RECOMMENDED ACQUISITION OF A&J MUCKLOW www.londonmetric.com - - PowerPoint PPT Presentation

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RECOMMENDED ACQUISITION OF A&J MUCKLOW www.londonmetric.com - - PowerPoint PPT Presentation

LONDONMETRIC FY 2019 RESULTS & RECOMMENDED ACQUISITION OF A&J MUCKLOW www.londonmetric.com IMPORTANT NOTICE The information contained in this presentation in respect of LondonMetric Property Plc (the Company ) and communicated


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www.londonmetric.com

LONDONMETRIC FY 2019 RESULTS & RECOMMENDED ACQUISITION OF A&J MUCKLOW

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IMPORTANT NOTICE

The information contained in this presentation in respect of LondonMetric Property Plc (the “Company”) and communicated during any delivery of the presentation whether orally or in writing, including the talks given by the presenters, any question and answer session and any document or material distributed at or in connection with the presentation (together, the “Presentation”) is only being made, supplied or directed at persons (a) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“Order”) (investment professionals) or (b) who fall within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations etc.) (all such persons referred to above being “Relevant Persons”). Any investment or investment activity to which the Presentation relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Each recipient is deemed to confirm, represent and warrant to the Company that they are a Relevant Person. Persons who are not Relevant Persons must not attend or receive this Presentation. No person may rely on or act upon the matters communicated in this Presentation. Any person who is not a Relevant Person who has received any document forming part of this Presentation must return it immediately. This Presentation is not a prospectus or a prospectus equivalent document and does not constitute, or form part of, nor is it intended to communicate, any offer, invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract for any such sale, issue, purchase or subscription. This Presentation does not constitute a recommendation regarding the Company’s securities. In particular, but without limitation, the information in this Presentation prepared in connection with the proposed recommended cash and share offer for A&J Mucklow Group plc(“Mucklow”) by the Company pursuant to which the Company will acquire the entire issued share capital and to be issued share capital of Mucklow, to be implemented by way of a scheme of arrangement under Part 26 of the Companies Act 2006, as amended (the “Combination”) should not be considered a recommendation regarding the Company’s securities or a recommendation to vote in favour of the Combination. Any such decision should only be made on the basis of the information in the combined circular and prospectus, and, in the case of Mucklow shareholders, the scheme document which will be circulated to Mucklow shareholders, to be published in connection with the Combination and not on the information contained in this Presentation. Recipients of the Presentation should conduct their own investigation, evaluation and analysis of the business, data and property described in the Presentation. The contents of the Presentation have not been examined or approved by the Financial Conduct Authority (“FCA”) or London Stock Exchange plc (the “London Stock Exchange”), nor is it intended that the Presentation will be so examined or approved. The information and opinions contained in the Presentation are subject to updating, completion, revision, further verification and amendment in any way without liability or notice to any party. The contents of this Presentation have not been independently verified and accordingly, no reliance may be placed for any purpose whatsoever on the information or opinions contained or expressed in the Presentation or

  • n the completeness, accuracy or fairness of such information and opinions. No undertaking, representation or warranty or other assurance, express or implied, is made or given as to the accuracy, completeness or fairness of

the information or opinions contained or expressed in the Presentation and, save in the case of fraud, no responsibility or liability is accepted by any person for any loss, cost or damage suffered or incurred as a result of the reliance on such information or opinions. In addition, no duty of care or otherwise is owed by any such person to recipients of the Presentation or any other person in relation to the Presentation. Past performance cannot be relied on as a guide for future performance. Certain statements, beliefs and opinions contained in this Presentation, particularly those regarding the possible or assumed future financial or other performance of the Company, industry growth or other trend projections are or may be forward looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “goal”, “target”, “aim”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company’s ability to control or predict. Forward-looking statements are not guarantees of future performance. 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The Company is not under any obligation (except as required by the Listing Rules of the FCA, the Disclosure Guidance and Transparency Rules of the FCA, the Market Abuse Regulation and the rules of the London Stock Exchange) and expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. No statement in this Presentation is intended as a profit forecast or a profit estimate and no statement in this Presentation should be interpreted to mean that earnings per Company share for the current or future financial years would necessarily match or exceed the historical published earnings per Company share. The Presentation is confidential and should not be distributed, copied, published or reproduced (in whole or in part) or disclosed or passed by its recipients in any way to any other person for any purpose, other than with the consent of the Company. By accepting receipt of, attending any presentation or delivery of or electronically accessing the Presentation, you undertake to keep this Presentation and the information contained herein confidential and not to forward the Presentation to any other person, or to distribute, copy, reproduce or publish the Presentation (in whole or in part) for any purpose. By accepting receipt of or electronically accessing this Presentation or attending any presentation or delivery of this Presentation you agree to be bound by the foregoing limitations and conditions and, in particular, will be taken to have represented, warranted and undertaken that: (i) you are a Relevant Person (as defined above); and (ii) you have read and agree to comply with the contents of this notice. All data is sourced by the Company unless identified as otherwise. Numbers presented have been rounded up to the nearest one or two decimal places as appropriate. Other jurisdictions The distribution of this Presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this Presentation or any part of it comes should inform themselves about, and observe, any such restrictions. The Presentation does not constitute or form part of, nor is it intended to communicate, any offer , invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract whatsoever relating to any securities. The Presentation does not constitute or form a part of any offer, invitation, inducement to sell or issue, or solicitation to purchase or subscribe for securities in the United

