## The warehouse ## provider of choice ### Annual Report and ### Financial Statements 2023 ## Warehouse REIT is an investor in UK warehouse ## assets, focused on multi-let industrial space ## Contents | Strategic report | Corporate governance | Financial statements | Additional information | | --- | --- | --- | --- | | Pages 1 to 66 | Pages 67 to 100 | Pages 101 to 143 | Pages 144 to 160 | | Financial highlights 1 | Chairman’s introduction | Statement of Directors’ | Unaudited supplementary | | | to governance 67 | responsibilities 101 | notes not part of the consolidated | Operational highlights 2 financial information 144 Board of Directors 70 Independent Auditor’s report 102 Our assets 3 Property portfolio 151 Investment Advisor 72 Consolidated statement Our locations 4 of comprehensive income 110 Shareholder information 154 Corporate governance statement 73 Investment case 5 Consolidated statement Glossary 156 Nomination Committee report 83 Chairman’s statement 6 of financial position 111 Contact details of the advisors 159 Audit and Risk Committee report 86 Q&A with Simon Hope 9 Consolidated statement Financial calendar 160 Management Engagement of changes in equity 112 Market overview 11 Committee report 90 Consolidated statement Business model 13 Sustainability Committee report 92 of cash flows 113 Stakeholders 14 Directors’ remuneration report 94 Notes to the consolidated Section 172(1) statement 17 financial statements 114 Directors’ report 97 Objectives and strategy 20 Company statement | Key performance indicators 22 | | | of financial position 139 | | --- | --- | --- | --- | | Strategy in action | | | Company statement | | | Growing our presence in a keylocation | 24 | of changes in equity 140 | Swift Valley Industrial Estate, Rugby 26 Company statement Investment Advisor’s report 27 of cash flows 141 Sustainability report 36 Notes to the Company financial statements 142 Principal risks and uncertainties 54 Going concern and viability statement 65 1 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Our purpose Financial highlights ### Year ended 31 March ### Our purpose is to provide the well-connected, ### high-quality and sustainable warehouse space our ### occupiers need to thrive and, by doing this responsibly, Gross property Operating profit before change ### income invalue of investment properties ### we generate positive outcomes for all our stakeholders. | £47.8m | £32.2m | | --- | --- | | 2023 £47.8m | 2023 £32.2m | | 2022 £48.7m | 2022 £35.4m | ## What we do 2021 £35.8m 2021 £24.8m ### We provide a range of warehouse accommodation in ### IFRS (loss)/profit before tax IFRS earnings per share ### key locations which meets the needs of a broad range ### of occupiers. Our focus on multi-let assets means we ## £(182.8)m (43.0)p ### provide occupiers with greater flexibility so we can | | 2023 £(182.8)m | | 2023 (43.0)p | | | --- | --- | --- | --- | --- | | continue to match their requirements as their businesses | | 2022 £191.2m | | 2022 45.0p | | | | 2021 £123.1m | | 2021 35.2p | ### evolve, encouraging them to stay with us for longer. ### EPRA earnings per share Adjusted earnings per share ### We invest in our business by selectively acquiring assets ### with potential and by developing opportunities we have ## 3.9p 4.7p ### created. Through pro-active asset management we | | 2023 | 3.9p | 2023 4.7p | | --- | --- | --- | --- | | unlock the value inherent in our portfolio, helping to | 2022 6.4p | | 2022 6.4p | | | 2021 5.3p | | 2021 5.3p | ### capture rising rents and driving an increase in capital ### values to deliver strong returns for our investors over ### Dividends per share Total accounting return ### thelong term. ## 6.4p (25.7)% ### Sustainability is embedded throughout our business, | | 2023 6.4p | 2023 (25.7)% | | | --- | --- | --- | --- | | helping us meet the expectations of our stakeholders | 2022 6.4p | | 2022 33.2% | | | 2021 6.2p | | 2021 27.7% | ### today and futureproofing our business for tomorrow. ### Total cost ratio EPRA Net Tangible Assets | Our vision | 28.4% | 122.6p | | --- | --- | --- | | | 2023 28.4% | 2023 122.6p | | As we grow, our vision is to become the UK’s | 2022 27.1% | 2022 173.8p | | | 2021 29.5% | 2021 135.1p | ### warehouse provider of choice. Strategic report 2 Warehouse REIT plc Annual Report and Financial Statements 2023 # Operational highlights ![img-0.jpeg](img-0.jpeg) ![img-1.jpeg](img-1.jpeg) ![img-2.jpeg](img-2.jpeg) ![img-3.jpeg](img-3.jpeg) Strong operational performance £3.5 million new rent generated (2022: £3.3 million) £45.3 million contracted rent (2022: £44.0 million) 23.4% new rent 23.4% ahead of prior contracted rent 5.3% like-for-like growth in contracted rents (2022: 3.0%) 95.8% occupancy (2022: 93.7%) Macro headwinds impact valuation but underlying rental growth resilient 18.5% decline in like-for-like portfolio value to £828.8 million driven by sector-wide asset repricing 6.5% equivalent yield; 131bps yield expansion 6.2% like-for-like growth in estimated rental values (2022: 6.0%) Targeted capital activity £59.6 million a net disposals, delivering on our strategy following a sharp increase in borrowing costs £64.0 million acquisitions, including Bradwell Abbey, a highly reversionary, multi-let estate £29.9 million sales completing post period end, 17.2% ahead of book value 33.9% LTV at 31 March 2023 (2022: 25.1%) Progressing our ESG agenda 60.2% of the portfolio EPC A to C rated following targeted investment in our assets (2022: 60.4%) Pathway to net zero advanced, including a target annual reduction of 4.2% in our Scope 1 and 2 emissions on a like for like basis Reporting TCFD disclosure, including our climate change impact assessment EPRA sBPR Gold award for the second year 1 Based on listings on the investment portfolio 3 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Our assets ### Key statistics at 31 March 2023 ## We own 8.2 million sq ft of ## high-quality, industrial warehouse ## spaceacross the UK. ## 833 Our primary focus is on multi‑let estates, which offer the ### units greatest flexibility for occupiers. Weoffer a range of units by size, enabling occupiers to take one or more to meet their needs and to scale up or down as their businesses evolve. We balance this with a high‑quality single‑let estate, comprising our Regional Distribution portfolio, which covers 1.4 million sq ft of big box assets, typically located on major transport routes, and 0.9 million sq ft of Last‑mile assets, which are close to major urban centres. These assets are ## 76 490 typically let on longer leases, providing a solid incomestream. ### estates occupiers We recognise that the sustainability credentials are increasingly important to our occupiers and are working with them to minimise their carbon footprint. 1 ### Focus on multi-let ## 35.8% ## 11% 71% ### rent roll accounted for by single-let – Multi-let ### top 15 occupiers Last-mile ## 99.0% ## 5.5 ### of assets within two ### years – average lease miles of a town centre, ## 18% ### lengthtoexpiry transport hub or single-let – ### motorway junction regional 1. Investment portfolio only; excludes development land. Strategic report 4 Warehouse REIT plc Annual Report and Financial Statements 2023 # Our locations Location is key for our occupiers because transport is a significant component of their operating costs, meaning proximity to major transport routes or the end customer directly impacts profitability. Our assets are located in strategically important places, such as the industrial hubs in the Midlands, North West and the Arc centred on Milton Keynes, providing occupiers with the access they need for their businesses to be successful and ensuring demand for our space remains strong. Supply in these locations is constrained due to a restrictive planning environment, creating favourable market dynamics from which we can drive rental growth. | Birmingham | | | --- | --- | | 1 Estate | £6.84 Rent per sq ft | | 220,000 | £7.42 ERV per sq ft | | Area (sq ft) | 2.9 WAULT to expiry | ![img-4.jpeg](img-4.jpeg) ### Middlewich | 1 Estate | £5.23 Rent per sq ft | | --- | --- | | 725,000 | £5.92 ERV per sq ft | | Area (sq ft) | 4.4 WAULT to expiry | ### Milton Keynes | 2 Estates | £6.86 Rent per sq ft | | --- | --- | | 482,000 | £9.43 ERV per sq ft | | Area (sq ft) | 5.5 WAULT to expiry | ### Key: Northern England Midlands South England The Arc Rest of the UK 5 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Investment case ## We operate in a growth market with significant opportunities for long-term value ## creation through active asset management and development. This drives rental income ## and supports values, delivering attractive, sustainable returns for our shareholders. ### Compelling, Attractive Total returns Sound financial Experienced ### long-term and resilient focused position management ### market trends portfolio strategy team | Occupier demand is underpinned | | Our portfolio is primarily focused | | We target an average total | | Our LTV is at the lower end of our | | We have an experienced Board and | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | by strong and enduring structural | | on multi‑let assets where we | | accounting return of at least 10.0% | | range at 33.9% and we benefit | | a highly knowledgeable Investment | | | themes including the growth of | | have the flexibility to attract a | | per annum through a combination | | from a range of funding sources | | Advisor in Tilstone, which gives us | | | e‑commerce and supply chain | | wider mix of occupiers to create | | of dividends and NAV growth | | and significant headroom to our | | a deep understanding of the sector | | | resilience which have accelerated | | enhanced performance through | | (average of 10.8% since IPO). We | | covenants, providing the flexibility | | and a wide network of industry | | | due to the pandemic, Brexit and | | asset management. Our assets | | drive like‑for‑like income growth | | to pursue opportunities in the | | contacts through which we can | | | the war in Ukraine. Location is key | | are close to urban centres and | | through active asset management | | market and on our portfolio to | | source investments. | | | for occupiers and supply of the | | major transport routes and we | | across our portfolio, which is highly | | drivereturns. | | | | | right type of space in economically | | have a significant presence in key | | reversionary. We deliver future | | | | | | | attractive places is constrained due | | industrialhubs in the Midlands, | | income growth through the selective | | | | | | | to planning restrictions. Together, | | North West and the Arc centred | | development of opportunities we | | | | | | | these dynamics support long‑term | | onMilton Keynes. | | have created, and these activities | | | | | | | rental growth. | | | | support long‑term value creation. | | | | | | | | Read more | | Read more | | Read more | | Read more | | Read more | | | on pages 11 and 12 | | on pages 3 and 4 | | on pages 20 and 21 | | on page 23 | | on pages 70 to 72 | Strategic report 6 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Chairman’s statement ## We continue to let space significantly ahead of previous rent, ## demonstrating that occupiers are prepared to pay a premium ## for the right space in the right locations. ### Neil Kirton Chairman The operational fundamentals of our business remained This also means we are well placed to appeal to a broader strong throughout the year, but this robust performance has range of occupier as demand diversifies in newdirections. been overshadowed by macro events which resulted in a This year alone we have let space to a software provider step change in interest rates, driving property yields higher to the healthcare industry, an electronic bike and scooter and impacting valuations across thesector. company and an automotive parts. Our multi‑let bias also means we can create our own increased rental tone through Amid this volatility, we have maintained our focus on driving targeted capital expenditure helping to capture reversion at the value of our portfolio through active asset management. lease events. The long‑term trends which have underpinned occupier demand in recent years continue tosupport our leasing Following the market correction in the second half, we activity, which this year delivered an additional £3.5 million successfully executed on our strategy to reduce the level in rent, bringing contracted rent to £45.3 million as at of variable‑rate debt through targeted asset disposals 31March2023. of non‑core properties. These totalled £59.6 million over the year and crystallised an unlevered IRR of 8.0%. We continue to let space significantly ahead of previous rent, Encouragingly, there are clear signs that liquidity is demonstrating the reversionary potential of our portfolio and returning to the investment markets, with the majority that occupiers are prepared to pay higher rents for the right of these transactions completing towards the end of the space in the right locations. Our activity drove a like‑for‑like second half and post year end we have exchanged a further increase in contracted rents of 5.3%, with the like‑for‑like £29.3million of sales, on average 17.2% ahead of book value. estimated rental value of our space up 6.2% reflecting sound underlying market fundamentals. In addition, building on This activity further focuses the portfolio on our core assets, our strategic focus on multi‑let industrial space, we acquired enabling Tilstone Partners – our Investment Advisor – Bradwell Abbey, a multi‑let estate near the gateway city of toconcentrate on opportunities which best drive value for Milton Keynes. Multi‑let assets allow greater flexibility for shareholders. occupiers because they can take multiple or different‑sized units and more easily scale up or down according to their needs, accelerating our ability to capture rental growth. Strategic report 7 Warehouse REIT plc Annual Report and Financial Statements 2023 # Chairman's statement continued Radway 16 in Crewe is the best example of this and an excellent case study of Tilstone's expertise in site assembly. Initially, it comprised a 250,000 sq ft multi-let estate with surplus land. It was acquired within a portfolio purchase and has grown through careful acquisition of adjacent sites from just 28 acres to be an exciting development site of over 100 acres, strategically located on Junction 16 of the M6. Inevitably, macro conditions have impacted its valuation, but its combination of best-in-class, sustainable space and superb connectivity make it highly attractive to a wide range of occupiers. We are pleased that discussions for a significant pre-let on the first phase of this scheme are well advanced and only subject to legal documentation. We will update stakeholders on any developments in due course. # Financial performance and returns The dramatic increase in interest rates over the course of the financial year to address levels of inflation not seen since the 1980s significantly reduced liquidity in investment markets. Valuers reacted quickly, increasing yields to reflect the new funding environment, and significantly reducing property valuations across all commercial real estate markets. We have not been immune and as a result of significant yield expansion, the value of the portfolio declined by 18.5% on a like-for-like basis over the 12 months. This was partially offset by an increase in ERV of 6.2% contributing to a fall in EPRA NTA to 122.6 pence per share at the year end (31 March 2022: 173.8 pence) and a negative total accounting return of (28.7%) (31 March 2022: 33.2%). However, reflecting our very strong performance in the years following IPO our five-year total accounting return is 10.8%. When it became clear that interest rates would trend upwards, in July 2022, two additional interest rate caps of £100.0 million each were acquired for a total premium payable of £10.9 million ahead of significant rate rises. These cap the variable SONIA rate at 1.5% until July 2025 and July 2027 respectively, 79.2% of our total debt of £306.0 million is fixed with the remaining 24.8% subject to variable rates. However, the increased cost of our variable rate debt had a negative impact on earnings. While we met our target dividend of 6.4 pence per share, adjusted earnings of 4.7 pence per share meant that for the full year, the dividend was uncovered. Following the disposals undertaken during the period, our efforts are now focused on continuing to capture the reversion embedded within the portfolio and reduce the variable rate component of our debt. As at 31 March 2023, the Group's loan to value remains within our target range of 30% to 40%, at 33.9% as at year end, with £14.0 million of headroom within our new facilities and with additional headroom created following further asset disposals that have exchanged, but not yet completed. # Environmental, social and governance matters We continued to make significant progress with our ESG agenda under the leadership of my colleague Aimée Pitman, who chairs our Sustainability Committee. We have further strengthened how we integrate ESG factors in everyday decisions, modelled our climate-related risks and formulated a pathway to net zero for our Scope I and 2 emissions by 2030. We continued to improve Energy Performance Certificate ("EPC") ratings across the portfolio. We have eradicated non-compliant F and G ratings ahead of statutory requirements and have a capital expenditure programme aimed at improving the ratings of all D and E rated units in England and Wales to progress meeting expected future legislative requirements for all commercial properties. In July 2022, the Company transferred from AIM to the Main Market. Given our already robust approach to corporate governance and our comprehensive disclosure, compliance with the requirements of the Listing Rules and related guidance has been straightforward and we now benefit from access to a wider pool of shareholder capital. We continue to follow and comply with the AIC Code of Corporate Governance. In May 2023, Tilstone Partners Limited, the Investment Advisor, appointed Simon Hope, one of its co-founders, as Executive Chairman and Co-Managing Director alongside Andrew Bird. This follows Simon's move to an executive role at Tilstone. In a separate announcement today Martin Meech has indicated that he will not stand for re-election at the AGM this September. Martin has served on the Board since 2017 as the Senior Independent Director and has been a hardworking, respected and valued colleague having served on the Audit, Management Engagement and more recently the Sustainability Committees. I would like to thank him for all his efforts on our behalf and wish him well as he takes up an executive position in the real estate industry. As reported in elsewhere, this year the Board underwent an externally facilitated Board evaluation. It is envisaged that the outputs of that evaluation will be able to assist the Nomination Committee in identifying Martin's successor. The Board have already commenced the process using external consultants to find a successor. 8 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Chairman’s statement continued ### Outlook I am confident that the business is well placed to deliver on Based on the performance of industry benchmarks and our behalf of shareholders moving forward. Our primary focus in own experience, there are clear signs that the investment the near term is continuing to optimise the portfolio earnings market is stabilising and investors are returning, reflecting growth through active asset management. It should be clear the very favourable supply‑demand dynamics in our markets. that the Board remain very focused on total shareholder However, as an industry, we are highly sensitive to the future returns. As we pay down more variable rate debt, further path of interest rates and the outlook remains uncertain, so capture the significant reversionary potential in the portfolio the Board will continue to manage the business diligently and and continue the value creation process at Radway Green we carefully. believe we have a clear path to further growth in our adjusted earnings per share and therefore our dividend cover. In this context, the ability to drive growth organically is key to delivering returns. Occupier demand for space remains robust and our sector continues to benefit from strong ### tailwinds, including the growth of online retail and heightened Neil Kirton focus on supply chain resilience. In addition, our strong bias Chairman towards multi‑let space in economically relevant locations 5 June 2023 means we are well placed to capture demand and drive rents. Selected development opportunities provide further upside and we will commit to these as and when the time is right. Daimler Green, Coventry 138,500 sq ft let to an automotive parts manufacturer Strategic report 9 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Q&A with Simon Hope ## Simon Hope, Co Managing-Director of our Investment Advisor, ## Tilstone Partners Limited, shares his thoughts on the market, ## ourstrategy and the Group’s performance and financial position. What’s behind your conviction in multi-let? ## Q It’s really about flexibility. Multi‑let assets give ## A occupiers more choice over the size of unit they want, and they can take more than one, which means we’re well placed to match their requirements. It also means we can attract a broader range of occupier. The average unit size across the Group’s multi‑let portfolio is just under 9,000 sq ft but we also have units up to 500,000sqft in our Regional portfolio. That means we can appeal to small and local businesses as well as global corporations and also keep satisfying occupiers’ requirements as theygrow. It is also easier to drive rental growth on multi‑let assets. Because we are churning space all the time, there’s more evidence that rents are rising and that raises the tone across the asset which can then be captured through lease events. Strategic report 10 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Q&A with Simon Hope continued How confident are you of driving rent in the What’s next at Radway? Is now the right time to ## Q Q current environment? commit to new development? We absolutely recognise that we’re operating in Radway is a hugely exciting scheme for us and ## A A uncertain times but we’re very confident of our one that offers a lot of optionality. We would never ability to drive rents, and that’s for a few reasons: develop it all in one go and we would not do any of it speculatively so we’re very measured in our Taking the macro points first, our markets are approach. underpinned by a supply‑demand imbalance. There are some strong structural drivers behind demand At the moment we’re in advanced negotiations growth, such as online retail and the growing focus for a significant pre‑let. This is for c.350,000 sq ft on supply chain resilience. At the same time, the and we’re relocating an existing occupier which is challenging planning environment in the UK means around 20,000 sq ft, so together, that would be supply is constrained and with input prices still the first phase. It isn’t a done deal yet so we’re not elevated, construction is likely to tail off. Gerald Eve committing to this today, but we’re very well placed reported speculative development starts of prime to progress this over the coming year. logistics space of 3.3 million sq ft in Q1 2023, down This is also just the first phase. The scheme has from over 6 million sq ft in Q4 2022. potential for a further 1.4 million sq ft. It is modern, Second, rents are actually a pretty small percentage best in class warehouse space with excellent of occupiers’ operating costs. Savills/Hatmill estimate sustainability credentials. We’re targeting a between 8‑16% for a range of operators. Whereas BREEAM Excellent rating, the base build is all transport can be up to 75% for a parcel operator. electric and it has the capacity for 100% PV loading That means location is key to profitability and it’s on the roof. It is well located on Junction 16 of M6 worth paying a premium to be inthe right place. in the north west, where rents for prime logistics space are growing faster than in any other region of And third, we have the right portfolio. We are over the UK. It is also one of the few schemes in the UK 70% multi‑let, with a range of unit sizes; we focus with the capacity to accommodate a 800,000 sq ft on key gateway cities and our space is affordable. requirement, so we’re very confident it will attract a Importantly, we have flexibility when it comes to rent lot of occupier interest. reviews and renewals. Index linked rent reviews are almost always capped and collared, whereas the We have outline consent for the wider scheme, so vast majority of our leases have open market rent we still have the ability to evolve our plans to meet reviews/lease renewals which are unfettered meaning occupier demand and we have full optionality over we can drive rents ahead of capped inflation. how we progress and fund the build out. Radway 16, Crewe Lessthan 9% of our leases are capped or collared. 1.8m sq ft development opportunity Strategic report 11 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Market overview ## The UK economic environment 90 140 ## became more challenging over the 80 8% 120 ## course of the year, with the steep 70 7% 100 | | 60 | | | 6% | | --- | --- | --- | --- | --- | | rise in borrowing costs impacting | | 10 year average | | | | | 50 | | 80 | 5% | | the investment markets while | 40 | | 60 | 4% | | | 30 | | | 3% | | inflation, and in particular the rapid | | | 40 | | | | 20 | | | 2% | 20 ## rise in energy costs, put pressure 10 1% 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ## on occupiers. | | | | | | Mid Box | Large | X Large | Availability | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Mid Box | Large | X Large | | (50k-99k) | (100k-250k) | (>250k) | | | In this context, the occupier market has remained resilient | (50k-99k) | (100k-250k) | (>250k) | Source: LSH | | | | | and the longer‑term outlook is favourable, given strong structural drivers set out below: • Continued growth of online retail. While online retail in ### Strong occupier Supply remains the UK has fallen back from its Covid‑induced peak, it ### demand constrained still accounted for 26.5% of total retail sales in the UK in March2023, up from around 19% before the pandemic. Take‑up was down across the market in 2022 following a While the volume of available space increased at the • Focus on supply chain resilience. External events record year in 2021, but the most resilient sector was the end of 2022, vacancy was low by historical standards, at such as the pandemic, Brexit and the Ukraine war are mid‑box sub‑sector (50k – 99k sq ft) which saw drops of 3.5%, with supply equivalent to only 1.1 years of average encouraging companies to manufacture closer to home around 15% and take up was still 7% above the ten‑year take‑up. For the mid‑box sub‑sector, supply rose by just 2%. and hold more stock as a buffer. At the same time, speed average. Demand was broad based, particularly for (Alldata:LSH). of delivery to the customer is increasingly important, mid‑boxes which offer greater flexibility. In this sub‑sector, Recent data from Gerald Eve showed that construction UK availability by size-band (sq ft) putting a premium on well‑located space. manufacturers accounted for 29% of take‑up, retailers and starts were at their lowest in Q1 2023 at 3.3 million sq ft, UK take-up by size band (m sq ft) • Drive towards sustainability and efficiency. Larger 9% wholesalers for28% and 3PLs 23%. (All data: LSH). down 50% on the prior quarter, reflecting the higher cost occupiers increasingly want buildings that support their ofraw materials as well as development finance. sustainability objectives and are more energy efficient, particularly in the context of higher energy costs. 0% Strategic report 12 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Market overview continued ### Responding to market conditions (£ per sq ft) Organic rental growth: benefiting from resilient demand, 6.0 | 80 | | | | | we are driving rental growth by capturing the reversionary | | --- | --- | --- | --- | --- | --- | | | 2.6% | 2021 2022 | 2025 | 5.5 | | | 70 | | | | | potential of our portfolio through active asset management. | 5.0 60 | | | | | | | | | | | | | 4.5 | Focusing on multi-let: currently 71% of our portfolio | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 50 | | | | | | | | | | | | | comprises multi‑let assets and future sales will target | | | 3.2% | | | | | | | | | | | 4.0 | | | 40 | | | | | | | | | | | | | non‑core properties, building our presence in this resilient | | | | 2.2% | | | | | | | | | | 3.5 | | | 30 | | | 3.6% | | | | | | | | | | part of the market. | | | | | | 1.9% | 2.0% | 2.1% | | | | | | | | | | | | | | | | 2.2% | 2.4% | | 2.6% | | 3.0 | | | | | | | | | | | | 2.4% | | 2.7% | | | 20 2.5 Selective development: progressing the development of 10 best‑in‑class space which meets the highest sustainability 2.0 Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021 Q3 2021 Q1 2022 Q3 2022 Q1 2023 0 Inner London London Greater South East North West South West East Midlands Humber Yorks & Eastern North East Scotland Wales standards but managing our risks appropriately through pre‑letting, for example at Radway 16, Crewe. Source: Gerald Eve Source: Gerald Eve ### Rental outlook for prime Investment market ### multi-letindustrial stabilising The outlook for rental growth in the industrial sector is Investment markets were severely affected by the rapid positive, reflecting the strong, long‑term structural trends increase in borrowing costs in the second half of 2022 with which are driving demand. Multi‑let assets in particular have volumes for the year of £11.5 billion down 24.0% on 2021’s a broad appeal, because their flexibility means occupiers recordyear. can scale up or down according to their needs. The Prime logistics yields reached levels not seen since 2017 frequency of lettings at a single site also provides stronger at 5.5% but early evidence suggests that this is starting to Prime multi-let rents and average annual growth 2023-25 evidence on which to base ERVs, making it easier to raise pull back as investors returned to the market. This reflects All UK average prime logistics yield (%) the rental tone. Looking forward, Gerald Eve expect the the favourable supply‑demand characteristics of the sector strongest rental growth for 2023‑25 to be in the North West, although investor appetite is increasingly focused on at 3.6%, where rents are expected to approach £15 per sq ft good‑quality assets and, in particular, those with excellent by 2025. ESG credentials. Valley Point, Rugby 38,600 sq ft let to PWR Europe West Midlands Strategic report 13 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Business model ## Our business model is designed to create both economic and social value for our ## stakeholders. Tosupportthis, we have integrated ESG considerations in every step. ### Inputs How we create value Creating long-term value | Our portfolio | | Financial | | --- | --- | --- | | • Multi let warehouses | Investment | We aim to deliver an average total | | • Strategically located | | accounting return of over 10% per | annum for our shareholders. For our • Attractive opportunities for lenders, we are an attractive covenant development with high‑quality assets and a robust Asset management Recycle capital interest cover. and development ### People and relationships ### Occupiers • Experienced Board We provide high‑quality, well‑located 1 | • Dedicated Investment Advisor with | | | | space and our effective retention rate | | --- | --- | --- | --- | --- | | | Investment | Asset management | Recycle capital | | | extensive real estate expertise and | | | | of 82.2% is a strong endorsement of | and development strong industry relationships ouroffer. We benefit from We actively manage We are long‑term holders Tilstone’s extensive our assets to drive of our properties but ### Environmental and social network to identify rental growth and keep regularly review our Our asset management initiatives are ### Financial attractive opportunities occupancy high. We portfolio and look to improving the environmental credentials • Sound financial position for investment and invest in our properties crystallise value through development which can to ensure they meet the asset disposals and recycle of our buildings. 60.2% of the portfolio • Access to a range of funding enable us to secure deals needs of occupiers and we capital where future returns is now EPC A to C rated and introducing sources and significant headroom off‑market, potentially on develop into markets with are lower than target or to green clauses to all new leases. tocovenants better terms. potential. pay downdebt. ### Operating sustainably ### Creating a Reducing our Supporting our Responsible Read more on page 37 ### resilient portfolio footprint occupiers business foundations 1. Including vacant units re‑let during the period. Strategic report 14 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Stakeholders ### Our approach to stakeholder engagement Our stakeholder engagement ## Understanding our stakeholders’ Tilstone is responsible for most of our day‑to‑day ## views and interests is essential Occupiers stakeholder engagement, with the Board receiving regular updates. In addition, the Management Engagement ## for meeting our responsibilities Our occupiers are at the heart of our value creation Committee (“MEC”) reviews service provider performance model. Tilstone’s approach to building occupier ## and creating economic and each year, including their policies and procedures around relationships ensures a robust understanding of current ethics and culture and their engagement with our other ## socialvalue. and potential occupiers and their needs. service providers. The MEC’s report can be found on page 90. Further information on ESG‑related engagement can also be found in the sustainability section on page 36. Their material issues • The size, quality and location of our warehouses • Rental levels • Lease length and terms • Flexibility and the ability to scale‑up their operations • Support for their sustainability targets, including renewable energy sources, energy use/costs, carbon emissions, sustainable transport, climate change adaptation and employee wellbeing How we engage • Occupier engagement is a key part of our business model (see page 13) • Regular communication with existing occupiers via the Tilstone and property management teams • Occupier surveys, for example on ESG matters (see page 42 in the sustainability section) • The Board receives regular updates on occupiers from the Tilstoneteam Outcomes • Ongoing engagement with occupiers to determine their strategies and meet their requirements, supporting 22 lease renewals across 0.2 million sq ft • Agreed 40 new leases across 0.5 million sq ft • Further developed understanding of occupiers’ approach toESG and our role as a landlord (see page 42) and integration into asset management Bradwell Abbey, Milton Keynes Acquired April 2022 Strategic report 15 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Stakeholders continued ### Our stakeholder engagement continued ### Shareholders Lenders The Investment Advisor A growing group of supportive and informed Employing an appropriate level of debt is a key part of Tilstone implements our strategy and is responsible for shareholders is vital to our business, in particular our generating financial returns. We therefore need strong the day‑to‑day operation of the business, making it a ability in the future to raise equity to expand the portfolio relationships with lenders, who are committed to providing critical stakeholder for the Group. and fund developments. the lending facilities we need on appropriate terms. Their material issues Their material issues Their material issues • Market drivers • Quality of security • The Investment Management Agreement • Strategy and business model • Compliance with covenants • Transparency of fee calculations and prompt payment • Operational and financial performance • Good working relationships • Clear investment strategy • Balance sheet strength • Ability to provide the accordion facility when required • Day‑to‑day asset management • ESG strategy, compliance and performance • Hedging of interest rates where appropriate • Code of conduct and Group policies • Climate risk • Management of other suppliers How we engage • Dividends and total returns • Tilstone engages with lenders through regular meetings to • Open communication and alignment of values support our relationships How we engage How we engage • Shareholder meetings and roadshows undertaken by Tilstone • The Board is kept informed of lender views by Tilstone • Open, regular and transparent discussions with Tilstone, • The Board receives regular shareholder updates from Tilstone • Regular portfolio updates via compliance reporting including attendance at Board meetings and our corporate brokers • Quarterly reviews of hedging and other funding matters with • Tilstone representatives have been appointed to the Board • All shareholders encouraged to vote at the AGM, during lenders and advisors • Tilstone can draw on Board members’ experience to support which the Board and the Tilstone team are available to answer its work Outcomes questions • Agreed two interest rate caps of £100.0 million each (see See the MEC report on page 90 for more information. • Website/Regulatory News Service (“RNS”) page34) Outcomes See the shareholder relations section on page 82 for more • Refinancing completed with new club of lenders with improved • Tilstone continued to execute the Company’s strategy in line information. reporting covenants for an additional five years with the Board’s expectations Outcomes • The Board has approved Tilstone’s continued appointment, • Maintained the dividend at 6.4 pence per share ontheMEC’s recommendation • Completed transfer to the Main Market of the London Stock Exchange • Continued to develop and communicate our ESG strategy and enhance reporting, including under TCFD, reflecting strong shareholder interest in ESG matters Strategic report 16 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Stakeholders continued ### Our stakeholder engagement continued ### Other third-party service providers Local communities Under our business model, third parties provide key We are aware of our wider responsibilities to the local services to us. These include G10 (Investment Manager), communities affected by the Company’s investments. Savills and Rapleys (Aston Rose) (Property Managers), Link (Administrator, Registrar and Company Secretary), AuditR (risk management and internal audit advisor), BDO (Auditor), Peel Hunt and Jeffries (Corporate Brokers), FTI Consulting (financial PR and IR advisor) and Crestbridge Property Partnerships (Depositary). Their material issues Their material issues • Clear terms of reference • Noise and traffic • Clarity of fees • Health and safety • Open two‑way communications and information flow • Environmental performance • Employment opportunities How we engage • Quarterly service calls between Tilstone and service providers How we engage • Monthly monitoring calls with the Investment Manager • The Board ensures that any key decisions take into account the • The Board maintains regular contact with key service providers impact on local communities and the environment via Tilstone, with the aim of building long‑term relationships. • The Company is pro‑active in meeting health and safety requirements, local environmental standards on waste and See the MEC report on page 90 for more information other regulatory obligations Outcomes Outcomes • Service providers’ advice, needs and views are routinely taken • Commitment to EPRA sustainability reporting into account • Consideration of local government ESG targets • Commitment to prompt payment • New lettings/renewals providing additional employment • All suppliers with spend over £100k and with higher risk have a opportunities Modern Slavery Statement or signed declaration • Supplier code of conduct developed • Checklist for appointment of third parties Strategic report 17 Warehouse REIT plc Annual Report and Financial Statements 2023 # Section 172(1) statement The Directors have had regard for the matters set out in section 172(1)(a)-(f) of the Companies Act 2006 when performing their duty under section 172. They consider that they have acted in good faith in the way that would be most likely to promote the success of the Company for the benefit of its members as a whole, while also considering the broad range of stakeholders who interact with and are affected by our business, especially with regard to major decisions. On this page are the matters the Board is required to take into account under section 172(1). ## Taking account of stakeholder views Information on stakeholder engagement, including how the Board is kept informed about stakeholder views, can be found on pages 14 to 16. This engagement is an important input to the Board's decision-making. The Directors keep the methods for engaging with stakeholders under review, to ensure they remain effective. ## Key Board decisions The Board's key decisions during the year included approving: - the four interim dividends in respect of the year, totalling 6.4 pence per share; - the purchase of two £100.0 million interest rate derivatives, capping SONIA at 1.5%; - the asset disposal programme, which raised £54.7 million in the second half of the year; - the Company's plans to reach net zero carbon for Scope 1 and 2 emissions by 2030; and - the refinancing of the Company's debt facilities, which completed after the year end. Case study # Asset disposal programme Link to business model Recycle capital Background The Group has regularly disposed of properties that are or have become non-core, where returns are likely to be below average, or the asset no longer meets income or ESG requirements without significant further capital expenditure. In September 2022, the Board reviewed the Group's strategy and the Investment Advisor. Tikkone, asked the Board to approve a larger asset disposal programme, as part of its plan to reduce the level of variable-rate debt, given the higher interest rate environment. Stakeholder considerations In making its decision, the Board considered the impact on the following stakeholders: - Shareholders. The financial benefit of the disposals is the crystallisation of valuation gains accrued over a number of years which will be returned to shareholders via dividends declared during the year and is key to ensuring that the dividend will be covered by adjusted earnings by the end of FY 2024. Although asset disposals reduce the Group's short-term rental income, there is a significant saving in interest costs. The Group also saves the capital expenditure that the assets would otherwise require. - Occupiers. To protect occupiers' interests, the decision to sell an asset is discussed with occupiers and in some instances there is the potential to sell some assets to our occupiers. - Lenders. By reducing the level of variable rate debt, keeping total debt at a prudent amount and improving the Group's overall financial performance, the Board considered the disposals would give increased comfort to lenders. - Service providers. The targets are carefully chosen by the Investment Advisor with some input from Property Managers to give time to conclude any ongoing value creating asset management. - Local community. The disposal provided a local charity in Staffordshire with new space to occupy as their headquarters. Impact of the decision in the long term The Board noted that as well as improving the Group's financial position and performance in the short term, the disposals would improve the overall quality of the portfolio and reduce future outflows on capital expenditure. Significantly, by assisting with the return to a covered dividend, the disposals would help to protect the Group's long-term retail prestige with its shareholders. Conclusion The Board concluded that the disposals were in the best interests of the Group and its stakeholders, and the programme should go ahead. This resulted in the further disposal of 14 assets for an aggregate consideration of £34.7 million in the second half of the year and two further sales for £29.9 million due to complete post year end. 18 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Section 172(1) statement continued ### Case study ## Adoption of net zeropathway Background The logistics industry is a significant contributor to global greenhouse gas emissions. The Group needs to play its part in reducing emissions, to help limit the impact of climate change, attract and retain high‑quality occupiers and safeguard the portfolio’s long‑term value. The Board was asked to approve the Group’s plan to achieve net zero for its Scope 1 and 2 emissions by 2030. See page 38 in the sustainability report for details on our pathway. Stakeholder considerations In making its decision, the Board considered the impact on the following stakeholders: • Shareholders. Occupiers are increasingly focused on the sustainability credentials and energy efficiency of their buildings. Following the pathway to net zero will help the Group to continue to attract occupiers, maintain or improve rental levels and support capital values, all of which benefit shareholders. • Occupiers. Occupiers benefit from potential savings on their energy bills and by reducing the environmental impact of their occupation of the building. Impact of the decision in the long term • Communities. Communities will benefit from a reduction in In addition to the long‑term environmental benefits, the Board carbon emissions, helping to mitigate the impact of climate noted the necessity of adopting carbon reduction strategies change. to protect the Group’s future financial performance and the value of its assets, as described above. Conclusion The Board concluded that the plan was in the best interests of the Group and its stakeholders and approved its adoption. Strategic report 19 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Section 172(1) statement continued Matter Response Matter Response a) The likely All Board decisions involve careful consideration of the e) The desirability of the The Board has a culture statement, setting out its commitment consequence of any longer‑term consequences and their implications for stakeholders. Company maintaining to ethics and high standards of business conduct. All of the key For example, during the year the Board approved the programme service providers are expected to abide by these standards. decision in the long a reputation for high of asset disposals and the adoption of the net zero pathway Reputational risks are also considered as part of the Group’s risk term. standards of business (seecase studies on pages 17 to 18) both of which have important management framework, as described in the risk management and conduct. longer‑term benefits. principal risks section on pages 54 to 64. As part of the Board’s ongoing review of corporate governance, b) The interests of the The Company is externally managed and therefore does not have the Board reviewed and approved updates to the following Company’s employees. any employees. policies: • anti‑bribery and corruption; c) The need to foster As described on page 29, the Group’s relationships with its • health and safety; the Company’s business occupiers are managed day‑to‑day by the Investment Advisor, • anti‑money laundering; Tilstone, with the Board kept regularly updated. relationships with • whistleblowing; The Board oversees the Group’s relationships with all its principal suppliers, customers service providers through the Management Engagement • supplier code of conduct; and and others. Committee. As a result of its oversight and review, during the year • business code of conduct. the Committee recommended the continuing appointment of Tilstone and the other key service providers. The Board is aware of the need to treat all shareholders equally. f) The need to act fairly between members of Nodecisions arose in the year where shareholders could be treated d) The impact of the The Board takes a keen interest in the Group’s environmental differently. the Company. Company’s operations performance and the energy efficiency of its assets, as reflected in In addition, Board members and members of Tilstone’s senior the portfolio’s EPC ratings. The Sustainability Committee provides on the community and management own a total of 28.6 million shares in the Company a dedicated forum for overseeing and directing our ESG activities, environment. between them, aligning their interests with the outcomes delivered and the Committee Chair Aimée Pitman has been closely involved for shareholders as a whole. in the key activities this year, such as the development of our net zero pathway and analysis of climate‑related risks. The Board approved the net zero plan at its meeting in January. Strategic report 20 Warehouse REIT plc Annual Report and Financial Statements 2023 # Objectives and strategy We aim to create value through a top-down approach to investment, hands-on asset management with best-in-class processes, and an appropriate mix of financing. ## Our objectives We aim to provide shareholders with an attractive total return, underpinned by secure income. ### Total accounting return Our target is 10% per annum, through a combination of dividends and growth in NAV. **Outcome in 2022/23** - Not achieved. The total accounting return for the year was (25.7%) (see page 1), reflecting the impact of adverse interest rates and market conditions on the portfolio valuation, partially offset by improvements in occupancy during the year and interest rate caps. Our average total accounting return since IPO is on track at 10.8%. #### Plan for 2023/24 We continue to target an average return of 10% per annum. ### Dividends Our target for this year was a total dividend of at least 6.4 pence per share. **Outcome in 2022/23** - Achieved. We declared total dividends of 6.4 pence per share. #### Plan for 2023/24 Our target for 2023/24 is to maintain the dividend at 6.4 pence per share. ### Sustainability Our new environmental performance target is a 4.2% annual reduction in our like for like scope 1 and 2 emissions. ## Our strategy To achieve our objectives, we follow the strategy set out below: ### Investment strategy We look for: - • take close to major transport lines and large consultations, with high occupier demand and a suitable workforce. - • buildings or cars with a range of uses and long-term flexibility, including the potential to change permitting use; - • waste that makes occupiers' current and future needs, including their ESG objectives; and - • multi-tier estates (present list and other more asset management opportunities, than single-tier assets). Rental increases can also be reflected across the estate. We generally target buildings of less than 100,000 sq ft, and have an average size of 12,000 sq ft. #### Risks: - • poor performance of the Investment Advisor. Titilone; - • poor returns on portfolio; and - • acquisition of inappropriate assets or unrecognised liabilities, or a breach of the investment strategy. #### What we achieved: - • acquired one asset totalling c.335,000 sq ft in the highly attractive location of Milton Keynes (see case study on page 24); and - • disposed of 16 assets for £59.6 million, generating an internal rate of return of 8.0%. #### Progress measured by: - • like-for-like valuation change; - • EPRA NAV; - • dividend per share; and - • Total accounting return. #### Post year end activity: - • exchanged on a further £29.3m of sales ![img-5.jpeg](img-5.jpeg) 21 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Objectives and strategy continued ### Our strategy continued ### Asset management strategy Financial strategy We budget to spend 0.75% of our gross asset value (“GAV”) on capital expenditure each year, with a We fund the business through shareholders’ equity, bankdebt and any disposal proceeds we generate. target return of at least 10%. We also target a vacancy level of 5‑7%, since vacant properties allow us We look to raise equity at times when we can make investments that are accretive to shareholders. tocarry out asset management activities. Our strategy for debt financing is to maintain a prudent level of debt, with an LTV range of 30‑40% Improving the sustainability performance of our assets, for example by improving their energy in the longer term. We look to hedge the interest on a significant proportion of our debt, to provide efficiency, is an important part of maintaining property values and occupier appeal. greater certainty overour financing costs. Risks: Risks: • poor performance of Tilstone. • significant volatility in interest rates; • inability to attract investors; and During the year we: • breach of borrowing policy or loan covenants. • invested £5.0 million, or 0.5% of GAV, in capital expenditure; • completed 40 new lettings, at rents 13.0% ahead of ERV; During the year we: • moved the Company’s listing to the Premium Segment of the Main Market of the London Stock • completed 22 lease renewals, with a 15.8% increase in headline rents; Exchange, thereby increasing the number of potential investors in the Company’s shares, in the UK • completed 21 rent reviews with a 21.5% increase in headline rents; and overseas; • continued to progress our development project at Radway 16, Crewe; and • took out two interest rate caps of £100.0 million each, for three and five years, capping the SONIA • 18 EV chargers installed. rate in the debt facilities at 1.5%; Progress measured by: • reduced leverage through the disposal programme described above; and • occupancy; • maintained the LTV ratio in line withour target of c.35%. • like‑for‑like rental income growth; Measured by: • rental increases agreed versus valuer’s ERV; • LTV ratio. • number of energy efficient initiatives; and Post year end activity: • portfolio EPC performance. • refinancing with new club of lenders agreed with improved reporting covenants for a further five years. Post year end activity: • eight new lettings and three renewals, 39.5% ahead of prior rents and 1.6% above March 2023 ERV;and • two rent reviews, 22.5% ahead of prior rent, 19.5% ahead of ERV at the time of the rent review. Strategic report 22 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Key performance indicators ## We use the following key performance indicators (“KPIs”) ### Link to strategy key: ## to monitor our performance and strategic progress. Investment Asset management Financial ### Occupancy Like-for-like rental income Rental increases agreed Like-for-like valuation change ### (%) growth (%) versusvaluer’s ERV (%) (%) ## 95.8% 5.3% 10.2% (18.5)% | 2023 95.8% | 2023 5.3% | 2023 10.2% | (18.5)% | 2023 | | | | --- | --- | --- | --- | --- | --- | --- | | 2022 93.7% | 2022 3.0% | 2022 6.0% | | | 2022 19.4% | | | 2021 95.6% | 2021 2.9% | 2021 4.3% | | | 2021 18.8% | | | 2020 93.4% | 2020 2.0% | 2020 5.1% | | | | 2020 2.5% | | 2019 92.0% | 2019 2.1% | 2019 10.0% | | | | 2019 4.3% | | Description | Description | Description | Description | | | | | Total open market rental value of the units | The increase in contracted rent of units | The difference between the rent achieved | The change in the valuation of properties | | | | | leased divided by total open market rental | owned throughout the period, expressed as a | on new lettings and renewals and the ERV | owned throughout the period under review, | | | | | value, excluding development property and | percentage of the contracted rent at the start | assessed by the external valuer, expressed as | expressed as a percentage of the valuation | | | | | land, and equivalent to one minus the EPRA | of the period, excluding development property, | a percentage above the ERV at the start of the | at the start of the period, and net of capital | | | | | vacancy rate. | land and units undergoing refurbishment. | period. | expenditure. | | | | | Why is this important? | Why is this important? | Why is this important? | Why is this important? | | | | | Shows our ability to retain occupiers at | Shows our ability to identify and acquire | Shows our ability to achieve rental growth | Shows our ability to acquire the right quality | | | | | renewal and to let vacant space, which in turn | attractive properties and grow average rents | ahead of ERV through asset management and | of assets at attractive valuations, add value | | | | | underpins our income and dividend payments. | over time. | the attractiveness of our assets to potential | through asset management and drive increased | | | | | | | occupiers. | capital values by capturing rental growth. | | | | | How we performed | How we performed | | | | | | | Active asset management, asset disposals and | We delivered further good rental growth, as | How we performed | How we performed | | | | | the robust occupational market helped us to | we continued to capture the reversionary | We maintained our track record of achieving | After two years of exceptionally strong valuation | | | | | increase occupancy during the year to 95.8%. | potential in the portfolio through active asset | rental levels ahead of ERV. | increases, investment market conditions led to an | | | | | | management. | | 18.5% fall in the like‑for‑like valuation. | | | | Link to strategy Link to strategy Link to strategy Link to strategy   Strategic report 23 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Key performance indicators continued ### Link to strategy key: Investment Asset management Financial ### Total cost ratio EPRA NTA Dividends per share Loan to value ratio ### (%) (p) (p) (%) ## 28.4% 122.6p 6.4p 33.9% | 2023 28.4% | 2023 122.6p | 2023 6.4p | 2023 33.9% | | --- | --- | --- | --- | | 2022 27.1% | 2022 173.8p | 2022 6.4p | 2022 25.1% | | 2021 29.5% | 2021 135.1p | 2021 6.2p | 2021 24.6% | | 2020 27.1% | 2020 109.5p | 2020 6.2p | 2020 40.2% | | 2019 29.4% | 2019 109.7p | 2019 6.0p | 2019 39.7% | | Description | Description | Description | Description | | --- | --- | --- | --- | | EPRA cost ratio including direct vacancy costs | This net asset value measure assumes entities | The total amount of dividends paid or declared | Gross debt less cash, short‑term deposits and | | but excluding one‑off costs. The EPRA cost | buy and sell assets, thereby crystallising certain | in respect of the financial year, divided by the | liquid investments, divided by the aggregate | | ratio is the sum of property expenses and | levels of deferred tax liability. The measure | number of shares in issue in the period. | value of properties and investments. (See table | | administration expenses, as a percentage of | excludes the fair value of financial instruments | | 10 on page 149 for detail.) | Why is this important? | gross rental income. (See table 6 on page 147 | that are used for hedging purposes where | | | | --- | --- | --- | --- | | | | Shows our ability to construct a portfolio that | Why is this important? | | for detail.) | the Company has the intention of keeping the | | | | | | delivers a secure and growing income, which | Shows our ability to balance the additional | hedge position until the end of the contract Why is this important? underpins progressive dividend payments to portfolio diversification and returns that come duration (this is regardless of whether hedge Shows our ability to effectively control our shareholders. from using debt, with the need to manage risk accounting under IFRS is applied). (See table 6 cost base, which in turn supports dividend through prudent financing. on page 147 for detail.) How we performed payments to shareholders. We achieved our dividend target for the year of How we performed Why is this important? How we performed at least 6.4 pence per share. The increase in the LTV primarily reflects our Shows our ability to acquire well and to The total cost ratio increased in the year due to acquisition in the year and the reduction in increase capital values through active asset non‑recoverable holding costs on larger vacant the value of the portfolio, partially offset by management. buildings. Excluding vacancy costs, the EPRA proceeds from asset disposals. cost ratio was 26.8%. How we performed The decline in capital values relative to the market contributed to a 29.5% reduction in EPRA NTA per share. Link to strategy Link to strategy Link to strategy Link to strategy Not applicable  Strategic report 24 Warehouse REIT plc Research by a Post-Financial Management plc # Strategy in action # Growing our presence in a key location ![img-6.jpeg](img-6.jpeg) In line with our purpose (see page 1) we look to own assets in economically vibrant areas with access to major arterial routes. # One of the UK's fastest-growing cities Milton Keynes is an excellent example of our approach. It is one of the UK's premier distribution and logistics locations. Prime rents in the area range from £10.50 to £11.50 per sq ft and residential growth is putting further pressure on demand, underpinning prospects for higher rents. # Strengthening our presence The Group has owned Granby Trade Park in Milton Keynes since December 2020. The asset comprises 24 units and has a total area of 147,000 sq ft. In April 2022, we announced the acquisition of Bradwell Abbey Industrial Estate, which has 69 units across 335,000 sq ft (see page 25). This gives us nearly 0.5 million sq ft of space in this key location. With low average rents at Bradwell Abbey of c.