NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE PERIOD FROM
1 JULY 2018 TO 31 DECEMBER 2018
1 Corporate information
The condensed consolidated financial statements of the Group for
the six month period ended 31 December 2018 comprise the results of
Tritax EuroBox plc ("the Company") and its subsidiaries (together
"the Group") and were approved by the Board for issue 28 March
2019. The Company has elected to have its year end as 30 September.
Prior to the listing of the Company on the London Stock Exchange,
the Company filed dormant company financial statements as of and
for the period to 30 June 2018. The Company is a public limited
company incorporated and domiciled in England and Wales. The
Company's Ordinary Shares were listed on the Official List of the
UK Listing Authority and admitted to trading on the Main Market of
the London Stock Exchange on 4 July 2018. The registered address of
the Company is disclosed in the Company information.
The company will be releasing a property valuation and a NAV
Calculation for the quarter ending 31 March 2019 as part of the
proposed step up to a premium listing.
The nature of the Group's operations and its principal
activities are set out in the Manager's Report.
2 Accounting policies
Basis of preparation
These condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union and as issued by the
International Accounting Standards Board (IASB).
These are the first financial statements prepared by the Company
in accordance with principals of International Financial Reporting
Standards ("IFRS"), as endorsed by the European Union. The previous
financial statements as of and for the period ended 30 June 2018
were dormant company accounts.
The Group's financial information has been prepared on a
historical cost basis, as modified for valuation of the Group's
investment properties and interest rate derivatives, which have
been measured at fair value through the Condensed Consolidated
Income Statement.
The consolidated financial statements are presented in Euros and
all values are rounded to the nearest Euro (EUR'000), except when
otherwise indicated.
The financial information contained in this interim report does
not constitute full statutory accounts as defined in Section 434 of
the Companies Act 2006.
Going concern
The Directors have made an assessment of the Group's ability to
continue as a going concern and are satisfied that the Group has
the resources to continue in business for at least 12 months from
the date of approval of these financial statements. Furthermore,
the Directors are not aware of any material uncertainties that may
cast significant doubt upon the Group's ability to continue as a
going concern.
3 Significant accounting judgements, estimates and assumptions
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:
Judgement
Business combinations
The Group acquires subsidiaries that own investment properties.
At the time of acquisition, the Group considers whether each
acquisition represents the acquisition of a business or the
acquisition of an asset. The Group accounts for an acquisition as a
business combination where an integrated set of activities is
acquired in addition to the property. The Group accounts for
acquisitions as asset acquisition where the acquired property
company is revenue-generating but limited or no processes have been
transferred.
The Group has determined that for all acquisitions disclosed,
limited processes were transferred as all investment property
processes including marketing, portfolio management, financial
management and more sophisticated property management services are
delivered by the Group. As a consequence, all acquisitions are
based on the fair value of property at the acquisition date with no
goodwill or recognition of deferred tax on the property asset
arising for valuation gains prior to the acquisition date.
Estimate
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 January 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 8.
4 Standards issued but not yet effective
The following are new standards, interpretations and amendments,
which are not yet effective and have not been early adopted in this
financial information, that will or may have an effect on the
Group's future financial statements:
IFRS 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.
Other standards
The following amended standards and interpretations are not
expected to have a significant impact on the Group's consolidated
financial statements:
-- IFRIC 23 Uncertainty over Tax Treatments.
5 Summary of significant accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial
results of the Company and its subsidiaries, as at the period end
date.
Subsidiaries
A subsidiary is an entity controlled by the Group. Control is
achieved where the Group has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its
activities.
The accounting policies of subsidiaries are brought into line
with those used by the Group.
Segmental information
The Directors are of the opinion that the Group is engaged in a
single segment business, being the investment in the European
logistics assets. The Directors consider that these properties have
similar economic characteristics and management information
utilised by the Executive Committee to monitor and review
performance and is considered at a total level.
Investment property
Investment property comprises property that is owned, or held
under a lease, to earn rentals or for capital appreciation, or
both.
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
Condensed Consolidated Income Statement.
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
Condensed consolidated income statement as incurred.
