THINKING

INSIDE

THE BOX

WAREHOUSE REIT PLC

Annual Report

and Financial Statements 2024

By identifying the right

space, in the right locations,

we create places where

our occupiers can

Think Inside the Box

,

unlocking the potential in

their business and creating

thriving industrial hubs.

OUR PURPOSE

our stakeholders.

OUR VISION

To be the UK warehouse provider of choice.

WAREHOUSE REIT

IS THE ONLY UK

REIT FOCUSED

ON MULTI-LET

WAREHOUSES.

INVESTOR AND INVESTMENT ADVISOR

INTERESTS ALIGNED

CONTENTS

Strategic report

Financial highlights

02

Operational highlights

03

Our space

04

Our key multi-let assets

05

Investment case

07

Chairman’s statement

08

Market overview

10

Business model

12

Our strategy

13

Key performance indicators

20

Stakeholder engagement

22

Section 172(1) statement

25

Investment Advisor’s report

27

Sustainability report

36

Principal risks and uncertainties

51

Going concern and viability

statement

61

Corporate governance

Chairman’s introduction

to governance

63

Board of Directors

65

Investment Advisor

67

Corporate governance statement

68

Nomination Committee report

78

Audit and Risk Committee report

82

Management Engagement

Committee report

86

Sustainability Committee report

88

Directors’ remuneration report

90

Directors’ report

93

Financial statements

Statement of Directors’

responsibilities

98

Independent Auditor’s report

99

Consolidated statement of

comprehensive income

106

Consolidated statement of

financial position

107

Consolidated statement of

changes in equity

108

Consolidated statement of

cash flows

109

Notes to the consolidated

financial statements

110

Company statement of

financial position

128

Company statement of

changes in equity

129

Notes to the Company

financial statements

130

Additional information

Unaudited supplementary notes

not part of the consolidated

financial information

132

Property portfolio

140

EPRA disclosure

144

Shareholder information

148

Glossary

150

Contact details of the advisors

153

Multi-let space

Warehouse space with

a range of unit size,

providing occupiers with

the flexibility to expand as

their business grows.

Well-connected

places

Close to major arterial

routes and thriving

economic centres with

strong local labour markets.

Built-in

opportunities

Well-built assets where we

can drive income growth

and resilience through

active asset management

and targeted refurbishment.

01

Multi-let focus driving

valuation and rental growth

01

Strong valuation performance

with ERV growth driven by our

leasing activity and supported

by the resilience of our markets

02

Successfully capturing

reversion, with deals 28.6%

ahead of prior rents and

£7.0 million of reversion still

to capture

03

Targeted disposal plan well

progressed, with c.£165 million

of sales since strategy

launched in November 2022

04

Robust financial

performance and sound

financial management

05

Delivering on our sustainability

commitments

FINANCIAL

Gross

property income

£47.2m

Operating profit before

change in value of

investment properties

£35.0m

£47.2m

£47.8m

£48.7m

2022

2023

2024

£35.0m

£32.2m

£35.4m

2022

2023

2024

IFRS profit/(loss)

before tax

£34.3m

IFRS earnings/(loss) per

share

8.1p

£34.3m

(£182.8m)

£191.2m

2023

8.1p

(43.0p)

45.0p

2023

EPRA earnings

per share

2.9p

Adjusted earnings

per share

4.8p

2.9p

3.9p

5.3p

2022

2023

2024

4.8p

4.7p

6.4p

2022

2023

2024

Dividends per share

6.4p

Total accounting return

6.7%

6.4p

6.4p

6.4p

2022

2023

2024

6.7%

(25.7%)

33.2%

2023

Total cost ratio

24.4%

EPRA net tangible assets

124.4p

24.4%

28.4%

29.5%

2022

2023

2024

124.4p

122.6p

173.8p

2022

2023

2024

Strong leasing

£10.0m

contracted rent secured

28.6% ahead of previous rent

5.1%

increase in like-for-like

contracted rent

96.4%

occupancy

(2023: 95.8%)

Attractive portfolio

£810.2m

portfolio value

(2023: £828.8m)

2.0%

increase in like-for-like valuation

7.7%

growth in estimated rental value

(2023: 6.2%)

Balance sheet

£53.0m

Sales ahead of book value

(2023: £59.6m)

88.0%

debt hedged (2023: 76.2%)

33.1%

LTV at 31 March 2024

(2023: 33.9%)

Progressing our ESG agenda

66.6%

of the portfolio (by sq ft) EPC A to C rated

(2023: 60.2%)

Pathway to net zero

2.8% reduction in scope 1 and 2 emissions

on a like-for-like basis with some scope 3

emission data reported for the first time

Reporting

Voluntary TCFD disclosure for the fourth year

and EPRA sBPR Gold award for the third year

OPERATIONAL

SUSTAINABILITY

03

77,400

sq ft

6.2

year lease

CSL, Seqirus

Boulevard Industrial Park, Speke

CSL Seqirus is one of the largest producers of influenza

vaccines globally. With four sites in Liverpool, they

manufacture vaccines utilising eggs sourced locally and the

finished product is delivered to Boulevard for transportation

around the world. 55 million doses pass through the site

every year.

THINKING INSIDE THE BOX

Our space

We provide warehouse space for a diversified mix of uses,

from trade distribution, light manufacturing and logistics

to engineering, technology and media. Our focus is on

multi-let assets with unit sizes ranging from 500 sq ft to

500,000 sq ft, enabling occupiers to take one or more

units and expand with us as their business grows.

Our locations

Our assets are focused on leading industrial areas,

including the North West, the Midlands and the Arc,

between Oxford and Cambridge, centred on Milton Keynes.

These locations are strategically important, with access to

key transport corridors, including motorways, railways and

ports, providing access to much of the country.

Our seven key multi-let assets occupy prime locations in

leading logistics hubs and account for 32.8% by value of

our portfolio.

Advantages

of our locations

ACCESS TO MAJOR

ARTERIAL ROUTES

97.6% of our assets are

within two miles of a town

centre, transport hub or

motorway junction. Transport

is often a high proportion

of occupier costs so easy

access to their customer

base is an important driver

of profitability.

THRIVING

ECONOMIC CENTRES

Our assets are close to some

of the UK’s most successful

cities, including Manchester,

Liverpool, Birmingham, and

the Oxford-Cambridge Arc.

These are typically more

affordable than London

and the South East while

still providing excellent

connectivity.

STRONG LOCAL

LABOUR MARKETS

The areas we focus on

benefit from a good supply

of local labour which can be

critical for our occupiers who

are often involved in more

labour intensive industries.

Northern England

Midlands

The Arc

South England

Rest of the UK

04

Our key multi-let assets

MIDPOINT 18

MIDDLEWICH

Area:

725,000 sq ft

Number of units:

24

Unique tenants:

16

Contracted rent:

£3.7m p.a.

WAULT:

3.5

BRADWELL ABBEY

MILTON KEYNES

Area:

335,000 sq ft

Number of units:

69

Unique tenants:

39

Contracted rent:

£2.6m p.a.

WAULT:

5.1

BOULEVARD

INDUSTRIAL PARK

SPEKE

Area:

390,000 sq ft

Number of units:

4

Unique tenants:

3

Contracted rent:

£2.1m p.a.

WAULT:

4.0

QUEENSLIE PARK

GLASGOW

Area:

395,000 sq ft

Number of units:

73

Unique tenants:

46

Contracted rent:

£1.7m p.a.

WAULT:

3.2

Multi-let portfolio overview

71.6%

of investment portfolio by value

£31.9m

contracted rent

419

occupiers

57.8%

EPC A–C rated by sq ft

KNOWSLEY BUSINESS PARK

KNOWSLEY

Area:

301,000 sq ft

Number of units:

18

Unique tenants:

9

Contracted rent:

£1.6m p.a.

WAULT:

4.5

GATEWAY PARK

BIRMINGHAM

Area:

220,000 sq ft

Number of units:

31

Unique tenants:

24

Contracted rent:

£1.5m p.a.

WAULT:

2.1

GRANBY INDUSTRIAL ESTATE

MILTON KEYNES

Area:

147,000 sq ft

Number of units:

24

Unique tenants:

19

Contracted rent:

£1.2m p.a.

WAULT:

6.1

KEY

Northern England

Midlands

The Arc

South England

Rest of the UK

05

Occupier

sectors/rent

Occupier

location/rent

Wholesale

and Trade

Distribution

£16.0m

Food and

General

Manufacturing

£12.8m

Services

and Utilities

£8.1m

Transport

and Logistics

£5.4m

Technology,

Media and Telecoms

£1.4m

Construction

£1.3m

Other

£0.7m

Northern

England

COMPELLING

MARKET DRIVERS

Attractive demand-supply

dynamics in the multi-let

industrial subsector.

Multi-let warehouses

provide highly flexible space,

which can accommodate

almost any industry from

light manufacturing and

engineering to technology

and media, making demand

resilient through the cycle.

While not overly exposed to

e-commerce, it has benefited

from the acceleration of

online retail in recent years.

At the same time supply is

constrained by a restrictive

planning environment and

the relatively high cost of

developing multi-let space.

ATTRACTIVE AND

RESILIENT PORTFOLIO

Well-located assets, close

to major arterial routes and

vibrant economic centres

with a range of unit sizes.

The strength of our locations

supports valuation and

underpins our ability to

re-let space at lease expiry.

We only invest in well-built

assets that require minimal

capex year-on-year to deliver

high-quality and sustainable

space, which meets the

demands of today’s occupier.

Multi-let space attracts

a broader diversity of

occupier, making our income

more resilient through the

economic cycle.

TOTAL RETURNS

FOCUSED STRATEGY

We target an average total

accounting return of at least

10% per annum through a

combination of dividends

and NAV growth.

We drive like-for-like

income through active asset

management. Our multi-let

focus means we have more

opportunities to increase

rents to market level.

We undertake selective

refurbishments, which

support long-term value

creation and enhance the

sustainability credentials of

our buildings.

Our focus on high-quality

and well-located assets

helps support NAV growth.

SOUND

FINANCIAL POSITION

Our LTV is within our target

range and we benefit from a

breadth of funding sources.

We take a disciplined

approach to capital

allocation, including

making asset disposals to

strengthen our financial

position.

We have significant

headroom to our covenants

providing the flexibility to

pursue opportunities in the

market and on our portfolio

when the time is right.

EXPERIENCED

MANAGEMENT TEAM

Our dedicated Investment

Advisor has a deep

understanding of the

sector, built up through

years of experience across

real estate.

Their capabilities and

network of industry contacts

provide a wide range of

opportunities and they have

assembled a full service

asset management team,

enabling us to deliver on our

strategy.

Their expertise is

complemented by a

highly experienced and

independent Board.

Read more on

pages

10

and

11

Read more on

pages

04

to

06

Read more on

pages

20

and

21

Read more on

page

17

Read more on

page

16

£93.5psf

capital value below the

reinstatment cost of

£116.2 per sq ft

97.6%

within two miles of a

motorway, rail or freight hub

10%

Target total accounting

return (“TAR”)

33.1%

Loan to

value ratio

6.8%

Tilstone Partners

shareholding

07

In many respects the standout feature of the year has

been the resilience and strength of our occupational

markets. The multi-let industrial sector, which remains

critically undersupplied in terms of well-located,

quality assets has continued to perform well. We have

maintained our strong track record of successfully

capturing reversion and generating significant rental

growth and I am pleased to say that this has underpinned

an increase in the net asset valuation for the year

under review.

In addition to maximising returns from the existing

portfolio, we have continued to focus on reshaping the

balance sheet to create a platform that is appropriate for

your business. We have sold £165.2 million of assets since

the disposal plan was announced in November 2022 but

importantly, we have not sold any flagship estates.

We know what our assets are worth and have been patient

but proactive in our approach. Releasing capital from

Radway Green, our 100-acre site adjacent to the M6 is a

very good example of that. We have refused to move with

undue haste, recognising the unrealised strategic value in

this development and during the year, have seen significant

interest develop from various parties with negotiations

now well advanced. A successful conclusion completes our

disposal plan.

This strategy is consistent not only with a higher interest

rate environment but also, with sales being accretive to

earnings, a commitment to move our shareholders back

towards a covered dividend. Reflecting the good progress

we have made, the Board is comfortable that the Group

now has the flexibility to selectively undertake value

accretive acquisitions, and accordingly is pleased to have

acquired part of the Ventura Retail Park in Tamworth, a

retail warehousing asset which is highly complementary to

our business and our skill set.

OPERATIONAL REVIEW

Our asset management in the year has driven a 5.1%

increase in like-for-like contracted rent, bringing total

contracted rent to £44.6 million. We are successfully

capturing reversion, with deals on average 28.6% ahead

of prior rents, equating to £2.1 million of new rent and

including the letting of vacant space, £3.0 million of new

rent was added in the year. Post year end activity adds a

further £0.6 million to contracted rent.

With over 100 deals completed in the year, our leasing

activity also provides strong evidence of rental growth,

supporting our valuation. ERV growth across the portfolio

was 7.7%, exceeding our own expectations, and driving

a like-for-like portfolio valuation uplift of 2.0%, (with an

increase of 3.1% in our multi-let portfolio), taking the total

value of our assets to £810.2 million.

This performance is a strong endorsement of our strategic

focus on multi-let industrials. As well as providing more

opportunities to capture reversion, this is a highly scarce

asset class, with rebuild costs well above capital values due

to expensive development finance and a strict planning

regime. Our capital value of £93.5 per sq ft compares to

a reinstatement value of c.£116.2 per sq ft. At the same

time, demand for multi-let space is more resilient given the

diversity of its occupier base and together these dynamics

support our continuing high occupancy of 96.4%, driving

future rental growth.

CAPITAL ACTIVITY

Our disposal programme has targeted assets that are

non-core or where our asset management plans have been

substantially delivered. We executed on £53.0 million of

sales in the year, in many cases successfully selling into

pockets of demand to achieve a price ahead of book value

with an average premium of 15.6%. This crystallised a profit

on sale of £5.5 million.

Post year end sales totalled £57.5 million and comprised

the £46.0 million disposal of Barlborough Links in

Chesterfield, a single-let property with rental growth

capped through indexation, as well as two other single-let

assets in Plymouth and Newport. These transactions

increase our pro forma weighting towards multi-let assets

to c.78% from c.72% at year end and further focus the

portfolio on our core assets where we see opportunities to

drive value for shareholders.

Neil Kirton

Chairman

OUR OCCUPATIONAL

MARKETS HAVE

BEEN RESILIENT AND WE

HAVE MAINTAINED OUR

STRONG TRACK RECORD OF

CAPTURING REVERSION AND

GENERATING SIGNIFICANT

RENTAL GROWTH.

Neil Kirton

Chairman

08

FINANCIAL PERFORMANCE

At £35.0 million, operating profits were 8.6% ahead of last

year, with our leasing activity and the fall in operating costs

more than offsetting the impact of disposals. Adjusted

earnings per share were 4.8 pence, 2.1% ahead of last year

and rise to 6.1 pence when profits from disposals are taken

into account, meaning that on a cash basis, the full year

dividend of 6.4 pence is 95.3% covered.

The uplift in valuation has driven an increase in our EPRA

NTA per share of 1.5% to 124.4 pence (31 March 2023:

122.6 pence), contributing to a total accounting return

of 6.7%.

BALANCE SHEET

In addition to the disposals programme, in June 2023 we

completed a successful refinancing of our previous £320.0

million facility to further optimise our balance sheet. The

new facility comprises a £220.0 million term loan and a

£100.0million revolving credit facility with a club of four

lenders: HSBC, Bank of Ireland, NatWest and Santander.

The new facility was agreed on more favourable covenants,

reflecting the strength of our banking relationships as well

as the quality of the portfolio, and the tenure has been

extended from January 2025 to June 2028.

In November 2023, we acquired a further £50.0 million

of interest rate caps, replacing the £30.0 million of caps

expiring and fixing SONIA at 2.0%. This is in addition to

the £200.0 million of interest rate caps acquired in the last

financial year. As a result, 88.0% of our debt was hedged at

year end and our weighted average cost of debt was 4.2%.

As at 31 March 2024, the Group’s loan to value of 33.1%

remains well within our target range of 30% to 40%, with

£36.0 million of headroom within our new facilities.

ESG

We have continued to progress our ESG agenda. Last year

we set out a commitment to be net zero in scope 1 and 2

greenhouse gas emissions by 2030 alongside a framework

for reducing our wider carbon footprint. Sustainability is

firmly embedded in the way we manage our portfolio with

each refurbishment aiming to remove gas, electrify heating

and lighting and deliver a minimum EPC B rating. This has

driven a significant increase in our EPC A–C rated space,

which now accounts for 66.6% of the portfolio compared

to 60.2% at the start of the year and, in addition, makes

our space more attractive to occupiers, supporting leasing

and valuation.

This year, we have also reported some scope 3 emissions

for the first time. Looking forward, improving our visibility

over, and ultimately setting a target for the reduction of

scope 3 emissions is an important priority for the business.

Our close engagement with occupiers and the steps we

have taken to introduce green leases, which encourage

data sharing wherever possible, are already having a

positive impact in this respect.

On the Governance side, as previously announced, Martin

Meech stepped down from the Board at the Annual

General Meeting (“AGM”) in September 2023. Following a

comprehensive search, Dominic O’Rourke joined the Board

as a Non-Executive Director in the same month. He is

currently Group Property Director for FTSE 100 retailer

Next plc, a role he has held since 2014. His customer-facing

experience in a sector that is key for our business is

proving to be a highly positive and complementary

addition to the Board’s expertise.

CONCLUSION AND OUTLOOK

Our disposal plan was announced in November 2022,

when the rapid adjustment in interest rates impacted our

financing costs, and in turn our earnings. We have largely

delivered on that plan and are optimistic of a positive

outcome on the Radway process in the coming months.

Thereafter, capturing reversion becomes our primary

tool for rebuilding dividend cover. Our focus on what

is a resilient part of the market and our active asset

management has created more rental upside in our

portfolio which is now 13.1% reversionary and looking

forward, we believe attractive levels of rental growth

will continue.

We are also identifying opportunities to selectively make

acquisitions of higher yielding warehousing assets. Retail

warehousing is an area in which Tilstone Partners has

experience and represents a highly attractive opportunity

at this time. We are very well placed to source value

accretive opportunities in this space and the Ventura Retail

Park is an excellent example of that.

This year, it feels appropriate to comment on the equity

market context, which has seen an increase in the level

of corporate activity, both in our sector and across

listed investment trusts more generally. Our conviction,

as a Board, is that this Company owns high-quality,

strategically-located assets, but we are acutely aware

that that is not reflected in the price at which our equity

currently trades. We believe that rebuilding dividend

coverage is an important first step in narrowing that

discount and are confident the Company has in place a

strategy that will deliver this.

In summary, commercial real estate is a sector that has

been, and may continue to be, challenged by higher

interest rates. We are successfully managing our way

through that and the Board are committed to making the

decisions and taking the steps that are necessary to create

a sound platform from which our operational strength can

drive value for all our shareholders.

Neil Kirton

Chairman

09

Warehouse market overview

The warehouse market covers a broad spectrum,

including big box warehouses, typically single-let units

over 100,000 sq ft, multi-let assets with a range of unit

sizes, urban logistics focused on last mile delivery and

retail warehousing.

Our portfolio is predominately multi-let warehouses,

although we maintain a balanced portfolio, making our

business more resilient through the cycle.

See page

14

for

our

multi-let approach

Key market themes

MACROECONOMIC BACKDROP

While certainty improved over the course of the year,

the operating environment has been challenging

both for businesses and for investors into real estate.

Inflation was nearly 8.0% at the start of the year and

only dipped below 4.0% in March while interest rates

have risen 100 bps to 5.25% by March 2024.

Impact and response

In this environment, occupiers have focused firmly

on costs, playing well to our value offering. Our

average contracted rent for multi-let space is £6.12 psf

compared to a market average of over £12.50 psf

for multi-let space in the South East and almost

£20.00 psf in Greater London. Rapid rental growth

in London and the South East reflects the expansion

of last mile delivery operators whose business model

depends on being close to the customer but is pricing

other businesses out of the market.

Market ERV vs Warehouse REIT rent, £ per sq ft

0

5

10

15

Yorks &

Humber

West

Midlands

South

East

North

West

East of

England

East

Midlands

Market

Source: Gerald Eve

These dynamics support demand for our space,

particularly in Milton Keynes and the Midlands, which

are easily accessible from London, have access to

major transport routes and benefit from a plentiful

supply of local labour.

OCCUPATIONAL MARKETS

After several exceptional years, with the Covid-19

pandemic fuelling demand from third-party logistics

providers and e-commerce businesses, take up

across the wider logistics sectors has returned to

pre-pandemic levels.

Overall, take up in 2023 was 26.0% below the

five-year average, with mid-box space, which includes

much of the multi-let activity, more resilient. Mid-box

take up was 11.0% below the five-year average

compared with 28.0% and 33.0% below, respectively,

for large and extra-large units.

INVESTMENT MARKETS

Reflecting the occupational markets, activity across

investment markets is also reverting to trend with

total volumes of £6.6 billion, 44.0% below 2022

volumes but just ahead of the pre-pandemic average.

Activity was also more resilient across industrial

and logistics compared to other areas of real estate,

accounting for 30.0% of the combined volume across

the three core commercial sectors of industrial, offices

and retail compared to a long-run average of 17.0%.

The multi-let sector saw good levels of activity,

accounting for 30% of industrial deals, the highest

since 2018.

Take-up by unit size (m sq ft)

0

10

20

30

40

50

60

70

80

2023

2022

2021

2020

2019

2018

2017

2016

X Large (>250k)

Mid Box (50k – 99k )

5-year average

Pre-pandemic avg

Source: Lambert Smith Hampton

Industrial investment volume (£bn)

Single-let distribution

Multi-let

Portfolios

No. of deals (RHS)

0

100

200

300

400

500

600

0

2

4

6

8

10

12

14

16

2012

2013

2014

2015

2016

2017

2018

2019 2020 2021 2022 2023

10-yr pre-pandemic avg

5-yr avg

Source: Lambert Smith Hampton

10

EVOLUTION OF THE OCCUPIER BASE

The multi-let occupational market is characterised

by its diversity and this has been evolving in recent

years to include retail, logistics, quasi-office and

leisure activities in addition to more traditional uses

such as manufacturing, engineering and service

centres. These trends have made demand more

resilient through the cycle.

At the same time, the multi-let subsector has not

been as exposed to e-commerce as other parts of

the industrial market and has therefore been less

affected by the reduction in demand post-pandemic.