  • States. The Company has not registered and does not intend to register any shares under the U.S. Securities Act of 1933 (the “Securities Act”), and the shares will not be offered or sold, directly or indirectly, in or into the United

States absent registration under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offering of any shares or of any securities in the United States. Subject to certain exceptions, neither this document nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into the United States of America, its territories or possessions. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. This Presentation is not for publication, release or distribution, directly or indirectly, in whole or in part, in or into the United States of America, Australia, Canada, Japan, the Republic of South Africa, New Zealand, Israel, Norway, Switzerland (the “Excluded Jurisdictions”) or any jurisdiction where it would be unlawful to do so. The relevant clearances have not been, and will not be, obtained from and no document or registration statement has been, or will be, filed, lodged or registered, with any applicable bodies in the Excluded Jurisdictions, in relation to the Company’s securities. Accordingly, the Company’s securities will not, directly or indirectly, be offered or sold within the Excluded Jurisdictions or any other country outside the United Kingdom where it would be unlawful to do so or offered or sold to any resident, national or citizen of Canada, Australia, Japan, the Republic of South Africa or any other country outside the United Kingdom where it would be unlawful to do so.

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AGENDA

Highlights (FY19) Recommended Acquisition Financial Review (FY19) Property Review (FY19) & Outlook Q&A

3

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Key FY Highlights

Sector calls and income focus continue to deliver portfolio outperformance 4

1. Including developments 2. Including leisure assets 3. Including vacant disposals

  • Portfolio aligned to structurally supported sectors

– Distribution 72.5%1 – Long income & convenience 22%1,2

  • Asset selection increasingly critical

– £402m investment activity – WAULT increased to 12.5 years

  • Focus on sustainable and growing income

– Net Rental Income up 3.5% to £94 million – 63% of income with contractual uplifts

  • Disciplined portfolio management

– Portfolio TPR +9.0% – 440 bps outperformance of IPD All Property

Net divestment

£75m

NIY arbitrage +90 bps3 Like for like income

+5.7%

+2.9% excluding one offs Occupancy

97.8%

+30bps Urban Logistics

27%1

Largest subsector of portfolio

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Earnings Yield2

5.3%

2018: 5.7%

FY Financial Highlights

Full Year to 31 March 2019 5 Revaluation surplus

+£64.4m

Yield compression 10 bps1, ERVg +1%

March 2019 March 2018 Change Net Rental Income £93.8m £90.6m +3.5% EPRA Earnings £61.0m £59.1m +3.2% EPRA Earnings (pps) 8.8p 8.5p +3.5% Dividend (pps) 8.2p 7.9p +3.8% EPRA NAV (pps) 175p 165p +5.9%

1. Equivalent yield movement on portfolio (LFL) 2. EPRA Earnings for the year divided by opening EPRA NAV

Reported Profit

£119.7m

2018: £186.0m Total Accounting Return

+10.7%

2018: +15.4%

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Recommended acquisition

  • f A&J Mucklow

A strategic combination to create one of the UK’s leading listed logistics & distribution platforms

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Transaction Summary

Recommended offer for A&J Mucklow Group plc by LondonMetric Property Plc (“Combination”)

1. Closing share prices as at 22 May 2019 of 205.8p for LondonMetric and 547.5p for Mucklow 2. Mucklow’s Rolled-Forward NAV based on EPRA NAV as at 31 December 2018 of £363.3m (572 pps) plus valuation uplift of £10m (16pps) between 31 December 2018 and 30 April 2019 as disclosed in Cushman & Wakefield’s valuation report. The Mucklow Directors have confirmed that other adjustments are not material 3. 35.74% irrevocables and 3.61% letters of intent

  • Recommended £415m offer for Mucklow at 655p per share1

– NAV for NAV valuation approach – 2.19 New LondonMetric shares, 204.5p in cash – c.£130m in cash – 11% premium to the rolled-forward Mucklow NAV2 – Unanimous board approval, 39.35% irrevocables and letters of intent received3

  • Compelling strategic and portfolio rationale

– Consistent with our strategy to increase exposure to urban logistics sector where rental growth is superior – Creates one of the UK’s leading listed logistics & distribution platforms