£7.83 per sq ft there is good reversionary potential compared to an ERV of £9.89 per sq ft. We see considerable scope to grow income from our Milton Keynes assets. In December 2022, we announced a new ten-year lease with no break on 20,200 sq ft at Granby Trade Park. This followed a comprehensive refurbishment of the unit, including significant roof works, installing electric vehicle charging points and a lighting upgrade to LED, improving the building's EPC rating from a D to a B. The new occupier, Superbike Factory Ltd, is a large motorbike retailer and will primarily use the unit for its "click and collect" sales. The contracted rent of £201,800 per annum equates to £10.00 per sq ft, 6.6% ahead of the 31 March 2022 ERV. Our new estate at Bradwell Abbey sets a precedent for the future pipeline of assets as we continuously improve the estate beyond energy efficiency initiatives to create a desirable and sustainable working environment. To support occupier wellbeing, the Group intends to provide amenities and further landscape the grounds with biodiversity net gain in mind. ![img-7.jpeg](img-7.jpeg) 25 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Strategy in action continued ### Net zero pathway and MEES regulation aligned works completed ### at Bradwell Abbey to date: • LED lighting upgrades; • installation of efficient mechanical ventilation and air conditioning; • electrification of hot water and heat; • air source heat pump; • provision of disabled toilet facilities; • fabric improvements including improved insulation and door replacements; and • EPC ratings improved. Acquiring Bradwell Abbey in July 2022, a 335,000 sq We have completed a programme of external repairs For a smaller number of units, we provided disabled toilets ft industrial estate, provides us with an opportunity to and refurbishment for over 100,000 sq ft of the site, and decarbonised larger units by installing air source heat showcase the sustainability policies and procedures we which follows the Group’s sustainable asset management pumps to power air conditioning and hot water. We also have been developing over the past few years, most approach of transforming and repositioning existing realised fabric improvements by installing insulated sectional notably our EPC improvement activities and Environmental buildings. The EPC upgrades completed in 2022/23 apply goods doors. Refurbishment and Development Standards. We have to three units and consist of LED lighting upgrades, the In addition to energy efficiency improvements, the since put asset refurbishment plans in place to improve the installation of efficient mechanical ventilation and air refurbishment works will include the development of public estate beyond just energy efficiency to create a desirable, conditioning, and the electrification of hot water and heat. amenities such as a gym and a coffee shop as well as a sustainable and pioneering working environment. It is expected that these measures should improve the three more strategic approach to the public realm beyond basic The current phase is due to be completed in June 2023 units’ EPC ratings to a B and are in line with our net zero landscaping through the introduction of native species. and future phases will continue following lease events and carbon pathway. Another five buildings on the estate are through pro‑active occupier engagement. Bradwell Abbey currently being refurbished with similar EPC improvement will set a precedent for the future pipeline of assets. aspirations. Themain estate lighting for c.40 units has been replaced with LEDs, with an estimated payback period of less than threeyears and cost and energy savings of 79%. Strategic report 26 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Strategy in action continuedStrategy in action ## Swift Valley ## Industrial Estate, ## Rugby ### What is it? What was the outcome? We acquired Valley Point in December 2020 as part of a The refurbishment programme increased the EPC rating portfolio of four single and multi‑let distribution warehouse from B to A. assets. The 39,000 sq ft property is in an excellent strategic In December 2022, we announced that we had completed location on the Swift Valley Industrial Estate, a prime West a 20 year lease to a leading developer and manufacturer of Midlands industrial hub in the UK’s ‘Golden Triangle’. The M6 cooling solutions to sectors such as motorsport, renewable and M1 can be reached in under ten minutes and 80% of the energy and aerospace. The unit will serve as its new UK’s population is within a four‑hour drive time. European headquarters. The contracted rent of £332,400 per annum equates to c.£8.60 per sq ft, 4.3% ahead of ### How have we added value since purchase? previous passing rent and 11.0% above the 31 March 2022 Following the expiry of the previous occupier’s lease, ERV and is subject to five‑yearly upward‑only rent reviews, we undertook various improvement works to the unit to to the higher of open market rent or indexation. strengthen its marketability and energy efficiency. We invested £0.3 million of capital expenditure, including installing LED lighting across the asset, as well as efficient mechanical ventilation and heat recovery systems, electrifying hot water and heat, and improving the building fabric through increased insulation and air tightness. Strategic report 27 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor's report ![img-8.jpeg](img-8.jpeg) The UK occupational market remains robust and strong occupier demand has helped us to continue to capture the inbuilt reversion in the portfolio. Tilstone Partners Limited Investment Advisor The Group performed well from an operational perspective, as we continued to successfully implement the strategy, with a particular focus on driving value from the portfolio through active asset management and progressing the development opportunities, notably at Radway 16, Crewe. On a statutory basis, the Group's earnings per share of (43.0) pence reflected the loss on revaluation of the investment properties at the year end of £193.4 million, as a result of the conditions in the investment market described on page 11. The Group had recognised gains on revaluation of £163.7 million and £105.0 million in the previous two financial years. On an adjusted basis the Group's results were affected by the increased cost of debt in the year, as a result of rising interest rates, and to a lesser extent by higher vacancy costs during the year. As a result, adjusted earnings per share of 4.7 pence were 26.6% lower than the previous financial year, resulting in dividend coverage of 73.4%. Investment portfolio During the year, the Group acquired two assets and disposed of a number of other properties. Acquisition The Group acquired Bradwell Abbey Industrial Estate in Milton Keynes for £62.0 million, excluding acquisition costs. The multi-let industrial asset comprises 69 units across c.335,000 sq ft and is let to occupiers including Argos, F&F Stores and Taylor Kerr Engineering. The current rent of c.£7.83 per sq ft offers good reversionary potential compared to an ERV of £9.89 per sq ft. We see clear opportunities to generate upside through strategic capital expenditure, working with the existing occupiers and improving the estate's sustainability credentials, and we have made good progress with our asset management plan since purchase. For more information on the attractions of Milton Keynes as a location, see the case study on page 24. 28 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor's report continued ## Investment portfolio continued Disposals The Group's asset management strategy includes an ongoing programme of disposing of mature or non-core assets, so it can redeploy the capital or use the proceeds to pay down debt. We keep the portfolio under constant review to identify assets that are candidates for disposal. During the first half, the Group disposed of two assets, for gross proceeds of £4.8 million. In the second half, we progressed the Group's short-term strategy to reduce the level of variable-rate debt with the disposal of 14 assets, for headline consideration of £54.7 million, crystallising a profit on cost of £3.3 million and generating an ungeared IRR of 8.9%. This brought the aggregate proceeds for the year to £59.6 million. On a statutory basis, due to the high watermark of March 2022 valuations, a £13.1 million loss was realised for the year ended 31 March 2023. The sale of the assets demonstrate the liquidity of the portfolio and include: - Exeter Way, Theale, a vacant 92,000 sq ft warehouse with a high office component, sold to an owner-occupier for £15.0 million; and - Temple House, Harlow, for £14.5 million. The asset was sold ahead of a potential vacancy and capital expenditure costs, following the receipt of notice to break from the main occupier in March 2023. The other assets disposed of included a range of smaller properties for £25.2 million with a net initial yield of 6.5% and generating an ungeared IRR of 15.4%. These are assets we had identified as being non-core. Top 15 tenants by contracted rent | Occupier | % contracted rent | | --- | --- | | Amazon UK Services Ltd | 6.66 | | John Lewis plc | 4.23 | | Wincanton Holdings Limited | 4.17 | | DFS Ltd | 2.94 | | Direct Wines Ltd | 2.54 | | Argos Ltd | 2.23 | | Alliance Healthcare (Distribution) Ltd | 2.08 | | Magna Exteriors (Liverpool) Limited | 1.84 | | International Automotive Components Limited | 1.80 | | Evtec Aluminium Technologies Ltd | 1.38 | | Emerson Process Management Ltd | 1.36 | | Iron Mountain (UK) Plc | 1.36 | | Colormatrix Europe Ltd | 1.09 | | Magna Exteriors (Banbury) Ltd | 1.07 | | Selco Trade Centres Ltd | 1.02 | ![img-9.jpeg](img-9.jpeg) ![img-10.jpeg](img-10.jpeg) 29 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor's report continued ## Asset management ### Working with occupiers The Group has a diverse base of 490 occupiers, with the top 15 occupiers accounting for 35.8% of the contracted rent roll from the investment portfolio. The spread of the Group's occupiers across different industries and business sizes means it is not reliant on any one occupier or industry. This increases the Group's resilience and helps to mitigate financial and leasing risks. We continue to actively monitor the strength of the occupiers' covenants using credit software such as Dun & Bradstreet, enabling us to keep abreast of the impact of the current economic environment on the Group's occupiers, in particular those where energy is a high proportion of their costs. However, we have not identified an increase in corporate failures, as reflected in the Group's rent collection performance and bad debts (see the financial review for more information). As at 2 June 2023, we had collected c.99.0% of the rent due in respect of the year and we expect this to increase as we work with occupiers to collect the outstanding amounts. ### Leasing activity As described on page 11, the UK occupational market remains robust and strong occupier demand has helped us to continue to capture the inbuilt reversion in the portfolio through lease renewals and new lettings. New leases continue to exceed ERVs, while lease renewals and rent reviews are achieving strong average uplifts against previous rental levels. As a result, like-for-like contracted rent increased by 5.3% year on year and ERVs by 6.2%, providing significant opportunities to capture the portfolio reversion in future periods. ### New leases The Group completed 40 new leases on 0.5 million sq ft of space during the year, which will generate annual rent of £3.0 million, 29.1% ahead of previous contracted rent and 13.0% ahead of 31 March 2022 ERV. The level of incentives remains steady on all multi-lat estates. Highlights included new leases for: - 23,700 sq ft at Midpoint 18, Middlewich, to a leading software provider to the UK healthcare sector, on a ten-year lease with a five-year break, at a rent of £237,000 per annum, 97.9% ahead of previous contracted rent and in line with the 31 March 2022 ERV; - 138,500 sq ft at Daimler Green, Coventry, to an automotive parts manufacturer, on a ten-year term at a rent of £623,000, 25.9% ahead of previous contracted rent and 16.9% above the 31 March 2022 ERV; - 38,600 sq ft at Swift Valley Industrial Estate, Rugby, on a 20-year lease at £8.60 per sq ft, 11.0% ahead of ERV (see the case study on page 26); - 20,200 sq ft at Granby Trade Park, Milton Keynes, on a ten-year lease with no break at £10.00 per sq ft (see the case study on page 24); - 15,200 sq ft at Gateway Park, Birmingham, to an electronic bike and scooter company, on a five-year term at a rent of £7.65 per sq ft, and 17.7% above the 31 March 2022 ERV; and - 36,100 sq ft at Carisbrooke Industrial Estate, Isle of Wight, for a headline rent of £185,000 per annum for ten years with a break at five years, equivalent to £5.12 per sq ft, 54.2% above previous contracted rent and 7.7% ahead of the 31 March 2022 ERV. The occupier is a leading manufacturing business. ### Lease renewals The Group continues to retain the majority of its occupiers, with 59.0% remaining in occupation at lease expiry and 67.6% with a break arising in the year, including units that were vacated and re-let in the period, this increased the Group's effective retention rate on lease renewals to 89.2%. There were 22 lease renewals on 0.2 million sq ft of space during the year, with an average uplift of 15.8% above the previous passing rent and 2.7% above the ERV. Highlights included: - 31,900 sq ft of lease renewals at Queenslie Park, Queenslie, across nine units, securing £196,500 at an average of 22.8% ahead of previous contracted rent and 10.6% ahead of 31 March 2022 ERV; - a five-year renewal at Linkway Industrial Estate, Middleton. The new lease generates total rent of £67,200 per annum and is c.11.0% ahead of both the previous rent and 31 March 2022 ERV; and - 22,000 sq ft lease renewal at Gateway Park, Birmingham, securing £176,700, 22.5% ahead of previous contracted rent and 6.6% ahead of 31 March 2022 ERV. 30 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor's report continued Asset management continued Leasing activity continued Rent reviews During the year 21 rent reviews were completed, generating an additional £0.3 million per annum, 21.5% ahead of previous rent and 5.2% ahead of the 31 March 2022 ERV. Highlights included: - rent reviews on two leases at Air Cargo Centre, Glasgow, which were settled at £440,000, 25.9% ahead of the previous contracted rent and 11.8% ahead of the 31 March 2022 ERV; - settled a rent review at Tewkesbury Business Park, Tewkesbury, for £330,000, 20.0% ahead of the previous contracted rent and 9.8% ahead of the 31 March 2022 ERV; - settled a rent review at Austin Drive, Coventry, for £275,000, 14.6% ahead of the previous contracted rent and the ERV at the date of the rent review; and - rent reviews on two leases at Chittening Industrial Estate, Bristol, which were settled at £210,000, 22.0% ahead of the previous contracted rent and 4.8% ahead of the ERV at the date of the rent review. Development activity Since 2017, we have assembled land for a flagship multi-let logistics park development at Radway 16, Crewe. The Group now owns 112 acres in this premier logistics location in the North West, market characterised by low vacancy rates and high take up in the region providing strong opportunities for above-average rental growth. Radway 16 will provide state-of-the-art, sustainable warehouse space that is suitable for a diverse range of occupiers. As previously reported, the Group has planning approval for more than 1.8 million sq ft of warehousing at Radway 16, having secured unanimous committee approval in July 2022 on phase 2 (1.02 million sq ft), to add to the phase 1 consent for 0.8 million sq ft secured in 2021. Since securing the approval on phase 2, we have now satisfied the pre-commencement planning conditions on phase 1 to enable a start on site. In Q4 2022, we launched a marketing campaign, generating significant occupier interest. We have also finalised the marketing for phase 2, which can be configured in a number of ways to provide a single 1 million sq ft unit or a number of smaller units. We continue to make progress with the Group's other development projects, where we will only commence development once a pre-let agreement has been signed. Capital expenditure We deploy carefully targeted capital expenditure to increase rents and capital values and improve the assets' ESG performance. On average, the Group aims to invest around 0.75% of its gross asset value ("GAV") in capital expenditure each year. This excludes development projects and is therefore based on GAV excluding developments. Total capital expenditure in the year was £5.0 million, equivalent to 0.5% of GAV excluding developments. At the year end, approximately 1.3% of the portfolio's ERV was under refurbishment (31 March 2022: 1.6%). In line with the Group's ESG strategy, all capital expenditure projects have long-term sustainable features which target an improvement in the Group's overall EPC rating. ![img-11.jpeg](img-11.jpeg) 31 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Investment Advisor’s report continued ### Portfolio analysis At the year end, the Group’s portfolio comprised 833 units across 8.2 million sq ft of space (31 March 2022: 867 units across 8.5 million sq ft). The table below analyses the portfolio as at 31 March 2023: | | Value (£m) | Occupancy by ERV (%) | NIY (%) | NRY (%) | WAULT to expiry (years) | WAULT to break (years) | Average rent (£ per sq ft) | Capital value (£ per sq ft) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Multi-let more than 100k sq ft | 384.0 | 95.2 | 5.5 | 6.5 | 4.6 | 3.6 | 5.88 | 92.13 | | Multi-let less than 100k sq ft | 153.9 | 92.3 | 6.4 | 7.4 | 5.4 | 4.0 | 6.63 | 89.95 | | Single let – regional | 131.9 | 100.0 | 5.1 | 5.8 | 7.8 | 7.6 | 5.22 | 95.55 | | Single let – last-mile | 83.3 | 100.0 | 5.6 | 6.9 | 6.2 | 5.2 | 5.74 | 89.64 | | **Total** | **753.1** | **95.8** | **5.6** | **6.6** | **5.5** | **4.5** | **5.90** | **91.97** | | Development land | 75.7 | | | | | | | | | **Total portfolio** | **828.8** | | | | | | | | At the year end, the contracted rent roll for the investment portfolio (excluding developments) was £45.3 million, with the ERV of £53.3 million showing the reversionary potential in the portfolio. Total contracted rents increased by 5.3% on a like-for-like basis during the year. The NIY of the investment portfolio was 5.6% at 31 March 2023, with an equivalent yield of 6.5% and a reversionary yield of 6.6%. The WAULT for the investment portfolio stood at 5.5 years at 31 March 2023 (31 March 2022: 5.6 years). Occupancy improved across the investment portfolio and was 95.8% at the year end (31 March 2022: 93.7%). Effective occupancy, which excludes units under offer to let or undergoing refurbishment, was 98.4% at the year end (31 March 2022: 95.8%), with 1.1% of the investment portfolio under offer to let and a further 1.5% undergoing refurbishment at that date. ![img-12.jpeg](img-12.jpeg) 32 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor's report continued ## Financial review ### Performance Rental income for the year was £45.8 million (year ended 31 March 2022: £44.0 million), with the movement reflecting like-for-like rental growth and the initial contribution from the acquisition of Bradwell Abbey Industrial Estate, less revenue foregone from the assets disposed of during the year. EPRA like-for-like rental growth was 6.0%. The Group's operating costs include its running costs (primarily the management, audit, company secretarial, other professional and Directors' fees), and property-related costs (including legal expenses, void costs and repairs). Total operating costs for the year were £18.9 million (year ended 31 March 2022: £16.0 million). The Investment Advisor fee for the year increased by £0.5 million, primarily as a result of the significant net asset growth in the second half of the previous financial year. The reduced valuation at 31 March 2023 will result in savings for the Group on the Investment Advisor fee in FY 2024 as this is calculated on net assets. The Company incurred one-off costs in the year of £11 million, in relation to its move from trading on AIM to the Main Market of London Stock Exchange. There were no one-off costs in the period to 31 March 2022. The net increase in the expected credit loss allowance was £0.2 million (year ended 31 March 2022: £0.3 million). This modest change reflects the diversity and quality of the Group's occupiers and our close relationships with them. The Group also often has rent deposits, giving it additional protection from bad debts. The total cost ratio, which is the adjusted cost ratio including direct vacancy costs, was 28.4% (year ended 31 March 2022: 27.1%), with the increase driven by holding costs relating to non-recoverable property expenses. Excluding void costs, the adjusted cost ratio is 24.4% (year ended 31 March 2022: 24.3%). The ongoing charges ratio, representing the costs of running the REIT as a percentage of NAV, was 1.3% (year ended 30 March 2022: 1.2%). The Group disposed of 16 assets in the year, resulting in a net loss on disposal of £13.1 million due to the strong revaluation uplifts since the assets were acquired. Against the assets' purchase price, the Group recorded an internal rate of return of 8.0%. There were no disposals in the prior year. At 31 March 2023, the Group recognised a loss of £193.4 million on the revaluation of its investment properties (year ended 31 March 2022: gain of £163.7 million). Financing income in the year was £6.9 million (year ended 31 March 2022: £0.3 million), including £2.0 million interest receipts (year ended 31 March 2022: £nil) from interest rate derivatives held by the Company and £4.9 million change in fair value of interest rate derivatives as at 31 March 2023 (year ended 31 March 2022: £nil). Financing costs include the interest and fees on the Group's revolving credit facility ("RCF") and term loan (see debt financing and hedging). Total finance expenses were £15.5 million (year ended 31 March 2022: £8.2 million). The increase reflects the higher average debt in the year following the acquisition of Bradwell Abbey and the higher weighted average cost of debt, which was partly mitigated by the interest rate caps taken out in the first half. ![img-13.jpeg](img-13.jpeg) ![img-14.jpeg](img-14.jpeg) 33 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor's report continued ## Financial review continued ### Performance continued The all-in cost of debt for the year was 4.3% (year ended 31 March 2022: 2.6%). We expect interest costs to reduce in FY 2024, as a result of the reduction in variable-rate debt following the asset disposals in the second half of the year. The statutory loss before tax was £182.9 million (year ended 31 March 2022: £191.2 million profit). The Group has continued to comply with its obligations as a REIT and the profits and capital gains from its property investment business are therefore exempt from corporation tax. The corporation tax charge for the year was therefore £nil (year ended 31 March 2022: £nil). Earnings per share ("EPS") under IFRS was (43.0) pence (year ended 31 March 2022: 45.0 pence). EPRA EPS was 3.9 pence (year ended 31 March 2022: 6.4 pence). Adjusted earnings per share was 4.7 pence (year ended 31 March 2022: 6.4 pence). ### Dividends The Company has declared the following interim dividends in respect of the financial year: | Quarter to | Declared | Paid | Amount (pence) | | --- | --- | --- | --- | | 30 June 2022 | 17 August 2022 | 3 October 2022 | 1.60 | | 30 September 2022 | 8 November 2022 | 30 December 2022 | 1.60 | | 31 December 2022 | 28 February 2023 | 3 April 2023 | 1.60 | | 31 March 2023 | 6 June 2023 | 7 July 2023 | 1.60 | | **Total** | | | **6.40** | The total dividend of 6.40 pence per share met the Group's target for the year and was 72.9% covered by adjusted EPS. All four interim dividends were property income distributions. The cash cost of the total dividend paid during the year was £27.6 million (year ended 31 March 2022: £26.3 million). ### Valuation and net asset value The portfolio was independently valued by CBRE as at 31 March 2023, in accordance with the internationally accepted RICS Valuation - Global Standards 2020 (incorporating the International Valuation Standards) (the "Red Book"), and the RICS Valuation - Global Standards 2017 - UK national supplement. The portfolio valuation was £828.8 million (31 March 2022: £1,012.0 million). This represented an 18.5% like-for-like valuation decline, after taking account of capital expenditure of £13.3 million, with the outward yield shift in the year being only partly offset by rising rental values. The EPRA NIY was 5.0% (31 March 2022: 4.0%) and the EPRA topped-up NIY was 5.5% (31 March 2022: 4.4%). The valuation resulted in an EPRA NTA of 122.6 pence per share at the year end (31 March 2022: 173.8 pence per share). ![img-15.jpeg](img-15.jpeg) 34 Warehouse REIT plc Annual Report and Financial Statements 2023 # Investment Advisor’s report continued ## Financial review continued ### Debt financing and hedging At the year end, the Group had a debt facility with a club of four banks: HSBC, Bank of Ireland, Royal Bank of Canada and Barclays. The facility runs until January 2025, with an option to extend for a further two years, and comprises an RCF of £138.0 million and a term loan of £182.0 million, to give a total facility of £320.0 million. At 31 March 2023, £124.0 million was drawn against the RCF and £182.0 million against the term loan. This gave total debt of £306.0 million (31 March 2022: £271.0 million), with the Group also holding cash balances of £25.1 million (31 March 2022: £16.7 million); the Group’s net debt as at 31 March 2023 is £280.9 million (31 March 2022: £254.3 million). The LTV ratio at 31 March 2023 was therefore 33.9% (31 March 2022: 25.1%), with the increase reflecting the acquisition in the year and the lower portfolio valuation, partially offset by the asset disposals. The Group remains substantially within its covenants in the debt facilities, which place a limit on the LTV of 55% and require minimum interest cover of 2.0 times. Interest cover for the year was 2.9 times. The Group’s debt facilities carry the cost of SONIA plus a lending margin. During the first half of the year, the Group took out two interest rate caps of £100.0 million each, for three and five years respectively at a cost of £10.9 million payable over the term, which cap the SONIA rate in the debt facilities at 1.5%. The Group also has an interest rate cap of £30.0 million, which expires in November 2023 and caps SONIA at 1.75%. A further interest rate cap of £30.0 million expired in November 2022. The Group had hedged approximately 75.0% of its year-end debt against interest rate volatility. We continue to explore opportunities to diversify the Group’s sources of debt funding, hedging requirements, extend the average maturity of its debt and further reduce the average cost of debt. ### Post year end activity Post-year end, the Group entered into a new five-year debt facility totalling £320.0 million, replacing the existing facility. The refinancing consists of £220.0 million term loan and an RCF of £10.0 million, with a club of lenders consisting of HSBC, Bank of Ireland, NatWest and Santander. The new facility extends the tenure of the Group’s debt and with improved reporting covenants. In addition, the Group has exchanged on two further disposals for an aggregate of £29.3 million. ## Compliance with the investment policy The Group’s investment policy is summarised below. The Group continued to comply in full with this policy throughout the year. ![img-16.jpeg](img-16.jpeg) 35 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Investment Advisor’s report continued ### Investment policy Status Performance The Group will only invest in warehouse assets in the UK. All of the Group’s assets are UK‑based urban warehouses. No individual warehouse will represent more than 20% of the Group’s last published gross asset value (“GAV”), at the The largest individual warehouse represents 6.2% of GAV. time it invests. The Group will target a portfolio with no one occupier accounting for more than 20% of its gross contracted rents at The largest occupier accounts for 6.7% of gross contracted the time of purchase. No more than 20% of its gross assets will be exposed to the creditworthiness of a single occupier rents and 7.1% of gross assets. at the time of purchase. The Group will diversify the portfolio across the UK, with a focus on areas with strong underlying investment The portfolio is well balanced across the UK. fundamentals. The Group can invest no more than 10% of gross assets in other listed closed‑ended investment funds. The Group held no investments in other funds during the year. The Group will consider where appropriate an element of speculative development, provided the exposure to these Other than refurbishing vacant units, the Group did not assets, assessed on a cost basis, shall not exceed 10% of the gross assets of the Company. undertake any speculative development in the period. The Group may invest directly, or through forward funding agreements or forward commitments (provided within the The Group’s exposure to developments at the year end was overall exposure limited stated above), in developments (including pre‑developed land), where: 9.1% of GAV. • the structure provides us with investment risk rather than development risk; • the development is at least partially pre‑let, sold or de‑risked in a similar way; and • we intend to hold the completed development as an investment asset. The Group views an LTV of between 30% and 40% as optimal over the longer term but can temporarily increase The LTV at 31 March 2023 was 33.9%. gearing up to a maximum of LTV of 50% at the time of an arrangement, to finance value enhancing opportunities. The Company’s full investment objective and policy are set out on page 154. ### Investment Manager The Company is an alternative investment fund for the purposes of the Alternative Investment Fund Managers Directive (“AIFMD”) and, as such, is required to have an Investment Manager who is duly authorised to undertake that role. G10 Capital Limited (“G10”) is the Company’s AIFMand Investment Manager and is authorised and regulated by the Financial Conduct Authority. ### Investment Advisor Tilstone Partners Limited is Investment Advisor to the Company and the Investment Manager. ### Tilstone Partners Limited 5 June 2023 Strategic report 36 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report In recent years, we have spent considerable time and effort Our EPC improvement programme is another major focus laying the groundwork for our approach to sustainability, and the Group continued to drive rating improvements this understanding what is required to manage ESG matters year, through its ongoing capital expenditure on refurbishing effectively and building capabilities, strategies and and enhancing its assets. This work is critical to reducing measurement frameworks into our operations. This includes the risks posed by increasingly stringent regulations, which ensuring accountability and governance are in place, in the coming years are proposed to require each asset determining our risk exposures and mitigation plans, as well to meet minimum EPC standards of C rating by 2027 and as understanding opportunities. Brating by 2030. Through this work, we have been able to take a We have also modelled our climate‑related risks under progressively more holistic approach to ESG issues, different scenarios. This insight allows us to reduce the moving from achieving compliance to looking to create the portfolio’s exposure through capital expenditure, for most value through each action we take. This is just good example by improving drainage to prevent flooding, business sense. Having a rigorous sustainability strategy is and support our evaluation of potential acquisitions and essential for protecting the Group’s commercial interests, disposals. We know that having insight into climate risk supporting our ability to attract high‑quality occupiers and and our response is important to our shareholders and we capitalise on the green premium for sustainable properties, are therefore voluntarily reporting under the Task Force on for both rental levels and asset values. Climate‑related Financial Disclosures (“TCFD”) – see pages 44 to 50. This is part of our commitment to transparent One of our important workstreams this year was developing reporting and benchmarking. our net zero carbon pathway to 2030 for our Scope 1 and 2 emissions. We have committed to an annual reduction As a priority, we will continue to progress our work on in Scope 1 and 2 emissions of 4.2% on a like for like basis. climate risk, understanding the impact on the portfolio This has wide‑ranging implications for us, helping to guide and upskilling team members. We will also continue our our actions across areas such as energy efficiency and engagement with occupiers, promoting information sharing supply on the assets we control, asset refurbishments, the and working with them to measure and report our Scope 3 sustainability credentials of our developments and the green emissions. We will continue on our journey towards GRESB clauses we incorporate into our leases. As part of this, the participation. Tilstone team has been trained on our new standards for refurbishments and developments so these standards are reflected on our sites. More information on our pathway can ### Aimée Pitman be found on page 18. Chair of the Sustainability Committee 5 June 2023 Strategic report 37 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Our vision is to be an industry-leading sustainable warehouse ## investor and, ultimately, the UK’s warehouse provider of choice. ### Aimée Pitman Chair of the Sustainability Committee ### Our vision ## Our sustainability strategy Our vision is to create environmental, social and economic value for our shareholders and wider stakeholders by integrating Integrating environmental, social and governance (“ESG”) sustainability into the way we grow and manage our portfolio. risks and opportunities into how we do business is increasingly important across our stakeholder groups, in particular helping us attract and retain occupiers and appeal to a broader range of investors. To inform our approach, in ### Creating a resilient portfolio Reducing our footprint 2020 we undertook a materiality assessment to identify the key risks and opportunities most important to our business Creating a resilient portfolio reduces our risk exposure Reducing our environmental footprint ensures our assets and our stakeholders and this is set out on our website to current and future legislation, transitional and are aligned to a net zero carbon future, while reducing (www.warehousereit.co.uk). physical climate risks and changing occupier demand. operating costs by minimising utilities consumption To further structure our approach and deliver on our including water, energy and waste removal. Read more on page 38 vision to be the warehouse provider of choice, we have Read more on page 40 established a clear framework which includes interim and long‑term goals, as set out below: ### Supporting our occupiers Responsible business foundations Supporting our occupiers strengthens our relationship Being a responsible business is critical to managing our with them, encourages sustainability knowledge sustainability risks while also clearly communicating | sharing and helps drive the sustainability and broader | our ambitions and actions to our investors and wider | | --- | --- | | ESG agenda across thesector. | stakeholders. | | Read more on page 42 | Read more on page 43 | Strategic report 38 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Creating a resilient portfolio ### Our journey to net zero ### Long-term goals Net zero pathway commitments During the 2022 calendar year, we engaged a third‑party • Targeting green building certifications consultant to review Warehouse REIT’s carbon footprint and 2030 net zero for GHG Scope 1 and 2 (UKGBC Net Zero • Reducing EPC risk formalise a pathway to net zero carbon. This involved setting Carbon Framework aligned) • Reducing climate‑related risks in the portfolio our baseline performance, identifying key decarbonisation Via the Environmental Refurbishment and Development • Defining and implementing net zero carbon pathway measures and quantifying their impact on the energy Standards: and carbon performance of the portfolio. Our pathway is 2023 highlights aligned to the UK Green Building Council’s (“UKGBC”) Net • develop refurbishment plan for each asset assigned • Undertook climate risk modelling to better understand Zero Carbon Framework and includes our Scope 1, 2 and capital expenditure, including building fabric, systems, our exposure to physical climate hazards building‑related Scope 3 emissions. controls and PV deployment; • Developed our net zero carbon pathway Based on the analysis, we have committed to achieve net • remove fossil fuels from landlord‑controlled • Continued the roll‑out of an EPC improvement zero carbon for our Scope 1 and 2 emissions by the 2030 commonparts; programme, with 92% of units now A‑D rated across all calendar year. In advance of setting long‑term climate • optimise deployment of PV panels on all new countries targets we target a 4.2% annual reduction in our Scope 1 developments and major refurbishments; and and 2 emissions. • use asset level scorecards to enable progress to be ### 2024 targets To achieve these targets, our pathway includes eight tracked and reported. • All developments to target EPC B or above decarbonisation commitments: • All developments >50,000 sq ft to target BREEAM 100% of directly procured electricity from renewable Excellent/Very Good sources • EPC improvement programme to ensure all in‑scope Engage with occupiers to reduce energy consumption, properties have a valid EPC and target 25% reduction collect and monitor energy usage across the portfolio of D or E rated properties Target 100% of all new leases and amended leases to • Build mitigation plans for assets identified as higher risk include green clauses of climate change Conduct energy‑related due diligence for new • Regular Board ESG training on future legislation, acquisitions occupier demands and climaterisk For new developments, target a BREEAM rating of 'Excellent', achieving a minimum rating of 'VeryGood’ Monitor and report progress on annual basis Strategic report 39 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Creating a resilient portfolio continued Assessing our climate-related risks Improving the EPC performance of Looking forward to the year ending 31 March 2024, we have In recent years, there has been a significant legislative push set several targets to drive energy efficiency improvements: ### ourportfolio for companies to mitigate against climate‑related risks and zero properties are to have an expired EPC or <2 years to An EPC rating is a regulatory requirement demonstrating 1 transition to a low‑carbon economy. Most notably, in the expiry , a 25% reduction in D and E‑rated properties. the energy efficiency of a building. Currently, all UK, the Companies Regulations 2022 place requirements non‑domestic rented buildings should be a minimum E ### EPC Rating by floor area 1 April 2023 on large private companies to incorporate Task Force on rating but MEES (Minimum Energy Efficiency Standard) Climate‑related Financial Disclosures (“TCFD”) in their legislation is expected to become more stringent by 2030, annualreports. requiring a minimum ‘B’ rating. In addition, environmental England and Wales % credentials are increasingly important to our occupiers so The Group reports annually in line with the TCFD despite no 53.19% Scotland % improving the EPC ratings of our portfolio is essential. obligation to do so, with this year’s disclosure available on 50.97% page 44. We commissioned an independent third party to We continued our portfolio‑wide EPC improvement conduct a physical climate hazard scenario analysis across programme in the year ending 31March2023, with 64% of three time horizons which found that 61% of our assets have our units in England and Wales (by sq ft) holding an EPC low exposure to physical climate hazards even under the rating of A to C (2022: 51%). In England and Wales, we no most severe climate scenarios, with 11% of assets that may be longer have any units with an EPC belowE. at high risk from at least one physical climate hazard by 2050 35.37% In Scotland, where the EPC rating system is different, under an intermediate emissions scenario. 70% of our units (by sq ft) have an EPC rating of A to We have extended our existing risk register to include D as of 31March 2023, a 5% increase from 65% in the 28.54% climate‑related risks, set a formal process for reviewing previous year. EPC ratings cannot be compared between climate‑related legislation and regulation and improved our Scotland and England and Wales due to differences in the internal knowledge of climate risk management. See our methodologiesapplied. TCFD response on page 49 for further details. The improvement to the portfolio’s EPC ratings in the year ending 31 March 2023 reflects the benefits of our investment 7.39% 7.03% activity where we have acquired higher‑rated assets and 2.78% | disposed of poorer‑quality buildings, as well as LED lighting | | | | 1.94% | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 1.92% | 9.38% | | | | | | | | | 0.76% | | | | | 0.72% | | 0.74% | | | | | | | | 0.00% | | 0.00% | | 0.00% | replacements and upgraded heating systems. A B C D E F G No Rating 1. This does not include units exempt from having an EPC or units where different Scottish requirements apply. Strategic report 40 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Reducing our footprint ### Environmental Refurbishment and • EV charging – all refurbishments above 10,000 sq ft must ### Long-term goals include the installation of a dual EV charging post, with ### Development Standards • Increasing energy and resource efficiency (landlord additional posts depending on the refurbishment size; and Wherever possible, we seek to deliver sustainability and occupier) improvements through refurbishing existing assets. • Ecology and trees – we look to install bird, bat and • Reducing waste and resource consumption Toestablish a consistent, effective and value‑for‑money hedgehog boxes as well as log piles and native tree • 2030 net zero carbon for Scope 1 and 2 carbon species to support wildlife and improve air quality. approach, in the year ended 31March2022 we developed emissions the Environmental Refurbishment and Development During the year ended 31 March 2023, we completed • Disclose Scope 3 carbon emissions Standards for our design teams, ensuring allprojects are training with all team members involved in refurbishment delivered to a high performing standard. and development projects and in the second half, started to ### 2023 highlights Thestandards set requirements including: integrate these new standards across refurbishment projects. • All landlord utilities converted to green tariffs (except • Internal fit-out – LED lighting throughout, office heating Our ambition this year is to conduct a photovoltaic panels those under tender) via air source heat pumps and point‑of‑use water heaters feasibility study on our portfolio to assist the drive towards • 18 EV chargers installed to date that provide the immediate production of hot water. Other renewable power. • Applied our Environmental Refurbishment considerations include aerated taps and dual flush toilets ### Development Standards to assets Improving energy efficiency to reduce water use as well as carbon neutral carpeting; Landlord‑obtained electricity consumption on a like‑for‑like • Renewable energy – consider the installation of ### 2024 targets basis decreased by 7% and fuels consumption decreased photovoltaicpanels when refurbishing assets of more than • All new utility contracts to be renewables based by 51% compared to the year ended March 2022, resulting 30,000sq ft; • All landlord‑sourced utilities to be on renewable tariffs in a 20% decrease in the energy intensity of our like‑for‑like • Sustainable drainage – to increase natural surface portfolio. • All developments to have a sustainability plan water drainage, we consider the use of block paving and • All refurbishments to align with TPL ESG We drive this reduction through our EPC improvement permeable tarmac in parking areas; Refurbishment Standards programme, landlord green tariffs and wider energy saving initiatives. Improvements have been achieved through LED • Occupier/unit scorecard to be developed lighting upgrades, efficient mechanical ventilation and • Developments >50,000 sq ft to be BREEAM heat recovery, fabric improvement insulations, efficient air Excellent/Very Good conditioning and electrification of hot water and heat across • 4.2% reduction in Scope 1 and 2 emissions our assets. Strategic report 41 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Reducing our footprint continued ### Improving energy efficiency continued ### Embedding green clauses into new leases We have now converted all our landlord‑paid utilities to green During the year ended 31 March 2023, we embedded tariffs, except those under tender, with plans to make all green clauses into all new leases to ensure the effective tariffs green in the year ending 31 March 2024. management and improvement of the portfolio’s Occupier engagement is an important part of our approach environmental performance. The clauses seek to given that most of our assets are owner‑operated and achieve five principles: controlled. Working to enhance our data collection practices 1. Co-operation and data sharing: this will improve our is a priority and we are engaging with them to ensure we insight into occupiers’ environmental data and therefore install features and report our ESG performance in line with our Scope 3 emissions as well as our ability to carry their own stakeholders’ requirements. out works to improve the building’s environmental performance ### Reducing resource consumption We are working towards adopting circular economy 2. Building management: we want to collaborate with principles throughout the life cycle of a building. Our our occupiers to identify and implement appropriate Environmental Refurbishment and Development Standards environmental performance strategies provides guidelines on reducing the proportion of waste 3. Occupier alterations: this will protect the building sent to landfill and we are looking to develop a guidance from alterations that could adversely impact its handbook for occupiers. To support occupiers to improve performance their consumption practices, we have added criteria within 4. Compliance with regulation and permits: this will lease renewals that promote responsible consumption (see safeguard against non‑compliance with legislation and page 29). the landlord’s reasonable regulations ### 5. EPC maintenance and improvement: this will ensure Carisbrook, Isle of Wight co‑operation from occupiers to support our large‑scale The refurbishment of Unit 3 – a 36,000 sq ft factory EPC improvement programme in Carisbrook, Isle of Wight – included a c.