Quality
Resilience
Performance
Annual Report 2022
TRITAX Big Box REIT plc Annual Report 2022
Specialists in UK logistics
real estate
We are optimally positioned to take advantage of the strong market
condition in UK logistics, underpinned by long-term structural growth.
Our Manager
The Company’s Manager, Tritax Management LLP, specialises in
investing in mission-critical supply chain real assets, aligned with the
structural trends shaping the future economy, including digitisation,
automation, urbanisation and green energy. It has deep expertise
inthesector, built up over more than 25 years.
The Manager has assembled a full-service UK logistics asset
management capability for the Company, including specialist
on-the-ground asset and property managers.
STRATEGIC REPORT
1 Our Strategic Framework
2 Highlights
4 Chairman’s Statement
6 At a Glance
10 Our Customer Proposition
11 Our Investor Proposition
12 Supply Chain
14 Fund Manager’s Q&A
16 Market Review
20 Our Business Model
22 Stakeholder Engagement and Section 172
26 Our Strategy
28 Key Performance Indicators
30 EPRA Performance Measures
32 ESG
39 Manager’s Report
48 Financial Review
53 Principal Risks and Uncertainties
59 Task Force on Climate-related Financial
Disclosures (“TCFD”) Report
69 Going Concern and Viability Statement
CORPORATE GOVERNANCE
70 Chairman’s Governance Overview
72 Board of Directors
74 Key Representatives of the Manager
76 Key Activities of 2022
77 Application of Code
79 Board Leadership and Company Purpose
82 Stakeholder Engagement
84 Division of Responsibilities
88 Nomination Committee Report
92 Audit, Risk and Internal Control
94 Audit and Risk Committee Report
98 Management Engagement
CommitteeReport
101 Directors’ Remuneration Report
104 Directors’ Report
106 Directors’ Responsibilities
FINANCIAL STATEMENTS
107 Independent Auditor’s Report
113 Group Statement of
ComprehensiveIncome
114 Group Statement of Financial Position
115 Group Statement of Changes inEquity
116 Group Cash Flow Statement
117 Notes to the Consolidated Accounts
141 Company Statement of Financial Position
142 Company Statement of ChangesinEquity
143 Notes to the Company Accounts
149 Notes to the EPRA and Other Key
Performance Indicators
153 Five Year Summary
155 Glossary of Terms
159 Company Information
Tritax Big Box REIT plc Annual Report 2022 1
STRATEGIC REPORT
Our Strategic Framework
Delivering against
our strategy
The value we create
By successfully implementing our strategy, we create value for all our stakeholders.
Customers
High-quality buildings
that play a central
role in fulfilling their
business needs
Society
Job creation, tax
revenues, local and
green infrastructure,
community
support, enabling
online shopping
Environment
Reduced impactthrough
sustainably built assets
and more efficient
supply chains
Shareholders
Long-term income and
capital growth
Lenders
Interest payments
backed by secure
cash flows
Our ESG strategy
Our ESG strategy aligns with the following four UNSustainable Development Goals:
Sustainable Buildings Climate and Carbon Nature and Wellbeing Social Value
Our business model
Our business model supports our purpose through our focus
on delivering modern, well-located and sustainable logistics
properties. These are thoughtfully designed to meet the current
and future needs of fast-growing, ambitious companies.
Source high-quality
investments
Invest and divest to
create value
Develop ona
risk-controlled basis
Proactively
andresponsibly
manage assets
Our strategy
Our strategy aligns the Group to key market drivers, while
ensuring it meets its wider responsibilities and carefully
manages risk.
The strategy has three interlinked components that aim to
deliver sustainable income and capital growth, resulting in
attractive performance through the economic cycle that
underpins a reliable and progressive dividend:
High-quality assets attracting
world-leading companies
Direct and active management
Insight-driven development and innovation
X Read more about our business model on pages 20 and 21
X Read more about our stakeholders on pages 22 to 24
X We have set objectives and initial targets for 2023 against each of these goals. See page 38
X Read more about our strategy on pages 26 and 27
Tritax Big Box REIT plc Annual Report 20222
Highlights
Strong operational performance
Increasing contracted rent
and expected reduction in
costs underpinning future
earnings growth
• £28.4 million growth (+14.5%) in annual
contracted rent to £224.0 million from
development lettings and active management
underpinning future earnings growth
when compared to current passing rent of
£205.1 million.
Record development lettings
secure £23.3 million of contracted
annual rent
• £23.3 million of contracted annual rent secured
from record 3.1 million sq ft of development
lettings in line with 6–8% yield on cost guidance.
• 2.9 million sq ft of development starts in 2022,
of which 2.4 million sq ft (82%) has been let to a
range of high-quality customers.
Occupational market remains at
near record levels
• 38 million sq ft of UK lettings in 2022 (2021: 42
million sq ft) to a diverse range of occupiers, the
third highest year on record and 33% above the
10-year average.
• UK supply constrained with ready to occupy
vacant space remaining low at just 2.0% (Q4
2021: 1.6%)
6
.
• Transaction market slowed in H2 2022; full year
investment volumes totalling £6.7 billion (2021:
£11.2 billion).
• Prime market yield for high-quality rack-rented
logistics real estate investment with c.15-year
unexpired lease and open market rent reviews
was 5.0%
6
as at 31 December 2022 (Q4
2021: 3.5%).
Adding value through active
management, customer
engagement and ESG
performance
• £5.1 million added to contracted annual rent
fromrent reviews and a lease renewal.
• Record like-for-like ERV growth of9.2%
overtheyear, with a 19.1% portfolio
rentalreversion at 31 December 2022.
• Continued emphasis on enhancing ESG
performance, demonstrated by inclusion
in Sustainalytics’ 2023 Top-Rated ESG
Companies List increase in MSCI rating from
BBB to AA and launch of new 2023 targets.
High-quality portfolio supports
resilient and growing income
• 100% of rent collected in relation to FY 2022
(2021: 100%).
• Long-term and full repairing and insuring (triple
net) leases to a diverse range of large and
resilient customers with 12.6 years weighted
average unexpired lease term (“WAULT”) as at
31 December 2022 (2021: 13.0 years).
Change in portfolio valuation and
EPRA NTA from market repricing
of logistics assets
• Total portfolio value of £5.06 billion as at 31
December 2022 (31 December 2021: £5.48
billion), equating to an equivalent yield of 5.3%
(31 December 2021: 4.1%).
Maintaining a strong
balance sheet
• 31.2% loan to value at 31 December 2022, within
medium-term guidance range of 30–35% and
maintaining substantial covenant headroom.
Including the assets exchanged for disposal
subsequent to the period end, the pro-forma
FY2022 LTV reduces to 29.0%.
Tritax Big Box REIT plc Annual Report 2022 3
STRATEGIC REPORT
Financial highlights
Contracted annual rent roll
£224.0m+14.5%
(2021: £195.6m)
Adjusted earnings per share
2
7.79p-5.3%
(2021: 8.23p)
Dividend per share
7.00p+4.5%
(2021: 6.70p)
Operating profit
1
£183.1m+2.9%
(2021: £178.0m)
Dividend pay-out ratio (excl. additional
development management income)
3
93%+2.0pts
(2021: 91%)
Adjusted earnings (excl. additional
development management income)
3
7.51p+1.8%
(2 0 21: 7. 3 8 p)
IFRS earnings per share
-32.08p-157.9%
(2021: 55.39p)
EPRA Net Tangible Assets per share
180.37p-19.0%
(2021: 222.60p)
Total Accounting Return
-15.9%-46.4pts
(2021: 30.5%)
Portfolio value
4
£5.06bn-7.7%
(2021: £5.48bn)
Loan to value (“LTV”)
31.2%+7.7p t s
(2021: 23.5%)
IFRS net asset value per share
179.25p-17.9%
(2021: 218.26p)
1. Operating profit before changes in fair value and other adjustments.
2. See note 13 to the financial statements for reconciliation.
3. The anticipated run rate for development management income is
£3.0–5.0 million per annum over the medium term. Adjusted EPS
becomes 7.51 pence when excluding development management
incomeabove this anticipated run rate (“additional” development
management income). £9.3 million of development management income
is included in the 7.79 pence Adjusted earnings per share in 2022
(2021:£19.0 million included in 8.23 pence Adjusted earnings per share).
Also see note 1 toEPRA and Other Key Performance Indicators.
4. The portfolio value includes the Group’s investment assets and
development assets, land options held at cost, the Group’s share of joint
venture assets and other property assets.
5. Excludes development assets, land and land options.
6. Source: CBRE.
Tritax Big Box REIT plc Annual Report 20224
Chairman’s Statement
Well positioned for the future
Strong operational performance and record
development activity
Operationally and strategically, 2022 was an excellent year for the
Company. Through our development programme, we let a record
3.1million sq ft of space and secured £23.3 million of additional rental
income, which will increasingly flow through into earnings during the
course of 2023, and we will see the full benefit in 2024. We also continued
to enhance our income and protect value through the active management
of our high-quality portfolio. During 2022, the occupational market
remained strong, with high occupier demand, very low availability and
as a consequence rising rents across the UK. This is underpinned by
the long-term structural tailwinds of e-commerce growth, supply chain
optimisation and sustainability.
Macroeconomic factors impacting property valuations
The second half of the year saw investment market conditions deteriorate
due to macroeconomic and geopolitical issues. A significant adjustment
in underlying interest rates, in an attempt to curb high levels of inflation in
the UK economy, caused a sharp increase in overall cost of capital and
subsequently drove property yields higher. The relatively low volumes of
investment transactions that completed in the latter part of the year were
likely to have been priced around the time of the UK’s “mini Budget” in
September and October, when uncertainty was at its height. The valuers
have been quick to reflect this in year-end valuations, which has led to a
decline in our portfolio valuation and net asset value. We expect higher
quality assets, of the type we own, to stabilise quicker and be more
resilient in the face of a potentially weaker UK economy. Although we
see the potential for some further but limited outward yield movements
in the first half of the year, since the year end we have seen encouraging
signs of the investment market stabilising and we believe there remains
significant capital waiting to be deployed into the logistics sector, given
itsfavourable long-term fundamentals.
“ We made excellent operational
progress this year, successfully
deploying capital into
higher yielding development
opportunities and delivering
record levels of new lettings,
validating both our strategy
and our decision to accelerate
development activity in 2022.”
Aubrey Adams
Chairman
A high-quality and resilient platform
In more uncertain times, we benefit from having built a business
focused on quality. Our investment portfolio is differentiated by its
high-quality and modern logistics real estate assets with strong
ESG credentials, let on long leases to a resilient and diverse customer
base that includes many of the world’s leading companies. The
investment portfolio comprises more than 90% of our portfolio value and
provides a strong foundation to our income generation and a resilient
platform from which to pursue growth opportunities through active
management and our development land portfolio.
Complementing our investment portfolio is our development land
portfolio. We have structured our development activities to enhance
returns while minimising risk and maintaining flexibility using options
over land. The land options include a defined discount to prevailing
land values at the time of drawdown and they give us greater
discretion and flexibility around capital deployment. The scale of
our combined investment portfolio and development platform gives
us in-depth insight into the market which enables us to effectively
adjust our development activity to match market conditions. This
puts us in a strong position to maximise returns while minimising
development risk. Through development, we can create an attractive
pipeline of high-quality new buildings, which meet the highest ESG
requirements, in a range of sizes, from small and last mile buildings
through to the largest distribution centres, with a variety of lease
structures all at an attractive yield on cost. The development pipeline,
with its potential range of locations and building sizes, helps us better
meet a broader range of requirements from customers and maintain
the modernity of assets within our investment portfolio and can
enhance the average unexpired lease term.
We actively manage our investment portfolio by working to enhance
the value of assets we own. We dispose of those assets which
no longer meet our return expectations and selectively acquired
assets in the market where we see strong potential. Proceeds from
investment disposals will also be used to fund our developments.
Given the volatility in the investment market during 2022, we decided
to reduce our acquisition activity. However, as markets normalise,
we expect to see opportunities to make investment acquisitions that
enhance portfolio returns, with a focus on assets with open market
leases in a range of building sizes.
