HALF YEAR RESULTS TO 30 SEPTEMBER 2019 WWW.URBANLOGISTICSREIT.COM - - PowerPoint PPT Presentation

HALF YEAR RESULTS

WWW.URBANLOGISTICSREIT.COM

TO 30 SEPTEMBER 2019

IMPORTANT LEGAL NOTICE

By attending the meeting where this presentation is made, or by reading this document, you agree to be bound by the limitations set out below. The information set out herein may be subject to updating, completion, revision and amendment and such information may change materially. Urban Logistics REIT plc (the “Company”), its advisers nor any other person, representative or employee undertakes any obligation to update any of the information contained herein. No representation or warranty, express or implied, is or will be made by the Company, its advisers or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation and any reliance you place on them will be at your sole risk. Without prejudice to the foregoing, neither the Company, its associates, its advisers nor its representatives accept any liability whatsoever for any loss howsoever arising, directly or indirectly, from the use of this presentation

• r its contents or otherwise arising in connection therewith.

This presentation is for information only. This presentation does not constitute an

• ffer for sale or subscription of, or solicitation of any offer to buy or subscribe for,

any securities of the Company nor should it form the basis of or be relied on in connection with any contract or commitment whatsoever. It does not constitute a recommendation regarding any securities. Past performance, including the price at which the Company’s securities have been bought or sold in the past and the past yield on the Company’s securities, cannot be relied on as a guide to future performance. Nothing herein should be construed as financial legal, tax, accounting, actuarial or other specialist advice. This presentation is not for distribution in the United States, Canada, Australia

• r Japan or in any jurisdiction where such distribution is unlawful.

Certain statements in this presentation constitute forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding the Company’s future expectations,

• perations, financial performance, financial condition and business is a

forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this presentation. As a result you are cautioned not to place reliance on such forward-looking statements. Nothing in this presentation should be construed as a profit forecast.

1

PAGE HIGHLIGHTS 5 THE MARKET 10 STRATEGY 13 OUR PORTFOLIO 16 ASSET MANAGEMENT 21 SUMMARY 27 APPENDIX 29

3

INTRODUCTION

4

URBAN LOGISTICS REIT

• UK REIT quoted on the AIM market of the London Stock

Exchange

• Income and Total Return strategy
• Invests in mid-box logistics sites in the urban logistics

market

• Focus on quality assets in key geographical locations
• Management team with unrivalled experience in

industrial property market

• Sector leading performance: 16.0% p.a. average total

return since IPO

INTRODUCTION

1. By property value 2. Per Dunn & Bradstreet (delinquency risk).

DIFFERENTIATORS Focus on “last mile” 20,000-200,000 sq.ft

• Highest growth segment

Strategic locations 73% Midlands and South East bias ¹

• Area with the strongest

take-up of logistics space Strong covenant 89% low/low-moderate risk ²

• Single-let assets
• High-quality tenants

5

HIGHLIGHTS

6

FINANCIAL HIGHLIGHTS

ANOTHER STRONG FINANCIAL PERFORMANCE

• Net rental income of £5.8m for H1 2020,

representing an increase of 31.3% from H1 2019

• Income leakage of only 0.8% as result of 100%
• ccupancy throughout the period
• Dividend per share 25.0% ahead of H1 2019
• EPRA NAV per share up 5.2% from 31 March 2019,

driven largely by like-for-like growth in our investment portfolio of 3.8%

• LTV of 34.1%, within our target of 35-40%

EPRA earnings

£3.4m +30.9% (H1 2019: £2.6m)

Dividend per share

3.75p +25.0% (H1 2019: 3.00p)

EPRA NAV per share

145.20p +5.2% from Mar 2019

Total Accounting Return

8.2% (H1 2019: 8.1%)

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URBAN LOGISTICS REIT

SECTOR LEADING RETURNS

Total accounting return ¹ Dividend per share EPRA earnings

£1.1m £2.5m £5.9m £3.4m

• £1.0m

£2.0m £3.0m £4.0m £5.0m £6.0m £7.0m Mar 17 Mar 18 Mar 19 Sep 19

1. Cumulative return generated from IPO (share price 100.00p)

6.23p 6.32p 7.00p 3.75p

• 2.00p

4.00p 6.00p 8.00p Mar 17 Mar 18 Mar 19 Sep 19 16% 5% 13% 5% 3% 5% 5% 3% 0% 10% 20% 30% 40% 50% 60% 0% 5% 10% 15% 20% 25% Mar 17 Mar 18 Mar 19 Sep 19 NAV growth Dividend Cumulative 56%