In the event of a disposal or retirement of all or part of own
investment property, the difference between the net disposal
proceeds and the carrying amount of the asset result in either
gains or losses which are recognised in the Condensed consolidated
income statement in the period of retirement or disposal.
Fair value hierarchy
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities. The Group holds no Level 1
financial instruments.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable. The Group's interest rate cap (note 20) is a
Level 2 fair value measurement provide by the banking
counterparty.
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable.
All the Group's investment property is a Level 3 fair value
measurement.
Derivative financial instruments
Derivative financial instruments refer to interest rate caps
purchased for hedging purposes which are initially recognised at
fair value plus costs of acquisition and are subsequently measured
at fair value, being the estimated amount that the Group would
receive or pay to terminate the agreement at the period end date,
taking into account current interest rate expectations of the
Company and its counterparties. The Group does not apply hedge
accounting and hence the gain or loss at each fair value
remeasurement date is recognised in the Condensed consolidated
income statement.
The Group's estimate of the mark to market valuation value is
based on an estimate provided by the banking counterparty.
Trade and other receivables
Trade and other receivables are initially recognised at their
fair value and subsequently measured at the lower of their original
invoiced value and recoverable amount. Impairments are assessed on
the Expected Credit Loss method in accordance with IFRS 9.
Trade and other payables
Trade payables are initially recognised at their fair value,
being at their invoiced value inclusive of local VAT costs that
maybe applicable. Payables are subsequently measured at amortised
cost.
Foreign exchange
Sterling costs are booked at the rate purchased in Euros; period
end balances are converted into Euros at the Bloomberg rate. All
Group companies have Euros as their functional currency.
Share issue costs
Costs directly attributable to the issue of share capital are
charged to the Share Premium Account.
Borrowings
The Company has an unsecured Revolving Credit Facility ("RCF")
which is initially recognised at fair value less costs of issue and
subsequently at amortised cost. Costs of issue of the RCF are
amortised over the period of the loan.
General and specific borrowing costs that are directly
attributable to the acquisition, construction or production of a
qualifying asset are capitalised during the period of time that is
required to complete and prepare the asset for its intended use or
sale. Qualifying assets are assets that necessarily take a
substantial period of time to get ready for their intended use or
sale. Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying assets
is deducted from the borrowing costs eligible for
capitalisation.
Dividends payable to Shareholders
Equity dividends are recognised as liabilities 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.
Property income
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 revenue in the Condensed consolidated
income statement. 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 Condensed consolidated statement of financial
position.
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.
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. 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.
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 Condensed
consolidated income statement.
Service charges, insurances and other expenses recoverable from
tenants
Income arising from expenses recharged to tenants is recognised
in the period in which the compensation becomes receivable. Service
and insurance charges and other such receipts are included in
revenue gross of the related costs, as the Directors consider that
the Group acts as principal in this respect.
Finance costs
Finance costs consist of interest and other costs that the Group
incurs in connection with bank and other borrowings and the holding
of deposits in Euro bank accounts. These costs are recognised as an
expense in the Condensed consolidated income statement on an
effective interest basis.
Tax
Investment trusts which have approval as such under section 1158
of the Corporation Taxes Act 2010 are not liable for taxation on
capital gains. The Company has taken advantage of modified UK tax
treatment in respect of its qualifying interest income for an
accounting period and will designate as an "interest distribution"
all or part of any amount it distributes to the Shareholders as
dividends, to the extent that it has qualifying interest income for
the accounting period. As such, the Company will be able to deduct
such interest distributions from its income in calculating its
taxable profit for the relevant accounting period. It is expected
that the Company will have qualifying interest income and therefore
may decide to designate some or all of the dividends payable as
interest distributions.
The income tax expense recognised in each interim period is
based on the best estimate of the weighted-average annual income
tax rate expected for the full year applied to the pre-tax income
of the interim period. If different income tax rates apply to
different categories of income e.g. capital gains or to different
tax jurisdictions, then a separate rate is applied to each category
in the interim period, to the extent practicable. However, a
weighted-average rate across jurisdictions and income categories
may be used if it is a reasonable approximation of the effect of
using more specific rates.