  • Strong operational benefits

– Creates a larger and more resilient portfolio with greater income diversification – More intensive asset management and portfolio enhancement programme will deliver significant upside

  • Financial benefits supporting progressive dividend policy

– Immediately earnings accretive through economies of scale and cost synergies – Rental reversions and portfolio activity will deliver further benefits – Conservative LTV approach maintained

  • Transaction provides the combined entity with greater scale

– Improved liquidity and optionality in both equity and debt markets

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Income focused REIT that is delivering strong income led returns

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  • £347m market capitalisation1

– Family business founded in 1933, floated in 1962 and converted to a REIT in 2007 – Extended family have a combined interest of c.30% – Long-term focus on income growth and value creation

  • Attractive and well located real estate2

– Total assets: £453m; capital value: £119 psf – 3.8m sq ft across 64 investment assets and 330+ units – Rent £26.1m pa, £6.90 psf (ERV:£7.50 psf) – 69% in distribution & multi-let industrial

  • Strong income growth prospects

– NIY of 5.4%3, equivalent yield of 6.1%3 – 135,000 sq ft of committed development adding c.£1.0m rent – Over 400,000 sq ft of pipeline developments

Mucklow – Overview

Earnings yield5

5.3%

Dividend cover 110%5

Midlands 86% London & SE 10% South West 4%

Geographical Exposure4 Occupancy2

97.6%

And WAULT of 7.2 years4

1. Closing share price as at 22 May 2019 of 547.5p for Mucklow 2. As at 31 December 2018 except for Mucklow asset value which is as at 30 April 2019 3. NIY calculated based on reported income at 31 December 2018. NIY and EY based on asset value as at 30 April 2019 4. LondonMetric calculation 5. EPRA EPS of 25.1p for FY 2018 divided by EPRA NAV of 471pps at start of that year. Dividend cover based on EPRA EPS divided by Dividend per share for FY 2018

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Mucklow – Portfolio & Assets

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Property Sector Sq ft

1 - Coventry Long Income (Costco) 129,000 2 - Crawley Distribution (Elekta, CGG) 161,000 3 - Wednesbury Distribution (HFR, Exova) 172,500 4 - Dudley Distribution (Eriks, Timken) 158,000 5 - Worcester Distribution (Bosch) 116,000

Distribution 54% Multi-let industrial 15% Office 15% Long Income 14% Retail Parks 2%

£0.45bn Distribution and Long Income focused REIT Top 5 assets by value ~ c25% of portfolio value

1. LondonMetric classification based on Mucklow 30 April 2019 valuations 2. Source: LSH 3. Up to 50,000 sq ft warehousing, current supply is less than a third of peak level 4. Source: Gerald Eve

  • Largest UK region for

distribution take up over the last 5 years2

  • Supply of small &

medium box at lowest level since peak in 20122,3

  • Rents grown by c.27%
  • ver 6 years compared

to London at c.31%4

  • Birmingham distribution

rents increased c.7% in 20182

West Midlands

Costco, Coventry Bosch, Worcester

Portfolio Split1

1 3 4 5

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Urban 54% Multi-let industrial 15% Office 15% Long Income 14% Retail Parks 2% Mega 19% Regional 18% Urban 31% Multi-let industrial 4% Long Income 20% Retail Parks 4% Office & Resi 4%

10

Mega 23% Regional 22% Urban 27% Long Income 22% Retail Parks 5% Resi 1%

£2.3bn £1.85bn £0.45bn

1. LondonMetric data as at 31 March 2019 2. Long Income includes convenience & leisure 3. Mucklow data as at 30 April 2019, split by LondonMetric classification 4. Mucklow’s logistics/multi-let industrial assets classified as urban logistics

LondonMetric1,2 Mucklow3 Combined2,4

Complementary Portfolios

£2.3 billion portfolio focused on distribution and long income

Distribution & Long Income focused REIT

  • Enlarged end-to-end distribution portfolio of £1.65bn
  • Increases LondonMetric’s urban logistics exposure from 27% to 35%4
  • 79% weighting to superior geographies - South East and Midlands
  • Increases income diversification – top 10 tenants exposure falls from 51% to 39%
  • Combined WAULT of 11.3 years and occupancy of 97.8%
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LondonMetric(1) Mucklow(2) Combined

Portfolio value £1.85bn £0.45bn £2.3bn Area (Sq Ft) 12.1m 3.8m 15.9m Contracted rent roll £89.7m £26.1m £115.8m Net initial yield 4.7% 5.4%3 4.9%3 Equivalent yield 5.1% 6.1% 5.3%3 Earnings Yield 5.3% 5.3% 5.3%3 Dividend Cover 1.07x4 1.10x4 1.07x4 WAULT (years) 12.5 7.23 11.33 Occupancy 97.8% 97.6% 97.8%3 Debt Drawn £626.2m £80.7m £852.1m5 Loan to value (LTV) 32% 16%3 35%3,5 Weighted average interest cost 3.1% 3.3% 3.1%3,5 Debt Maturity (years) 6.4 10.23 6.13,5