Multi-let take up by occupier type, 2023 (%)

Source: Lambert Smith Hampton

Impact and response

Our space is highly flexible and can accommodate

a wide range of occupier but we are increasingly

targeting higher value businesses that have the

potential to pay higher rents and to grow on

our estates.

Examples include Habitat at Bradwell Abbey, Milton

Keynes (see page 18) where the space is used as

a virtual showroom and Fugro at Murcar Industrial

Estate, Aberdeen, where this geo-data specialist

conducts surveys of the North Sea infrastructure and

sea bed using unmanned vessels.

MULTI-LET DEVELOPMENT UNECONOMIC

The construction of multi-let space is typically more

expensive and complicated than big box space,

making it less economic, particularly in the current

environment where development finance is scarce

and costly as a result of higher interest rates.

The reinstatement cost of our portfolio is £116.2 psf,

which compares to an average capital value of

£93.5 psf, meaning it is impossible to replicate our

portfolio for less than it is currently worth, and that

is without taking the cost of land into account. In

addition, achieving planning for new developments is

highly challenging.

These dynamics have constrained supply of new

mid-box and multi-let space. In 2023, speculative

development in the mid-box segment was just

3.3 million sq ft, a reduction of 19.0% year on year.

Speculative development, at year end (m

sq ft)

0

5

10

15

20

25

2023

2022

2021

2020

2019

2018

2017

2016

X Large (>250k sq ft)

Mid Box (50k – 99k sq ft)

Source: Lambert Smith Hampton

Manufacturing

Retail/wholesale

Third-party logistics

Other

Freight/parcel services

Data centres

DEMAND FOR SUSTAINABLE SPACE

Demand for energy efficient and more sustainable

space is increasing, both from an occupier and investor

perspective. This is partly driven by the growth of

regulation, in particular around EPC ratings with

the proposed MEES timetable expected to require

properties in England and Wales to have a minimum

EPC C rating by 2027 and B rating by 2030. At the

same time, occupiers, especially larger, multi-national

businesses, often have ambitious sustainability

commitments of their own, and need space that helps

them achieve those targets.

Impact and response

Retrofitting industrial space to improve EPC ratings is

relatively straightforward compared to other areas of

the real estate market. Little of our warehouse space

is heated, meaning that lighting upgrades to LEDs are

often the key intervention we can deliver. Where we do

have heated office space, we are introducing air source

heat pumps and capping the gas connections as part

of our standardised approach to refurbishment.

See

sustainability report

on pages

36

to

50

.

Impact and response

The scarcity of multi-let space drives both rental

growth and property valuation and is the rationale

for our focus on this part of the market. Supply,

in terms of both development and availability of

existing space, is among the lowest in the country

in our highest conviction locations of the Midlands

(including the Oxford-Cambridge Arc) and the

North West.

OUR DRIVERS

OUR RESOURCES

Our purpose

We provide the

well-connected,

high-quality and

sustainable warehouse

space our occupiers

need to succeed and by

doing this responsibly we

generate attractive returns

for all our stakeholders.

Our vision

To be the UK warehouse

provider of choice.

Our portfolio

7.8m sq ft of strategically

located warehouse space

Read more on

page

04

People and relationships

Experienced Board and

dedicated Investment

Advisor.

Read more on

pages

65

to

67

Financial

A range of funding sources

and significant headroom

to covenants.

Read more on

page

17

WHAT WE DO

VALUE CREATED

Identify opportunities and invest

6.7%

Total accounting return

We invest in well-located, well-constructed assets where we

see the potential to drive rents and values by delivering our

asset management strategy.

1.5m sq ft

leasing activity

28.6%

uplift on previous

contracted rent

Refurbish and future-proof

Our assets are well built so we can deliver refurbishments

quickly and at comparative low cost. Improving energy

efficiency and reducing carbon emissions are integral to

our approach.

5.1%

like-for-like

rental growth

£5.5m

profit on sales

Active asset management

We target higher-value occupiers who have the potential to

pay more rent and to grow with us. Our key multi-let assets

are individually branded and we invest in the wider area

to improve the amenity and working environment of the

whole estate.

£36.0m

headroom in

current facility

2.8%

reduction in scope

1 and 2 emissions

Refine and recycle

We look to sell assets where we have substantially delivered

our plans, which typically amounts to around 10% of the

portfolio per year. This provides capital for reinvestment or

strengthens our financial position.

£10,600

charitable donations

12

We create value by investing in assets where we see an opportunity to drive rents and increase

value by delivering our strategy. We provide space which suits the life cycle of a company and

target occupiers who have the potential to grow with us. We are advised by Tilstone Partners,

our dedicated Investment Advisor and warehouse real estate specialist.

STRATEGIC OBJECTIVE

10% TAR

Delivered through our strategic drivers:

ESG

NET ZERO PATHWAY

Our target is to be net zero in

scope 1 and 2 emissions by 2030.

Our scope 3 reporting currently

covers over half the portfolio,

positioning us to set a target for

emission reduction next year.

A FOCUS ON

MULTI-LET

SPACE

A STRONG

AND RESILIENT

INCOME STREAM

INVESTOR AND

INVESTMENT ADVISOR

INTERESTS ALIGNED

A DISCIPLINED

FINANCIAL

POSITION

With a balanced portfolio

of well-connected assets

with attractive income

characteristics

Capitalising on

opportunities to deliver

rental growth and

strengthen resilience

Managing an experienced

and dedicated team with

a network of successful

relationships

Appropriate gearing and

flexible funding sources

OUR STRATEGY

13

ATTRACTIONS OF A

MULTI-LET ESTATE

Frequency of lease events

The higher frequency of lease events

provides more opportunities to

increase rents to market levels and

establish a higher rental tone across

the asset. With less than 10% of our

leases index-linked, there is no cap

on rental growth and we can achieve

increases ahead of inflation.

Range of unit size

Our assets typically offer a range of

unit sizes to suit the life cycle of a

company. For example, at Bradwell

Abbey, in Milton Keynes we offer

nursery units of c.700 sq ft through

to over 15,000 sq ft, meaning

occupiers can stay with us longer.

See the Bradwell Abbey case study,

page

18

.

Robust and diverse occupier base

The flexibility of a multi-let estate

makes them relevant to a wider

pool of occupier, increasing the

diversity and resilience of our income

streams. See the At a Glance section,

pages

04

to

06

.

Scarce asset class

Reinstatement costs for multi-

let estates are generally above

capital values making development

uneconomic. This constrains supply,

further supporting rental growth. See

the Market Overview, pages

10

to

11

.

01

A focus on multi-let space

HOW THE MULTI-LET MODEL DRIVES RENTS

MULTI-LET

SPACE

DEDICATED

ASSET

MANAGEMENT

EXPERTISE

RENTAL

GROWTH

•

Faster access to

reversion

•

Suits life cycle

of an occupier

•

Diverse

occupier mix

•

Low

obsolescence:

able to unlock

opportunities at

low cost

•

Leasing c.30%

ahead of

prior rents

•

Consistently

strong

ERV growth

PROGRESS IN THE YEAR

Since 1 April 2023, we have sold or

exchanged for sale over £57.5 million of

single-let assets taking the portfolio to

c.78% multi-let on a pro forma basis.

KEY METRICS (MULTI-LET)

71.6%

of the portfolio

multi-let

95.1%

occupancy

3.1%

valuation

change

419

unique

occupiers

71.6%

of investment

portfolio is multi-let

(by value)

£731.8m

total

Single-let

Last Mile

Single-let

Regional

Distribution

Multi-let

Our portfolio is highly reversionary,

meaning there is rental uplift to be

captured between what occupiers are

currently paying and the market rent.

Our business model is to capture this

through active asset management

and selective refurbishment. Our

multi-let focus means we have

multiple opportunities at the end of

each lease to deliver improvements,

making them best in class and

fully meeting the sustainability

expectations of our occupiers. This

includes targeting a minimum EPC

B rating on refurbishment. By only

investing in assets which are well

built, the capex required to achieve

this is relatively modest.

We target higher-value occupiers,

who have the ability to pay more

rent and to grow with us and we

rigorously assess the covenants of

all our occupiers to ensure we only

let space to businesses that are

financially sound.

02

A strong and resilient income stream

HOW WE DO IT

Tilstone has established a three-stage

plan to driving rental growth on an

asset-by-asset basis. Starting with

occupier engagement and light touch

improvements, we then undertake selective

refurbishments on lease expiry to deliver

higher-value space back into the market at

an increased rent.

TILSTONE ASSET MANAGEMENT STRATEGY

PHASE 1

• Occupier engagement

• Cosmetic improvements

•

Initiate marketing plan

•

Refurbish and re-let vacant space

PHASE 2

•

Continued refurbishment and

improved amenities

•

Full rebrand, relaunch and

repositioning

•

Target higher-value occupiers

PHASE 3

• Capture reversion

•

Driving long-term value

•

Explore adjoining acquisitions/

development opportunities

KEY METRICS

£44.6m

contracted rent

5.1%

LFL rental growth

7.7%

ERV growth

£7.0m

reversionary potential

66.6%

EPC A–C rated

PROGRESS IN THE YEAR

Leasing activity covered 1.5m sq ft in the

year, representing 19.7% of the portfolio,

with deals signed on average 28.6%

ahead of prior contracted rents.

This activity generated like-for-like rental

growth of 5.1%.

15

Aligned

interests

03

Investment Advisor closely aligned to investor interests

Our Investment Advisor, Tilstone

Partners, has a 6.8% shareholding in

Warehouse REIT meaning that their

interests are fully aligned with those

of our investors.

Tilstone Partners has assembled

a specialist team with expertise

across asset management and

development, investment and

finance. It promotes an inclusive and

respectful environment, encourages

collaboration and entrepreneurship

and with just 17 employees, all

individuals are able to make a

meaningful contribution to the

performance of the Group.

PROGRESS IN THE YEAR

Tilstone Partners purchased a further

£0.5 million of Warehouse REIT shares,

increasing their collective shareholding

to 6.8%.

An anonymous staff survey was

completed in the year with a 100%

completion rate. Feedback has

prompted new initiatives including staff

volunteering days and matched funding

for charitable activities and we continue

focus on training and development.

We align objectives to our values and

everyone has at least one ESG-related

objective.

This year we have increased our

disclosure on HR matters, as set out in

our EPRA disclosures.

Read more on

page

146

KEY METRICS

6.8%

shareholding of

Tilstone Partners

94%

retention rate

0.6m

WHR shares

purchased during

the year

14

training hours

per person

OUR VALUES

We have four clear values which underpin the way we work:

01

Engagement

03

Empowerment

Spirit of commitment, collaboration

and communication across our team

Culture of entrepreneurialism where

individuals can make things happen

02

Excellence

04

Environment

Targeting the highest standards

but fully considering the impact

we have

A respectful and inclusive culture

and a responsible approach to

doing business

To encourage a pipeline of talented individuals from a wide

range of backgrounds, we work with Pathways to Property

and support their outreach programmes targeting less

advantaged demographics.

Scrutinises and

approves decisions

and capital allocation

Sources opportunities

and runs the day-to-day

business

We fund the business through

a combination of shareholders’

equity, bank debt and proceeds

from disposals, with the

contribution depending on the

relative cost of debt and equity and

the income profile of our assets. We

look to raise equity where we see

attractive investment opportunities

that are accretive for shareholders.

Our strategy for debt financing is

to maintain a prudent level of debt,

with an LTV range of 30–40% in

the longer term. We look to hedge

the interest on a significant portion

of our debt to provide greater

certainty over our financing costs.

PROGRESS IN THE YEAR

This year we completed a £320.0 million

debt refinancing, including £220.0 million

term loan and £100.0 million revolving

credit facility with improved covenants.

We acquired £50.0 million of interest rate

caps taking the total to £250.0 million of

hedged debt.

We have paid down £22.0m of our

revolving credit facility reducing exposure

to unhedged interest rates.

KEY METRICS

33.1%

LTV

88.0%

of debt hedged

£36.0m

headroom

4.2%

weighted average

cost of debt

3.1x

interest

cover ratio

04

A disciplined financial position

17

Why we bought it

A strong strategic location was the key

rationale for our purchase of Bradwell

Abbey. It is in Milton Keynes, one of the

UK’s fastest growing cities and benefits

from close proximity to key transport

corridors including the M1 and A5 as well as

a large local labour force.

Importantly, it is a multi-let asset that had

been historically underinvested, providing

strong repositioning potential.

Rents were affordable, with an average

across the estate of £7.80 psf at acquisition

making it attractive to occupiers being

priced out of London, but also providing a

sensible base from which to grow.

What we have done

We are part way through delivering the

Tilstone asset management strategy,

with cosmetic improvements, improved

amenities for occupiers and new branding

all delivered.

We have refurbished c.15% of the asset and

re-let 22.2% of the space. The average rent

agreed across all our leasing activity since

purchase is c.£10.08 psf, 36.8% ahead of

prior passing rent.

Our refurbishment plans have raised the

percentage of EPC A–C rated space from

38% at acquisition to 75%.

The future

With 70,300 sq ft of lease events before

the end of FY25, we have the opportunity

to access further reversion and add more

higher-value occupiers to the park.

BRADWELL ABBEY, MILTON KEYNES

335,000

sq ft

£2.6m

p.a. rent

69

units

5.1

WAULT

39

occupiers

107,000

sq ft

8.2

year lease

Habitat

Bradwell Abbey

Habitat, the homewares retailer, use their space at

Bradwell Abbey as a virtual showroom. Website footage is

produced here and customers can call sales representatives

for virtual demonstrations.

THINKING INSIDE THE BOX

MILTON KEYNES

BRADWELL ABBEY

18

THINKING INSIDE THE BOX

What Genesys does

Genesys manufactures water treatment

chemicals for use in a wide variety of

industries, including water desalination,

mining, oil and gas, and food processing.

Water re-use is a key driver of Genesys’

business as a growing number of

companies, in line with their ESG ambitions,

are looking to recycle water rather than

discharge it as waste.

Operating through a network of 150

distributors, Genesys is part of international

group, H2O Innovation.

Why Midpoint 18 works

Midpoint 18 is strategically located just off

the M6 with easy access to international

freight lines through Liverpool, London

Gateway and Felixstowe docks. With

95% of Genesys’ products for export,

this connectivity is essential for the

successes of their business.

How their space has evolved

Genesys has been based at Midpoint 18

since 2012 and in that time has almost

doubled its footprint to 26,800 sq ft. Its

facilities now include offices and laboratory

space, in addition to two manufacturing

units in which Genesys recently invested

£0.7 million for specialist plant equipment.

Genesys has further investment plans for

the sites totalling £0.5 million.

MIDPOINT 18, MIDDLEWICH

725,000

sq ft

£3.7m

p.a. rent

24

units

3.5

WAULT

16

occupiers

THE STRATEGIC

LOCATION OF

MIDPOINT – CLOSE TO THE M6

AS WELL AS INTERNATIONAL

FREIGHT LINES – IS WHAT

REALLY UNDERPINNED OUR

DECISION TO BASE OUR

BUSINESS HERE.

Nick Davenport

Director Manufacturing and

Quality Manager

CHESTER

GENESYS/

MIDPOINT 18

OCCUPIER CASE STUDY

OCCUPANCY

LIKE-FOR-LIKE

RENTAL INCOME GROWTH

RENTAL INCREASES AGREED

VERSUS VALUER’S ERV

LIKE-FOR-LIKE

VALUATION CHANGE

96.4%

5.1%

8.6%

2.0%

96.4%

95.8%

93.7%

2022

2023

2024

5.1%

5.3%

3.0%

2022

2023

2024

8.6%

10.2%

6.0%

2022

2023

2024

2.0%

(18.5%)

19.4%

2022

2023

2024

Description

Total open market rental value of

the units leased divided by total

open market rental value, excluding

development property and land, and

equivalent to one minus the EPRA

vacancy rate.

Why is this important?

Shows our ability to retain occupiers

at renewal and to let vacant space,

which in turn underpins our income and

dividend payments.

How we performed

Active asset management, asset

disposals and the robust occupational

market helped us to increase occupancy

by 6 bps during the year to 96.4%.

Description

The increase in contracted rent of units

owned throughout the period, expressed

as a percentage of the contracted rent

at the start of the period, excluding

development property, land and units

undergoing refurbishment.

Why is this important?

Shows our ability to identify and acquire

attractive properties and grow average

rents over time.

How we performed

We delivered further good rental

growth, as we continued to capture the

reversionary potential in the portfolio

through active asset management.

Description

The difference between the rent

achieved on new lettings and renewals

and the ERV assessed by the external

valuer, expressed as a percentage above

the ERV at the start of the period.

Why is this important?

Shows our ability to achieve rental

growth ahead of ERV through asset

management and the attractiveness of

our assets to potential occupiers.

How we performed

We let space overall 8.6% ahead of ERV,

maintaining our strong track record of

exceeding valuers expectations.

Description

The change in the valuation of

properties owned throughout the period

under review, expressed as a percentage

of the valuation at the start of the

period, and net of capital expenditure.

Why is this important?

Shows our ability to acquire the right

quality of assets at attractive valuations,

add value through asset management

and drive increased capital values by

capturing rental growth.

How we performed

After last year’s adverse market

conditions, we have seen a 2.0%

increase in the like-for-like valuation as

general market conditions improve and

reflecting the quality of our portfolio.

TOTAL

ACCOUNTING RETURN

TOTAL

COST RATIO

EPRA NTA

PER SHARE

LOAN TO

VALUE RATIO

6.7%

24.4%

124.4p

33.1%

6.7%

(25.7%)

33.2%

2022

2023

2024

24.4%

28.4%

27.1%

2022

2023

2024

124.4p

122.6p

173.8p

2022

2023

2024

33.1%

33.9%

25.1%

2022

2023

2024

Description

The movement in EPRA NTA over a

period plus dividends paid in the period,

expressed as a percentage of the EPRA

NTA at the start of the period.

Why is this important?

Demonstrates the Group’s success at

creating value for shareholders.

How we performed

We delivered a total accounting return

of 6.7% in the year, below our target

as ongoing economic uncertainty

continues to weigh on the sector but

significantly ahead of last year reflecting

a increase in our valuation.

Description

The total cost ratio is the sum of

property expenses and administration

expenses (ex one-off costs) as a

percentage of gross rental income.

(See table 6 on page 136 for detail)

Why is this important?

Shows our ability to effectively control

our cost base, which in turn supports

dividend payments to shareholders.

How we performed

The total cost ratio improved further in

the year due to non-recoverable holding

costs on larger vacant buildings and a

lower investment advisor fee. Excluding

vacancy costs, the total cost ratio was

23.4%.

Description

The EPRA net asset value measure

assumes entities buy and sell assets,

thereby crystallising certain levels of

deferred tax liability. This is expressed

on a per share basis.

(See table 3 on page 136 for detail)

Why is this important?

Shows our ability to acquire well and to

increase capital values through active

asset management.

How we performed

The increase in capital values relative

to the market contributed to a 1.5%

increase in EPRA NTA per share to

124.4pence per share.

Description

Gross debt less cash, short-term

deposits and liquid investments,

divided by the aggregate value of

properties and investments.

(See table 10 on page 140 for detail)

Why is this important?

Shows our ability to balance the

additional portfolio diversification and

returns that come from using debt,

with the need to manage risk through

prudent financing.

How we performed

The decrease in the LTV primarily

reflects our proceeds from asset

disposals reducing our level of debt as

well as an increase in portfolio value.

Understanding our stakeholders’ views and interests is essential for meeting

our responsibilities and creating economic and social value.

OUR APPROACH TO

STAKEHOLDER ENGAGEMENT

Tilstone is responsible for most of our day-to-day

stakeholder engagement, with the Board receiving

regular updates. In addition, the Management

Engagement Committee (“MEC”) reviews service

provider performance each year, including their policies

and procedures around ethics and culture and their

engagement with our other service providers.

The MEC’s report can be found on pages 86 to 87.

Further information on ESG-related engagement

can also be found in the sustainability section on

pages 88 to 89.

OCCUPIERS

Why we engage

Our occupiers provide us with rental income; having

the right mix of occupier supports income resilience

and potential for rental growth. Tilstone’s approach

to building occupier relationships ensures a robust

understanding of current and potential occupiers and

their needs.

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 ambitions, primarily

improving energy efficiency

How we engage

•

Regular communication with existing occupiers via

the Tilstone and property management teams

•

Tilstone asset management team regularly onsite;

permanent office in Milton Keynes

•

Occupier surveys, including on ESG matters (see

page 40 in the sustainability section)

•

The Board receives regular updates on occupiers

from the Tilstone team

Outcomes

•

Retention rate of 76.0%

•

Engagement supported 36 lease renewals across

0.4 million sq ft

•

Targeted marketing supported 45 new leases across

0.2 million sq ft

•

11.4% by sq ft have shared energy data following

initial engagement

•

Defibrillators fitted at 3 key sites

•

Delivering occupier amenities, including a café at

Bradwell Abbey, Milton Keynes

22

THINKING INSIDE THE BOX

STAKEHOLDER ENGAGEMENT

SHAREHOLDERS

Why we engage

Supportive and informed shareholders provide insightful

feedback on our strategy and are vital to the growth of

our business, for example, our ability to raise equity to

fund future growth opportunities.

Their material issues

•

Key market trends

•

Strategy and business model

•

Operational and financial performance

•

Balance sheet strength

•

ESG strategy, compliance and performance

• Climate risk

•

Dividends and total returns

How we engage

•

Formal results presentations every six months,

available on website

•

Capital markets events as appropriate

•

Regular updates on leasing and capital activity

•

Shareholder meetings and roadshows undertaken by

Tilstone

•

Feedback provided by corporate brokers and

Tilstone to the Board

•

Board and Tilstone available for questions at AGM

every year

•

Website providing Company information

See the shareholder relations section on pages 148 to

149 for more information.

Outcomes

•

Maintained the dividend at 6.4 pence per share

•

Tour of Bradwell Abbey and presentation for

professional investors and analysts

•

Developed and enhanced our ESG disclosure

including voluntarily reporting under TCFD

LENDERS

Why we engage

Employing an appropriate level of debt is a key part of

generating financial returns. We therefore need strong

relationships with lenders, who can provide the facilities

we need on appropriate terms.

Their material issues

•

Quality of security

•

Compliance with covenants

•

Good working relationships

•

Ability to provide an accordion facility when required

•

Hedging of interest rates where appropriate

How we engage

•

Tilstone engages with lenders through regular

meetings to support our relationships

•

The Board is kept informed of lender view by Tilstone

•

Regular portfolio updates via compliance reporting

•

Quarterly reviews of hedging and other funding

matters with lenders and advisors

Outcomes

•

New £50.0 million interest rate cap taking total

hedged debt to £250.0 million and increasing the

proportion of hedged debt to 88.0%

•

Five-year refinancing completed with new club of

lenders with improved covenants

•

£53.0 million of asset sales, reducing LTV to 33.1%

THE INVESTMENT ADVISOR

Why we engage

Tilstone implements our strategy and is responsible for

the day-to-day operation of the business, making it a

critical stakeholder for the Group.