£200,000 investment to strip back the asset to its core, upgrade the lighting and install electric heating and hot water. The works resulted in an EPC upgrade from an E to a B. Following this, the Group obtained planning consent for the unit’s use as a warehouse and has let the building to a major occupier on a ten‑year lease. Strategic report 42 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Supporting our occupiers ### Engaging occupiers The themes that emerged as the main drivers behind ### Long-term goals We engage occupiers on a whole spectrum of sustainability adoption of environmental initiatives were regulation and • Engagement to understand occupier net zero carbon aspects from health and wellbeing to energy and carbon compliance, cost saving, business reputation, wider business goals and support wellbeing and sustainable connectivity. As we progress our own net strategy/ethos and improving the working environment. • Support occupiers’ wellbeing and provide a safe zero carbon pathway, we will place an increased focus These results will help shape our agenda for the next environment for all building users on their environmental data. Occupier emissions account financial year. • Integrating sustainability criteria into lease clauses for the majority of our Scope 3 emissions, so collecting Responsible business foundations are essential to the and monitoring their emissions and collaborating on Group’s success and underpin our sustainability strategy. ### 2023 highlights decarbonisation measures will be essential for reducing • Rolled out an occupier engagement survey to ourown carbon footprint. understand the key drivers behind their environmental Following on from last year’s occupier survey, we rolled initiatives out our annual questionnaire to gain insight into occupiers’ • Green clauses embedded into all newleases outlook on their industry, key challenges and space • Continued our pro‑active approach to asset requirements. Importantly, we sought to understand the management and occupier engagement environmental initiatives that they have implemented as wellas the key drivers for doing so. ### 2024 targets The responses covered a range of business sizes from micro • Launch portfolio‑wide occupier engagement, target ### Roman Way (less than ten employees) to larger companies with over 250 20% response rate, to identify: At Roman Way, we carried out the refurbishment of employees. Unsurprisingly, some of the biggest challenges • occupier ESG agenda; two units, 3 and 19, which were originally re‑assessed facing occupiers emerged as rising supply costs and labour • energy data sharing appetite; and at EPC E rating. Following MEES recommendations, supply. Regarding environmental initiatives, of the occupiers we undertook improvement works, including: • energy efficient knowledge and WHR ESG priorities. who responded, LED lighting was the mostly widely adopted • Implement plan from 2023 occupier survey results environmental measure, followed by EV chargers and other • installation of extractor fans within restroom facilities; transport initiatives such as cycle racks and carpooling. • Inclusion of green clause principles in all new leases • LED lighting upgrades; • new double‑glazed doors for each unit; and • removing the heating from the warehouse, Unit 19. As a result of these upgrades, we achieved an EPC C for Unit 19 and secured an occupier, and an EPC B for Unit 3. Strategic report 43 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## Responsible business foundations ### Governing responsibly Enhancing our disclosures ### Long-term goals The Sustainability Committee, which was formed two years We report our ESG performance in line with the European • Robust governance and oversight of ESGrisks ago, consists of three Non‑Executive Directors, who meet a Public Real Estate Association (“EPRA”) Sustainability Best • Transparent disclosure and participation ininvestor minimum of three times a year, providing a forum to address Practices Recommendations (“sBPR”) being awarded an benchmarks and indices critical issues and opportunities. For detailed information on EPRA Gold award for the second year (see page 51 for this the role of the committee, see page 92 in the Sustainability year’s EPRA disclosure). ### 2023 highlights Committee report. Despite no obligation to do so, we have also been reporting • Gold award achieved from the EPRA sBPR for the Our sustainability strategy was strengthened this year to our climate disclosures in line with the Task Force on second year further support our suite of policies that enforce the highest Climate‑related Financial Disclosures (“TCFD”) for three • Gap analysis and improvement plan created to support standards of ethical behaviour regarding whistleblowing, years, enhancing the breadth of our response year‑on‑year. our journey towards GRESB participation in2024 anti‑money laundering, anti‑bribery and corruption and Recognising GRESB’s value as a widely acknowledged ESG • Stand‑alone climate risk register created to ensure health and safety. Our new Business Code of Conduct benchmarking tool for real estate, in 2022, with the help these risks receive due attention applies to all employees and contractors working on behalf of JLL, we completed a gap analysis to identify a series of the Investment Advisor and sets expectations regarding of actions to put in place this year to align our business ### 2024 targets bribery and corruption, harassment and discrimination, methods further with the GRESB benchmark. • Identify data solution for ESG management diversity, sustainability and governance, data and conflicts • Retain EPRA sBPR Gold award of interest. • Progress on reporting alignment with TCFD Our Supplier Code of Conduct, published in May 2022, recommendations for 2024 outlines the standards that we expect within our supply • ESOS phase 3 compliance chain, encompassing the suppliers, partners and contractors • Implement recommendations to align with GRESB we work with. When selecting third parties to work with, we benchmark operate a checklist to ensure that we are working with those that share and uphold the same values and responsible business foundations as us. Strategic report 44 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continuedSustainability report continued ## 2022 TCFD disclosure ### Introduction In line with the recommendations of TCFD dated June 2017, this report complies with nine of the eleven TCFD As part of our vision to be an industry‑leading sustainable recommendations and recommended disclosures and partially compliant with recommendation 2b. The Group warehouse investor, we are dedicated to pro‑actively is developing our quantitative approach to assessing the impact of climate related risks and opportunities on the managing climate‑related risks and publicly reporting organisation’s business, strategy and financial planning. Furthermore, we have not yet reported our Scope 3 emissions climate‑related financial information to our stakeholders. under TCFD Recommended Disclosure – Metrics and Targets b), due to limited data availability. Here we disclose the climate‑related risks we have identified to the business and set out our overarching risk management approach in line with the recommendations ### Pillar Recommended disclosure Consistency note of the TCFD. We are exempt from the amendments to the Listing Rules published by the FCA in 2022 and therefore make our disclosures on a voluntary basis in order to Board oversight Consistent ### Governance demonstrate our dedication to this highly important topic. Management role Consistent Identified climate‑related risks and opportunities Consistent ### Strategy Impact of climate‑related risks and opportunities Developing quantitative approach to impact of risks and opportunities Resilience of the Group’sstrategy Consistent Process for identifying and assessing climate‑related risks Consistent ### Risk ### management Process for managing climate‑related risks Consistent How the processes are integrated into risk management Consistent Climate‑related metrics Consistent ### Metrics ### and targets Scope 1, 2 and 3 GHG emissions Developing approach to disclose scope 3 Climate‑related targets Consistent Strategic report 45 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## 2022 TCFD disclosure continued The Chair of the Sustainability Committee reports to the The Investment Advisor is well briefed on the Group’s ## 1. Governance Board on a quarterly basis and the Sustainability Committee sustainability and climate‑related ambitions and ### 1a. The Board’s oversight of climate-related makes recommendations to the Board, as appropriate, to reports significant risks at the property level to Board ### risks and opportunities ensure that any material climate‑driven macroeconomic, committees onan ad‑hoc basis, ensuring that there is clear The Board is ultimately responsible for the Group’s approach financial and regulatory market changes are escalated and communication between occupiers and the Board. to risk management and internal control process, including integrated into strategic decision‑making. The Sustainability setting the Group’s risk appetite, identifying principal risks A detailed overview of our governance structure can be Committee is also responsible for setting and overseeing and determining mitigating controls via regular risk reviews. found below. performance towards climate‑related targets and long‑term The Board has fundamental responsibility over wider ### goals, available on page 92. The implementation roadmap Overview of roles and responsibilities sustainability matters, including the Group’s sustainability and actions towards achieving these goals are then strategy. Climate change has been identified as a principal overseen by the Investment Advisor. Warehouse REIT Board risk to the business in the corporate risk register and is a key component of our sustainability strategy. ### 1b. Management’s role in assessing and Target ### The Audit and Risk Committee provides additional oversight managing climate-related risksand setting and Reports ### of the Group’s risk management framework and is involved opportunities Decisions and objectives decision‑making on in identifying, assessing and managing risks. The committee The Investment Advisor supports the Board and Audit preparations, progress meets twice a year to review the effectiveness of the and Risk Committee in identifying and evaluating risks and progress report overall risk management strategy and reviews the impact is responsible for forming and implementing the Group’s and related business mitigation strategies of principal risk management strategy. The Investment Advisor is also Audit Committee risks across the risk register, including the climate‑related responsible for co‑ordinating with stakeholders and engaging principal risk. with occupiers to identify risk and implement mitigating Identifies, assesses Recommends climate‑ controls at the asset level. The Investment Advisor sits on The Sustainability Committee, chaired by Board member and manages risks and related risks and mitigation the Sustainability Committee, alongside Board members, mitigation strategies actions Aimée Pitman, is responsible for developing and enabling the communication of climate‑related risks between implementing the Group’s responsible business agenda, operational, management and Board levels. Sustainability Committee sustainability strategy and external ESG reporting. Following the climate risk scenario modelling undertaken this year, The Investment Advisor is responsible for day‑to‑day Strategic guidance the Sustainability Committee will review the Group’s operational activities and the application of the risk Report on progress at and support during climate‑related risks and mitigation strategies via the newly management strategy, including climate risk management. segments and departments implementation formed additional ESG risk register and recommend any The Investment Advisor, with support from the Property required updates to the Audit and Risk Committee. This ESG Manager, is responsible for collecting and reporting TPL Sustainability Team risk register enables the Sustainability Committee to review environmental and climate‑related data, enabling Board climate related risks at a more granular level. The Audit and committees and the Investment Advisor to monitor Risk Committee reviews and monitors the risk management performance against strategic long‑term goals and targets. framework. Strategic report 46 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## 2022 TCFD disclosure continued The exposure level to each hazard was ranked across In addition, we recognise that transition risks are expected ## 2. Strategy low, moderate and high‑risk likelihood bands, based on to be the most impactful in the short term and likely across ### 2a. Climate-related risks and opportunities a simplified classification of the results generated by scenarios associated with significant policy action and ### identified over the short, medium and each risk model, which had individual likelihood ratings. market shifts towards decarbonisation. Transition risks that ### longterm Theassessment also revealed the number of assets exposed we have identified which should all be considered relevant We recognise that climate‑related risks materialise over to each risk level and provided hazard exposure profiles of for the current time horizon (up to c.2028) include: the medium to longer term and that the assets we acquire our top ten largest estates. This provided a clear overview • regulatory risks regarding the costs for compliance, as well and occupy now will still be here far in the future. Without of the impact likelihood that modelled hazards pose to the as costs arising from breach of environmental regulation appropriate risk management, these risks could have portfolio, enabling us to make strategic decisions on where such as the MEES regulations; severe financial and reputational implications. As such, to focus mitigation actions and harness opportunities. we conducted climate risk scenario modelling to assess • increasing costs of supplies or disruption to supplies for The assessment found that 61% of units have a very good maintenance and development; the exposure of our portfolio to physical climate‑related resilience to physical climate hazards, continuing to have risks across the three Intergovernmental Panel on Climate • increasing cost of utilities; low exposure to all physical climate hazards even under the Change (“IPCC”) climate scenarios – RCP 2.6, RCP 4.5 • properties not meeting occupier requirements relating to most severe climate scenarios. For the units at risk from and RCP 8.5 – over the short term (present day), medium energy efficiency or logistics; physical climate hazards, flooding is the most likely risk; 5% term (2050) and long term (2080). The time horizons • impact on property values/rents if assets are not of assets exposed to high risk under best‑case scenario by align with the 2050 net zero carbon deadline set by the developed or maintained to appropriate modern standards; mid‑century withup to 6% of modelled units found to be at UK Climate Change Act as well as the associated risks and a moderate to high risk in a late century scenario. Up to 11% • impact on investor interest and our reputation compared capture a range of climate‑related risks that are expected to of assets are exposed to a subsidence hazard in a severe, to our peers; and materialise in the near and long term. late century scenario, whereas our portfolio is not exposed • inability to access funding through green bonds or similar. The climate risk scenario modelling covered a total of five to coastal erosion. As expected, the likelihood of flooding climate‑related hazards, covering coastal flooding, river Additionally, we have identified opportunities in our and subsidence increases across emission scenarios and flooding, flash (surface water) flooding, subsidence and sustainability strategy that are climate mitigation actions and time horizons. coastal erosion and assessed the likelihood of these hazards improve our resilience. These include improving our energy Following this, we are planning on enhancing our climate risk and carbon data management and investment in low‑carbon impacting a total of 803 units within our portfolio across assessment by assessing the possible business and portfolio solutions to increase energy and resource efficiency, with three climate scenarios and time horizons. The assessment impacts of the likely climate hazards as well as further the aim of achieving long‑term savings, green building was based on trusted climate and natural hazard databases, asset‑level climate risk assessments to assess and assign certifications and our net zero carbon ambitions. We believe such as JBA Floodability Index, British Geological Survey adaptation solutions necessary for mitigating onsite risk, these initiatives improve our reputation and attract premium and National Coastal Erosion Risk Mapping. starting with assets identified to have the highest exposure. occupiers. Overall, the business plans to integrate the findings of the climate risk scenario modelling within the risk management approach under the climate change principal risk. Strategic report 47 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## 2022 TCFD disclosure continued Throughout the operational life cycle of assets, we engage Having conducted physical climate risk scenario modelling, ## 2. Strategy continued with occupiers to understand their ESG needs and we understand the exposure of our assets to selected ### 2b. Impact of climate-related risks and aspirations, reduce their energy consumption and collect climate risks in the UK across the IPCC’s RCP 2.6, RCP ### opportunities on the organisation’s businesses, and monitor energy consumption across the portfolio. We 4.5 and RCP 8.5 climate scenarios. Throughout our risk ### strategy and financial planning also maintain 100% of electricity procured from renewable review processes, we have also identified transition risks Climate‑related risks and building resilience are embedded sources and ensure all new and amended leases include associated with climate change and have developed risk into our business strategy under the creating a resilient green clauses in line with our net zero carbon pathway and mitigation measures in terms of minimum certification portfolio pillar and as an independent principal risk in climate risk management efforts. standards, compliance and decarbonisation. While resilience our risk register. Energy, water and carbon efficiency is inherently integrated into our business strategy, we are We have also developed Environmental Refurbishment opportunities are also identified within our sustainability currently in the process of integrating the results of the and Development Standards covering several sustainability strategy under the reducing our footprint, supporting recently conducted climate risk assessment into our risk topics including ecology, EV charging, sustainable drainage, our occupiers and responsible business foundation management framework and decision‑making, further onsite renewable energy (solar PV panels), sustainable pillars. To enable us to mitigate climate risks and harness improving our understanding of the business impacts of travel and resource and energy efficient internal fit‑outs opportunities, we have included a sustainability budget in physical climate‑related risks and mitigation actions to for all large‑scale refurbishments and new developments. our financial modelling processes, informing our investment improve our resilience. The standards help us manage flood, subsidence and strategy across the whole property life cycle. erosion risk, as well as transition risks associated with Throughout the acquisition process our investments decarbonisation. We are also targeting a BREEAM rating are informed by energy‑related due diligence, ensuring of Excellent where possible, with a minimum rating of that potential acquisitions align with our net zero carbon Very Good to minimise the embodied carbon emissions pathway and preliminary climate risk assessments assessing associated with our developments and refurbishments. flood risk. We are planning on integrating a broader range Additionally, while EPC ratings have been integrated into of climate‑related risks into our acquisitions protocol. our business already, we are accelerating the process of Ouroverall investment strategy of recycling and upgrading improving ratings and making sure all buildings have been assets by improving their energy efficiency and building rated whilst considering the MEES proposed regulations for fabric also helps extend the life expectancies of our 2027 and 2030 where all non‑domestic rented buildings buildings and reduce our carbon emissions. must hold a ‘C’ and ‘B’ EPC rating respectively. Strategic report 48 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## 2022 TCFD disclosure continued The RCP 2.6 climate scenario represents a pathway where Our resilience to scenarios associated with transition risks ## 2. Strategy continued greenhouse gas emissions are greatly reduced by immediate is secured by our net zero carbon pathway and related ### 2c. Resilience of the organisation’s policy action and market forces, to decarbonise and meet activities described in TCFD Recommended Disclosure ### strategy, taking into consideration different the Paris Agreement. RCP4.5 is a more moderate climate – Strategy b). Our resilience against risks associated with ### climate-related scenarios, including a 2°C scenario where emissions peak in 2040 followed by the RCP 8.5 climate scenario is currently secured by our ### orlower scenario significant decarbonisation policy and market action. The Environmental Refurbishment and Development Standards The climate scenarios RCP 2.6, RCP 4.5 and RCP 8.5 were RCP 8.5 scenario is characterised by a large increase in GHG and our pro‑active approach to assessing risks. selected for our assessment, as they cover a range of emissions contributing to high temperature rises, significant We are planning on furthering our resilience with additional possible emissions scenarios. changes in weather patterns and severe physical risks. climate‑related KPIs and risk management measures, such as regular legislation and regulation reviews and climate riskupskilling. ### Climate scenarios: ### Scenario Average temperature rise Transition Impact Scenario 1 1.2 – 1.6°C by 2100 Low emissions scenario where there is Economic: Immediate globally co‑ordinated decarbonisation efforts immediate policy action to meet the Paris to achieve net zero by 2050, associated with significant costs to meet Low emissions scenario: Agreement. Transition risks dominate. these demands. RCP 2.6 Environmental: Low physical risk. Scenario 2 1.6 – 3.2°C by 2100 Moderate emissions scenario where there is Economic: Delayed transition requiring more substantial regulatory significant policy action in 2040. Transition and market pressures to decarbonise in the medium term. Moderate emissions risks dominate, but physical risks are still scenario: RCP 4.5 Environmental: Less physical risk, although up to 3.2°C warming still present. presents substantial physical climate risks. Scenario 3 3.2 – 5.4°C by 2100 High emissions, business‑as‑usual scenario Economic: Permanently stunted GDP growth and severe economic where policy action is negligible and global and social shifts. High emissions scenario: warming rises drastically. Physical risks RCP 8.5 Environmental: Chronic changes to weather patterns and ecosystems dominate. causing severe impacts on a global scale. Strategic report 49 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## 2022 TCFD disclosure continued ### Moving forward, we aim to further integrate the findings 3c. Describe how processes for identifying, ## 3. Risk management of our climate risk scenario modelling into our risk ### assessing and managing climate-related risks ### 3a. Describe the organisation’s processes for management framework under the climate related risks and ### are integrated into the organisation’s overall ### identifying and assessing climate-related risks use this to enhance mitigation strategies. The Group has also ### Our risk framework includes four actions to identify, risk management committed to annually reporting against TCFD and regularly assess and manage risks to the business: identify, evaluate All principal risks captured in our corporate risk register, conducting climate risk assessments in line with TCFD and mitigate and monitor. Our primary tool within the including climate change, are a priority. The corporate best practice recommendations, ensuring climate‑related risk framework is the risk register used to record our risk register lists the material impacts of principal risks, risks are consistently integrated into our risk management key corporate risks, including climate‑related risks and related risk mitigation activities and changes in risk profile. framework. opportunities, and communicate these to the Board. Additionally, each risk is given a probability and impact Principal risks on the risk register are scored on probability score based on the impact on asset values and shareholder ### 3b. Describe the organisation’s processes and impact and are assessed based on the severity of returns. The corporate risk register is regularly reviewed ### formanaging climate-related risks financial, environmental and brand impacts, pertaining by the Board, Audit and Risk Committee and Investment To manage climate‑related risks, the impact of climate to the underlying value of the assets and the returns for Advisor, with the Board having overarching responsibility for change on our portfolio has been recognised as a principal shareholders. These are reviewed throughout the year by determining the most material risks. In the review process, risk in our risk register and risk management process. Wealso the Investment Advisor, with the Audit and Risk Committee the Audit and Risk Committee reviews corporate risks and recognise compliance risks associated with climate change reviewing the risk register at each meeting and conducting risks that the Board considers to be principal. Bycapturing in our risk register. Thisensures that climate‑related risks an overall review of the risk management process annually. climate change as a principal risk, it has been fully integrated and opportunities are actively monitored and mitigated by into our risk management framework. The Investment Advisor also assists in the implementation the Board and committees. The risk management process, and measurement of climate‑related activities at the as well asadditional insights gained from third‑party operational level, and monitors the business’s and portfolio’s consultants, such as the climate risk scenario modelling we compliance with those activities. A third‑party consultant conducted this year, help us prioritise climate‑related risks supports the Investment Advisor with the identification and and controlmeasures. assessment of risks. The Investment Advisor also reviews Processes for managing climate‑related risks and emerging and existing regulation requirements, including in opportunities at a portfolio and asset level are described relation to climate‑related risks. inTCFD Recommended Disclosure – Strategy b). The Sustainability Committee has more specific responsibilities for overseeing the newly formed separate ESG risk register and makes recommendations to the Audit and Risk Committee regarding inclusion in the Group’s risk management practices. Strategic report 50 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## 2022 TCFD disclosure continued ### 4c. Describe the targets used by the ## 4. Metrics and targets ### organisation to manage climate-related ### 4a. Disclose the metrics used by the ### risksand opportunities and performance ### organisation to assess climate-related risks ### against targets ### andopportunities in line with its strategy and As a business we have set the target of reaching net zero ### risk management process carbon for our Scope 1 and 2 emissions by 2030. To help We publicly report on our environmental performance in achieve these targets, we developed our net zero carbon line with EPRA sBPR for sustainability reporting. Our EPRA pathway in 2022. Under our sustainability strategy we have tables are available on pages 52 to 53. We use a range also set long‑term goals for creating a resilient portfolio, of metrics to assess our resource consumption, energy targeting green building certifications, reducing EPC risk and carbon emissions and determine our exposure to and reducing climate‑related impacts at the portfolio climate‑related risks and opportunities. These include: level. These are supported by short‑term targets for 2024, • scope 1 and 2 carbon emissions in tCO e; 2 whichinclude: • energy consumption in kWh in absolute and like‑for‑like • all developments to target EPC B; terms; • all developments >50,000 sq ft to target BREEAM • energy intensities for Scope 1 and 2 emissions in Excellent/Very Good; 2 kgCO e/m /year; 2 • roll out EPC improvement programme to ensure all 3 • water consumption in m , including building water properties in scope have a valid EPC and reduction of D 3 2 intensity in m /m /year; and and E rated units; • EPC ratings and building certifications as a holistic • apply new Environmental Refurbishment and indicator of the portfolio’s performance. Development Standards to all new refurbishments; ### 4b. Disclose Scope 1, Scope 2 and, if • assess potential for on‑site renewables across the ### appropriate, Scope 3 greenhouse gas (“GHG”) portfolio; ### emissions and the related risks • undertake energy efficiency audits as part of Phase 3 We report our Scope 1 and 2 GHG emissions data in our ESOS compliance; EPRA disclosure available on pages 51 to 53. These have • all new utility contracts and landlord‑paid utilities to be on been calculated and reported in alignment with the GHG renewable tariffs; and Protocol Corporate Accounting and Reporting Standard. • continue to roll out EV charging installation. Wehave yet to disclose our Scope 3 emissions and set Having conducted a physical climate risk assessment related targets due to limited data availability, but plan and developed our net zero carbon pathway this year, to improve our data collection to enable disclosure in the we are currently in the process of setting additional coming years in line with our net zero carbon pathway. decarbonisation and climate‑related metrics and targets. Strategic report 51 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## EPRA sBPR ### Boundaries Analysis – segmental analysis ## 1. Overarching recommendations ### Electricity and fuel consumption which we purchase as (bypropertytype,geography) ### Organisational boundaries landlords for common areas, shared services and occupier The property classification utilised in our financial reporting Our EPRA sBPR reporting covers the Group’s assets areas is what comprises the energy and associated GHG guides our segmental analysis, classifying our investment for which we exercise operational control. This totalled emissions data. Utilities purchased directly by the occupier portfolio as urban warehouse assets. As all assets are 30 out of 76 estates across the United Kingdom as at fall outside of our operational control and are excluded from located in the United Kingdom, further segmental analysis 31 March 2023. The remaining properties are single or this data. by geography is not applicable. multiple occupancy assets with no utilities purchased by the landlord. Theactions of our Investment Advisor, who ### Estimation of landlord-obtained Reporting period oversees all management and administrative duties, are not ### utilityconsumption While we report on absolute performance measures and covered by this report because it is a separate legal entity Where possible, the data is collected from invoices intensity metrics for the most recent reporting year (ending from theGroup. and/or meter readings. If invoices were not available at the 31 March 2023), the like‑for‑like performance measures time of publication, consumption estimates were made. are reported for the last two consecutive years (ending ### Coverage These estimates are based on the most recent invoices for 31March2022 and 2023). All absolute performance measures relating to electricity, the corresponding time period. On this basis, for the year fuels and associated GHG emissions apply to assets for ### Disclosure on own offices ending 31 March 2023, the following proportion of data was which we as landlord procure utilities for the common areas, Our Investment Advisor has their own office, and their estimated: electricity 42%, gas 14% and water 40%. shared services, occupier areas as well as vacant properties, consumption and employee‑related performance measures unless indicated otherwise. At 31 March 2023, these account ### Analysis – normalisation are outside the scope of our organisational boundaries and for 30 estates within our portfolio, with 97% coverage, Our calculations for energy and emissions intensity are therefore excluded. based on 29 assets with available consumption data. indicators are calculated using floor area (m²) for whole ### Like‑for‑like performance indicators include properties Data verification and assurance estates. As our utilities consumption data in certain buildings within this scope for which we collected data for two Before being entered into the Company reporting is limited to common spaces exclusively while in others it consecutive years and excludes properties sold, acquired database, all generated data is checked for consistency includes shared services, outside space and occupier areas or under development during 2021/22. Our like‑for‑like and coherence. A third party does not currently conduct where there are no sub‑meters, we are aware of mismatches portfolio includes 19 assets with 94% data coverage external verification or assurance. this causes between the numerator and denominator. for these properties, based on 18 assets with available Weare working to better track our consumption as it relates consumption data. to the space and organisational boundaries at a unit level. Strategic report 52 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## EPRA sBPR continued Waste‑Abs and Waste‑LfL have been excluded as we have The total absolute Scope 1 and 2 emissions from building ## 1. Overarching recommendations | | no control over operational waste, which is generated solely | energy consumption were 604 tonnes of CO2e, resulting in | | | | --- | --- | --- | --- | --- | | continued | | | | 2 | | | by our occupiers. The EPRA sBPR does not apply to waste | a 2.29 kg/CO | e/m | /year intensity. For this reporting period, | 2 Materiality created by our development operations. Nonetheless, as green tariffs for electricity supply accounted for 99.97% of In this report we focus on EPRA sBPR measures that are part of our sustainability strategy, we have set a long‑term the reported consumption. Like‑for‑like Scope 1 decreased material to our business. Therefore, in accordance with our goal of reducing waste from developments. by 29% and while Scope 2 increased by 8%. materiality assessment, we have excluded the following Absolute water consumption for the year ended ### Narrative on performance performance measures from our reporting: DH&C‑Abs 3 31March2023 was 14,052 m , representing a water intensity During the year ended 31 March 2023, absolute and DH&C‑LfL as no district heating or cooling is procured 3 2 of 0.13 m per m . Like‑for‑like water consumption fell landlord‑obtained electricity consumption was 2,155 MWh across our portfolio. by92%. and fuel consumption (natural gas) for the same time period Diversity‑Emp, Diversity‑Pay, Emp‑Training, Emp‑Dev, was 791 MWh, equating to an energy intensity (electricity Consumption data from previous reporting periods has Emp‑Turnover and H&S‑Emp have been excluded as 2 been updated as we received more accurate figures from and gas) of 11.17 kWh per m across all included properties. Warehouse REIT plc has no direct employees. The invoices and meter readings that were received after Landlord‑obtained electricity consumption on a like‑for‑like Investment Advisor handles all administrative duties related publication of our last report. basis increased by 8% and fuels consumption decreased by to the asset management of the portfolio; however, it is a 29% compared to the year ended March 2022, resulting in Our analysis of Energy Performance Certificates is available separate legal identity and therefore falls outside the scope a 0.4% decrease in the energy intensity of our like‑for‑like on page 7. For the year ended 31 March 2023 there were no of this report. portfolio. properties in our portfolio with green building certification (BREEAM, LEED or similar). ## 2. Environmental performance measures Absolute Absolute Like-for-like Like-for-like Like-for-like EPRA code Performance measure Unit Scope 2021/22 2022/23 2021/22 2022/23 change (%) Elec‑Abs, Elec‑LfL Total electricity consumption kWh Total landlord‑obtained electricity 2,509,462 2,155,013 1,190,279 1,286,494 8 Fuels‑Abs, Fuels‑LfL Fuel consumption kWh Total landlord‑obtained fuels 1,172,754 791,033 350,768 249,143 ‑29 Energy‑Int Building energy intensity kWh/m²/year Building energy intensity 17.96 11.17 8.74 8.71 ‑0.4 GHG‑Dir‑Abs Total direct GHG emissions tCO₂e Direct – Scope 1 214 145 64 46 ‑29 GHG‑Indir‑Abs Total indirect GHG emissions tCO₂e Indirect – Scope 2 (location‑based) 533 459 253 274 8 GHG‑Int GHG emissions intensity from building kgCO₂e/m²/year Scopes 1 & 2 GHG emissions 3.64 2.29 1.80 1.81 1 energy consumption 3 Water‑Abs, Water‑LfL Water consumption (mains supply) m Total landlord‑obtained water 39,143 14,052 35,294 2,654 ‑92 3 Water‑Int Building water intensity m /m²/year Building water intensity 0.61 0.13 0.25 0.02 ‑92 Strategic report 53 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability report continued ## EPRA sBPR continued ### Community engagement Governance ## 3. Social and governance By meeting health and safety requirements, conducting Governance performance measures relate to the Board. ## performance measures impact assessments and undertaking wider consultations Onpage 73 we outline the full background information Health and safety required as part of the planning approval process for new including the Board profile, the nomination procedures and The health and safety assessment of the assets conducted developments, we ensure that key decisions relating to the process for managing potential conflicts of interest. by our managing agents on an annual basis covers: the portfolio consider our impact on local communities. Asthere were no new developments for the year ended • general hazards and risk assessment; 31March 2023, the performance measure Comty‑Eng • fire safety; is notapplicable. For more information refer to the • water hygiene; stakeholder engagement section on page 14. • progress on existing hazards identified; and • any specific risks related to a particular site. EPRA code Performance metric Unit of measure FY2023 H&S‑Asset % 100% Asset health and safety assessment H&S‑Comp % 100% Comty‑Eng Community engagement, impact assessments and development % N/A programmes Gov‑Board Composition of the highest governance body Number of non‑executive Board members 6 Number of independent non‑executive Board members 4 Average tenure on the governance body (years) 5 Number of independent/non‑executive Board members with 2 competencies relating to environmental and social topics Gov‑Select Nominating and selecting the highest governance body Please see the Nomination Committee report on pages 83 Gov‑Col Process for managing conflicts of interest Please see the corporate governance statement on page 79 Strategic report 54 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties ## Our ability to identify, understand and manage our risks and uncertainties ## is key to delivering our strategy and generating returns for investors. ### Our approach and culture Risk management framework Risk appetite Our understanding of the potential risks associated with Our strong culture is underpinned by a structured approach Risk management is embedded in our decision‑making our business activities, and our ability to implement robust to the understanding and management of risk, with a risk processes, supported by robust systems, policies, leadership management arrangements linked to our risk appetite, are management framework which is reviewed and approved by and governance. Our business uses an outsourced model, essential for a successful business. Our risk management the Board, via the Audit and Risk Committee, each year. and we rely on our service providers to make decisions and activities enable us to identify and manage risks arising take risks within agreed parameters in the delivery of our The framework is clear and focused, setting out the Board’s internally – from our decision‑making and strategy; and objectives. Those parameters are summarised in our stated risk appetite, with defined responsibilities; processes for from external risks – which arise when we are impacted by risk appetite. the regular review of risk and consideration of emerging changes in the external market and environment. risk; and reporting arrangements. This clarity is designed to The level of risk considered appropriate to accept in Our culture of practical, pragmatic risk awareness and enable the Group’s Investment Advisor to take advantage of achieving business objectives is determined by the Board: management has been particularly important during the opportunities and make effective business decisions, whilst • the Group has no appetite for risk in areas relating to economic challenges of the last financial year, which include staying within an agreed set of parameters. regulatory compliance, and the health, safety and welfare increasing interest rates, rising inflation, and significant During the year, the risk framework and risk appetite of our occupiers, stakeholders, and the wider community increases in energy and utility costs. These financial were enhanced to reflect our growing focus on ESG and in which we work; challenges in particular had an impact on our occupiers climate‑related risks. We also took the decision to review • appetite for risk relating to climate change is low, and and the population of potential occupiers, leading to some ourrisk evaluation matrix, to reflect the increasing size of the Group is actively focusing on the identification changes in our risk profile and risk mitigation plans. thebusiness, and our move from AIM to the Main Market. and mitigation of physical and transitional risks for its portfolio;and • we have a moderate appetite for risk in relation to activities which are directed towards driving revenues andincreased financial returns for its investors. Strategic report 55 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Risk appetite continued Responsibilities • Approves the risk framework ### Willingness to accept risk ### Board • Articulates the REIT’s appetite for risk • Receives reports and information, via the Audit Committee, onthe business key risks and issues Category Medium High Low • Receives and reviews risk information, including a detailed assessment ### Audit ofthe corporate risk register at each meeting ### Committee Business • Receives assurance from a range of sources, including the Investment Advisor, Investment Manager, valuers and externalaudit • Considers any significant risk issues arising, and agrees the approach Compliance tomanagement of the outcome • Assesses the effectiveness of the risk management process Financial • Reviews business activities and operations to identify, document and ### Investment evaluate current and emerging risks ### Advisor • Determines and develops appropriate mitigation strategies to ensure Operational thatrisks remain within the Board’s agreed risk appetite • Works with other third‑party providers to ensure that mitigations andcontrols are operating effectively Climate change • Provides reports to the Audit Committee and Board Strategic report 56 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### The Board The Audit and Risk Committee The Sustainability Committee The Board has overall responsibility for the Group’s The majority of the operations of the Group are outsourced, The Sustainability Committee has oversight of the Group’s approach to risk management and internal control, and the Audit and Risk Committee relies on risk information approach to the management of climate‑related risks. It including: from its service providers, primarily the Investment Advisor. provides the Audit and Risk Committee and Board with updates and information in relation to climate risk generally, • the design and implementation of risk management and To fulfil its responsibilities, the Audit and Risk Committee: and progress with the strategy agreed for the Group to internal control systems which identify the risks facing the • monitors key risks and changes in risk throughout the year; manage risks in this area. business and enable the Board to make an assessment of • seeks to identify and consider potential emerging risks to principal risks; ### the Group, arising both externally and internally; The Investment Advisor • determining the nature and extent of the principal risks The Investment Advisor supports the Audit and Risk • considers each of the principal risks, the business’s faced, and those risks which the Group is willing to take; Committee and Board, and is responsible for risk mitigation strategies, and assurances from both • agreeing how principal risks are managed or mitigated to identification, documentation and evaluation, including management and independent sources; reduce their likelihood or impact; and both current and emerging risks;for the implementation of • undertakes an annual review of the effectiveness of the • ensuring that there is sufficient relevant, reliable and valid appropriatecontrols; and for meaningful reporting to the risk management process, including: assurance about the mitigation of risk. Audit and Risk Committee. • the operation of risk management and control systems; ### • integration of risk management and internal control with Documentation and reporting strategy and business planning; The corporate risk register is the core of the risk • changes in the nature, likelihood and impact of principal management process. It contains an assessment of the risks risks; faced by the Group together with the controls established to reduce those risks to an acceptable level. It is maintained • the quality of risk reporting; and reviewed regularly by the Investment Advisor, and • any issues dealt with in reports reviewed during the formally reviewed at each meeting of the Audit and Risk year, in particular the incidence of significant control Committee. failings or weaknesses that have been identified, and the extent of the impact which they had or could have A standard evaluation matrix is used to assess the exposure had; to risks, and that is reviewed and approved as part of the risk management framework at least annually. • the effectiveness of the Company’s public reporting processes; and • takes advice from the Sustainability Committee with respect to updating climate‑related risks and mitigations. Strategic report 57 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Documentation and reporting continued Board Risks are categorised into: Management Engagement Committee • Business risk – the risk of making poor business decisions, reports implementing decisions ineffectively, or being unable to Management reports – Investment Advisor, adapt to changes in its environment. Inparticular, this Investment Manager, Company Secretary Audit CommitteeSustainability Committee includes our property investment risk, and our acquisition, External reports – external audit reports, valuations, Depositary reports disposal and tenancy decision‑making processes; Incident analysis reports, Whistleblowing • Compliance risk – the risk of legal or regulatory reports sanctions, financial loss, or loss to reputation a regulated business may suffer as a result of its failure to comply with all applicable laws, regulations, codes of conduct andstandards of good practice; • Climate-related risk – risks to the business from the impact of climate change. This includes direct Risk Identification Activities Control ActivitiesRisk Register physical impacts such as flooding, or excessive indoor temperatures during periods of extreme heat; and transitional risks such as changes in demand from occupiers, or the cost of complying with changes in Changes in regulation, changesin Risk mitigation planning controls design, building standards; competitors managementoversight andcontrol New and emerging risks • Financial risk – the risk of financial loss resulting from Controls compliance, monitoring, Changes in activities, processes, systems, recording, reporting risks such as market, credit and liquidity risks: projects • Market risk – economic losses resulting from price Market changes – changes in market, financing, economy changes in the capital markets; Reportable incidents includingfraud • Credit risk – change in the financial situation of a counterparty, such as an issuer of securities or other debtor with liabilities or arising out of investments and payment transactions with investors; • Liquidity risk – not meeting the criteria of the borrowing policy and payment obligations at all times; and Investment Manager • Operational risk – the risk of a loss resulting from inadequate processes, technical failure, human error Investment Advisor orexternal events. Strategic report 58 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Emerging risk Our governance framework has been enhanced with a The regular risk reviews undertaken by the Investment Sustainability Committee (asub‑committee of the Board/ Change in risk over time Advisor specifically include review of emerging risks, and Investment Advisor), having regular oversight of the Group’s this is also part of the review by and discussions with the responsible business agenda, sustainability strategy and Audit and Risk Committee. The assessment considers external ESG reporting plus being provided with regular internal changes, and external changes trends, and updates on regulatory requirements and general market incidents, and considers: expectations. Following the climate risk scenario modelling undertaken this year, the Sustainability Committee will • is this risk relevant to the Group’s business activities? review the Group’s climate‑related risks and mitigation • what is the potential impact, if the risk crystallises? strategies in detail via the focused ESG risk register and • what are our potential strategies for the management recommend any required updates to the Audit and Risk andmitigation of the risk? Committee. • how could we get assurance that these strategies are Climate‑related risks, particularly physical risks, are effective in practice? incorporated in our decision‑making protocols for portfolio • is this a risk that we should continue to pro‑actively changes and capital developments. Costs associated with monitor? the Group’s sustainability and climate‑related ambitions During the year, we have made some changes to the risks on e.g. minimum energy efficiency standards ahead of | | | | 2023 | 2024 2025 2026 2027 | | | --- | --- | --- | --- | --- | --- | | the register, enhancing risk definitions and the evaluation of | legislative requirements for properties and net zero carbon | | | | | | some risks, to reflect the challenges being presented by the | pathway, are included in our financial modelling and | | | | | | | | | Incorrect, inaccurate | |  Cost of decarbonisation | | current cost of financing, and more difficult economic and | budgeting. Capital project planning also includes a focus | | | | | | | | data reporting | | | plans/achieving net zero | | market conditions. | on energy usage reduction and implementing building | | | | | | | | | Cost of compliance | |  Loss of occupiers and | efficiency measures such as building management systems, revenues – as they move One new principal risk was agreed during the year, relating replacement of high emission fittings, reduction of water  Flooding – impacting on to more sustainable to the Group’s ability to raise funding – be that equity, loan occupiers, and asset buildings usage and support of sustainable transport initiatives. A financing or through asset disposals. values climate risk scenario modelling has been completed, to Inability to access green enable us to assess the exposure of our portfolio to physical Extreme weather events finance options ### Environmental, social and governance climate‑related risks across certain climate scenarios; see ### (“ESG”) risk pages 44 to 50 in the TCFD reporting for more detail on We have continued to invest in and develop our knowledge Further information on our sustainability strategy and the methodology and results. The assessment provided and plans to manage risk exposure around our sustainable progress is included in the sustainability report on pages 37. a clear overview of the impact likelihood that modelled ambitions and climate‑related risks. The associated risks hazards pose to the portfolio, enabling us to make strategic are integrated in the Group’s risk management process decisions on where to focus mitigation actions and harness and corporate risk register, and we have also developed an opportunities. We are introducing targeted surveys of additional, more granular ESG risk register. Climate change occupiers to understand their challenges and requirements, risk remains one of the Group’s principal risks. to enable us to work together to reduce risk and further understand our energy consumption baseline. Strategic report 59 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued Our assessment of the changes in key risks over the medium ### Principal risk heat map as at 31 March 2023 term is summarised below. All risks are evaluated on a consistent basis across the Group, which includes both the likelihood of the risk crystallising and the potential impact. Our model evaluates both inherent exposure (i.e. before any mitigating controls or actions) and ### Principal risks residual, or current, exposure (i.e. after controls and mitigations). This assessment allows us to see the areas of highest gross Principal risks are those which are considered material to risk, and to recognise the positive impact of control on the underlying inherent risk. the Group’s development, performance, position or future prospects. The principal risks are captured in the corporate risk register and are reviewed by the Board and Audit and Low risk Medium risk High risk Risk Committee, who consider: • any substantial changes to principal risks; 16 Poor returns on portfolio 9 • material changes to control frameworks in place; 12 • changes in risk scores; and Business risks Impact of climate change 9 • any significant risk incidents arising. Poor performance of 12 Investment Advisor or Manager 3 ### Changes in principal risks during the year One new principal risk was agreed during the year, relating 15 REIT status lost | to the Group’s ability to raise funding – be that equity, | | | 5 | | Compliance | | | --- | --- | --- | --- | --- | --- | --- | | loan financing or through asset disposals. Previously, risks | | | | | | risks | | | Breach of loan covenants/ | | | 15 | | | | covering this area were included in the risk register, but were | borrowing policy | 4 | | | | | not considered to be significant principal risks. However, 16 Unable to raise funding the combination of a hardening market for asset disposals, 12 Financial market uncertainties impacting on our share price, the risks 16 timing of our refinancing, and the increasing cost of capital Interest rate changes 9 have all combined to result in an increased exposure. 