8

OPERATIONAL HIGHLIGHTS

ACTIVE ASSET MANAGEMENT DURING THE PERIOD

ACQUISITIONS

• £15.2m of investments in the period ¹
• Sourced off-market with a blended NIY of 6.6%
• 80% (by value) located in South East and Midlands

ASSET MANAGEMENT

• 4 rent reviews and 3 new lettings ²
• Average LFL income growth of 38% on rent reviews
• 100% occupancy

DISPOSALS

• £18.4m of asset sales, 5% ahead of NBV
• Average NIY at disposal of 4.9% v 7.0% at acquisition
• Total property return of c.50% from asset sales in the period

Portfolio value ³

£195.0m

Valuation uplift

£5.6m

EPRA cost ratio

18.6%

WAULT

6.1 years

1. Excluding development land 2. Includes two rent reviews settled post period end. 3. Per CBRE independent valuation at 30 September 2019

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URBAN LOGISTICS REIT

DRIVING PERFORMANCE THROUGH ASSET MANAGEMENT

Like for like capital growth Driven by management decisions Total property return Six months to 30 Sep 19 Income 3% Capital 4% Total Property Return 7%

10% 13% 11% 4% 0% 2% 4% 6% 8% 10% 12% 14% Mar 17 Mar 18 Mar 19 H1 20 78% 69% 70% 84% 22% 31% 30% 16% 0% 20% 40% 60% 80% 100% Mar 17 Mar 18 Mar 19 H1 20 Asset management Market movement 11% 9% 9% 7% 5% 8% 7% 0% 10% 20% 30% 40% 50% 60% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Mar 17 Mar 18 Mar 19 Sep 19 H1 H2 Cumulative 56%

10

THE MARKET

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URBAN LOGISTICS REIT

FALL IN SUPPLY AND LOW VACANCY RATES

Fall in supply ¹ Vacancy rates at c.7% ¹

• Supply of warehouse space has fallen by 30% since 2012
• Stabilised vacancy rates of c.7%, down from c.11% in 2012
• Replacement costs too high to justify meaningful development of mid-box warehouses
• Supply constraints and low vacancies will continue to put upward pressure on rental values
• 1. Source: Savills

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URBAN LOGISTICS REIT

STEADY TAKE UP AND RISING RENTS

• Units under 100,000 sq ft account for 67% of take up in 2019
• Average rents risen by c.50% since 2012
• Market rental growth of c.3% pa forecast through to 2022

Steady levels of take up ¹ Rental growth forecast ²

1. Source: Savills 2. Source: Savills, PMA, Realfor

13

STRATEGY

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URBAN LOGISTICS REIT

HOW WE CREATE VALUE FOR OUR SHAREHOLDERS

1. The blended NIY on properties acquired in the period was 6.6%. 2. This includes two rent reviews that were settled shortly after the period end, but had effective review dates that fell within the interim period

BUY WELL ASSET MANAGEMENT PROVING VALUES

4.9% average disposal yield

• n asset sold in the period

Sales at or above book value 50% total property return generated from assets sold in the period

VALUE CREATION 16.0% 11.0% average EPRA NAV per share growth pa since IPO

average Total Accounting Return pa since IPO

12 rent reviews and 14 new lettings/lease re-gears completed since IPO 38% average LFL income growth for rent reviews settled in the period ² 84% of valuation uplift achieved in the period through asset management 45 properties acquired since IPO 7.1% ¹ average purchase yield on assets acquired since IPO 30-70% replacement cost

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URBAN LOGISTICS REIT

STRUCTURAL TAILWINDS

Ecommerce as % of total retail sales

13% 15% 16% 18% 19% 25% 0% 5% 10% 15% 20% 25% 30% 2015 2016 2017 2018 2019 F'cast 2022

Structural not cyclical drivers

• Ecommerce is expected to account for

19% of total retail sales in 2019

• Forecast to reach 25% by 2022
• Reduced land availability for warehouse

space creating upward pressure on rent and land values

• Average population growth of 10% over

next 20 years in major UK conurbations

Source: Oxford Economics Source: Office of National Statistics, Retail Economics

Current lands values and average rents

Region £ per acre Rent per sq.ft Leeds 650,000 £6.75 Manchester 650,000 £7.25 Coventry 950,000 £6.95 Northampton 950,000 £7.25 Leicester 750,000 £6.75 Reading 2,000,000 £11.75