Tritax Big Box REIT plc Annual Report 2022 5
STRATEGIC REPORT
Continuing to improve our ESG performance
In addition to the clear imperative around environmental issues,
we believe there is a strong alignment between value, financial
performance and ESG. In simple terms, looking ahead we think
buildings with superior ESG credentials attract more demand from
customers and in turn will be more marketable and command
higher rents. It is pleasing to see our work being recognised, with
improving ESG scores, including being named in Sustainalytics’ 2023
Top-Rated ESG Companies List, improving our MSCI rating to AA
(anupgrade from BBB), and improving our GRESB score to 83/100 (an
improvement from our score of 81/100 in 2021). We still have much
to do, and a key priority has been establishing a clear baseline from
which to launch our new 2023 ESG targets. While these encompass
the full range of factors we are considering, most notable within these
targets is an enhanced commitment to achieve net zero carbon
across all aspects of our business by 2040, rather than our previously
stated 2050 target. You can read more about our new targets, and
our approach to ESG in more detail on pages 32 to 38.
Strong balance sheet and significant liquidity
With an LTV at the year end of 31.2%, within our guidance range of
30–35%, and benefiting from a low cost of debt with fixed or capped
interest rates across the vast majority of our debt facilities, wehave
maintained our balance sheet strength despite the downward
adjustment in our portfolio value during the second half of 2022.
Wehad available liquidity in excess of £500 million at the year end,
with no loan maturities until the end of 2024. We agreed increases to
our revolving credit facilities of £200 million in the year, demonstrating
support from our lenders. Our balance sheet strength both increases
our resilience to further changes in asset valuations and provides us
with the ability to continue to efficiently fund our strategy.
Financial performance and dividend
Our underlying financial performance was good and in line with our
expectations. Adjusted earnings increased by 8.3% when excluding
additional DMA income, although as a consequence of higher average
shares in issue we saw a more modest increase in Adjusted EPS
1
of
1.8%. The contribution made by our development activity secured
a 14.5% increase in contracted annual rent during 2022. With the
majority of these development assets still under construction, and
therefore not yet contributing to gross rental income, this provides
us with confidence in our ability to grow earnings during 2023, with
the full benefit expected in 2024. The decline in the fair value of the
portfolio, principally driven by outward yield movements due to macro
economic factors, resulted in EPRA Net Tangible Assets of 180.37 pence
per share (31 December 2021: 222.60 pence).
The reduction in EPRA NTA will be a contributing factor to an
expected reduction in the investment management fee in FY 2023
which, combined with the increasing income contribution from
development completions, we believe will result in a lower EPRA Cost
Ratio for 2023.
Having paid three interim dividends of 1.675 pence each, we have
declared a fourth interim dividend of 1.975 pence per share, to give a
total for the year of 7.0 pence, an increase of 4.5% (2021: 6.70 pence).
Karen Whitworth appointed as Senior
Independent Director
In November 2022, we announced changes to some Board and
Committee responsibilities. The principal change was Karen Whitworth’s
appointment as Senior Independent Director (“SID”), in addition to being
the Board’s champion for ESG matters, and taking over from Alastair
Hughes, who had been in the role since May 2021. Alastair made an
invaluable contribution as SID and he will continue to play an important
part as a Non-Executive Director to the Group.
Enhancements to the Investment
Management Agreement
As previously reported, during the year Shareholders approved a
new Investment Management Agreement, the contract that defines
the relationship between the Company and the Manager, with an
extended term, expanded key person principles and a lower NTA
derived fee scale from 1 July 2022. This reduces costs and gives us
additional security in respect of our main service provider. On behalf
of the Board, I would like to thank the Manager for their performance
during the year, particularly in navigating the changing investment
landscape and delivering the strong operational performance we
report today. See the Manager’s Report for further details.
Outlook supported by long-term structural drivers,
strategic positioning and portfolio quality
The strong operational performance we have delivered in 2022
through our extensive development letting activity will begin to make
an increasing contribution to FY 2023 earnings and a full contribution
in FY 2024. Development led leasing will be complemented with
ongoing rental growth from our investment portfolio through a blend
of inflation linked and open market rent reviews plus the potential for
lease renewals.
We have seen exceptionally high occupational demand for new logistics
space in recent times although it is likely that a more challenging
economic backdrop may moderate occupational demand to levels
which historically would have still been considered strong. The
structural demand drivers, combined with very low levels of new
logistics buildings supply, are expected to continue to support
attractive rental growth in the future.
While we continue to see high levels of interest from occupiers with
incremental space requirements, with greater economic uncertainty,
and due to the volatility in the investment market, we expect to
revert to our long-term guidance for new construction starts in 2023
of 2–3million sq ft, targeting capital expenditure into development
of £200–250 million. We see the potential for some further, albeit
more limited, yield expansion in the first half of the year, but we are
witnessing encouraging early signs of stabilisation in the investment
market which could manifest more clearly in the second half. A
moderated pace of development, combined with our ability to rotate
capital from standing investments, allows us to maintain a strong
balance sheet, with LTV within a 30–35% range, while continuing
tocapture attractive investment and development opportunities.
Looking further ahead, the outlook for the sector remains positive.
Thestructural tailwinds in the occupational market continue as
occupiers seek to reduce their own cost pressures by generating
greater internal operating efficiencies, led by optimisation of supply
chains. As the current spike in inflation recedes, we see good
prospects for rental growth to exceed inflation over the medium term
which will help us to deliver attractive returns to our Shareholders.
Aubrey Adams
Chairman
1 March 2023
Adjusted earnings per share
1
7.51p+1.8%
(2 0 21: 7. 3 8 p)
Dividend per share
7.00p+4.5%
(2021: 6.70p)
1. Excluding additional development management income.
Tritax Big Box REIT plc Annual Report 20226
At a Glance
Investment portfolio
Strategic land and development portfolio
Ports
Diversified by customer and sector
Our portfolio is let to 51 customers across
diversification by customer and by sector.
largest companies and are weighted towards
defensive, non-cyclical or high-growth
sectors, helping to reduce our risk.
Our
portfolio
Our investments and development sites are in
strategically important logistics locations across
the UK that provide easy access to transport
infrastructure, skilled workforce and power.
Online retail 21%
Food retail 17%
Homewares and DIY 14%
2% Other manufacturing
2% Clothing retail
3% Information and communication
3% Food production and service
3% Computer and electronics retail
3% Automotive manufacturing
4% Wholesale and retail trade
4% Post and parcels
5% Data and information services
5% Product manufacturing
5% 3PL distribution
10% Other retail
51
customers across
79
investment assets
Tritax Big Box REIT plc Annual Report 2022 7
STRATEGIC REPORT
£5.06bn
portfolio value
51
customers
79
investment assets
A portfolio thatreflects our strategy
Our portfolio is weighted towards assets that
deliver resilient and growing income.
The majority of these are Foundation assets, which provide long-term
and secure income from high-quality occupiers, combined with
a smaller proportion of Value Add assets which offer additional
upside potential through our active approach to management,
such as renewing leases, adding extensions and enhancing
environmentalperformance.
Investment portfolio
investment assets and the largest logistics-
focused development land platform, offering
the potential to deliver attractive, sustainable
Modern buildings... ...with high EPC ratings...
...attractive blend of review types...
n
<5 44%
n
5–10 12%
n
10–15 14%
n
15–25 25%
n
>25 5%
n
Fixed 9%
n
Inflation linked 52%
n
Hybrid 8%
n
Open market 31%
n
Annually 18%
n
Five yearly 82%
n
A 49%
n
B 29%
n
C 20%
n
D 2%
10-year average
building age
98% of portfolio
EPC rated A/C
39% open market
exposure
Note: Based on square footage.
Note: Based on contracted rent.
...and frequency
Tritax Big Box REIT plc Annual Report 20228
At a Glance continued
Strong foundations
for growth
potential developable space
25
sites across the UK
Development pipeline of growth opportunities
Planning process stage
Unallocated/allocated
Outline consent
Future consent pipeline Near-term development pipeline Current development pipeline
Detailed consent
Timing
Size
Rent
potential
Longer-term land held
under option
28.4m sq ft 8.5m sq ft 2.3m sq ft 3.0m sq ft
£234m £70m £18m c.£23.6m
Potential starts
in following 12–24 months
Potential starts
within the next 12 months
Development under
construction
Potential to deliver 2–3m sq ft per annum of development starts over the next 10 years
Development portfolio
The development portfolio comprises 25 sites,
the long term to deliver c.40 million sq ft of
Tritax Big Box REIT plc Annual Report 2022 9
STRATEGIC REPORT
Capable of more than doubling our rent roll
By holding capital efficiently under
long-term options, we can reduce risk
and increase flexibility to align our
development activity with prevailing
market conditions.
n
Existing portfolio
n
Land portfolio potential
Strong foundations
£5.06bn portfolio
Significant development potential
from land portfolio
£594m
rent per annum
1
£224m
contracted rent
per annum
1
£224m
93%
£370m
7%
1. For illustrative purposes only, assumes no future rental growth and includes portfolio reversion.
Tritax Big Box REIT plc Annual Report 202210
Our Customer Proposition
Providing
high-quality space
In line with our purpose, we work closely with our
customers to deliver the space they need to succeed.
X Read more about the future of supply chains on pages 12 to 13
We are customer focused
The Manager’s team works in partnership
with our customers to ensure our buildings
maximise their operational effectiveness.
This direct approach helps to future proof
our buildings for our customers and to grow
income and capital values for Shareholders.
Being close to our customers gives us a
competitive edge, by providing insight into
future demand and occupier requirements.
We supplement this information with specialist
supply chain advice, so we better understand
their logistics operations and property
network. This insight informs our development
and asset management activities, to reduce
risk and enhance returns for Shareholders.
The right size
With the UK’s largest investment and land
portfolios, we are able to provide new
and existing customers with a range of
building sizes to suit their requirements.
This makes them flexible and efficient and
generates economies of scale, enabling cost
efficiencies for our customers.
Sustainable
Our customers are increasingly looking
to occupy sustainable assets. 98% of our
investment portfolio has an EPC grade
of A–C and we continue to invest in ESG
initiatives such as on-site renewable energy
generation. Our development activity
includes our commitment to net zero carbon
in construction.
Modern
Our investment portfolio has an average
building age of 10 years and our development
activity creates a long-term pipeline of
state-of-the-art buildings, to meet the
requirements of market-leading occupiers.
Well located
Our investment and land assets are in
strategically important logistics locations,
which benefit from strong transport
infrastructure and suitable power and
labour supplies.
Innovative
The scale and flexibility of our buildings make
them suitable for a wide range of customers
to install the latest technology, including
highly automated and robotic stocking and
retrieval systems, which improve efficiencies
and reduce costs.
Tritax Big Box REIT plc Annual Report 2022 11
STRATEGIC REPORT
Our Investor Proposition
A compelling
investment case
Tritax Big Box is dedicated to investing in
and developing high-quality logistics assets
in the UK. We offer investors a sustainable
blend of long-term growing income and
capital growth.
A clear and compelling strategy
We focus on attracting high-quality and resilient customers, engaging
directly to grow and maintain income and capital values through active
management, and delivering insight-led development from our
landportfolio.
X Read more about our strategy on pages 26 and 27
A resilient portfolio
We have constructed a portfolio of high-quality assets, in key
locations, let to customers operating in strong business segments.
The portfolio has proven its ability to generate highly visible and
resilient income, even in uncertain times. We complement this strong
foundation with assets in a range of sizes and locations that allow us
to apply our asset management expertise to drive greater returns.
X Read more about our portfolio on pages 6 and 7
Attractive development opportunities
We have the UK’s largest logistics-focused land platform, giving us
an attractive pipeline of internally generated opportunities for long-
term phased delivery and an attractive yield on cost target of 6–8%.
X Read more about development opportunities on pages 8 and 9
Financial discipline
With a loan-to-value ratio of 31.2%, the Group is well financed,
with a strong balance sheet, significant headroom and a range
of funding sources to support our growth ambitions and drive
Shareholder returns.
X Read more about our financial discipline on pages 48 to 52
Long-term structural drivers
We believe this is the most attractive and dynamic sector in
commercial property. There are major long-term structural trends
driving occupational and investor demand for large-scale logistics
assets. These trends have many years to run and events such as
Covid-19 and Brexit have helped to sustain and accelerate them.