16 Significant bad debt In some cases the evaluation of principal risks has changed 9 Operational during the year, and the detailed risks section on the risks Inappropriate acquisition, 20 following pages shows those changes, with additional breach of investment policy 8 information setting out the reasons for changes and risk mitigation plans. Inherent risk Reduction of inherent risk to residual risk through mitigating controls Residual risk ### Key: Identify assets Review and approve Monitor and Create value through Recycle New Decrease No change Increase to acquire transactions manage investments asset management capital Strategic report 60 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Financial risks A  Interest rate changes B  Unable to raise funding through equity, debt or asset disposals ### sufficient to raise capital and finance the Group’s activities Changes in interest rates could directly Risk mitigation: There are three areas of potential risk: Risk mitigation: impact on our cost of capital, and Increases in interest rates are not completely within • inability to attract additional equity The downturn in the economy during the year has had indirectly may impact on market our control, and our focus is therefore primarily on investment; an impact on each of these potential risk areas. We have stability. | | mitigation of the impact. Interest rate caps are in place, | • difficulty in securing new loan funding | a framework of mitigations in place, designed to address | | --- | --- | --- | --- | | Interest rates continued to increase | and we are revising and renegotiating our funding | for the business, at an affordable | the risks, but recognise that market conditions are more | | during2022/23. | arrangements. | rate;and | challenging. | | | The Investment Advisor maintains detailed records of | • our ability to raise funds through | We have regular investor communications and | | | the property portfolio, and financial scenario testing is | the disposal of assets could be | performance reporting against our strategy, and have | | | undertaken to assess the potential impact of changes in | impacted by a hardening market if | the benefit of an enlarged investor base following | | | financing costs. | the economic outlook deteriorates | previous fundraises. | further. Whilst we remain comfortable that appropriate new The Investment Advisor completed the refinance of the funding arrangements will be put in place, changes Group’s financing arrangements. in interest rates could have an impact on returns and The Investment Advisor maintains close contact with profitability. agents to ensure that disposal proceeds and the timing of sales are optimised. The monitoring of financial covenants also enables efficient disposal planning. Change and commentary Interest rates have increased significantly over the last 12 Change and commentary This is the first year this has been considered a months, and there is still the risk of further increases. principal risk, and this decision has been driven bythe combination of pressures on each of the three areas. However, during the year we have reduced our exposure, by increasing hedging and reducing debt levels, and our plans and forecasts have taken the current high interest rates into account. Overall, we consider that the level of risk is therefore unchanged from previous years. Business model link: Business model link: Link to strategy: Link to strategy: Financial Financial Strategic report 61 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Business risks C  Poor portfolio returns D  Poor performance of the Investment Advisor or ### InvestmentManager There is a risk that the returns generated Risk mitigation: The Group outsources it activities Risk mitigation: by the portfolio may not be in line with and is reliant on the performance of The investment strategy is set by the Board, and There are contracts in place between the Company, the our plans and forecasts. There are many third‑party service providers. performance against key targets and KPIs is reviewed Investment Advisor and the Investment Manager, setting factors that could drive this, including: and reported to the Board on an ongoing basis. In particular, poor performance of out responsibilities. • inappropriate investment strategy set the Investment Advisor could have a Significant decisions, relating to assets or occupiers, Both provide regular quarterly reports to the Board, by the Board; significant impact on the performance follow established protocols, ensuring there is proper which include key performance targets and KPIs. • poor delivery of the strategy by the of the Group, as it is fundamental to the assessment, at the right levels. The Management Engagement Committee carries out Investment Advisor; and management and delivery of all aspects an annual service review, which is reported to the Board. of the business. • poor yields from the property Members of the Investment Advisor team have portfolio because of reduced capital investments in the Group, which reduces the risk of valuations or rental income. reduced or poor service levels. This would have an impact on the financial performance of the REIT, and returns for our investors. Change and commentary The external economic environment has increased the Change and commentary potential for occupier defaults and liquidations, which in turn may impact both rental income and portfolio valuations. Business model link: Business model link: Link to strategy: Link to strategy: Investment Investment Strategic report 62 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Business risks continued E  Impact of climate change on our portfolio Climate change is likely to have an increasing impact across the Risk mitigation: business, which could include: We have a Sustainability Committee, which challenges, approves and monitors our sustainability strategy and progress. Thecommittee • extreme weather events impacting on properties; members have received training on climate‑related risks from MEES, and this training will be rolled out to the Investment Advisor. • increasing costs of suppliers/disruption to supplies for During the year we have obtained support from external specialists to assist us with defining our ambitions, including our maintenance and development; decarbonisation pathway, climate‑related governance and the resulting TCFD reporting. • properties not meeting regulatory/occupier requirements relating An environmental specialist completed a climate risk scenario modelling to assess the exposure of our portfolio to physical hazards. to energy efficiency, building standards, or location for logistics; Wecontinue to invest in resource and expertise in this area, as we recognise the importance and the challenges ahead. • increasing costs of compliance as requirements around energy Our Investment Advisor, along with our Property Managers, are working with occupiers to understand their energy usage, and how we efficient solutions and building standards continue to strengthen. can support them to meet their sustainability objectives and net zero plans. There is also a potentially significant resource requirement for Capital development and refurbishment works include detailed consideration of energy efficient solutions, emissions management, and the collection and maintenance of the different data required for options to reduce waste and resource usage through the use of existing or low carbon material. reporting (e.g. carbon emissions), because of the size and make up of the portfolio; and Although the challenges in this area are increasing, we have made good progress this year towards understanding our climate‑related risk and consider the results highlighted to date and our approach to investments and improvements made this year have resulted in no • a reduction in property values and achievable rents, if assets are overall change to the current level of risk. not developed/maintained to appropriate standards. More details of our plans and progress are included in the sustainability report, see pages 36 to 43 and the TCFD reporting on pages 44 It may also impact on investor interest, our reputation compared to to 50. our peers, and our ability to access green funding options. Change and commentary Business model link: Link to strategy: Asset management Strategic report 63 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Operational risks F  Significant rent arrears/irrecoverable bad debt G  Inappropriate acquisitions, breach of the investment policy A substantial increase in our bad debt, Risk mitigation: Inappropriate acquisitions could Risk mitigation: or the level of arrears and slow payment, increase risk in relation to portfolio Our diverse portfolio of assets, and wide range of We have comprehensive governance procedures could have a direct impact on cash flow returns, as properties may be harder occupiers, is key to maintaining a low risk profile in supporting acquisition decisions, including an acquisition and profitability, and could also have an to let, may not generate appropriate relation to bad debts. protocol which is linked to the matters reserved for the impact on average lease lengths, and revenues, or may require additional Board and the delegated authority matrix. We have approximately 490 occupiers across our void levels and costs. costs to support. portfolio of around 76 estates, and our top ten occupiers The protocol sets out detailed due diligence steps Furthermore, poor payment generate less than 30% of our rent roll. This is closely which must be completed and fully evidenced as part performance would increase the monitored to ensure that we are not at significant risk of the decision‑making process. Acquisition decisions focus required from the Property from any individual tenant. are approved by the Investment Advisor Investment Managers and Investment Advisor Committee and the Investment Manager Investment At an operational level, we have robust processes in place Asset Managers, impacting on resource Committee, and any higher risk acquisition decisions across our tenancy management activities, ensuring that availability to manage other aspects of (byvalue or complexity) are escalated to the Board. we accurately record, invoice and collect amounts due. the business. The REIT’s Depositary, Crestbridge, is also required to There is a rigorous due diligence process prior to approve acquisition decisions. the acceptance of occupiers, with rent guarantees or rent deposits taken where appropriate. Occupier management routines include credit control processes to identify any potential arrears problems and ensure that debt is recovered or actions taken at an early stage. Enhanced automated monitoring on the occupier portfolio has been implemented during the year through subscriptions to credit management software. In addition, disposals in 2022 targeted those more granular assets with exposure to smaller SMEs, which has also reduced our risk. Change and commentary We consider it sensible to increase our assessment Change and commentary of risk in these areas, as whilst our rent collection performance remains good, with bad debts consistently below our level of provisioning, the current economic challenges and high inflation increase the likelihood that some occupier businesses will fail. Business model link: Business model link: Link to strategy: Link to strategy: Investment Investment Strategic report 64 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Principal risks and uncertainties continued ### Compliance risks H  Loss of REIT status I  Breach of loan covenants or our borrowing policy Loss of our REIT status, through failing Risk mitigation: Our loan funding is subject to Risk mitigation: to meet regulatory requirements or the conditions, and breach of those could The Board has approved a clear governance framework Our financial position is closely and regularly monitored, Listing Rules would have a significant result in restrictions to funding and which incorporates the matters reserved for the Board and in particular the Investment Advisor monitors LTV impact on our reputation and the activities going forward. In addition to and delegated authorities, which are further supported % against our loan covenant and borrowing policy on an financial returns for our investors. the loan covenants, the Board approved by the clear, contracted allocation of responsibilities to ongoing basis. and communicated our borrowing our third‑party service providers. In addition, forward forecasts are prepared and reviewed policy, and breach of those limits may The Investment Advisor reviews the position against both to assess the business’s position, and to ensure that risk financial and reputation damage. REIT legislation with Link quarterly, and this is reported any acquisition decisions include consideration of the to the Audit and Risk Committee and Board. We are cash and funding impact. further supported by Deloitte, who complete our PID The Board receives a formal update each quarter, and tracker. there is a quarterly compliance letter prepared for the Dividend cover and cash is continuously monitored and bank. forecast forward, and the position reported to the Audit and Risk Committee and Board. Change and commentary Change and commentary Business model link: Business model link: Link to strategy: Link to strategy: Financial Financial Strategic report 65 Warehouse REIT plc Annual Report and Financial Statements 2023 # Going concern and viability statement ## Going concern The Board monitors the Group's ability to continue as a going concern. Specifically, at quarterly Board meetings, the Board reviews summaries of the Group's liquidity position and compliance with loan covenants, as well as forecast financial performance and cash flows. Throughout the year, the Board met, in conjunction with the Investment Advisor, Tlistone, to review the uncertainties created by geopolitical tensions and rising inflation and interest rates, and specifically their potential impact on rent collection, cash resources, loan facility headroom, covenant compliance, acquisitions and disposals of investment properties, discretionary and committed capital expenditure and dividend distributions. The Group ended the year with £19.0 million of unrestricted cash and £14.0 million of headroom readily available under its facilities. Disposals are an important part of our approach to portfolio optimisation and we continually review the portfolio to identify opportunities to increase efficiency and dispose of any assets that are considered ex-growth or non-core, recycling that capital into accretive acquisitions or to reduce debt. The Group made disposals totalling £59.5 million during the year and exchanged on two further disposal for £29.3 million post year end. The Group has completed a new five year £320.0 million facility with a club of lenders extending the tenure of the previous financing arrangements past 2025. In making this an assessment on going concern, the Board have considered covenant compliance based on the new terms of the facility. The Group is operating significantly within its covenants and a sensitivity analysis has been performed to identify the decrease in valuations and rental income that would result in a breach of the LTV market value covenants or interest cover covenants. Valuations would need to fall by 32.9% or rents by 30.5%, when compared with 31 March 2023, before these covenants would be breached, which, based on available market data, is considered unlikely. As at 5 June 2023, c.99.0% of rents invoiced in relation to the year ended 31 March 2023 have been received. Furthermore, current debt and associated covenants are summarised in note 28, with no covenant breaches during the period. Tlistone has prepared projections for the Group covering the going concern period to 30 June 2024, which have been reviewed by the Directors. As part of the going concern assessment, and taking the above into consideration, the Directors reviewed a number of scenarios which included extreme downside sensitivities in relation to rental cash collection, making no discretionary capital expenditure, adverse refinancing conditions and minimum dividend distributions under the REIT rules. Accordingly, based on this information, and in light of mitigating actions available and the recent refinancing, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in business for a period of at least 12 months from the date of approval of the Annual Report and Financial Statements. ## Assessment of viability In accordance with the AIC Code of Corporate Governance, the Directors have assessed the Group's prospects over a period greater than the 12 months considered by the going concern provision. The Directors have conducted their assessment over a three-year period to June 2026, allowing a reasonable level of accuracy given typical lease terms and the cyclical nature of the UK property market. The principal risks detailed on pages 54 to 64 summarise the matters that could prevent the Group from delivering its strategy. The Board seeks to ensure that risks are kept to a minimum at all times and, where appropriate, the potential impact of such risks is modelled within its viability assessment. The nature of the Group's business as the owner of a diverse portfolio of UK warehouses, principally located close to urban centres or major highways and let to a wide variety of occupiers, reduces the impact of adverse changes in the general economic environment or market conditions, particularly as the properties are typically flexible spaces, adaptable to changes in occupational demands. ![img-17.jpeg](img-17.jpeg) 66 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Going concern and viability statement continued ### Assessment of viability continued Furthermore, the Board, in conjunction with the Audit and Viability statement The Directors’ assessment takes into account forecast Risk Committee, carried out a robust assessment of the The period over which the Directors consider it is feasible cash flows, debt maturity and renewal prospects, principal risks and uncertainties facing the Group, including and appropriate to report on the Group’s viability is a forecast covenant compliance, dividend cover and REIT those that would threaten its business model, strategy, three‑year period to June 2026. This period has been compliance. The model is then stress tested for severe future performance, solvency or liquidity over the three‑year selected because it is the period that is used for the Group’s but plausible scenarios, individually and in aggregate, period. The risk review process provided the Board with medium‑term business plans. Underpinning this plan is an along with consideration of potential mitigating factors. assurance that the mitigations and management systems assessment of each individual unit’s performance, driving The key sensitivities applied to the model are a downturn are operating as intended. The Board believes that the theoverall letting assumptions and corresponding forecast in economic outlook and restricted availability of finance, Group is well positioned to manage its principal risks and cash flows. specifically: uncertainties successfully, taking into account the current Having made an assessment of each individual unit’s economic and political environment. (i) increased occupier churn and occupier defaults; performance, the forecast cash flows, covenant compliance The Board’s expectation is further supported by regular and the impact of sensitivities in combination, the Directors (ii) increased void periods following break or expiry; briefings provided by Tilstone. These briefings consider confirm that, taking account of the Group’s current position, (iii) decreased rental income; market conditions, opportunities, changes in the regulatory the principal risks and in light of the current economic (iv) decrease in property valuation; and landscape and the current economic and political risks uncertainty, they have a reasonable expectation that the and uncertainties. Additionally, the trend for increased Group will be able to continue in operation and meet its (v) increased interest rates. warehouse space driven by online sales and the need to liabilities as they fall due over the three‑year period of their The sensitivity analysis identifies the decrease in valuations reinforce supply chains, combined with the shortage of assessment. and rental income that would result in a breach of the supply nationally, is seen as mitigation. These risks, and The strategic report on pages 1 to 66 is approved and LTV, market value covenants as set out in the Going other potential risks which may arise, continue to be closely signed on behalf of the Board. Concern section above. Taking into account mitigating monitored by the Board. actions, the results of the sensitivity analysis and stress testing demonstrated that the Group would have sufficient ### liquidity to meet its ongoing liabilities as they fall due, Neil Kirton maintain compliance with banking covenants and maintain Chairman compliance with the REIT regime over the period of the 5 June 2023 assessment. Strategic report 67 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Chairman’s introduction to governance ## Both the independent Directors and Tilstone have worked ## hard to ensure that we consider all our stakeholders in our ## decision-making, as we continue to mature as a public company. ### Neil Kirton Chairman As Chairman of Warehouse REIT, I am pleased to present In addition to our Board sessions, members of the Board the governance report for our financial year ended committed significant time to Warehouse REIT business 31March2023. either via their various committee responsibilities, or less formally through dialogue outside the boardroom Our operational results reflect both the experience and environment, where we regularly exchange views on decision‑making around the opportunities sourced by many areas of our development, strategy and stakeholder Tilstone, as well as thestrong and cohesive sense of purpose interests. that all the Board have shared since our IPO in 2017. ### In addition to the contractual arrangement that exists Strategy day between the Company and Tilstone, the spirit of this One particularly important occasion for the Board is the arrangement has been very strong. I am committed to a strategy day that we undertake annually, usually in the transparent and open culture and we have constructive and second quarter of the financial year. The structure of the day probing dialogue with Tilstone. Both parties have a common entails a detailed set of preparatory notes and a discussion agenda, strengthened by the level of equity ownership within focused on a small number of agreed items with Tilstone. the boardroom, which has again grown during the year. The core areas from the 2022 day included: • a review of the market for urban warehousing in the UK ### The Board and its impact on our strategy; The Board met regularly during the year, as we transitioned where possible from a virtual or screen‑based format to • a detailed discussion of various options to maximise more regular face‑to‑face interaction, which we have all thepotential and manage the risks to shareholders of enjoyed as the Covid‑19 related restrictions started to theRadway 16 site in particular; reduce. • the move to a Main Market listing; and • our capital markets strategy. Corporate governance 68 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Chairman’s introduction to governance continued ### Strategy day continued Our strategy continues to focus on creating a resilient Although the strategy day is not a formal Board meeting, portfolio, reducing our footprint, being able to measure our Statement of compliance we find it useful to minute this session as a record of our progress and reinforce that with independent validation, The Board recognises the importance of sound discussions and decision‑making. We also find it beneficial and supporting our occupiers. During 2021, we engaged corporate governance, commensurate with the from time to time to call upon external professional advisors a number of occupiers in a survey on their views and Group’s size and nature and the interests of its and ahead of this session we reviewed two reports compiled approaches to ESG, which has been particularly useful in shareholders. The Board is therefore committed to for the Board on items above. terms of understanding our customers and responding to maintaining high standards of corporate governance. their needs. This is a cornerstone of what we do. The Board undertakes an annual review of its ### Board Committees More generally, the Board continues to take a keen interest compliance with the principles and recommendations We made no changes to the Board in personnel terms during in stakeholder views and we ensure we have robust of the AIC Code of Corporate Governance (the “AIC the year, but the Nomination Committee – which I continue reporting from Tilstone on their day‑to‑day interactions Code”). A copy of the AIC Code, which was last to chair – regularly reviews the skill sets required to ensure with stakeholders. Members of the Board are also available updated in 2019, can be obtained via the AIC website, robust governance over the Company. For example, as our to hold discussions with shareholders as necessary. More www.theaic.co.uk. marketplace evolves and existing assets continue to be information on the Group’s stakeholder engagement can be aggressively sought after by many investors, it is likely that During the year ended 31 March 2023, the Company found in the strategic report on pages 14 to 16. development will play an increased role in our future returns. has complied with the AIC Code throughout the year, except where the Board has concluded that We conducted a further review of the Group’s arrangements adherence or compliance with any particular principle with our Investment Advisor, which are enshrined in both ### Neil Kirton or provision would not have been appropriate to the the investment policy and the Investment Management Chairman Company’s circumstances, in which case the reasons Agreement. In so doing, the independent Directors are fully explained in this statement. 5 June 2023 commissioned advice from Reed Smith, Jefferies and Peel Hunt to ensure that any proposed changes were both ‘fair and reasonable’ and continue to be compliant from aregulatory perspective. The Sustainability Committee completed its first full year of operation. The Board as a whole fully understands and endorses the importance of ESG to our existing investors, potential shareholders and other stakeholders including occupiers. We discuss ESG in more detail elsewhere but our experience is that the great majority of our stakeholders are continually elevating the importance of ESG. Corporate governance 69 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Chairman’s introduction to governance continued | Board leadership and purpose | | | Division of responsibilities | | | Audit, risk and internal control | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Principle Where it is in this report | | | Principle Where it is in this report | | | Principle Where it is in this report | | | | Principle A Strategic report | | pages 1 to 66 | Principle F Role of the Chairman | | pages 74 and 75 | Principle M Risk management and | | | | | Board of Directors | pages 70 and 71 | | The Board | page 67 | | internalcontrols | page 87 | | | Business model | page 13 | | | | | Audit and Risk | | | | | | Principle G Board of Directors | | pages 70 and 71 | | | | | | | | | | | | Committeereport | pages 86 to 89 | | Principle B Strategic report | | pages 1 to 66 | | Board Committees | pages 68 and 79 | | | | | | Our culture | page 75 | | | | Principle N Fair, balanced and | | | Principle H Board composition and | | Our purpose | page 1 and 75 | | | understandable reporting | page 89 | | --- | --- | --- | --- | --- | --- | --- | | | | | succession | pages 74 to 77 | | | | | | | | | Strategic report | pages 1 to 66 | | Principle C Sustainability report | | pages 36 to 53 | Management Engagement | | | | Audit and Risk Principal risks and pages 54 to 64 Committee report pages 90 and 91 Committeereport pages 86 to 89 uncertainties Principle I The Board page 67 Independent Auditor’s report pages 102 to 109 Risk management and | | | Section 172 statement | pages 17 to 19 | Financial Statements | pages 101 to 143 | | --- | --- | --- | --- | --- | --- | | internalcontrols | page 87 | | | | | | | | Induction of new Directors | N/A | | | Principle O Principal risks and | Principle D Stakeholders | | pages 14 to 16 | | | | --- | --- | --- | --- | --- | | | | | uncertainties | pages 54 to 64 | | | Section 172 statement | pages 17 to 19 | | | | | | | Viability statement | page 66 | | | Shareholder engagement | page 82 | | | Audit and Risk Committeereport pages 86 to 89 Management Engagement Committee report pages 90 and 91 Risk management and internalcontrols page 87 | Composition, succession and evaluation | | | Remuneration | | | | --- | --- | --- | --- | --- | --- | | Principle Where it is in this report | | | Principle Where it is in this report | | | | Principle J Diversity | | pages 84 and 85 | Principle P Strategic report | | pages 1 to 66 | | | Nomination Committee report | pages 83 to 85 | | Directors’ remuneration policy | pages 94 and 95 | | | Board composition and | | | Directors’ remuneration report | pages 94 to 96 | | | succession | pages 74 to 77 | | | | Principle Q Directors’ remuneration report pages 94 to 96 Principle K Board of Directors pages 70 and 71 Principle R Directors’ remuneration report pages 94 to 96 Nomination Committee report pages 83 to 85 Board Committees pages 68 and 79 Board composition and succession pages 74 to 77 With regards to Principle E, the AIC and FRC do not require investment trusts Principle L Board evaluation page 76 to report against this principle. Corporate governance 70 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Board of Directors ## Membership of the Board was unchanged during the year. All the Directors are ## non-executive and the majority are independent of the Investment Advisor. ### Neil Kirton Aimée Pitman Lynette Lackey Non-Executive Chairman Non-Executive Director Non-Executive Director Date of appointment Date of appointment Date of appointment 1 August 2017 1 August 2017 15 November 2018 Skills and experience Skills and experience Skills and experience Neil has over 25 years of experience working in the securities and Aimée has over 30 years’ experience in strategy development across Lynette is a chartered accountant and experienced non‑executive investment banking industries, giving him a deep understanding various sectors, most notably real estate, travel and leisure, and director. She has considerable knowledge of financial matters and ofcapital markets and investor needs. financial services. ofthe real estate sector. Other current appointments Other current appointments Other current appointments Neil is also a non‑executive director of Ingenta plc and Senior Aimée runs her own strategy consulting business, Pitman & Co. Lynette is also a non‑executive director of Centaurea Investment Advisor at Smith Square Partners. Consulting. As an independent consultant, she works as a client Limited and a member of council at the London Chamber of director with Eden McCallum LLP, a London‑based consultancy Commerce & Industry. She is also a partner in her business advisory Past appointments firm. Sheis also a non‑executive director of Native Holdings firm one5two LLP, focused on growing businesses. Until December 2021, Neil was a managing director and co‑regional Ltd and sits on the Advisory Board of McArthurGlen and has head, EMEA, Forensic Investigations and Intelligence at Kroll. Past appointments recently been appointed a Fellow of Chapter Zero, a not‑for‑profit Neilwas formerly global head of equity distribution at ABN AMRO Lynette was until recently a non‑executive director of Places for organisation focused on helping UK organisations achieve net zero Bank NV and a member of ABN AMRO’s Global Equity Directorate. People group and chair of its regulated board. She was previously transitionplans. He was head of UK equity sales and deputy chief executive at Hoare the senior independent director and chair of the group audit and risk Govett, head of equities at Bridgewell Securities, head of corporate Past appointments committee of the group board. finance and CEO at Arbuthnot Securities and an executive director Aimée was a Vice President within MAC Group/Gemini Consulting’s Lynette was a partner of BDO LLP for ten years, where she was of Arbuthnot Banking Group plc. strategy practice and went on to work over a number of years with responsible for a portfolio of real estate investor and developer European travel group TUI, supporting it on strategy, distribution clients. She is a former partner in Greenside Real Estate Solutions, and operational excellence. aswell as the chair of the Association of Women in Property. She also served on the boards and as chair of the audit and risk committees of the London Chamber of Commerce & Industry and Land Aid Charitable Trust. Corporate governance 71 Warehouse REIT plc Annual Report and Financial Statements 2023 # Board of Directors continued ![img-18.jpeg](img-18.jpeg) Martin Meech Non-Executive Director # Date of appointment 1 August 2017 # Skills and experience Martin has more than 30 years' operational experience as a property director, gained in a range of major companies. Martin is a Fellow of the Royal Institution of Chartered Surveyors. # Other current appointments Martin was recently appointed as senior advisor to the Dominion Group's Board. # Past appointments Prior to his retirement in December 2021, Martin was the group property director of Travis Perkins plc, the largest supplier of building materials in the UK, and chief executive officer of Travis Perkins (Properties) Ltd. He oversaw the group's freehold portfolio, with a market value in excess of £700 million. Martin is a former non-executive director of Quintain Estates and Development plc, chairman of the BRC Property Advisory Group and member of the Bank of England Property Forum. ![img-19.jpeg](img-19.jpeg) Simon Hope Non-Executive Director (non-independent) # Date of appointment 24 July 2017 # Skills and experience Simon has over 35 years' experience in the real estate sector, gained during his career at Savills, one of the world's leading property agents. During this period he was Global Head of Capital Markets. # Other current appointments Simon is the Non-Executive Chairman of Tildone and represents Tildone on the Board. He is the Vice-Chairman of Ironstone Asset Management Limited, the Investment Advisor to Life Science REIT plc, a UK listed company which invests in a diversified portfolio of properties across the UK which typically provide benefit to the life science sector. Simon is also a Senior Advisor at Savills UK Ltd. Simon owns a thoroughbred stud farm called Aston Mullins and is a director of a number of bloodstock syndicates and other home racing organisations. He is a governor of Magdalen College, Oxford. # Past appointments Simon was on the Savills Group and plc boards from 1999 to 2021 and led the real estate investment teams until December 2022. As Chairman of Savills Investment Management, he led Savills UK Limited's proprietary trading arm, Grosvenor Hill Ventures Limited, during a five-year period up to 2006, when this fund delivered an internal rate of return in excess of 35%. Simon also chaired the Charities Property Fund from 2002 until 2007. ![img-20.jpeg](img-20.jpeg) Stephen Barrow Non-Executive Director (non-independent) # Date of appointment 24 July 2017 # Skills and experience Stephen is an experienced global equity investor, giving him an in-depth understanding of capital markets and institutional investors. # Other current appointments Stephen is a member of the advisory board of Glia Ecosystems Limited and a non-employee partner of Absolute Return Partners, where he manages his own portfolio. Stephen is Chairman of Ironstone Asset Management Limited, the Investment Advisor to Life Science REIT plc, a UK listed company which invests in a diversified portfolio of properties across the UK which typically provide benefit to the life science sector. # Past appointments In his former roles as chief investment officer at IronBridge International and head of global equities at Deutsche Asset Management, Stephen managed over £5 billion of assets for a wide variety of clients, including many large global institutions. 72 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Investment Advisor ## The Board has appointed Tilstone Partners Limited to provide day-to-day ## asset management and advisory services to the Group. ### Simon Hope Andrew Bird Paul Makin Peter Greenslade Non-Executive Chairman/Joint Fund Managing Director/Joint Fund Manager Investment Director Finance Director Manager Simon has been Chairman of Tilstone since its Andrew founded the Tilstone brand in 2010 to Paul joined Tilstone in 2013 and was part of the Peter has significant experience in company formation in 2010 and was a founding investor. focus on commercial property investment and original team creating the Tilstone property management, control, reporting and corporate Prior to that he worked with Andrew Bird whilst development. After identifying opportunities portfolio and was a co‑founder of Tilstone activity, especially in the private equity arena. He Andrew was property director at Barlows Plc, within the warehouse sector, the focus moved Partners Limited. Paul is Tilstone’s Investment qualified as a chartered accountant with Binder trading a number of portfolios including a sale to in August 2013 to creating the Tilstone Property Director and is responsible for the sourcing of Hamlyn, before working in a variety of finance Westbury Fund Management. Portfolio, which the Company acquired as its seed investment opportunities, asset management and roles for blue chip companies including Grand portfolio as part of the September 2017 initial creating positive occupier relationships. Metropolitan (Diageo plc), De La Rue plc and ICL Simon’s biography can be found on page 71. public offering. As Managing Director of Tilstone, plc. During his time as group finance director of He has extensive investment consultancy Andrew takes overall responsibility for strategy, Robert Walters plc, the company successfully experience through his work at CBRE Limited direction and business performance. floated on the Main Market of the London Stock and subsequently at Mapeley Estates Limited (a Exchange. While he was at Spectron Group Prior to founding Tilstone, Andrew was appointed previously listed property company), where he Limited, the company was restructured and as property director to the board of Barlows was head of investment and investment asset eventually sold to a trade buyer. | plc in 1994, a north‑west focused commercial | management, tasked with extracting value from | | | --- | --- | --- | | property company with a listing on the Main | outsourcing contracts and new acquisitions. Paul | As part of the management team of Axiom | | Market of the London Stock Exchange. He was | expanded his horizons with a senior investment | Consulting Limited, Peter was involved in a | | subsequently part of a consortium that took | asset management role at Moorfield Group | management buyout from Aon Limited, funded by | | the company private in 2001. The business | Limited, a real estate private equity company. | private equity, and later its trade sale to Charles | | created a separate asset management company | There he took a key role in the purchase and asset | Taylor plc. He was also part of the team at Kane | | through which Andrew served on the investment | management of projects such as the UK Logistics | Group Limited which undertook the private | | committee of Westbury plc, a quoted property | Fund, in a joint venture with SEGRO plc. | equity‑backed acquisition of HSBC Insurance | | fund (2002‑2007). Andrew has also served as a | | Services Limited. Peter also stood on the board of | | non‑executive director of Dee Valley Group plc, at | | Leander Club Limited for ten years, stepping down | | that time a London Stock Exchange quoted water | | in 2022. | utility company. Corporate governance 73 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement ## This report explains the key features of ## the Group’s governance structure. The Board of Directors The Board consists entirely of six Non‑Executive Directors, All material changes in any Director’s commitments outside Under the leadership of the Chairman, the Board of with no individual having unfettered powers of decision. the Group are required to be, and have been, disclosed prior Directors is collectively responsible for the long‑term TheDirectors hold, or have held, senior positions in industry to the acceptance of any such appointment. sustainable success of the Company, generating value and commerce and possess a wide range of relevant ### Director induction for shareholders and contributing to wider society. Each business and financial expertise, and brief biographies, The Group has established an induction procedure for Director recognises that they have a statutory duty to including details of their significant commitments, can new Directors, including the provision of an induction pack consider and represent the Company’s various stakeholders be found on pages 70 to 71. During the year, the Board containing information about the Group, its processes and in deliberations and decision‑making. More details can be was satisfied that all the Directors were able to commit procedures. New appointees also meet the Chairman and found about how the Directors have fulfilled their duties sufficient time to the Group’s affairs and discharge their relevant Investment Advisor personnel. under section 172 of the Companies Act 2006 on page 17 responsibilities effectively having given due consideration of this report. The Board establishes the purpose, values tothe Directors’ external appointments. and strategic aims of the whole Group and satisfies itself Each Director was appointed for an initial three‑year term, that these and its culture are aligned and ensures that the subject to re‑election annually at each AGM (see page necessary resources are in place for the Group to meet its 77). The Board has not stipulated a maximum term of any objectives and fulfil its obligations to shareholders, within a directorship, except that, subject to ensuring business framework of high standards of corporate governance and continuity, the Chairman will remain on the Board for a effective internal controls. The Directors are responsible maximum period of nine years. for the determination of the Group’s investment policy and None of the Directors has a service contract. Letters strategy and have the overallresponsibility for the Group’s of appointment set out the terms of their appointment activities, including the control and supervision of the and copies are available on request from the Company Investment Manager andInvestment Advisor. Secretaryand will be available at the AGM. The Directors were advised on appointment of the expected time required to fulfil their roles and have confirmed that they remain able to make that commitment. Corporate governance 74 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ### Director induction continued ### Structure of the Board during the year Management Audit and Risk Engagement Nomination Sustainability Independent/ Committee Committee Committee Committee Non‑independent Male/Female Neil Kirton¹ Independent Male Aimée Pitman² Independent Female Lynette Lackey³ Independent Female 4 Martin Meech Independent Male Simon Hope Non‑independent Male Stephen Barrow Non‑independent Male 1. Chairman of the Nomination Committee. 2. Chair of the Sustainability Committee. 3. Chair of the Audit and Risk Committee. 4. Chairman of the Management Engagement Committee. Board size and composition As part of the ongoing succession cycle, the Board will take The Board has appointed Martin Meech as the Senior We consider that a diversity of skills, backgrounds, into consideration the need to improve the ethnic diversity Independent Director. Martin Meech shall continue to serve knowledge, experience, geographic location, nationalities of the Board when recruiting new Non‑Executive Directors. as the Senior Independent Director until the upcoming AGM. and gender is important to effectively govern the business. It is anticipated that this process will satisfy the Parker A replacement for the role of Senior Independent Director is The Board and its Nomination Committee will work to Review requirements. Our approach to diversity is balanced currently under consideration by the Nomination Committee. with the need to appoint directors who can best serve the The Senior Independent Director provides a channel for any ensure that the Board continues to have the right balance of interests of the Company, having the relevant experience, shareholder with concerns regarding the Chairman and leads skills, experience, knowledge and independence necessary and its shareholders. the independent Directors’ annual evaluation of the Chairman. to discharge its responsibilities in accordance with the The Senior Independent Director would consult when highest standards of governance. Martin Meech will not be seeking re‑election to the Board necessary with the other Non‑Executive Directors without the As Warehouse REIT plc is now a FTSE 250 company, the at the forthcoming AGM and therefore will cease to be a Chairman being present, if required, for example to consider Board is mindful of developing diversity at Board level in Director of the Company from the conclusion of the AGM. the Chairman’s performance. the Group. Female representation on the Board is at 33%. More information on the Company’s Diversity Policy, its The roles and responsibilities of the Chairman and the Senior The Board is also aware of the aims of the Parker Review, objectives, implementation and results can be found on Independent Director are clearly defined and set out in writing, for companies to have at least one director from an ethnic page 84. a copy of which is available on the Company’s website at minority background by 2024. ### Chairman and Senior Independent Director www.warehousereit.co.uk. The independent non‑executive Chairman, Neil Kirton, isdeemed to have no conflicting relationships. He considers himself to have sufficient time to commit to the Company’saffairs. Corporate governance 75 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued Board size and composition continued The Board believes that it has a responsibility to set and Annually, the Management Engagement Committee demonstrate high standards of ethics and behaviour. We are analyses and systematically reviews all our service ### Purpose and culture strongly committed to an ethos and culture that balances providers, including Tilstone – a review which includes an Investment both our shareholders’ need and desire for financial returns understanding of their policies, procedures and actions and the process and environment within which we achieve around behaviour, ethics and culture and consideration ### CulturePurpose Asset management those returns. This obligation begins with the Board of of their own engagement with other third‑party service Directors but extends into our engagement with Tilstone. providers. This includes assessing their approach to Financial Both parties operate with complete mutuality of trust and significant ethical issues such as modern slavery. The transparency embedded in the relationship. Company’s Modern Slavery Statement, reviewed by the The Group’s purpose is to provide the well‑connected, Board each May, is available from its website high‑quality and sustainable space our occupiers need to As an externally managed Group we expect all our external www.warehousereit.co.uk. thrive and by doing this responsibly, we generate positive service providers, including Tilstone, to fully endorse these outcomes for all our stakeholders. values and exercise commercial judgement with due and The Group has policies and procedures to assist with full consideration of the impact of those decisions on their maintaining a culture of good governance, including those The Chairman leads the Board and is responsible for employees, our customers, the communities in which we relating to delegated authorities, diversity and related its overall effectiveness in directing the Group. He operate, and our wider stakeholder base. parties. The Board assesses and monitors compliance with demonstrates objective judgement, promotes a culture of these policies regularly through Board meetings. openness and debate, and facilitates effective contributions by all Directors. In liaison with the Company Secretary, ### Engaging with our stakeholders he ensures that the Directors receive accurate, timely Details of how we engaged with our key stakeholders during and clear information to enable them to discharge their the year ended 31 March 2023 are set out in the strategic responsibilities. report on pages 14 to 16. ### Board operation The Directors meet at regular Board meetings, held at least four times a year, with additional meetings arranged as necessary. The table below sets out the Directors’ attendance at both regular and ad‑hoc Board and Committee meetings during the year ended 31 March 2023, against the number of meetings each Board member was eligible to attend: Audit and Risk Management Nomination Sustainability Board Committee Engagement Committee Committee Committee Neil Kirton — — Aimée Pitman — Lynette Lackey — Martin Meech — Simon Hope — — — Stephen Barrow — — — Corporate governance 76 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ### Board size and composition continued The evaluation included: Looking ahead, key areas of focus included: Board operation continued • A tailored questionnaire which was completed by Board i. Ensuring that the Board continues to contribute fully As noted above, additional ad‑hoc Board meetings were members and selected executives, comprising both a and effectively to strategy and also to oversee its held during the period to discuss strategic matters and qualitative survey and a quantitative component. The implementation approve the release of the annual and half‑year results. questionnaire focused on overall Board effectiveness, ii. Active and forward‑looking consideration of Board including accountability, risk oversight, strategy, composition taking account of strategic priorities, The Board has formal arrangements for the Directors, in the dynamic, composition, Board materials, key Board roles diversity and tenure furtherance of their duties, to take independent professional and Committees and shareholder and stakeholder advice at the Company’s expense. The Company has iii. Maintaining effective shareholder and stakeholder engagement. It also provided a deep dive into three key also taken out a Directors’ and Officers’ liability insurance engagement priorities for the Board and the business. (Fidelio did not policy, which includes cover for legal expenses. In addition, The Board is adopting and prioritising practical have the opportunity to interview Board members but did the Company has specific Public Offering of Securities recommendations with a view to further developing its speak with two external advisors.); insurance, which began on 20 September 2017 with a effectiveness, in particular regarding the key areas of focus six‑year run‑off period. • A workshop with the Board in which Fidelio shared above. Fidelio remains available as a sounding board to initial findings and explored potential next steps and Subject to the provisions of UK law, the Company has the Chairman and the Board over the year ahead, as the recommendations. This also afforded the opportunity for provided each Director with an indemnity in respect of recommendations arising from the evaluation are adopted. Fidelio to observe Board dynamic; liabilities which they may incur when discharging their duties • A review of Board and Committee materials as well as as a Director. There are no other qualifying third‑party overall governance; and indemnity provisions in place. • A report including key findings and recommendations ### Board evaluation as well as supporting analysis. This was shared initially Fidelio Partners, an independent Board Advisory firm, with the Chairman and will also subsequently be shared conducted an external Board evaluation of the Warehouse with the Board as a whole. REIT Board in line with the Corporate Governance Code 2018. The evaluation afforded Board members the opportunity Fidelio worked with the Chairman to define the scope to provide open and constructive input and resulted in and objectives of the evaluation, which focused on practical findings and recommendations. providing comfort to shareholders and also enhancing the The Board was seen to take its responsibilities and duties effectiveness of the Board. seriously. Board members were open to challenge and able to consider both what is working well and also how to increase effectiveness. Corporate governance 77 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued Independence of Directors Beyond these requirements, and in line with corporate • approving the Company’s sustainability strategy; The Board has reviewed the independence of each Director governance best practice, the Board has determined that • appointing or removing the Investment Manager, and the Board as a whole in line with principle G of the all Directors will seek annual re‑election at the Company’s Investment Advisor, Depositary, Auditor and Company AIC Code and is of the opinion that over half the Board AGMs. Notwithstanding Martin Meech’s directorship ceasing Secretary; and members, are considered independent. Most of the Board at the close of the 2023 AGM, all other Directors will stand • ensuring a satisfactory dialogue with shareholders is independent of the Investment Advisor and free from any for re‑election at the forthcoming AGM. The Board considers andother key stakeholders. business or other relationships that could materially interfere that, during the year ended 31 March 2023, each Director has A copy of the schedule of matters reserved for the with the exercise of the Directors’ independent judgement. performed effectively and demonstrated commitment to Board’sdecision is available on the Company’s website at the role. It therefore believes that it is in the best interests of Simon Hope is the Non‑Executive Chairman of the www.warehousereit.co.uk. shareholders that each Director is re‑elected at the AGM. Investment Advisor and an ex‑employee of Savills (one of the The Company has sub‑contracted its day‑to‑day functions Company’s Property Managers); he is therefore considered ### Board responsibilities and relationship to service providers, each engaged under separate legal to be a non‑independent Director. Stephen Barrow is also on ### withthe Investment Advisor agreements. For example, portfolio management and risk the Tilstone Board of Directors and is therefore considered The Board’s main roles are to lead the Group and ensure management of the Group’s assets has been delegated to to be a non‑independent Director. Both Simon Hope and its long‑term sustainable success, generating value for the Investment Manager. The Investment Advisor provides Stephen Barrow have cross‑directorships in Tilstone Partners shareholders and contributing to wider society, and to recommendations to the Investment Manager’s investment Limited and are both LLP members of Tilstone Investments approve the Group’s purpose, values and strategic objectives committee. LLP, Tilstone Halifax LLP and Somersham Coventry LLP. and satisfy itself that these and its culture arealigned. These recommendations cover acquisitions and sales The Board considers that all other Directors are independent The Board has adopted a schedule of matters reserved of Group assets (where this would be in line with the of the Investment Advisor in both character and judgement. for its decision, which is reviewed annually. Thesespecific Company’s objectives and investment policy) and responsibilities include: recommendations on where the Group should incur ### Election/re-election of Directors • approving the Company’s investment and business strategy; borrowings and give guarantees and securities (subject to Under the Company’s Articles of Association, Directors • approving the gearing policy; certain investment restrictions imposed by the Board and arerequired to stand for election at the first AGM after • overseeing cash management; the Board’s overall control and supervision). The Board, the theirappointment. Thereafter, at each AGM any Director Investment Manager and the Investment Advisor operate in who hasnot stood for appointment or re‑election at either • approving the Annual and Half‑yearly Reports and Financial a fully supportive, co‑operative and open environment. of the two preceding AGMs is required to retire and offer Statements and accounting policies, prospectuses, circulars him/herself for re‑election, as is any Director who has held and other shareholder communications; At each Board meeting, the Directors follow a formal office for a continuous period of nine years or more. agenda, which is circulated in advance by the Company • approving acquisitions and disposals which are within the investment policy but have a value of 20% or more ofgross Secretary. The Company Secretary and Investment Advisor asset value (“GAV”) of the Company’s portfolio,and any regularly provide financial information, together with acquisitions or disposals outside the investment policy; briefing notes and papers in relation to changes in the Group’s economic and financial environment, statutory • raising new capital and approving major financing facilities; and regulatory changes and corporate governance best • approving the valuation of the Group’s portfolio; practice. Representatives from the Investment Advisor and • approving and recommending dividends; the Investment Manager attend each Board meeting and • approving Board appointments and removals; communicate with the Board between formal meetings. Corporate governance 78 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ### Key Board activities during the year A report from the Investment Advisor is reviewed at each meeting, which includes relevant matters to highlight since the previous meeting and details of portfolio activity, the pipeline andhealth and safety matters. A quarterly report from the Investment Manager is presented at each scheduled Board meeting. The Board also receives and reviews a quarterly share register analysis, as well as a report from the Company Secretary including regulatory and governance updates. In addition to these regular agenda items, the Board dealt with the following matters during the year: • Approval of first interim dividend for the 2023 financialyear • Updates from Sustainability Committee and Audit and Risk Committee Chairs • Approval of the Notice of Annual General Meeting • Approval of third interim dividend for the 2023 financialyear • Release of the circular to shareholders | in respect of themove from AIM to | | • Review of Board Diversity Policy and | | --- | --- | --- | | MainMarket | | Diversity andInclusion Policy | | • Review