Source: Colliers

16

OUR PORTFOLIO

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URBAN LOGISTICS REIT

AT A GLANCE

Portfolio value ¹ Valuation NIY

£195.0m 6.2%

• No. of assets

Purchase NIY

38 7.1%

Area Contracted rent

2.2m sq. ft £12.2m

1. Per CBRE independent valuation at 30 September 2019.

Other sites Top 10 sites*

*By market value

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URBAN LOGISTICS REIT

WELL LOCATED WITH HIGH QUALITY TENANTS

Location Tenant diversity Income leakage Credit ratings 1

99.2% 0.8%

Net income Income leakage

50% 23% 27%

3PL SME Large corporate

1. Per Dunn & Bradstreet (delinquency risk)

66% 7% 27%

Midlands South East Other

89% 2% 9%

Low/low-moderate risk Moderate risk Moderate-high/high risk

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URBAN LOGISTICS REIT

CREATING DEPENDABLE INCOME GROWTH

11% 10% 9% 9% 8% 7% 5% 4% 4% 4% XPO Unipart Group DHL Your Farmer Produce Culina Logistics Tuffnells Parcels Express Hillary's Blinds OTC Direct Manitowoc Crane Group (UK) Strata Products

Top 10 tenants (% of contracted income) ²

1. Includes two rent reviews settled post period end 2. As a percentage of contracted rent at 30 September 2019

2.9% 4.8% 2.0% 3.1% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% Mar 17 Mar 18 Mar 19 Sep 19 ²

LFL contracted rental income growth ¹ Contractual rent reviews ²

13.0% 9.1% 26.8% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

0-1 year 1-2 years 3-5 years

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URBAN LOGISTICS REIT

OPPORTUNITY TO CREATE VALUE

WAULT by contracted rent Valuation yield ¹ Short leases provide opportunity WAULT of 6.1 years at 30 September 2019 Average like-for-like income growth on:

• Rent reviews 29%
• New lettings 23%

31.3% 33.1% 35.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 0-3 years 4-5 years 6+ years 7.3% 5.8% 5.6% 0.7% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 0-3 years 4-5 years 6+ years

1. The valuation yield on assets with a WAULT greater than 6 years is skewed by recent Tuffnells portfolio acquisition, which has a valuation NIY of 7.4%.

Tuffnells portfolio

21

ASSET MANAGEMENT

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URBAN LOGISTICS REIT

INVESTMENT ACTIVITY

Acquisitions ¹ Disposals

• £15.2m off-market acquisitions,

last mile logistics and parcel depots, 100% occupied

• 80% Midlands/South-East
• 6.6% blended NIY
• £18.4m selective asset disposals
• Recycled into higher yielding assets
• On averaged 5.4% ahead of last valuation
• 50% total property return

POSTLEY ROAD TUFFNELLS PORTFOLIO

1. Excludes development land

COVENTRY NEWPORT PLYMOUTH ANDOVER

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URBAN LOGISTICS REIT

ACQUISITION – TUFFNELLS PORTFOLIO

The portfolio Six parcel distribution depots acquired from Connect Group plc for £10m at 7.0% NIY.

• Low site cover of 18%
• Distributor specialising in irregular

dimensions and weights

• Located in urban locations
• 20 year 1-4% cap and collar leases
• 70% Midlands/South East

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URBAN LOGISTICS REIT

DISPOSALS – PROVING VALUES

1. Purchase price includes acquisition costs of £0.4m 2. Includes net income and capital expenditure during ownership

POSTLEY ROAD

H1 2020 Disposals: £18.4m

NUNEATON CEMETERY ROAD

Purchase price ¹ £6.9m £5.7m £0.6m Sales price £8.1m £9.1m £1.2m Total property return ² 23.3% 73.1% 126.3% Sales price v NBV +1.3% +8.2% +14.3% Disposal NIY 4.7% 4.7% 5.3%

25

URBAN LOGISTICS REIT

FORWARD FUNDING OF NEW WAREHOUSING

Yield on cost ¹ 6.0% 6.0% 6.0% Total cost ² £8.5m £6.9m £4.6m Unit size 86,000 63,500 24,000

• The Group will benefit from a 6% interest rate coupon on forward funding provided.