6 Operating loss
Operating loss is stated after charging
From 1 July From 17 May
2018 to 2018 to
31 December 30 June
2018 2018
EUR 000 EUR 000
Investment management fees 902 -
Directors' remuneration 95 -
Auditor's fees 95 -
============ ===========
7 Finance costs
From 1 July From 17 May
2018 to 2018 to
31 December 30 June
2018 2018
EUR 000 EUR 000
Finance costs
Bank charge for Euros held on deposit 355 -
Interest expense 677 -
Amortisation of loan arrangement costs 89 -
------------ -------------------
Financing costs 1,121 -
Foreign exchange loss 12 -
Total finance costs 1,133 -
============ ===================
8 Investment properties
Investment
properties
land and buildings
EUR 000
Fair value
At 1 July 2018 -
Acquisition of property 469,124
Deferred consideration 5,487
Additional costs capitalised 8,133
Fixed rental uplift 596
Rent guarantees 426
Purchase of Investment Property 483,766
Fair value loss on investment property (8,036)
Market value per external valuation report 475,730
-------------------
Fair value at 31 December 2018 475,730
===================
The Group has elected to include within the carrying value of
investment property EUR596,000 in respect of accrued income arising
from the spreading of rents and up to EUR426,000 in respect of
expected receipts under rent guarantees.
Acquisitions
On 25 September 2018 the Group purchased its first asset in
Barcelona, Spain, of a retail distribution centre let to Mango for
EUR150 million. This property was acquired with the benefit of a
tenant deposit of EUR1.16 million and also a rent guarantee from
Banco Sabadell of up to EUR6.25 million.
On 16 October 2018 the Group purchased a unit let to Amazon in
Rome, Italy, for EUR118 million.
On 25 October 2018 the Group purchased two units in Belgium in
Rumst and Bornem for EUR83.4 million.
On 4 December 2018 the Group purchased a unit let to Action in
Peine, Germany, for EUR86 million.
On 10 December 2018 and 7 November 2018, the Group purchased
four units in Bochum, Germany. Two were let and the other two were
purchased with the benefit of a five year rent guarantee from Dietz
AG. One of these units has been let since the year end.
Valuation of investment property
Valuation of investment property is performed by Jones Lang
LaSalle, an accredited external valuer with recognised and relevant
professional qualifications and recent experience of the location
and category of the investment property being valued.
The valuation of the Group's investment property at fair value
on the basis of market value in accordance with the internationally
accepted RICS Valuation - Global standards 2017 published by the
Royal Institute of Chartered Surveyors ("RICS") in accordance with
IFRS 13 Fair Value. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date.
9 Trade and other receivables
31 December 30 June
2018 2018
Non-current trade and other receivables EUR 000 EUR 000
Cash in public institutions 1,167 -
VAT receivable 5,450 -
---------------- -----------
6,617 -
================ ===========
The Cash in public institutions is for a deposit received of
EUR1,166,666 given by the tenant for the property in Barcelona,
Spain.
31 December 30 June
2018 2018
Current trade and other receivables EUR 000 EUR 000
Trade receivables 2,146 -
VAT recoverable 14,016 -
Other receivables 2,429 57
----------- --------
18,591 57
=========== ========
All current assets have been reviewed and none of them were
considered to be impaired at the period end.
VAT receivable relates to VAT on the purchase of the property in
Italy which is recovered over two years until 2020.
10 Cash and cash equivalents
Note 31 December 30 June
2018 2018
EUR 000 EUR 000
Cash at bank 17,916 -
============ ========
11 Trade and other payables
31 December 30 June
2018 2018
EUR 000 EUR 000
Trade payables 6,430 -
Sundry payables 2,912 -
Accrued expenses 4,312 -
Deferred consideration 5,487 -
-------------- ----------
19,141 -
============== ==========
12 Loans and borrowings
31 December 30 June
2018 2018
EUR 000 EUR 000
Non-current loans and borrowings
Bank borrowings 171,489 -
============== ==========
On 19 October 2018, the Group agreed a long-term, Revolving
Credit Facility ("RCF") of EUR200 million with HSBC Bank PLC and
BNP Paribas. The facility is for five years, with an option to
extend for a further two years. The loan has a margin of 1.55% to
2.2% depending on the drawn level and the prevailing LTV
(loan-to-value) ratio. The RCF was extended on 11 December 2018 to
include EUR100 million of accordion funding from BAML.