X Read more about our structural drivers on page 5
A sustainable approach
ESG considerations are central to all our investment decisions.
From integrating ESG initiatives into our asset management plans,
to developing net zero carbon buildings, or funding through Green
Finance, ESG factors are fully considered to ensure long-term risks
and opportunities are addressed.
X Read more about our ESG strategy on page 32 to 38
Extensive expertise
The Manager’s deep understanding of our sector, combined with the
calibre of its team and network of contacts, gives us the capabilities
we need to identify opportunities and successfully execute
our strategy.
X Read more about our expertise on pages 39 to 47 and page 74
Tritax Big Box REIT plc Annual Report 202212
Supply Chain
High-quality
buildings
Modern and prime logistics buildings occupy an increasingly critical position within
Biodiversity and wellbeing
Focus on increasing local biodiversity
and measures that improve general
employee wellbeing, such as green and
active spaces and wildlife habitats.
Workplace
Providing a safe workspace with an
increasing component of office and
collaborative working spaces and
higher levels of amenities such as cafes,
restaurants and gyms.
Technology and maintenance
Greater requirements for high levels of
automation, supported by power and
digital infrastructure, sensors and smart
building technology, increasing overall
central network visibility of inventory.
Operations
Customers are seeking highly efficient
buildings with high-quality floors and
greater loading requirements combined
with increased roof height, appropriate
access, yard space and parking to help
support efficient operations.
Tritax Big Box REIT plc Annual Report 2022 13
STRATEGIC REPORT
Zero carbon
Customers are now focused on achieving
their Paris-aligned performance pathways,
increasing focus on whole life carbon
emissions from supply chains and
logistics buildings.
Social impact and partnerships
Customers must increasingly consider
their social impact, and how they can
support employee and community
engagement and support local
supply chains.
Labour
Customers frequently note access to a
high-quality local labour market as one
of their greatest requirements. Choice
of location and ways to enhance overall
employee proposition are now being
factored into new logistics buildings.
Energy generation and use
Access to significant amounts of
affordable, reliable and increasingly
decarbonised power is a central
requirement for customers to support
greater automation and electrification
ofvehicle fleets.
Tritax Big Box REIT plc Annual Report 202214
Fund Manager’s Q&A
Stakeholder questions
Q: What impact has higher interest rates had on
your balance sheet and cost of debt?
We entered this period of heightened volatility in the debt capital
markets in a very strong position because we have maintained a
conservative approach to borrowings. Our debt is either fixed cost,
or hedged with interest rate caps, and we have no near-term debt
maturities. This strong balance sheet position has insulated us from
the immediate effects of the increasing rate environment. When
considering future funding we will consider the impact on our LTV
guidance, which remains a 30–35% range. As a result, it is likely
that the quantum of our capex/investment into development will be
broadly similar to the levels of disposals we achieve as we efficiently
recycle capital into higher returning opportunities. Given the overall
change in the cost of debt in the market, our marginal cost of debt
will increase but the effects will be limited and phased over time.
Q: With high levels of rental growth and increases
in business rates, is affordability becoming an issue
for your customers?
Rental growth and business rates will have some impact on our
customers. However, we believe that these elements remain a
relatively small component of the overall cost of their supply chains
and we aren’t seeing affordability being an issue. The pandemic
accelerated e-commerce sales and exposed vulnerabilities in
supply chains, causing companies to recognise the importance of
warehouses in increasing resilience and this has produced strong
occupational demand. Supply of new buildings is constrained by the
planning system and is not meeting demand with the result that we
are experiencing healthy levels of rental growth. A weaker economic
backdrop may mean we experience rental growth at a lower rate than
some of the exceptional levels reported in 2021 and 2022; however,
we expect to continue to capture attractive levels of rental growth
viaindexation and open market lease events.
“ We are in a good position
to manage and mitigate cost
increases. Currently we remain
confident in targeting an
attractive 6–8% yield on cost for
our development programme.”
Frankie Whitehead
Chief Financial Officer for Tritax Big Box REIT plc
Petrina Austin
Head of Asset Management
Tritax Big Box REIT plc Annual Report 2022 15
STRATEGIC REPORT
Colin Godfrey
Chief Executive Officer for Tritax Big Box REIT plc
Q: How has cost inflation impacted on your
development activities?
We have structured our development activity to be low-risk and highly
flexible. We control most of our land through options, which have a
pre-agreed embedded discount, and we control when we trigger
the options and buy in the land. This allows us discretion to either
scale up or down our development activities given market conditions.
Through a combination of fixed-cost build contracts, the attractive
nature of the land options and strong rental growth we have been
able to manage and minimise the impact of cost inflation, allowing
us to maintain our 6–8% yield on cost target, although when inflation
was at its peak some of our projects were at the lower end of this
range. In more recent months, we have begun to see a stabilisation
in building costs, and in some instances a reduction, resulting in
the yield on cost for an increasing proportion of projects improving
towards the midpoint of our guidance range.
Bjorn Hobart
Investment Director
Q: What impact have declining asset values had on
the business?
The primary impact of declining asset values is an increase in our LTV
from 23.5% to 31.2% due to a 15.2% decrease in the like-for-like value
ofour investment assets.
We took steps to preserve our balance sheet strength, such as reducing
the level of speculative development, and we are also evaluating
disposals of assets where we’ve maximised returns and it is attractive
for us to recycle capital into higher returning opportunities. We recently
exchanged on the sale of £150 million of assets at a price in line with
our 31 December 2022 valuation, and we continue to progress other
opportunities. Including the assets exchanged for disposal subsequent
to the period end, the pro-forma FY 2022 LTV reduces to 29.0%.
Although we see the potential for some further but limited outward
yield shift in the first half of the year, since the year end we are seeing
encouraging early signs of stabilisation in the investment market and we
believe there remains significant capital waiting to be deployed into the
logistics sector given its attractive fundamentals.
We also believe that the repricing of assets and volatility within the
investment market create opportunities for us, particularly through
potential investment acquisition activities.
Q: How has Tritax Big Box REIT performed in terms
of ESG over the last financial year?
We have continued to perform strongly from an ESG perspective in
FY2022, as seen by our improving GRESB ratings (83/100 for standing
investments and 99/100 for developments) and our Sustainalytics score
(negligible risk, 8.3) for which we were recognised in Sustainalytics’ 2023
Top-Rated ESG Companies List by region and sector. We also improved
our MSCI rating from BBB to AA.
This performance continues to be underpinned by our strong
relationships with our customers, with whom we regularly engage to
better understand their needs. This has resulted in improving our data
coverage for our assets, and we are continuing to roll out the installation
of on-site solar photovoltaic projects, with the total solar photovoltaic
capacity installed across our portfolio now standing at 14.6 MW.
We continue to make progress on the delivery of our net zero carbon
strategy and we have updated the net zero carbon pathway for the
portfolio. Our updated ESG targets are disclosed in the ESG section.
Tritax Big Box REIT plc Annual Report 202216
Market Review
Long-term structural
drivers enhance the
attractions of the sector
Three long-term drivers continue to underpin occupier demand for logistics
real estate in the UK. Our strategy is aligned to these drivers, which are:
2.
The need to optimise
supply chains
Global supply chains continue to face intense
pressure even as Covid-19 related challenges
subside. The high-inflation environment that
has prevailed through 2022 has resulted
in significant increases in costs which
have exacerbated the challenges already
evident from Brexit. Companies continue
to review how they operate and adjust
their supply chain accordingly. Additional
resilience is now a priority alongside
optimising for efficiency, productivity and
cost. Occupiers continue to pursue a variety
ofsolutions,including:
• consolidating older disparate units into
larger, often purpose-built distribution
centres, which offer economies of scale
and the ability to optimise staffing and
distribution costs as well as stock levels;
• deploying automation and technology
to stock, retrieve and process products
in volume and at speed. These systems
are most suited to large, modern
logisticsbuildings;
• bringing more inventory onshore
and reviewing every aspect of their
supply chains, from manufacturing
and transportation to storage. This
“deglobalisation” effect is further
increasing demand for high-quality
logistics space closer to the end
consumer. It also has the benefit of
reducing the environmental impact of
supply chains, by cutting the distances
goods must travel; and
• outsourcing supply chain functions to
specialists or leveraging third-party logistics
providers’ (“3PLs”) networks to provide
overflow space for stock. 3PLs were
particularly active in the market in 2022
accounting for 33% of leasing activity
2
.
1.
The growth of e-commerce
Consumers want faster, more flexible
and more convenient ways to make
purchases, which has driven strong growth
in e-commerce over the last decade
and beyond. Physical restrictions during
Covid-19 accelerated the trend and online
sales remain well above pre-pandemic
levels, accounting for 26.5% of total UK
retail sales in 2022, up from 19.2% in 2019
1
.
Demographic and technology trends remain
supportive and are expected to drive further
growth over the medium term.
Logistics real estate plays a fundamental
role in delivering online orders to consumers
and managing returns rapidly and efficiently.
Price transparency contributes to business
models being orientated around throughput
where delivery, speed and convenience
are critical. This drives up distribution
costs and our research shows that for
e-commerce companies, rents are typically
a relatively small proportion of total supply
chain cost. Proximity to final delivery point
is therefore essential and, as a result,
leading e-commerce, omni-channel and
parcel companies require large, flexible,
well-located properties. This is contributing
to demand for new and larger buildings
which have the technical and ESG attributes
required to support operations that are
often highly automated and which can act
as a hub for distribution to end consumers
or urban/last mile facilities. Typically, we
see these attributes manifest in areas
such as floor quality and loading capacity,
building height and flexibility, power
availability, workplace safety, and the digital
infrastructure required to connect to central
logistics management systems.
3.
The drive for ESG performance
Most organisations are now striving to be
more sustainable. This offers numerous
benefits, including:
• reducing their environmental impact and
improving the resilience of their operations
and assets;
• cutting energy use, helping to protect
them from high and volatile energy prices,
and increasing demand for renewable
energy sources;
• increasing employee and local community
engagement through enhanced comfort
and wellbeing facilities, which is important
in a highly competitive labour market; and
• helping them to meet the ESG demands of
their own investors and other stakeholders.
Modern logistics assets have important
sustainability features, such as enhanced
insulation, LED lighting and large roof
spaces capable of accommodating solar
PV. These buildings are also more likely to
meet future regulations, such as minimum
energy performance standards. In addition,
larger modern buildings lend themselves
to better staff facilities, such as gyms,
canteens and offices, and have more
scope for green space, which can support
biodiversity and outdoor amenities. Logistics
assets can make a positive contribution to
local communities by offering employment
opportunities, green infrastructure for
community use and support for local
good causes.
1. ONS.
2. CBRE.
Tritax Big Box REIT plc Annual Report 2022 17
STRATEGIC REPORT
Near record demand and low availability
arecontinuing to drive rental growth
Occupational demand remains at elevated levels
The trends discussed on the previous page continue to drive
high occupier demand. Following two years of very strong annual
take-up in excess of 42 million sq ft, leasing activity in 2022
was 38 million sq ft, remaining well ahead of the 10-year average
annual take-up of 29 million sq ft. Demand was strong for all size
bands with 139 deals completed in 2022 and 18 of those being
for buildings over 500k sq ft (2021: 18). Businesses continue
to invest in their supply chain and a further 11.9 million sq ft of
space was under offer at the year end (2021: 9.1 million sq ft)
3
.
Demand for space remains very diverse. Supply chain issues
impact all companies and with the UK economy reopening and
rebalancing through 2022, more companies have begun to
adjust their networks accordingly. 3PLs were particularly active in
2022, accounting for 33% of take-up, while manufacturing (12%),
omni-channel retailers (16%) and the food sector (11%, including
food service and supermarkets) have also been prominent. Online
retail accounted for 11% of take-up, down from 40% in 2021
with some market leaders having already made significant
investments in their warehouse networks over the last few
years. New entrants and companies from outside the traditional
logistics sectors also continue to take space in the UK market.
Other occupiers, which includes our 1 million sq ft letting to Iron
Mountain Inc. at Rugby, accounted for 9% of take-up during
the year
3
.