Practical completion for all sites is expected in Q1 of FY 2021

• A two-year rent guarantee will be in place from practical completion for all sites

HINCKLEY STONE SOUTHWATER

1. Based on expected rental values 2. Includes allowance for tenant incentives

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URBAN LOGISTICS REIT

ACTIVE ASSET MANAGEMENT

• No. of

Deals Rental Uplift LFL Rental Uplift % of Sep 19 Rent ¹ WAULT (years)

New lettings 3 £0.2m n/a 2% 7.3 Fixed rent reviews 1 £0.1m 20% 2% n/a OMV rent reviews ¹ 3 £0.3m 44% 8% n/a Total 7 £0.6m 38% 12%

• 13% of rent roll subject to outstanding rent reviews providing opportunity for further income growth and

valuation upside

• £2m increase in valuation attributed to settled rent reviews and new lettings
• Rent reviews post period end were settled 9% ahead of ERV

1. Includes two rent reviews settled post period end.

27

SUMMARY

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URBAN LOGISTICS REIT

WELL POSITIONED

• Market fundamentals remain resilient, with strong
• ccupier demand and low vacancy rates
• H2 2020 income to benefit from acquisitions and

rent reviews settled, on average, 9% ahead of ERV

• 13% of contractual rental income subject to outstanding rent

reviews which we expect to conclude prior to 31 March 2020

• Low rent per sq.ft of £4.90 across our industrial and

logistics portfolio with significant upside potential Total accounting return

8.2%

Dividend per share

3.75p

Average rent per sq.ft

£4.90

APPENDIX

29

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URBAN LOGISTICS REIT

CASE STUDY – BUY WELL, IMPROVE RENT, RECYCLE

Units A-D, Postley Road, Bedford

• Purchased at IPO for £5.7m and comprised four units and

development land

• Increased rent to £6.52psf on Unit A and to £6.26psf on Unit B,

up from £4.00psf

• With little further asset management available, the property was sold

in May 2019. The land element was retained and the purchaser has an option to acquire for £0.5m if planning redevelopment is granted

• 1. Includes purchaser costs of £0.2m

£5.7m £9.1m

£0.5m £1.5m £0.7m £0.7m

• £1.0m

£2.0m £3.0m £4.0m £5.0m £6.0m £7.0m £8.0m £9.0m £10.0m Purchase price ¹ Mar 17 Mar 18 Mar 19 Disposal premium Sales price

Capital growth = 60%

Purchase NIY

6.02%

Sales price v NBV

+8%

Disposal NIY

4.7%

TPR

73%

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URBAN LOGISTICS REIT

INCOME STATEMENT

£m 30 Sep 19 30 Sep 18 Variance Net rental income 5.8 4.4 +31% Administrative expenses (1.1) (0.9) EBIT 4.7 3.5 +33% Net finance costs (1.3) (0.9) EPRA earnings 3.4 2.6 +31% IFRS profit 9.0 9.3 EPRA earnings per share 3.92p 3.13p +25% Dividend per share 3.75p 3.00p +25%

Income leakage

0.8%

(H1 19: 8.9%)

Contracted rent

£12.2m

(H1 19: £10.7m)

EPRA cost ratio

18.6%

(H1 19: 26.2%)

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URBAN LOGISTICS REIT

BALANCE SHEET

£m 30 Sep 19 30 Sep 18 Movement Investment property 195.0 173.8 +12% Cash 9.1 4.8 Debt (75.7) (64.4) Interest rate derivatives (1.3) 0.1 Other net liabilities (1.0) (2.3) Net assets 126.1 112.0 +13% EPRA adjustments 1.3 (0.1) EPRA net asset 127.4 111.9 +14% EPRA NAV per share 145.20p 129.21p +12%

Total accounting return

8.2%

(H1 19: 8.1%)

Loan to value

34.1%

(H1 19: 34.3%)

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URBAN LOGISTICS REIT

EPRA NAV BRIDGE

137.96p 145.20p 4.02p 3.92p 0.66p 6.42p 0.25p

134.00p 136.00p 138.00p 140.00p 142.00p 144.00p 146.00p EPRA NAV Mar 19 EPRA earnings Profit on disposal of

• inv. properties

Dividends paid Revaluation Other EPRA NAV Sep 19

5.2%

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URBAN LOGISTICS REIT

POTENTIAL FOR FURTHER INCOME GROWTH

£12.2m £14.2m £0.3m £0.5m £1.2m

£10.0m £10.5m £11.0m £11.5m £12.0m £12.5m £13.0m £13.5m £14.0m £14.5m Contracted rent at 30 September 19 Rent reviews settled post period end Reversion ¹ Development pipeline Total potential

1. Per CBRE valuation report as at 30 September 2019

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URBAN LOGISTICS REIT

FINANCING OVERVIEW

Gross debt Debt maturity

£75.7m

(secured)