Combined information

1. LondonMetric data as at 31 March 2019. NIY is topped up 2. Mucklow portfolio value as at 30 April 2019, all other stats as at 31 December 2018 3. LondonMetric calculation. Combined represents Proforma 4. Mucklow as at FY18, LondonMetric as at FY19. Combined represents Proforma cover 5. Allowing for cash element of the offer

Creating a larger and more resilient company

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12

Transaction structure and timetable

Consideration 2.19 New LondonMetric shares and 204.5p in cash for each Mucklow ordinary share held Mix and Match Scheme1: Opportunity to realise part or all of investment at a premium to current share price2, and/or remain substantially invested Ownership & financing Irrevocables and letters of intent received of 39.35%3 Combined Group will be owned 16.5% by Mucklow shareholders & 83.5% by LondonMetric shareholders Cash element paid from LondonMetric’s existing facilities (2.0% marginal cost of debt) Dividends Mucklow shareholders entitled to Q2 Mucklow dividend of 5.24p, payable on 26 June LondonMetric shareholders entitled to Q4 dividend of 2.5p, payable on 11 July LondonMetric Q1 2019/20 dividend payable to shareholders in Combined Group (expected October) Structure Combination to be effected by means of a scheme of arrangement The Combination constitutes a Class 1 transaction for LondonMetric requiring shareholder approval Timetable 23 May Rule 2.7 announcement Late May Class 1 Circular, Prospectus and Scheme Document posted Mid June Shareholder meetings End June Anticipated completion

1. There will be a Mix and Match Facility with details in the Mucklow Scheme Document; no offer is being made for the Mucklow Preference shares (£675,000 nominal value) at this time 2. Closing share prices as at 22 May 2019 of 205.8p for LondonMetric and 547.5p for Mucklow 3. 35.74% irrevocables and 3.61% letters of intent

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FY19 FINANCIAL REVIEW

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Income Statement1

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31 March 2019 31 March 2018 Change Net rental income £93.8m £90.6m Administrative costs £(13.7)m £(13.9)m Net Finance costs £(20.2)m £(18.5)m EPRA Earnings £61.0m £59.1m +3.2% EPRA Earnings (pps) 8.8p 8.5p +3.5% Dividend (pps) 8.2p 7.9p +3.8% Reported Profit2 £119.7m £186.0m

EPRA cost ratio3 15.0% Gross / net income leakage 1.8% Dividend cover 107%

1. Proportionally consolidated basis, unless otherwise stated 2. IFRS basis 3. 14.1% excluding vacancy costs

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Balance Sheet1

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31 March 2019 31 March 2018 Change Property portfolio £1,846.2 £1,842.0m Cash £24.1m £39.3m Debt £(626.2)m £(708.9)m Fair value of derivatives £(1.9)m £2.9m Other net liabilities £(25.4)m £(25.8)m Net Assets £1,216.8m £1,149.5m EPRA Adjustments £1.9m £(2.9)m EPRA Net assets £1,218.7m £1,146.6m +6.3% EPRA NAV per share 174.9p 165.2p +5.9%

1. Proportionally consolidated basis

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Movements in EPRA NAV

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EPRA NAV per share (p)

165.2 166.0 166.0 174.9

8.8 8.0 9.3

0.4

150.0 155.0 160.0 165.0 170.0 175.0

EPRA NAV Mar '18 EPRA Earnings Dividend charge Revaluation Other movements EPRA NAV Mar '19

1.7 2.0

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Financing

Debt Metrics1 31 March 2019 31 March 2018

Total Facilities £999.7m

80% unsecured

£774.8m Gross Debt £626.2m

70% unsecured

£708.9m Average cost of finance 3.1% 2.8% Marginal cost of debt 2.0% 1.8% Average maturity 6.4 years 4.8 years Hedging2 73% 73% Loan to Value3 32% 35%

1. Proportionally consolidated basis 2. Based on total facilities drawn 3. LTV includes consideration receivable/payable on transactions exchanged with delayed completion at year end

17

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FY19 PROPERTY REVIEW & OUTLOOK

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Our Portfolio

Aligned to structurally supported sectors

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NIY1

EY1

Rent2 WAULT TPR2,3 CVg3

Urban (£504m)2

4.3% 5.0% £21.5m 10.0yrs +16% +12%

Regional (£408m)2

4.1% 4.9% £17.2m 13.6yrs +12% +8%

Mega (£427m)2

4.4% 4.7% £20.2m 15.4yrs +8% +3%

Long Income (£403m)2,4

5.7% 5.6% £24.7m 12.1yrs +5%

  • 1%

Retail Parks (£87m)