Their material issues

•

Clear investment strategy

•

Day-to-day asset management

•

Attracting and retaining an expert team

•

Code of conduct and Group policies

•

Management of other suppliers

•

Open communication and alignment of values

How we engage

•

Open, regular and transparent discussions with

Tilstone, including attendance at Board meetings

•

Tilstone representatives appointed to the Board

•

Tilstone interests fully aligned to shareholders given

their 6.8% shareholding

•

Annual staff survey for the Tilstone team and formal

appraisal and feedback process

See the MEC report on pages 86 to 87 for more

information.

Outcomes

•

Tilstone fee reduced to £5.7 million in line with

movement in NAV

•

Tilstone continued to execute the Company’s

strategy in line with the Board’s expectations

•

The Board has approved Tilstone’s continued

appointment, on the MEC’s recommendation

23

OTHER THIRD-PARTY SERVICE PROVIDERS

Why we engage

Under our business model, third parties provide key

services to us. These include G10 Capital Limited

(Investment Manager), Savills and Rapleys (Aston

Rose) (Property Managers), Waystone (Administrator),

MUFG (Registrar and Company Secretary), AuditR

(risk management and internal audit advisor), BDO

(Auditor), Peel Hunt and Jefferies (Corporate Brokers),

FTI Consulting (financial PR and IR advisor) and

GenII (Depositary).

Their material issues

•

Clear terms of reference

•

Clarity of fees and prompt payment

•

Open two-way communications and information flow

How we engage

•

Quarterly service calls between Tilstone and service

providers

•

The Board maintains regular contact with key service

providers via Tilstone, with the aim of building

long-term relationships

•

Clear supplier appointment process including

Supplier Code of Conduct and checklist for

third-party suppliers

See the MEC report on pages 86 to 87 for

more information.

Outcomes

•

Higher-quality service providers appointed

•

Service providers’ advice, needs and views,

are routinely taken into account

• Prompt payment

LOCAL COMMUNITIES

Why we engage

We are aware of our wider responsibilities to the local

communities affected by the Company’s investments.

Their material issues

•

Noise and traffic

•

Health and safety

• Environmental performance

• Employment opportunities

How we engage

•

The Board ensures that any key decisions take into

account the impact on local communities and the

environment

•

The Company meets all health and safety

requirements, local environmental standards on

waste and other regulatory obligations

•

Building relationships with organisations and

charities close to our assets

•

Working with Pathways to Property to encourage

young people from disadvantaged backgrounds to

careers in real estate

Outcomes

•

Commitment to EPRA sustainability reporting

•

New lettings/renewals providing additional

employment opportunities

•

£10,600 charitable donations across Tilstone and

Warehouse REIT, including £5,000 to Bus Shelter,

a homeless charity in Milton Keynes

•

Volunteering at Bradwell Abbey Discovery Centre,

a local community organisation

•

2 Tilstone members participated in Pathways to

Property event in Birmingham

24

THINKING INSIDE THE BOX

STAKEHOLDER ENGAGEMENT

CONTINUED

CASE STUDY

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.

Set out on the following pages 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 22 to 24. 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;

•

refinancing of the Group’s debt facilities for a further

five-year tenure;

•

the purchase of an additional £50.0 million interest rate

derivatives, capping SONIA at 2.0%;

•

the asset disposal programme, which raised

£53.0 million during the year; and

•

progressed the sale of Radway Green, Crewe.

Proposed sale of Radway Green

Background

In June 2023, the Group announced a potential pre-let

to an occupier for Phase I of the development at

Radway Green, Crewe. While progressing with the

letting negotiation, the occupier indicated that they

had won additional contracts and needed to take space

immediately. Due to the accelerated timetable and

enhanced space requirement, the Group was unable to

meet these time frames and the negotiations ceased.

Concurrently, in September 2023, the Board reviewed

the Group’s strategy and the Investment Advisor,

Tilstone, asked the Board to approve the sale or part

sale of its land holding at Radway Green, Crewe, as

part of its plan to reduce the level of variable-rate debt,

given the higher-for-longer interest rate environment.

Stakeholder considerations

In making its decision, the Board considered the impact on

the following stakeholders:

•

Shareholders.

The financial benefit of any disposal

is the crystallisation of gains accrued through the

successful planning applications which will be returned to

shareholders via ordinary dividends declared during the

year. Shareholders also benefit from a significant saving

in interest costs as the unhedged revolving credit facility

is repaid. The Group also saves the significant capital

expenditure that the assets would otherwise require.

•

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 a disposal would give increased comfort

to lenders.

•

Investment Advisor.

Having maximised the potential

planning upside from Phase I of the scheme, the

Investment Advisor can dedicate resources to driving

returns from the existing portfolio through active

asset management.

•

Service providers.

The timing of the sale is 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 is expected to deliver

an accelerated development timeline, providing earlier

employment opportunities to individuals in the Crewe area.

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,

a disposal would reduce future outflows of capital

expenditure. Significantly, by assisting with the return to

a covered dividend, it would help to protect the Group’s

long-term relationships with its shareholders.

Conclusion

The Board concluded that a disposal of Radway Green would

be in the best interests of the Group and its stakeholders,

and the programme should go ahead. Negotiations are now

well progressed.

SECTION 172(1) STATEMENT

25

Matter

Response

a) The likely

consequence of

any decision in the

long term.

All Board decisions involve careful consideration of the

longer-term consequences and their implications for

stakeholders. For example, during the year the Board

approved the disposal of Radway Green, Crewe (detailed

on page 25, which will deliver important longer-term

benefits for the Company.

b) The interests of the

Company’s employees.

The Company is externally managed and therefore does

not have any employees.

c) The need to foster

the Company’s business

relationships with

suppliers, customers and

others.

As described on page 22, the Group’s relationships with

its occupiers is managed day-to-day by the Investment

Advisor, Tilstone, with the Board kept regularly updated.

The Board oversees the Group’s relationships with all

its principal service providers through the Management

Engagement Committee. As a result of its oversight and

review, during the year the Committee recommended

the continuing appointment of Tilstone and the other key

service providers.

d) The impact of the

Company’s operations

on the community and

environment.

The Board takes a keen interest in the Group’s

environmental performance and the energy efficiency of

its assets, as reflected in the portfolio’s EPC ratings. The

Sustainability Committee provides a dedicated forum

for overseeing and directing our ESG activities, and the

Committee Chair Aimée Pitman has been closely involved

in the key activities this year, such as the development of

our net zero pathway and analysis of climate-related risks.

For more information on our environmental performance

and community engagement, see pages 36 to 42.

Matter

Response

e) The desirability of the

Company maintaining

a reputation for high

standards of business

conduct.

The Board has a culture statement, setting out its

commitment to ethics and high standards of business

conduct. All of the key service providers are expected to

abide by these standards.

Reputational risks are also considered as part of the

Group’s risk management framework, as described in

the risk management and principal risks section on

pages 51 to 60.

As part of the Board’s ongoing review of corporate

governance, the Board continues to review all current

policies for relevance and compliance annually.

f) The need to act fairly

between members of the

Company.

The Board is aware of the need to treat all shareholders

equally. No decisions arose in the year where shareholders

could be treated differently.

In addition, Board members and members of Tilstone’s

senior management own a total of 27.8 million shares in

the Company between them, aligning their interests with

the outcomes delivered for shareholders as a whole.

26

THINKING INSIDE THE BOX

SECTION 172(1) STATEMENT

CONTINUED

GOOD PROGRESS WITH OUR PRIORITIES

At the start of the financial year, we set ourselves four

priorities for FY24. These were to:

•

capture the reversionary potential in the portfolio;

•

recycle capital by disposing of assets, enabling us to

pay down the Group’s floating rate debt, strengthen the

balance sheet and support earnings;

•

progress the Radway Green development scheme; and

•

increase dividend cover, by driving earnings through

these actions.

We made good progress with the first two of these

priorities, and we have a clear plan in place to deliver value

from Radway Green, Crewe, which will position the Group

to increase its dividend cover over time.

PRIORITY: CAPTURING REVERSION

At the year end, the contracted rent roll for the investment

portfolio (excluding developments) was £44.6 million,

compared to an ERV of £53.5 million. The difference

reflects £7.0 million (or 13.1%) of portfolio reversion and

£1.9 million of potential rent on vacant space.

The structure of the Group’s leases supports capturing this

reversion, with less than 10% being index linked through

either a cap or collar arrangement. This flexibility is an

important advantage in a more inflationary environment

We made good progress capturing reversion in FY24, with

a total of 103 lease events completed, covering 1.5 million

sq ft. As a result, we were able to capture £3.0 million

of new contracted rent for the year, with £0.9 million of

contracted rent coming from the letting vacant space.

Total contracted rents for the investment property

portfolio stood at £44.6 million at year end, an increase of

5.1% on a like-for-like basis during the year.

The table following demonstrates the potential for

continuing to capture reversion in the years ahead.

These represent good opportunities for further rental

growth and reflects the position before any further ERV

growth or outperformance.

Rent subject to review or

lease expiry

Contracted

rent (£m)

ERV

(£m)

FY25

12.6

16.1

FY26

8.0

9.1

FY27

5.7

6.5

FY28

5.4

5.6

FY28+

12.9

14.3

PRIORITY: CAPITAL RECYCLING

We keep the portfolio under constant review, to identify

mature or non-core assets that are candidates for disposal.

This has been a particular focus in FY24.

During the year, the Group sold seven estates for

£53.0 million. This was 15.6% ahead of their aggregate

book value, crystallising a profit on disposal of £5.5 million

in the year, and reflecting a blended net initial yield of 5.0%.

Sales have focused on single-let assets, or assets where

we have substantially completed our asset management

initiatives leaving little further upside. This good

performance demonstrates our ability to match assets that

are non-core for Warehouse REIT with pockets of demand

across the market. We will continue to rigorously assess

our portfolio to ensure we remain focused on the highest

returning opportunities to maximise value for shareholders.

The assets sold in FY24 were:

•

Dales Manor Business Park, Cambridge for

£27.0 million;

•

Warrington South Industrial Estate, for

£11.6 million; and

•

smaller assets in Ipswich, Ellesmere Port, the Isle of

Wight, Cardiff and Halifax totalling £14.4 million.

The Group’s total asset sales since we announced the

disposal plan in November 2022 stood at £107.7 million at

31 March 2024. Since the year end, we have announced

further disposals totalling £57.5 million. This takes

total dispsals since November 2022 to £165.2 million

demonstrating the liquidity of the Group’s portfolio. See

Post-Period End Activity for more information.

Simon Hope

Co-Managing Director

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.

Simon Hope

Co-Managing Director

INVESTMENT ADVISOR’S REPORT

27

PRIORITY: PROGRESSING RADWAY GREEN

Radway Green is the Group’s key logistics development

opportunity, in a premier location just 1.5 miles from

Junction 16 of the M6 near Crewe. At the interim results

in November 2023, the Group announced that it was

evaluating options for the scheme, including the sale

of all or part of Radway Green, and that it would not

progress the development alone. Negotiations are now

well advanced.

This is a highly attractive scheme, with full planning

permission and the potential to deliver at least 1.8 million

sq ft of space, across two phases of 0.8 million sq ft and

1.0 million sq ft.

PRIORITY: INCREASE DIVIDEND COVER

Adjusted earnings per share was 4.8 pence for the year

(FY23: 4.7 pence), representing cover of 75.0% of the

total dividend for the year of 6.4 pence. The table below

reconciles the movement in adjusted EPS between the

two years:

Adjusted earnings per share

Pence

For the year ended 31 March 2023

4.7

Rental income and dilapidations

(0.1)

Reduced non-recoverable property expenses

0.2

Reduced investment management fee and

other administrative expenses

0.2

Net finance costs

(0.2)

For the year ended 31 March 2024

4.8

The actions we have taken in FY24 position the

Group to deliver rising earnings and dividend cover

moving forwards.

In FY24, the Group generated profits on disposals of

£5.5 million or 1.3 pence per share. Adding these profits

to adjusted EPS results in earnings of 6.1 pence per share,

increasing dividend cover on a cash basis to 95.3% for

the year.

AN ATTRACTIVE AND RESILIENT PORTFOLIO

Focus on multi-let estates

The Group is highly focused on multi-let estates, which

made up 71.6% of the portfolio by value at the year end

(excluding development land). We favour these estates

because they:

•

offer more asset management opportunities than

single-let assets, helping us to raise the rental tone more

quickly and capture the reversion created;

•

reduce risk by having a more diverse range of occupiers,

spread across different industries;

•

provide flexibility for occupiers with a range of unit sizes

to suit the life cycle of a company and the ability to

scale up by taking multiple units; and

•

are a scarce asset class, with rebuild costs generally

below capital values, constraining supply and

supporting rental growth.

The portfolio analysis table below provides more

information on the split between multi-let and single-let

assets at the year end.

A strategically located portfolio

The portfolio is spread across important economic

hubs, in gateway locations with access to major arterial

routes and a plentiful local labour force. This contributes

to occupier demand and the potential for long-term

rental growth.

In particular, the portfolio has exposure to key industrial

hubs in:

•

the North West (25.1% of the investment portfolio);

•

the Midlands (22.7%); and

•

the Oxford-Cambridge Arc, centred on Milton Keynes

(24.2%).

28

THINKING INSIDE THE BOX

INVESTMENT ADVISOR’S REPORT

CONTINUED

Portfolio analysis

At the year end, the investment portfolio comprised 642 units across 7.8 million sq ft of space

(31 March 2023: 833 units across 8.2 million sq ft). The table below analyses the portfolio as at 31 March 2024:

Value (£m)

Occupancy

by ERV

(%)

NIY (%)

Equivalent

yield (%)

Average

rent (£ per

sq ft)

ERV

(£ per sq

ft)

Capital

value (£

per sq ft)

Multi-let more than 100k sq ft

373.5

96.1

5.6

6.4

5.84

6.82

90.93

Multi-let less than 100k sq ft

150.4

92.7

6.0

6.8

6.89

7.58

99.32

Single-let regional distribution

129.9

100.0

5.5

6.1

5.54

6.55

94.09

Single-let last mile

78.0

100.0

6.0

6.6

6.49

7.48

94.79

Total

731.8

96.4

5.7

6.5

6.05

6.99

93.52

Development land

78.4

Total portfolio

810.2

Capital values show upside potential

The NIY of the investment portfolio was 5.7% at

31 March 2024, with a reversionary yield of 6.8%.

The average capital value across the portfolio was

£93.52 per sq ft, which remains well below the

reinstatement value for this type of asset, which is

£116.16 per sq ft on our portfolio.

Occupancy remains high

Occupancy across the investment portfolio remained high

at 96.4% at the year end (31 March 2023: 95.8%). Effective

occupancy, which excludes units under offer to let or

undergoing refurbishment, was 97.6% (31 March 2023:

98.4%), with 0.4% of the investment portfolio under offer

to let and a further 0.8% undergoing refurbishment at

that date.

The weighted average unexpired lease term for the

investment portfolio stood at 5.0 years (31 March 2023:

5.5 years).

DIVERSE OCCUPIER BASE INCREASES

RESILIENCE

The Group has a diverse occupier base of 445 businesses,

with around 73.8% generating revenues of more than

£10 million and around 89.2% exceeding £1 million of

revenues.

The table below shows the occupier split by sector at the

year end:

Occupier base by sector at 31 March 2024

Contracted

rent %

Wholesale and trade distribution

35.0

Food and general manufacturing

28.0

Services and utilities

17.8

Transport and logistics

11.8

Technology, media and telecoms

3.1

Construction

2.9

Other

1.4

100

The Group’s rent roll is also well diversified. The top 15 occupiers account for 36.3% of the contracted rents from the

investment portfolio, with the top 100 generating 77.7%.

Top 15 occupiers at

31 March 2024

Rent

£m

% of

total

rent

D&B

score

Amazon UK Services Limited

3.2

7.3

5A2

John Lewis plc

1.9

4.3

5A1

Wincanton Holdings Limited

1.9

4.2

5A1

DFS Limited

1.3

3.0

5A2

Direct Wines Limited

1.2

2.6

N2

Alliance Healthcare

(Distribution) Limited

0.9

2.1

5A2

Argos Limited

0.8

1.9

5A2

Magna Exteriors

(Liverpool) Limited

0.8

1.9

N-

International Automotive

Components Limited

0.8

1.8

4A4

Evtec Aluminium

Technologies Limited

0.7

1.4

N4

Emerson Process

Management Limited

0.7

1.4

5A2

Howden Joinery

Properties Limited

0.5

1.1

N3

A. Schulman

Thermoplastics Limited

0.5

1.1

4A2

Colormatrix Europe Limited

0.5

1.1

5A2

Magna Exteriors

(Banbury) Limited

0.5

1.1

C3

Total

16.2

36.3

29

This spread of occupiers across industries and business

sizes means the Group is not reliant on any one occupier or

industry. This increases the Group’s resilience and helps to

mitigate both financial and leasing risks.

Contracted rent by occupier size

%

Top 15 occupiers

36.3

Occupiers 16 – 25

9.2

Occupiers 26 – 50

15.9

Occupiers 51 – 100

16.2

Others

22.4

100.0

Occupiers remain in robust shape

We monitor the strength of the occupiers’ covenants by

using credit software such as Dun & Bradstreet, anti-

money laundering software such as Dow Jones, monitoring

news flow and analysing company reports. This keeps

us informed of how evolving macroeconomic conditions

are affecting their businesses. For smaller occupiers, the

Group also often has the benefit of rent deposits, giving it

additional protection from bad debts.

Overall, the Group’s occupiers appear well placed in

the current environment, which is reflected in our rent

collection and the continued low level of bad debts (see

the Financial Review). As at 17 June 2024, we had collected

99.3% of the rent due in respect of the year and we expect

this to increase further as we work with occupiers to

collect the outstanding amount.

Working with occupiers

While the Group’s outsourced property managers handle

some day-to-day administrative tasks with occupiers,

we ensure that we always own the occupier relationship.

Our asset management team regularly visits sites, meets

occupiers face to face and holds calls with them. Initiatives

such as the recently opened estate office at Bradwell

Abbey in Milton Keynes enable our team to be on site, build

stronger relationships and helps develop letting interest.

We also run surveys to obtain insights from occupiers,

so we can support them better and to inform our asset

management plans. These typically cover current and

future space requirements, the number of people on site,

where their stock comes from and goes to, what, if any,

on site amenities they would value and what their ESG

priorities are. This year our occupier survey covered the

top 25 occupiers and two of the Group’s largest estates;

responses covered around 19% of contracted rents. It was

conducted in person, providing an excellent opportunity to

develop these key relationships.

LEASING ACTIVITY

Robust occupier demand has helped us to continue

to capture the reversion in the portfolio through lease

renewals and new lettings. New leases were ahead of ERVs,

while lease renewals and rent reviews are achieving strong

average uplifts against previous rental levels.

New leases

The Group completed 45 new leases on 0.2 million sq ft of

space during the year, which will generate annual rent of

£1.6 million, 37.7% ahead of the previous contracted rent

and 8.7% ahead of the 31 March 2023 ERV. The level of

incentives has reduced compared with the prior year.

Highlights are shown in the table below:

Increase over

Estate

Lease length

(years)

Annual rent

(£)

Previous

rent

ERV at

31/3/23

Halebank Industrial Estate, Widnes

5

325,000

+50.2%

+1.6%

Delta Court Industrial Estate, Doncaster

5

138,800

+15.7%

+12.0%

Bradwell Abbey, Milton Keynes

3

97,000

–

+10.5%

Delta Court Industrial Estate, Doncaster

10

89,100

+31.0%

+40.6%

Lease renewals

The Group continues to retain the majority of its occupiers, with 76.7% remaining in occupation at lease expiry and 74.3%

with a break arising in the year.

There were 36 lease renewals on 0.4 million sq ft of space during FY24, with an average uplift of 36.7% above the previous

passing rent and 9.9% above the ERV.

Highlights are shown in the table below:

Increase over

Estate

Lease length

(years)

Annual rent

(£)

Previous

rent

ERV at

31/3/23

Kingsland Grange, Warrington

5

498,000

+42.3%

+27.3%

Matrix Park, Eaton Point

5

320,500

+22.7%

In-line

South Fort Street, Edinburgh

10

200,200

+30.1%

+5.5%

Knowsley Business Park, Knowsley

10

118,900

+37.5%

In-line

30

THINKING INSIDE THE BOX

INVESTMENT ADVISOR’S REPORT

Rent reviews

During the year, we completed 22 rent reviews, generating an additional £5.6 million per annum, 23.9% ahead of previous

rent and 8.0% ahead of the March 2023 ERV.

Highlights are shown in the table below:

Increase over

Estate

Agreed

passing rent

(£)

Previous

rent

ERV at

31/3/23

Chittening Industrial Estate, Bristol

390,000

+51.0%

+3.2%

Lynx Business Park, Newmarket

334,500

+28.6%

+28.6%

Howley Park Industrial Estate, Morley

304,500

+31.5%

+15.0%

TARGETED CAPITAL EXPENDITURE DRIVING

RENTAL GROWTH AND IMPROVED ENERGY

PERFORMANCE

On average, the Group budgets 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. Our priorities

when investing in the estate are to drive rental growth,

improve EPC ratings and secure other ESG improvements.

Approximately 20% of capex is typically directed to

EPC-related improvements and all capex must generate a

minimum return of 10% on the capital deployed. Our capital

expenditure plans also take account of local demand and

supply, the requirements of individual units versus the

overall estate, and our longer-term aspirations to hold or

sell the asset.

Total capital expenditure in the year was £3.3 million,

equivalent to 0.4% of GAV excluding developments. At the

year end, approximately 0.8% of the portfolio’s ERV was

under refurbishment (31 March 2023: 1.3%).

FINANCIAL REVIEW

Performance

Rental income for the year was £44.0 million (FY23: £45.8

million), with the reduction reflecting the impact of asset

disposals, partially offset by the Group’s leasing activity,

EPRA like-for-like rental growth of 5.7% and a full year

contribution from Bradwell Abbey (acquired in the first half

of FY23).

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 £16.0 million

(FY23: £18.9 million), with the cost base benefiting from a

reduction in the Investment Advisor’s fee of £1.2 million to

£5.7 million (FY23: 6.9 million) and lower vacancy costs,

following successful lettings activity in the year.