Availability remains very low
Strong demand, low vacancy and rising rents (see below) have
encouraged speculative development but much of this space has
been rapidly taken up. UK completions totalled 33million sq ft in
2022 but vacancy (buildings that are physically built, standing and
capable of being utilised by an occupier immediately) stands at just
2.0% (2021: 1.6%). At the year end, speculatively developed space
either completed and unlet or for delivery in the next 12 months
totals 22 million sq ft. 70% of these buildings (by number) are in
the 100k–250k sq ft size rangewith three larger than 500k sq ft
3
.
Going into 2023, we expect occupiers to continue to sign new
leases on modern buildings that meet technical requirements,
can accommodate automation, meet stringent ESG standards,
provide an attractive work environment and are mission
critical to their businesses. Larger logistics buildings fulfil a
strategic role – occupiers will often sign a long lease and invest
significantly in operational fit-out; as such these are long-term
commitments which tend to look beyond the prospect of a
near-term recession. Economic conditions may, however, make
some occupiers more cautious about taking space in the short
term and we expect demand in 2023 to moderate across all
size bands towards levels that would historically have still been
considered strong.
Take-up, million sq ft
Another very strong year of leasing activity…
50
40
30
20
10
0
20222016 2017 2021202020192018
Current enquiries as of Q4 2022
Under offer as of Q4 2022
500k sq ft +
10-year average
250–500k sq ft
100–250k sq ft
Source: CBRE.
2023+
3. All data from CBRE.
Tritax Big Box REIT plc Annual Report 202218
Near record demand and low availability are
continuing to drive rental growth continued
Availability remains very low continued
We also expect levels of speculative development in the market to
decline as a consequence of the current and expected near-term
UK economic challenges. Savills, for example, suggests there is
3.6 million sq ft of space that has yet to sign a build contract and
could therefore be delayed
4
. In addition to this potential slow down,
substantial barriers to new supply remain in place. These include the:
•
low availability and cost of suitable land, in the right locations and
with sufficient power and labour supplies;
•
slow planning system and extensive infrastructure requirements
before a building is constructed;
•
reduced availability and substantially increased cost of debt financing;
•
higher build costs, although we may see some reductions
in 2023; and
•
buyer and seller pricing aspirations for land out of equilibrium
(sellers not yet having adjusted to market correction).
Control of a significant land portfolio, largely through capital efficient
option agreements, some with existing planning consents and which
is capable of near-term development is particularly attractive in the
current market. The fact that we have agreements in place which
link our land purchase price to open market value (less a prescribed
discount) means that we benefit from the overall reduction in land
values across our future development pipeline. This is assisting in
maintaining our guided 6–8% yield on cost range from development.
The logistics development industry has also changed markedly
since the global financial crisis, with a decline in the importance
of trader-developers and the growth of well-capitalised investor-
developers, who are incentivised to obtain the best possible terms
for new leases, to protect the value of their existing investments.
More recently, for those remaining trader-developers, a change in
market dynamics and particularly the cost of finance and exit yield
positioning means that, for some, the financial returns have become
unviable and therefore this will naturally curtail supply over the
short term. Today, the investor-developer community approaches
development with a greater degree of sophistication than in the past,
which therefore allows overall levels of supply to be moderated to
match demand.
…availability remains at very low levels
2016 2017 2021202020192018
500k sq ft +
250–500k sq ft
100–250k sq ft
UK vacancy rate (right-hand side)
Source: CBRE.
May-21 Nov-22Nov-21 May-22
2.8%
3.5%
...expectations for rental growth remain very strong
2021-2025
Availability (inc. spec under contract)
million sq ft
Market Review continued
4.0%
3.9%
Source: IPF Research (industrial consensus rental value growth forecasts).
2022
35
30
25
20
15
10
5
0
7%
6%
5%
4%
3%
2%
1%
0%
Vacancy (ready to occupy)
4. Savills, Big Shed Breakfast webinar, November 2022.
IPF Consensus forecasts for rental growth
2022-2026
Tritax Big Box REIT plc Annual Report 2022 19
STRATEGIC REPORT
Robust rental growth
Strong demand and limited available space have pushed rents to
new highs across all UK regions. Outside of the South East, headline
prime rents are typically between £8 and £9 psf. Headline rents have
increased by between 75 pence and £1.25 psf through 2022. In the
South East headline rents are £10.75 (Q4 2021: £9.75) in prime big
box logistics markets such as along the M1 corridor. Inner London
urban rents are significantly higher at around £26.50 psf but units
tend to be smaller, and often have shorter lease terms
3
.
UK real estate leases often create a lag in capturing market rental
growth across an investment portfolio due to the common nature of
five-yearly rent reviews. Market rental growth is, however, reflected
in the further increase in our portfolio rental reversion to 19.1% at
31 December 2022 (2021: 11%). Active asset management and
development lettings provide a faster transmission and here we have
been able to add £28.4 million of annual contracted rent in 2022,
helped by achieving rents above appraised ERVs at developments
such as Biggleswade and Aston Clinton.
Capital market backdrop slows investment activity
Capital market conditions adjusted rapidly through 2022 and
investors reconsidered pricing in light of elevated inflation, a higher
cost of capital and a weaker growth outlook. Debt markets repriced
as costs increased and lenders lowered loan to value ratios for
new loans to maintain adequate interest cover. Balance sheets and
available liquidity are once again important metrics, and we continue
to benefit from a low LTV of 31.2% and available liquidity in excess of
£500 million.
...macroeconomic factors leading to rapid H2
adjustment in investment marketing pricing
0 0
8
4
2
6 3%
1%
6%
2%
7%
4%
10 5%
14
12
2009
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2011
2010
2012
£ billion
Investment volumes
Yield (right-hand side)
Source: Property Data (investment volume data relates to distribution
warehouse transactions greater than £5 million), CBRE.
Logistics transaction volumes have slowed since Q1 2022 with total
investment volumes for the year of £6.7 billion (2021: £11.2 billion)
5
.
Prime market yields softened rapidly through the second half of
2022 to 5.0% as at 31 December 2022 (2021: 3.5%)
2
. The speed
at which pricing adjusted is unprecedented with the equivalent
150bps movement seen in the second half of 2022 taking more
than 12 months to materialise in 2007. While investors have been
understandably hesitant to transact in a volatile and rapidly adjusting
market, it is notable that liquidity remains evident with several deals
completing towards the end of the year and more transactions being
progressed currently.
The health of the logistics occupier market and the scope for
continued rental growth remains an attractive feature of our
sub-sector. While the near-term outlook for capital values will
continue to be impacted by the macro-drivers that currently
dominate, in the medium term, we believe logistics real estate
remains a compelling area for investment. The structural tailwinds
supporting the occupier market remain in place, supply chain
evolution is still in its early stages of development and investment
capital remains committed to an asset class that is core to the
global economy.
5. Property Data.
Tritax Big Box REIT plc Annual Report 202220
Our Business Model
Our advantages
Focused approach
Our Manager is focused solely on the UK logistics market, giving it
in-depth knowledge and understanding of the sector and strong,
long-standing relationships with market participants. This gives us
privileged access to opportunities, often off-market, enabling us to
secure better returns for Shareholders.
Agile and entrepreneurial culture
Our Manager’s culture is agile and entrepreneurial, allowing us to
move rapidly to secure the best opportunities and leverage the
huge opportunity available to us, as demand for quality logistics
warehouses exceeds supply.
Combined investment and development platform
Combining our investment portfolio and our development platform
within the same Group gives us significant advantages. For example,
we can draw on customer insights from our asset management
work to inform our development programme, while our development
operation enables us to support new space requirements for
existingcustomers.
How we create value
High-quality portfolio
We have an in-depth portfolio of large-scale, high-quality buildings,
in key logistics locations close to transport networks, where occupier
demand is strong.
Strong customer relationships
We work closely with our customers to understand their businesses.
This ensures we can deliver solutions that address their individual
supply chain and property needs, informs our decision making
and often leads to working with customers again in the future at
other sites.
Active management
We actively manage our properties and portfolio, for example
by adding extensions, improving our assets’ environmental
performance, securing lease renewals and agreeing rent reviews.
This increases income and capital values.
Attractive leases to market leaders
Our buildings are let on long, full repairing and insuring leases with
upward-only rent reviews, to a well-diversified base of occupiers who
are typically market leaders in their fields. At 31 December 2022, our
weighted average unexpired lease term was 12.6 years and our top
10 customers accounted for 50% of the contracted rent roll.
Long-term outperformance throughdevelopment
We have the UK’s largest logistics-focused land platform, which enables
us to develop properties that deliver a target yield on cost of 6–8%.
This provides us the opportunity to deliver long-term outperformance to
Shareholders and high-quality buildings to customers.
Building on
our advantage
We own, manage and develop logistics real estate in strategic locations across
the UK, let to customers that include some of the world’s largest companies.
In doing so, we look to deliver attractive total returns for Shareholders.
Tritax Big Box REIT plc Annual Report 2022 21
STRATEGIC REPORT
The value we create
High-quality buildings for our customers
We create high-quality buildings that play a central role in supporting
our customers’ business needs and growth ambitions.
Long-term income and capital growth for our
Shareholders
We generate attractive long-term income and capital growth for our
Shareholders. In 2022, we paid dividends totalling 7.0 pence per
share and added £28.4 million to our contracted rent roll through
ourdevelopments and active management of our portfolio.
Economic and social value for society
andcommunities
Our buildings benefit local communities and society more generally.
They have strong ESG credentials, with 98% having an EPC rating of
A–C and new assets being built to net zero carbon in construction,
helping to minimise their environmental impact. They also support
significant employment in their local areas both during construction
and once in operation.
How we generate returns
We generate returns through the rent we
receive from our tenants and from profits
associated with our portfolio. We have a low
and transparent cost base, with an EPRA
Cost Ratio in 2022 of 15.7%, efficiently
converting the rent we receive into income
We recycle capital, selling assets which we
believe have delivered their full potential in
our ownership and redeploying the proceeds
into higher-returning opportunities.
“ We have a high-quality portfolio
delivering resilient income that
leaves us well positioned for
the future and potentially more
uncertain economic conditions.”
Tritax Big Box REIT plc Annual Report 202222
Stakeholder Engagement and Section 172
Engaging with
By considering the Company’s purpose and vision, together
with its strategic priorities, we aim to balance stakeholders’
Section 172 statement
The Directors have had regard for the matters set out in Section
172(1) (a)–(f) of the Companies Act 2006 when performing their duty
under Section 172. The Directors 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,
and in doing so have considered (amongst other matters):
• the likely consequences of any decision in the long term;
• interest of the Manager and its employees, as the Company
doesnot have any employees;
• the need to foster the Company’s business relationships
withsuppliers, customers and others;
• the impact of the Company’s operations on the community
andenvironment;
• the Company’s reputation for high standards of
businessconduct;and
• the need to act fairly as between members of the Company.
The table on the right indicates where the relevant information
isinthis Annual Report that demonstrates how we act in
accordancewith the requirements of Section 172.
Further information on how we have engaged with our key
stakeholders and considered their interests during the last
reportingperiod can be found on pages 23 and 24 and 76.
Our stakeholders
The Manager and its employees
Our Shareholders
Our suppliers
Our customers
Our lenders
Government, regulators
andlocalcouncils
Our communities
X Read more on pages 23 and 24 and 82 and 83
Tritax Big Box REIT plc Annual Report 2022 23
STRATEGIC REPORT
The Manager and its employees
What they care about
The long-term success of the Company is of key importance
to the Manager. In order to achieve this, as well as establishing
and maintaining lasting relationships, the Manager takes a keen
interest in the wellbeing and satisfaction of its employees. Being
able to attract and retain high-calibre talent and then support
those individuals in their professional development is a high
priority for the Manager. The Board and the Manager maintain
a positive and transparent relationship to ensure alignment of
values and business objectives.
How we engage
•
Quarterly reporting to the Board
•
External Board evaluations
•
Informal meetings
•
Professional and executive development programmes
•
Employee surveys, social events and ESG initiatives
Topics
•
Employee satisfaction and resourcing
•
Remote working, staff health and wellbeing, development
andprogression
•
Business updates
Outcomes
•
Updated software and systems for remote working
•
Implementation of a Working from Home Policy of the
Manager during and post Covid-19
•
Employee social events
Further information
X Page 82 in Key Decisions of the Board 2022
X Pages 84 and 85 in Division of Responsibilities
X Management Engagement Committee Report on pages 98 to 100
Our Shareholders
What they care about
Delivering sustainable, profitable growth over the longer
term. Our investors take a keen interest in strong corporate
governance, as well as a transparent reporting framework and
the ESG initiatives of the Company.