6.3% 6.2% £5.9m 10.4yrs

  • 3%
  • 8%

Investment portfolio 4.7% 5.1% £89.5m 12.5yrs +9% +4%

1. Topped up NIY and Equivalent Yield 2. Including developments 3. Source: IPD. Portfolio TPR and CVg includes residential 4. Long Income including convenience & leisure assets

Mega 23.1% Regional 22.1% Urban

27.3%

Long Income 21.9% Retail Parks 4.7% Resi 0.9%

72.5% Distribution2

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Our Core Portfolio

72% of portfolio providing end to end logistics 20 Mega & Regional Distribution1

  • 17 assets, 6.6m sq ft
  • £37.5m rent (£5.80 psf)
  • NIY2 4.3%, EY 4.8%
  • WAULT 15 years
  • Occupancy 98%
  • Contractual uplifts on 88%
  • ERVg +1.7%
  • Rent reviews +8% ahead3

Urban Logistics1

  • 55 assets, 3.3m sq ft
  • £21.5m rent (£6.70 psf)
  • NIY24.3%, EY 5.0%
  • WAULT 10 years
  • Occupancy 95%
  • Contractual uplifts on 44%
  • ERVg +5.0%
  • Rent reviews +28% ahead3

Long Income & convenience-led retail1,4

  • 60 assets, 1.9m sq ft
  • £24.7m rent (£18.60 psf)
  • NIY2 5.7%
  • WAULT 12 years
  • Occupancy 100%
  • Contractual uplifts on 52%
  • ERVg -3.2%
  • Rent reviews +15% ahead3

1. As at 31 March 2019. Rent, NIY & WAULT on Investment Portfolio 2. Topped up NIY 3. Ahead of passing on 5 yearly equivalent basis 4. Includes long income, convenience & leisure, excludes retail parks

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Investment Activity

Asset selection is increasingly critical – focussing on the right assets in the right sectors 21

Acquisitions - £163.3m Disposals - £238.2m

£106.6m urban – including Milton Keynes and Orpington £35.8m convenience – including Durham and London

  • 4.6% NIY, rising to 5.3% in 5 years
  • 14.0 years WAULT
  • Superior geographies - South East focused

£115.6m mega/regional – including Wakefield and Sheffield £43.9m retail parks in Ipswich and Launceston

  • 3.7% NIY (5.3% NIY ex-vacant sales)
  • 8.8 years WAULT (31% vacant)
  • Weaker geographies

Milton Keynes Ipswich

Howdens

Hemel Hempstead Orpington Doncaster Wakefield (Ex Poundworld) Cambridgeshire Sheffield (Ex M&S)

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SLIDE 22

Bedford Phase I

  • 188,000 sq ft
  • 6.4% YOC, 73% let adding £1.0m rent

Bedford Phase II

  • 500,000 sq ft
  • 7.3% YOC, subject to commitments

Convenience

  • 4 developments
  • 158,000 sq ft
  • 5.8% YOC

Mega & Regional

  • 1.3m sq ft, 11.3 years
  • £7.5m total rent

22

Asset Management & Development

Developments 50 Lettings & Rent Reviews

  • 19 lettings, 11 years WAULT
  • 31 rent reviews, 11.7% ahead1
  • £3.2m rental income uplift
  • 5.7% L-F-L (2.9% ex one-off gains)

1. 5 yearly equivalent basis 2. Including convenience, leisure, retail parks

Distribution & Convenience, 0.9m sq ft Lettings & regears, 2.0m sq ft Rent reviews1, 4.2m sq ft

Urban Logistics

  • 0.6m sq ft, 9.5 years
  • +17% uplift on regears

Urban Logistics +28% Regional +11% Mega +7% Long Income2 +18%

100 105 110 115 120 125 130 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

FY15 FY16 FY17 FY18 FY19

Like for Like (LFL) L4L Cumulative

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SLIDE 23

Market Outlook

Income continues to be the defining characteristic of the next decade’s investment environment

  • Structurally supported sectors remain in demand

– Disruption is challenging some traditional sectors, generating material value destruction – Momentum accelerating – creating large sector polarisation

  • Asset selection to define winners and losers

– Property market not properly discriminating between assets within sectors – Cap rates need to reflect direction, trajectory and timings of cashflows

  • Income compounding strategies to outperform hyperactive ones

– Low interest rates/bond yields and an ageing population driving demand for income – Reliable, repetitive and growing income streams remain highly attractive

23

1. Capital Economics

Logistics Convenience Student Healthcare Geography Credit strength WAULT Income growth Income as % of UK property returns1