of Directors’ fees | • Board strategy meeting | • Reviewed matters reserved for the Board | | July 2022 | October 2022 | January 2023 | | May 2022 September 2022 | | November 2022 | March 2023 | | --- | --- | --- | --- | | • Updates from Management Engagement | • Annual General Meeting | • Update from Sustainability Committee and | • Approval of the financial budget and capital | | Committee, Nomination Committee and | | Audit and Risk Committee Chairs | expenditure programme for the financial | | Audit and Risk Committee Chairs | | • Approval of Half‑yearly Report and second | year to 31March 2024 | | • Approval of preliminary results for the year | | interim dividend for the 2023 financial year | • Review of the Company’s compliance with | | ended 31March 2022 and fourth interim | | • Reviewed performance against revised | the AICCode | | dividend for the 2022 financial year | | short‑term strategy | • Annual review of the investment policy | | • Review of going concern and long‑term | | | • Annual review of the Board, Committees | | viability statements | | | and Chairmanthrough an externally | | • Approval of Annual Report and Financial | | | facilitated independentevaluation | Statements for the year ended 31 March 2022 • Review of Directors’ performance evaluation for the year ended 31 March 2022 • Annual review of Modern Slavery Statement • Review of Sustainability Policy Corporate governance 79 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ### Conflicts of interest The members of the Audit and Risk Committee consider In accordance with the Companies Act 2006, the Articles that they collectively have the requisite skills and experience of Association permit the Board to consider and, if it sees to fulfil the Audit and Risk Committee’s responsibilities and fit, to authorise situations where a Director has an interest competence relevant to the REIT sector. Lynette Lackey is a that conflicts, or may possibly conflict, with the Group’s qualified Chartered Accountant with audit experience in the interests. The Board has a formal system to consider such real estate investor and developer industry. conflicts, with the Directors who have no interest in the A report from the Chair of the Audit and Risk Committee is matter deciding whether to authorise the conflict and any set out onpages 86 to 89. conditions to attach to such authorisation. ### Management Engagement Committee ### Board Committees During the year, the Management Engagement Committee The Board has four Committees: the Nomination comprised of Martin Meech (Chairman), Neil Kirton and Committee, the Audit and Risk Committee, the Management Lynette Lackey, all of whom are independent Non‑Executive Engagement Committee and the Sustainability Committee. Directors. The Chairman of the Board is a member of the Given the Board’s size, it is not felt appropriate for the Committee. Company to have a separate remuneration committee and A report from the Chairman of the Management Engagement the full Board deals with the functions that this committee Committee is set out on pages 90 to 91. would normally carry out. ### The Committees’ terms of reference are available on the Sustainability Committee Company’s website at www.warehousereit.co.uk. The Sustainability Committee is comprised of Aimée Pitman (Chair), Martin Meech and Stephen Barrow. Representatives ### Nomination Committee of the Investment Advisor also attend the Committee. During the year, the Nomination Committee comprised of A report from the Chair of the Sustainability Committee is Neil Kirton, Lynette Lackey and Simon Hope. The Chairman set out on pages 92 to 93. of the Board is a member of, and chairs, the Nomination Committee. A majority of the members of the Nomination ### Company Secretary Committee are independent Non‑Executive Directors. The Board has direct access to the advice and services of the A report from the Chair of the Nomination Committee is set Company Secretary, Link Company Matters Limited, which out on pages 83 to 85. is responsible for ensuring that the Board and Committee procedures are followed and that applicable regulations are ### Audit and Risk Committee complied with. The Company Secretary is also responsible The members of the Audit and Risk Committee are Lynette to the Board for ensuring timely delivery of information and Lackey (Chair), Aimée Pitman and Martin Meech. The reports and for ensuring that the Group meets its statutory Chairman of the Board is not a member of the Committee. obligations. Corporate governance 80 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ### How governance supported the delivery of the Group’s strategy during the year ended 31March 2023 As noted on page 73, approving the strategy and overseeing its implementation is one of the Board’s core responsibilities. Set out below are the Board’s activities in respect of each element of the strategy set out on pages 20 to 21 of this report. In addition, during the year the Board held a strategy day, which is a key event allowing the Board to examine the strategy and the market context for it. More information can be found in the Chairman’s statement on pages 6 to 8. ### Strategy Board governance role Key activities during the year ### Investment strategy • Overseeing the selection of acquisitions, against the backdrop of During the year, the Board: current market and economic conditions • reviewed an acquisition pipeline tracker at each quarterly meeting; • Approving acquisitions which are within the investment policy but • reviewed the details of all acquisitions at its quarterly meetings; and have a value of 20% or more of the Company’sGAV • assessed in detail the ongoing availability of quality stock that could be acquired at the strategy day • Approving any acquisitions outside the investment policy held during the year (see the Chairman’s introduction to governance on pages 67 to 69 for more information). Read more about the acquisitions in the year in the Investment Advisor’s report on pages 27 to 35. ### Asset management • Overseeing the portfolio During the year, the Board: • Overseeing the Investment Advisor’s asset management activities • reviewed quarterly portfolio updates from the Investment Advisor, including details of occupancy levels, ### strategy • Approving disposals which are within the investment policy lease events, rental values and rent collection; but have a value of 20% or more of the GAV of theCompany’s • monitored the Investment Advisor’s and Investment Manager’s adherence to the capital expenditure portfolio budget, through quarterly reports from the Investment Advisor; and • Approving any disposals outside the investment policy • approved the annual budget (including capital expenditure) for the year to 31March2024. Read more about asset management during the year in the Investment Advisor’s report onpages 27 to35. ### Financial strategy • Approving any changes to the Group’s capital structure During the year, the Board: • Approving the Group’s gearing policy, dividend policy and • monitored the Group’s debt levels and reviewed the hedging strategy. treasury policy Read more about financing activity during the year in the Investment Advisor’s report onpage 32. ### Sustainability • Approval of policy, strategy and targets. During the year the Board: • Approval of governance policies. • reviewed and oversaw progress made against the strategy with particular focus on the key projects; ### strategy • Set and approved 2023 targets; • Reviewed and oversaw the net zero carbon pathway project through to approving our eight decarbonisation commitments; and • Participated in training on climate risks and received information on ESG legislation, peer reviews, green bonds, benchmarking to enable informed decisions. Read more on pages 20 to 21 Corporate governance 81 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ### Internal control review Internal control assessment process One of the key internal controls which the Group has in The Board is responsible for the systems of internal The Board undertakes regular robust risk assessments and place is a corporate risk register, which is maintained by the controls relating to the Group, including the reliability of the reviews of internal controls, in the context of the Group’s Investment Advisor, against which the Group monitors the financial reporting process and for reviewing their systems’ overall investment objective. The Board, through the Audit risks identified, the impact of such risks and the controls in effectiveness. and Risk Committee, has categorised risk management place to mitigate them. It also considers and monitors both controls under the following headings: current and emerging risks to ensure meaningful reporting The Directors have reviewed and considered the to the Audit and Risk Committee. Other key internal Financial Reporting Council’s (“FRC’s”) guidance on risk • business risk; controls, which the Group has in place during the year, management, internal control and related finance and • operational risk; include a procedure to monitor the compliance status of business reporting and have established an ongoing process • reputational risk; the Company to ensure that it can continue to be approved for identifying, evaluating and managing the principal • compliance risk; and as a REIT; and the Investment Advisor prepares forecasts risks faced by the Group. This process, together with key • financial risk. and management accounts which allow the Board to assess procedures established to provide effective financial control, performance. The risks are assessed based on the likelihood was in place during the period under review and at the date In arriving at its judgement of what risks the Group faces, of them happening, the impact on the business if they were of the signing of this report. The internal control systems the Board has considered the Group’s operations mindful of to occur and the effectiveness of the controls. The Audit and are designed to ensure that proper accounting records are the following factors: Risk Committee reviews the risk matrix at least twice in each maintained, that the financial information on which business • the nature and extent of risks which the Board regards financial year and at other times as necessary. decisions are made and which is issued for publication as acceptable for the Group to bear, within its overall is reliable, and that the Group’s assets are safeguarded. The principal and emerging risks that the Board has business strategy; The risk management process and the Group’s systems identified are set out on pages 54 to 64. • the threat of such risks becoming reality; of internal control are designed to manage rather than Most functions for the Group’s day‑to‑day management are • the Group’s ability to reduce the incidence and impact of eliminate the risk of failure to achieve the Group’s objectives. sub‑contracted and the Directors therefore obtain regular risk on its performance; and It should be recognised that such systems can only provide assurances and information from key third‑party suppliers reasonable, not absolute, assurance against material • the cost to the Group and the benefits related to the regarding their internal systems and controls. misstatement or loss. Group and third parties operating the relevant controls. The Directors have reviewed the effectiveness of the Group’s risk management and internal control systems as they have operated over the period and up to the date of approval of the Annual Report and Financial Statements. There were no matters arising from this review that required further investigation and no significant failings or weaknesses wereidentified. Corporate governance 82 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Corporate governance statement continued ## Communication with shareholders is a high priority for both the Board and ## the Investment Advisor, and the Directors are available to discuss the Group’s ## progress and performance with shareholders. Shareholder engagement The Company always responds to letters from shareholders. The Company is committed to ongoing shareholder The Investment Advisor, the Company’s Joint Brokers Shareholders are also invited to submit questions ahead of dialogue and takes an active interest in voting outcomes. (Peel Hunt LLP and Jefferies International Limited) and the AGM by email and responses are provided ahead of the If there are substantial votes against any resolutions, the Nominated Advisor (Peel Hunt LLP) are in regular contact proxy voting deadline where practicable. Company will consult with shareholders to understand the with the major institutional investors and report the results reasons for any such vote. The Company will provide an All resolutions proposed at the 2023 AGM will be voted of meetings and the views of those shareholders to the update on the views received from shareholders and any on separately and the voting results will be announced Board. The Chairman and the other Directors are available resulting action will be detailed in the next Annual Report. to the London Stock Exchange and made available on to attend these meetings withshareholders if required. the Company’s website as soon as practicable after the The Board and its advisors will prepare the Group’s All shareholders are encouraged to attend, either in person meeting. These will include all votes cast for and against Annualand Half‑yearly Reports to present a full and when able to or by proxy, and vote at the AGM, during andthose withheld, together with all proxies lodged prior readily understandable review of the Group’s performance. whichthe Board and representatives of the Investment tothe meeting. Copies will be released through the Regulatory News Advisor are available to discuss issues affecting the Service, dispatched to shareholders depending on their Group and answer any questions. Shareholders wishing to communication preference and made available from the communicate directly with the Board or to lodge a question Company Secretary or by downloading from the Company’s in advance of the AGM should contact the Company website at www.warehousereit.co.uk. Secretary at the address on page 159. See pages 14 to 16 for further information on shareholder and stakeholder engagement. Corporate governance 83 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Nomination Committee report ### Dear shareholders In summary, the Committee’s primary responsibilities are to: I am pleased to present the report on the activities of the • keep under review the Board’s structure, size and Nomination Committee. composition, including diversity and the balance of The Board undertook an externally facilitated evaluation of independent and non‑independent Non‑Executive its composition, succession planning, expertise, dynamics, Directors, and make recommendations to the Board management and focus of meetings, support, culture, and withregard to any changes required; risk management and oversight. • consider and formulate succession plans for Directors, giving consideration to the length of service of the Board The Nomination Committee has spent time this year as a whole and the need for membership to be regularly considering future appointments and looking at the skills and refreshed; experience across existing Board members, possible gaps to what we see as necessary for the future development of the • identify and nominate candidates to fill any Board business, and other matters includingdiversity. vacancies for the Board’s approval, giving due regard to the current and recommended future balance of skills, We continue to be mindful of the gender diversity on the knowledge, experience, independence, diversity and Board and, to that end, we are looking at opportunities to cognitive and personal strengths on the Board; meet the targets set by the FTSE Women Leaders Review ## The Nomination Committee is • review the results of the Board performance evaluation and the Parker Review. We have 33% representation of ## responsible for maintaining a that relate to the Board’s composition; women on the Board. • review annually the time required from Non‑Executive ## balance of skills, experience and The Nomination Committee is responsible for maintaining a Directors; balance of skills, experience and perspectives on the Board. ## perspectives on the Board. • make recommendations to the Board regarding ### Role of the Nomination Committee membership of the Board’s Committees, in consultation The role of the Nomination Committee is to assist in with the Chair of each Committee; ### Neil Kirton ensuring that the Board comprises individuals who are • make recommendations to the Board concerning the Chairman of the Nomination Committee bestable to discharge the responsibilities of Directors, re‑appointment of Non‑Executive Directors, at the having regard to the highest standards of governance, the conclusion of their specified term of office; and strategic direction of the Group and ambitions of the Board • make recommendations to the Board regarding the in respect of diversity and inclusion. re‑election of Directors at AGMs. The Nomination Committee operates within defined terms of reference, which are regularly reviewed and updated as necessary. The terms of reference are available on the Group’s website. Corporate governance 84 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Nomination Committee report continued Composition and meeting attendance Size, structure and composition of the Whilst the Board does not feel that it would be appropriate The composition of the Nomination Committee and the to set targets as all appointments are made on merit, the ### Boardand Committees meeting attendance for the year are set out in the Board following objectives for the appointment of Directors have During the year, the Committee reviewed the size, structure and Committee meeting attendance table on page 75. been established: and composition of the Board and its Committees and agreed that these were appropriate for the Company, • all Board appointments will be made on merit, in the ### Activities including the balance of independent and non‑independent context of the skills, knowledge and experience that are The Nomination Committee met once during the year ended Directors. It is the Committee’s view that all members of the needed for the Board to be effective; and 31 March 2023 and once between the year end and the Board bring differing perspectives and contribute to the • long lists of potential Non‑Executive Directors should date of this report. The main activities of the Nomination overall success of Board meetings and the Group. include diverse candidates of appropriate merit. Committee are set out below. When considering the appointment of new Directors, the As a Board, we are supportive of the ambition shown in ### Re-election of Directors at the AGM Committee will actively consider a range of factors including recent reviews on diversity, including the FTSE Women The Nomination Committee considered the re‑election of the expertise and experience required in a prospective Leaders Review (formerly the Hampton‑Alexander – each Director at the AGM. Following consideration of a candidate and the diversity of the Board, as set out in the gender diversity) and the Parker Review (ethnic diversity). range of factors, including Directors’ other commitments Company’s diversity policy. TheNomination Committee will continue to examine ways in and the results of the recent Board evaluation, the which we can become an increasingly diverse Board. Thisis ### Diversity Nomination Committee concluded that each Director on appropriate as the Board considers diversity in all its forms There have been no appointments to the Board during the the Board standing for re‑election at the AGM continues to be important for the future development of thebusiness. year. However, before any appointment is made to the Board, to demonstrate the necessary skills, experience and the Committee evaluates the current and recommended The Company is not yet compliant with LR 9.8.6(9) and shall commitment to contribute effectively and add value to future balance of skills, knowledge, experience, endeavour to meet the requirements of this listing rule at the theBoard. independence, diversity and cognitive and personal strengths nearest opportunity. Accordingly, the Committee is focused Biographies of each Director are available on pages 70 to 72. on the Board. The appointment of any new Director is made on the new gender and diversity recommendations and It is the Committee’s and the Board’s view that the Directors’ on the candidate’s merits, measuring his or her skills and FCA rules on diversity and inclusion, effective for financial biographies illustrate why each Director’s contribution is, experience against the criteria identified by the Board as years beginning on or after 1 April 2022. In accordance and continues to be, important to the Group’s long‑term being desirable to complement the Board’s composition and with these requirements, the Committee is continuing to sustainable success. qualifications. develop succession plans to increase diversity on the Board The Board reviewed and approved its diversity policy in and will consider such recommendations in all future Board January 2023, which mirrors best practice and acknowledges appointments and succession planning discussions. As the benefits of greater diversity, including diversity of gender, a result of the outputs of the recent externally facilitated social and ethnic backgrounds, cognitive and personal board evaluation and the process to be undergone to recruit strengths, and remains committed to ensuring that the a successor to Martin Meech, the FCA requirements will be Directors bring a wide range of skills, knowledge, experience, a significant factor in any selection process. The Board will backgrounds and perspectives to the Board. strive to ensure that it continues to comprise individuals with diverse and complementary skills and experience to meet the Company’s objectives. Corporate governance 85 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Nomination Committee report continued ### Activities continued External appointments ### Diversity continued Prior to accepting any external appointments, Directors are required to seek the Board’s The following tables, in the prescribed format, show the gender and ethnic background of approval. The Board believes that other external directorships and positions help provide the Directors as of the date of this report, in accordance with Listing Rule 9 Annex 2.1. the Directors with valuable expertise which enhances their ability to act as a Non‑Executive Director of the Company. The number of external directorships and positions should, ### Gender identity or sex however, be limited, to ensure that Directors are able to dedicate the amount of time necessary to contribute effectively to the Board. | | Number of | | Number of | | | Number of | | | --- | --- | --- | --- | --- | --- | --- | --- | | | independent | non‑independent | | Percentage | senior positions | | | | | | 1 | | | | | Looking ahead to 2024 | | Board members | | Board members | | on the Board | | on the Board | | In the coming year, the Nomination Committee will spend time on reviewing succession Men 2 2 66.6 2 planning and diversity at Board level. 2 Women 2 0 33.3 0 As reported elsewhere, Martin Meech is not putting himself forward for re‑election at the Not specified/prefer not to say 0 0 0 0 2023 AGM. Accordingly, the Committee is currently considering the composition of the 1. The Company does not disclose the number of Directors in executive management as this is not applicable for an externally managed Real Estate Investment Trust. Audit and Risk Committee and the Sustainability Committee following the 2023 AGM. 2. Although not forming part of the FCA’s definition of ‘senior positions on the Board’, Lynette Lackey is Chair of the The Committee is also considering a replacement Chair of the Management Engagement Audit and Risk Committee and Aimée Pitman is Chair of the Sustainability Committee. Committee and a designated Senior Independent Director. Martin joined the Board in 2017 and his advice and counsel has been highly valued, in particular his chairmanship of ### Ethnic background the Management Engagement Committee. It is anticipated that the results of the recently Number of Number of Percentage on senior positions conducted external Board evaluation will be able to inform the Committee of the future Board members the Board on the Board structure for the Board and its Committees. White British or other White (including 6 100 2 minority white groups) | Mixed/multiple ethnic groups 0 0 0 | Neil Kirton | | --- | --- | | Asian/Asian British 0 0 0 | Chairman of the Nomination Committee | | Black/African/Caribbean/Black British 0 0 0 | 5 June 2023 | Other ethnic group, including Arab 0 0 0 Not specified/prefer not to say 0 0 0 The data in the above tables was collected through self‑reporting by the Directors. Corporate governance 86 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Audit and Risk Committee report ### Dear shareholders The Committee’s primary responsibilities are to: One of the Committee’s key roles is to recommend the • monitor the integrity of the Group’s financial statements financial statements to the Board and review the Group’s and review its financial reporting process and accounting financial reporting and accounting policies. We also oversee policies; the relationship with BDO LLP (“BDO”), the Group’s • keep under review the effectiveness of the Group’s internal externalAuditor. control environment and risk management systems; The ongoing economic uncertainty for the UK economy • make recommendations to the Board in relation to the and related challenges remained a focus area of the Audit appointment, re‑appointment or removal of the external and Risk Committee and the Board during 2022. We have Auditor and to approve its remuneration and terms of reviewed and challenged the Company’s Valuers, CBRE LLP, engagement, including the provision of any non‑audit during the financial year. services; The Committee has also continued to focus on the key • review the effectiveness of the audit process; issues relevant to the Group’s financial reporting and worked • review and monitor the Auditor’s independence and with the Investment Advisor and the external Auditor to objectivity; review any changes required in response to the introduction • review assurances from the Group’s service providers ## The Audit Committee of new accounting or regulatory guidance. regarding their systems and controls for the detection of ## is responsible for the Martin Meech will not be seeking re‑election at the 2023 fraud and the prevention of bribery and receive reports AGM and the composition of the Committee from that onnon‑compliance; and ## effectiveness ofinternal date is under consideration by the Nomination Committee. • review the adequacy and security of the Group’s ## control, riskmanagement I would like to thank Martin for his invaluable help as a arrangements for its contractors, suppliers and other member of this Committee. ## andauditingprocesses. stakeholders (as applicable) to raise concerns, in confidence, about possible wrongdoing in financial ### Role of the Audit and Risk Committee reporting or other matters. The Audit and Risk Committee safeguards high standards ### Lynette Lackey The Audit and Risk Committee has direct access to the of integrity and oversees conduct in financial reporting, Chair of the Audit Committee Group’s Auditor, BDO LLP, and provides a forum through internal control and risk management. which the Auditor reports to the Board. Representatives of the Auditor attend Audit and Risk Committee meetings at least annually. The Audit and Risk Committee operates within defined terms of reference, which are regularly reviewed and updated as necessary. The terms of reference are available on the Group’s website. Corporate governance 87 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Audit and Risk Committee report continued ### Composition and meeting attendance Activities An effective date for compliance was anticipated to be The composition of the Audit and Risk Committee and the The Audit and Risk Committee met three times during the 2024. The Audit and Risk Committee has begun to consider meeting attendance for the year are set out in the Board year ended 31 March 2023 and twice following the year end. the preparations that would be required and will carefully and Committee meeting attendance table on page 75. Atthe meetings, the Committee has: monitor progress of the consultation paper. The composition of the Audit and Risk Committee complies • reviewed the internal controls and risk management With respect to external assurance, the Audit and Risk with the AIC Code, which provides that the Audit and Risk systems of the Group and its third‑party service providers; Committee reviews the external Auditor’s reports presented Committee should comprise at least three independent to the Audit and Risk Committee, which include the external • agreed the audit plan with the Group’s Auditor, BDO LLP, Non‑Executive Directors, where all the Audit and Risk Auditor’s observations on risk management and internal including the principal areas of focus, and agreed the Committee members are independent. The Board is financial controls identified as part of its audit. audit fee; satisfied that at least one member of the Audit and Risk • reviewed the Annual Report and Accounts content and The Audit and Risk Committee has also reviewed and Committee has recent and relevant financial experience and advised the Board on whether the Annual Report was fair, updated, whereappropriate, the corporate risk register. believes the Audit and Risk Committee has competence balanced and understandable; The Audit and Risk Committee reviewed the requirement relevant to the sector in which the Company operates and • reviewed the Group’s financial statements and discussed for an internal audit function and concluded that this holds the relevant combination of skills and experience to the appropriateness of the accounting policies adopted; would provide minimal added comfort at considerable discharge its responsibilities. and extra cost to the Group. The Audit and Risk Committee The Company Secretary is secretary to the Audit and • reviewed the valuation of the Group’s investment receives reports on internal control and compliance from Risk Committee and attends all meetings. The meetings properties and recommended this to the Board. the Investment Advisor in conjunction with third‑party risk are also attended by representatives of the Investment and internal audit advisor, AuditR, and discusses these with ### Advisor, BDO, the third‑party portfolio valuers (CBRE LLP) Risk management and internal controls the Investment Advisor. This report also covers the internal and the external risk consultants. In addition to the formal Although the Board assumes the ultimate responsibility controls of the Group’s other key service providers, including meetings of the Audit and Risk Committee, the Audit and for the Group’s risk management and internal control the Administrator. No significant matters of concern were Risk Committee members also met throughout the year framework, its work is supported by the Audit and Risk identified during the year. to discuss the external audit process. In addition, they met Committee. ad‑hoc to attend an externally facilitated risk workshop. The Audit and Risk Committee assists the Board in fulfilling The Chair of the Audit and Risk Committee will be available its responsibility to review the adequacy and effectiveness at the AGM to respond to any shareholder questions that of the controls over financial reporting and operational risk. may be raised on the Audit and Risk Committee’s activities. During the year, the Audit and Risk Committee received updates on UK Corporate Governance reform, including ### Meetings with the Auditor on the consultation paper entitled ‘Restoring trust in audit During the year, the Audit and Risk Committee Chair met and corporate governance’ which would apply to all UK privately, without the Investment Advisor present, with Premium‑listed entities. The output from the consultation BDO. The focus of these private meetings was to encourage process was expected in spring 2023. discussion of any issues of concern in more detail and directly with the external Auditor. Corporate governance 88 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Audit and Risk Committee report continued ### Review of external audit effectiveness Significant issues The Audit and Risk Committee monitors and reviews the effectiveness of the external The Audit and Risk Committee considered the following key issues in relation to the Group’s audit process for the Annual Report, including: a detailed review of the audit plan, regular financial statements during the year: communications with the external Auditor, and with the Investment Advisor (without BDO Valuation of property assets The Audit and Risk Committee considered and discussed present), to discuss the external audit process and the audit results report and noting key the valuation of the Group’s investment properties as at areas of auditor judgement and the reasoning behind the conclusions reached, a formal 31March2023. To enable a full discussion of the valuation, and questionnaire issued to all Audit and Risk Committee members and to the Investment to enable the Directors to challenge the valuations and the Advisor which covers – among other items – the quality of the audit and audit team, underlying assumptions, as appropriate, the Valuer attended the the audit planning approach and execution, the presence and capabilities of the lead Audit and Risk Committee meeting in May 2023. audit partner, the audit team’s communication with the Audit and Risk Committee and Maintenance of REIT status The UK REIT regime affords the Group a beneficial tax treatment management and the Auditor’s independence and objectivity. This review considers the for income and capital gains, provided certain criteria are met. experience and tenure of the audit partner and team, the nature and level of services Thereis a risk that these REIT conditions may not be met and provided, and confirmation that the Auditor has complied with independence standards. additional tax becomes payable by the Group. The Audit and Risk Any concerns with the effectiveness of the external audit process would be reported to the Committee therefore monitored the Group’s compliance status and considered each of the requirements for the maintenance of Board. REIT status throughout the year ended 31 March 2023. The Audit and Risk Committee is satisfied that the relationship between the external Going concern and The Audit and Risk Committee considered the Group’s Auditorand the Investment Advisor allows for scrutiny of views on both sides and it is long-term viability of financial requirements for the next 12 months and concluded pleased that the evaluation paid testament to the ability and willingness of the external that it has sufficient resources to meet its commitments and theCompany Auditor to challengethe Audit and Risk Committee’s and Investment Advisor’s views in any outstanding loan covenants. Consequently, the financial aconstructive and proportionate manner. statements have been prepared on a going concern basis. The Audit and Risk Committee also considered the longer‑term ### AIC statement of compliance viability statement within the Annual Report, for the three‑year For the audit of the Financial Statements in this Annual Report, the Company complied period to June 2026, and the underlying factors and assumptions with the mandatory audit processes, including The Statutory Audit Services for Large which contributed to the Committee deciding that three years Companies Market Investigation (Mandatory Use of Competitive Tender Processes and was an appropriate length of time to consider the Group’s long‑term viability. Audit Committee Responsibilities) Order 2014 (“CMA Order”), and the Committee complied with the responsibility provisions set out in the CMA Order relating to: (a) putting the audit The Group’s going concern and viability statement, as well as full details of the assessment carried out by the Directors, can be services engagement on tender every ten years; and (b) strengthening the accountability found on pages 65 and 66. of the external auditors to the Committee, including: requiring that only the Committee is permitted to agree to the external auditors’ fees and scope of services; influence the Governance • Reviewed governance processes appointment of the audit engagement partner; make recommendations regarding the • Reviewed the terms of reference of the Audit and Risk appointment of auditors; and authorise the auditors to carry out non‑audit services. Committee • Undertook an externally facilitated effectiveness evaluation Corporate governance 89 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Audit and Risk Committee report continued ### Compliance, whistleblowing and fraud Auditor independence and objectivity Fair, balanced and understandable reporting The Audit and Risk Committee ensures that there are The Audit and Risk Committee has considered the The Audit and Risk Committee reviewed drafts of this effective procedures relating to whistleblowing. The Auditor’s independence and objectivity. The Audit and Risk Annual Report and Financial Statements to consider Whistleblowing Policy, which is reviewed annually, allows Committee will pre‑approve all non‑audit services prior to whether it is fair, balanced and understandable and provides employees to confidentially raise any concerns about any work commencing and considers safeguards in place, the information necessary for shareholders to assess the business practices. such as the use of separate teams to mitigate the risk of any Group’s performance, business model and strategy. We also self‑review. The Audit and Risk Committee also receives an gained assurance that there is a robust process of review Responsibility for the whistleblowing process sits with annual assurance from the Auditor that its independence is and challenge at different levels within the Group to ensure the Board. The Audit and Risk Committee continues to not compromised by the provision of any non‑audit services. balance and consistency. monitor the whistleblowing processes, procedures and any respective updates. The Audit and Risk Committee is satisfied that the Auditor’s Following the consideration of the above matters and its objectivity and independence is not impaired by performing detailed review, the Audit and Risk Committee was of the ### Audit fees and non-audit services non‑audit services and that the Auditor has fulfilled its opinion that the Annual Report, taken as a whole, is fair, An audit fee of £191,500 has been agreed in respect of the obligations to the Group and its shareholders. balanced and understandable and provides the information audit for the year ended 31 March 2023. This incorporates necessary for shareholders to assess the Group’s position ### a fee of £170,000 for auditing the Annual Report and Re-appointment of the Auditor and performance, business model and strategy. consolidated financial statements for the period and BDO LLP was appointed as Auditor to the Company with ### £21,500 for auditing the accounts of the Company’s effect from 1 April 2021 and Richard Levy has been the Looking ahead subsidiaries for the period. Group Engagement Partner since that time. Following The Audit and Risk Committee has agreed several areas of a review of the service provided by BDO LLP during focus, including: The Audit and Risk Committee reviews the scope and nature the year and a review of value for money, the Audit and of all proposed non‑audit services before engagement, to 1. ensuring continued integrity and balance in the Group’s Risk Committee has recommended to the Board the safeguard auditor independence and objectivity. During the financial reporting; re‑appointment of BDO LLP as Auditor to the Company. period, BDO non‑audit services totalled £110,000, relating 2. monitoring proposals for UK Corporate Governance Anordinary resolution for BDO’s re‑appointment will be to the review of the Company’s statement of working capital reform and considering appropriate processes; putto shareholders at this year’s AGM. and Financial Position and Prospects Procedures in relation 3. consideration of new and emerging risks; and to the move to the Premium Segment of the Main Market. The Audit and Risk Committee will regularly consider the need to put the audit out to tender, the Auditor’s fees and 4. looking at specific implications of the current UK We continue to believe that, in some circumstances, independence, and the matters raised during each audit. economic downturn on the Group’s portfolio value the external Auditor’s understanding of the Company’s including macro and regional‑specific impacts and business can be beneficial in improving the efficiency and assessing financial impacts. effectiveness of advisory work. The Non‑Audit Services Policy requires approval by the Committee before the external Auditor is engaged to provide any permitted ### non‑audit services. Lynette Lackey Chair of the Audit and Risk Committee 5 June 2023 Corporate governance 90 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Management Engagement Committee report ### I am pleased to present the Management Engagement Role of the Management Committee report on behalf of the Board and to provide ### EngagementCommittee details on how the Committee discharged its responsibilities The Committee’s primary responsibilities are to: throughout the year ended 31 March 2023. • satisfy itself that the terms of the Investment Management The Management Engagement Committee is central to the Agreement between the Group, the Investment Manager Company’s investment process and is also a key part of the and the Investment Advisor remain fair, competitive Company’s corporate governance framework. The Board and sensible for shareholders, and review and make has delegated the day‑to‑day running of the Company recommendations on any proposed amendment to the to the Investment Advisor pursuant to the terms of the Investment Management Agreement; Investment Management Agreement (“IMA”). TheIMA • satisfy itself that systems put in place by the Investment is reviewed and amended when necessary to ensure Advisor, Administrator and Depositary are adequate it reflectsthe relationship between the Board and the to meet relevant legal and regulatory requirements, Investment Advisor. including the AIFMD; The Board continues to review all investment and • satisfy itself that any compliance matters are under divestment decisions established by the Investment proper review; ## The Management Engagement Advisor and remains responsible for ensuring that these • consider whether the continuing appointment of the decisions are made in accordance with the Company’s ## Committee ensures that Investment Advisor is in the interests of shareholders as investmentpolicy. a whole and make recommendations to the Board in this ## third-party appointments are The Management Engagement Committee ensures that regard; ## conducted in shareholders’ third‑party appointments are conducted in shareholders’ • keep under review the Investment Advisor’s performance best interests. and the level of the investment advisory fee; and ## bestinterests. I will not be seeking re‑election at the 2023 AGM and the • keep under review the performance of other service composition of the Management Engagement Committee providers, including compliance with the terms of their Martin Meech from that date is under consideration by the Nomination respective agreements and their internal controls and Chairman of the Management Engagement Committee Committee. policies. The Management Engagement Committee operates within defined terms of reference, which are regularly reviewed and updated as necessary. The terms of reference are available on the Group’s website. Corporate governance 91 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Management Engagement Committee report continued ### Composition and meeting attendance • reviewed the ongoing performance and the continuing The composition of the Management Engagement appointment of the Group’s other key service providers. Committee and the meeting attendance for the year are set The review comprised open and closed‑ended questions out in the Board and Committee meeting attendance table and included a review of the quality of their services and on page 75. fees to ensure they remained competitive and a review of each service provider’s policies and procedures to To ensure open and regular communication between ensure each service provider had adequate controls and the Investment Advisor and the Board, certain key procedures in place. The Committee has concluded that representatives of the Investment Advisor are invited to the services provided to the Group were satisfactory and attend all Board meetings to update the Board on the that the contractual relationships with them are operating Company’s portfolio activity and discuss the general market in the best interests of the shareholders and that each be conditions and the financial performance and strategy of retained until the next review; and the Company. • reviewed the systems put in place by the Investment ### Activities Advisor (including both the investment policy and The Committee met once during the year ended Investment Management Agreement), Administrator and 31March2023 and once following the year end. At these Depositary to meet legal and regulatory requirements, meetings, the Committee has: particularly the AIFMD, and concluded that these remain adequate. • considered the performance of the Investment Advisor against its obligations under the Investment ### Looking ahead Management Agreement during the year. The Given the Company’s recent admission to the Main Market, Committee’s recommendation regarding the continuing the Management Engagement Committee’s focus will be to appointment of the Investment Advisor is set out on keep all service providers under increased scrutiny, including page 15. In reaching its recommendation to the Board, their terms of engagement and performances, to ensure the Committee’s deliberations included consideration that they are in the best interests of the Company. of the basis of the investment management fee and the execution of the Group’s investment strategy by the Investment Advisor during the year. The Board delegates ### Martin Meech the execution of its investment strategy and business Chairman of the Management Engagement Committee model to the Investment Advisor, subject to the Board being kept informed of all material property acquisitions 5 June 2023 and disposals, including development projects; Corporate governance 92 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability Committee report The Sustainability Committee has completed its first full The Board and Investment Advisor are continually developing year of operation, meeting four times during the year. their understanding of the potential physical impact of climate change and the wider implications associated with ### Role of the Sustainability Committee increased regulation, occupier requirements and increased The Committee’s primary responsibilities are to: focus on sustainable assets. • oversee the formulation and implementation of the Group’s ### Activities undertaken during the year sustainability strategy, review updates on any regulatory The Committee was established during the year ended changes affecting the strategy and make recommendations 31March2021 and met four times in the current year to to the Board regarding changes to strategy; undertake the following activities: • review annually the key sustainability‑related policies, ensuring compliance across external reporting; • review and approve the Group’s targets, challenging the Group to report against measurable targets and • review the Group’s efficacy in relation to its sustainability ensure the focus is prioritised according to the Group’s reporting; materiality matrix; • review climate‑related risk and make recommendations to • drive progress and provide direction on four key projects: the Audit and Risk Committee regarding inclusion in the ## The landscape for this topic is climate change risk, EPC improvement programme, Group’s risk management practices; and GRESB gap analysis and TCFD improvements; ## rapidly changing with respect • approve the budget provided for sustainability purposes. • receive training and information to inform decisions, ## to legal obligations and market Governance examples of topics covered are climate change risks, The Board is responsible for approving the Group’s occupier questionnaire insights, refurbishment standards, ## expectation, therefore a key part sustainability strategy, long‑term goals and actively green bonds, peer review and EPC proposed regulations; ## of the Committee’s focus has been monitoring portfolio performance. In conjunction with the • recommend a separate risk register is maintained for Investment Advisor, the Sustainability Committee oversees ESG risks and identification of climate change risks and ## to stay educated as well as driving the management of the Group’s climate‑related risks and opportunities plus recommend to the Audit and Risk ## our strategy. opportunities. Committee any updates as they were required; • constructively consider the merits of market benchmarks ### Risk management and direct our actions accordingly; ### Aimée Pitman With a growing focus on sustainability, the Board has • review and approve the Committee’s terms of reference Chair of the Sustainability Committee recognised the importance of identifying the impact of and the Committee’s composition; and climate change to the Group’s business. During the year, • ensure transparency and accurate reporting through the the Committee identified the key risks with input from our Annual Report, RNS, and website. consultant and added them to the Group’s risk register so they are monitored as part of our wider risk management process. Corporate governance 93 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Sustainability Committee report continued ### Our ESG commitments The Group’s commitment to ESG is to ensure its assets are attractive to occupiers in the long term. The Board is committed to driving towards net zero carbon by reviewing current developments and refurbishment standards versus green building certificates standards, as well as reducing EPC risk. The Board will continue to engage with its key occupiers to understand occupiers’ decarbonisation priorities, appetite to share data and share vital guidance on energy efficiency. ### Aimée Pitman Chair of the Sustainability Committee 5 June 2023 Corporate governance 94 Warehouse REIT plc Annual Report and Financial Statements 2023 # Directors' remuneration report ![img-21.jpeg](img-21.jpeg) Given the size of the Board, it is not considered appropriate for the Company to have a separate remuneration committee and the functions of this committee are therefore carried out by the Board as a whole. Neil Kirton Chairman The Board has prepared this report in partial and proportionate compliance with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Board was not advised by remuneration consultants during the financial year. ## Statement from the Chairman Given the size of the Board, it is not considered appropriate for the Company to have a separate remuneration committee and the functions of this committee are therefore carried out by the Board as a whole. The Board consists entirely of Non-Executive Directors and the Company has no employees. We have not, therefore, reported on those aspects of remuneration that relate to Executive Directors. The remuneration report will be presented at the AGM on 12 September 2023 for shareholder consideration and approval. Following a review of Directors' remuneration during the year and, in recognition of the Company's performance over the period, the Board resolved to maintain Directors' remuneration at the current levels. As a result, fees are set at a level of £48,375 per annum (2022: £48,375) for the Chairman and £37,625 per annum (2022: £37,625) for the independent Non-Executive Directors. No fees are payable to Stephen Barrow or Simon Hope as non-independent Non-Executive Directors. ## Directors' remuneration policy A resolution to approve the Directors' remuneration policy was proposed and passed at the Company's first AGM in 2018. As a binding vote on the policy is necessary every three years, an ordinary resolution to approve the policy was also put to shareholders at the 2021 AGM. There were no changes made to the policy, which is set out below, in advance of the shareholder vote in 2021. The next time it is intended that shareholders will be asked to approve the Directors' remuneration policy will be at the Company's AGM in 2024 and the remuneration policy approved at the Company's 2021 AGM will continue to apply until such time. The Company follows the recommendation of the AIC Code that Non-Executive Directors' remuneration should reflect the time commitment and responsibilities of their role. The Board's policy is that the remuneration of Non-Executive Directors should reflect the experience of the Board as a whole, and be determined with reference to comparable organisations and appointments. All Directors are non-executive, appointed under the terms of letters of appointment that set out the terms and conditions of their directorship, including the fees payable and the expected time commitment. There are no service contracts in place. The terms of their appointment provide that Directors shall retire and be subject to election at the first AGM after their appointment. Thereafter, at each AGM, any Director who has not stood for appointment or re-election at either of the two preceding AGMs is required to retire and offer themselves for re-election. Any Director who has held office for more than nine years is required to retire and offer themselves for re-election on an annual basis. Beyond these requirements, it has been agreed that all Directors will seek annual re-election at the Company's AGMs. The Directors are not entitled to any compensation for loss of office. The fees for the Non-Executive Directors are determined within the limits (not to exceed in aggregate £300,000 per annum) set out in the Company's Articles of Association, or any greater sum that may be determined by ordinary resolution of the Company. Directors are not eligible for bonuses, share options or long-term incentive schemes or other performance-related benefits, as the Board does not believe that this is appropriate for Non-Executive Directors. There are no pension arrangements in place for the Directors. 95 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Directors’ remuneration report continued | Directors’ remuneration policy continued | Annual change in remuneration | | | | | | --- | --- | --- | --- | --- | --- | | The Board has set two levels of fees: £48,375 per annum for the Chairman and £37,625 | | | Year ended | | Year ended | | | | 31 March 2023 | | 31 March 2022 | | per annum for the independent Non‑Executive Directors. No additional fees are payable for membership of the Board’s Committees or for appointment as a Director to any Group Neil Kirton 1.8% 7. 5% subsidiary. The fee for any new Director appointed to the Board will be determined on the Aimée Pitman 1.8% 7. 5% same basis, whilst fees in respect of subsequent periods will be determined following an Lynette Lackey 1.8% 7. 5% annual review. The Board would consider any views expressed by shareholders on the fees Martin Meech 1.8% 7. 5% being paid to Directors. Simon Hope 1.8% 7. 5% Under the Company’s Articles of Association, if any Director is called upon to perform extra Stephen Barrow 1.8% 7. 