How we engage
•
Regular market updates on strategy and performance
•
Virtual meetings with the Board and the Manager to aid
understanding and decision making
•
Investor roadshows, site visits and investor seminars
•
Quarterly update reports to the Board from Investor Relations
•
Annual General Meeting
•
Meetings held between Shareholders and key personnel
from the Board and Manager
Topics
•
Strategic plans and long-term value and returns
•
Governance
•
Environmental and social performance
Outcomes
•
Engagement with key representatives to ensure our purpose
and strategy remain in line with expectations
•
Focus on recycling assets into higher returning development
and investment opportunities
Further information
X Pages 20 and 21 in the Business Model
X Pages 79 to 81 in Board Leadership and Company Purpose
Tritax Big Box REIT plc Annual Report 202224
Stakeholder Engagement and Section 172 continued
Our suppliers
What they care about
Our suppliers care about having collaborative and transparent
working relationships with us, including responsive communication
and being able to deliver to their service level agreements at a
competitive fee.
How we engage
•
Invited key suppliers to attend Board and
Committee meetings
•
Informal, one-to-one virtual meetings
•
Review of supplier performance by the Management
Engagement Committee
•
Externally facilitated adviser reports
Topics
•
Service levels and annual performance
•
Fee structure
•
Relationship management
•
Processes and procedures
Outcomes
•
Continued good, and in some cases, exceptional, levels
of service
Further information
X Pages 82 and 83 in Key Decisions of the Board 2022
X Management Engagement Committee Report pages 98 to 101
Our customers
What they care about
Quality assets, including buildings with strong ESG ratings that
enable their business to succeed, and a knowledgeable and
committed landlord that supports their strategy, with a current
focus on fulfilling their rapidly growing e-commerce sales. Our
customers want efficient supply chain logistics and attractive
price labour pools.
How we engage
•
Regular face-to-face meetings both virtual and on-
site, when able
•
Charitable engagement which in turn helps bring
environmental and social benefits to the communities
weoperate in
•
Joining UK GBC and Better Building Partnership Working
Groups promoting market leadership in zero carbon,
engagement and biodiversity
•
Demonstrating leadership by continuing the Sustainable
Logistics Alliance with Prologis which published a new white
paper on measuring social value in the logistics sector
•
Review of published data, such as annual accounts,
tradingupdates and analysts’ reports to identify mutually
beneficial opportunities
•
Greater discussion over cash flow and rental collection inthe
current climate
•
Stakeholder surveys
•
Ensuring buildings comply with the necessary safety
regulations and insurance
•
Commissioned supply chain analysis to understand our
customer needs
Topics
•
ESG initiatives
•
Treasury management
•
Supporting e-commerce initiatives
•
Operational efficiencies and resilience
Outcomes
•
Strengthening of business relationships
•
Development of a dedicated Occupier Hub
•
Asset management and ESG initiatives
Further information
X Manager’s Report pages 39 to 47
X ESG section pages 32 to 38
X Pages 82 and 83 in Key Decisions of the Board 2022
Tritax Big Box REIT plc Annual Report 2022 25
STRATEGIC REPORT
Section 172 matter
Further information incorporated into this statement
byreference
Long term
X Market Review pages 16 to 19
X Our Business Model pages 20 and 21
X Manager’s Report pages 39 to 47
X Key Board Decisions pages 82 and 83
Investors
X Strategic Report pages 1 to 69
X Key Board Decisions pages 82 and 83
X Governance Report pages 70 to 106
Employees
X For information on the Manager’s employees
please refer to pages 23, 37, 82, 83 and 99
Community
and environment
X Strategic Report pages 1 to 69
X Manager’s Report pages 39 to 47
X Key Board Decisions pages 82 and 83
Suppliers
X Strategic Report pages 1 to 69
X Manager’s Report pages 39 to 47
X Key Board Decisions pages 82 and 83
High business
conduct
X Our Business Model pages 20 and 21
X Stakeholder Engagement pages 22 to 24
X Strategic Report pages 1 to 69
Section 172
“ We continued to successfully
deliver our strategy and raised
the funding to accelerate our
development programme, against
a backdrop of a highly attractive
occupational market.”
Tritax Big Box REIT plc Annual Report 202226
Our Strategy
Aligned to long-term
structural growth
We have a clear and compelling strategy designed to capture
the significant opportunities our market creates, underpinned
by a disciplined approach to capital allocation and a
commitment to ESG, which is intrinsic to each element of
our strategy.
Progress 2022
Continued to maintain the portfolio
quality striking a balance between
Foundation and Value Add assets.
Given the changing investment market
in the second half of 2022, we did not
dispose of any assets but continue to
evaluate opportunities to do so.
Progress 2022
Through a combination of lease extensions,
renewals and embedded rent reviews, we
added £5.1 million to contracted annual
rent, achieving a 7.6% increase across
34.2% of the portfolio.
Progress 2022
We achieved 2.9 million sq ft of
development starts and added
£23.3million to our contracted rent
roll, which will underpin future earnings
growthand dividend progression.
Future focus
Monitor customers’ credit quality in the
face of a potential UK recession.
Evaluate the weighting of the investment
portfolio between Foundation and Value
Add assets, geographic regions and
building sizes.
Future focus
Settle any outstanding open market rent
reviews, progress lease extensions and
renewal discussions, make further selective
asset disposals and continue to evaluate
opportunities for asset acquisitions.
Future focus
Maintain our long-term development
guidance of 2–3 million sq ft per annum,
representing £200–250 million of
annual capex, at a target yield on cost
of 6% to 8%.
Direct and active
management
Protecting, adding and
realising value
We actively and directly manage our
existing property portfolio, developing
long-term relationships with our customers
and realising opportunities to add
value and generate secure and
increasing income.
When we believe an asset has reached
its full potential within our ownership,
we look to crystallise this value
through disposals, recycling capital
into higher returning development
andinvestmentopportunities.
X Read more on pages 42 and 43
Insight driven
development
Creating value and capturing
occupier demand
We tailor the development pipeline to meet
demand, at an attractive 6–8% yield
on cost target. In doing so, we utilise
customer insights from our investment
portfolio and implement innovations in
areas such as ESG and power.
Most of our development is on a demand
driven pre-let basis, significantly de-risking
the process and ensuring we only deploy
significant amounts of the Group’s capital
when we are confident the returns
areappropriate.
X Read more on pages 43 to 47
High-quality assets
attracting world-
leading companies
Delivering high-quality,
resilient and growing income
We continue to build a portfolio that
will perform well through the economic
cycle, providing resilient long-term
income even during challenging
times. As part of this, we weight our
customer exposure towards defensive
and high-growth sectors.
We monitor the market for opportunities
to acquire assets and add value
through active asset management.
X Read more on pages 40 and 41
Our strategy
Tritax Big Box REIT plc Annual Report 2022 27
STRATEGIC REPORT
Our strategy
Underpinned by
a disciplined approach
to capital allocation
Underpinning our strategy is a disciplined
approach to capital, wherewe aim to
maximise returns to Shareholders while
minimising risk. By evaluating the Group’s
existing assets and identifying ways to
maximise and then realise value, we will
effectively recycle capital to support the
Group’s objectives, using debt appropriately
and potentially raising additional capital when
it is inShareholders’interests.
The Group’s commitment to ESG forms an
intrinsic andoverarching part of our strategy.
X See pages 32 to 38
Developing assets in the
portfolio at a target yield
on cost of 6–8%
Adding and
realising value
Redeploying proceeds
into higher returning
opportunities
“ The successful implementation
of our strategy is reflected
in the strong operational
performance we have delivered.”
High-quality
assets attracting
world-leading
companies
Direct
and active
management
Insight driven
development
and innovation
Tritax Big Box REIT plc Annual Report 202228
1. Total
Accounting
Return (“TAR”)
See Notes to the EPRA and Other
KeyPerformance Indicators.
2. Dividend
See note 14.
per share
1
See note 30.
4. Loan to value
ratio (“LTV”)
See Notes to the EPRA and Other
KeyPerformance Indicators.
5. Adjusted
earnings
per share
See note 13.
6. Weighted
average
unexpired
lease term
(“WAULT”)
8. Total
-15.9%
2021: 30.5%
7.00p
2021: 6.70p
2021: 222.60p
31.2%
2021: 23.5%
7.79p
2021: 8.23p
Excluding additional development
management income, Adjusted
EPS was 7.51p (2021: 7.38p).
See note 13.
12.6 years
2021: 13.0 years
4 Green
Star rating
2021: 81/100 and 4 Green
Starrating
0.76%
2021: 0.79%
Relevance to strategy
TAR calculates the change
in the EPRA Net Tangible
Assets (“EPRA NTA”) over
the period plus dividends
paid. It measures the ultimate
outcome of our strategy,
which is to deliver value to
our Shareholders through
our portfolio and to deliver
a secure and growing
income stream.
Relevance to strategy
The dividend reflects our
ability to deliver a low-risk
but growing income stream
from our portfolio and is a key
element of our TAR.
Relevance to strategy
The EPRA NTA reflects our
ability to grow the portfolio
and to add value to it
throughout the lifecycle of
our assets.
Relevance to strategy
The LTV measures the
prudence of our financing
strategy, balancing the
potential amplification
of returns and portfolio
diversification that come with
using debt against the need to
successfully manage risk.
Relevance to strategy
The Adjusted EPS reflects our
ability to generate earnings
from our portfolio, which
ultimately underpins our
dividend payments.
Relevance to strategy
The WAULT is a key measure
of the quality of our portfolio.
Long lease terms underpin the
security of our income stream.
Relevance to strategy
The GRESB score reflects
the ESG performance of
our assets and how well
we are managing ESG
risks and opportunities.
Sustainable assets protect
us against climate change
and help our customers to
operateefficiently.
We were also awarded the
GRESB 2022 Leader for
Development in the European
and Global Industrial
Sectors award.
Relevance to strategy
This is a key measure of our
operational performance.
Keeping costs low supports
our ability to pay dividends.
Key Performance Indicators
Measuring our
performance
Our objective is to deliver attractive, low-risk returns to
Shareholders, by successfully implementing the Group’s
strategy. Set out below are the key performance indicators we
use to track our progress. For a more detailed explanation of
1. EPRA NTA is calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (“EPRA”).
Weusethese alternative metrics as they provide a transparent and consistent basis to enable comparison between European property companies.
30.5%
19.9%
2022
2021
2020
7.00 p
6.70p
6.40p
2022
2021
2020
180.37p
222.60p
175.61p
2022
2021
2020
31.2%
23.5%
30.0%
2022
2021
2020
(15.9)%
Tritax Big Box REIT plc Annual Report 2022 29
STRATEGIC REPORT
1. Total
Accounting
Return (“TAR”)
See Notes to the EPRA and Other
KeyPerformance Indicators.
2. Dividend
See note 14.
per share
1
See note 30.
4. Loan to value
ratio (“LTV”)
See Notes to the EPRA and Other
KeyPerformance Indicators.
5. Adjusted
earnings
per share
See note 13.
6. Weighted
average
unexpired
lease term
(“WAULT”)
8. Total
-15.9%
2021: 30.5%
7.00p
2021: 6.70p
2021: 222.60p
31.2%
2021: 23.5%
7.79p
2021: 8.23p
Excluding additional development
management income, Adjusted
EPS was 7.51p (2021: 7.38p).
See note 13.
12.6 years
2021: 13.0 years
4 Green
Star rating
2021: 81/100 and 4 Green
Starrating
0.76%
2021: 0.79%
Relevance to strategy
TAR calculates the change
in the EPRA Net Tangible
Assets (“EPRA NTA”) over
the period plus dividends
paid. It measures the ultimate
outcome of our strategy,
which is to deliver value to
our Shareholders through
our portfolio and to deliver
a secure and growing
income stream.
Relevance to strategy
The dividend reflects our
ability to deliver a low-risk
but growing income stream
from our portfolio and is a key
element of our TAR.