The net increase in the expected credit loss allowance

remained low at £0.2 million (FY23: £0.2 million). This

reflects the diversity and quality of the Group’s occupiers

and our close relationships with them.

The total cost ratio, which is the adjusted cost ratio including

direct vacancy costs, was 24.4% (FY23: 28.4%). The ongoing

charges ratio, representing the costs of running the REIT as

a percentage of NAV, was 1.4% (FY23: 1.3%).

The Group disposed of assets totalling £53.0 million in the

year, resulting in a net profit on disposal of £5.5 million.

At 31 March 2024, the Group recognised a gain of

£15.1 million on the revaluation of its portfolio (FY23: loss

of £193.4 million). See the Valuation section below for

more information.

Financing income in the year was £8.5 million (FY23:

£6.9 million), including £8.2 million (FY23: £2.0 million)

of interest receipts from interest rate derivatives.

Financing costs include the interest and fees on the

Group’s revolving credit facility (“RCF”) and term loan (see

Debt Financing and Hedging). The finance expenses were

£24.6 million (FY23: £15.5 million). While the impact has

been partly mitigated by the Group’s interest rate caps

(see below), the all-in cost of debt for the year reduced

to 4.2% (FY23: 4.3%). The Group also had a £5.2 million

change in fair value of derivatives (FY23: £4.9 million

gain), as well as £1.7 million related to the accelerated

amortisation of loan issue costs, as a result of the debt

refinancing in the first half of the year (see page 32).

The statutory profit before tax was £34.3 million

(FY23: £182.9 million loss).

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 (FY23: £nil).

Earnings per share under IFRS was 8.1 pence

(FY23: 43.0 pence loss per share). EPRA EPS was

2.9 pence (FY23: 3.9 pence). Adjusted earnings per share

was 4.8 pence (FY23: 4.7 pence).

31

Dividends

The Company has declared the following interim dividends in respect of the year:

Quarter to

Declared

Paid/to be paid

Amount (pence)

30 June 2023

31 August 2023

6 October 2023

1.6

30 September 2023

15 November 2023

29 December 2023

1.6

31 December 2023

26 January 2024

2 April 2024

1.6

31 March 2024

25 June 2024

26 July 2024

1.6

Total

6.4

The total dividend was therefore in line with the Group’s

target for the year of 6.4 pence and was 95.3% covered by

adjusted EPS and profit on sale of investment properties.

Three dividends were property income distributions and

one was a non-property income distribution. The cash

cost of the total dividend for the year will be £27.2 million

(FY23: £27.6 million).

Valuation

The portfolio was independently valued by CBRE as at

31 March 2024, 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

2021 – UK national supplement.

The portfolio valuation was £810.2 million (31 March 2023:

£828.8 million), representing a 2.0% like-for-like valuation

increase. The value of the investment portfolio was up 2.6%

on a like-for-like basis with development land down 2.5%

reflecting the impact of higher interest rates on financing

development schemes.

The EPRA NIY at the year end was 5.4% (31 March 2023:

5.0%) and the EPRA topped up NIY was 5.6% (31 March

2023: 5.5%). Whilst there was some softening in valuation

yields in the December 2023 quarter across the whole,

FY24 valuation yields for mulit-let warehouses generally

remained flat. The increase in valuation was therefore

driven by an increase in rental levels and ERVs brought

about by a combination of market forces and active

asset management.

Net asset value

EPRA Net Tangible Assets (“NTA”) per share was

124.4 pence at 31 March 2024 (31 March 2023: 122.6 pence.)

The table below reconciles the movement in the EPRA NTA

in FY24:

EPRA NTA per share

Pence

As at 31 March 2023

122.6

Adjusted earnings

4.8

Profit on disposals

1.3

Dividends

(6.4)

Valuation movement

3.5

Accelerated borrowing costs

(0.4)

Cost of interest rate caps taken out in the

year

(1.0)

As at 31 March 2024

124.4

Debt financing and hedging

The Group refinanced its debt facilities in the first half of

FY24, extending the term and improving the covenants.

The new £320.0 million facility comprises a £220.0 million

term loan and a £100.0 million RCF. It replaces the

Company’s previous £320.0 million debt facility and

extends the tenure from January 2025 to June 2028.

The facility is provided by a club of four lenders: HSBC,

Bank of Ireland, NatWest and Santander. The minimum

interest cover is 1.5 times, compared to 2.0 times under the

previous facility, and the maximum LTV has been extended

from 55% to 60%. Both the term loan and the RCF attract

a margin of 2.2% plus SONIA for an LTV below 40% or 2.5%

if the LTV is above 40%.

At 31 March 2024, £64.0 million was drawn against the RCF

and £220.0 million against the term loan. This gave total

debt of £284.0 million (31 March 2023: £306.0 million),

with the Group also holding cash balances of £16.0 million

(31 March 2023: £25.1 million). The LTV ratio at 31 March

2024 was therefore 33.1% (31 March 2023: 33.9%). Interest

cover for the period was 3.1 times, meaning the Group was

substantially within the covenants in the debt facility.

At the year end, the Group had £250.0 million of interest

rate caps in place, of which £200.0 million fixed SONIA

at 1.5% and £50.0 million fixed SONIA at 2.0%. The Group

took out the £50.0 million cap in November 2023, to

replace a £30.0 million cap that expired in the month.

We continue to explore opportunities to diversify the

Group’s sources of debt funding, extend the average

maturity of its debt and further reduce the average cost

of debt.

32

THINKING INSIDE THE BOX

INVESTMENT ADVISOR’S REPORT

CONTINUED

TILSTONE PARTNERS LIMITED

As the Investment Advisor, our team plays a crucial role in

the Group’s success. Our people have a range of relevant

skills, including real estate investment, asset management,

finance and sustainability.

While everyone who joins us has the experience and

qualifications they need for their role, we are committed

to supporting professional and personal development and

training. We therefore run an annual appraisal process and

provide both statutory and individual training, according

to each person’s job or personal requirements. This year

we have provided some additional disclosure on training

and development within our EPRA Sustainability tables

(see page 146).

In March 2024 we also conducted our first employee

survey. We had a 100% participation rate and were

particularly pleased that over 90% rated their overall

working environment as Very Good or Good. Responding

to the survey, we have introduced a number of benefits,

including employee volunteering days and match funding.

We set annual objectives which align to our values and

every employee has at least one ESG-related objective.

Diversity and inclusion are important to us, as we recognise

the benefits of diverse viewpoints and life experiences.

At the year end, our gender diversity was 55% male, 45%

female across the Investment Advisor.

POST-PERIOD END ACTIVITY

The Group exchanged or completed on the sale

of £57.5 million of three-let assets in four separate

transactions. These sales bring the total since 1 April 2023

to £110.5 million.

The transactions comprise Barlborough Links in

Chesterfield, which has exchanged for £46.0 million,

Parkway Industrial Estate in Plymouth sold for £6.3 million,

Celtic Business Park and Newport sold for £5.2 million.

Also in June 2024, the Group exchanged contracts

to acquire Ventura Retail Park in Tamworth, a retail

warehousing asset for £38.6 million, representing a net

initial yield of 7.4% Ventura is one of the top 20 shopping

parks in the UK with an excellent occupier line up including

Boots, Sports Direct and H&M. Comprising 13 units and

covering 119,000 sq ft, it is part of a larger retail cluster

including M&S and Asda, adjacent to the A5.

COMPLIANCE WITH THE INVESTMENT POLICY

The investment policy is summarised below. The Group

continued to comply in full with this policy throughout

the year.

33

Investment policy

Status

Performance

The Group will only invest in warehouse assets in the UK.

All of the Group’s estates are UK-based warehouses.

No individual warehouse will represent more than 20% of the Group’s last published gross asset value

(“GAV”), at the time it invests.

The largest individual warehouse represents 5.8% of GAV.

The Group will target a portfolio with no one occupier accounting for more than 20% of its gross contracted

rents at the time of purchase. No more than 20% of its gross assets will be exposed to the creditworthiness

of a single occupier at the time of purchase.

The largest occupier accounts for 7.3% of gross contracted

rents and 6.4% of gross assets.

The Group will diversify the portfolio across the UK, with a focus on areas with strong underlying investment

fundamentals.

The portfolio is well balanced across the UK, as shown in the

chart on page 04.

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’s exposure to assets under development (including pre-let assets, forward fundings or assets

which have been at least partially de-risked), assessed on a cost basis, will not exceed 20% of gross assets

at the time of purchase.

The Group may invest directly, or through forward funding agreements or commitments, in developments

(including pre-developed land), where:

•

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 may, where considered appropriate, undertake an element of speculative development,

provided that the exposure to these assets, assessed on a cost basis, does not exceed 10% of gross assets.

Speculative developments are those which have not been at least partially leased, pre-leased or de-risked in

a similar way.

The Group’s exposure to developments at the year end was

9.7% of GAV.

The Group views an LTV of between 30% and 40% as optimal over the longer term but can temporarily

increase gearing up to a maximum of LTV of 50% at the time of an arrangement, to finance value-enhancing

opportunities.

The LTV at 31 March 2024 was 33.1%.

The Group’s full investment objective and policy are set out on page 148.

34

THINKING INSIDE THE BOX

INVESTMENT ADVISOR’S REPORT

CONTINUED

GOING CONCERN

In preparing the financial statements, we and the

Company’s Board are required to assess whether the

Group remains a going concern. During the year, the Group

generated total property income of £51.0 million and

operating profits of £35.0 million, showing that rents would

have to fall by approximately 31.4% before the business

became loss-making. This is considered highly unlikely

given the high occupational demand for warehouse assets,

our strong relationships with the broad range of occupiers

across the portfolio, the level of rent collection and the fact

that the portfolio ERV exceeds the year-end contracted

rent roll by 20.0%.

At the same time, the Group has a strong balance sheet,

with substantial cash and headroom within its facilities at

the year end of £45.9 million. The Group has refinanced its

debt facilities, extending the term by more than three years

to June 2028, and at the date of this report has interest

rate caps on £250.0 million of debt.

We and the Company’s Board have also carefully reviewed

the risk landscape and do not believe that the risks facing

the Group have materially increased. As a result, we are

confident that the Group remains a going concern.

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.

Simon Hope

Tilstone Partners Limited

24 June 2024

35

Building on the net zero commitments we made in

2022/23, we have further embedded sustainability into the

way we do business. Our sustainability programme creates

value by making our portfolio more resilient to the impact

of climate change and means that our offer is better

aligned to the needs of today’s businesses. Improving

our ESG performance is also important for many of our

shareholders, so while we are pleased with the progress we

have made this year, we recognise that there is more work

to be done.

Improving EPC ratings has been a key focus for the year

and is central to our commitment to create a resilient

portfolio. At year end, 66.6% of our space was EPC A–C

rated, up from 60.2% at the start of the year and we have

more than doubled the percentage of A and B rated

space to 26.5%. We typically refurbish our space at lease

events and our refurbishment standards target a minimum

B rating. This means we are not incurring capex sooner

than necessary and are minimising inconvenience for our

occupiers. At the same time, we regularly share insights on

how our occupiers can drive energy efficiency, delivering

ratings improvements outside of lease events. We are

therefore confident of meeting the initial guidance relating

to proposed MEES legislation.

To reduce our carbon footprint, last year we committed to

reducing our scope 1 and 2 emissions by 4.2% annually. We

recognise that these only account for a small percentage

of our overall emissions compared to scope 3 where we

are building our knowledge. This year, we achieved a 2.8%

reduction in scope 1 and 2 emissions on a like-for-like basis,

which is below our target due to higher gas consumption

last summer on two units but also reflects the small pool of

assets in the like-for-like calculation.

Reducing scope 3 emissions, primarily occupier energy

consumption, will be more impactful. This is an area where

we have far less control, and do not yet have full visibility,

making it hard to benchmark performance. We have taken

the first steps towards addressing that this year and have

worked with Savills to estimate energy consumption across

over 50% of our space (see page 42). At the same time,

we are engaging closely with occupiers to secure their

permission to collect unit-specific data. These projects

have enabled us to report some scope 3 emission data for

the first time. The more data we gather, the better placed

we will be to set a target for scope 3 emissions and this is

something we are working on in the current year.

Aimée Pitman

Chair of the Sustainability Committee

OUR LONG-TERM ESG GOALS

01

Creating a resilient portfolio

02

Reducing our footprint

03

Supporting our occupiers

04

Responsible business

•

Reducing EPC risk

•

Reducing climate-related risks in the

portfolio

•

Targeting green building certifications

•

Implementing our net zero carbon

pathway for scope 1 and 2

•

Disclosing scope 3 carbon emissions

•

Increasing energy and resource

efficiency

•

Reducing waste and resource

consumption

•

Engaging with occupiers to understand

their net zero carbon goals and

support wellbeing

•

Supporting occupiers’ wellbeing and

providing a safe environment for all

building users

•

Integrating sustainability criteria into

lease clauses

•

Implementing robust governance and

oversight of ESG risks

•

Being transparent in disclosure and

participation in investor benchmarks

and indices

36

THINKING INSIDE THE BOX

Occupier engagement more generally is something we

value highly. This year we conducted a wide-ranging,

face-to-face occupier survey that has provided very

granular information on occupier requirements as well as

their ESG agendas. We did this in person to strengthen our

relationships with our occupiers. Some of the insights from

this are set out on page 40. In particular, we made great

progress at Bradwell Abbey, where in response to occupier

feedback from previous surveys, we launched a café and

opened an office on the estate so that one of the Tilstone

team is on hand daily to support our occupiers.

This year, we have widened the scope of our ‘Responsible

Business’ commitment to include supporting communities

local to our assets. The Tilstone team spent a day

volunteering at the Milton Keynes City Discovery Centre,

directly adjacent to our Bradwell Abbey estate. This is an

important amenity for the local community. It preserves the

historical site of the abbey, provides sensory areas for local

children, including those with special needs and volunteers

grow organic vegetables for local foodbanks. Across

Warehouse REIT and Tilstone Partners our charitable

donations totalled £10,600 with the most significant being

to Bus Shelter, an organisation tackling homelessness in

Milton Keynes.

We have also taken a number of steps to improve our

disclosure. Recognising the key role that our Investment

Advisor plays in delivering the Group’s strategy, this year

we have extended our employment disclosures to cover

the Tilstone team, including diversity and training. We are

working to extend the scope and quality of our disclosures

across the ESG spectrum to better inform our shareholders

and to improve our performance in sustainability

benchmarks which remains a long-term priority for the

Group. This year, we were pleased to have retained our

EPRA sBPR Gold award for the third consecutive year.

Looking forward, we are earmarking a small amount

of capital to finance projects that improve the climate

resilience of our portfolio or enable us to assess the

feasibility of ESG-related initiatives. Returns from

such projects may be harder to measure or delivered

over a longer time frame. An example of how we are

employing these funds is to finance a solar PV (photo

voltaic) feasibility study to understand where we have

an opportunity to increase our on-site renewable energy

provision through the installation of PV panels.

We have made good progress embedding ESG into our

business. The team are actively looking for opportunities

to decarbonise our portfolio and make it more resilient

and we are delivering on those wherever we can. Wider

economic challenges mean that our focus is sharply upon

initiatives that deliver value for shareholders but at the

same time we recognise that we serve a broad spectrum of

stakeholders and we will continue to deliver for them over

the coming year.

Aimée Pitman

Chair of the Sustainability Committee

37

01

2024 target

Progress

EPC improvement

programme to ensure

all in-scope properties

have a valid EPC and

target 25% reduction of

D and E rated properties

Achieved a 25.7% reduction in D and E rated

properties which are subject to MEES requirements

vs FY23 baseline

66.6% of the portfolio is now EPC A–C rated

(FY23: 60.2%) and 26.5% is A–B rated (FY23: 10.4%)

Fully compliant with existing EPC regulations and on

track to meet proposed regulations

Build mitigation plans

for assets identified as

at higher risk of climate

change

We commissioned third-party consultants to

undertake enhanced flood risk assessments of

six assets that were identified as being high risk

through our climate change scenario analysis. This

assessment showed only one asset to be at high risk

from one of six possible flooding types and we are

evaluating mitigation options (see TCFD section,

pages 43 to 50)

All developments over

50,000 sq ft to target

BREEAM Excellent /

Very Good

We have one development, Radway Green

1

near

Crewe where we are targeting a minimum BREEAM

Very Good rating for New Construction

All developments to

target EPC B or above

Radway Green is targeting an EPC A rating

Regular Board ESG

training on future

legislation, occupier

demands and

climate risk

The Board received a comprehensive update on the

ESG regulatory landscape from our legal advisors

Osborne Clarke and on the impact of climate change

from JLL’s sustainability team

1

Intention to sell all or part of the asset was announced in November 2023.

Delivering EPC improvements

Our approach

Delivering EPC improvements is an integral part of our

asset management approach (see page 15). We refurbish

buildings at lease events in line with our Environmental

Refurbishment and Development Standards which formally

target a minimum EPC B. This aligns to proposed MEES

requirements of a minimum EPC B rating by 2030.

Energy efficiency initiatives include upgrading lighting

to LEDs, disconnecting gas, replacing boilers and

radiators with electric panel heaters and introducing air

source heat pumps for the office space. Annual capex is

typically 0.75% of GAV of which c.20% is allocated to EPC

improvement-related initiatives.

CASE STUDY

Progress and

performance

of refurbished

units achieved an

EPC B rating on

reassessment

A–B rated as at

March 2024

A–C rated as at

March 2024

EPC performance

02

2024 target

Progress

4.2% reduction in scope

1 and 2 emissions on a

like-for-like basis

2.8% reduction achieved which is below our target

due to higher gas consumption on two units last

summer, but reflects the small like-for-like pool of

just seven assets. Further progress to be delivered

through refurbishment in line with our standards

Increase visibility over

scope 3 emissions

1

Occupier energy usage is our primary source of

scope 3 emissions. This year we have worked with

Savills to report occupier electricity usage on an

anonymous basis, and now have coverage of 52.1% of

the portfolio

In addition we have identified a solution to enable

us to track unit specific usage which is being rolled

out; coverage is currently 11.4% giving a combined

coverage of 53.8% (note there is overlap between the

approaches)

All new utility contracts

to be renewables based

100% of landlord procured electricity contracts are

REGO backed tariffs at year end

All refurbishments

to align with Tilstone

Environmental

Refurbishment and

Development Standards

Refurbishments covering 182,000 sq ft were

delivered this year with progress tracked through

occupier scorecards

LED lighting was fitted at all, 78% had gas removed /

disconnected or there was no connection and eight

new EV charging points were installed bringing the

total to 43 across the portfolio

Environmental Refurbishment and Development

standards formally updated to target a minimum

EPC B rating and to upgrade meters to half hourly

where possible

All developments to have

a sustainability plan

Radway Green

2

is our only development;

sustainability is fully embedded in its design which

targets a Very Good rating

1

Target added in the year.

2

Intention to sell all or part of the asset was announced in November 2023.

Progressing net zero

Widnes case study

Outcomes

CASE STUDY

03

2024 target

Progress

Launch portfolio-wide

occupier engagement

survey, targeting 20%

response rate

Comprehensive occupier survey conducted, with

responses covering over 19% of our portfolio by

rent. Topics ranged from space requirements to ESG

priorities, including:

•

ESG approach and priorities

•

Appetite to share utility data

•

Preferred occupier amenities

Implementing plan from

2023 occupier survey

Responding to occupier feedback from our FY23

survey, we launched a new site office and opened a

new café / delicatessen at Bradwell Abbey. Following

this successful pilot, we will look for opportunities to

improve the amenity provision elsewhere

Re-tendered landlord electricity supplier delivering

cost savings for occupiers

Four new EV charging points installed bringing the

total to 43 across the portfolio

Inclusion of green clause

principles in all new

leases

All new leases incorporate green clauses; 60%

include absolute provisions on:

•

Sharing environmental data

•

Maintaining the EPC rating

Defibrillators installed at

large, multi-let assets

1

Defibrillators have been installed at Bradwell Abbey

in Milton Keynes, Tramway Industrial Estate in

Banbury and Queenslie Industrial Estate in Glasgow

Further installations planned for the coming year

1

Target added in the year.

Supporting our occupiers

Occupier survey

Our survey covered the top 25

occupiers as well as two of our largest

multi-let assets. Around two-thirds

of respondants have an active ESG

strategy in place with our larger

occupiers focused on renewable energy

use and decarbonising transport to

achieve their net zero commitments.

Occupiers were surveyed on their

ESG priorities with over 90% of those

responding identifying reducing

energy consumption as a priority;

rising energy costs were cited as a key

operational challenge.

Employee wellbeing is increasingly

important for many of our occupiers,

regardless of size. Building on the

success of our new café at Bradwell

Abbey, we will look to roll out

site-specific amenities this year

including more EV charging facilities.

Key ESG priorities

Most requested occupier amenities

CASE STUDY

04

2024 targets

Progress

Retain EPRA sBPR

Gold award

Gold award maintained for the third year

Progress alignment with

TCFD recommendations

Voluntary TCFD disclosure for the fourth year;

quantification of EPC retrofit cost included for the

first time (see page 46)

Undertook comprehensive flood risk assessments

on assets identified as high risk following climate

change scenario analysis (see pages 44 to 45)

Formalised governance on climate change risk

Implement

recommendations

to align with GRESB

benchmark

Commitment to be net zero in scope 1 and 2

emissions by 2030 and progressing plans to set a

scope 3 target

Provided additional disclosure on Tilstone employees

(see page 146)

ESG formally integrated within annual performance

targets for all Tilstone employees

Green lease clauses included within all new leases

ESOS phase 3

compliance

ESOS report prepared for June 2024 submission

Supporting local

communities

1

£10,600 charitable donations across Warehouse REIT

and Tilstone Partners to organisations local to our

sites, including Bus Shelter, a Milton Keynes homeless

charity

Joint social responsibility plan established for REIT

and Tilstone including Company volunteering and

match funding

Supporting young talent through Pathways to

Property

1

Target added in the year.

Volunteering at Bradwell Abbey

In October, the Tilstone team spent a

day volunteering for the Milton Keynes

City Discovery Centre, a local charity

adjacent to our Bradwell Abbey asset.

The centre is a key amenity for the

community; it preserves the heritage

of the Abbey, hosts educational visits

and sensory gardens have been

established in the grounds for use by

local charities, including Make Well,

who work with neurodiverse children

and adults. The area is maintained

by volunteers who grow organic

vegetables in the garden to supply to

local food banks.

Supporting young talent

This year we joined Pathways to

Property, a project led by the Reading

Real Estate Foundation at the Henley

Business School, which aims to widen

access to the real estate profession.