5% or special services of any kind, he/she may be paid such extra remuneration as the Directors may determine. Directors are also entitled to be paid all expenses properly incurred in ### Total shareholder return attending Board or shareholder meetings or otherwise in the performance of their duties. The graph below shows the total shareholder return (as required by company law) of the Under the Company’s Articles of Association, all Directors are entitled to the remuneration Company’s ordinary shares relative to a return on a hypothetical holding over the same determined by the Board. There were no revisions to the policy during the period and there period in the FTSE 250 and the FTSE All‑Share REIT Index. were no deviations from the procedure for the implementation of the remuneration policy. 250 ### Statement of implementation of remuneration policy in respect of the Warehouse REIT: +39% FTSE EPRA REIT: -5% FTSE All share: +30% ### financial year ending 31March 2024 200 The Board will, as usual, review Directors’ fees during the 2023 financial year, including the 150 time required to be committed to the business of the Group, and will consider whether any further changes to remuneration are required. 100 ### Remuneration report 50 ### Directors’ fees for the year Past performance is not a reliable indicator of future results There are no variable elements to the remuneration for the Directors. The Directors who 0 Sep 2017 Jan 2018 May 2018 Sep 2018 Jan 2019 May 2019 Sep 2019 Jan 2020 May 2020 Sep 2020 Jan 2021 May 2021 Sep 2021 Jan 2022 May 2022 Sep 2022 Jan 2023 May 2023 served in the year to 31 March 2023 received the following emoluments: Year ended 31 March 2023 Year ended 31 March 2022 | | | | | Source: Morningstar | Monthly Index: 18 Sept 2017 = 100 As at 26 May 2023 | | --- | --- | --- | --- | --- | --- | | Fees | Total | Fees | Total | | | | £’000 | £’000 | £’000 | £’000 | | | Neil Kirton 48.4 48.4 47.5 47.5 Aimée Pitman 37.6 37.6 36.9 36.9 Lynette Lackey 37.6 37.6 36.9 36.9 Martin Meech 37.6 37.6 36.9 36.9 Simon Hope — — — — Stephen Barrow — — — — 161.2 161.2 158.2 158.2 Corporate governance 96 Warehouse REIT plc Annual Report and Financial Statements 2023 # Directors' remuneration report continued ## Remuneration report continued ### Directors' beneficial and family interests There is no requirement under the Company's Articles of Association for Directors to hold shares in the Company. The Company has adopted a share dealing code in relation to the Company's shares, which is based on the requirements of the Listing Rules and Market Abuse Regulations. None of the Directors or any persons connected with them had a material interest in the Company's transactions, arrangements or agreements during the year. The Board will continue to monitor the interests of each individual Director. The interests of the Directors and any connected persons in the ordinary shares of the Company are set out below: | | As at 31 March 2023 | | As at 31 March 2022 | | | --- | --- | --- | --- | --- | | | Number of shares | Percentage of issued share capital | Number of shares | Percentage of issued share capital | | Neil Kirton^{1} | 390,909 | 0.09 | 390,909 | 0.09 | | Aimée Pitman^{2} | 734,908 | 0.17 | 689,543 | 0.16 | | Lynette Lackey | 51,603 | 0.01 | 51,603 | 0.01 | | Martin Meech^{3} | 290,909 | 0.07 | 290,909 | 0.07 | | Simon Hope^{4} | 12,407,697 | 2.92 | 12,407,697 | 2.92 | | Stephen Barrow^{5} | 10,120,307 | 2.38 | 10,103,050 | 2.38 | 1. 190,909 of these shares are held by Mr Kirton's spouse. 2. 346,080 of these shares are held by Ms Pitman's spouse, whilst 20,487 are held by her children. 3. 190,909 of these shares are held by Mr Meech's spouse. 4. 3,155,371 of these shares are held by Mr Hope's spouse, whilst 391,899 are held by his children. 5. 4,491,525 of these shares are held by Mr Barrow's spouse and 350,000 are held by his child. ## Relative importance of spend on pay (unaudited) The table below sets out significant use of profit and cash in respect of the years ended 31 March 2022 and 31 March 2023: | | 2023 £m | 2022 £m | Change % | | --- | --- | --- | --- | | Directors' remuneration | 0.18 | 0.18 | 0.0 | | Investment management fees | 6.97 | 6.5 | 7.2 | ## Voting at Annual General Meeting The Directors' remuneration report for the year ended 31 March 2022 and the Directors' remuneration policy were approved by shareholders at the AGM held on 13 September 2022. The votes cast by proxy were as follows: | | Directors' remuneration report (2022 AGM voting figures) | | Directors' remuneration policy (2021 AGM voting figures) | | | --- | --- | --- | --- | --- | | | Number of votes | % of votes cast | Number of votes | % of votes cast | | For | 220,336,218 | 99.97 | 203,532,620 | 99.96 | | Against | 66,906 | 0.03 | 77,848 | 0.04 | | At Chairman's discretion | — | — | 3,102 | — | | Total votes cast | 220,403,124 | 100.00 | 203,613,570 | 100.00 | | Number of votes withheld | 131,891 | | 108,118 | | Shareholders who wish to see a full copy of the remuneration policy are advised to contact the Company Secretary. ## Approval The Directors' remuneration report was approved by the Board on 5 June 2023. ## Neil Kirton Chairman 5 June 2023 97 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Directors’ report ## The Directors present their report and the audited ## financial statements for the year ended 31 March 2023. | Corporate governance | Information about securities carrying | Share capital | | --- | --- | --- | | The corporate governance statement on pages 67 to 100 | votingrights | Share issues | | forms part of the Directors’ report. | The following information is disclosed in accordance with | At the AGM held on 12 September 2022, the Directors | | | The Large and Medium‑sized Companies and Groups | were granted: (i) the authority to allot ordinary shares on a | ### Directors (Accounts and Reports) (Amendment) Regulations 2013 and non‑pre‑emptive basis up to an aggregate nominal amount The Directors in office during the year and at the date of DTR 7.2.6 of the Financial Conduct Authority’s Disclosure of £2,832,410 (being 66% of the issued ordinary share thisreport and their biographical details are shown on Guidance and Transparency Rules: capital at the date of the notice) by way of a rights issue; pages 70 and 71. and (ii) in any other case, the authority to allot ordinary • the Company’s capital structure and voting rights and Details of the Directors’ terms of appointment can be found shares up to an aggregate nominal amount of £1,416,205 details of the substantial shareholders in the Company are in the corporate governance statement and the Directors’ (being 33% of the issued ordinary share capital at the date set out on page 98; remuneration report. Details of indemnities provided to the of the notice). The Directors were also granted the authority • the giving of powers to issue or buy back the Company’s Directors can also be found in the corporate governance to disapply pre‑emption rights in respect of the allotment shares requires an appropriate resolution to be passed by statement. of shares or treasury shares up to 5% of the issued ordinary shareholders; and share capital at the date of the notice and a further 5% of ### Status of Warehouse REIT plc • there are no restrictions concerning the transfer of the issued ordinary share capital where the allotment and The Company is an investment company, as defined in securities in the Company or on voting rights, no special issue of such shares is for the sole purpose of financing (or section 833 of the Companies Act 2006, and qualifies as a rights with regard to control attached to securities, and no refinancing) an acquisition or other capital investment of a UK Real Estate Investment Trust (“REIT”) as defined under agreements between holders of securities regarding their kind contemplated by the Pre‑Emption Group’s Statement section 527(2) of the Corporation Tax Act 2010. transfer known to the Company. of Principles. These existing authorities will expire at the Company’s AGM to be held in September 2023. Corporate governance 98 Warehouse REIT plc Annual Report and Financial Statements 2023 # Directors' report continued ## Share capital continued ### Purchase of own shares At the AGM held on 12 September 2022, the Company was authorised to purchase up to 42,486,165 of its own shares (being 10% of the Company's issued ordinary share capital at the date of the notice). No ordinary shares have been bought back under this authority, which will expire at the AGM to be held in September 2023 where a resolution for its renewal will be proposed. The Directors will consider repurchasing ordinary shares in the market if they believe it to be in shareholders' interests as a whole and as a means of correcting any imbalance between supply of and demand for the ordinary shares. They will have regard to the Company's REIT status when making any repurchase and will only make such repurchases through the market at prices (after allowing for costs) below the relevant prevailing NAV per ordinary share and otherwise in accordance with guidelines established from time to time by the Board. ### Current share capital As at 31 March 2023 and the date of this report, there were 424,861,650 ordinary shares of £0.01 each in issue, all of which are fully paid up and are quoted on the London Stock Exchange, and none of which are held in treasury. Each ordinary share has one voting right attached to it. The total number of voting rights in the Group at this date was therefore 424,861,650. At the Company's general meeting held on 11 July 2022, the Company was granted authority to issue up to 175 million ordinary shares on a non-pre-emptive basis with effect from the Company's admission to the Premium Segment of the London Stock Exchange's Main Market. Further details regarding the Company's issued share capital are set out in note 21 of the financial statements. ## Results and dividends A summary of the Group's performance during the period and the outlook for the forthcoming year is set out in the strategic report on page 20. Dividends totalling 6.4 pence per ordinary share have been paid or declared in respect of the year ended 31 March 2023, further details of which can be found in the Investment Advisor's report on page 33. No final dividend is being proposed. The Company's dividend policy is set out on page 20 in the strategic report. ## Substantial shareholdings As at 31 March 2023, the following held voting rights greater than 3% in the Company (in accordance with DTR 5 (concerning notification of "major shareholdings" or "voting rights arising from the holding of certain financial instruments"): | | Number of ordinary shares held | % of total voting rights at 31 March 2023 | | --- | --- | --- | | Investec Wealth & Investment | 82,018,122 | 19.3 | | Evelyn Partners | 28,812,043 | 6.78 | | BlackRock | 22,539,133 | 5.31 | | Columbia Threadneedle Investments | 20,033,111 | 4.72 | | Hargreaves Lansdown | 17,920,552 | 4.22 | 99 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Directors’ report continued ### Management arrangements The Investment Advisor receives an annual fee (payable Continuing appointment of the The Company is an alternative investment fund for the quarterly in arrears) equal to 1.1% of the NAV of the Group’s ### InvestmentAdvisor purposes of the AIFMD and, as such, is required to have an portfolio on the basis of funds being fully invested up to The Board keeps the performance of the Investment Advisor Investment Manager who is duly authorised to undertake £500 million and 0.9% thereafter. The fee is payable to the under continual review. The Management Engagement that role. G10 Capital Limited is authorised and regulated Investment Advisor, which pays a quarterly fee of £15,000 to Committee conducts an annual appraisal of the Investment bythe Financial Conduct Authority (“FCA”) as the AIFM of the Investment Manager for the duration of its appointment, Advisor’s performance and makes a recommendation to the the Company under an agreement dated 22 August 2017 in addition to other one‑off fees in relation to regulatory Board about the continuing appointment of the Investment (the “Investment Management Agreement”). The Investment reporting services (Annex IV), compliance services and Advisor. It is the opinion of the Directors that the continuing Manager is responsible for overall portfolio management, investment committee services. No performance fee or appointment of the Investment Advisor is in the interests risk management and compliance with the Group’s acquisition fee is payable. of shareholders as a whole. The reasons for this view are investment policy and the requirements of the AIFMD that that the Investment Advisor has continued to execute the In the event that the Investment Management Agreement apply to the Group. investment strategy according to the Board’s expectations is terminated following a third party (or third parties acting in concert) acquiring a majority of the Company’s ordinary and on terms which the Board is of the view continue to The Investment Advisor is an appointed representative of shares, the Investment Advisor would be entitled to receive remain commercial and reasonable. the Investment Manager. As an appointed representative, Tilstone is responsible for working with and advising an exit fee equal to 15% of the total shareholder returns ### Auditor the Group and the Investment Manager in respect of (defined as the price per share paid by such third party The Directors holding office at the date of this Annual sourcing investment opportunities which meet the Group’s plus dividends and other distributions paid) generated Report confirm that, so far as they are each aware, there investment policy. As an appointed representative of since Admission, above a hurdle rate of 10% per annum is no relevant audit information of which the Company’s the Investment Manager, Tilstone is exempt from the on a compound basis since Admission. The exit fee will be Auditor is unaware. Each Director has taken all the steps that requirement to be authorised by the FCA as a pre‑requisite capped at the amount of the annual management fee paid they ought to have taken as a Director to make themselves to giving investment advice and arranging deals in in the immediately preceding financial year. aware of any relevant audit information and to establish that investments. Tilstone is also responsible for managing Following the expiry of the initial three‑year term on the Company’s Auditor is aware of that information. the underlying real estate assets within the Group’s 22August 2020, the Investment Management Agreement investment portfolio, which does not constitute a regulated BDO LLP has expressed its willingness to continue as isterminable on 24 months’ notice in writing by either party. activity. TheInvestment Manager has, and shall maintain, Auditor of the Company and resolutions for its re‑election In addition, it is terminable on 30 days’ notice by either party the necessary expertise and resource to supervise the and to authorise the Audit and Risk Committee to determine in writing in the event of a material breach or insolvency of delegated tasks effectively. its remuneration will be proposed at the forthcoming AGM. the other party. The Company is also entitled to terminate the agreement forthwith by notice in writing in the event that the Investment Manager ceases to be able to fulfil its obligations as a result of a change of the FCA’s rules. Corporate governance 100 Warehouse REIT plc Annual Report and Financial Statements 2023 # Directors' report continued ## Financial risk management Information about the nature of these risks and the Company's financial risk management objectives and policies is set out in note 26 to the financial statements. The work of the Audit and Risk Committee in respect of risk management is described on page 87. ## Information to be disclosed in accordance with the Listing Rule 9.8.4R The following information required to be disclosed in accordance with Listing Rule 9.8.4R is not applicable unless stated otherwise: 1. information in relation to the publication of unaudited financial information; 2. any arrangements under which a Director has waived emoluments, or agreed to waive any future emoluments from the Group; 3. details of any non-pre-emptive issues of equity for cash by the Group; 4. any non-pre-emptive issues of equity for cash by the Group or by any unlisted major subsidiary undertaking; 5. parent participation in a placing by a listed subsidiary; 6. any contract of significance in which a Director of the Company is or was materially interested; 7. any waiver of dividends by a shareholder; and 8. details of any long-term incentive schemes. ## Political donations No political donations were made by the Company or its subsidiaries during the year or prior year. ## Miscellaneous Further information regarding the future developments and relevant research activities of the Company can be found within the strategic report. The Company does not have any registered overseas branches. ## Post balance sheet events Post-year end, the Group entered into a new five-year debt facility totaling £320.0 million, replacing the existing facility. The refinancing consists of £220.0 million term loan and an RCF of £100.0 million, with a club of lenders consisting of HSBC, Bank of Ireland, NatWest and Santander. The new facility extends the tenure of the Group's debt and with improved reporting covenants. In addition, the Group has exchanged on two further disposals for an aggregate of £29.3 million. ## Climate-related matters Information about the Group's greenhouse gas emissions and the Company's voluntary reporting against the Task Force on Climate-related Financial Disclosures ("TCFD") recommendations is set out in the strategic report. ## Articles of Association The Articles of Association of the Company may only be amended by a special resolution at a general meeting of the shareholders. ## Powers of Directors The Directors may exercise all powers of the Company subject to applicable legislation and regulations and the Company's Articles of Association. ## Significant agreements The Company is not party to any significant agreements that take effect, alter or terminate upon a change of control of the Company. The Company is not aware of any agreements between holders of its ordinary shares that may result in restrictions on the transfer of its ordinary shares or on voting rights. Further details regarding the principal agreements between the Company and its service providers, including the Investment Advisor, are set out in note 29 to the financial statements and on page 16. ## Financial instruments Details of the financial instruments used by the Group and financial risk management policies can be found in notes 18 and 26 of the financial statements and in the principal risks and uncertainties section on pages 54 to 64. ## Directors' indemnities and Directors' and Officers' liability insurance The Company's agreement to indemnify each Director against any liability incurred during their tenure, to the extent permitted by law, remains in place. The Directors were covered throughout the period. ## Annual General Meeting ("AGM") The Company's AGM will be held on 12 September 2023. The Notice of the AGM will be circulated to shareholders separately. ## Link Company Matters Limited Company Secretary 5 June 2023 Company Number 10880317 101 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Statement of Directors’ responsibilities ### in respect of the Annual Report and Financial Statements The Directors are responsible for preparing the Annual Report and Financial Statements in The Directors are responsible for the maintenance and integrity of the corporate and accordance with UK adopted international accounting standards and applicable law and financial information included on the Company’s website, including ensuring the Annual regulations. Company law requires the Directors to prepare financial statements for each Report and Financial Statements are made available. The work carried out by the Auditor financial year. Under that law, the Directors have elected to prepare the financial statements does not involve consideration of the maintenance and integrity of this website and, of the Group and the Company in accordance with UK adopted international accounting accordingly, the Auditor accepts no responsibility for any changes that have occurred to standards. Additionally, the Directors must not approve the financial statements unless they the financial statements since they were initially presented on the website. As such, the are satisfied that they present fairly the financial position, financial performance and cash Directors’ responsibility also extends to the ongoing integrity of the financial statements flows of the Group and Company for that year. contained therein. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and In preparing the financial statements, the Directors are required to: dissemination of financial statements and visitors to the website need to be aware that • select suitable accounting policies in accordance with IAS 8 Accounting Policies, legislation in the UK covering the preparation and dissemination of the financial statements Changes in Accounting Estimates and Errors and apply them consistently; may differ from legislation in their jurisdiction. • present information, including accounting policies, in a manner that provides relevant, The Directors confirm that, pursuant to their responsibilities under DTR 4, to the best of reliable, comparable and understandable information; their knowledge: • provide additional disclosures when compliance with specific requirements in IFRS is • the financial statements, prepared in accordance with UK adopted international insufficient to enable users to understand the impact of particular transactions, other accounting standards and in conformity with the requirements of the Companies Act events and conditions on the Group’s financial position and financial performance; 2006, give a true and fair view of the assets, liabilities, financial position and profit of the • state that the Group has complied with UK adopted international accounting standards, Company (and Group as a whole); and subject to any material departures disclosed and explained in the financial statements; • this Annual Report includes a fair review of the development and performance of the • make judgements and estimates that are reasonable and prudent; business and the position of the Company (and Group as a whole), together with a • prepare the financial statements on the going concern basis unless it is inappropriate to description of the principal risks and uncertainties that it faces. presume that the Group and the Company will continue in business; and Having taken advice from the Audit Committee, the Directors consider that the Annual • prepare a Directors’ report, a strategic report and Directors’ remuneration report which Report and Financial Statements, taken as a whole, are fair, balanced and understandable comply with the requirements of the Companies Act 2006. and provide the information necessary for shareholders to assess the Company’s position The Directors are responsible for keeping adequate accounting records that are sufficient and performance, business model and strategy. to show and explain the Company’s transactions and disclose with reasonable accuracy On behalf of the Board at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the ### prevention and detection of fraud and other irregularities. Neil Kirton Chairman 5 June 2023 Financial statements 102 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor's report to the members of Warehouse REIT plc ### Opinion on the financial statements In our opinion: - the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 March 2023 and of the Group's loss for the year then ended; - the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; - the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and - the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Warehouse REIT plc (the "Parent Company" or the "Company") and its subsidiaries (the "Group") for the year ended 31 March 2023 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows, the Company statement of financial position, the Company statement of changes in equity, the Company statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. ### Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit Committee. ### Independence Following the recommendation of the Audit Committee, we were appointed by the Directors in March 2021 to audit the financial statements for the year ended 31 March 2022 and subsequent financial periods. The period of total uninterrupted engagement including retenders and re-appointments is two years, covering the years ended 31 March 2022 to 31 March 2023. We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group or the Parent Company. ### Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Group and the Parent Company's ability to continue to adopt the going concern basis of accounting included: - using our knowledge of the Group and its market sector together with the current general economic environment to assess the Directors' identification of the inherent risks to the Group's business and how these might impact the Group's ability to remain a going concern for the going concern period, being the period to 31 May 2024, which is at least 12 months from when the financial statements are authorised for issue; - obtaining an understanding of the Directors' process for assessing going concern including an understanding of the key assumptions used; - obtaining the Directors' going concern assessment and: - assessing the Group's forecast cash flows with reference to historic performance and challenging the Directors' forecast assumptions in comparison to the current performance of the Group; - testing the inputs into the forecasts for reasonableness based on historic activity and corroboration to contractual agreements; and - agreeing the Group's available borrowing facilities and the related terms and covenants to loan agreements; - obtaining forecast covenant calculations to check for any potential future covenant breaches. We also considered the covenant compliance headroom for sensitivity to both future changes in property valuations and the Group's future financial performance; - reviewing the documentation relating to the loan refinancing and assessing the implication of the refinancing on the Group's forecasts and going concern status; 103 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor's report continued to the members of Warehouse REIT plc ### Conclusions relating to going concern continued - considering Board minutes, and evidence obtained through the audit, and challenging the Directors on the identification of any contradictory information in the forecasts and the impact on the going concern assessment; - analysing the Directors' stress testing calculations and challenging the assumptions made using our knowledge of the business and of the current economic climate, to assess the reasonableness of the downside scenarios selected and the appropriateness of the Directors' mitigating actions; and - reviewing the disclosures in the financial statements relating to going concern to check that the disclosure is consistent with the circumstances. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company's ability to continue as a going concern for a period of at least 12 months from when the financial statements are authorised for issue. In relation to the Parent Company's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. ### Overview | Coverage | 100% (2022: 100%) of Group profit before tax | | | | --- | --- | --- | --- | | | 100% (2022: 100%) of Group revenue | | | | | 100% (2022: 100%) of Group total assets | | | | Key audit matters | | 2023 | 2022 | | | Valuation of investment properties | ✓ | ✓ | | | Revenue recognition – rental income | ✓ | ✓ | | Materiality | Group financial statements as a whole | | | | | £8.9m (2022: £10.5m) based on 1% (2022: 1%) total assets | | | ### An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The Group operates in one segment, investment property, structured through a number of subsidiary entities and therefore we treated the Group as one significant component. The Group audit engagement team performed all the work necessary to issue the Group and Parent Company audit opinion, including undertaking all of the audit work on the risks of material misstatement identified in the key audit matters section below. ### Climate change Our work on the assessment of potential impacts on climate-related risks on the Group's operations and financial statements included: - enquiries and challenge of management to understand the actions they have taken to identify climate-related risks and their potential impacts on the financial statements and adequately disclose climate-related risks within the Annual Report; - our own qualitative risk assessment taking into consideration the sector in which the Group operates and how climate change affects the real estate sector; and - review of the minutes of Board, Sustainability Committee and Audit Committee meetings and other papers related to climate change and performed a risk assessment as to how the impact of the Group's commitment as set out in the sustainability report on pages 36 to 53 may affect the financial statements and our audit. We challenged the extent to which climate-related considerations, including the expected cash flows from the initiatives and commitments, have been reflected, where appropriate, in management's going concern assessment and viability assessment. We also assessed the consistency of management's disclosures included as statutory other information on pages 44 to 50 with the financial statements and with our knowledge obtained from the audit. Based on our risk assessment procedures, we did not identify there to be any key audit matters materially impacted by climate-related risks and related commitments. 104 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor’s report continued ### to the members of Warehouse REIT plc ### An overview of the scope of our audit continued ### Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, andin forming our opinion thereon, and we do not provide a separate opinion on these matters. ### Key audit matter How the scope of our audit addressed the key auditmatter Valuation of The Group has an investment property portfolio of Our audit procedures included, but was not restricted to, the following: investment warehouses and light industrial assets located across Experience of the valuer and relevance of its work properties the United Kingdom. The properties are independently, We assessed the valuer’s competence and capabilities and read their terms of engagement with the externally valued in accordance with RICS As detailed in note 13 Group, to identify any matters that could have affected their independence and objectivity or imposed methodology and IFRS 13 Fair Value Measurement, to the consolidated scope limitations upon them. This includes completed investment property which is financial statements, let, or available to let, and is valued using the income With the assistance of our real estate specialists, we read the valuation reports and assessed whether the Group owns capitalisation method; and development property the valuations had been prepared in accordance with applicable valuation guidelines and IFRS 13 and a portfolio of and land which is valued using the comparable they were appropriate for determining the carrying value in the Group’s financial statements. investment properties method supported, where appropriate, by a residual which are held at their Data provided to the valuer development appraisal (which estimates the gross fair value. We checked that the data provided to the valuer by the Investment Advisor was consistent with the development value of the completed project less The Group’s information provided to, and tested by, us. This data included inputs such as current rent and lease estimated costs to completion and an appropriate accounting policy for term, which we have agreed on a sample basis to executed lease agreements. developer’s margin). these properties is Assumptions and estimates used by the valuer The valuation of investment property requires described in note 13 significant judgement and estimates by the Directors We developed yield expectations for each property using available independent industry data, reports to the consolidated and their independent valuer and is therefore and details of relevant comparable transactions in the market around the year‑end date. financial statements. considered a significant risk due to the subjective We compared the key valuation assumptions used by the valuers against our independently formed The key judgements nature of certain assumptions inherent in each market expectations and challenged the external valuers where significant variances from these and estimates in valuation. expectations were identified. We corroborated their responses to supporting documentation arriving at the fair Any input inaccuracies or unreasonable bases used where appropriate. The key valuation assumptions were the equivalent yields, which we evaluated values are set out in in the valuation judgements (such as in respect of by reference to market data based on the location and specifics of each property. Additionally for notes 2.2, 13 and 25 estimated rental value and yield profile applied) could development property and land, the key valuation assumptions included land value comparables, to the consolidated result in a material misstatement of the Group financial construction and other development costs and a developer’s margin which were compared to financial statements. statements. comparable market benchmarks where available and assessed for reasonableness where not readily comparable with published benchmarks. Financial statements 105 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor’s report continued ### to the members of Warehouse REIT plc ### An overview of the scope of our audit continued ### Key audit matters continued ### Key audit matter How the scope of our audit addressed the key auditmatter Valuation of There is also a risk that management may influence Assumptions and estimates used by the valuer continued investment the judgements and estimates in respect of property Alongside our real estate specialists, we met with the Group’s external valuers to discuss and challenge properties continued valuations in order to achieve property valuations the valuation methodology and key assumptions and considered if there were any indicators of undue and other performance targets to meet market Directors’ influence on the valuations. expectations. Key observations: The valuation of investment properties was therefore Based on the procedures performed, we did not identify any indicators to suggest that the judgements considered to be a key audit matter. and estimates made in the valuation of the Group’s investment properties were inappropriate. Revenue recognition The Group has multiple occupiers across its property We obtained the tenancy schedule and the Investment Advisor’s analysis of revenue recognised for – rental income portfolio. each property and performed the following: Refer to note 3 for Rental income is recognised on a straight‑line basis • for a sample of occupiers we reviewed the underlying leases to confirm the accuracy of the tenancy details of the Group’s over the lease term for the Group’s properties based schedule inputs. We also agreed one rental receipt for each of those occupiers to bank statements; revenue, including the upon rental agreements that are in place. Judgement • we developed an expectation of rental income to be invoiced for the year in respect of each property accounting policy. is required to determine the term over which incentives based on the tenancy schedule and compared this to the Investment Advisor’s analysis of the rental should be recognised. income recognised prior to lease incentive adjustments, corroborating explanations provided by the Investment Advisor in respect of variances identified; and There is a risk that rental income is not supported by underlying tenancy agreements or is inappropriately • we obtained the Investment Advisor’s schedule of lease incentive adjustments, including rent‑free recognised as a result of errors in recording lease periods and other rent concessions, and, for a sample, we recalculated the adjustment and agreed details in the tenancy schedules or inappropriate the inputs to the underlying lease documentation. We considered the completeness of the schedule judgements being applied by management. based on information included in the tenancy schedule and the underlying lease information obtained. Where applicable we assessed the Investment Advisor’s judgements against past and For these reasons we consider the recognition of current occupier behaviour in respect of the lease term over which the incentives are recognised. revenue from rental income to be a key audit matter. Key observations: We did not identify any indicators to suggest that revenue has been recognised inappropriately. ### Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Financial statements 106 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor's report continued to the members of Warehouse REIT plc ### Our application of materiality continued Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: | | Group financial statements | | Parent company financial statements | | | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Materiality | 8.9 | 10.5 | 3.4 | 3.7 | | Basis for determining materiality | | | 1% of total assets | | | Rationale for the benchmark applied | We determined that total assets would be the most appropriate basis for determining overall materiality as we consider it to be one of the principal considerations for users of the financial statements in assessing the financial performance of the Group and the Parent Company. | | | | | Performance materiality | 6.7 | 7.35 | 2.5 | 2.59 | | Basis for determining performance materiality | Overall performance materiality for the Group and Parent Company has been set at 75% (2022: 70%) of materiality. This was on the basis of our risk assessment, together with our assessment of the Group's and Parent Company's overall control environment and our past experience of the audit which has indicated a low number of corrected and uncorrected misstatements in the prior period and management's willingness to investigate and correct these. | | | | ### Specific materiality We also determined that for any items that could affect the calculation of the Group's European Public Real Estate ("EPRA") earnings, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decisions of users. We consider EPRA earnings to be a key performance measure of the Group. EPRA earnings excludes the impact of the net surplus on revaluation of investment properties, profit on disposal of investment properties and changes in the fair value of interest rate derivatives. As a result, we determined materiality for these items based on 5% of EPRA earnings, amounting to £0.83 million (2022: £1.38 million) for the Group. We further applied a performance materiality level of 75% (2022: 70%) of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately mitigated. ### Reporting threshold We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of £445,000 (2022: £525,000) for items audited to financial statement materiality, and £40,000 (2022: £70,000) for items audited to specific materiality. We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds. ### Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and Financial Statements other than the financial statements and our Auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 107 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor’s report continued ### to the members of Warehouse REIT plc ### Corporate governance statement Strategic In our opinion, based on the work undertaken in the course of the The Listing Rules require us to review the Directors’ statement in relation to going concern, report and audit: longer‑term viability and that part of the corporate governance statement relating to the Directors’ • the information given in the strategic report and the Directors’ Parent Company’s compliance with the provisions of the UK Corporate Governance Code report report for the financial year for which the financial statements are specified for our review. prepared is consistent with the financial statements; and Based on the work undertaken as part of our audit, we have concluded that each of the • the strategic report and the Directors’ report have been prepared in following elements of the corporate governance statement is materially consistent with the accordance with applicable legal requirements. financial statements or our knowledge obtained during the audit. In the light of the knowledge and understanding of the Group and Going concern • The Directors’ statement with regard to the appropriateness of Parent Company and its environment obtained in the course of the and longer- adopting the going concern basis of accounting and any material audit, we have not identified material misstatements in the strategic term viability uncertainties identified (set out on page 65) report or the Directors’ report. • The Directors’ explanation as to their assessment of the Group’s Directors’ In our opinion, the part of the Directors’ remuneration report to prospects, the period this assessment covers and why the period is remuneration be audited has been properly prepared in accordance with the appropriate (set out on page 65 and 66) Companies Act 2006. Other Code • The Directors’ statement on fair, balanced and understandable (set Matters on We have nothing to report in respect of the following matters in provisions out on page 101) which we relation to which the Companies Act 2006 requires us to report to you • The Board’s confirmation that it has carried out a robust assessment are required if, in our opinion: of the emerging and principal risks (set out on page 81) to report by • adequate accounting records have not been kept by the Parent • The section of the Annual Report that describes the review of exception Company, or returns adequate for our audit have not been received effectiveness of risk management and internal control systems (set from branches not visited by us; or out on page 81) • the Parent Company financial statements and the part of the • The section describing the work of the Audit and Risk Committee Directors’ remuneration report to be audited are not in agreement (set out on page 86 to 89) with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are ### Other Companies Act 2006 reporting not made; or Based on the responsibilities described below and our work performed during the course • we have not received all the information and explanations we require of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on for our audit. certain opinions and matters as described below. Financial statements 108 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor’s report continued ### to the members of Warehouse REIT plc ### Responsibilities of Directors Extent to which the audit was capable of detecting irregularities, ### As explained more fully in the statement of Directors’ responsibilities, the Directors are including fraud responsible for the preparation of the financial statements and for being satisfied that Irregularities, including fraud, are instances of non‑compliance with laws and regulations. they give a true and fair view, and for such internal control as the Directors determine is We design procedures in line with our responsibilities, outlined above, to detect material necessary to enable the preparation of financial statements that are free from material misstatements in respect of irregularities, including fraud. The extent to which our misstatement, whether due to fraud or error. procedures are capable of detecting irregularities, including fraud, is detailed below: In preparing the financial statements, the Directors are responsible for assessing the • through our knowledge of the Company and the Group and its sector we gained an Group’s and the Parent Company’s ability to continue as a going concern, disclosing, understanding of the legal and regulatory framework applicable to the Company and the as applicable, matters related to going concern and using the going concern basis of Group and the industry in which it operates, and considered the risk of acts by the Group accounting unless the Directors either intend to liquidate the Group or the parent company that were contrary to applicable laws and regulations, including fraud; or to cease operations, or have no realistic alternative but to do so. • we considered the Company’s and the Group’s compliance with laws and regulations that have a direct impact on the financial statements, including UK company law, Auditor’s responsibilities for the audit of the financial statements the applicable accounting framework, tax legislation (including the UK REIT regime Our objectives are to obtain reasonable assurance about whether the financial statements requirements) and the relevant Listing Rules, and we considered the extent to which as a whole are free from material misstatement, whether due to fraud or error, and to non‑compliance might have a material effect on the Group financial statements; issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of • we designed audit procedures to identify instances of non‑compliance with such assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will laws and regulations. Our procedures included reviewing the financial statement always detect a material misstatement when it exists. Misstatements can arise from fraud or disclosures and accounting policies to identify instances of management bias, and error and are considered material if, individually or in the aggregate, they could reasonably agreeing to underlying supporting documentation where necessary. We reviewed be expected to influence the economic decisions of users taken on the basis of these minutes of Board meetings held during and subsequent to the year for any indicators of financial statements. non‑compliance and made enquiries of management and of the Directors as to the risks of non‑compliance and any instances thereof; • we assessed the susceptibility of the financial statements to material misstatement, including fraud, and considered the fraud risk areas to be investment property valuations, revenue recognition and management override of controls. Our responses to the valuation of investment properties and revenue recognition risks are set out in the key audit matters section above; • we addressed the risk of management override of internal controls by testing a sample of journal entries processed during the year, agreeing to supporting documentation and evaluating whether there was evidence of bias by management or the Directors that represented a risk of material misstatement due to fraud; and • we communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non‑compliance with laws and regulations throughout the audit. Financial statements 109 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Independent Auditor’s report continued ### to the members of Warehouse REIT plc ### Auditor’s responsibilities for the audit of the financial Use of our report ### statementscontinued This report is made solely to the Parent Company’s members, as a body, in accordance Extent to which the audit was capable of detecting irregularities, with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required ### including fraud continued to state to them in an auditor’s report and for no other purpose. To the fullest extent The engagement partner has assessed and confirmed that the engagement team permitted by law, we do not accept or assume responsibility to anyone other than the collectively had the appropriate competence and capabilities to identify or recognise Parent Company and the Parent Company’s members as a body, for our audit work, for this non‑compliance with laws and regulations. report, or for the opinions we have formed. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may ### Richard Levy (Senior Statutory Auditor) involve deliberate concealment by, for example, forgery, misrepresentations or through For and on behalf of BDO LLP, Statutory Auditor collusion. There are inherent limitations in the audit procedures performed and the further removed non‑compliance with laws and regulations is from the events and transactions London, UK reflected in the financial statements, the less likely we are to become aware of it. 5 June 2023 A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Financial statements 110 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Consolidated statement of comprehensive income For the year ended 31 March 2023 All items in the statement derive from continuing operations. No operations were acquired or discontinued during the year. There is no other comprehensive income and therefore the profit for the year after tax is also the total comprehensive income. | Continuing operations | Notes | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | --- | | Gross property income | 3 | **47,845** | 48,714 | | Service charge income | 3 | **3,340** | 2,682 | | Service charge expenses | 4 | **(3,767)** | (3,011) | | Net property income | | **47,418** | 48,385 | | Property operating expenses | 4 | **(5,454)** | (4,789) | | **Gross profit** | | **41,964** | 43,596 | | Administration expenses | 4 | **(9,716)** | (8,244) | | **Operating profit before (losses)/gains on investment properties** | | **32,248** | 35,352 | | Fair value (losses)/gains on investment properties | 13 | **(193,367)** | 163,685 | | Realised (loss) on disposal of investment properties | 13 | **(13,105)** | — | | **Operating (loss)/profit** | | **(174,224)** | 199,037 | | Finance income | 7 | **2,039** | 321 | | Finance expenses | 8 | **(15,528)** | (8,154) | | Changes in fair value of interest rate derivatives | 18 | **4,850** | — | | **(Loss)/profit before tax** | | **(182,863)** | 191,204 | | Taxation | 9 | **—** | — | | **Total comprehensive (loss)/income for the period** | | **(182,863)** | 191,204 | | **(Loss)/Earnings per share (basic and diluted) (pence)** | 12 | **(43.0)** | 45.0 | The accompanying notes on pages 114 to 138 form an integral part of these financial statements. 111 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Consolidated statement of financial position As at 31 March 2023 These financial statements were approved by the Board of Directors of Warehouse REIT plc on 5 June 2023 and signed on its behalf by: Neil Kirton Company number: 10880317 The accompanying notes on pages 114 to 138 form an integral part of these financial statements. | | Notes | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | --- | | **Assets** | | | | | **Non-current assets** | | | | | Investment property | 13 | 842,269 | 1,026,066 | | Interest rate derivatives | 18 | 11,228 | 337 | | | | **853,497** | **1,026,403** | | **Current assets** | | | | | Investment property held for sale | 14 | 625 | — | | Cash and cash equivalents | 15 | 25,053 | 16,706 | | Trade and other receivables | 16 | 9,258 | 9,849 | | | | **34,936** | **26,555** | | **Total assets** | | **888,433** | **1,052,958** | | **Liabilities** | | | | | **Non-current liabilities** | | | | | Interest-bearing loans and borrowings | 17 | (304,093) | (268,216) | | Other payables and accrued expenses | 20 | (11,300) | (16,550) | | Head lease liability | 19 | (14,320) | (14,200) | | | | **(329,713)** | **(298,966)** | | **Current liabilities** | | | | | Interest rate derivatives | 18 | (3,841) | — | | Other payables and accrued expenses | 20 | (18,584) | (6,855) | | Deferred income | 20 | (7,115) | (7,487) | | Head lease liability | 19 | (705) | (696) | | | | **(30,245)** | **(15,038)** | | **Total liabilities** | | **(359,958)** | **(314,004)** | | **Net assets** | | **528,475** | **738,954** | | **Equity** | | | | | Share capital | 21 | 4,249 | 4,249 | | Share premium | 22 | 275,648 | 275,648 | | Retained earnings | 23 | 248,578 | 459,057 | | **Total equity** | | **528,475** | **738,954** | | Number of shares in issue (thousands) | | **424,862** | **424,862** | | **Net asset value per share (basic and diluted) (pence)** | 24 | **124.4** | **173.9** | 112 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Consolidated statement of changes in equity For the year ended 31 March 2023 Further details of retained earnings are presented in note 23. | | Notes | Share capital £'000 | Share premium £'000 | Retained earnings £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | | **Balance at 31 March 2021** | | 4,249 | 275,648 | 294,194 | 574,091 | | Total comprehensive income | | — | — | 191,204 | 191,204 | | Dividends paid | 11 | — | — | (26,341) | (26,341) | | **Balance at 31 March 2022** | | **4,249** | **275,648** | **459,057** | **738,954** | | Total comprehensive income | | — | — | (182,863) | (182,863) | | Dividends paid | 11 | — | — | (27,616) | (27,616) | | **Balance at 31 March 2023** | | **4,249** | **275,648** | **248,578** | **528,475** | The accompanying notes on pages 114 to 138 form an integral part of these financial statements. 113 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Consolidated statement of cash flows For the year ended 31 March 2023 | | Notes | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | --- | | **Cash flows from operating activities** | | | | | Operating (loss)/profit | | (174,224) | 199,037 | | **Adjustments to reconcile profit for the period to net cash flows:** | | | | | Losses/(gains) from change in fair value of investment properties | 13 | 193,367 | (163,685) | | Realised loss on disposal of investment properties | 13 | 13,105 | — | | Head lease movement in asset value | | (42) | 181 | | **Operating cash flows before movements in working capital** | | **32,206** | **35,533** | | Decrease/(increase) in other receivables and prepayments | | 329 | (6,318) | | Increase/(decrease) in other payables and accrued expenses | | 2,788 | (970) | | **Net cash flow generated from operating activities** | | **35,323** | **28,245** | | **Cash flows from investing activities** | | | | | Acquisition of investment properties | | (66,053) | (45,178) | | Capital expenditure | | (4,628) | (7,536) | | Development expenditure | | (7,141) | (1,133) | | Purchase of interest rate caps | | (2,200) | — | | Interest received | | 989 | — | | Disposal of investment properties | | 58,101 | — | | **Net cash flow used in investing activities** | | **(22,932)** | **(53,847)** | | **Cash flows from financing activities** | | | | | Bank loans drawn down | 17 | 65,000 | 49,000 | | Bank loans repaid | 17 | (30,000) | — | | Loan interest and other finance expenses paid | | (11,810) | (5,288) | | Other finance expenses paid | | (390) | (799) | | Recurrent loan fees | | (396) | (392) | | Head lease payments | | (832) | (1,057) | | Dividends paid in the period | 11 | (27,616) | (26,341) | | **Net cash flow (used in)/generated from financing activities** | | **(5,648)** | **15,123** | | **Net increase/(decrease) in cash and cash equivalents** | | **8,347** | **(10,479)** | | Cash and cash equivalents at start of the period | | 16,706 | 27,185 | | **Cash and cash equivalents at end of the period** | 15 | **25,053** | **16,706** | The accompanying notes on pages 114 to 138 form an integral part of these financial statements. 