3.2 years

Interest cover ratio

3.3x 4.4x 4.4x 4.2x

• 1.0x

2.0x 3.0x 4.0x 5.0x Mar 17 Mar 18 Mar 19 Sep 19

Weighted average cost of debt Hedging Loan to value

72% 34%

3.1% 3.0% 3.1% 3.1%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% Mar 17 Mar 18 Mar 19 Sep 19

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URBAN LOGISTICS REIT

FINANCIAL TRACK RECORD

FY 2017 FY 2018 FY 2019 H1 2020

Contracted rent £3.3m £7.6m £11.3m £12.2m EPRA earnings ¹ £1.1m £3.1m £5.9m £3.4m EPRA earnings per share ¹ 7.82p 6.12p 7.01p 3.92p Dividend per share 6.23p 6.32p 7.00p 3.75p EPRA cost ratio 22.3% 20.1% 23.5% 18.6% Number of assets 13 29 33 38 Portfolio valuation ² £43.4m £131.8m £186.4m £195.0m EPRA net assets £25.5m £84.2m £121.2m £127.4m EPRA NAV per share 116.11p 122.49p 137.96p 145.20p EPRA NAV per share growth 16.1% 5.5% 12.6% 5.2% Loan to value 38.5% 34.4% 33.7% 34.1% Total accounting return 19.1% 10.9% 17.7% 8.2%

1. FY 2018 adjusted for LTIP crystallisation in August 2017 2. Per CBRE independent valuation at period end

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URBAN LOGISTICS REIT

A BOARD WITH EXPERIENCE AND EXPERTISE

Richard Moffitt CEO

Former Head of UK Distribution at CBRE Qualified Chartered Surveyor 25 years of experience in acquisition, performance and disposal of investments Experience includes: ‒ Acquired, managed and traded £175 million asset portfolio ‒ Acquired and repositioned €135 million industrial portfolio in Germany

Christopher Turner Asset Manager

Nigel brings a wealth of Board experience, having operated across the globe in senior positions, most recently at Segro plc where he was Chairman for 10 years

Nigel Rich Independent Non-Executive Chairman Jonathan Gray Independent Non-Executive Director

Jonathan has considerable financial services experience having worked in senior roles at HSBC, UBS and NCB Co-founded Pacific Investments with Sir John Beckwith

Mark Johnson Non Independent Non-Executive Director Bruce Anderson Independent Non-Executive Director

Bruce has considerable real estate, REIT and financial services experience having worked in senior roles at Green, Lloyds, HBoS and Bank of Scotland > 25 years’ experience of UK Industrial and Logistics markets Transaction history includes: ‒ Goodman acquisition of Rosemound for £650m + ‒ Scaling up and subsequent disposal by London & Stamford Plc for in excess of £350m ‒ Disposal of £300m of assets to Logicor by Anglesea ‒ Founding partner of M3 Agency LLP (logistics property consultancy). ‒ Ran CBRE Logistics business 2010-2015

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URBAN LOGISTICS REIT

MANAGEMENT ARRANGEMENTS

Investment Management Agreement runs to April 2024

ANNUAL MANAGEMENT FEE:

0.95% EPRA NAV per annum, paid in cash quarterly in arrears

LONG TERM INCENTIVE PLAN (“LTIP”):

The LTIP has a NAV Element and a Share Price Element. It is assessed on (i) 30 September 2020 (the “First Calculation Date”); and (ii) 30 September 2023 (the “Second Calculation Date”)

NAV ELEMENT:

10% of excess of NAV Per Share Return over an annualised 9% hurdle, multiplied by the number of shares in issue at the relevant calculation date

SHARE PRICE ELEMENT:

10% of excess of Share Price Element (including dividends) over an annualised 9% hurdle, multiplied by the number of shares in issue at the relevant calculation date

FIRST CALCULATION DATE:

Share Price Element and NAV Element calculated by reference to the capital raise placing price in August 2017 – 115p

SECOND CALCULATION DATE:

If a payment is made at the First Calculation Date under either element, the hurdle for that element at the Second Calculation Date shall be re-set to the prevailing EPRA NAV per share/share price as at the First Calculation Date (as applicable). If no payment is made under an element, then that element shall continue to be calculated by reference to the capital raise placing price If there is a change of control, the LTIP will be assessed by applying the relevant offer price to the NAV Element and the Share Price Element calculations at the Change of Control Date The LTIP will be paid, at the plc Board’s discretion, in shares or cash