The Group has been in compliance with all of the financial
covenants of the Group's bank facilities as applicable throughout
the period covered by these interim financial statements.
The costs of arranging the RCF that are unamortised as at the
year-end are offset against amounts drawn on the facilities as
shown in the table below:
31 December 30 June
2018 2018
EUR 000 EUR 000
Bank borrowings drawn: due in more than
one year 174,001 -
Loan issue costs paid (2,601) -
Non-cash amortisation of loan issue costs 89 -
----------- --------
171,489 -
=========== ========
13 Tenant deposit
31 December 30 June
2018 2018
EUR 000 EUR 000
Non-current liabilities
Tenant deposit 1,167 -
=========== ========
This balance relates to a cash deposit given by the tenant for
the property in Barcelona, Spain.
14 Earnings per share
Earnings per share
Earnings per share (EPS) are calculated by dividing loss for the
period attributable to ordinary equity holders of the Company by
the weighted average number of Ordinary Shares in issue during the
period.
Weighted Net Profit attributable Earnings
average to Ordinary Shareholders per share
number EUR 000 Cents
of Ordinary 31 December
Shares 2018
'000
Total Comprehensive Loss (6,566)
Weighted average number of Ordinary
Shares 286,885
Basic (and Diluted) Loss Per
Share (2.3)
------------ ------------------------- ------------
Adjustments to remove:
Change in fair value of investment
properties 8,036
Change in value of interest
rate derivatives 349
------------------------- ------------
EPRA Earnings 1,819 0.6
Rent guarantee receipts excluded
from property income 73
Fixed rental uplifts recognised
in rental income (596)
Amortisation of loan arrangement
costs 89
------------------------- ------------
Adjusted Earnings 1,385 0.5
========================= ============
There were no earnings in the period to 30 June 2018.
Adjusted earnings is a performance measure used by the Board to
assess the level of the Group's dividend payments. The metric
amends EPRA earnings for non-cash items credited or charged to the
Condensed consolidated income statement, such as fixed rental
uplift adjustments and amortisation of loan arrangement fees. The
Board reviews the Adjusted earnings when considering the level of
dividend to pay.
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.
Rental guarantee adjustments relate to acquired assets with
leases which have had an income guarantee attached to them as part
of the acquisition of the asset. The rental guarantee is released
as distributable income over the period of the lease which it is
intended to cover, however, this release does not go through rental
income in the Condensed consolidated income statement, and as such
an adjustment is made to recognise the receipt.
15 Net Asset Value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the
Condensed Consolidated Statement of Financial Position attributable
to ordinary equity holders of the parent by the number of Ordinary
Shares outstanding at the end of the period.
Number of ordinary Net Assets Assets Per
shares attributable Share
'000 to Ordinary 31 December
Shareholders 2018
EUR
EUR'000
Number of Ordinary Shares 300,000
Net assets per Condensed Group
statement of financial position 325,977
Basic NAV 1.09
Mark-to-Market adjustment of
derivatives 349
------------- ------------
EPRA NAV 326,326 1.09
Impact of transfer taxes estimation 9,650
------------- ------------
Adjusted NAV 335,976 1.12
============= ============
There were no Ordinary Shares in issue at 30 June 2018.
The adjusted NAV is after adding back the EUR9.65 million of
additional transfer taxes that were included within the valuation
to reflect an assumption that assets will be sold by the property
companies in which they sit. In most European markets the
established practice is to sell the assets within a corporate
structure which means that this high frictional cost is not
incurred.
16 Share capital
Allotted, called up and fully paid shares
31 December 2018 30 June 2018
No. 000 EUR 000 No. 000 EUR 000
Ordinary shares of EUR0.01
each 300,000 3,000 - -
Preference shares of
EUR1 each - - 57 57
On 26 September 2018, the Group cancelled 57,100 redeemable
preference shares with a nominal value of EUR57,100. The preference
shares did not carry any rights to a dividend.
The Group has one class of Ordinary Shares which carry no right
to fixed income.