114 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements For the year ended 31 March 2023 ## 1. General information Warehouse REIT plc is a closed-ended Real Estate Investment Trust ("REIT") with an indefinite life incorporated in England and Wales on 24 July 2017. The Company began trading on 20 September 2017. The registered office of the Company is located at 65 Gresham Street, London EC2V 7NQ. The Company's shares are admitted to trading on the Premium Listing Segment of the Main Market, a market operated by the London Stock Exchange. The Group's consolidated financial statements for the year ended 31 March 2023 comprise the results of the Company and its subsidiaries (together constituting the "Group") and were approved by the Board and authorised for issue on 5 June 2023. The nature of the Group's operations and its principal activities are set out in the strategic report on pages 1 to 66. ## 2. Basis of preparation These financial statements are prepared in accordance with UK adopted international accounting standards and in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared under the historical cost convention, except for the revaluation of investment properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The audited financial statements are presented in Pound Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated. ### Going concern The Directors have made an assessment of the Group's ability to continue as a going concern. They carefully considered areas of potential financial risk and reviewed cash flow forecasts, evaluating a number of scenarios which included extreme downside sensitivities in relation to rental cash collection, making no acquisitions or discretionary capital expenditure and minimum dividend distributions under the REIT rules. Accordingly, based on this information, and in light of mitigating actions available and the recent refinancing, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in business for a period of at least 12 months from the date of approval of the Annual Report and 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. Therefore, the financial statements have been prepared on the going concern basis. ## 2.1 Changes to accounting standards and interpretations New standards and interpretations effective in the current period There were a number of new standards and amendments to existing standards which are required for the Group's accounting period beginning on 1 April 2022, which have been considered and applied as follows: - • Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37); - • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); - • Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and - • References to Conceptual Framework (Amendments to IFRS 3). There was no material effect from the adoption of the above-mentioned amendments to IFRS effective in the period. They have no significant impact to the Group as they are either not relevant to the Group's activities or require accounting which is already consistent with the Group's current accounting policies. ![img-22.jpeg](img-22.jpeg) 115 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the consolidated financial statements continued ### For the year ended 31 March 2023 ### 2. Basis of preparation continued ### 2.1 Changes to accounting standards and interpretations continued Financial statements New and revised accounting standards not yet effective There are a number of new standards and amendments to existing standards which have been published and are mandatory for the Group’s accounting periods beginning on or after 1 April 2023 or later. The Group is not adopting these standards early. The following are the most relevant to the Group: Amendments to IAS 1 Presentation of Financial Statements clarifies that liabilities are classified as either current or non‑current, depending on the rights that exist at the end of the reporting period and not expectations of, or actual events after, the reporting date. The amendments also give clarification to the definition of settlement of a liability. Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors clarifies the distinction between accounting policies and accounting estimates and also replaces the definition of accounting estimates. Under the new definition, estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. The amendments are not expected to have a significant impact on the preparation of the financial statements. 2.2 Significant accounting judgements and estimates The preparation of these financial statements in accordance with IFRS requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future. Judgements In the course of preparing the financial statements, no judgements have been made in the process of applying the Group’s accounting policies, other than those involving estimations detailed below, that have had a significant effect on the amounts recognised in the financial statements. Estimates In the process of applying the Group’s accounting policies, the Investment Advisor has made the following estimates which have the most significant risk of material change to the carrying value of assets recognised in the consolidated financial statements: Valuation of property The valuations of the Group’s investment property are at fair value as determined by the external independent valuer on the basis of market value in accordance with the internationally accepted RICS Valuation – Professional Standards January 2020 (incorporating the International Valuation Standards) and in accordance with IFRS 13. The key estimates made by the valuer are the ERV and equivalent yields of each investment property and land values per acre for development properties. The valuers have considered the impact of climate change and that this has not had a material impact on the valuation at the current time. See notes 13 and 25 for further details. 2.3 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are stated in the notes to the financial statements. a) Basis of consolidation The Company does not meet the definition of an investment entity and therefore does not qualify for the consolidation exemption under IFRS 10. The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March 2023. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtained control, and will continue to be consolidated until the date that such control ceases. An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In preparing these financial statements, intra‑group balances, transactions and unrealised gains or losses have been eliminated in full. All subsidiaries have the same year end as the Company. Uniform accounting policies are adopted in the financial statements for like transactions and events in similar circumstances. 116 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 ## 2. Basis of preparation continued ### 2.3 Summary of significant accounting policies continued #### b) Functional and presentation currency The overall objective of the Group is to generate returns in Pound Sterling and the Group's performance is evaluated in Pound Sterling. Therefore, the Directors consider Pound Sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions and have therefore adopted it as the functional and presentation currency. #### c) Segmental reporting The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment in, and provision of, UK urban warehouses. ## 3. Property income | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Rental income | 45,750 | 44,020 | | Insurance recharged | 1,592 | 1,507 | | Dilapidation income | 503 | 3,187 | | Gross property income | 47,845 | 48,714 | | Service charge income | 3,340 | 2,682 | | Total property income | 51,185 | 51,596 | No occupier accounts for more than 10% of rental income. ## Accounting policy Rental income arising from operating leases on investment property is accounted for on a straight-line basis over the lease term and is included in gross property income in the Group statement of comprehensive income. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income. Rental income is invoiced in advance and for all rental income that relates to a future period, this is deferred and appears with current liabilities on the Group statement of financial position. For leases which contain fixed or minimum uplifts, the rental income arising from such uplifts is recognised on a straight-line basis over the lease term. A rental adjustment is recognised from the rent review date in relation to unsettled rent reviews, once the rental uplifts are agreed. Occupier lease incentives are recognised as an adjustment 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 occupier has the option to continue the lease where, at the inception of the lease, the Directors are reasonably certain that the occupier will exercise that option. Insurance income is recognised in the accounting period in which the services are rendered. Amounts received from occupiers to terminate leases or to compensate for dilapidations are recognised in the Group statement of comprehensive income when the right to receive them arises, typically at the cessation of the lease. Service charge income is recognised when the related recoverable expenses are incurred. The Group acts as the principal in service charge transactions as it directly controls the delivery of the services at the point at which they are provided to the occupier. 117 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 4. Property operating and administration expenses | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Service charge expenses | 3,767 | 3,011 | | Premises expenses | 2,481 | 2,313 | | Insurance | 1,735 | 1,558 | | Rates | 716 | 490 | | Utilities | 335 | 87 | | Loss allowance on trade receivables | 187 | 341 | | Property operating expenses | 5,454 | 4,789 | | Investment Advisor fees | 6,970 | 6,484 | | Costs associated with the transfer to the Main Market | 1,069 | — | | Directors' remuneration (including social security costs) | 179 | 175 | | Head lease asset depreciation | 189 | 181 | | Other administration expenses | 1,309 | 1,404 | | Administration expenses | 9,716 | 8,244 | | Total | 18,937 | 16,044 | Main Market expenses are costs associated with the transfer to the Premium Segment of the Main Market of the London Stock Exchange. On 12 July 2022, Warehouse REIT transferred the trading of its ordinary shares to the Premium Segment of the Main Market of the London Stock Exchange. Details of how the Investment Advisor fees are calculated are disclosed in note 29. # Accounting policy All property operating expenses and administration expenses are charged to the consolidated statement of comprehensive income and are accounted for on an accruals basis. Property expenses are costs incurred by the Group that are not directly recoverable from an occupier, as well as professional fees relating to the letting of our estates. 5. Directors' remuneration | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Neil Kirton | 48 | 47 | | Lynette Lackey | 38 | 37 | | Martin Meech | 38 | 37 | | Aimée Pitman | 38 | 37 | | Total | 162 | 158 | A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' remuneration report. The Group had no employees in either period. 6. Auditor's remuneration | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Audit fee | 192 | 148 | | Total | 192 | 148 | The Group reviews the scope and nature of all proposed non-audit services before engagement, to ensure that the independence and objectivity of the Auditor are safeguarded. Audit fees are comprised of the following items: | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Group year-end Annual Report and Financial Statements | 172 | 130 | | Subsidiary accounts | 20 | 18 | | Total | 192 | 148 | 118 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 6. Auditor's remuneration continued Non-audit fees payable to the Group's Auditor comprised of the following: | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Services as reporting accountant relating to Main Market move | 110 | — | | Total | 110 | — | There were no non-audit services provided by the Auditor in the year to 31 March 2022. The Audit Committee receives assurance from the Auditor that its independence is not compromised. The Group's Auditor for the year ended 31 March 2023 was BDO LLP. # 7. Finance income | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Interest from cash and short-term deposits | 12 | — | | Interest from derivatives | 2,027 | — | | Total | 2,039 | — | # Accounting policy Interest income is recognised on an effective interest rate basis and shown within the Group statement of comprehensive income as finance income. See note 18 for details on the accounting policy for interest rate derivatives. # 8. Finance expenses | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Loan interest | 14,057 | 5,816 | | Head lease interest | 961 | 1,030 | | Loan arrangement fees amortised | 1,052 | 898 | | Recurrent loan fees | 607 | 392 | | Bank charges | 5 | 18 | | | 16,682 | 8,154 | | Less: amounts capitalised on the development of properties | (1,154) | — | | Total | 15,528 | 8,154 | The interest capitalisation rates for the year ended 31 March 2023 ranged from 3.2% to 4.3% (31 March 2022: £nil). # Accounting policy Any finance costs that are separately identifiable and directly attributable to an asset which takes a period of time to complete are capitalised as part of the cost of the asset. Ongoing services fees relating to the maintenance of the loan are expensed in the period in which they occur. All other finance costs are expensed in the period in which they occur. Finance costs consist of interest and other costs that the Group incurs in connection with bank and other borrowings. Fair value movements on derivatives are recorded in finance expenses or in finance income depending on the fair value movement during the year. See note 19 for the accounting policy on head lease interest expensed. 119 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 9. Taxation Corporation tax has arisen as follows: | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Corporation tax on residual income | — | — | | Total | — | — | | Reconciliation of tax charge to profit before tax: | | | | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | (Loss)/profit before tax | (182,863) | 191,204 | | Corporation tax at 19.0% (2022: 19.0%) | (34,744) | 36,329 | | Change in value of investment properties | 36,740 | (31,092) | | Realised loss on disposal of investment properties | 2,490 | — | | Tax-exempt property rental business | (4,486) | (5,237) | | Total | — | — | # Accounting policy Corporation tax is recognised in the consolidated statement of comprehensive income except where in certain circumstances corporation tax may be recognised in other comprehensive income. As a REIT, the Group is exempt from corporation tax on the profits and gains from its property rental business, provided it continues to meet certain conditions as per the REIT regulations. Non-qualifying profits and gains of the Group continue to be subject to corporation tax. Therefore, current tax is the expected tax payable on the non-qualifying taxable income for the period, if applicable, using tax rates enacted or substantively enacted at the balance sheet date. The United Kingdom Government has announced an increase to the main rate of corporation tax from 19% to 25% from April 2023. As the Company is a REIT, it is not anticipated that the change in the corporate tax rate will have a material impact on the Group, however tax charges on any non-property income will increase. # 10. Operating leases # Operating lease commitments – as lessor The Group has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have a remaining term of up to 15 years. Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2023 are as follows: | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Within one year | 42,033 | 42,364 | | Between one and two years | 33,340 | 35,838 | | Between two and three years | 26,998 | 27,002 | | Between three and four years | 22,360 | 21,154 | | Between four and five years | 18,457 | 17,058 | | Between five and ten years | 34,394 | 35,641 | | More than ten years | 19,607 | 22,578 | | Total | 197,189 | 201,635 | 120 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 11. Dividends | For the year ended 31 March 2023 | Pence per share | £'000 | | --- | --- | --- | | Third interim dividend for year ended 31 March 2022 paid on 1 April 2022 | 1.55 | 6,585 | | Fourth interim dividend for year ended 31 March 2022 paid on 30 June 2022 | 1.75 | 7,435 | | First interim dividend for year ended 31 March 2023 paid on 3 October 2022 | 1.60 | 6,798 | | Second interim dividend for year ended 31 March 2023 paid on 30 December 2022 | 1.60 | 6,798 | | Total dividends paid during the year | 6.50 | 27,616 | | Paid as: | | | | Property income distributions | 6.50 | 27,616 | | Non-property income distributions | — | — | | Total | 6.50 | 27,616 | | For the year ended 31 March 2022 | Pence per share | £'000 | | --- | --- | --- | | Third interim dividend for year ended 31 March 2021 paid on 1 April 2021 | 1.55 | 6,585 | | Fourth interim dividend for year ended 31 March 2021 paid on 30 June 2021 | 1.55 | 6,586 | | First interim dividend for year ended 31 March 2022 paid on 1 October 2021 | 1.55 | 6,585 | | Second interim dividend for year ended 31 March 2022 paid on 30 December 2021 | 1.55 | 6,585 | | Total dividends paid during the year | 6.20 | 26,341 | | Paid as: | | | | Property income distributions | 6.20 | 26,341 | | Non-property income distributions | — | — | | Total | 6.20 | 26,341 | As a REIT, the Group is required to pay property income distributions ("PIDs") equal to at least 90% of the property rental business profits of the Group. A third interim property income dividend for the year ended 31 March 2023 of 1.60 pence per share was declared on 28 February 2023 and paid on 3 April 2023. # Accounting policy Dividends due to the Company's shareholders are recognised when they become payable. # 12. Earnings per share Basic EPS is calculated by dividing profit for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares during the period. As there are no dilutive instruments in issue, basic and diluted EPS are identical. The European Public Real Estate Association ('EPRA') publishes guidelines for calculating adjusted earnings on a comparable basis. EPRA EPS is a measure of EPS designed by EPRA to enable entities to present underlying earnings from core operating activities, which excludes fair value movements on investment properties. The Company has also included an additional earnings measure called "Adjusted Earnings" and "Adjusted EPS." Adjusted Earnings and Adjusted EPS is based on EPRA's Best Practices Recommendations and recognises finance income earned from derivatives held at fair value through profit and loss used to hedge the Company's floating interest rate exposure. Also included in adjusted earnings is the add back of the costs associated with the transfer to the Premium Segment of the Main Market of the London Stock exchange, as these costs will not be reoccurring. The Board deems this a more relevant indicator of core earnings as it reflects our ability to generate earnings from our portfolio. 121 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 12. Earnings per share continued | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | IFRS earnings | (182,863) | 191,204 | | EPRA earnings adjustments: | | | | Loss on disposal of investment properties | 13,105 | — | | Fair value losses/(gains) on investment properties | 193,367 | (163,685) | | Interest from derivatives | (2,027) | — | | Changes in fair value of interest rate derivatives | (4,850) | (321) | | EPRA earnings | 16,732 | 27,198 | | Group-specific earnings adjustments: | | | | Interest from derivatives | 2,027 | — | | Costs associated with the transfer to the Premium Segment of the Main Market of the London Stock Exchange | 1,069 | — | | Adjusted earnings | 19,828 | 27,198 | | | Year ended 31 March 2023 pence | Year ended 31 March 2022 pence | | Basic IFRS EPS | (43.0) | 45.0 | | Diluted IFRS EPS | (43.0) | 45.0 | | EPRA EPS | 3.9 | 6.4 | | Adjusted EPS | 4.7 | 6.4 | | | Year ended 31 March 2023 Number of shares | Year ended 31 March 2022 Number of shares | | Weighted average number of shares in issue (thousands) | 424,862 | 424,862 | 13. UK investment property | | Completed Investment property £'000 | Development property and land £'000 | Total Investment property £'000 | | --- | --- | --- | --- | | Investment property valuation brought forward as at 1 April 2022 | 913,035 | 98,950 | 1,011,985 | | Transferred in the period | 5,449 | (5,449) | — | | Acquisition of properties | 64,512 | 2,216 | 66,728 | | Capital expenditure | 5,035 | 8,295 | 13,330 | | Movement in rent incentives | 1,272 | 28 | 1,300 | | Disposal of properties | (71,206) | — | (71,206) | | Assets transferred to held for sale | (625) | — | (625) | | Fair value losses on revaluation of investment property | (164,987) | (28,380) | (193,367) | | Total portfolio valuation per valuer's report | 752,485 | 75,660 | 828,145 | | Adjustment for head lease obligations | 14,124 | — | 14,124 | | Carrying value at 31 March 2023 | 766,609 | 75,660 | 842,269 | | | Completed Investment property £'000 | Development property and land £'000 | Total Investment property £'000 | | Investment property valuation brought forward as at 1 April 2021 | 751,930 | 40,870 | 792,800 | | Acquisition of properties | 30,027 | 13,364 | 43,391 | | Capital expenditure | 6,467 | 1,103 | 7,570 | | Movement in rent incentives | 4,545 | (6) | 4,539 | | Fair value gains on revaluation of investment property | 120,066 | 43,619 | 163,685 | | Total portfolio valuation per valuer's report | 913,035 | 98,950 | 1,011,985 | | Adjustment for head lease obligations | 14,081 | — | 14,081 | | Carrying value at 31 March 2022 | 927,116 | 98,950 | 1,026,066 | 122 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 13. UK investment property continued Included within the carrying value of investment properties as at 31 March 2023 is £10.4 million (31 March 2022: £9.1 million) in respect to rent incentives as a result of the IFRS treatment of leases with rent-free periods, which require recognition on a straight-line basis over the lease term. The difference between this and cash receipts change the carrying value of the property on which revaluations are measured. During March 2023, the Group reached practical completion of the development at Valley Court, Middlewich, at which point the asset became income-producing. The transfer between development property and land and completed investment property reflects the completion of this development. During the period the Group capitalised £1.2 million (31 March 2022: nil) of interest paid in development properties. Please see note 8 for details on the capitalisation rate used. Realised loss on disposal of investment properties | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | Net proceeds from disposals of investment property during the year | 58,101 | – | | Carrying value of disposals | (71,206) | – | | Realised loss on disposal of investment properties | (13,105) | – | # Accounting policy Investment property comprises property held to earn rental income or for capital appreciation, or both. Investment properties are recognised upon legal completion of the contract, where costs are reliably measured and future economic benefits that are associated with the property flow to the entity. Investment properties are measured initially at cost including transaction costs. Transaction costs include transfer taxes and professional fees to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred, if the recognition criteria are met. Development property and land is where the whole or a material part of an estate is identified as having potential for development. Assets are classified as such until development is completed and they have the potential to be fully income-generating. Development property and land is measured at fair value if the fair value is considered to be reliably determinable. Where the fair value cannot be determined reliably but where it is expected that the fair value of the property will be reliably determined when construction is completed, the property is measured at cost less any impairment until the fair value becomes reliably determinable or construction is completed, whichever is earlier. It is the Group's policy not to capitalise overheads or operating expenses for assets with approved planning permission. In addition, it is the Group's policy to capitalise finance costs relating to the development of the assets with planning permission, see note 8 for details. Subsequent to initial recognition, investment property is stated at fair value (see note 25). Gains or losses arising from changes in the fair values are included in the consolidated statement of comprehensive income in the period in which they arise under IAS 40 Investment Property. Investment properties cease to be recognised when they have been disposed of or withdrawn permanently from use and no future economic benefit is expected. Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset. Movements in rent incentives are presented within the total portfolio valuation. Where an investment property is held under a leasehold interest, the headlease is initially recognised as an asset at cost plus the present value of minimum ground rent payments and is subsequently measured at fair value. The corresponding rental liability to the head leaseholder is included in the balance sheet as a finance lease obligation (see note 19). 123 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 14. Investment properties held for sale | | Completed investment property £'000 | Development property and land £'000 | Total investment property £'000 | | --- | --- | --- | --- | | Investment property held for sale | 625 | — | 625 | | **Carrying value at 31 March 2023** | **625** | **—** | **625** | | Carrying value at 31 March 2022 | — | — | — | As at 31 March 2023, Ellesmere Port, Burnell Road is designated as held for sale, as sales contracts were exchanged on 3 March 2023 and will be completed during the year ended 31 March 2024. # Accounting policy An asset will be classified as held for sale in line with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations if its carrying value is expected to be recovered through a sale transaction rather than continuing use. An asset will be classified in this way only when a sale is highly probable, management are committed to selling the asset at the year-end date, the asset is available for immediate sale in its current condition and the asset is expected to be disposed of within 12 months after the date of the consolidated statement of financial position. # 15. Cash and cash equivalents | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Unrestricted cash and cash equivalents | 18,990 | 10,787 | | Restricted cash and cash equivalents | 6,063 | 5,919 | | **Total** | **25,053** | **16,706** | Restricted cash comprises £6.1 million (31 March 2022: £5.9 million) of cash held by the Company's Registrar to fund the shareholder dividend, less withholding tax, which was paid on 3 April 2023 as disclosed in note 11. # Accounting policy Cash and cash equivalents comprise cash at bank and short-term deposits with banks and other financial institutions, with an initial maturity of three months or less. # 16. Trade and other receivables | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Rent and insurance receivables | 3,952 | 5,445 | | Payments in advance of property completion | 2,080 | 2,090 | | Interest receivable on derivatives | 1,050 | — | | Occupier deposits | 698 | 535 | | Prepayments | 191 | 198 | | Other receivables | 1,287 | 1,581 | | **Total** | **9,258** | **9,849** | The rent and insurance receivables balance represents gross receivables of £4.2 million (31 March 2022: £6.2 million), net of a provision for doubtful debts of £0.2 million (31 March 2022: £0.8 million). Payments in advance of property completion represent the deposits paid to vendors upon exchange of purchase contracts. # Accounting policy Rent and other receivables are recognised at their original invoiced value and become due based on the terms of the underlying lease or at the date of invoice. The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and ageing. The expected loss rates are based on the Group's historical credit losses experienced over the two-year period prior to the year end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. 124 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 17. Interest-bearing loans and borrowings | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | At the beginning of the year | 271,000 | 222,000 | | Drawn in the year | 65,000 | 49,000 | | Repaid in the year | (30,000) | — | | Interest-bearing loans and borrowings | 306,000 | 271,000 | | Unamortised fees at the beginning of the year | (2,784) | (2,901) | | Loan arrangement fees paid in the year | (175) | (781) | | Amortisation charge for the year | 1,052 | 898 | | Unamortised loan arrangement fees | (1,907) | (2,784) | | Loan balance less unamortised loan arrangement fees | 304,093 | 268,216 | At the year end, the Group had a debt facility with a club of four banks: HSBC, Bank of Ireland, Royal Bank of Canada and Barclays. The facility runs until January 2025, with an option to extend for a further two years (subject to lender consent), and comprises an RCF of £138.0 million and a term loan of £182.0 million, to give a total facility of £320.0 million. At 31 March 2023, £124.0 million was drawn against the RCF and £182.0 million against the term loan. This gave total debt of £306.0 million (31 March 2022: £271.0 million); with the Group also holding cash balances of £25.1 million (31 March 2022: £16.7 million); the Group's net debt as at 31 March 2023 is £280.9 million (31 March 2022: £254.3 million). The LTV ratio at 31 March 2023 was therefore 33.9% (31 March 2022: 25.1%), with the increase reflecting the acquisition in the year and the lower portfolio valuation, partially offset by the asset disposals. All borrowings under these agreements attract a margin of 2.0% - 2.2% per annum above SONIA, plus a credit adjustment spread equal to 11.93 bps. As at 31 March 2023, there is £14.0 million (31 March 2022: £49.0 million) available to draw. The debt facility includes interest cover and market value covenants that are measured at a Group level. The Group has complied with all covenants throughout the financial period. # Accounting policy Loans and borrowings are initially recognised at the proceeds received net of directly attributable transaction costs. Loans and borrowings are subsequently measured at amortised cost with interest charged to the consolidated statement of comprehensive income at the effective interest rate, and shown within finance costs. Transaction costs are spread over the term of the loan. 18. Interest rate derivatives | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | At the start of the period | 337 | 16 | | Additional premiums paid and accrued | 10,926 | — | | Changes in fair value of interest rate derivatives | 4,850 | 321 | | Interest rate derivative premium payable | (8,726) | — | | Balance at the end of the period | 7,387 | 337 | | Current | (3,841) | — | | Non-current | 11,228 | 337 | | Balance at the end of the period | 7,387 | 337 | On 20 July 2022, the Group entered into interest rate caps with a premium of £2.2 million paid in the year ending 31 March 2023. The remaining premium of £8.7 million is due in quarterly instalments with the final payment due in January 2025. This isn't recognised as a separate liability because together with the derivative asset it is considered to be one instrument. The instruments have a combined notional value of £230.0 million with £200.0 million at a strike rate of 1.50% and the remaining £30.0 million at a strike rate of 1.75%. The £30.0 million instrument has a termination date of 20 November 2023. £100.0 million has a termination date of 20 July 2025 and £100.0 million has a termination date of 20 July 2027. 125 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 ## 18. Interest rate derivatives continued ### Accounting policy Interest rate derivatives are initially recognised at fair value and are subsequently measured at fair value, being the estimated amount that the Group would receive or pay to terminate the agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the Group and its counterparties. Premiums paid are recognised within the fair value of the derivative in the Statement of Financial Position. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole. Changes in fair value of interest rate derivatives are recognised within finance expenses in profit or loss in the period in which they occur. All receipts of income from the instrument are recognised as finance income in note 8 of the financial statements separate from the fair value measurement recorded. ## 19. Head lease obligations The following table analyses the present value of minimum lease payments under non-cancellable head leases using an average discount rate of 6.9% for each of the following periods: | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Current liabilities | | | | Within one year | 705 | 696 | | Non-current liabilities | | | | After one year but not more than five years | 2,975 | 2,931 | | Later than five years | 11,345 | 11,269 | | | 14,320 | 14,200 | | Total head lease obligations | 15,025 | 14,896 | No discounting is applied to deferred consideration on the grounds of materiality. | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Head lease liability – opening balance | 14,896 | 14,897 | | Cash flows | | | | Non-cash movements | (832) | (1,057) | | Interest | 961 | 1,030 | | Head lease accrual | – | 26 | | Head lease obligations – closing balance | 15,025 | 14,896 | The following table analyses the minimum undiscounted lease payments under non-cancellable head leases for each of the following periods: | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Current liabilities | | | | Within one year | 1,052 | 1,053 | | Non-current liabilities | | | | After one year but not more than five years | 4,219 | 4,211 | | Later than five years | 85,530 | 85,526 | | Total | 90,801 | 90,790 | The fair value of the Group's lease obligations is estimated to be equal to its carrying value. ### Accounting policy At the commencement date, head lease obligations are recognised at the present value of future lease payments using the discount rate implicit in the lease, if determinable, or, if not, the property-specific incremental borrowing rate. 126 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 20. Other liabilities – other payables and accrued expenses, provisions and deferred income | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Administration expenses payable | 2,170 | 2,576 | | Deferred consideration payable | 4,500 | – | | Capital expenses payable | 3,864 | 2,042 | | Loan interest payable | 3,691 | 1,444 | | Property operating expenses payable | 855 | 465 | | Other expenses payable | 3,504 | 328 | | **Total other payables and accrued expenses – current** | **18,584** | **6,855** | Other payables and accrued expenses are initially recognised at fair value and subsequently held at amortised cost. | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | Capital expenses payable | 11,300 | 16,550 | | **Total other payables and accrued expenses – non-current** | **11,300** | **16,550** | During the year ended 31 March 2021, the Group exchanged contracts to acquire land for £15.0 million. The first three instalments were paid for a total of £2.5 million to the year ended 31 March 2022 with an additional £1.5 million paid during the year ended 31 March 2023. The final instalment of £11.3 million is due to be paid on 1 September 2024. Deferred consideration payable of £4.5 million is in relation to a property acquired during the year ended 31 March 2020. The deferred consideration is due in September 2023, or earlier if the property is sold before that date. The consideration is secured on a second ranking charge over the asset. | | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | | **Total deferred income** | **7,115** | **7,487** | Deferred income is rental income received in advance during the accounting period. The income is deferred and is unwound to revenue on a straight-line basis over the period in which it is earned. # 21. Share capital Share capital is the nominal amount of the Company's ordinary shares in issue. | Ordinary shares of £0.01 each | 31 March 2023 | | 31 March 2022 | | | --- | --- | --- | --- | --- | | | Number | £'000 | Number | £'000 | | Authorised, issued and fully paid: | | | | | | At the start of the period | 424,861,650 | 4,249 | 424,861,650 | 4,249 | | Shares issued | – | – | – | – | | **Balance at the end of the period** | **424,861,650** | **4,249** | **424,861,650** | **4,249** | The share capital comprises one class of ordinary shares. At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every share held. There are no restrictions on the size of a shareholding or the transfer of shares, except for the UK REIT restrictions. 127 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the consolidated financial statements continued ### For the year ended 31 March 2023 ### 22. Share premium Share premium comprises the following amounts: | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | At the start of the period 275,648 275,648 Shares issued — — Share premium 275,648 275,648 Share premium represents the excess over nominal value of the fair value of the consideration received for equity shares net of direct issue costs . Financial statements 23. Retained earnings Retained earnings comprise the following cumulative amounts: 31 March 2023 £’000 31 March 2022 £’000 Capital reduction reserve 161,149 161,149 Total unrealised gains on investment properties 96,011 289,378 Total unrealised gain on interest rate caps 5,046 196 Total realised profits 82,208 76,554 Dividends paid from revenue profits (95,836) (68,220) Retained earnings 248,578 459,057 Retained earnings represent the profits of the Group less dividends paid from revenue profits to date. Unrealised gains on the revaluation of investment properties and interest rate caps contained within this reserve are not distributable until any gains crystallise on the sale of the investment property and settlement of the interest rate caps. The capital reduction reserve is a distributable reserve established upon cancellation of the share premium of the Company on 17 November 2017. As at 31 March 2023, the Group had distributable reserves available of £147,521,000 (31 March 2022: £169,483,000). 24. Net asset value per share Basic NAV per share amounts are calculated by dividing net assets attributable to ordinary equity holders of the Company in the statement of financial position by the number of ordinary shares outstanding at the end of the period. As there are no dilutive instruments in issue, basic and diluted NAV per share are identical. 31 March 2023 £’000 31 March 2022 £’000 IFRS net assets attributable to ordinary shareholders 528,475 738,954 IFRS net assets for calculation of NAV 528,475 738,954 Adjustment to net assets: Fair value of interest rate derivatives (note 18) (7,387) (337) EPRA NTA 521,088 738,617 31 March 2023 Pence 31 March 2022 Pence IFRS basic and diluted NAV per share (pence) 124.4 173.9 EPRA NTA per share (pence) 122.6 173.8 31 March 2023 Number of shares 31 March 2022 Number of shares Number of shares in issue (thousands) 424,862 424,862 128 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 25. Fair value IFRS 13 defines fair value as 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. The following methods and assumptions were used to estimate the fair values. The fair value of cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments. Interest-bearing loans and borrowings are disclosed at amortised cost. The carrying value of the loans and borrowings approximate their fair value due to the contractual terms and conditions of the loan. The loans are at variable interest rates of 2.0% to 2.2% above SONIA. # Interest rate derivatives The fair value of the interest rate cap contracts is recorded in the statement of financial position and is revalued quarterly by an independent valuations specialist, Chatham Financial. The fair value is determined by forming an expectation that interest rates will exceed strike rates and discounting these future cash flows at the prevailing market rates as at the year end. # Investment properties Six-monthly valuations of investment property are performed by CBRE, accredited independent external valuers with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued. The valuations are the ultimate responsibility of the Directors however, who appraise these every six months. The valuation of the Group's investment property at fair value is determined by the independent external valuer on the basis of market value in accordance with the internationally accepted RICS Valuation – Professional Standards January 2020 (incorporating the International Valuation Standards). Completed investment properties are valued by adopting the 'income capitalisation' method of valuation. This approach involves applying capitalisation yields to current and future rental streams, net of income voids arising from vacancies or rent-free periods and associated running costs. These capitalisation yields and future rental values are based on comparable property and leasing transactions in the market using the valuer's professional judgement and market observations. Other factors taken into account in the valuations include the tenure of the property, tenancy details and ground and structural conditions. Development property and land has been valued by adopting the 'comparable method of valuation and where appropriate supported by a 'residual development appraisal'. The comparable method involves applying a sales rate per acre to relevant sites supported by comparable land sales. Residual development appraisals have been completed where there is sufficient clarity regarding planning and an identified or indicative scheme. In a similar manner to 'income capitalisation', development inputs include the capitalisation of future rental streams with an appropriate yield to ascertain a gross development value. The costs associated with bringing a scheme to the market are then deducted, including construction costs, professional fees, finance and developer's profit, to provide a residual site value. The following tables show an analysis of the fair values of investment properties and interest rate derivatives recognised in the statement of financial position by level of the fair value hierarchy¹: 31 March 2023 | Assets and liabilities measured at fair value | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Investment properties and assets held for sale | — | — | 828,770 | 828,770 | | Interest rate derivatives | — | 7,387 | — | 7,387 | | **Total** | **—** | **7,387** | **828,770** | **836,157** | 31 March 2022 | Assets and liabilities measured at fair value | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Investment properties | — | — | 1,011,985 | 1,011,985 | | Interest rate derivatives | — | 337 | — | 337 | | **Total** | **—** | **337** | **1,011,985** | **1,012,322** | 1. Explanation of the fair value hierarchy: - Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; - Level 2 – use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly observable market data; and - Level 3 – use of a model with inputs that are not based on observable market data. 129 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the consolidated financial statements continued ### For the year ended 31 March 2023 ### 25. Fair value continued Financial statements Sensitivity analysis to significant changes in unobservable inputs within the valuation of investment properties The following table analyses: • the fair value measurements at the end of the reporting period; • a description of the valuation techniques applied; • the inputs used in the fair value measurement, including the ranges of rent charged to different units within the same building; and • for Level 3 fair value measurements, quantitative information about significant unobservable inputs used in the fair value measurement. 31 March 2023 Fair value £’000 Valuation technique Key unobservable inputs Range Completed investment property 753,110 Income capitalisation ERV Equivalent yield £2.38 per sq ft – £17.50 per sq ft 5.03% – 19.77% Development property and land 75,660 Comparable method Sales rate per acre £200,000 – £925,000 828,770 31 March 2022 Fair value £’000 Valuation technique Key unobservable inputs Range Completed investment property 913,035 Income capitalisation ERV Equivalent yield £3.00 per sq ft – £17.50 per sq ft 3.5% – 13.23% Development property and land 98,950 Comparable method £300,000 – £1,750,000 1,011,985 The weighted average ERV and equivalent yield for completed investment property is 6.8% and £7.26 per sq ft respectively (31 March 2022: 5.3% and £6.49 per sq ft). The weighted average sales rate per acre for development property and land is £622,000 (31 March 2022: £846,000). Significant increases/decreases in the ERV (per sq ft per annum) and rental growth per annum in isolation would result in a significantly higher/lower fair value measurement. Significant increases/decreases in the long–term vacancy rate and discount rate (and equivalent yield) in isolation would result in a significantly higher/lower fair value measurement. 130 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 ## 25. Fair value continued Sensitivity analysis to significant changes in unobservable inputs within the valuation of investment properties continued Generally, a change in the assumption made for the ERV is accompanied by: - a similar change in the rent growth per annum and discount rate (and exit yield); and - an opposite change in the long-term vacancy rate. The table below sets out a sensitivity analysis for each of the key sources of estimation uncertainty with the resulting increase/(decrease) in the fair value of completed investment property and derivatives: As at 31 March 2023 | Completed investment property | Increase in sensitivity £'000 | Decrease in sensitivity £'000 | | --- | --- | --- | | Change in ERV of 5% | 37,656 | (37,656) | | Change in net equivalent yields of 25 basis points | 28,012 | (30,341) | | Development property and land | Increase in sensitivity £'000 | Decrease in sensitivity £'000 | | Change in sales rate per acre of 5% | 3,756 | (3,756) | As at 31 March 2022 | Completed investment property | Increase in sensitivity £'000 | Decrease in sensitivity £'000 | | --- | --- | --- | | Change in ERV of 5% | 45,652 | (45,652) | | Change in net equivalent yields of 25 basis points | (48,513) | 43,630 | | Development property and land | Increase in sensitivity £'000 | Decrease in sensitivity £'000 | | Change in sales rate per acre of 5% | 4,751 | (4,751) | | Interest rate derivatives | Increase in sensitivity £'000 | Decrease in sensitivity £'000 | | Change in SONIA by 50 basis points | 1,359 | (1,360) | The sensitivity analysis for a change in SONIA has not been prepared for the year ended 31 March 2022 on the basis that the movements are immaterial. Losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy amount to £193,367,000 (31 March 2022: gain of £163,685,000) and are presented in the consolidated statement of comprehensive income in line item 'fair value (losses)/gains on investment properties'. All gains and losses recorded in profit or loss for recurring fair value measurements categorised within Level 3 of the fair value hierarchy are attributable to changes in unrealised gains or losses relating to investment property held at the end of the reporting period. The carrying amount of the Group's assets and liabilities is considered to be the same as their fair value. 131 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the consolidated financial statements continued ### For the year ended 31 March 2023 ### Credit risk Credit risk is the risk that a counterparty or occupier will cause a financial loss to the Group by failing to meet a commitment it has entered into with the Group. All cash deposits are placed with approved counterparties, currently HSBC Bank plc. In respect of property investments, in the event of a default by a occupier, the Group will suffer a shortfall and additional costs concerning re‑letting of the property. The Investment Advisor monitors the occupier arrears in order to anticipate and minimise the impact of defaults by occupational occupiers. Credit risk is not considered material due to the diverse number of occupiers in the investment property portfolio. The following table analyses the Group’s exposure to credit risk: | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Cash and cash equivalents 18,990 10,787 Restricted cash 6,063 5,919 1 Trade and other receivables 6,987 7,561 Total 32,040 24,267 1. Excludes prepayments . Financial statements Changes in interest rates may have an impact on consolidated earnings over the longer term. The table below provides indicative sensitivity data. 2023 2022 Effect on profit before tax: Increase in interest rates by 1% £’000 Decrease in interest rates by 1% £’000 Increase in interest rates by 1% £’000 Decrease in interest rates by 1% £’000 Increase/(decrease) (760) 760 (2,498) 2,498 26. Financial risk management objectives and policies The Group’s principal financial liabilities are loans and borrowings. The main purpose of the Group’s loans and borrowings is to finance the acquisition of the Group’s property portfolio. The Group has trade and other receivables, trade and other payables and cash and short‑term deposits that arise directly from its operations. The Group is exposed to market risk, interest rate risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below. Market risk The Group’s activities expose it primarily to the financial risks of changes in interest rates. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate risk. There has been no change to the Group’s exposure to market risks or the manner in which these risks are managed and measured. Interest rate risk Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates to its variable rate bank loans. In order to address interest rate risk, the Group has entered into interest rate cap instruments. The instruments have a combined notional value of £230.0 million, with £200.0 million at a strike rate of 1.50% and the remaining £30.0 million at a strike rate of 1.75%. The £30.0 million instrument has a termination date of 20 November 2023, £100.0 million has a termination date of 20 July 2025 and £100.0 million has a termination date of 20 July 2027. As at 31 March 2023, the unhedged exposure to changes in interest rates is £76.0 million (31 March 2022: £211.0 million). 132 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the consolidated financial statements continued ### For the year ended 31 March 2023 ### 26. Financial risk management objectives and policies continued Financial statements Liquidity risk Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Exposure to liquidity risk arises because of the possibility that the Group could be required to pay its liabilities earlier than expected. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank deposits and loans. Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are carried in the financial statements: 2023 2022 Fair value hierarchy Carrying value £’000 Fair value £’000 Carrying value £’000 Fair value £’000 Held at amortised cost Cash and cash equivalents n/a 18,990 18,990 10,787 10,787 Restricted cash n/a 6,063 6,063 5,919 5,919 Trade and other receivables 1 n/a 6,987 6,987 7, 561 7,561 Other payables and accrued expenses 2 n/a (26,629) (26,629) (23,209) (23,209) Head lease liabilities n/a (15,025) (15,025) (14,896) (14,896) Interest‑bearing loans and borrowings n/a (304,093) (304,093) (268,216) (268,216) Held at fair value Interest rate derivatives (assets) 2 7,387 7,387 337 337 1. Excludes prepayments and payments in advance of completion. 2. Excludes VAT liability and deferred income. 133 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 ## 26. Financial risk management objectives and policies continued Liquidity risk continued The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments: | Year ended 31 March 2023 | Less than three months £'000 | Three to 12 months £'000 | One to two years £'000 | Two to five years £'000 | More than five years £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Interest-bearing loans and borrowings | — | 13,993 | 321,112 | — | — | 335,105 | | Other payables and accrued expenses | 10,829 | 4,500 | 11,300 | — | — | 26,629 | | Head lease obligations | 263 | 789 | 1,055 | 3,164 | 85,530 | 90,801 | | Total | 11,092 | 19,282 | 333,467 | 3,164 | 85,530 | 452,535 | | Year ended 31 March 2022 | Less than three months £'000 | Three to 12 months £'000 | One to two years £'000 | Two to five years £'000 | More than five years £'000 | Total £'000 | | Interest-bearing loans and borrowings | — | 5,329 | 7,098 | 276,776 | — | 289,203 | | Other payables and accrued expenses | 6,159 | 500 | 4,875 | 11,675 | — | 23,209 | | Head lease obligations | 263 | 790 | 1,052 | 3,159 | 85,526 | 90,790 | | Total | 6,422 | 6,619 | 13,025 | 291,610 | 85,526 | 403,202 | 134 Warehouse REIT plc Annual Report and Financial Statements 2023 Financial statements Notes to the consolidated financial statements continued For the year ended 31 March 2023 27. Subsidiaries Company Country of incorporation and operation Number and class of share held by the Group Group holding Tilstone Holdings Limited UK 63,872 ordinary shares 100% Tilstone Warehouse Holdco Limited UK 94,400 ordinary shares 100% Tilstone Property Holdings Limited UK 9,102 ordinary shares 100% Tilstone Industrial Warehouse Limited 1 UK 23,600 ordinary shares 100% Tilstone Retail Warehouse Limited 1 UK 20,000 ordinary shares 100% Tilstone Industrial Limited 1 UK 20,000 ordinary shares 100% Tilstone Retail Limited 1 UK 200 ordinary shares 100% Tilstone Trade Limited 1 UK 20,004 ordinary shares 100% Tilstone Basingstoke Limited 1 UK 1,000 ordinary shares 100% Tilstone Glasgow Limited 1 UK 1 ordinary share 100% Tilstone Radway Limited 1 UK 100 ordinary shares 100% Tilstone Oxford Limited 1 UK 1,000 ordinary shares 100% Tilstone Liverpool Limited 1 UK 100 ordinary shares 100% Warehouse 1234 Limited 1 UK 100 ordinary shares 100% Tilstone Chesterfield Limited 1 UK 15,000,001 ordinary shares 100% 1. Indirect subsidiaries. The registered office of all subsidiaries is located at 65 Gresham Street, London EC2V 7NQ. 135 Warehouse REIT plc Annual Report and Financial Statements 2023 Financial statements Notes to the consolidated financial statements continued For the year ended 31 March 2023 27. Subsidiaries continued Accounting policy Where property is acquired, via corporate acquisitions or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business. Under the Definition of a Business (Amendments to IFRS 3 Business Combinations), to be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. The optional ‘concentration test’ is also applied; where substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. Where an acquisition is considered to be a business combination the consolidated financial statements incorporate the results of business combinations using the acquisition method. In the Group statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. Any excess of the cost of a business combination over the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired is treated as goodwill. Where the fair value of identifiable assets, liabilities and contingent liabilities acquired exceeds the fair value of the purchase consideration, the difference is treated as a gain on bargain purchase and credited to the Group profit or loss. The results of acquired operations are included in the Group profit or loss from the date on which control is obtained until the date on which control ceases. Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises. Contingent consideration is deemed to be equity or a liability in accordance with IAS 32. If the contingent consideration is classified as equity, it is not re‑measured and its subsequent settlement shall be accounted for within equity. If the contingent consideration is classified as a liability, subsequent changes to the fair value are recognised either in profit or loss or as a change to other comprehensive income. 