In March, two of the Tilstone Team

supported their Insight Day, which was

an opportunity for young people in

the area to present their work to real

estate professionals.

RESPONSIBLE BUSINESS FOUNDATIONS

FUTURE COMMITMENTS

The following are specific commitments for FY25 and sit alongside our business as usual interventions which we are delivering in support of our long-term goals.

01

Creating a resilient portfolio

02

Reducing our footprint

03

Supporting our occupiers

04

Responsible business

•

£100,000 earmarked to cover

ESG-related investment

•

Further 25% reduction in EPC D and

E rated properties subject to MEES

regulations (vs FY23 our position)

•

Deliver mitigation plans for assets

identified as higher risk through

climate change scenario analysis

•

Progress ambition to achieve net zero

on scope 1 and 2 by 2030

•

Increase visibility over occupier energy

usage by at least another 10%

•

Target PV on a minimum of 10% of the

portfolio by 2030

•

Ensure 100% of directly procured

electricity from renewable contracts

•

Perform annual occupier survey

•

Respond to feedback from FY24 survey:

•

Increase EV charging provision

•

Site-specific amenities at key

multi-let assets

•

Share insights to improve energy

efficiency and reduce costs

•

Improve performance in sustainability

benchmarks

•

Progress community programme

•

Deliver investment Advisor

ESG-training

•

Develop approach to biodiversity

NET ZERO AMBITIONS

Last year we set a commitment to be net zero in

greenhouse gas scope 1 and 2 emissions by 2030.

We also launched a series of commitments to support

emission reduction across the wider portfolio, including

occupier emissions.

This framework is set out on our website; key interventions

include adopting our Environmental Refurbishment and

Development Standards, procuring 100% of our electricity

from renewable sources and engaging with occupiers.

Measuring and reducing scope 3 emissions

Before we set a target to be net zero on our scope 3

emissions, we need to establish a baseline from which we

can measure performance.

This year, for the first time we are reporting some scope

3 emission data. We now collect occupier electricity data

from 33 of our estates covering 53.8% of the portfolio

by sq ft. The majority of this is on an anonymous basis,

but we are working with our occupiers to collect unit-

specific data which will enable us to provide more targeted

advice to our occupiers on how to reduce their own

carbon footprint.

The occupier electricity data we have collated and

associated GHG emissions are set out in the table.

Occupier emissions

2023/24

Sq ft covered (% of total)

4.2m (53.8%)

Annual consumption (MWh)

9,766

Building energy intensity, kWh/m

2

/year

25.0

GHG emissions (tCO

2

e)

2,022

FUNDS EARMARKED FOR ESG PROJECTS

We are earmarking £100,000 to finance investment

which improves the climate resiliance of our portfolio

or enables us to assess the feasibility of ESG-related

initiatives. Returns from such projects may be harder

to measure or delivered over a longer timeframe.

One example is a PV feasibility study we are

undertaking that will assess the potential for

installing PV panels on buildings shortlisted by the

Tilstone team. Other examples include biodiversity

benchmarking and the installation of EV chargers.

42

Introduction

AS PART OF OUR VISION TO BE AN

INDUSTRY-LEADING INVESTOR INTO UK

WAREHOUSES, WE PROACTIVELY MANAGE OUR

CLIMATE-RELATED RISKS AND PUBLICLY REPORT

CLIMATE-RELATED FINANCIAL INFORMATION TO

OUR STAKEHOLDERS.

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 TCFD

recommendations. This report complies with 10 of the 11

TCFD recommendations and recommended disclosures.

We have not fully reported our scope 3 emissions under

TCFD Recommended Disclosure – Metrics and Targets

b), due to limited data availability but are making good

progress, with over 50% visibility on occupier electricity

consumption, a key contributor to our scope 3 emissions.

Governance

THE BOARD’S OVERSIGHT OF CLIMATE-RELATED

RISKS AND OPPORTUNITIES

The Board is ultimately responsible for the Group’s

approach to risk management and its internal control

process, including setting the Group’s risk appetite,

identifying principal risks, and assessing mitigating controls

via regular risk reviews. The Board has fundamental

responsibility over wider sustainability matters, including

the Group’s sustainability strategy and reporting

obligations. Climate change has been identified as a

principal risk to the business in the corporate risk register

and is a key component of our sustainability strategy.

The Audit and Risk Committee provides additional

oversight of the Group’s risk management framework and

is involved in identifying, assessing, and managing risks.

The committee meets more than twice a year to review

the effectiveness of the overall risk management strategy

and reviews the potential impact and related business

mitigation strategies of principal risks across the risk

register, including the climate-related principal risk.

The Sustainability Committee, chaired by Board member

Aimée Pitman, is responsible for developing and

implementing the Group’s responsible business agenda,

sustainability strategy and external ESG reporting. This

year, JLL conducted a comprehensive training session

to give the Board a better understanding of the evolving

reporting obligations across the industry. In this session,

the Board was also shown examples of approaches to

climate adaptation and resilience planning. This was

supplemented by a training session on the regulatory

landscape, conducted by legal advisors Osborne Clarke.

Following the climate risk scenario modelling undertaken

last year, the Sustainability Committee reviewed the

Group’s climate-related risks and mitigation strategies via

the newly formed separate risk register and will continue

to recommend any required updates to the Audit and

Risk Committee. The Audit and Risk Committee reviews

and monitors the risk management framework. The Chair

of the Sustainability Committee reports to the Board

on a quarterly basis and the Sustainability Committee

makes recommendations to the Board, as appropriate, to

ensure that any material climate-driven macroeconomic,

financial, and regulatory market changes are escalated

and integrated into strategic decision-making. The

Sustainability Committee is also responsible for setting and

overseeing performance towards climate-related targets

and long-term goals, available on page 36 to 42. The

implementation roadmap and actions towards achieving

these goals are then overseen by the Investment Advisor.

MANAGEMENT’S ROLE IN ASSESSING

AND MANAGING CLIMATE-RELATED RISKS

AND OPPORTUNITIES

The Investment Advisor supports the Board and Audit

and Risk Committee in identifying and evaluating risks and

is responsible for forming and implementing the Group’s

risk management strategy. The Investment Advisor is

also responsible for coordinating with stakeholders and

engaging with occupiers to identify risk and implement

mitigating controls at the asset level. The Investment

Advisor sits on the Sustainability Committee, alongside

Board members, enabling the communication of

climate-related risks between operational, management

and Board levels.

The Investment Advisor is responsible for day-to-day

operational activities and the application of the risk

management strategy, including climate risk management.

The Investment Advisor, with support from the Property

Manager, is responsible for collecting and reporting

environmental and climate-related data, enabling Board

committees and the Investment Advisor to monitor

performance against strategic long-term goals and

targets. The Investment Advisor is well briefed on the

Group’s sustainability and climate-related ambitions and

reports significant risks at the property level to Board

committees on an ad hoc basis, ensuring that there is clear

communication between occupiers and the Board.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

TCFD DISCLOSURE

43

Strategy

CLIMATE-RELATED RISKS AND OPPORTUNITIES

IDENTIFIED OVER THE SHORT, MEDIUM AND

LONG TERM

We recognise that climate-related risks materialise over

the medium to longer-term and that the assets we acquire

and occupy now will still be here for many years into the

future. Without appropriate risk management, these risks

could have severe financial and reputational implications.

As such, we conducted climate risk scenario modelling last

year to assess the exposure of our portfolio to physical

climate-related risks across the three Intergovernmental

Panel on Climate Change (IPCC) climate scenarios – RCP

2.6, RCP 4.5 and RCP 8.5 – over the short term (present

day), medium term (2050) and long term (2080). The time

horizons align with the 2050 net zero carbon deadline set

by the UK Climate Change Act as well as the associated

risks and capture a range of climate-related risks that are

expected to materialise in the near and long term.

Table 1: Percentage of portfolio classified as ‘high-risk assets’ under different scenarios

Scenario and physical hazard

Current

(Present day)

Medium horizon

(2050)

Long horizon

(2080)

Low Scenario (RCP2.6)

Flooding

3.5%

4.3%

4.6%

Subsidence

6.1%

0.0%

6.1%

Costal erosion

0.0%

0.0%

0.0%

Medium Scenario (RCP 4.5)

Flooding

3.5%

4.5%

4.6%

Subsidence

6.1%

6.1%

9.1%

Costal erosion

0.0%

0.0%

0.0%

High Scenario (RCP 8.5)

Flooding

3.5%

4.6%

4.6%

1

Subsidence

6.1%

12.1%

12.1%

Costal erosion

0.0%

0.0%

0.0%

1

In our original analysis, 5.6% of modelled units were considered at high risk from flooding, falling to 4.6% post asset sales and less than 1%

reflecting the findings from further, more detailed assessments on the remaining units categorised as high risk.

A detailed overview of our governance structure

can be found below.

Warehouse REIT Board

Audit and Risk Committee

Sustainability Committee

TPL Sustainability Team

Strategic guidance

and support during

implementation

Report on progress

against targets

Identifies, assesses

and manages risks

and mitigation

strategies

Recommends

climate-related

risks and mitigation

actions

Decisions and

objectives

Target setting and

decision-making

preparations

Reports on

progress

The climate risk scenario modelling covered a total of

five climate-related hazards, including coastal flooding,

river flooding, flash (surface water) flooding, subsidence

and coastal erosion and assessed the likelihood of these

hazards impacting our portfolio. Our original analysis

was restated this year to take account of asset sales and

consequently covers 782 units within our portfolio as at

31 March 2024. The analysis was performed across three

climate scenarios and time horizons as set out in Table 1.

The assessment was based on trusted climate and natural

hazard databases, such as JBA Floodability Index, British

Geological Survey and National Coastal Erosion Risk

Mapping. The exposure level to each hazard was ranked

across low, moderate, and high-risk likelihood bands, based

on a simplified classification of the results generated by

each risk model, which had individual likelihood ratings.

The assessment also revealed the number of assets

exposed to each risk level and provided hazard exposure

profiles of our top 10 largest estates. This provided a clear

overview of the impact likelihood that modelled hazards

pose to the portfolio, enabling us to make strategic

decisions on where to focus mitigation action.

The assessment found that 59.7% of units have a very good

resilience to physical climate hazards, continuing to have

low exposure to all physical climate hazards even under the

most severe climate scenarios. For the units at risk from

physical climate hazards, flooding is the most likely risk,

with 4.6% of modelled units potentially at high risk. 12.1%

of assets are potentially exposed to a subsidence hazard

in a severe, late-century scenario, and this is something we

monitor with our property managers. Our portfolio is not

exposed to coastal erosion.

Following this review, we have continued to expand our

understanding of climate risk, including further asset-level

flood risk assessments starting with assets identified

as having the highest exposure to flooding. These

assessments demonstrate that on further investigation,

less than 1% of assets are classified as “high” risk. More

details can be found in the Risk Management section

of this report. Overall, the business has integrated the

findings of the climate risk scenario modelling within the

risk management approach under the climate change

principal risk.

In addition, we recognise that transition risks are expected

to be the most impactful in the short term and likely across

scenarios associated with significant policy action and

market shifts towards decarbonisation.

Transition risks that we have identified include:

•

risk of non-compliance with increasing regulation, such

as MEES and environmental regulation;

•

increasing cost of compliance with environmental

regulation;

•

costs of meeting decarbonisation targets;

•

increasing costs of maintenance and refurbishments,

for example, due to supply chain issues or the switch to

more environmentally friendly materials;

•

risk of inaccurate data reporting;

•

lack of ESG credentials makes it challenging to access

finance at affordable rates; and

•

loss of occupiers, revenues and value as properties do

not meet requirements.

Additionally, we have identified opportunities in our ESG

strategy that are climate mitigation actions and improve

our resilience. These include improving our energy and

carbon data management and assessment of low-carbon

solutions, including on-site renewables, to increase energy

and resource efficiency, with the aim of achieving long-

term savings, securing satisfactory energy performance

certificates and our net zero carbon ambitions. We believe

these initiatives improve our reputation and attract

premium occupiers.

DETERMINING THRESHOLDS OF ‘HIGH-RISK’

Flood

risk analysis is undertaken using the JBA

Climate Change Floodability Index dataset. The

Floodability Index summarises information about

depth and frequency of flooding into five simplified

hazard bands with an equivalent rating of Low to

Very High risk. Our analysis grouped the top three

tiers of the Floodability Index into a single ‘High

Risk’ band which better reflects the range of hazards

within the red and black categories and simplifies the

overall reporting of asset risk when combined with

other perils.

Subsidence

hazard data used in the British

Geological Survey model is underpinned by the

UKCP09 Climate Projections, which are based on

the SRES A1B climate scenario. The BGS classifies

the degree of hazard according to the likelihood that

foundations would be affected by increased clay

shrink-swell due to climate change.

Coastal erosion

risk has been evaluated using a

subset of the National Coastal Erosion Risk Mapping

(NCERM) datasets. The NCERM mapping divides

the coastline into ‘frontages’. These are defined as

lengths of coast with consistent characteristics based

on the characteristics of the cliffs and any defences

which may be present. The data describes the upper

and lower estimates of erosion risk at a particular

location, within which the actual location of the

coastline is expected to lie.

45

IMPACT OF CLIMATE-RELATED RISKS AND

OPPORTUNITIES ON THE ORGANISATION’S

BUSINESSES, STRATEGY AND

FINANCIAL PLANNING

Climate-related risks and building resilience are embedded

into our business strategy under the ‘Creating a resilient

portfolio’ pillar and as an independent principal risk in our

risk register. Energy and carbon efficiency opportunities

are also identified within our sustainability strategy under

the ‘Reducing our footprint’, ’Supporting our occupiers’

and ‘Responsible business foundations’ pillars. To enable

us to mitigate climate risks and harness opportunities, we

have included a sustainability budget within our financial

budgeting processes, which is informed by our experience

of investing in and managing our properties to align with

best sustainability practices over the whole property

life cycle.

Throughout the acquisition process our investment

decisions are informed by preliminary climate risk

assessments for flood risk and take into account the EPC

rating of the building, ensuring that potential acquisitions

align with our net zero carbon pathway or that mitigation

actions are integrated within the asset business plan post

acquisition. Our overall approach to asset management

includes upgrading assets by improving their energy

efficiency and building fabric, which also helps to extend

the life expectancies of our buildings thereby reducing

longer-term carbon emissions.

Throughout the operational life cycle of our assets, we

engage with occupiers to understand their ESG needs and

aspirations, reduce their energy consumption and collect

and monitor energy use across the portfolio. 100% of

electricity was procured from renewable sources at year

end and we ensure all new leases include green principles

in line with our net zero carbon pathway and climate risk

management efforts.

We have also developed Environmental Refurbishment

and Development Standards covering several sustainability

topics including ecology, EV charging, sustainable

drainage, on-site renewable energy (solar PV panels),

sustainable travel and resource and energy efficient

internal fit-outs for all refurbishments and developments.

The standards help us manage the transition risks

associated with decarbonisation. We are also targeting a

BREEAM rating of Excellent for significant developments

where possible, with a minimum rating of Very Good.

We remain focused on improving EPC ratings for all

buildings in our portfolio as part of our EPC Improvement

Programme. This effort aligns with the proposed MEES

regulations for 2027 and 2030, which require non-

domestic rented buildings to hold a ‘C’ and ‘B’ EPC rating,

respectively. Through a comprehensive desktop study,

we have identified where we need to invest in assets to

drive the necessary improvements and based on projects

delivered to date, have estimated the total capex costs

required to upgrade all our buildings to a minimum EPC

B rating. Through this analysis we determined that the

cost for retrofitting the portfolio in England and Wales

to a minimum of an EPC B by 2030 is approximately

£6.4 million (excluding assessment fees). This can

comfortably be covered through our annual capex to 2030

which is typically 0.75% of GAV. This analysis makes no

assumption on asset sales which would reduce the overall

cost. Timing will be driven by lease events, which afford an

opportunity to deliver improvements and engage with the

occupier, but we also engage with our occupiers on these

matters on an ongoing basis. This proactive approach aims

to mitigate the risk of non-compliant buildings becoming

unlettable or stranded in the future.

Having conducted physical climate risk scenario modelling,

we understand the exposure of our assets to selected

climate risks in the UK across the IPCC’s RCP 2.6, RCP

4.5 and RCP 8.5 climate scenarios. Throughout our risk

review processes, we have also identified transition risks

associated with climate change and have developed risk

mitigation measures in terms of minimum certification

standards, compliance and decarbonisation. While

resilience is inherently integrated into our business

strategy, following the results of our portfolio-wide

scenario analysis, we commissioned site-focused flood

risk assessments to improve our understanding of the

mitigation actions required to improve our resilience.

RESILIENCE OF THE ORGANISATION’S STRATEGY,

TAKING INTO CONSIDERATION DIFFERENT

CLIMATE-RELATED SCENARIOS, INCLUDING A

2°C OR LOWER SCENARIO

The climate scenarios RCP 2.6, RCP 4.5 and RCP 8.5 were

selected for our assessment, as they cover a range of

possible emissions scenarios. The RCP 2.6 climate scenario

represents a pathway where greenhouse gas emissions are

greatly reduced by immediate policy action and market

forces, to decarbonise and meet the Paris Agreement. RCP

4.5 is a more moderate climate scenario where emissions

peak in 2040 followed by significant decarbonisation

policy and market action. The RCP 8.5 scenario is

characterised by a large increase in GHG emissions

contributing to high temperature rises, significant changes

in weather patterns and severe physical risks. Our resilience

to scenarios associated with transition risks is secured

by our net zero carbon pathway and related activities

described in TCFD Recommended Disclosure – Strategy b).

Our resilience against risks associated with the RCP

8.5 climate scenario is currently supported by our

Environmental Refurbishment and Development Standards

and our proactive approach to assessing risks. In this

scenario, we would also expect our business model to

evolve. We are planning on furthering our resilience with

additional climate-related KPIs and risk management

measures, such as regular briefings and training on

forthcoming regulation and climate risk upskilling.

46

THINKING INSIDE THE BOX

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

CONTINUED

TCFD DISCLOSURE

Scenario

Average

°C rise

Transition

Impact

Ongoing Warehouse REIT

response

Scenario 1

Low

emissions

scenario:

RCP 2.6

1.2 –

1.6°C by

2100

Low emissions

scenario where there

is immediate policy

action to meet the

Paris Agreement.

Transition risks

dominate.

Economic:

Immediate globally

coordinated decarbonisation

efforts to achieve net zero by

2050, associated with significant

costs to meet these demands.

Environmental:

Low physical risk.

•

Net zero carbon pathway

•

Maintain 100% of

electricity procured from

renewable sources

•

Ensure all new and

amended leases include

green clauses

•

EPC improvement project

Scenario 2

Moderate

emissions

scenario:

RCP 4.5

1.6 –

3.2°C by

2100

Moderate emissions

scenario where

there is significant

policy action in

2040. Transition

risks dominate, but

physical risks are still

present.

Economic:

Delayed transition

requiring more substantial

regulatory and market

pressures to decarbonise in the

medium term.

Environmental:

Less physical risk,

although up to 3.2°C warming

still presents substantial physical

climate risks.

• Accelerate refurbishment

plans in line with internal

standards

• Wider engagement

with occupiers on

decarbonisation

•

Increase investment in our

energy and carbon data

management systems

Scenario 3

High

emissions

scenario:

RCP 8.5

3.2 –

5.4°C

by 2100

High emissions,

business-as-usual

scenario where policy

action is negligible

and global warming

rises drastically.

Physical risks

dominate.

Economic:

Permanently stunted

GDP growth and severe economic

and social shifts.

Environmental:

Chronic

changes to weather patterns

and ecosystems causing severe

impacts on a global scale.

•

Evolve business model

and strategy focusing

on approach to climate

resilience

As an investor solely in the UK, we are conscious of

the government strategy which sets out policies and

proposals for decarbonising the economy to meet its

net zero target by 2050. This strategy has introduced

policies that will trigger transition in our sector, particularly

relating to improving the energy efficiency of buildings

and electrification of heating. With our net zero pathway

and strong focus on improving EPCs across the portfolio,

we are confident that our approach to decarbonisation

will make the business resilient to the transition risks

expected with a 2°C or lower scenario. There is a danger

of underestimating the magnitude of impacts associated

with global temperature rises over 3°C and that such a

scenario will be accompanied by significant macro social

and economic disruption which will be difficult to avoid.

We have already begun to improve our resilience to the

effects of more significant temperature increases, as

detailed in the table above, including a focus on managing

flood risk, which we have identified as a key climate hazard

for our portfolio.

47

Risk Management

DESCRIBE THE ORGANISATION’S PROCESSES

FOR IDENTIFYING AND ASSESSING CLIMATE-

RELATED RISKS

Our risk register categorises risk by physical and transition,

which is informed by input from the Investment Advisor. In

the ESG risk register, specific climate-related risks will be

identified, for example a physical risk of extreme weather

events, which are then described by their nature, cause

and general impact. An example of transition risk would

be failure to meet upcoming building energy efficiency

regulation. In the risk register, each risk is assigned an

inherent risk score; controls and mitigations are taken into

account to derive an adjusted residual risk score. There

is also a section covering emerging risks, which is for

consideration by the Sustainability Committee.

Risk impact is scored on a severity scale of one to five

based on a combined assessment of impact criteria

covering operational, brand, environmental and financial

aspects. The financial impact is assessed pertaining to

the underlying value of the assets and the returns for

shareholders. Likelihood is also scored from one to five

ranging from remote likelihood to almost certain.

The ESG risk register is used to communicate these risks

to the Board, to be embedded in our risk management

approach and decision-making. Principal risks on the risk

register are scored on probability and impact and are

assessed based on the severity of financial, environmental

and brand impacts, pertaining to the underlying value

of the assets and the returns for shareholders. These are

reviewed throughout the year by the Investment Advisor,

with the Audit and Risk Committee conducting an overall

review of the risk management strategy on an annual basis.

The Investment Advisor also assists in the implementation

and measurement of climate-related activities at the

operational level and monitors the business’s and

portfolio’s compliance with those activities. A third-party

consultant supports the Investment Advisor with the

identification and assessment of risks. The Investment

Advisor also reviews emerging and existing regulation

requirements, including in relation to climate-related risks.

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.

Moving forward, we aim to further integrate the findings

of our climate risk scenario modelling into our risk

management framework under the climate change

principal risks and develop mitigation strategies. The

Group has also committed to annually reporting against

TCFD and regularly conducting climate risk assessments in

line with TCFD best practice recommendations, ensuring

climate-related risks are consistently integrated into our

risk management framework.