Relevance to strategy
The EPRA NTA reflects our
ability to grow the portfolio
and to add value to it
throughout the lifecycle of
our assets.
Relevance to strategy
The LTV measures the
prudence of our financing
strategy, balancing the
potential amplification
of returns and portfolio
diversification that come with
using debt against the need to
successfully manage risk.
Relevance to strategy
The Adjusted EPS reflects our
ability to generate earnings
from our portfolio, which
ultimately underpins our
dividend payments.
Relevance to strategy
The WAULT is a key measure
of the quality of our portfolio.
Long lease terms underpin the
security of our income stream.
Relevance to strategy
The GRESB score reflects
the ESG performance of
our assets and how well
we are managing ESG
risks and opportunities.
Sustainable assets protect
us against climate change
and help our customers to
operateefficiently.
We were also awarded the
GRESB 2022 Leader for
Development in the European
and Global Industrial
Sectors award.
Relevance to strategy
This is a key measure of our
operational performance.
Keeping costs low supports
our ability to pay dividends.
“ While we delivered strong
operational performance,
particularly in capturing future
income, rapid repricing of
logistics assets has resulted in
significantly lower total returns
for the year.”
7.79 p
8.23p
7.17p
2022
2021
2020
12.6 years
13.0 years
13.8 years
2022
2021
2020
83/100 0.76%
81/100 0.79%
72/100 0.86%
2022 2022
2021 2021
2020 2020
Tritax Big Box REIT plc Annual Report 202230
(diluted)
See note 13.
Tangible Assets
See note 30.
Reinstatement
See note 30.
Disposal
See note 30.
See Notes to the EPRA and Other
KeyPerformance Indicators.
See Notes to the EPRA and Other
KeyPerformance Indicators.
See Notes to the EPRA and Other
KeyPerformance Indicators.
See Notes to the EPRA and Other
KeyPerformance Indicators.
Purpose
A key measure of a company’s
underlying operating results
and an indication of the extent
to which current dividend
payments are supported
by earnings.
Purpose
Assumes that entities buy and
sell assets, thereby crystallising
certain levels of unavoidable
deferred tax.
Purpose
Assumes that entities never sell
assets and aims to represent
the value required to rebuild
the entity.
Purpose
Represents the Shareholders’
value under a disposal
scenario, where deferred
tax, financial instruments and
certain other adjustments are
calculated to the full extent
of their liability, net of any
resulting tax.
Purpose
This measure should make it
easier for investors to judge for
themselves how the valuations of
two portfolios compare.
Purpose
This measure should make it
easier for investors to judge for
themselves how the valuations
oftwo portfolios compare.
Purpose
A “pure” (%) measure of
investment property space
that is vacant, based on ERV.
Purpose
A key measure to enable
meaningful measurement of
the changes in a company’s
operating costs.
EPRA Performance Measures
Measuring our
performance
The table below shows additional performance measures, calculated in
accordance with the Best Practices Recommendations of the European
Public Real Estate Association (“EPRA”). We provide these measures to aid
comparison with other European real estate businesses.
For a full reconciliation of all EPRA performance indicators, please see Notes
to the EPRA and Other Key Performance Indicators.
£14 4.8 m / 7.66 p
£131. 2m / 7. 47p
£105.5m/6.17p
7.66p
2021: £131. 2 m / 7. 47p
2022
2021
2020
£3.4bn/180.37p
£4.2bn/222.60p
£3.0bn/175.61p
2021: £4.2bn/222.60p
2022
2021
2020
£3.8bn/201.17p
£4.5bn/242.84p
£3.3bn/193.41p
201.17p
2021: £4.5bn/242.84p
2022
2021
2020
£3.6bn/192.18p
£4.1bn/219.27p
£2.9bn/166.36p
2021: £4.1bn/219.27p
2022
2021
2020
Tritax Big Box REIT plc Annual Report 2022 31
STRATEGIC REPORT
(diluted)
See note 13.
Tangible Assets
See note 30.
Reinstatement
See note 30.
Disposal
See note 30.
See Notes to the EPRA and Other
KeyPerformance Indicators.
See Notes to the EPRA and Other
KeyPerformance Indicators.
See Notes to the EPRA and Other
KeyPerformance Indicators.
See Notes to the EPRA and Other
KeyPerformance Indicators.
Purpose
A key measure of a company’s
underlying operating results
and an indication of the extent
to which current dividend
payments are supported
by earnings.
Purpose
Assumes that entities buy and
sell assets, thereby crystallising
certain levels of unavoidable
deferred tax.
Purpose
Assumes that entities never sell
assets and aims to represent
the value required to rebuild
the entity.
Purpose
Represents the Shareholders’
value under a disposal
scenario, where deferred
tax, financial instruments and
certain other adjustments are
calculated to the full extent
of their liability, net of any
resulting tax.
Purpose
This measure should make it
easier for investors to judge for
themselves how the valuations of
two portfolios compare.
Purpose
This measure should make it
easier for investors to judge for
themselves how the valuations
oftwo portfolios compare.
Purpose
A “pure” (%) measure of
investment property space
that is vacant, based on ERV.
Purpose
A key measure to enable
meaningful measurement of
the changes in a company’s
operating costs.
“ Many of our KPIs this year
reflect the rapid repricing
of assets experienced in the
second half of 2022.”
4.19%
3.56%
4.18%
4.19%
2021: 3.56%
2022
2021
2020
4.39%
3.75%
4.38%
4.39%
2021: 3.75%
2022
2021
2020
0.0%
0.0%
2.1%
2.1%
2021: 0.0%
2022
2021
2020
15.7%
13.9%
14.2%
15.7%
2021: 13.9%
Both the 2022 and 2021
ratios arethe same, inclusive
orexclusiveofvacancy costs.
2022
2021
2020
Tritax Big Box REIT plc Annual Report 202232
ESG
Focused and integrated
approach to ESG
In 2020, we set a range of ESG targets that we aimed to meet by 2023. The following pages set
out these targets and explain our progress against them during 2022. As we are coming to the
end of the target period, we have considered the key areas of ESG we intend to address going
forward. Our intention is to simplify our approach and ensure we can maximise our focus on
the most important elements.
Approach underpinned by:
1. Global frameworks
2. Evidence and data
•
Targets and KPIs
3. External benchmarks
•
•
•
•
•
4. Collaborations
•
Customers
•
Investors
•
Communities
•
Suppliers
2. Climate and carbon
Our portfolio and assets will
be net zero carbon.
• Net zero carbon pathway
• Climate risk mitigation
and adaptation
• Renewable energy
andlow-carbon building
infrastructure
3. Nature and wellbeing
Our portfolio has a positive
impact on our climate and
the natural world.
• Biodiversity and
workplace enhancement
1. Sustainable buildings
Our ESG targets are
integrated across the asset
lifecycle from acquisition
to development, asset
management and disposal.
4. Social value
The social value within
our portfolio makes a
meaningful difference to
people and communities.
• Delivery and
measurement of
social impact
Tritax Big Box REIT plc Annual Report 2022 33
STRATEGIC REPORT
Our progress with our ESG agenda is reflected in further
improvements in our ratings by leading agencies. The Group’s
GRESB score increased to 83/100 and we maintained our four Green
Stars (2021: 81/100 and four Green Stars). We were also awarded
the GRESB 2022 Leader for Development in European and Global
Industrial Sectors for the second year, scoring 99/100 and five stars
(2021: 97/100 and five stars).
We also achieved a Sustainalytics score of 8.3 (negligible risk), for
which we were recognised in Sustainalytics’ 2023 Top-Rated ESG
Companies List by region and sector, and improved our MSCI rating
from BBB to AA.
Our 2022 objectives
In our 2021 Annual Report, we set out the following objectives for
2022. These objectives support and complement the achievement of
our targets for 2023:
Objective Achievement in 2022
Expand the installation of renewable energy initiatives
including solar
We have a total solar PV installed capacity of 14.6 MW on our buildings, and are in
discussions with our customers to add solar PV capacity to an additional 15 assets.
EV charging spaces are currently available at 54% of our assets (based on floorspace).
Improve the EPC ratings of assets below grade C 98% of our portfolio has an EPC rating between A and C, with all new additions to
the portfolio during the year being A-rated.
Collaborate with customers to obtain emissions data and
further develop net zero carbon plans
For the 2022 GRESB assessment, our emissions data coverage was 84% of the
total floor area of the portfolio, up from 74% for the 2021 assessment.
Develop further our net zero carbon in construction work,
toincrease our knowledge of low-carbon materials and
construction methods
The development process now integrates the calculation of embodied carbon as
astandard process. We continue to engage with suppliers and market leadership
forums on options for low-carbon materials and methodologies. For all new
development projects, Tritax Symmetry undertake lifecycle assessments to review
the upfront carbon, in alignment with the RICS Whole Life Carbon Guidance, using
the One Click LCA assessment software.
Work with existing customers to improve biodiversity
through innovative use of landscaping and habitat
We have formalised the process of collecting biodiversity data on our standing
assets on an annual basis.
Continue to assess the potential for biodiversity net gain in
development projects
We are using specialist consultants to measure our biodiversity performance across
10 projects.
Support local communities through job creation
opportunities and charity partnerships, developing on the
proactive work already undertaken with schools, colleges
and Schoolreaders
We have extended our support for the Schoolreaders charity and we continue to
work with local authorities on other local community partnerships, including through
Tritax Symmetry’s Community Benefit Fund.
Work with customers on initial fit-out designs and
enhancements, to provide or improve employee welfare
facilities, both internal and external
We continued to work constructively with customers to optimise fit-out proposals.
Tritax Big Box REIT plc Annual Report 202234
ESG continued
As the owner of the largest logistics portfolios and the biggest
logistics development land portfolio in the UK, we have
aresponsibility to ensure our portfolio is sustainable and supports
thehealth and wellbeing of our customers.
The table below sets out our progress against our 2023 targets
forsustainable buildings:
ESG goals 2023 target Actions in 2022 Progress against target
Sustainable buildings
Ensure and demonstrate
the sustainability of
ourassets
Embed ESG into investment
practices and ensure any new
acquisitions and investments align
with ESG investment principles.
All developments completed and assets acquired
met our minimum ESG criteria, in accordance with
our ESG policy.
Achieved
Ensure all new assets in the portfolio
have a green building certification.
All new development assets completed in 2022
were built to achieve BREEAM Very Good, and are
all pending the certification.
On track
Improve GRESB score to three
Green Stars.
Improve MSCI ESG rating to A.
Achieved a score of 83/100 (four Green Stars) for
the standing portfolio and 99/100 (five Green Stars)
for the development activities.
Achieved an MSCI rating of AA, upgraded from BBB.
Achieved
Achieved
Implement green leases on all new
leasing opportunities, where our
customers agree.
All three leases agreed this year included green
clauses (see page 42).
Achieved
Provide recommendation reports
to tenants, and provide
sustainable operations guides.
We continued to engage with our customers on
ESG topics.
On track
Tritax Big Box REIT plc Annual Report 2022 35
STRATEGIC REPORT
Achieving net zero carbon is a key consideration for us and our
customers. Our direct operational greenhouse gas (“GHG”) emissions
(Scopes 1 and 2) are minimal and principally relate to assets where
we provide energy for external services, such as estate roadway
lighting. We continue to engage and work with our property managers
to ensure we procure renewable energy, and maintained 100%
renewable energy procurement for all landlord-purchased energy.
We are now focused on reducing our indirect (Scope 3) supply chain
GHG emissions, including our development activity. Since 2020,
all our new developments are constructed to be net zero carbon in
construction, as defined by the UK Green Building Council.
We also work with our customers to assess emissions from their
operations and to facilitate the deployment of low-carbon alternatives,
such as solar PV or wind generated power.
The table below sets out our progress against our 2023 targets for
climate and carbon:
ESG goals 2023 target Actions in 2022 Progress against target
Climate and carbon
Achieve net zero carbon
for all direct activities
Maintain net zero carbon for
Scope 1 and 2 GHG emissions.
Measure indirect (Scope 3) emissions.
Continued to source 100% renewable energy for all
landlord-purchased energy. We improved the data
coverage of our customers’ emissions (to 84% of
floor area, up from 74%), and modelled the emissions
profile of each asset using the CRREM platform.