130%

next 5 years

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SLIDE 24

Look forward

Alignment, Building & Compounding to enhance dividend progression

24

Aligned to structural trends

  • Structural calls will continue to define the winners and losers
  • Those that cling onto the more traditional forms of business will be disrupted
  • Alignment to distribution and long income puts us on the right side of structural changes

Building an ‘all weather’ & leading distribution portfolio

  • Disciplined investment approach to ensure portfolio is fit for purpose
  • Creating one of the UK’s leading logistics & distribution platforms
  • Benefit from superior rental growth both organically and through contractual uplifts

Compounding

  • ur income to

progress dividend

  • Our sustainable and growing earnings are delivering dividend progression that is well covered
  • We continue to believe that income compounding strategies will outperform

Deal to acquire A&J Mucklow

  • Compelling strategic and portfolio rationale
  • Strong operational benefits and economies of scale
  • More intensive asset management programme to deliver significant upside
  • Financial benefits supporting progressive dividend
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SLIDE 25

APPENDICES – FULL YEAR RESULTS

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SLIDE 26

Buy the right SECTORS

26

Market Backdrop

Income quality & growth will define the investment winners

2019+ 2012 2015 2018 2015

Own the right ASSETS

Buy any assets, any sectors

  • Yield arbitrage highly attractive

across all property sectors

  • All boats rise on the same tide

and benefit from re-pricing Align to sectors with structural support

  • Logistics
  • Convenience
  • Student accommodation
  • Healthcare
  • Long income

Buy the MARKET

– –

Own the right assets in the right sectors by focusing on

  • Geography
  • Credit strength of occupier
  • WAULT
  • Occupier contentment
  • Income growth prospects
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SLIDE 27

3.0 4.0 5.0 6.0 7.0 8.0 9.0

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19

Prime Shops Prime Shopping Centres Prime Distribution Warehouses

27

Investment Yields (%)1 UK Online Retail Share2

22.0% 23.2% 24.3% 25.3% 26.1% 26.9% 27.5% 20% 22% 24% 26% 28% 30% 2017(a) 2018 2019 2020 2021 2022 2023

Logistics market backdrop

1. CBRE 2. Global Data 3. CBRE, warehousing >100k sq ft

Logistics Take Up (2018) 3

Percentage of non-food retail online (estimates)

  • 5

10 15 20 25 30 35

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Grade A (m sq ft) Second Hand (m sq ft)

Record take-up of 31.5m sq ft

  • East Midlands accounted for c37%
  • Online retail accounted for 32%, followed by

– 3PLs: 25% – Traditional & Food retail: 20% Rational response to increased demand

  • c12 months supply
  • 8m sq ft of spec development
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SLIDE 28

Mega 23.1% Regional 22.1% Urban 27.3% Long Income 21.9% Retail Parks 4.7% Resi 0.9%

Portfolio change since 2013

28

Distribution 21%

Long Income 5%

Retail Parks 26% Resi & Office 48%

March 2013

£1.22bn1,2

March 2019

£1.85bn1,2

1. Including developments 2. Long Income including convenience & leisure assets

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SLIDE 29

29

Delivering Long Term Shareholder Returns

Our key focus is to drive earnings and distribute

Earnings Growth (pps) Net Rental Income (£m)

20 40 60 80 100

Total Shareholder Return (rebased to 100)1,2

1. Source: Bloomberg as at 31 March 2019, dividend return assumes reinvestment 2. Based on financial year end. First year shown is for FY 13/14

Dividend Return (rebased to 100)1,2

  • 2.0

4.0 6.0 8.0 10.0 100 140 180 220 260

Dividend Share price

100 110 120 130 140 150 160 170 180

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SLIDE 30

30

Rental Income Profile

Delivering long term repetitive, dependable and growing income

Contractual Rent Reviews

(2019: 63% of income)

Key occupiers

(>2% of income)

FIXED , 28.1% FIXED, 28.4%

Index, 22.2% Index, 34.8%

50.3% 63.2%

0% 20% 40% 60% 80% 100% 2018 2019

Unexpired Lease Terms

(2019: 12.5 years)

13.1 12.8 12.8 12.4 12.5

11.0 11.5 12.0 12.5 13.0 13.5

2015 2016 2017 2018 2019

2.1% 2.3% 2.4% 2.6% 2.8% 3.3% 3.5% 4.3% 4.6% 4.7% 5.2% 8.8% 10.9%

Next Wickes Amazon Clipper Logistics Tesco Odeon DHL DFS Eddie Stobart Argos M&S Dixons Carphone Primark % Distribution & Convenience Rent

0% 0% 16% 89% 62% 97%

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SLIDE 31

Largest distribution assets (by value) Occupier Annualised rent (£m) Islip Primark 5.6 Dagenham Eddie Stobart 4.1 Thrapston Primark 4.2 Newark Dixons Carphone 4.4 Bedford Argos 4.1 Warrington Amazon 2.1 Croydon Tesco 1.9