136 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 28. Capital management The Group's capital is represented by share capital, reserves and borrowings. The primary objective of the Group's capital management is to ensure that it remains within its quantitative banking covenants and maintains a strong credit rating. The Group's capital policies are as follows: - the Group will keep sufficient cash for working capital purposes with excess cash, should there be any, deposited at the best interest rate available whilst maintaining flexibility to fund the Group's investment programme; - borrowings will be managed in accordance with the loan agreements and covenants will be tested quarterly and reported to the Directors. Additionally, quarterly lender reporting will be undertaken in line with the loan agreement; and - new borrowings are subject to Director approval. Such borrowings will support the Group's investment programme but be subject to a maximum 50% LTV. The intention is to maintain borrowings at an LTV of between 30% and 40%. The Group is subject to banking covenants in regard to its debt facility and these include a prescribed methodology for interest cover and market value covenants that are measured at a Group level. The Group has complied with all covenants on its borrowings up to the date of this report. All of the targets mentioned above sit comfortably within the Group's covenant levels, which include loan to value ("LTV"), interest cover ratio and loan to projected project cost ratio. The Group LTV at the year end was 33.9% (2021: 25.1%) and there is substantial headroom within existing covenants. # 29. Related party transactions # Directors The Directors (all Non-Executive Directors) of the Company and its subsidiaries are considered to be the key management personnel of the Group. Directors' remuneration (including social security costs) for the period totalled £179,000 (31 March 2022: £175,000) and at 31 March 2023, a balance of £nil (31 March 2022: £nil) was outstanding. During the year the Directors who served during the year received £1.6 million in dividend payments (31 March 2022: £1.5 million). Further information is given in note 5 and in the Directors' remuneration report on pages 94 to 96. # Investment Advisor The Company is party to an Investment Management Agreement with the Investment Manager and the Investment Advisor, pursuant to which the Company has appointed the Investment Advisor to provide investment advisory services relating to the respective assets on a day-to-day basis in accordance with their respective investment objectives and policies, subject to the overall supervision and direction by the Investment Manager and the Board of Directors. For its services to the Company, the Investment Advisor receives an annual fee at the rate of 11% of the NAV of the Company up to £500 million and at a lower rate of 0.9% thereafter. Refer to page 99 of the Directors' report for further information. During the year, the Group incurred £6,970,000 (31 March 2022: £6,484,000) in respect of investment management fees. As at 31 March 2023, £1,529,000 (31 March 2022: £1,715,000) was outstanding. During the year, the Group reimbursed £86,900 (31 March 2022: £nil) in respect of direct costs incurred by the Investment Advisor relating to the movement to the Premium Segment of the Main Market, as well as £16,665 (31 March 2022: £16,192) of incidental travel related costs. # 30. Ultimate controlling party It is the view of the Directors that there is no ultimate controlling party. 137 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 31. Notes to the statement of cash flows Reconciliation of changes in liabilities to cash flows generated from financing activities | | Interest payable £'000 | Interest-bearing loans and borrowings £'000 | Head lease liability £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Balance as at 1 April 2022 | 1,444 | 268,216 | 14,896 | 284,556 | | Changes from financing cash flows: | | | | | | Bank loans drawn down | — | 65,000 | — | 65,000 | | Bank loans repaid | — | (30,000) | — | (30,000) | | Loan arrangement fees paid in the year | — | (175) | — | (175) | | Loan interest paid | (11,810) | — | — | (11,810) | | Head lease payments | — | — | (832) | (832) | | Total changes from financing cash flows | (11,810) | 34,825 | (832) | 22,183 | | Amortisation charge for the year | — | 1,052 | — | 1,052 | | Head lease interest | — | — | 961 | 961 | | Interest and commitment fee | 14,057 | — | — | 14,057 | | Accrued head lease expense | — | — | — | — | | Balance as at 31 March 2023 | 3,691 | 304,093 | 15,025 | 322,809 | 138 Warehouse REIT plc Annual Report and Financial Statements 2023 # Notes to the consolidated financial statements continued For the year ended 31 March 2023 # 31. Notes to the statement of cash flows continued Reconciliation of changes in liabilities to cash flows generated from financing activities continued | | Interest payable £'000 | Interest-bearing loans and borrowings £'000 | Head lease liability £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Balance as at 1 April 2021 | 916 | 219,099 | 14,897 | 234,912 | | Changes from financing cash flows: | | | | | | Bank loans drawn down | — | 49,000 | — | 49,000 | | Bank loans repaid | — | — | — | — | | Loan arrangement fees paid in the year | — | (781) | — | (781) | | Interest and commitment fees paid | (5,288) | — | — | (5,288) | | Head lease payments | — | — | (1,057) | (1,057) | | Total changes from financing cash flows | (5,288) | 48,219 | (1,057) | 41,874 | | Amortisation charge for the year | — | 898 | — | 898 | | Head lease interest | — | — | 1,030 | 1,030 | | Interest and commitment fee | 5,816 | — | — | 5,816 | | Accrued head lease expense | — | — | 26 | 26 | | Balance as at 31 March 2022 | 1,444 | 268,216 | 14,896 | 284,556 | # 32. Post balance sheet events A third interim dividend in respect of the year ended 31 March 2023 of 1.6 pence per share was paid to shareholders on 3 April 2023. A fourth interim dividend in respect of the year ended 31 March 2023 of 1.6 pence per share will be payable to shareholders on the register on 16 June 2023. The ex-dividend date will be 15 June 2023. On 2 June 2023, the Group entered into a new five-year debt facility totalling £320.0 million, replacing the existing facility. The refinancing consists of £220.0 million term loan and an RCF of £100.0 million, with a club of lenders consisting of HSBC, Bank of Ireland, NatWest and Santander. The new facility extends the tenure of the of the Group's debt and with improved reporting covenants. In addition, the Group has exchanged on two further disposals for an aggregate of £29.3 million. 139 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Company statement of financial position As at 31 March 2023 The Company reported a profit for the year ended 31 March 2023 of £2,495,000 (year ended 31 March 2022: loss of £1,515,000). These financial statements were approved by the Board of Directors of Warehouse REIT plc on 5 June 2023 and signed on its behalf by: Neil Kirton Company number: 10880317 The accompanying notes on pages 142 to 143 form an integral part of these Company financial statements. | | Notes | 31 March 2023 £'000 | 31 March 2022 £'000 | | --- | --- | --- | --- | | **Assets** | | | | | **Non-current assets** | | | | | Investment in subsidiary companies | 35 | 66,477 | 66,477 | | Amount due from subsidiaries | 37 | 242,750 | 268,323 | | | | 309,227 | 334,800 | | **Current assets** | | | | | Cash and cash equivalents | 36 | 6,245 | 5,945 | | Amount due from subsidiaries | 37 | 27,000 | 27,000 | | Trade and other receivables | 37 | 697 | 1,053 | | | | 33,942 | 33,998 | | **Total assets** | | 343,169 | 368,798 | | **Liabilities** | | | | | **Current liabilities** | | | | | Other payables and accrued expenses | 38 | (1,793) | (2,353) | | Amount due to subsidiaries | 38 | (5,042) | — | | **Total liabilities** | | (6,835) | (2,353) | | **Net assets** | | 336,334 | 366,445 | | **Equity** | | | | | Share capital | | 4,249 | 4,249 | | Share premium | | 275,648 | 275,648 | | Retained earnings | | 56,437 | 86,548 | | **Total equity** | | 336,334 | 366,445 | | Number of shares in issue (thousands) | | 424,862 | 424,862 | | **Net asset value per share (basic and diluted) (pence)** | | 79.2 | 86.3 | 140 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Company statement of changes in equity For the year ended 31 March 2023 Retained earnings represent distributable profits available to the members of the Company. | | Share capital £'000 | Share premium £'000 | Retained earnings £'000 | Total £'000 | | --- | --- | --- | --- | --- | | **Balance at 31 March 2021** | 4,249 | 275,648 | 114,404 | 394,301 | | Total comprehensive expense | — | — | (1,515) | (1,515) | | Dividends paid | — | — | (26,341) | (26,341) | | **Balance at 31 March 2022** | **4,249** | **275,648** | **86,548** | **366,445** | | Total comprehensive expense | — | — | (2,495) | (2,495) | | Dividends paid | — | — | (27,616) | (27,616) | | **Balance at 31 March 2023** | **4,249** | **275,648** | **56,437** | **336,334** | The accompanying notes on pages 142 to 143 form an integral part of these Company financial statements. ![img-23.jpeg](img-23.jpeg) 141 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Company statement of cash flows For the year ended 31 March 2023 | | Year ended 31 March 2023 £'000 | Year ended 31 March 2022 £'000 | | --- | --- | --- | | **Cash flows from operating activities** | | | | Operating loss | (2,495) | (1,515) | | Adjustments to reconcile profit for the period to net cash flows: | | | | Decrease/(increase) in other receivables and prepayments | 356 | (336) | | Increase in amounts due from subsidiary companies | (12,365) | (6,432) | | (Decrease)/increase in other payables | (560) | 535 | | **Net cash flow used in operating activities** | **(15,064)** | **(7,748)** | | **Cash flows from investing activities** | | | | Loans repaid by subsidiary companies | 43,780 | 34,252 | | Loans advanced to subsidiary companies | (800) | (5,701) | | **Net cash flow generated from investing activities** | **42,980** | **28,551** | | **Cash flows from financing activities** | | | | Dividends paid in the period | (27,616) | (26,341) | | **Net cash flow utilised in financing activities** | **(27,616)** | **(26,341)** | | **Net increase/(decrease) in cash and cash equivalents** | **300** | **(3,538)** | | Cash and cash equivalents at the start of the period | 5,945 | 11,483 | | **Cash and cash equivalents at the end of the period** | **6,245** | **5,945** | The accompanying notes on pages 142 to 143 form an integral part of these Company financial statements. 142 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the Company financial statements ### For the year ended 31 March 2023 | 33. General information | 35. Investment in subsidiary companies | | | | | | --- | --- | --- | --- | --- | --- | | Warehouse REIT plc is a closed‑ended REIT incorporated in England and Wales on | | 31 March | | 31 March | | | | | | 2023 | | 2022 | 24July2017. The Company began trading on 20 September 2017. The registered office of £’000 £’000 the Company is located at 6th Floor, 65 Gresham Street, London, England, EC2V 7NQ. The Investment in subsidiary companies Company’s shares are admitted to trading on the Premium Segment of the Main Market, Total carrying value 66,477 66,477 amarket operated by the London Stock Exchange. Total 66,477 66,477 ### 34. Basis of preparation 31 March 31 March These financial statements are prepared in accordance with UK adopted international 2023 2022 accounting standards in conformity with the requirements of the Companies Act 2006. The £’000 £’000 financial statements have been prepared under the historical cost convention. The audited Investments in subsidiary companies financial statements are presented in Pound Sterling and all values are rounded to the Tilstone Holdings Limited 21,017 21,017 nearest thousand pounds (£’000), except when otherwise indicated. Tilstone Warehouse Holdco Limited 4,227 4,227 The Company has taken advantage of the exemption in section 408 of the Companies Act Tilstone Property Holdings Limited 41,233 41,233 2006 not to present its own statement of comprehensive income. 66,477 66,477 The financial statements of the Company follow the accounting policies laid out on pages 114 to 143. ### Accounting policy In the course of preparing the financial statements, no judgements or estimates have been Investments in subsidiary companies are included in the statement of financial position made in the process of applying the accounting policies that have had a significant effect at cost less impairment. on the amounts recognised in the financial statements. Where the carrying value of the investment exceeds its recoverable amount (the higher of value‑in‑use and fair value less costs to sell), the investment is impaired accordingly. Impairment charges are included in Company profit or loss. Financial statements 143 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Notes to the Company financial statements continued ### For the year ended 31 March 2023 | 36. Cash and cash equivalents | | | | | 38. Other payables and accrued expenses | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | 31 March | | 31 March | | | | | 2023 | | 2022 | | | 2023 | | 2022 | | | | £’000 | | £’000 | | | £’000 | | £’000 | | Cash and cash equivalents 182 26 | | | | | Other expenses payable 1,793 2,353 | | | | | | Restricted cash 6,063 5,919 | | | | | Amounts due to subsidiaries 5,042 — | | | | | | Total 6,245 5,945 | | | | | Total 6,835 2,353 | | | | | Restricted cash comprises £6.1 million (31 March 2022: £5.9 million) of cash held by the Company’s Registrar to fund the shareholder dividend, less withholding tax, which was paidon 3 April 2023 as disclosed in note 11. ### 37. Trade and other receivables | 31 March | | 31 March | | | --- | --- | --- | --- | | | 2023 | | 2022 | | | £’000 | | £’000 | Prepayments 22 37 Other receivables 675 1,016 Amount due from subsidiaries 27,000 27,000 Current receivables 27,697 28,053 Amount due from subsidiaries 242,750 268,323 Non-current receivables 242,750 268,323 Loans due from subsidiary companies are unsecured, interest free and repayable on demand. The Directors have reviewed the Company’s cash flow forecast and presented the amount expected to fall due within 12 months as current. The Directors do not expect any further amounts to be paid within 12 months and as such the remaining balance has been classified as non‑current assets. The amounts due from subsidiaries are not considered to carry any material credit risk, being from related parties that remain trading in their normal capacity. Financial statements 144 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information ### For the year ended 31 March 2023 ### The Group is a member of the European Public Real Estate Association (“EPRA”). EPRA Table 2: EPRA income statement has developed and defined performance measures to give transparency, comparability Year ended Year ended and relevance of financial reporting across entities which may use different accounting 31 March 2023 31 March 2022 Notes £’000 £’000 standards. Total property income 3 51,185 51,396 The Group presents adjusted earnings per share (“EPS”), dividends per share, total Less: service charge income 3 (3,340) (2,682) accounting return, total cost ratio, LTV ratio and EPRA Best Practices Recommendations, Less: dilapidation income 3 (503) (3,187) calculated in accordance with EPRA guidance, as Alternative Performance Measures (“APMs”) to assist stakeholders in assessing performance alongside the Group’s statutory Less: insurance recharged 3 (1,592) (1,507) results reported under IFRS. APMs are among the key performance indicators used Rental income 45,750 44,020 by theBoard to assess the Group’s performance and are used by research analysts Property operating expenses 4 (5,454) (4,789) coveringthe Group. Service charge expenses 4 (3,767) (3,011) EPRA Best Practices Recommendations have been disclosed to facilitate comparison with Add back: service charge income 3 3,340 2,682 the Group’s peers through consistent reporting of key real estate specific performance Add back: dilapidation income 3 503 3,187 measures. Certain other APMs may not be directly comparable with other companies’ Add back: insurance recharged 3 1,592 1,507 adjusted measures and are not intended to be a substitute for, or superior to, any IFRS Gross profit 41,964 43,596 measures of performance. Administration expenses 4 (9,716) (8,244) | Table 1: EPRA performance measures summary | | Operating profit before interest and tax 32,248 35,352 | | --- | --- | --- | | | Notes 2023 2022 | Interest from cash and short‑term deposits 7 12 — | | EPRA EPS (pence) Table 2 3.9 6.4 | | Finance expenses 8 (15,528) (8,154) | | EPRA cost ratio (including direct | | Profit before tax 16,732 27,198 | | vacancy cost) Table 6 30.8% 27.1% | | Tax on adjusted profit — — | | EPRA cost ratio (excluding direct | | EPRA earnings 16,732 27,198 | vacancy cost) Table 6 26.8% 24.3% EPRA NDV per share (pence) Table 3 124.4 173.9 Weighted average number of shares inissue EPRA NRV per share (pence) Table 3 135.9 190.0 (thousands) 424,862 424,862 EPRA NTA per share (pence) Table 3 122.6 173.8 EPRA EPS (pence) 3.9 6.4 EPRA NIY Table 4 5.0% 4.0% EPRA ‘topped‑up’ net initial yield Table 4 5.5% 4.4% EPRA vacancy rate Table 5 5.0% 6.3% EPRA LTV Table 10 36.1% 26.8% Additional information 145 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information continued ### For the year ended 31 March 2023 | Table 2: EPRA income statement continued | | | | | | | EPRA NTA is considered to be the most relevant measure for Warehouse REIT’s operating | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Year ended | | | Year ended | | activities. | | | | | | | | | 31 March 2023 | | | 31 March 2022 | | | | | | | | | | | | | | £’000 | | | £’000 | | EPRA NDV | | EPRA NRV | | EPRA NTA | | | | | | | | | | As at 31 March 2023 | | £’000 | | £’000 | | £’000 | EPRA earnings 16,732 27,198 1 Total properties 828,770 828,770 828,770 Add: interest from derivatives 2,027 — 2 Net borrowings (280,947) (280,947) (280,947) Add: costs associated with the transfer to the Other net liabilities (19,348) (19,348) (19,348) PremiumSegment of the Main Market of the IFRS NAV 528,475 528,475 528,475 LondonStock Exchange 1,069 — Exclude: fair value of interest rate Adjusted earnings 19,828 27,198 derivatives — (7,387) (7,387) Weighted average number of shares in issue (thousands) 424,862 424,862 3 Include: real estate transfer tax — 56,356 — Adjusted EPS (pence) 4.7 6.4 NAV used in per share calculations 528,475 577,444 521,089 The Company has also included an additional earnings measure called “Adjusted Earnings” Number of shares in issue (thousands) 424,862 424,862 424,862 and “Adjusted EPS.” Adjusted Earnings and Adjusted EPS is based on EPRA’s Best NAV per share (pence) 124.4 135.9 122.6 Practices Recommendations and recognises finance income earned from derivatives held at fair value through profit and loss used to hedge the Company’s floating interest rate EPRA NDV EPRA NRV EPRA NTA exposure. Also included in adjusted earnings is the add back of the costs associated with | | As at 31 March 2022 | | | £’000 | £’000 | £’000 | | --- | --- | --- | --- | --- | --- | --- | | the transfer to the Premium Segment of the Main Market of the London Stock exchange, | | 1 | | | | | | | Total properties | | 1,011,985 1,011,985 1,011,985 | | | | as these costs will not be reoccurring and has been adjusted for as a ‘company‑specific 2 Net borrowings (254,294) (254,294) (254,294) adjustment’. Other net liabilities (18,737) (18,737) (18,737) The Board deems this a more relevant indicator of core earnings as it reflects our ability to IFRS NAV 738,954 738,954 738,954 generate earnings from our portfolio. Exclude: fair value of interest rate derivatives — (337) (337) ### Table 3: EPRA balance sheet and net asset value performance 3 Include: real estate transfer tax — 68,815 — ### measures NAV used in per share calculations 738,954 807,432 738,617 In line with the European Public Real Estate Association (“EPRA”) published Best Practice Recommendations (“BPR”) for financial disclosures by public real estate companies, the Number of shares in issue (thousands) 424,862 424,862 424,862 Group presents three measures of net asset value: EPRA net disposal value (“NDV”), EPRA NAV per share (pence) 173.9 190.0 173.8 net reinstatement value (“NRV”) and EPRA net tangible assets (“NTA”). 1. Professional valuation of investment property (including assets held for sale). 2. Comprising interest‑bearing loans and borrowings (excluding unamortised loan arrangement fees) of £306,000,000 (31 March 2022: £271,000,000) net of cash of £25,053,000 (31 March 2022: £16,706,000). 3. EPRA NTA and EPRA NDV reflect IFRS values which are net of real estate transfer tax. Real estate transfer tax is added back when calculating EPRA NRV. Additional information 146 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information continued ### For the year ended 31 March 2023 ### Table 3: EPRA balance sheet and net asset value performance 31 March 2023 31 March 2022 £’000 £’000 ### measures continued Add notional rent on expiry of rent‑free periods or EPRA NDV details the full extent of liabilities and resulting shareholder value if company 6 otherlease incentives 4,068 3,376 assets are sold and/or if liabilities are not held until maturity. Deferred tax and financial ‘Topped-up’ net annualised rents (C) 44,030 42,503 instruments are calculated as to the full extent of their liability, including tax exposure not reflected in the statement of financial position, net of any resulting tax. EPRA NIY (B/A) 5.0% 4.0% EPRA ‘topped-up’ net initial yield (C/A) 5.5% 4.4% EPRA NTA assumes entities buy and sell assets, thereby crystallising certain levels of deferred tax liability. 4. Estimated purchasers’ costs estimated at 6.8%. 5. Gross passing rents and irrecoverable property costs assessed as at the balance sheet date for completed investment EPRA NRV highlights the value of net assets on a long‑term basis and reflects what would properties excluding development property and land. be needed to recreate the Company through the investment markets based on its current 6. Adjustment for unexpired lease incentives such as rent‑free periods, discounted rent period and step rents. The adjustment includes the annualised cash rent that will apply at the expiry of the lease incentive. Rent‑frees expire over capital and financing structure. Assets and liabilities that are not expected to crystallise a weighted average period of three months’ passing rents. Irrecoverable property costs assessed as at the balance in normal circumstances, such as the fair value movements on financial derivatives and sheet date for completed investment properties excluding development property and land. deferred taxes on property valuation surpluses, are excluded. Costs such as real estate EPRA NIY represents annualised rental income based on the cash rents passing at the transfer taxes are included. balance sheet date, less non‑recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers’ costs. It is a ### Table 4: EPRA net initial yield comparable measure for portfolio valuations designed to make it easier for investors to 31 March 2023 31 March 2022 judge for themselves how the valuation of portfolio X compares with portfolio Y. £’000 £’000 EPRA ‘topped‑up’ NIY incorporates an adjustment to the EPRA NIY in respect of the Total properties per external valuers’ report 828,770 1,011,985 expiration of rent‑free periods (or other unexpired lease incentives such as discounted rent Less development property and land (75,660) (98,950) periods and step rents). Net valuation of completed investment property 753,110 913,035 NIY as stated in the Investment Advisor’s report calculates net initial yield on topped‑up 4 Add estimated purchasers’ costs 51,211 62,086 annualised rents but does not deduct non‑recoverable property costs. Gross valuation of completed property including estimated purchasers’ costs (A) 804,321 975,121 ### Table 5: EPRA vacancy rate 5 | Gross passing rents | (annualised) 41,241 40,605 | | | 31 March 2023 | | 31 March 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | 5 | | | £’000 | | £’000 | | Less irrecoverable property costs | | | (1,279) (1,478) | | | | | Annualised ERV of vacant premises (D) 2,537 3,241 Net annualised rents (B) 39,962 39,127 Annualised ERV for the investment portfolio (E) 50,736 51,479 EPRA vacancy rate (D/E) 5.0% 6.3% EPRA vacancy rate represents ERV of vacant space divided by ERV of the completed investment portfolio, excluding development property and land. It is a pure measure of investment property space that is vacant, based on ERV. Additional information 147 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information continued ### For the year ended 31 March 2023 | Table 6: Total cost ratio/EPRA cost ratio | | | | | | | | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | 31 March 2023 | | | 31 March 2022 | | | | | | Year ended | | | Year ended | | | | | | | | | | | | | | | | | | | | £’000 | | | £’000 | | | 31 March 2023 | | | 31 March 2022 | | | | | | | | | | | | | | £’000 | | | £’000 | Total cost including direct vacancy cost (F) 12,745, 11,674 | | | | | | | | Property operating expenses 5,454 4,789 | | | | | | | Costs associated with the transfer to the Premium | | | | | | | | Service charge expenses 3,767 3,011 | | | | | | | Segment of the Main Market of the London Stock | | | | | | | Exchange 1,069 — Add back service charge income (3,340) (2,682) EPRA total cost (I) 13,814 11,674 Add back insurance recharged (1,592) (1,507) Direct vacancy cost (1,774) (1,224) Net property operating expenses 4,289 3,611 EPRA total cost excluding direct vacancy cost (J) 12,040 10,450 Administration expenses 9,716 8,244 Costs associated with the transfer to the Premium Segment of the Main Market of the London Stock Exchange (1,069) — EPRA cost ratio including direct vacancy cost (I/H) 30.8% 27.1% 7 EPRA cost ratio excluding direct vacancy cost (J/H) 26.8% 24.3% Less ground rents (189) (181) Total cost including direct vacancy cost (F) 12,747 11,674 7. Ground rent expenses included within administration expenses such as depreciation of head lease assets. Direct vacancy cost (1,774) (1,224) EPRA cost ratios represent administrative and operating costs (including and excluding Total cost excluding direct vacancy cost (G) 10,973 10,450 costs of direct vacancy) divided by gross rental income less ground rents. They are a key measure to enable meaningful measurement of the changes in the Group’s operating costs. Rental income 45,750 44,020 Less ground rents paid (832) (1,058) It is the Group’s policy not to capitalise overheads or operating expenses and no such costs were capitalised in either the year ended 31 March 2023 or the year ended 31 March 2022. Gross rental income less ground rents (H) 44,918 42,962 Less direct vacancy cost (1,774) (1,224) Net rental income less ground rents 43,144 41,738 Total cost ratio including direct vacancy cost (F/H) 28.4% 27.1% Total cost ratio excluding direct vacancy cost (G/H) 24.4% 24.3% Additional information 148 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information continued ### For the year ended 31 March 2023 ### Table 7: Lease data | | | | Years | | Head rents | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Year 1 | Year 2 | 3-10 | Year 10+ | | payable | Total | | As at 31 March 2023 | £’000 | £’000 | £’000 | £’000 | | £’000 | £’000 | Passing rent of leases expiring in: 5,812 4,327 27, 533 4,773 (1,204) 41,241 ERV of leases expiring in: 9,239 5,062 33,716 6,460 (1,204) 53,273 Passing rent subject to review in: 15,782 8,522 18,139 2 (1,204) 41,241 ERV subject to review in: 21,055 10,280 23,140 2 (1,204) 53,273 WAULT to expiry is 5.5 years and to break is 4.5 years. | | | | Years | | Head rents | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Year 1 | Year 2 | 3‑10 | Year 10+ | | payable | Total | | As at 31 March 2022 | £’000 | £’000 | £’000 | £’000 | | £’000 | £’000 | Passing rent of leases expiring in: 2,725 5,380 28,818 4,873 (1,191) 40,605 ERV of leases expiring in: 10,529 6,018 30,600 5,523 (1,191) 51,479 Passing rent subject to review in: 5,960 5,176 25,828 4,832 (1,191) 40,605 ERV subject to review in: 10,529 6,018 30,600 5,523 (1,191) 51,479 WAULT to expiry is 5.6 years and to break is 4.5 years. ### Table 8: EPRA capital expenditure | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | | 31 March 2023 | | | 31 March 2022 | | | | | | £’000 | | | £’000 | 8 Acquisitions 66,728 43,391 9 Development spend 8,295 1,103 10 Completed investment properties: No incremental lettable space – like‑for‑like portfolio 5,035 6,467 No incremental lettable space – other — — Occupier incentives — — Total capital expenditure 80,058 50,961 Conversion from accruals to cash basis (1,082) 2,886 Total capital expenditure on a cash basis 78,976 53,847 8. Acquisitions include £64,512,000 completed investment property and £2,216,000 development property and land (2022: £30,027,000 and £13,364,000 respectively). 9. Expenditure on development property and land. 10. Expenditure on completed investment properties. Additional information 149 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information continued ### For the year ended 31 March 2023 | Table 9: EPRA like-for-like rental income | | | | | Table 10: Loan to value (“LTV”) ratio and EPRA LTV | | --- | --- | --- | --- | --- | --- | | | | Year ended | | Year ended | Gross debt less cash, short‑term deposits and liquid investments, divided by the aggregate | | | 31 March 2023 | | 31 March 2022 | | | value of properties and investments. The Group has also opted to present the EPRA loan Note £’000 £’000 % change to value, which is defined as net debt divided by total property market value. This measure EPRA like-for-like was included as a new measure in EPRA’s Best Practices Recommendations (issued in 11 rental income 40,722 38,400 6.1 February 2022). The year ended 31 March 2023 is the first year this measure has been 12 Other (815) — adopted and published. Adjusted like-for-like | | | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | --- | --- | | rental income 39,907 38,400 3.9 | | 31 March 2023 | | | 31 March 2022 | | | | | Note | | | £’000 | | | £’000 | Development lettings 306 483 Interest‑bearing loans and borrowings 17 306,000 271,000 Properties acquired 3,155 863 Cash 15 (25,053) (16,706) Properties sold 2,382 4,274 Net debt (A) 280,947 254,294 Rental income 45,750 44,020 Total portfolio valuation per valuer’s Service charge income 3,340 2,682 report (B) 13,14 828,770 1,011,985 Dilapidation income 503 3,187 LTV ratio (A/B) 33.9% 25.1% Insurance recharged 1,592 1,507 Total property income 3 51,185 51,396 ### EPRA LTV 11. Like‑for‑like portfolio valuation as at 31 March 2023: £679.9 million (31 March 2022: £814.1 million). Year ended Year ended 12. Includes rent surrender premiums, back rent and other items. 31 March 2023 31 March 2022 Note £’000 £’000 13 Interest‑bearing loans and borrowings 17 306,000 271,000 14 Net payables 29,352 21,044 Cash 15 (25,053) (16,706) Net borrowings (A) 310,299 275,338 Investment properties at fair value 13,14 828,770 1,011,985 Interest rate derivatives 18 7,387 337 Head lease obligation 14,124 14,081 Total property value (B) 850,281 1,026,403 EPRA LTV (A/B) 36.5% 26.8% 13. Excludes unamortised loan arrangement fees asset of £1.9 million (2022: £2.8 million) (see note 17). 14. Net payables includes trade and other receivables, and other payables and accrued expenses. Additional information 150 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Unaudited supplementary notes not part of the consolidated financial information continued ### For the year ended 31 March 2023 | Table 11: Total accounting return | | | | | | Table 12: Ongoing charges ratio | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | The movement in EPRA NTA over a period plus dividends paid in the period, expressed as a | | | | | | Ongoing charges ratio represents the costs of running the REIT as a percentage of NAV as | | | | | | | | | percentage of the EPRA NTA at the start of the period. | | | | | | prescribed by the Association of Investment Companies. | | | | | | | | | | | | Year ended | | Year ended | | | | Year ended | | | Year ended | | | | | 31 March 2023 | | 31 March 2022 | | | | 31 March 2023 | | | 31 March 2022 | | | | | Note | Pence per share | | Pence per share | | | Note | | | £’000 | | | £’000 | | Opening EPRA NTA (A) 173.8 135.1 | | | | | | Administration expenses 4 9,716 8,244 | | | | | | | | | Movement (B) (51.2) 38.7 | | | | | | Less: costs associated with moving to | | | | | | | | | Closing EPRA NTA 24 122.6 173.8 | | | | | | Main Market (1,069) — | | | | | | | | | Dividends per share (C) 11 6.5 6.2 | | | | | | Less: head lease asset depreciation (189) (181) | | | | | | | | | Total accounting return (B+C)/A (25.7%) 33.2% | | | | | | Annualised ongoing charges (A) 8,458 8,063 | | | | | | | | Opening NAV as at 1 April 738,954 574,091 NAV as at 30 September 678,578 647, 366 Closing NAV as at 31 March 528,475 738,954 Average undiluted NAV during the period (B) 648,669 653,470 Ongoing charges ratio (A/B) 1.3% 1.2% Additional information 151 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Property portfolio ### As at 31 March 2023 Estate Town Postcode Area Air Cargo Centre Glasgow PA3 2AY 149,000 Ashmead Industrial Estate Keynsham BS31 1TU 38,000 Austin Drive Coventry CV6 7NS 33,000 Barlborough Links Chesterfield S43 4PZ 501,000 Birkenshaw Retail Park Uddingston G71 5PR 67,000 Boulevard Industrial Park Speke L24 9PL 390,000 Brackmills Industrial Estate Northampton NN4 7PN 335,000 Bradwell Abbey Milton Keynes MK13 9HA 335,000 Cairn Court East Kilbride G74 4NB 87,000 Carisbrooke Retail Park Newport PO30 5LG 54,000 Celtic Business Park Newport NP19 4QZ 48,000 Chittening Industrial Estate Bristol BS11 0YB 199,000 Crown Street Carlisle CA2 5AB 26,000 Daimler Green Coventry CV6 3LT 139,000 Dales Manor Business Park Cambridge CB22 3FG 130,000 Daneshill Industrial Estate Basingstoke RG24 8PD 113,000 Delta Court Industrial Estate Doncaster DN9 3GN 58,000 Evolution 27 Nottingham NG15 0DJ 217,000 Falcon Business Park Burton on Trent DE14 1SG 30,000 Farthing Road Industrial Estate Ipswich IP1 5AP 101,000 Festival Drive Ebbw Vale NP23 8XF 54,000 Gateway Park Birmingham B26 3QD 220,000 Gawsworth Court Warrington WA3 6NJ 95,000 Glasgow Airport Business Park Glasgow PA3 2SJ 53,000 Gloucester Business Park Gloucester GL3 4AQ 188,000 Granby Industrial Estate Milton Keynes MK1 1NL 147,000 Great Grimsby Business Park Grimsby DN37 9TW 139,000 Additional information 152 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Property portfolio continued ### As at 31 March 2023 Estate Town Postcode Area Groundwell Industrial Estate Swindon SN25 5AW 91,000 Halebank Industrial Estate Widnes WA8 8TZ 49,000 Howley Park Industrial Estate Morley LS27 0BN 62,000 Ikon Trading Estate Hartlebury DY10 4EU 160,000 Jensen Court Runcorn WA7 1PJ 60,000 Kendal House Burgess Hill RH15 9NF 27,000 Kingsditch Trading Estate Cheltenham GL51 9PL 40,000 Kingsland Grange Warrington WA1 4SR 71,000 Knowsley Business Park Knowsley L34 9GT 301,000 Leanne Business Centre Wareham BH20 4DY 13,000 Lincoln Park Preston PR5 8NA 33,000 Linkway Industrial Estate Middleton M24 2AE 48,000 Lynx Business Park Newmarket CB8 7NY 42,000 Matrix Park Chorley PR7 7NA 47,000 Maxwell Road Industrial Estate Peterborough PE2 7JE 128,000 Meridian Business Park Leicester LE19 1UX 114,000 Midpoint 18 Middlewich CW10 0HS 725,000 Milner Street Warrington WA5 1AD 42,000 Murcar Industrial Estate Aberdeen AB23 8JW 126,000 New England Industrial Estate Hoddesdon EN11 0BZ 22,000 Newport Road Cardiff CF23 9AE 49,000 Nightingale Road Industrial Estate Horsham RH12 2NW 22,000 Oldbury Point Oldbury B69 4HT 96,000 Parkway Industrial Estate Plymouth PL6 8LH 66,000 Pellon Lane Retail Park Halifax HX1 5RA 20,000 Pikelaw Place Skelmersdale WN8 9PP 124,000 Queenslie Park Glasgow G33 4DZ 395,000 Radway 16 Crewe CW2 5PR 21,000 Ransomes Europark Ipswich IP3 9RR 30,000 Roman Way Industrial Estate Godmanchester PE29 2LN 53,000 Additional information 153 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Property portfolio continued ### As at 31 March 2023 Estate Town Postcode Area Roseville Business Park Leeds LS8 5DR 29,000 Ryan Business Park Wareham BH20 4DY 31,000 Shaw Lane Industrial Estate Doncaster DN2 4SQ 66,000 South Fort Trade Park Edinburgh EH6 5PE 26,000 South Gyle Industrial Estate Edinburgh EH12 9EB 48,000 St James Mill Business Park Northampton NN5 5JF 42,000 Stadium Industrial Estate Luton LU4 0JF 66,000 Stonebridge Cross Business Park Droitwich Spa WR9 0 LW 48,000 Sussex Avenue Leeds LS10 2LF 30,000 Swift Valley Industrial Estate Rugby CV21 1TN 39,000 Tewkesbury Business Park Tewkesbury GL20 8JF 114,000 Thornton Road Industrial Estate Ellesmere Port CH65 5EP 32,000 Tramway Industrial Estate Banbury OX16 5TU 151,000 Viables Business Park Basingstoke RG22 4BS 49,000 Wakefield 41 Industrial Estate Wakefield WF2 0XW 53,000 Walton Road Industrial Estate Stone ST 15 0LT 57,000 Warrington South Industrial Estate Warrington WA4 4TQ 106,000 Webb Ellis Business Park Rugby CV21 2NP 45,000 Witan Park Industrial Estate Witney OX28 4YQ 112,000 Additional information 154 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Shareholder information ### The Company was incorporated on 24 July 2017. This Annual Report and Financial Investment policy Statements covers the period from 1 April 2022 to 31 March 2023. The Company may acquire property interests either directly or through corporate structures (whether onshore UK or offshore) and also through joint venture or other shared The Company’s ordinary shares were admitted to trading on AIM on 20 September 2017 ownership or co‑investment arrangements. following IPO and the Group’s operations therefore commenced on this date. The Company invests and manages its portfolio with an objective of spreading risk and, in ### Capital structure doing so, maintains the following investment restrictions: The Company’s share capital consists of ordinary shares of £0.01 each. At shareholder • the Company will only invest, directly or indirectly, in warehouse assets located in the UK; meetings, members present in person or by proxy have one vote on a show of hands and • no individual warehouse property will represent more than 20% of the last published GAV on a poll have one vote for each ordinary share held. Shareholders are entitled to receive of the Company at the time of investment; such dividends as the Directors resolve to pay out of the assets attributable to ordinary • the Company will target a portfolio with no one occupier accounting for more than 15% of shares. Holders of ordinary shares are entitled to participate in the assets of the Company the gross contracted rents of the Company at the time of purchase. In any event, no more attributable to the ordinary shares in a winding up of the Company. The ordinary shares are than 20% of the gross assets of the Company will be exposed to the creditworthiness of not redeemable. any one occupier at the time of purchase; As at the date of this report, there were 424,861,650 ordinary shares in issue, none of which • the portfolio will be diversified by location across the UK with a focus on areas with are held in treasury. strong underlying investment fundamentals; and • the Company will not invest more than 10% of its gross assets in other listed ### Investment objective closed‑ended investment funds. The Company’s investment objective is to provide shareholders with an attractive level The Company considers investments where there is potential for active asset management, of income together with the potential for income and capital growth by investing in a including general refurbishment works. diversified portfolio of UK commercial property warehouse assets. The Company will not undertake speculative development (that is, development of property which has not been at least partially leased or pre‑leased or de‑risked in a similar way), save for refurbishment and/or extension of existing holdings. The Company may, provided that the exposure to these assets at the time of purchase shall not exceed 15% of the gross assets of the Company, invest directly, or via forward funding agreements or forward commitments, in developments including pre‑developed land, where the structure is: (i) designed to provide the Company with investment rather than development risk; (ii) where the development has been at least partially pre‑let or sold or de‑risked in a similar way; and (iii) where the Company intends to hold the completed development as an investment asset. Additional information 155 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Shareholder information continued ### Investment policy continued Electronic communications from the Company The Company is permitted to invest cash, held by it for working capital purposes and Shareholders now have the opportunity to be notified by email when the Company’s awaiting investment, in cash deposits and gilts. The Company may also invest in derivatives Annual Report, Half‑yearly Report and other formal communications are available on the for the purpose of efficient portfolio management. In particular, the Company may engage Company’s website, instead of receiving printed copies by post. This has environmental in interest rate hedging or otherwise seek to mitigate the risk of interest rate increases as benefits in the reduction of paper, printing, energy and water usage, as well as reducing part of the Company’s efficient portfolio management strategy. costs to the Company. It is envisaged that an LTV ratio of between 30% and 40% would be the optimal capital If you have not already elected to receive electronic communications from the Company structure for the Company over the longer term. However, in order to finance value and wish to do so, please contact the Registrar using the details shown on page 159. enhancing opportunities, the Company may temporarily incur additional gearing, subject to Pleasehave your investor code to hand. a maximum LTV ratio of 50%, at the time of an arrangement. In the event of a breach of the investment guidelines and restrictions set out above, the Share capital and net asset value information Investment Manager shall inform the Directors upon becoming aware of the breach and if Ordinary 1p shares 424,861,650 the Directors consider the breach to be material, notification will be made to a Regulatory SEDOL Number BD2NCM3 Information Service. Any material change to the investment policy of the Company may ISIN Number GB00BD2NCM38 only be made with the approval of shareholders. ### Sources of further information ### Share dealing and share prices Copies of the Company’s Annual and Half‑yearly Reports are available from the Company Shares can be traded through your usual stockbroker. The Company’s shares are admitted Secretary who can be contacted on 01392 477500 and, together with stock exchange to trading on the premium segment of the London Stock Exchange’s Main Market. announcements and further information on the Company, are also available on the Company’s website, www.warehousereit.co.uk. ### Share register enquiries The register for the ordinary shares is maintained by Link Group. In the event of queries ### Association of Investment Companies regarding your holding, please contact the Registrar on 0371 664 0300. You can also email The Company is a member of the AIC. enquiries@linkgroup.co.uk. Changes of address and mandate details can be made over the telephone, but all other changes to the register must be notified in writing to the Registrar: Link Group, Shareholder Services, 10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL. Additional information 156 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Glossary ### Adjusted earnings per share (“Adjusted EPS”) BREEAM EPRA EPRA EPS adjusted to exclude one‑off costs, divided by A BREEAM certified rating reflects the sustainability The European Public Real Estate Association, the industry the weighted average number of shares in issue during the performance achieved by a project and its stakeholders as body for European REITs year, which ultimately underpins our dividend payments well as comparability between projects and assurance on ### EPRA cost ratio performance, quality and value of the asset ### Admission The sum of property expenses and administration expenses as a percentage of gross rental income less ground rents, ### The admission of Warehouse REIT plc onto the Premium Company calculated both including and excluding direct vacancy List of the London Stock Exchange on 12July2022 Warehouse REIT plc cost ### AGM Contracted rent ### EPRA earnings Annual General Meeting Gross annual rental income currently receivable on a IFRS profit after tax excluding movements relating to property plus rent contracted from expiry of rent‑free changes in fair value of investment properties, gains/losses ### AIC periods and uplifts agreed at the balance sheet date less on property disposals, changes in fair value of financial The Association of Investment Companies any ground rents payable under head leases instruments and the related tax effects ### AIFM ### Development property and land ### EPRA earnings per share (“EPRAEPS”) Alternative Investment Fund Manager Whole or a material part of an estate identified as having A measure of EPS on EPRA earnings designed to present potential for development. Such assets are classified as underlying earnings from core operating activities based ### AIFMD onthe weighted average number of shares in issue during development property and land until development is The Alternative Investment Fund Managers Regulations the year completed and they have the potential to be fully income 2013 (as amended by The Alternative Investment Fund generating ### Managers (Amendment etc.) (EU Exit) Regulations 2019) EPRA guidelines and the Investment Funds Sourcebook forming part of the The EPRA Best Practices Recommendations Guidelines ### Effective occupancy FCAHandbook October 2019 Total open market rental value of the units leased divided by total open market rental value excluding assets under ### AIM EPRA like-for-like rental income growth development, units undergoing refurbishment and units A market operated by the London Stock Exchange The growth in rental income on properties owned under offer to let throughout the current and previous year under review. ### APM This growth rate includes revenue recognition and lease ### EPC accounting adjustments but excludes development An Alternative Performance Measure is a numerical Energy Performance Certificates are a requirement for property and land in either year and properties acquired or measure of the Company’s current, historical or future properties. An EPC contains information about a property’s disposed of in either year financial performance, financial position or cash flows, energy use, typical energy costs and recommendations other than a financial measure defined or specified in ### about how to reduce energy use and save money. An EPC EPRA NDV / EPRA NRV / EPRA NTA per share the applicable financial framework. In selecting these The EPRA net asset value measures figures divided by the gives a property an energy efficiency rating from A (most APMs, the Directors considered the key objectives and number of shares outstanding at the balance sheet date efficient) to G (least efficient) and is valid for ten years expectations of typical investors Additional information 157 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Glossary continued ### EPRA net disposal value (“EPRANDV”) EPS Investment portfolio The net asset value measure detailing the full extent of Earnings per share Completed buildings and excluding development property liabilities and resulting shareholder value if company assets and land ### Equivalent yield are sold and/or if liabilities are not held until maturity. ### The weighted average rental income return expressed as IPO Deferred tax and financial instruments are calculated as to a percentage of the investment property valuation, plus Initial public offering the full extent of their liability, including tax exposure not purchasers’ costs, excluding development property and reflected in the statement of financial position, net of any ### Like-for-like rental income growth land resulting tax The increase in contracted rent of properties owned ### ERV throughout the period under review, expressed as a ### EPRA net initial yield (“EPRANIY”) The estimated annual open market rental value of lettable percentage of the contracted rent at the start of the The annualised passing rent generated by the portfolio, less space as assessed by the external valuer period, excluding development property and land and units estimated non‑recoverable property operating expenses, undergoing refurbishment expressed as a percentage of the portfolio valuation ### FCA (adding notional purchasers’ costs), excluding development ### Financial Conduct Authority Like-for-like valuation increase property and land The increase in the valuation of properties owned ### GAV throughout the period under review, expressed as a ### EPRA net reinstatement value (“EPRA NRV”) Gross asset value percentage of the valuation at the start of the period, net The net asset value measure to highlight the value of net ofcapital expenditure assets on a long‑term basis and reflect what would be ### Group needed to recreate the Company through the investment Warehouse REIT plc and its subsidiaries ### Loan to value ratio (“LTV”) markets based on its current capital and financing Gross debt less cash, short‑term deposits and liquid ### structure. Assets and liabilities that are not expected to IFRS investments, divided by the aggregate value of properties crystallise in normal circumstances, such as the fair value International Financial Reporting Standards and investments movements on financial derivatives and deferred taxes on ### property valuation surpluses, are excluded. Costs such as IFRS earnings per share (“EPS”) Main Market real estate transfer taxes are included IFRS earnings after tax for the year divided by the The Premium Segment of the London Stock Exchange’s weighted average number of shares in issue during the year Main Market ### EPRA net tangible assets (“EPRA NTA”) ### The net asset value measure assuming entities buy and sell IFRS NAV per share NAV assets, thereby crystallising certain levels of deferred tax IFRS net asset value divided by the number of shares Net asset value liability outstanding at the balance sheet date ### Net initial yield (“NIY”) ### EPRA vacancy rate Interest cover Contracted rent at the balance sheet date, expressed as Total open market rental value of vacant units divided by Adjusted operating profit before gains on investment a percentage of the investment property valuation, plus purchasers’ costs, excluding development property and total open market rental value of the portfolio excluding properties, interest (net of interest received) and tax, land development property andland divided by the underlying net interest expense Additional information 158 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Glossary continued ### Net rental income SONIA Gross annual rental income receivable after deduction of Sterling Overnight Index Average ground rents and other net property outgoings including ### void costs and net service charge expenses Total accounting return The movement in EPRA NTA over a period plus dividends ### Occupancy paid in the period, expressed as a percentage of the EPRA Total open market rental value of the units leased divided NTA at the start of the period by total open market rental value excluding development ### property and land, equivalent to one minus the EPRA Total cost ratio vacancy rate EPRA cost ratio excluding one‑off costs calculated both including and excluding vacant property costs ### Ongoing charges ratio ### Ongoing charges ratio represents the costs of running Weighted average unexpired lease term the REIT as a percentage of NAV as prescribed by the ### (“WAULT”) Association of Investment Companies Average unexpired lease term to first break or expiry weighted by contracted rent across the portfolio, excluding ### Passing rent development property andland Gross annual rental income currently receivable on a property as at the balance sheet date less any ground rents payable under head leases ### Property income distribution (“PID”) Profits distributed to shareholders which are subject to tax in the hands of the shareholders as property income. PIDs are usually paid net of withholding tax (except for certain types of tax‑exempt shareholders). REITs also pay out normal dividends called non‑PIDs ### RCF Revolving credit facility ### Real Estate Investment Trust (“REIT”) A listed property company which qualifies for, and has elected into, a tax regime which is exempt from corporation tax on profits from property rental income and UK capital gains on the sale of investment properties Additional information 159 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Contact details of the advisors | Investment Manager | Corporate Brokers | Property Managers | | --- | --- | --- | | G10 Capital Limited | Peel Hunt LLP | Rapleys Aston Rose Ltd | | (part of IQ‑EQ) | Moor House | 4 Tenterden Street | | 4th Floor, | 120 London Wall | London W1S 1TE | | 3 More London Riverside | London EC2Y 5ET | | ### Savills plc London SE1 2AQ ### Jefferies International Limited 33 Margaret Street Telephone: 020 3696 1306 100 Bishopsgate London W1G 0JD London EC2N 4JL ### Investment Advisor Registrar United Kingdom | Tilstone Partners Limited | | Link Asset Services | | --- | --- | --- | | Chester office | Depositary | Shareholder Services Department | | Gorse Stacks House | Crestbridge Property Partnerships Limited | 10th Floor | | George Street | 8 Sackville Street | Central Square | | Chester CH1 3EQ | London W1S 3DG | 29 Wellington Street | Leeds LS1 4DL Telephone: 01244 470 090 ### Financial PR and IR Advisor Telephone: 0371 664 0300 ### FTI Consulting ### London office (or +44 (0)371 664 0300 from outside the UK) 200 Aldersgate 55 Wells Street Email: enquiries@linkgroup.co.uk Aldersgate Street London W1 3PT London EC1A 4HD Website: www.linkgroup.com Telephone: 020 3102 9465 ### Legal Advisors Company Secretary and registered office ### Company website ### Reed Smith LLP Link Company Matters Limited www.warehousereit.co.uk The Broadgate Tower 6th Floor, 20 Primrose Street 65 Gresham Street ### Administrator London EC2A 2RS London EC2V 7NQ ### Link Alternative Fund Administrators Limited ### Osborne Clarke LLP Telephone: 01392 477500 ### (trading as Link Asset Services) One London Wall Broadwalk House ### London EC2Y 5EB Valuer Southernhay West ### CBRE Limited Exeter EX1 1TS ### Shepherd and Wedderburn LLP Henrietta House 1 Exchange Crescent ### Auditor Henrietta Place Conference Square ### BDO LLP London W1G 0NB Edinburgh EH3 8UL 55 Baker Street ### Temple Bright LLP London W1U 7EU 81 Rivington Street London EC2A 3AY Additional information 160 Warehouse REIT plc Annual Report and Financial Statements 2023 ## Financial calendar ### June 2023 Announcement of final results Payment of fourth interim dividend ### September 2023 Annual General Meeting Half‑year end ### November 2023 Announcement of half‑yearly results ### March 2024 Year end Additional information The paper used in this report is produced using virgin wood fibre from Designed and produced by well‑managed, FSC®‑certified forests and other controlled sources. All pulps used are elemental chlorine free and manufactured at a mill that www.lyonsbennett.com has been awarded the ISO 14001 and EMAS certificates for environmental management. The use of the FSC® logo identifies products which contain wood from well‑managed forests and other controlled sources certified in accordance with the rules of the Forest Stewardship Council®. Printed by an FSC® and ISO 14001 certified company. Warehouse REIT plc 55 Wells Street London W1T 3PT 020 3011 2160 www.warehousereit.co.uk Warehouse REIT plc Annual Report and Financial Statements 2023