On track
Identify the products and
processes that remove carbon
from construction.
The development process now integrates the
calculation of embodied carbon as a standard
process. We continue to engage with suppliers and
market leadership forums on options for low-carbon
materials and methodologies. For all new development
projects, Tritax Symmetry undertake lifecycle
assessments to review the upfront carbon, in
alignment with the RICS Whole Life Carbon Guidance,
using the One Click LCA assessment software.
On track
Improve EPCs to A–C grade. 98% of our portfolio has an EPC rating between
Aand C, with all new additions to the portfolio
during the year being A-rated.
On track
Install renewable energy generation
projects to benefit our customers.
We have a total solar PV installed capacity of
14.6MW on our buildings, and are in discussions
with our customers to add solar PV capacity to an
additional 15 assets.
On track
Ensure top three priority assets
have climate resilience plans in place.
We continued to integrate the results of our physical
risk assessment conducted in 2022 into asset
management processes.
On track
Climate and carbon
Tritax Big Box REIT plc Annual Report 202236
ESG continued
continued
Streamlined Energy and Carbon Reporting (“SECR”)
Methodology
The greenhouse gas (“GHG”) emissions data was compiled in
accordance with the Streamlined Energy and Carbon Reporting
(“SECR”) guidance for the period covering January to December
2022. The Company reports its GHG emissions in line with the revised
edition of the GHG Protocol Corporate Accounting and Reporting
Standard and the GHG Protocol Scope 2 Guidance.
The Company’s reporting boundary for GHG emissions data is based
on the principle of operational control. This means that only assets
where the Company has the authority, via its managing agents, to
introduce and implement its operating policies and procedures fall
within the reporting scope. These include landlord consumed energy
and Scope 1 and 2 GHG emissions associated with the common
parts areas, external areas and tenant voids at Aston Clinton, Bicester,
Littlebrook, Stoke and Harlow assets. Energy consumption and
corresponding emissions of the office operation of Tritax Symmetry
Limited are also included.
With most energy being procured and consumed by its tenants, the
Company has limited operational control. This means that Scope 1
and 2 GHG emissions of the Company are relatively low compared
to its Scope 3 emissions. Partial Scope 3 emissions data is provided
in this report on a voluntarily basis, including operating emissions by
the Investment Manager, Tritax Management LLP, indirect emissions
associated with the purchase of goods and services, and emissions
of downstream leased assets. The Scope 3 (capital goods) emissions
are associated with the embodied carbon of development projects
managed by Tritax Symmetry and includes upfront embodied carbon
of the projects completed in the reporting year. The total embodied
carbon emissions of each project was provided by Tritax Symmetry.
All reported energy use and associated GHG emissions data relate
to the Company’s operations in the UK. Scope 1, Scope 2 location-
based and Scope 3 emissions for managed assets were calculated
using the UK Government Department for Business, Energy & Industrial
Strategy (“BEIS”) Conversion Factors for Company Reporting for the
respective reporting periods. Scope 2 market-based GHG emissions
were calculated using the European Residual Mixes factors and the
zero emissions factor for the Renewable Energy Guarantees of Origin
(“REGO”) backed electricity supplies.
Savills (UK) Limited has been appointed to prepare this SECR report
and perform Scope 1 and 2 emissions data quality checks.
Energy consumption and GHG emissions breakdown
GHG emissions source Description 2022 2021
Energy consumption
Tritax office consumed energy (kWh) 148,727 154,372
Landlord consumed energy (kWh)
173,251
1
37,330
2
Tenant consumed energy (kWh) N/A
3
341,712,507
4
GHG emissions scope
Description
2022 2021
Scope 1
Direct emissions – landlord gas and fuel consumption (tCO
2
e) 0.03 0.05
2
Scope 2 (Location-based)
Indirect emissions – landlord purchased electricity (tCO
2
e) 33.47 7.87
2
Indirect emissions – Tritax office electricity consumption (tCO
2
e) 28.76 32.78
Scope 2 (Market-based)
Indirect emissions – landlord purchased electricity (tCO
2
e) 15.53 N/A
Total Scope 1 and 2 emissions
5
62.26 40.70
Scope 1 and 2 emissions intensity (kgCO
2
/m
2
) 0.0198 0.0132
Scope 3 (purchased goods
and services)
Indirect emissions associated with business travel and Investment
Manager energy consumption (tCO
2
e)
103.21 N/A
Scope 3 (capital goods)
Indirect emissions associated with embodied carbon of development
projects (tCO
2
e)
46,165.00 N/A
Scope 3 (downstream leased asset)
Indirect emissions associated with energy consumption of tenants (tCO
2
e) N/A
3
69,770.14
4
1. 24% of the landlord energy consumption data was estimated in 2022.
2. 2021 figures restated to rectify an accounting error. 2021 landlord consumption figures included some tenant energy use and were restated to rectify this.
Previous total energy consumed was stated at 1,145,879 kWh, Scope 1 emissions were stated at 0 tCO
2
e and Scope 2 emissions were stated at 1,114 tCO
2
e.
3. Data in the process of being obtained for disclosure in 2023.
4. Data covering 84% of tenants’ energy consumption and corresponding GHG emissions by total floor area.
5. Total Scope 1 and 2 emissions reported using location-based method.
Energy performance and energy efficiency measures
Landlord energy consumption has increased substantially in 2022
dueto the addition of assets with operational control. Considering
that over 99% of the energy consumption of our assets is controlled
by ourtenants, the Company has actively engaged with tenants to
reduce their GHG emissions through: updating sustainability
action plans, exploring the feasibility of solar photovoltaic (“PV”)
panels, maintaining Energy Performance Certificate (“EPC”) schedule
and communicated actions, ensuring compliance with Minimum
Energy Efficiency Standards (“MEES”) regulations, and implementing
green lease clauses.
Tritax Big Box REIT plc Annual Report 2022 37
STRATEGIC REPORT
Nature and wellbeing
With biodiversity in decline, we have a responsibility to mitigate our
impact and actively enhance biodiversity, to deliver a net gain. Our
biodiversity aims cover all of the portfolio and many of our standing
investments already have biodiversity features, such as green areas
for recreation and habitats supporting native and locally important
species. For assets with no biodiversity features, our initiatives include
creating Biodiversity Action Plans, with actions such as rewilding.
We also promote local volunteering opportunities to our customers,
which include practical activities such as planting trees, sowing
meadows and establishing wildlife ponds, with a focus on health
and fitness.
The table below sets out our progress against our 2023 targets for
nature and wellbeing:
ESG goals 2023 target Actions in 2022 Progress against target
Nature and wellbeing
Enhance biodiversity and
wellbeing on our land
Pilot 15% biodiversity net gain on
new developments.
We are using specialist consultants to measure our
biodiversity performance across 10 projects.
On track
Implement biodiversity
enhancements on 11 assets with
no measures in place.
Implemented biodiversity-related initiatives across
more than 11 assets, with further enhancement
options being considered across the entire portfolio.
On track
Support the local environment for
the communities near our assets.
Social impact is being delivered through our
development programme and engagements with
the communities surrounding our assets.
On track
Our assets are well located for local employment opportunities,
meaning our investments in standing assets and developments
create jobs and positive social impact across a wide supply chain.
These jobs often provide skills training, improving the economic
opportunities for those employed.
We have a social value charter, which sets out our ambition to
create socioeconomic value in our development of new logistics
assets, and we actively engage with our communities throughout the
development process.
Our Community Benefit Fund is committed to providing 10 pence
per sq ft of new logistics space delivered. This complements our
charity partnership with Schoolreaders, where we fund volunteers to
provide reading support for schoolchildren in the communities around
our assets.
The table below sets out our progress against our 2023 targets for
social value:
ESG goals 2023 target Actions in 2022 Progress against target
Social value
Create a positive
socioeconomic impact
through our investment
Measure social value to demonstrate
impact of our investment.
Released a white paper on measuring social value
in the logistics sector, along with Prologis and the
Social Value Portal.
Continuing to measure the social value and impact
associated with our development programme.
The Company organised its first Women’s
Networking Lunch event during which The
Mothership, an all-female rowing crew sponsored
by the Company, shared their experiences from
the 3,000-mile Talisker Whiskey Atlantic Challenge.
Achieved
Support apprenticeships and
employability in construction.
Continuing to work with our supply chains through
the development programme to support local
apprenticeships and employment.
On track
Support Schoolreaders until 2023,
to increase childhood literacy in
the communities where our assets
are located.
Extended the agreement for the support of the
Schoolreaders charity until 2026.
Achieved
Invest in our communities through
the Community Benefit Fund.
Community investment made into local primary
schools surrounding our development in Bicester.
On track
Social value
Tritax Big Box REIT plc Annual Report 202238
ESG continued
One of our key priorities for 2022 has been establishing a clear baseline from which to launch our updated ESG targets. These targets reflect
our ambition for the ESG performance of the Company. These encompass the full range of factors we are considering; most notable within
these targets is an enhanced commitment to achieve net zero carbon across all aspects of our business by 2040, rather than our previously
stated 2050 target. These targets will be reviewed annually against our KPIs and updated as required.
Theme 2023 target 2023 KPIs
Sustainable
buildings
•
100% of all asset due diligence uses Tritax ESG due
diligence framework
•
% utilisation of enhanced ESG due diligence framework
•
Produce and implement low-carbon baseline
development specification on all new projects
•
Production and % utilisation of low-carbon specification
•
% circularity certified materials
•
% projects undertaking a whole life performance analysis
Climate and
carbon
•
Produce and disclose updated net zero
carbon pathways
•
Scope 1 and Scope 2 – 2025
•
Scope 3 (construction) – 2030
•
Scope 3 (remainder of material emissions) – 2040
•
Annual review of pathway and emissions
•
% carbon risk incorporation into each asset management plan
•
1.5°C Paris decarbonisation pathway alignment
•
Science Based Targets initiative (“SBTi”) alignment (or
equivalent)
•
Integrate physical climate risk mitigation across
asset lifecycle
•
% climate risk incorporation into each asset management plan
•
Portfolio TCFD alignment
Nature and
wellbeing
•
Year-on-year annual increase in biodiversity for
standing assets
•
% increase in biodiversity against 2022 baseline
•
Year-on-year increased provision of wellbeing
enhancements to developments and standing assets
•
% increase in provision against 2022 baseline
Social value
•
Publish community investment structure
•
Further integrate ESG criteria into supply chain
procurement processes – upstream and downstream
•
Set-up and operation of community investment structure
•
% utilisation of due diligence framework for suppliers
•
Continue support for key fund charity
•
Level of financial and non-financial contributions
2023 ESG
targets and KPIs
Tritax Big Box REIT plc Annual Report 2022 39
STRATEGIC REPORT
Manager’s Report
Strong operational
performance
“ We have achieved a record level
of development lettings, adding
£23.3 million to our contracted
annual rent and supplementing
our portfolio with brand new
buildings let to a range of
Colin Godfrey
CEO for Tritax Big Box REIT plc
Strategy
Our strategy aligns the Group to the market drivers, while
ensuring it meets its wider responsibilities and carefully
manages risk.
The strategy has three interlinked components that aim to deliver
sustainable income and capital growth, resulting in attractive
performance through the economic cycle that underpins a
predictable and progressive dividend:
1
High-quality assets attracting world-leading customers –
delivering high-quality, resilient and growing income.
2
Direct and active management – protecting, adding and
realising value.
3
Insight driven development and innovation – creating value and
capturing occupier demand.
ESG is intrinsic to each of these elements. The Group’s key ESG
themes are:
• sustainable buildings – ensuring existing assets, acquisitions
and developments align with our ESG objectives;
• climate and carbon – achieving net zero carbon for all direct
(Scope 1 and 2) and indirect (Scope 3) activities;
• nature and wellbeing – enhancing biodiversity and wellbeing
across the portfolio; and
• social value – creating value and positive impact for people
and communities.
Information on how we implemented the strategy during 2022 is
set out in the following sections.
40 Tritax Big Box REIT plc Annual Report 2022
1
High-quality assets attracting
world-leading customers
Through our continuous focus on quality, we have assembled what
we believe to be one of the best portfolios of any quoted logistics real
estate business in Europe. The portfolio’s quality is reflected in its
long leases with embedded income growth, high-quality customers,
desirable locations, and modern flexible buildings in a range of sizes
and formats, with strong ESG credentials.