Distribution Assets

31

1 3 4 2 5 6

REGIONAL

London & South East 41% Midlands 24% North East & Yorkshire 15% North West 12% South West 8% 100%

URBAN LOGISTICS

London & South East 64% Midlands 13% North West 9% North East & Yorkshire 6% South West 5% Other 3% 100%

MEGA

Midlands 72% London & South East 20% North East & Yorkshire 8% 100%

Split by region

7

7 1 3 4 2 5 6

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SLIDE 32

Bedford Distribution Development

Recycling disposal proceeds at attractive yields 32 Attractive location

1. Based on anticipated rents 2. Includes allowance for tenant incentives and voids

c.688,000 sq ft

Phase 1

  • 188,000 sq ft (3 units)
  • 6.4% yield on cost
  • 73% pre-let

Phase 2

  • 500,000 sq ft (2 units)
  • 7.3% yield on cost
  • Discussions ongoing
  • Subject to pre-let

Total cost2

£66 million

Yield on cost1

7.0%

Phase 2

Let Let

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SLIDE 33

Developments Summary

33

Sq ft 000 PC1 Rent/ uplift £m YOC (%) Total cost £m FY 19 FY 20 FY 21 Dagenham3 180 Q2 18 0.9 5.7 17 3 Frimley 62 Q2 18 0.7 5.6 13 7

Ringwood 33 Q4 18 0.2 5.0 4 3 Ipswich 39 Q2 18 0.7 6.9 9 3 Telford 8 Q4 18 0.1 5.7 2 2 Completed

322 2.6 5.8 45 18 Bedford (Regional)2 500 20/21 3.3 7.3 46 3 TBD TBD Subject to occupier commitments Bedford (Urban)2,4 188 Q2 19 1.3 6.4 20 11 5 73% pre-let Durham 58 Q3 19 0.8 5.4 14 7 7 Forward fund, pre-let to Lidl & The Range New Malden 57 20 0.4 5.6 6 6 Extension & modification of existing asset with 3 new convenience occupiers including Lidl Swindon3 55 Q4 19 0.3 7.8 4 4 Extension to existing asset Weymouth2,4 27 20 0.6 6.3 9 5 Land acquired, 19k sq ft pre-let to Aldi Derby2 16 20 0.4 6.7 6 TBD TBD Site acquisition conditional on planning Committed & pipeline 901 7.1 6.7 105 21

1. Based on calendar quarters and years 2. Anticipated yield on cost and rents 3. Marginal yield on cost 4. Some of the total cost for Bedford and Weymouth was spent in FY 18 when the land was acquired

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SLIDE 34

34

Acquisitions

FY 2019

Sector Value (LM share) Yield WAULT (years) £m NIY Reversion1 Expiry 1B Cambridgeshire Distribution 10.0 4.6% 5.3% 20.0 20.0 Portfolio - 9 assets2 Distribution 49.1 4.3% 5.3% 8.0 6.6 Milton Keynes Distribution 12.0 5.0% 5.0% 9.9 9.9 Avonmouth Distribution 13.5 5.1% 6.0% 8.7 8.7 Thorne Distribution 7.9 4.8% 5.5% 20.0 20.0 x4 assets Long Income (MIPP) 10.6 5.5% 6.2% 14.3 13.6 Derby2 Long Income 5.9 5.3% 5.3% 14.1 14.1 Durham Convenience 13.6 5.4% 5.8% 20.1 16.2 Portfolio – 8 roadside assets Convenience 12.1 4.1% 4.7% 24.5 24.5 Hull Leisure 4.3 5.5% 6.3% 20.0 20.0 Orpington Distribution 7.8 3.8% 4.7% 15.0 15.0 Basildon Distribution 6.3 4.4% 5.1% 20.0 20.0 x2 London Convenience 10.2 3.7% 4.1% 16.1 16.1 163.3 4.6% 5.3% 14.0 13.2

34

1. Reversionary yield based on current ERV or, in case of contractual uplifts, running yield in 5 years based on inflation expectations 2. Acquired as part of a portfolio totalling £55m

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SLIDE 35

35

Disposals

FY 2019

Sector Value (LM share) Yield WAULT (years) £m % Expiry 1B Warrington Leisure 13.7 4.8% 20.0 20.0 Penrith & Cowes Convenience 10.7 4.5% 17.0 17.0 Launceston Retail Parks 21.9 5.6% 10.0 8.4 x2 Roadside Assets Convenience 2.2 4.6% 24.3 24.3 Portfolio of 6 assets Distribution 36.0 5.9% 5.7 5.3 Ipswich Retail Parks 22.0 5.2% 11.9 10.0 Leicester (vacant) & Doncaster Distribution 17.3 3.3% 0.9 0.9 Oldham Long Income (MIPP) 2.2 6.2% 14.7 14.7 Ashby de la Zouche & x2 in Wakefield Distribution 24.3 5.4% 7.5 3.4 One Stop, Wakefield Distribution 10.5 5.4% 4.2 4.2 Sheffield Distribution 23.5 vacant n/a n/a Poundworld, Wakefield Distribution 43.5 vacant n/a n/a Moore House Residential 10.4 n/a n/a n/a 238.2 3.7% 8.8 7.6