17 Share premium account
31 December 30 June
2018 2018
EUR 000 EUR 000
Balance at the beginning of the period - -
Issued on admission to trading on the London
Stock Exchange on 9 July 336,330 -
Share issue costs (6,787) -
Cancellation of share premium (329,543) -
------------- --------
Balance at the end of the period - -
============= ========
The 1 cent shares listed on the Main Market of the London Stock
Exchange on 4 July 2018 were issued for GBP1. Following a Special
Resolution of Tritax EuroBox plc the High Court cancelled this
share premium on 25 September 2018. This resulted in the full
balance being transferred into distributable reserves.
18 Non-controlling interests
The non-controlling interests reserve reflects a 5.1%
non-controlling interest held in two German asset holding
SPV's.
19 Guarantees and commitments
Operating leases
The Company has entered into commercial property leases on its
investment property portfolio. These non-cancellable leases have a
remaining term of between 1 and 18 years.
The total future value of minimum lease payments is as
follows:
31 December 30 June
2018 2018
EUR 000 EUR 000
Within one year 26,330 -
In two to five years 117,317 -
In over five years 230,648 -
----------- --------
374,295 -
=========== ========
Purchase of property in Wunstorf
In the period the Group exchanged contracts to provide forward
funding for the development of a new cold store and primary
distribution facility at Wunstorf, near Hannover in Germany. The
development represents an investment of EUR27.5 million, reflecting
a net initial yield of 4.9% on the acquisition. The Group completed
the acquisition of the land in February 2019 and the building is
expected to be delivered to the tenant, HAVI Logistics GmbH, in
January 2020.
Purchase of property in Poland
In the period the Group exchanged contracts to purchase a
forward funding development of a logistics warehouse in Lodz,
Poland. The three phase development has a price of EUR55m net of
costs, reflecting an anticipated net initial yield of 5.7%. The
purchase is conditional on a VAT ruling from the Polish tax
authorities, which is expected in March 2019. Phase I of the
development has completed and the vendor is onsite progressing the
development of phases II and III. Once fully complete the building
will be entirely let to Castorama Polska Sp. Zoo for a term
expiring in November 2027.
20 Derivative financial instruments
Non-current
31 December
2018 30 June 2018
EUR 000 EUR 000
Interest rate caps 1,497 -
================ ================
This reflects EUR200 million of interest rate CAPS at 0.75% for
the five-year period to October 2023.
These were acquired for EUR1.846 million in December but were
revalued at the 31 December resulting in a revaluation loss of
EUR0.349 million which was recognised in the Condensed consolidated
income statement for the period.
21 Related party transactions
The fees calculated and payable for the period to the Investment
Manager and Directors were as follows:
31 December
2018 30 June 2018
EUR 000 EUR 000
Tritax Management LLP Investment Management
Fees 902 -
SG Commercial LLP* Agency Fees 594 -
Directors' remuneration 95 -
----------- ------------
1,591 -
=========== ============
*Of the four controlling members of the Investment Manager,
namely Mark Shaw, Colin Godfrey, James Dunlop and Henry Franklin,
all except Henry Franklin are also controlling members of SG
Commercial LLP Agency Fees. The agency fees to SG Commercial
represents 19% of the agency costs incurred by the Group during the
period. There are no existing contractual arrangements between the
Group and SG Commercial although they may choose to use them in the
future. Any such appointment would be on the market based arm's
length terms and the Board has and shall continue to be consulted
and asked for their approval.
There have been no other related party transactions during the
period.
22 Non adjusting events after the financial period
A further GBP100 million cap was purchased on 22 February 2019
to protect the Group from interest rates in excess of 0.5% for the
period to October 2023.
In relation to the purchase of a property in Wundstorf set out
in note 15, the Group completed the acquisition of the land in
February 2019 and the building is expected to be delivered to the
tenant, HAVI Logistics GmbH, in January 2020.
The Group completed the acquisition of a building pre-let to
Castorama Polska Sp. Zoo in Poland for EUR55 million net of
costs.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LIFSDVVITFIA
(END) Dow Jones Newswires
March 28, 2019 03:51 ET (07:51 GMT)
Grafico Azioni Tritax Eurobox (LSE:BOXE)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Tritax Eurobox (LSE:BOXE)
Storico
Da Apr 2023 a Apr 2024