DESCRIBE THE ORGANISATION’S PROCESSES

FOR MANAGING CLIMATE-RELATED RISKS

To manage climate-related risks, the impact of climate

change on our portfolio has been recognised as a principal

risk in our risk register and risk management process

for ESG considerations. We also recognise compliance

risks associated with climate change in our risk register.

This ensures that climate-related risks and opportunities

are actively monitored and mitigated by the Board and

committees. The risk management process, as well as

additional insights gained from third-party consultants,

such as the climate risk scenario modelling we conducted

last year, help us prioritise climate-related risks and

control measures.

For flood risk, we commissioned a third-party specialist

to conduct site-specific flood risk assessments and site

surveys for those estates identified as potentially at ‘high

risk’ in our climate risk scenario modelling. This assessment

provided a more in-depth analysis of present day and

future flood risk using Environmental Agency hazard

mapping, historical flood analysis and site-specific detail,

to verify the degree of hazard and inform options for flood

mitigation, where necessary.

Following these assessments we are able to update that

of the nine assets initially identified as being at high risk,

three have been sold and just one asset continues to be

potentially at high risk of surface water flooding and a

second asset is considered at moderate risk. The remaining

assets are considered negligible, low, or low to moderate

risk across all time horizons and flooding types including

fluvial, tidal, surface water, reservoir failure, groundwater

and artificial sources.

Post this study, we will assess the need for further site-

wide flood protection, drainage improvement, property

flood resilience and flood preparedness options on the two

sites that have been identified as moderate or high risk of

surface water flooding.

Processes for managing climate-related risks and

opportunities at a portfolio and asset level are described in

TCFD Recommended Disclosure – Strategy b).

48

THINKING INSIDE THE BOX

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

CONTINUED

TCFD DISCLOSURE

DESCRIBE HOW PROCESSES FOR IDENTIFYING, ASSESSING AND MANAGING CLIMATE-RELATED RISKS ARE INTEGRATED INTO THE ORGANISATION’S

OVERALL RISK MANAGEMENT

All principal risks captured in our corporate risk register, including climate change, are a priority. The corporate risk register lists the material impacts of principal risks, related risk

mitigation activities and changes in risk profile. Additionally, each risk is given a probability and impact score based on the impact on asset values and shareholder returns. The corporate

risk register is regularly reviewed by the Board, Audit and Risk Committee, and Investment Advisor, with the Board having overarching responsibility for determining the most material

risks and the Investment Advisor evaluating and presenting risks to the Board. In the review process, the Audit and Risk Committee oversees reviewing corporate risks and risks that the

Board considers to be principal. By capturing climate change as a principal risk, it has been fully integrated into our risk management framework.

Metrics and Targets

DISCLOSE THE METRICS USED BY THE ORGANISATION TO ASSESS CLIMATE-RELATED

RISKS AND OPPORTUNITIES IN LINE WITH ITS STRATEGY AND RISK MANAGEMENT PROCESS

We publicly report on our environmental performance in line with EPRA sBPR for sustainability reporting. Our EPRA tables are available on pages 143 to 147. We use a range of metrics

to assess our resource consumption, energy and carbon emissions and determine our exposure to climate-related risks and opportunities.

Metric category

Metric

2023 progress to date

2024 Target

Long-term goals

Resource

Consumption

Energy consumption in

kWh in absolute and like-

for-like terms

Absolute:

1,118 MWh

Like-for-like:

739 MWh

All new utility contracts to be renewables based

Implementing our net

zero carbon pathway

All landlord-sourced utilities to be on renewable tariffs

Water consumption in m³,

including building water

intensity in m³/m²/year

Absolute:

71,668 m

3

1.24 m³/m²/year

n/a

Reducing waste and

resource consumption

Energy and

Carbon Emissions

Scope 1 and 2 carbon

emissions in tCO₂e

Absolute:

295.5tCO₂e

Like-for-like

: 162.1tCO₂e

4.2% reduction in scope 1 and 2 emissions

Net zero carbon for our

scope 1 and 2 emissions

by 2030

Exposure to

Climate-related

Risks and

Opportunities

EPC ratings and building

certifications as a holistic

indicator of the portfolio’s

performance

Continued the roll-out

of an EPC improvement

programme, with 67% of

units now A–C rated across

all countries

All refurbishments and developments to target EPC B or above

Reducing climate related

risks in the portfolio

See ‘Long-term goals’ in

our Sustainability Report,

Page 36

EPC improvement programme to ensure all in-scope properties have a

valid EPC and target a 25% reduction of D or E rated properties from

FY23 baseline

Undertook climate risk

modelling to better

understand our exposure to

physical climate hazards

Build mitigation plans for assets identified as higher risk of

climate change

Regular Board ESG training on future legislation, occupier demands

and climate risk

49

DISCLOSE SCOPE 1, SCOPE 2 AND, IF

APPROPRIATE, SCOPE 3 GREENHOUSE GAS

(GHG) EMISSIONS, AND THE RELATED RISKS

We report our scope 1 and 2 GHG emissions data in our

EPRA disclosure available on pages 145 to 149. These have

been calculated and reported in alignment with the GHG

Protocol Corporate Accounting and Reporting Standard.

We are aware that the majority of our GHG emissions will

relate to occupier controlled space, which is accounted for

within our scope 3 emissions. This year we are reporting

some scope 3 data for this first time.

We collected occupier energy data representing 4.2 million

sq ft of our portfolio, equivalent to 53.8% of the total.

Electricity consumption across this space was 9,766 MWh

which implies an annual energy intensity of 25.0 kWh per

sq m. Associated GHG emissions were 2,022 tCO

2

e.

We aim to improve our disclosure of scope 3 emissions and

set related targets when we have sufficient coverage of

the portfolio.

DESCRIBE THE TARGETS USED BY THE

ORGANISATION TO MANAGE CLIMATE-RELATED

RISKS AND OPPORTUNITIES AND PERFORMANCE

AGAINST TARGETS

Our targets were developed as part of our net zero carbon

pathway in 2022 and form part of our sustainability

strategy. Our targets can be found alongside the relevant

metric and our progress can be tracked over time.

Having conducted a physical climate risk assessment

and developed our net zero carbon pathway we are

now progressing plans to set a scope 3 emissions

reduction target when we have sufficient visibility on

occupier emissions.

50

THINKING INSIDE THE BOX

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

CONTINUED

TCFD DISCLOSURE

We continuously assess risks to our

strategy and objectives, and make

business decisions taking our risk

appetite into account.

RISK PROFILE

Our understanding of the potential risks associated with

our activities, and our ability to implement a robust control

framework, are essential to our success.

The economic challenges during the financial year,

including high interest rates and inflation, which has

been slower than anticipated to reduce, coupled with a

market-wide reduction in property values caused us to

review changes in our risk profile and risk mitigation plans.

RISK MANAGEMENT CULTURE

Our strong culture is underpinned by a structured

approach to the understanding and management of risk,

with a risk management framework which is reviewed and

approved by the Board, via the Audit and Risk Committee,

each year.

The framework sets out the Board’s risk appetite;

allocation of responsibilities; processes for the regular

review of risk and consideration of emerging risk; and

reporting arrangements. This clarity is designed to enable

the Group’s Investment Advisor to take advantage of

opportunities and make effective business decisions, while

staying within an agreed set of parameters. Operationally,

the parameters for key decisions are set out within the

Group’s delegated authority matrix, which is reviewed

regularly to ensure that it continues to match the Board’s

risk appetite.

The level of risk considered appropriate to accept in achieving business objectives is determined by the Board:

•

the Group has no appetite for risk in areas relating to regulatory compliance, and the health, safety and welfare

of our occupiers, stakeholders, and the wider community in which we work;

•

appetite for risk relating to climate change is low, and the Group is actively focusing on the identification and

mitigation of physical and transitional risks for its portfolio; and

•

we have a moderate appetite for risk in relation to activities that are directed towards driving revenues and

increased financial returns for its investors.

WILLINGNESS TO ACCEPT RISK

Category

Low

Medium

High

Business

Compliance

Climate

Operational

Financial

RISK APPETITE

The Group uses an outsourced model, and relies on our service providers to make decisions and take risks in the delivery

of our objectives. Their decision-making takes into account our risk appetite.

PRINCIPAL RISKS AND UNCERTAINTIES

51

RESPONSIBILITIES

THE BOARD

The Board has overall responsibility for the

Group’s approach to risk management and internal

control, including:

•

the design and implementation of risk management

and internal control systems that identify the risks

facing the business and enable the Board to make

an assessment of principal risks;

•

ensuring that internal control and risk management

processes remain effective;

•

determining the nature and extent of the principal

risks faced, and those risks which the Group is

willing to take;

•

agreeing how principal risks are managed or

mitigated to reduce their likelihood or impact; and

•

ensuring that there is sufficient relevant, reliable

and valid assurance about the mitigation of risk.

THE AUDIT

AND RISK

COMMITTEE

The majority of the operations of the Group are

outsourced, and the Audit and Risk Committee relies

on risk and assurance information from its service

providers, primarily the Investment Advisor.

To fulfil its responsibilities the Audit and Risk

Committee:

•

monitors changes in risk throughout the year.

•

seeks to identify and consider emerging risks to the

Group, arising both externally and internally;

•

in particular for each of the principal risks,

considers risk mitigation strategies, and assurances

from both management and independent sources;

•

undertakes an annual review of the effectiveness of

the risk management process through its review of

the risk framework, risk reporting and review of the

risk register; and

•

takes advice from the Sustainability Committee

with respect to updating climate-related risks and

mitigations.

THE

SUSTAINABILITY

COMMITTEE

The Sustainability Committee has oversight of the

Group’s approach to the management of climate

related risks. It provides the Audit and Risk Committee

and Board with updates and information in relation to

climate risk generally and progress with the strategy

agreed for the Group to manage risks in this area.

THE

INVESTMENT

ADVISOR

The Investment Advisor supports the Audit and

Risk Committee and the Board and is responsible

for risk identification, documentation and

evaluation; the implementation of appropriate

controls; and meaningful reporting to the Audit and

Risk Committee.

52

THINKING INSIDE THE BOX

PRINCIPAL RISKS AND UNCERTAINTIES

CONTINUED

Board

Audit and Risk Committee

Sustainability Committee

Risk Management Framework

Risk Culture

Decision-making

and oversight

The approach

How we do it

What we do

Reporting

Management reports – Investment

Advisor, Investment Manager,

Company Secretary and Fund

Administrators

External reporting – valuations,

depositary, external Auditors,

other external assurance reviews

Incident analysis reviews

Independence assurance

assignments

Assurance

New activities or operations

Changes in key systems or

processes

Changes in competitors

New regulation

Economic changes and other

external changes

Incidents arising, including

near misses

Risk Identification

Governance framework, including

delegations of authorities

Risk mitigation planning and

decision-making

Internal controls design and

implementation

Management monitoring and

oversight

Reporting and escalation of issues

Insurance

Outsourcing to specialists

Risk Mitigation

53

DOCUMENTATION AND REPORTING

The Corporate Risk Register documents the assessment

of the risks faced by the Group, together with the controls

established to reduce those risks to an acceptable level.

It is reviewed regularly by the Investment Advisor and at

each meeting of the Audit and Risk Committee.

A standard evaluation matrix is used to assess the

exposure to risks and that is reviewed by the Audit and

Risk Committee at least annually.

Risks are categorised into:

•

Business Risk

– the risk of making poor business decisions,

implementing decisions ineffectively, or being unable to

adapt to changes in its environment. In particular this

includes our property investment risk, and our acquisition,

disposal and tenancy decision-making processes.

•

Compliance Risk

– the risk of legal or regulatory

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

physical impacts such as flooding, or excessive indoor

temperatures during periods of extreme heat; and

transitional risks such as changes in demand from

tenants, or the cost of complying with changes in

building standards.

•

Financial Risk

– the risk of financial loss resulting from

risks such as market, credit and liquidity risks:

•

Market risk

– economic losses resulting from price

changes in the capital markets.

•

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 borrowing

policy and payment obligations at all times.

•

Operational Risk

– the risk of a loss resulting from

inadequate processes, technical failure, human error or

external events.

EMERGING RISK

The regular risk reviews undertaken by the

Investment Advisor, and by the Audit and Risk

Committee specifically include consideration of

emerging risks. The assessment considers internal

and external changes, trends and incidents, and

considers:

•

is this risk relevant to the Group?

•

what is the potential impact, if the risk crystallises?

•

what would be our strategies for the management

and mitigation of the risk?

•

is this a risk that we should continue to proactively

monitor?

During the year we have added new risks relating to

development works, the potential for legal disputes,

and risk relating to electrical capacity limitations.

However, there have been no new risks identified

during the year that are currently considered to be

principal risks.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

(“ESG”) RISK

During the year we have strengthened our approach to

both mitigating exposure to climate-related risks, and

minimising our impact on the environment. ESG and

climate-related risks are included in the Corporate Risk

Register and are considered at a more granular level in our

ESG risk register. Climate change risk remains one of the

Group’s principal risks.

The Sustainability Committee has regular oversight of

the Group’s sustainability strategy and ESG reporting.

Our separate climate risk related risk register is regularly

considered by the Investment Advisor and reviewed by the

Sustainability Committee.

Consideration of climate-related risks is incorporated in

our decision-making protocols for portfolio changes and

capital developments. Costs associated with the Group’s

sustainability and climate related ambitions are included

in our financial modelling and budgeting. Capital project

planning also includes a focus on energy usage reduction

and implementing building efficiency measures such as

replacement of high emission fittings, reduction of water

usage and support of sustainable transport initiatives.

Further information on our sustainability strategy and

progress are included in the sustainability report on

pages 36 to 42.

Principal risks

Principal risks are those which are considered material to

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

Risk Committee, who consider:

•

any substantial changes to principal risks;

•

material changes to control frameworks in place;

•

changes in risk scores; and

•

any significant risk incidents arising.

Changes in principal risk during the year

The Board has elevated one additional principal risk during

the year, relating to the potential for a wider economic

downturn to impact on the warehouse market, and

therefore the Group’s ability to deliver its objectives. No

risks were removed from our previously reported list of

principal risks.

Where the evaluation of a principal risk has changed during

the year, the detailed risks section on the following pages

sets the reasons for changes and risk mitigation plans.

54

THINKING INSIDE THE BOX

Likelihood

1

2

3

4

5

5

4

3

2

1

Key

Business

A

Economic downturn impacting on the warehouse market

B

Poor returns on the portfolio

C

Poor performance of the Investment Advisor

or Investment Manager

Compliance

D

Loss of REIT status

E

Breach of loan covenants or our borrowing policy

Climate

F

Impact of climate change on our portfolio

Operational

G

Significant rent arrears/irrecoverable bad debt

H

Inappropriate acquisitions, breach of the investment policy

Financial

I

Unable to raise funding through equity, debt or asset disposals

sufficient to raise capital and finance the Group’s activities

J

Interest rate changes

A

B

D

E

F

G

H

I

J

Risks

Low Risk

Medium Risk

High Risk

Business

A

16

12

B

16

9

C

12

3

Compliance

D

15

5

E

15

4

Climate

F

16

9

Operational

G

16

9

H

20

8

Financial

I

16

12

J

16

12

Reduction in risk through mitigating controls

Principal risk heat map as at 31 March 2024

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 residual, or current, exposure (i.e. after

controls and mitigations). This assessment allows us to

see the areas of highest gross risk and to recognise the

positive impact of control on the underlying inherent risk.

Inherent risk

Residual risk

C

55

BUSINESS

A

Economic downturn impacting on the warehouse market

B

Poor returns on the portfolio

A general downturn in the UK

economy could have a negative

impact on the warehouse market.

In particular, the exposure would be

increased if there was a decline in

specific markets, for example logistics.

Risk mitigation:

The Investment Advisor maintains detailed

forecasts of the property portfolio, which is

subject to regular scenario testing.

Metrics in key areas e.g. rent collection, credit

risk ratings are monitored monthly to enable

prompt identification of changes or trends.

We have a robust and diverse occupier base

and our annual review of the occupier mix

informs our leasing approach. We conduct a

portfolio risk review monthly.

We also stress test the working capital model

and associated assumptions are reviewed

biannually.

There is a risk that the returns

generated by the portfolio may not

be in line with our plans and forecasts.

There are many factors that could

drive this, including an inappropriate

investment strategy set by the Board;

poor delivery of the strategy; or poor

yields from the property portfolio

because of reduced capital valuations

or rental income.

This would have an impact on the

financial performance of the REIT, and

returns for our investors.

Risk mitigation:

The investment strategy is set by the Board,

and performance against key targets and KPIs

is reviewed and reported to the Board on an

ongoing basis.

Significant decisions, relating to assets or

occupiers, follow established protocols,

ensuring there is proper assessment, at the

right levels.

Change from previous year

N

This was previously included in the corporate

risk register, but during 2023, it was

escalated to the list of principal risks.

Change from previous year

Link to strategy:

Link to strategy:

Link to strategy

A focus on multi-let space

A strong and resilient income stream

Investor and Investment Advisor interests aligned

A disciplined financial position

Key

Increase

Decrease

No change

N

New

56

BUSINESS

COMPLIANCE

C

Poor performance of the Investment Advisor or Investment Manager

D

Loss of REIT status

The Group outsources its activities

and is reliant on the performance of

third-party service providers.

In particular, poor performance of

the Investment Advisor could have a

significant impact on the performance

of the Group, as it is fundamental to

the management and delivery of all

aspects of the business.

Risk mitigation:

There are contracts in place between

the Company, the Investment Advisor

and the Investment Manager, setting out

responsibilities.

The Group has a clear scheme of delegation,

approved by the Board. Significant decisions

are the responsibility of the Board.

The Investment Advisor and Investment

Manager provide regular quarterly reports to

the Board, which include key performance

targets and KPIs.

The Management Engagement Committee

carries out an annual service review, which is

reported to the Board.

Members of the Investment Advisor team

have an equity investment in the Group,

ensuring incentives are aligned and

minimising the risk of reduced or poor

service levels.

Loss of our REIT status, through failing

to meet regulatory requirements or

listing rules would have a significant

impact on our reputation and the

financial returns for our investors.

Risk mitigation:

The Board has approved a clear governance

framework that incorporates the Matters

Reserved for the Board and delegated

authorities, which are further supported

by the clear, contracted allocation of

responsibilities to our third-party service

providers.

The Investment Advisor reviews the position

against REIT legislation with the Company

Secretary quarterly.

Dividend cover and cash are continuously

monitored against forecasts, and the position

reported to the Audit and Risk Committee,

and Board.

Change from previous year

Change from previous year

Link to strategy:

Link to strategy:

Link to strategy

A focus on multi-let space

A strong and resilient income stream

Investor and Investment Advisor interests aligned

A disciplined financial position

Key

Increase

Decrease

No change

N

New

57

COMPLIANCE

CLIMATE

E

Breach of loan covenants or our borrowing policy

F

Impact of climate change on our portfolio

Our loan funding is subject to

conditions, and breach of those

could result in restrictions to funding

and activities going forwards. In

addition to the loan covenants, the

Board approved and communicated

our borrowing policy, and breach of

those limits may risk financial and

reputational damage.

Risk mitigation:

Our financial position is closely monitored,

with the Investment Advisor monitoring loan-

to-value percentages and interest cover ratios

against the loan covenant and borrowing

policy on an ongoing basis.

In addition, forecasts are prepared and

reviewed both to assess the business’s

position, and to ensure that any acquisition

decisions include consideration of the cash

and funding impact.

The Board receives a formal update each

quarter, and there is a quarterly compliance

letter prepared for the bank.

Climate change may have an impact

across the business, including both

physical risks – e.g. extreme weather

events impacting on properties – and

transitional risks – such as properties

not meeting occupier requirements

relating to energy efficiency, or the

increasing costs of compliance as

requirements around energy efficient

solutions and building standards

increase.

It is important to our investors that

we manage our portfolio responsibly,

which may also increase opportunities

for access to green financing.

Risk mitigation:

The Sustainability Committee approves

and monitors progress on our sustainability

strategy.

Our Investment Advisor, along with our

property managers, are working with

occupiers to understand their energy usage,

and how we can support them to meet their

sustainability objectives and net zero plans.

We are also working with external specialists

to refine our ambitions and targets, and

enhance our climate-related governance

and reporting.

Capital development and refurbishment

works include consideration of energy

efficient solutions, emissions management,

and options to reduce waste and resource

usage, and we are building these into our

standard processes through the use of

our Environmental Refurbishment and

Development standards.

More details of our plans and progress are

included in the sustainability report, see

pages 36 to 42 and the TCFD reporting on

pages 43 to 50.

Change from previous year

Change from previous year

Link to strategy:

Link to strategy:

Link to strategy

A focus on multi-let space

A strong and resilient income stream

Investor and Investment Advisor interests aligned

A disciplined financial position

Key

Increase

Decrease

No change

N

New

58

OPERATIONAL

G

Significant rent arrears/irrecoverable bad debt

H

Inappropriate acquisitions, breach of the investment policy

A substantial increase in our bad

debt, or the level of arrears and slow

payment, could have a direct impact

on cash flow and profitability. This may

also have an impact on average lease

lengths, and void levels and costs.

Risk mitigation:

Our diverse portfolio of assets and wide

range of occupiers is a key driver of our

performance and risk profile in relation to

bad debts.

We have approximately 445 occupiers across

our portfolio of 69 estates, and our top ten

occupiers generate less than 35% of our

rent roll.

Our occupier portfolio risk is monitored

to ensure that commitments to / reliance

on different sectors and business types is

understood.

At an operational level, we have robust

processes in place to ensure that we

accurately record, invoice and collect

amounts due. Working with the property

managers, our credit control processes

identify any potential arrears problems to

enable action to be taken at an early stage.

There is a rigorous due diligence process

prior to the acceptance of occupiers, with

rent guarantees or rent deposits taken

where appropriate. We also have ongoing

automated credit risk monitoring on the

occupier portfolio.

Inappropriate acquisitions could

increase risk in relation to portfolio

returns, as properties may be harder

to let, may not generate appropriate

revenues, or may require additional

costs to support.

Risk mitigation:

We have a comprehensive acquisition

protocol which is linked to the Matters

Reserved for the Board and the delegated

authority matrix.

The protocol sets out detailed due diligence

steps (including environmental due

dilligence), which must be completed and

fully evidenced as part of the decision-making

process. Acquisition decisions are approved

by the Investment Advisor Investment

Committee and the Investment Manager

Investment Committee, and any higher risk

acquisition decisions (by value or complexity)

are escalated to the Board.

The REIT’s Depositary, Gen II, is also required

to approve acquisition decisions.