35

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SLIDE 36

Historic Debt Metrics

36

Warrington Bedford

Debt Maturity (years)

3.7 4.2 5.6 5.2 4.8 6.4 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

2014 2015 2016 2017 2018 2019

Interest Cover Ratio (x) Cost of Debt (%)

2.9 4.0 5.0 4.5 5.0 4.7

0.0 1.0 2.0 3.0 4.0 5.0 6.0

2014 2015 2016 2017 2018 2019 3.9 3.7 3.5 3.5 2.8 3.1 0.0 1.0 2.0 3.0 4.0 5.0 2014 2015 2016 2017 2018 2019

Loan to Value Ratio (%)

32 36 38 30 35 32 10 20 30 40 50

2014 2015 2016 2017 2018 2019

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SLIDE 37

Debt Facilities

As at 31 March 2019

Facility Drawn Maturity Sector Lender (£m) (£m) (years) Expiry Wholly-owned portfolio Distribution term loan Distribution Helaba 130.0 130.0 5.3 2024 Unsecured RCF All Syndicate 337.5 79.9 3.0 2022 Unsecured RCF All Syndicate 106.3 25.1 2.0 2021 Private Placement 2016 All Syndicate 130.0 130.0 5.8 2023-28 Private Placement 2018 All Syndicate 150.0 150.0 11.8 2029-34 Unsecured All Wells Fargo 75.0 50.0 6.3 2025 Total wholly-owned 928.8 565.0 6.7 JV portfolio (LondonMetric at share) MIPP JV (50%) Long income Deutsche Pfandbrief 50.0 40.3 4.1 2023 DFS JV (45%)1 Long income M&G 20.9 20.9 0.3 2019 Total JV portfolio 70.9 61.2 2.8 Total Group and JV 999.7 626.2 6.4

37

37

1. Post year end this facility was fully repaid following the increase in the company’s equity holding in the JV from 45% to 82%

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SLIDE 38

Portfolio Metrics

38

Area Valuation (Share) Revaluation Surplus/(Deficit) IPD CVg4 Occupancy NIY1 WAULT (years) Contracted Rent Fixed Uplifts Average Rent As at 31-March-19 (m sq ft) (£m) (£m) (%) (%) (%) (%) Expiry Break (£m) (%) (£ psf)

Mega distribution 3.6 427.1 13.5 3.3 3.2 100.0 4.4 15.4 15.4 20.3 100.0 5.7 Regional distribution 3.0 385.5 33.7 9.6 7.8 95.7 4.1 13.6 13.1 17.2 73.2 6.2 Urban logistics 3.3 480.0 35.3 7.9 11.5 95.1 4.3 10.0 8.4 21.5 44.3 6.7 Distribution 9.9 1,292.6 82.5 6.8 7.7 96.9 4.3 12.9 12.2 59.0 71.8 6.2 NNN Income2 1.4 237.4 (17.0) (6.7) (5.3) 100.0 6.2 10.7 9.1 15.7 33.9 19.0 Convenience & Leisure 0.5 152.1 2.2 1.5 4.9 100.0 4.8 14.8 14.6 7.9 84.0 15.8 Long Income 1.9 389.5 (14.8) (3.7) (0.5) 100.0 5.7 12.1 10.9 23.6 52.0 17.8 Retail Parks (RPs) 0.3 87.0 (11.2) (11.4) (8.0) 98.8 6.3 10.4 8.6 5.9 22.6 18.5 Long income & RPs 2.2 476.5 (26.0) (5.2) (2.1) 99.8 5.8 11.8 10.6 29.5 46.4 17.9 Investment Portfolio 12.1 1,769.1 56.5 3.3 97.8 4.7 12.5 11.6 88.5 63.2 7.9 Residential – 17.3 (1.7) (9.2) 0.2 Development3 – 59.8 9.6 19.3 1.0 Total Portfolio 12.1 1,846.2 64.4 3.6 3.9 4.4 12.6 11.8 89.7 8.0

1. Topped up NIY 2. Comprises long let retail with low operational requirements, primarily DFS and MIPP JVs 3. Developments consist of Bedford, Durham, & Weymouth. Derby development site acquisition conditional on planning so not included 4. As calculated by MSCI (IPD) which includes development gains in each sector line and takes into account the performance of assets sold prior to the year end

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SLIDE 39