Change from previous year

Change from previous year

Link to strategy:

Link to strategy:

Link to strategy

A focus on multi-let space

A strong and resilient income stream

Investor and Investment Advisor interests aligned

A disciplined financial position

Key

Increase

Decrease

No change

N

New

59

FINANCIAL

I

Unable to raise funding through equity, debt or asset disposals sufficient to

raise capital and finance the Group’s activities.

J

Interest rate changes

There are three areas of potential risk:

inability to attract additional equity

investment;

difficulty in securing new loan funding

for the business, at an affordable

rate; and

our ability to raise funds through the

disposal of assets could be impacted

by a hardening market if the economy

weakens.

Risk mitigation:

We recognise that market conditions remain

challenging and in particular impact our

ability to raise equity but we have a range of

alternative funding options at our disposal.

The Group’s refinancing was completed

during the year, which improved the

headroom in the loan-to-value percentage

and the interest cover ratio.

We have successfully completed a number

of disposals during the year. The Investment

Advisor maintains close contact with agents

to ensure that disposal proceeds and the

timing of sales are optimised. The monitoring

of financial covenants also enables efficient

disposal planning.

Regular investor communications ensure we

receive timely feedback on our strategy and

performance, informing decision-making

around potential future capital raisings.

Changes in interest rates could directly

impact on our cost of capital, and

indirectly may impact on market

stability.

Risk mitigation:

Changes in interest rates are not in our

control, and our focus is therefore on

mitigation of the impact. A five-year funding

agreement was agreed during the year and

the Group has £250.0m of interest rate caps

in place.

The Investment Advisor maintains detailed

records of the property portfolio, and

financial scenario testing is undertaken to

assess the potential impact of changes in

financing costs.

Change from previous year

Change from previous year

While interest rates have stabilised during the

year, they remain high, increasing our cost of

capital, and increasing our financial exposure.

Link to strategy:

Link to strategy:

Link to strategy

A focus on multi-let space

A strong and resilient income stream

Investor and Investment Advisor interests aligned

A disciplined financial position

Key

Increase

Decrease

No change

N

New

60

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, Tilstone, to review the uncertainties created by

geopolitical tensions and 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 £9.9 million of unrestricted

cash and £36.0 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 £53.0 million during the year and completed

£57.5 million post year end.

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 c.40% or rents by c.45%, when compared

with 31 March 2024, before these covenants would be

breached, which, based on available market data, is

considered unlikely.

As at 21 June 2024, 99.3% of rents invoiced in relation

to the year ended 31 March 2024 have been received.

Furthermore, current debt and associated covenants are

summarised in note 17, with no covenant breaches during

the period.

Tilstone has prepared projections for the Group

covering the going concern period to 30 June 2025,

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 that 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 2027, 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 51 to 60 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.

The Directors’ assessment takes into account forecast

cash flows, debt maturity and renewal prospects,

forecast covenant compliance, dividend cover and REIT

compliance. The model is then stress tested for severe

but plausible scenarios, individually and in aggregate,

along with consideration of potential mitigating factors.

The key sensitivities applied to the model are a downturn

in economic outlook and restricted availability of

finance, specifically:

i.

increased occupier churn and occupier defaults;

ii. increased void periods following break or expiry;

iii. decreased rental income;

iv. decrease in property valuation; and

v. increased interest rates.

GOING CONCERN AND VIABILITY STATEMENT

61

The sensitivity analysis identifies the decrease in valuations

and rental income that would result in a breach of the LTV,

market value covenants or interest cover covenants as

set out in the Going Concern section above. Taking into

account mitigating 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, maintain compliance with banking

covenants and maintain compliance with the REIT regime

over the period of the assessment.

Furthermore, the Board, in conjunction with the Audit

and Risk Committee, carried out a robust assessment of

the principal risks and uncertainties facing the Group,

including those that would threaten its business model,

strategy, future performance, solvency or liquidity over

the three-year period. The risk review process provided

the Board with assurance that the mitigations and

management systems are operating as intended. The

Board believes that the Group is well positioned to manage

its principal risks and uncertainties successfully, taking into

account the current economic and political environment.

The Board’s expectation is further supported by regular

briefings provided by Tilstone. These briefings consider

market conditions, opportunities, changes in the regulatory

landscape and the current economic and political risks

and uncertainties. Additionally, the shortage of supply

nationally, is seen as mitigation. These risks, and other

potential risks that may arise, continue to be closely

monitored by the Board.

VIABILITY STATEMENT

The period over which the Directors consider it is feasible

and appropriate to report on the Group’s viability is a

three-year period to June 2027. This period has been

selected because it is the period that is used for the

Group’s medium-term business plans. Underpinning

this plan is an assessment of each individual unit’s

performance, driving the overall letting assumptions and

corresponding forecast cash flows.

Having made an assessment of each individual unit’s

performance, the forecast cash flows, covenant compliance

and the impact of sensitivities in combination, the Directors

confirm that, taking account of the Group’s current

position, the principal risks and in light of the current

economic uncertainty, they have a reasonable expectation

that the Group will be able to continue in operation and

meet its liabilities as they fall due over the three-year

period of their assessment.

The strategic report on pages 02 to 62 is approved and

signed on behalf of the Board.

Neil Kirton

Chairman

24 June 2024

62

THINKING INSIDE THE BOX

GOING CONCERN AND VIABILITY STATEMENT

CONTINUED

As Chairman of Warehouse REIT, I am pleased to present the governance report

for our financial year ended 31 March 2024.

The Board is responsible for ensuring sound management

and the long-term success of the Group, which can only

be achieved with an appropriate governance framework.

During the year, we have continued to operate in

accordance with the AIC Code, with a view that good

governance delivers a series of strategic and

organisational benefits.

Our results reflect both the experience and

decision-making around the opportunities sourced by

Tilstone, as well as the strong and cohesive sense of

purpose that all the Board has shared since our IPO in 2017.

A key part of the Board’s focus during the year was to

oversee the successful implementation of the Company’s

strategy, which the Board believes positions it well for

the long term. In particular, the Board has evaluated

capital activity decisions which have resulted in sales of

£53.0 million during the year and a further £57.5 million

post period-end to support the reduction of the Group’s

variable rate debt and fully endorses plans to release

capital from the Radway Green development scheme.

In addition to the contractual arrangement that exists

between the Company and Tilstone, the spirit of

this arrangement has been very strong. The Board is

committed to ensuring that the impact of its activities

on key stakeholders is fully considered in Board

decision-making. It maintains a transparent and open

culture with a productive but appropriately challenging

dialogue with Tilstone. Both parties have a common

agenda, strengthened by the level of equity ownership

within the boardroom, and the Board was pleased that

again this has risen during the year.

At a time of considerable macroeconomic uncertainty, we

believe our exposure to the defensive nature of multi-let

industrials will allow us to continue delivering stable and

long-term income to our shareholders.

THE BOARD

The Board met regularly during the year. In addition to

our Board sessions, members of the Board committed

significant time to Warehouse REIT business either via

their various committee responsibilities, or less formally

through dialogue outside the boardroom environment,

where their expertise on particularly areas of our business,

including development, strategy and sustainability has

been very valuable.

During the year, the Board, together with the Investment

Advisor, ensured ongoing strategic focus on capturing

the reversionary potential of the asset portfolio. One of

the ways they have done this is by scheduling a series

of monthly calls between the Investment Advisor and

the Board, so that both parties remain engaged on the

various portfolio transactions, which has led to particularly

pleasing results.

STRATEGY DAY

One particularly important occasion for the Board is the

strategy day that we undertake annually, usually in the

second quarter of the financial year. Discussion materials

are prepared by Tilstone based on an agenda set by the

Board which typically reviews progress and strategy with a

detailed session on a number of key topics. In prior years,

the Board has also invited external professional advisors to

present at the strategy day. The core areas from the 2023

day included a review of:

•

the market for urban warehousing in the UK and its

impact on our strategy;

•

the Company’s investment proposition and current

performance; and

•

our revised strategy.

Neil Kirton

Chairman

OUR RESULTS

REFLECT BOTH THE

EXPERIENCE AND DECISION-

MAKING AROUND THE

OPPORTUNITIES SOURCED

BY TILSTONE, AS WELL AS

THE STRONG AND COHESIVE

SENSE OF PURPOSE THAT

ALL THE BOARD SHARES.

Neil Kirton

Chairman

CHAIRMAN’S INTRODUCTION TO GOVERNANCE

63

BOARD COMMITTEES

The Board undertook an internal effectiveness review

of itself and its Committees. This was facilitated by the

Company Secretary and further details on the process and

outcomes of this evaluation can be found on page 72.

Board Committee and Board changes can be found

on page 70 of the Annual Report. The Nomination

Committee – which I continue to chair – regularly reviews

the skill sets required to ensure robust governance over

the Company. This year, the Nomination Committee had

oversight of the recruitment of a new Non-Executive

Director of the Company. We are delighted to report on

the recent addition of Dominic O’Rourke to our Board.

Dominic strengthens our Board in terms of experience,

and is already adding value to our discussions. Dominic’s

biography can be found on page 66 of this Annual

Report, including information on his Board Committee

memberships. Succession planning is an important part

of our governance process and will be a key focus for the

Nomination Committee in 2025.

ESG

To ensure strong ESG practices across the organisation,

all of our Directors participated in ongoing training

and professional development throughout 2023, which

included briefings and presentations by the Company

Secretary, members of the Investment Advisor, and

professional advisors on regulatory changes, specifically

matters related to ESG.

The Board as a whole continues to fully understand and

endorse the importance of ESG to our existing investors,

potential shareholders and other stakeholders including

occupiers. We discuss ESG in more detail elsewhere in this

Annual Reprot. Our strategy continues to focus on creating

a resilient portfolio, reducing our footprint, being able to

measure our progress and reinforce that with independent

validation, and supporting our occupiers.

During the period in review, we engaged a number of

occupiers in a survey on their views and approaches

to ESG, which has been particularly useful in terms of

understanding our customers and responding to their

needs. This is a cornerstone of what we do.

More generally, the Board continues to take a keen

interest in stakeholder views and we ensure we have

robust reporting from Tilstone on their day-to-day

interactions with stakeholders, understanding that the

Group’s operations may have both positive and negative

impacts on the economy, people and the environment

and recognising its role in ensuring that the Group

properly manages its impacts, limiting and mitigating the

negative ones, and promoting positive outcomes for its

stakeholders. Members of the Board are also available to

hold discussions with shareholders as necessary. More

information on the Group’s stakeholder engagement can

be found in the strategic report on pages 22 to 24.

Further information on our ESG strategy can be found on

pages 36 to 50 of this Annual Report.

We remain committed to working with the Investment

Advisor to ensure that our high standards extend beyond

the boardroom and are implemented throughout the

business in the successful delivery of the Group’s strategic

priorities.

Neil Kirton

Chairman

24 June 2024

64

THINKING INSIDE THE BOX

CHAIRMAN’S INTRODUCTION TO GOVERNANCE

CONTINUED

CHAIRMAN’S INTRODUCTION TO GOVERNANCE

CONTINUED

After 6 years as a Non-executive Director, Martin Meech did not stand for re-election at the Company’s AGM on the 12 September 2023 and Dominic O’Rourke was appointed to the

Board on the 13 September 2023. There were no other Board changes during the year. All the Directors are non-executive and the majority are independent of the Investment Advisor.

Key

Audit and Risk Committee

Nomination Committee

Management Engagement Committee

Sustainability Committee

Independent

Non-independent

Chair

Neil Kirton

Non-Executive Chairman

Aimée Pitman

Non-Executive Director

Lynette Lackey

Non-Executive Director

Date of appointment

1 August 2017

Skills and experience

Neil has over 25 years of experience working in

the securities and investment banking industries,

giving him a deep understanding of capital markets

and investor needs. Neil has regularly advised and

consulted at Board level for three decades and has

considerable UK capital markets and professional

services experience.

Other current appointments

Neil is also a non-executive director of Ingenta

plc and is currently a Senior Advisor for Smith

Square Partners.

Past appointments

Until December 2021, Neil was a managing director

and co-regional head, EMEA, Forensic Investigations

and Intelligence at Kroll. Neil was formerly global

head of equity distribution at ABN AMRO Bank

NV and a member of ABN AMRO’s Global Equity

Directorate. He was head of UK equity sales and

deputy chief executive at Hoare Govett, head of

equities at Bridgewell Securities, head of corporate

finance and CEO at Arbuthnot Securities and an

executive director of Arbuthnot Banking Group plc.

Date of appointment

1 August 2017

Skills and experience

Aimée has over 30 years’ experience in strategy

development across various sectors, most notably

real estate, travel and leisure, and financial services.

Other current appointments

Aimée runs her own strategy consulting business,

Pitman & Co. Consulting. As an independent

consultant, she works as a client director with Eden

McCallum LLP, a London-based consultancy firm.

She is also a non-executive director of Native

Holdings Ltd, sits on the Advisory Board of

McArthurGlen and has recently been appointed a

Fellow of Chapter Zero, a not-for-profit organisation

focused on helping UK organisations achieve net

zero transition plans.

Past appointments

Aimée was a Vice President within MAC Group/

Gemini Consulting’s strategy practice and went on

to work over a number of years with European travel

group TUI, supporting it on strategy, distribution and

operational excellence.

Date of appointment

15 November 2018

Skills and experience

Lynette is a chartered accountant and experienced

non-executive director. She has considerable

knowledge of financial matters and of the real

estate sector.

Other current appointments

Lynette is also a member of Council at the London

Chamber of Commerce & Industry. She is also a

partner in her business advisory firm one5two LLP,

focused on growing businesses.

Past appointments

Lynette was a non-executive director of Places for

People group and chair of its regulated board. Her roles

included the senior independent director and chair of

the group audit and risk committee of the Board.

Lynette was a partner of BDO LLP for ten years,

where she was responsible for a portfolio of real estate

investor and developer clients. She is a former partner in

Greenside Real Estate Solutions, as well as the National

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.

BOARD OF DIRECTORS

65

Key

Audit and Risk Committee

Nomination Committee

Management Engagement Committee

Sustainability Committee

Independent

Non-independent

Chair

Dominic O’Rourke

Non-Executive Director

Simon Hope

Non-Executive Director

Stephen Barrow

Non-Executive Director

Date of appointment

13 September 2023

Skills and experience

Dominic has over 25 years’ experience in the

property industry with a particular focus on retail and

logistics. He has a strong track record formulating,

managing and unwinding property vehicles, joint

ventures and commercial partnerships.

Other current appointments

Dominic is the Group Property Director for Next

plc where he is responsible for a large real estate,

construction and facilities management team.

Dominic is a board member, trustee and finance

committee member for the University College of

Estate Management (UCEM).

Past appointment

Dominic was a director and Retail Executive

Committee member at Land Securities plc. He also

served on the boards of Broadway Homelessness

and Support (now St Mungos) and Regent’s

University London.

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.

Current appointments

Simon is co Managing Director of Tilstone and represents

Tilstone 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 horse racing

organisations. He is a governor of Magdalen College, Oxford,

Trustee of Racing Welfare and Chairman of Racing Homes.

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.

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. Stephen is also a Director of Tilstone.

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.

66

THINKING INSIDE THE BOX

The Board has appointed Tilstone Partners Limited to provide day-to-day asset management and advisory services to the Group.

Simon Hope

Chairman/

Co-Managing Director

Andrew Bird

Managing Director/

Co-Managing Director

Paul Makin

Investment Director

Peter Greenslade

Finance Director

Simon has been Chairman of Tilstone

since its formation in 2010 and was

a founding investor. Prior to that he

worked with Andrew Bird while Andrew

was property director at Barlows Plc,

trading a number of portfolios including

a sale to Westbury Fund Management.

Simon’s biography can be found on the

previous page.

Andrew founded the Tilstone brand in

2010 to focus on commercial property

investment and development. After

identifying opportunities within the

warehouse sector, the focus moved in

August 2013 to creating the Tilstone

Property Portfolio, which the Company

acquired as its seed portfolio as part of

the September 2017 initial public offering.

As Managing Director of Tilstone, Andrew

takes overall responsibility for strategy,

direction and business performance.

Prior to founding Tilstone, Andrew

was appointed as property director

to the board of Barlows plc in 1994,

a north-west focused commercial

property company with a listing on

the Main Market of the London Stock

Exchange. He was subsequently part

of a consortium that took the company

private in 2001. The business created a

separate asset management company

through which Andrew served on the

investment committee of Westbury

plc, a quoted property fund (2002-

2007). Andrew has also served as a

non-executive director of Dee Valley

Group plc, at that time a London Stock

Exchange quoted water utility company.

Paul joined Tilstone in 2013 and was

part of the original team creating the

Tilstone Property Portfolio and was a

co-founder of Tilstone Partners Limited.

Paul is Tilstone’s Investment Director

and is responsible for the sourcing

of investment opportunities, asset

management and creating positive

occupier relationships.

He has extensive investment

consultancy experience through his

work at CBRE Limited and subsequently

at Mapeley Estates Limited (a previously

listed property company), where he

was head of investment and investment

asset management, tasked with

extracting value from outsourcing

contracts and new acquisitions. Paul

expanded his horizons with a senior

investment asset management role at

Moorfield Group Limited, a real estate

private equity company. There he took

a key role in the purchase and asset

management of projects such as the UK

Logistics Fund, in a joint venture with

SEGRO plc.

Peter has significant experience in

company management, control,

reporting and corporate activity. He

qualified as a chartered accountant

with Binder Hamlyn, before working in

a variety of finance roles for blue chip

companies including Grand Metropolitan

(Diageo plc), De La Rue plc and ICL

plc. During his time as group finance

director of Robert Walters plc, the

company successfully floated on the

Main Market of the London Stock

Exchange. While he was at Spectron

Group Limited, the company was

restructured and eventually sold to a

trade buyer.

As part of the management team of

Axiom Consulting Limited, Peter was

involved in a management buyout from

Aon Limited, funded by private equity,

and later its trade sale to Charles Taylor

plc. He was also part of the team at

Kane Group Limited which undertook

the private equity-backed acquisition of

HSBC Insurance Services Limited. Peter

also stood on the board of Leander Club

Limited for ten years, stepping down

in 2022.

INVESTMENT ADVISOR

67

BOARD LEADERSHIP AND PURPOSE

Principle

Where it is in this report

Principle A

Strategic report

Board of Directors

Business model

pages 02 to 62

pages 65 to 66

page 12

Principle B

Strategic report

Our culture

Our purpose

pages 02 to 62

page 71

page 71

Principle C

Sustainability report

Principal risks and

uncertainties

Risk management and

internal controls

pages 36 to 50

pages 51 to 60

pages 83 to 84

Principle D

Section 172 statement

Shareholder engagement

pages 25 to 26

pages 22 to 24

With regards to Principle E, the AIC and FRC do not

require investment trusts to report against this principle.

DIVISION OF RESPONSIBILITIES

Principle

Where it is in this report

Principle F

Role of the Chairman

The Board

page 71

page 69

Principle G

Board of Directors

Board Committees

pages 65 to 66

pages 70 to 71

Principle H

Board composition and

succession

Management Engagement

Committee report

pages 78 to 81

pages 86 to 87

Principle I

The Board

Section 172 statement

Induction of new Directors

page 69

pages 25 to 26

N/A

COMPOSITION, SUCCESSION AND EVALUATION

Principle

Where it is in this report

Principle J

Diversity

Nomination

Committee report

Board composition and

succession

pages 79 to 80

pages 78 to 81

page 79

Principle K

Board of Directors

Nomination

Committee report

Board Committees

Board composition and

succession

pages 65 to 66

pages 78 to 81

page 70

page 79

Principle L

Board evaluation

page 72

AUDIT, RISK AND INTERNAL CONTROL

Principle

Where it is in this report

Principle M

Audit and Risk

Committee report

pages 82 to 85

Principle N

Strategic report

Audit and Risk

Committee report

Independent

Auditor’s report

Financial Statements

pages 02 to 62

pages 82 to 85

pages 99 to 105

pages 106 to 131

Principle O

Principal risks and

uncertainties

Viability statement

Audit and Risk

Committee report

Management Engagement

Committee report

pages 51 to 60

page 61

pages 82 to 85

pages 86 to 87

REMUNERATION

Principle

Where it is in this report

Principle P

Strategic report

Directors’

remuneration policy

Directors’

remuneration report

pages 02 to 62

pages 90 to 91

pages 90 to 92

Principle Q

Directors’

remuneration report

pages 90 to 92

Principle R

Directors’

remuneration report

pages 90 to 92

68

THINKING INSIDE THE BOX

CORPORATE GOVERNANCE STATEMENT

This report explains the key features of the Group’s governance structure.

STATEMENT OF COMPLIANCE

The Board recognises the importance of sound corporate

governance, commensurate with the Group’s size and

nature and the interests of its shareholders. The Board

is therefore committed to maintaining high standards of

corporate governance.

The Board undertakes an annual review of its compliance

with the principles and recommendations of the AIC

Code of Corporate Governance (the “AIC Code”). A copy

of the AIC Code, which was last updated in 2019, can be

obtained via the AIC website,

www.theaic.co.uk

. It includes

an explanation of how the AIC Code adapts the Principles

and Provisions set out in the UK Corporate Governance

Code 2018 (the “UK Code”) on issues that are of specific

relevance to the Company. The Board considers that

reporting against the Principles and Provisions of the

AIC Code, which has been endorsed by the Financial

Reporting Council, provides more relevant information

to shareholders.

During the year ended 31 March 2024, the Company

has complied with the AIC Code throughout the year,

except where the Board has concluded that adherence

or compliance with any particular Principle or Provision

would not have been appropriate to the Company’s

circumstances, in which case the reasons are fully

explained in this statement. The Company is an externally

managed investment company, and given the size,

complexity and structure of the Company, it does not have

a separate remuneration committee. Remuneration matters

are dealt with by the Board of Directors. All the Company’s

day-to-day management and administrative functions are

outsourced to third parties, as explained in the Directors’

Report. This Annual Report therefore makes disclosures

relevant to a company like ours.

THE BOARD OF DIRECTORS

Under the leadership of the Chairman, the Board of

Directors has a collective responsibility for the long-

term sustainable success of the Company, generating

value for shareholders and contributing to wider society.

Each Director recognises that they have a statutory

duty to consider and represent the Company’s various

stakeholders in deliberations and decision-making. More

details on how the Directors have fulfilled their duties

under section 172 of the Companies Act 2006 are on

pages 25 to 26 of this report. The Board establishes the

purpose, values and strategic aims of the whole Group

and satisfies itself that these and its culture are aligned

and ensures that the necessary resources are in place for

the Group to meet its objectives and fulfil its obligations

to shareholders, within a framework of high standards

of corporate governance and effective internal controls.

The Directors are responsible for the determination of

the Group’s investment policy and strategy and have the

overall responsibility for the Group’s activities, including

the control and supervision of the Investment Manager

and Investment Advisor. The other responsibilities of the

Board are detailed in the matters reserved for the Board,

and some are listed on page 73 of this Annual Report.

At the date of this report, the Board consists entirely of six

Non-Executive Directors, including the Chairman, with no

individual having unconstrained powers of decision. The

Directors have a broad range of relevant experience to

meet the Company’s requirements and their biographies,

including details of their other significant commitments,

can be found on pages 65 and 66. During the year, the

Board was satisfied that all the Directors were able

to commit sufficient time to the Group’s affairs and

discharge their responsibilities effectively having given

due consideration to the Directors’ external appointments.

APPROACH TO TENURE

The Board recognises the benefits to the Company of

having longer-serving Directors together with progressive

refreshment of the Board in line with corporate governance

best practice. Each Director was appointed for an initial

three-year term, subject to re-election annually at each

AGM. The Board has adopted a succession plan that

allows for gradual refreshment. Accordingly, the Board

has not stipulated a maximum term of any directorship,

except that, subject to ensuring business continuity, the

Chairman will remain on the Board for a maximum period

of nine years.

None of the Directors have a service contract. Letters

of appointment set out the terms of their appointment

and copies are available on request from the Company

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 keep to that commitment. All material

changes in any Director’s commitments outside the Group

are required to be, and have been, disclosed prior to the

acceptance of any such appointment.

DIRECTOR INDUCTION

The Group has established an induction procedure for new

Directors, including the provision of an induction pack

containing information about the Group, its processes and

procedures. New appointees also meet the Chairman and

relevant Investment Advisor personnel. More information

on the most recent induction for Dominic O’Rourke can be

found on page 70.

69

We consider that a diversity of ethnicity, skills,

backgrounds, knowledge, experience, geographic location,

nationalities and gender is important to effectively govern

the business. The Board and its Nomination Committee will

work to ensure that the Board continues to have the right

balance of skills, experience, knowledge and independence

necessary to discharge its responsibilities in accordance

with the highest standards of governance.

Following the spirit of the Financial Conduct Authority

(FCA) Listing Rules, diversity targets and associated

disclosure requirements for UK companies, the Board

is mindful of developing diversity at Board level in the

Group. Female representation on the Board is at 33%.

The Board is also aware of the aims of the Parker Review

for companies to have at least one Director from an ethnic

minority background. As part of the ongoing succession

plan, consideration will be given to the need to improve

the ethnic diversity representation on the Board when

recruiting new Non-Executive Directors. Therefore, the

Company aims to satisfy the Parker Review goals through

future appointments. The Directors believe that the

Company’s approach to diversity should be balanced with

the need to appoint Directors who can best serve the

interests of the Company, having the relevant experience,

and its shareholders.

The Company announced the appointment of Dominic

O’Rourke as a Non-Executive Director on 13 September

2023. Dominic is currently Group Property Director for

FTSE 100 retailer Next plc, a role he has held since 2014,

where he oversees Next’s real estate activities across

retail and store development, distribution and facilities

management. Prior to this, he spent 13 years at Land

Securities Group plc, where he was a director and Retail

Executive Committee member.

The appointment of Dominic O’Rourke forms

part of the Company’s Board succession strategy,

following Martin Meech’s decision not to stand for

re-election at the Company’s AGM after six years as a

Non-executive Director.

BOARD AND COMMITTEE SIZE AND COMPOSITION

Board

Audit and Risk

Committee

Management

Engagement

Committee

Nomination

Committee

Sustainability

Committee

Members:

Lynette Lackey

(Chair), Aimée

Pitman and Dominic

O’Rourke, all of whom

are independant

Non-Executive

Directors.

A report from the Chair

of the Audit and Risk

Committee is set out

on pages 82 to 85.

Members:

Dominic O’Rourke

(Chair), Neil Kirton and

Lynette Lackey, all of

whom are independent

Non-Executive

Directors.

A report from the Chair

of the Management

Engagement

Committee is set out

on pages 86 to 87.

Members:

Neil Kirton (Chair),

Lynette Lackey and

Simon Hope, the

majority of whom

are independent

Non-Executive

Directors.

A report from the Chair

of the Nomination

Committee is set out

on pages 78 to 81.

Members:

Aimée Pitman (Chair),

Dominic O’Rourke

and Stephen Barrow,

the majority of whom

are independent

Non-Executive

Directors.

A report from the Chair

of the Sustainability

Committee is set out

on pages 88 to 89.

The Board committees’ terms of reference are available on the Company’s website at

www.warehousereit.co.uk

.

70

THINKING INSIDE THE BOX

On appointment, Dominic became a member of the Audit

and Risk and Sustainability Committees, and became Chair

of the Management Engagement Committee.

More information on the Company’s Diversity Policy, its

objectives, implementation and results can be found on

pages 79 to 80.

Chairman and Senior Independent Director

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.

Following Martin Meech’s decision not to stand for re-

election at the Company’s AGM on the 12 September

2023, the Board appointed Aimée Pitman as the Senior

Independent Director on the 13 September 2023. The

Senior Independent Director provides a channel for any

shareholder or Director concerns regarding the Chairman

and leads the independent Directors’ evaluation of the

Chairman.

The roles and responsibilities of the Chairman and the

Senior Independent Director are clearly defined and set out

in writing, a copy of which is available on the Company’s

website at

www.warehousereit.co.uk

.

Purpose and culture

The Group’s purpose is to provide the well-connected,

high-quality and sustainable space our occupiers need to

thrive and, by doing this responsibly, we generate positive

outcomes for all our stakeholders.

The Chairman leads the Board and is responsible for

its overall effectiveness in directing the Group. He

demonstrates objective judgement, promotes a culture

of openness and debate, and facilitates effective

contributions by all Directors. In liaison with the Company

Secretary, he ensures that the Directors receive accurate,

timely and clear information to enable them to discharge

their responsibilities, reinforcing a culture that contributes

to achieving the purpose of the Company, consistent with

its values and strategy, in the pursuance of the long-term

sustainable success of the Company. Board discussions

draw upon Directors’ individual experience, and they try to

engage with shareholders as appropriate.

The Board believes that it has a responsibility to set and

demonstrate high standards of ethics and behaviour.

We are strongly committed to an ethos and culture that

balances both our shareholders’ need and desire for

financial returns and the process and environment within

which we achieve those returns. This obligation begins with

the Board of Directors but extends into our engagement

with Tilstone. Both parties operate with complete mutuality

of trust and transparency embedded in the relationship,

ensuring that the interests of shareholders, the Board and

the Investment Advisor are well aligned and adopt a tone

of constructive challenge.

The culture is the product of the Board’s and the

Company’s service providers’ values, diversity and

behaviours. As an externally managed Group, we expect

all our external service providers, including Tilstone,

to fully endorse these values and exercise commercial

judgement with due and full consideration of the impact

of those decisions on their employees, our customers,

the communities in which we operate, and our wider

stakeholder base.

Annually, the Management Engagement Committee

analyses and systematically reviews all our service

providers, including Tilstone – a review which includes an

understanding of their policies, procedures and actions

around behaviour, ethics and culture and consideration

of their own engagement with other third-party service

providers. Thus, these reviews embed consideration of

stakeholders’ interests, long-term perspective, maintaining

reputation for fairness and high standards of governance,

corporate reporting and business conduct more generally

in the Company’s culture and processes.

A healthy corporate culture contributes to the long-

term success of the Company. The following observable

outcomes may be indicative of the Directors’ success in

embedding a healthy corporate culture in the Company’s

processes and policies and actively promoting it through

their behaviours:

•

the extent to which the Investment Advisor, members of

the Investment Advisor and Directors are willing to be

long-term shareholders in the Company;

•

recognition of the transparency and clarity of reporting

(and content disclosed on its website); and

•

development and continuous review of policies and

procedures to assist with maintaining a culture of

good governance, like the Company’s Modern Slavery

Statement, which is reviewed and approved by the

Board annually, and is available on the Company’s

website.

Engaging with our stakeholders

Details of how we engaged with our key stakeholders

during the year ended 31 March 2024 are set out in the

strategic report on pages 22 to 24.

71

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 Board and Committee meetings during the year ended

31 March 2024, against the number of meetings each Board member was eligible to attend:

Board

Audit

and Risk

Committee

Management

Engagement

Committee

Nomination

Committee

Sustainability

Committee

Neil Kirton

7/7

–

1/1

2/2

–

Aimée Pitman

7/7

4/4

–

–

4/4

Lynette Lackey

7/7

4/4

1/1

2/2

–

Martin Meech

1

4/4

2/2

1/1

–

2/2

Dominic O’Rourke

2

2/3

2/2

–

–

2/2

Simon Hope

7/7

–

–

1/2

–

Stephen Barrow

7/7

–

–

–

4/4

1

Martin Meech did not stand for re-election at the Company’s AGM on 12 September 2023.

2

Dominic O’Rourke was appointed on 13 September 2023.

Ad hoc Board committee meetings were held during the

period to discuss strategic matters and approve the release

of the annual and half-year results.

The Board has formal arrangements for the Directors,

in the furtherance of their duties, to take independent

professional advice at the Company’s expense on an

ongoing basis. The Company has also taken out a

Directors’ and Officers’ liability insurance policy, which

includes cover for legal expenses.

Subject to the provisions of UK law, the Company has

provided each Director with an indemnity in respect of

liabilities that they may incur when discharging their duties

as a Director. There are no other qualifying third-party

indemnity provisions in place.

BOARD EVALUATION

The Directors continue to be committed to the need for

regular Board evaluation. This enables them to continually

monitor and improve the performance of the Board, its

Committees and its individual Directors and to implement

actions to improve the Board’s focus and effectiveness,

which contribute to the Group’s success. This year’s

evaluation involved an internal performance evaluation by

way of questionnaires completed by the Directors. The

questionnaire was designed to assess the strengths and

effectiveness of the Board and its Committees. The scope

of the questionnaire is designed to cover all aspects of the

Board’s operation, including the management of meetings,

the strengths and independence of the Board and the

Chairman, individual Directors and the performance of its

Committees, each Director’s perspective on the Board’s

future priorities, training requirements, and the way the

Board works as a team.

Each of the Directors completed a questionnaire which

was then used to hold constructive discussions led by

the Chairman.

The key conclusions were that the Board considers that

it has performed effectively and that it demonstrates a

good balance of skills, performance and knowledge and

has a particularly strong working relationship with the

Investment Advisor. There were no significant concerns

that arose in the evaluation. During the remainder of the

year, the Board will continue to refine its own mechanisms

but may also provide more training where required

and ensure that it is both careful and committed to the

execution of its strategy. While the Board recognises it

could benefit from greater diversity, it does not consider it

is in the best interests of shareholders to force diversity by

imposing fixed criteria or quotas. The Board will continue

to make appointments based on merit, having regard to

factors including gender, ethnicity, skills and experience.

The Board will continue to monitor and encourage diversity

as part of its ongoing succession planning.

INDEPENDENCE OF DIRECTORS

The Board has reviewed the independence of each Director

and the Board as a whole in line with principle G of the AIC

Code and is of the opinion that the majority of the Board

members are considered independent. The majority of

the Board is independent of the Investment Advisor and

free from any business or other relationships that could

materially interfere with the exercise of the Directors’

independent judgement.

Simon Hope is the Co-Managing Director of the Investment

Advisor and a Senior Adviser at Savills UK (one of the

Company’s Property Managers); he is therefore considered

to be a non-independent Director. Stephen Barrow is

also on the Tilstone Board of Directors and is therefore

considered to be a non-independent Director. Both Simon

Hope and Stephen Barrow have cross-directorships in

Tilstone Partners Limited.

The Board considers that all other Directors are

independent of the Investment Advisor in both character

and judgement.

72

ELECTION / RE-ELECTION OF DIRECTORS

Under the Company’s Articles of Association, Directors

are required to stand for 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

him/herself for re-election, as is any Director who has held

office for a continuous period of nine years or more.

Beyond these requirements, and in line with corporate

governance best practice, the Board has determined that

all Directors will seek annual re-election at the Company’s

AGMs. The Board considers that, during the year ended

31 March 2024, each Director has performed effectively

and demonstrated commitment to the role. It therefore

believes that it is in the best interests of shareholders that

each Director is re-elected at the AGM.

BOARD RESPONSIBILITIES AND RELATIONSHIP

WITH THE INVESTMENT ADVISOR

To ensure the Board meets its responsibilities, certain key

decisions can only be approved by the Board. Recognising

its duties under the Companies Act 2006, the Board’s

main roles are to lead the Group and ensure its long-term

sustainable success, generating value for shareholders and

contributing to wider society, and to approve the Group’s

purpose, values and strategic objectives and satisfy itself

that these and its culture are aligned. The Board has adopted

a schedule of matters reserved for its decision, which is

reviewed annually. These specific responsibilities include:

•

approving the Company’s investment and

business strategy;

•

approving the gearing policy;

•

overseeing cash management;

•

approving the Annual and Half-yearly Reports

and Financial Statements and accounting policies,

prospectuses, circulars and other shareholder

communications;

•

approving acquisitions and disposals which are within

the investment policy but have a value of 20% or

more of gross asset value (“GAV”) of the Company’s

portfolio, and any acquisitions or disposals outside the

investment policy;

•

raising new capital and approving major

financing facilities;

•

approving the valuation of the Group’s portfolio;

•

approving and recommending dividends;

•

approving Board appointments and removals;

•

approving the Company’s sustainability strategy;

•

appointing or removing the Investment Manager,

Investment Advisor, Depositary, Auditor and Company

Secretary; and

•

ensuring a satisfactory dialogue with shareholders and

other key stakeholders.

A copy of the schedule of matters reserved for the

Board’s decision is available on the Company’s website at

www.warehousereit.co.uk

.

The Board’s responsibilities also include developing and

overseeing the execution of the Company’s strategy within

a framework of effective risk management and internal

controls, demonstrating ethical leadership, and upholding

corporate governance best practice.

The Board monitors the execution of strategy and

financial performance, appreciating the need to ensure

the Company strikes the right balance between delivering

on short-term objectives and ensuring sustainable

long-term growth.

The Company has sub-contracted its day-to-day functions

to service providers, each engaged under separate legal

agreements. For example, portfolio management and risk

management of the Group’s assets have been delegated to

the Investment Manager. The Investment Advisor provides

recommendations to the Investment Manager’s investment

committee. These recommendations cover acquisitions

and sales of Group assets (where this would be in line

with the Company’s objectives and investment policy)

and recommendations on whether the Group should incur

borrowings and give guarantees and securities (subject to

certain investment restrictions imposed by the Board and

the Board’s overall control and supervision). The Board, the

Investment Manager and the Investment Advisor operate in

a fully supportive, co-operative and open environment.

At each Board meeting, the Directors follow a formal

agenda, which is circulated in advance by the Company

Secretary. The Company Secretary and Investment Advisor

regularly provide financial information, together with

briefing notes and papers in relation to changes in the

Group’s economic and financial environment, statutory

and regulatory changes and corporate governance best

practice. Representatives from the Investment Advisor and

the Investment Manager attend each Board meeting and

communicate with the Board between formal meetings.

CONFLICTS OF INTEREST

In accordance with the Companies Act 2006, the Articles

of Association permit the Board to consider and, if it sees

fit, to authorise situations where a Director has an interest

that conflicts, or may possibly conflict, with the Group’s

interests. It is the responsibility of each individual Director

to avoid an unauthorised conflict arising. Directors must

request authorisation from the Board as soon as they

become aware of the possibility that a conflict may arise.

When the Board is deciding whether to authorise a conflict

or potential conflict, only Directors who have no interest in

the matter being considered can participate in the relevant

decision, and in taking the decision the Directors must act

in a way they consider, in good faith, will be most likely to

promote the Company’s success. The Board can impose

limits or conditions when giving authorisation if they think

this is appropriate in the circumstances. The Board has a

formal system to consider such conflicts and the Company

Secretary maintains the Register of Directors’ Conflicts

of Interests, which is reviewed at each quarterly Board

meeting and when changes are notified.

COMPANY SECRETARY

The Board has direct access to the advice and services

of the Company Secretary, Company Matters, which is

responsible for ensuring that the Board and Committee

procedures are followed and that applicable regulations are

complied with. The Company Secretary is also responsible

to the Board for ensuring timely delivery of information

and reports and for ensuring that the Group meets its

statutory obligations.

73

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, real estate

market and macroeconomic update, 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:

May 2023

•

Updates from Management Engagement

Committee, Sustainability Committee,

Nomination Committee and Audit and Risk

Committee Chairs

•

Approval of preliminary results for the year

ended 31 March 2023 and fourth interim

dividend for the 2023 financial year

•

Review of going concern and long-term

viability statements

•

Review of Directors’ external evaluation for

the year ended 31 March 2023

•

Discussed, reviewed and approved the

Group’s Annual Report

•

Reviewed Board Committees’ Terms of

Reference

•

Reviewed Directors’ fees

•

Approval of first interim

dividend for the financial

year ended 31 March 2024

• Updates from

Sustainability Committee

and Audit and Risk

Committee Chairs

•

Considered ESG practices

and sustainability strategy

August 2023

•

Board strategy meeting

•

Reviewed the Company’s

business principles,

purpose and strategy

• Reviewed performance

against strategy

October 2023

•

Updates from Sustainability Committee

and Audit and Risk Committee Chairs

•

Approved the third interim dividend for

the 2024 financial year

•

Reviewed matters reserved for

the Board

•

Received updates from the Investment

Advisor on key areas of the Group’s

operations as at March 2024

January 2024

•

Updates from the Audit and

Risk Committee Chair

•

Approval of Half-yearly Report

and second interim dividend

for the 2024 financial year

•

Reviewed performance against

strategy

•

Reviewed the Modern Slavery

Statement

November 2023

•

Annual General Meeting

•

Appointment of Dominic

O’Rourke as Director of

the Company

•

Resignation of Martin

Meech as Director of the

Company

September 2023

•

Approval of Annual Report for the

financial year ended 31 March 2023

•

Discussed, reviewed and approved

the Notice of Annual General

Meeting for the financial year

ended 31 March 2023

June 2023

•

Approved the financial

budget and capital

expenditure programme for

the financial year to

31 March 2025

•

Reviewed the Company’s

compliance with the

AIC Code

•

Reviewed the investment

policy, sustainability policy,

Matters Reserved for

the Board, diversity and

inclusion policy and Board

diversity policy

•

Reviewed the Directors’

performance evaluation for

the year ended 31 March 2024

March 2024

74

THINKING INSIDE THE BOX

CORPORATE GOVERNANCE STATEMENT

CONTINUED

HOW GOVERNANCE SUPPORTED THE DELIVERY

OF THE GROUP’S STRATEGY DURING THE YEAR

ENDED 31 MARCH 2024

As noted on page 63, approving the strategy and

overseeing its implementation is one of the Board’s core

responsibilities. The timeline on the previous page sets

out the Board’s activities in respect of each element of

the strategy. 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 in which the

Company operates.

Strategy

Board governance role

Key activities during the year

Investment

strategy

Overseeing the selection

of acquisitions, against the

backdrop of current market and

economic conditions

Approving acquisitions that are

within the investment policy but

have a value of 20% or more of

the Company’s GAV

Approving any acquisitions

outside the investment policy

During the year, the Board:

•

reviewed and discussed the details of all disposals, as part of

the disposal strategy, at its quarterly meetings. No material new

acquisitions were made during the year; and

•

assessed in detail the ongoing availability of quality stock that

could be acquired and held during the year

Read more about the disposals in the year in the Investment

Advisor’s report on page 27.

Asset

management

strategy

Overseeing the portfolio

Overseeing the Investment

Advisor’s asset management

activities

Approving disposals that are

within the investment policy but

have a value of 20% or more

of the GAV of the Company’s

portfolio

Approving any disposals outside

the investment policy

During the year, the Board:

•

reviewed quarterly portfolio updates from the Investment

Advisor, including details of occupancy levels, lease events,

rental values and rent collection;

•

monitored the Investment Advisor’s and Investment Manager’s

adherence to the capital expenditure budget, through quarterly

reports from the Investment Advisor; and

•

approved the annual budget (including capital expenditure) for

the year to 31 March 2025.

Read more about asset management during the year in the

Investment Advisor’s report on pages 30 to 31.

Financial

strategy

Approving any changes to the

Group’s capital structure

Approving the Group’s gearing

policy, dividend policy and

treasury policy

During the year, the Board:

•

monitored the Group’s debt levels and reviewed the

hedging strategy;

•

refinanced the Group’s debt facilities for a further five-year

tenure; and

•

purchased an additional £50.0 million interest rate derivatives.

Read more about financing activity during the year in the

Investment Advisor’s report on page 32.

Sustainability

strategy

Approval of policy, strategy and

targets

Approval of governance policies

During the year the Board:

•

reviewed and oversaw progress made against the strategy with

particular focus on the key projects;

•

set and approved 2024 targets; and

•

participated in training on climate risks and received

information on ESG legislation, peer reviews, green bonds and

benchmarking to enable informed decisions.

75

INTERNAL CONTROL REVIEW

The Board is responsible for the systems of internal

controls relating to the Group, including the reliability of

the financial reporting process and for reviewing their

systems’ effectiveness, in accordance with the AIC Code.

The Directors have reviewed and considered the

Financial Reporting Council’s (“FRC’s”) guidance on risk

management, internal control and related finance and

business reporting and have established an ongoing

process for identifying, evaluating and managing the

principal risks faced by the Group. This process, together

with key procedures established to provide effective

financial control, was in place during the period under

review and at the date of the signing of this report. The

internal control systems are designed to ensure that proper

accounting records are maintained, that the financial

information on which business decisions are made and

which is issued for publication is reliable, and that the

Group’s assets are safeguarded. The risk management

process and the Group’s systems of internal control are

designed to manage rather than eliminate the risk of failure

to achieve the Group’s objectives. It should be recognised

that such systems can only provide reasonable, not

absolute, assurance against material misstatement or loss.

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. There were no

matters arising from this review that required further

investigation and no significant failings or weaknesses were

identified. Therefore, the Board believes that the existing

arrangements present an appropriate framework to meet

the internal control requirements.

Internal control assessment process

The Board undertakes regular robust risk assessments and

reviews of internal controls, in the context of the Group’s

overall investment objective. The Board, through the Audit

and Risk Committee, has categorised risk management

controls under the following headings:

• business risk;

• operational risk;

• reputational risk;

•

compliance risk; and

• financial risk.

In arriving at its judgement of what risks the Group faces,

the Board has considered the Group’s operations mindful

of the following factors:

•