The portfolio has been constructed to generate attractive long-term
income through the economic cycle. The quality of our assets and
customer base enabled us to collect 100% of rent again this year, an
area where we outperformed during the pandemic, and we continue
our track record of never having a void on lease expiry.
Our priorities for 2022
We set the following priorities for 2022 in relation to the
investmentportfolio:
Priority Progress
Rotate out of assets which no
longer fit the shape and balance of
the portfolio and which are
expected to deliver lower-quartile
total returns.
Disruption in the investment market
meant we decided to pause on our
planned disposals in H2 2022. We
exchanged on the disposal of two,
non-core assets at Littlebrook for
£25 million. Post the period end we
exchanged on the disposal of a
portfolio of assets with a gross
consideration of £125 million.
Maintain our disciplined approach
to acquisitions, ensuring they
complement the portfolio and
have potential for superior
risk-adjusted returns relative to the
investment pillar; these may
include opportunities to add value
through active management or
investments considered mispriced.
Maintained discipline and did not
acquire any assets during 2022,
reflecting superior opportunities
for capital and income returns
through allocating capital to the
development programme and the
desire to maintain balance sheet
strength and corporate liquidity.
Maintain the balance between
low-risk foundation income and
higher rental growth potential.
Foundation assets continue to
comprise the majority of the
investment portfolio (63.1% of
GAV), with Value Add assets
(29.4% of GAV) presenting
appropriate exposure to growth
opportunities. This balance is
further considered against our
development activity which is
subject to limits set within our
Investment Policy.
Portfolio composition supports resilience and growth
Our overall portfolio comprises the investment portfolio, which
are assets with either a lease or agreement for lease in place, and
the development portfolio, which generates new assets for us
through pre-let and speculative developments (see insight driven
development and innovation below).
At the year end, the total portfolio was valued at £5.06 billion
(31December 2021: £5.48 billion), a reduction of 7.7% over the year,
reflecting the portfolio equivalent yield softening over the year from
4.1% to 5.3%, which more than offset the impact of development
gains, asset management and ERV growth.
As at 31 December 2022, the investment portfolio had increased to
79 assets (31 December 2021: 62 assets), as we leased or practically
completed new buildings from our development activities. The investment
portfolio’s gross lettable area was 37.5 million sq ft at the year end
(31 December 2021: 33.7 million sq ft).
Investment portfolio: 92.5% of GAV Development portfolio: 7.5% of GAV
Foundation: 63.1% Developments and land: 7.5%
Value Add: 29.4%
Foundation assets are typically new or modern buildings in prime
locations, let on long leases to customers with excellent covenant
strength. They provide us with long-term and resilient income through
the economic cycle. Value Add assets present opportunities to grow
income and capital values through active asset management or have
customers with the potential to grow and improve in covenant quality.
They typically have shorter remaining lease terms and therefore
nearer-term opportunity to capture market rental reversion.
Secure customer base underpins income generation
The Group has a diversified base of 51 customers (2021: 44),
including some of the biggest and most important companies in
the world, with 74.5% being part of groups listed on exchanges
such as the S&P 500, FTSE 100 and DAX 30. We have minimal
exposure to small and medium sized enterprises (“SMEs”).
Weconduct ongoing due diligence on our customers’ covenant
strength, as discussed in the asset management section below.
Our buildings often form the backbone of our customers’ UK
supply chains, and they frequently invest heavily in technology
and automation within the buildings. The structural importance
of our buildings to our customers’ supply chains further
increases the income resilience of our portfolio.
The portfolio reported 2.1% vacancy as at 31 December 2022
(2021: 0%), reflecting recently completed development buildings
that were unlet at the year end. When including post-year-end
lettings, the pro-forma vacancy rate reduces to 1.1% within the
portfolio; this vacancy offers opportunity for further short-term
income growth following letting.
The table below lists the Group’s top 10 customers:
Customer % of contracted annual rent
Amazon 14.5%
Morrisons 5.3%
Tesco 4.7%
Iron Mountain 4.5%
Howdens 4.0%
B&Q 3.9%
The Co-Operative Group 3.7%
Ocado 3.4%
Marks & Spencer 3.4%
Argos 3.2%
Long duration, full repairing and insuring leases minimise capex
and enhance income security
At the year end, the investment portfolio’s WAULT was 12.6 years
(31December 2021: 13.0 years), with the Foundation assets having
aWAULT of 15.9 years (31 December 2021: 15.1 years).
Of total rents:
•
35.2% is generated by leases with 15 or more years to run; and
•
20.1% comes from leases expiring in the next five years, providing
near-term opportunities to capture the growing reversion within
theportfolio.
Manager’s Report continued
Tritax Big Box REIT plc Annual Report 2022 41
STRATEGIC REPORT
All but one of our properties is single let. Our leases are full repairing
and insuring (equivalent to triple net leases in the United States). This
means our customers are responsible for property maintenance and
dilapidations. This minimises our irrecoverable property costs, which
in 2022 totalled £0.2 million, and is reflected in our strong gross to
net rental income conversion ratio of 99.9% in the year.
Leases provide protection from inflation and an effective
minimum level of rental growth
All our leases benefit from upward-only rent reviews, with 18.5% of
our rents reviewed annually and 81.5% reviewed every five years (on
a staggered basis such that there are five-yearly rent reviews taking
place every year). The table below shows the composition of rent
review types across the portfolio, which balances the certainty offered
by fixed and inflation linked leases with the ability to capture market
rental growth from open market and hybrid reviews. Through our
development activities we have successfully increased the weighting of
the investment portfolio’s exposure to open market rent reviews from
36.7% to 39.0%.
Rent review type
% of rent roll at
31 December
2021
% of rent roll at
31 December
2022
RPI/CPI linked 53.6% 52.3%
Open market 28.5% 30.5%
Fixed 9.7% 8.7%
Hybrid (higher of inflation/open market) 8.2% 8.5%
35% of the portfolio was subject to rent reviews in 2022 with a further
19% in 2023. Progress with rent reviews in 2022 is discussed in the
direct and active management section below.
Approximately 55.7% of the rent roll has either a fixed or minimum
increase at rent review. This creates an effective minimum annualised
rental growth of 1.7% across this element of the portfolio. Our inflation
linked reviews typically have cap and collar arrangements, at an
average range of 1.6% to 3.5% respectively. While this provides
an element of certainty on the minimum rental increase within the
portfolio, we aim to supplement this via the capture of strong market
rental growth through uncapped open market and hybrid rent reviews,
alongside other forms of active asset management including the
opportunity to capture market rental reversion following lease expiry.
Increasing ERVs provide future rental growth opportunities
At each valuation date, the valuers independently assess the
investment portfolio’s estimated rental value (“ERV”), which is the
amount of rent that the properties would be expected to secure
through an open market letting at that date. As at 31 December 2022,
our portfolio ERV was £266.8 million (31 December 2021: £217.1
million). This is £42.7 million (19.1%) above the FY 2022 contracted rent
position and a 9.2% like-for-like ERV increase over the year. We have
opportunities to capture this reversionary potential through regular rent
reviews, lease expiries or lease regears.
Due to the balance between open market and inflation linked rent
reviews, and the growing rental reversion within the investment
portfolio, we remain positive about our ability to continue to deliver
attractive, long-term income growth, particularly when allied with the
strong rental growth we are capturing through our new developments
and the ability to apply this positive new letting evidence in enhancing
the open market rent review outcomes of our investment portfolio.
As of 31 December 2022, 98% of our investment portfolio has an EPC
rating of C or above, and all assets which are certified by BREEAM
(49%) have a rating of Very Good or above.
Of our development assets which completed during the financial year,
100% received an EPC rating of A, they all targeted a BREEAM Very
Good rating (final certification pending) and were built to be net zero
carbon in construction in accordance with the UK Green Building
Council’s (“UK GBC”) framework definition.
Our priorities for 2023
Our priorities for the investment portfolio for 2023 are to continue to:
•
closely monitor customers’ credit quality in the face of a potential
UK recession;
•
evaluate the weighting of the portfolio between Foundation and
Value Add to inform our approach to active management of the
portfolio; and
•
evaluate both the geographic composition and range of building
sizes within the portfolio to maintain an appropriate balance
between rental growth, covenant strength and risk.
Tritax Big Box REIT plc Annual Report 202242
Manager’s Report continued
2
Direct and active management
Our priorities for 2022
We set the following priorities for 2022 in relation to asset management:
Priority Progress
Complete all outstanding
open market rent reviews.
Completed three of the four open market
rent reviews outstanding from 2021. Six
open market rent reviews were in
negotiation at the year end.
Complete further lease
extensions, incorporating
ESG initiatives and green
lease clauses.
Extended three leases – two by 10 years,
and one to a 15-year lease term. All three
leases included green lease clauses.
Agree terms to extend a
property or alternatively
secure an additional
pre-let for our
development portfolio
with a current customer.
In discussions with six existing customers
about taking additional properties from
the development portfolio, as well as
extensions to existing assets.
Understanding and supporting customers
Being close to our customers maximises our ability to identify
opportunities to support their logistics needs. We undertake supply
chain research on selected customers, which gives us detailed
insights into their entire logistics network, the role of our assets
within it and their future business needs. This means we can have
meaningful conversations about supporting them through our
developments and active asset management, as well as informing
our investment decisions and helping us work in partnership with
customers on ESG objectives.
We conduct ongoing covenant analysis of our customers, combining
publicly available and third-party information with our own insights.
Following the Russian invasion of Ukraine, we enhanced our monitoring
of the sanctions lists, as part of these reviews. This work has not
identified any direct concerns relating to entities covered by sanctions.
Realising value and recycling capital through disposals
We constantly review and evaluate the Group’s portfolio, to identify
assets where:
1) we have completed our asset management plans and
maximised value;
2) the asset’s investment characteristics no longer fit within the
portfolio profile; or
3) the asset’s relative future performance may be below others in
the portfolio, perhaps because there is less opportunity or more
risk attached to future performance.
When considering asset disposals, we take account of criteria such as
age, location and ESG credentials, income and capital value growth
prospects, conditions in the investment market, and near-term
opportunities to reinvest in income-producing acquisitions and
developments to maintain earnings and dividend progression.
Thisactivity helps to maintain an appropriate portfolio composition
toachieve our strategic objectives.
Our approach to disposals evolved over the course of 2022, influenced
by market conditions. Initially, our expectation was that divestments
were likely to take place towards the end of the year and into the early
part of 2023. This would correspond with accelerated development
activity in 2022 and our expectation that these new development
assets will become income producing through 2023. The rapid
deterioration in the investment market, combined with the strength
of our balance sheet, meant significant disposals were not in
Shareholders’ interests in the second half of 2022. Wewere able to
exchange contracts to sell two vacant multi-let assets at Littlebrook in
December 2022 for £25 million, with completion occurring post the year
end. Subsequent to the year end, we also exchanged on the disposal
of three assets, to an institutional buyer, for a gross consideration of
£125 million in line with 31 December 2022 valuations.
Investment acquisitions complementing returns
Given its attractive returns, over the past 12 months we have focused
our capital deployment on development. However, we continue
to evaluate acquisitions in the market with a focus on assets that
offer opportunities for near-term reversion capture and greater
exposure to open market reviews across a broad range of building
sizes. Given the changing dynamics within the investment market
we are beginning to see increasing opportunities and so could be
more active in the investment market during 2023 than we were
last year. Investment acquisitions give us further opportunities to
tailor the overall composition of our investment portfolio to meet our
strategicobjectives.
“ Being close to our customers
maximises our ability to identify
opportunities to support their
Tritax Big Box REIT plc Annual Report 2022 43
STRATEGIC REPORT
Growing and lengthening income
During the year we agreed 20 rent reviews, an increase for one lease
to a 15-year lease term certain, and two 10-year lease renewals,
which in total resulted in a £5.1 million increase in annual contracted
passing rent, an increase of 7.6%. Three of these rent reviews were
outstanding from 2021. Overall, 33% of the portfolio benefited from
a review. In total, we reported a 3.6% increase in EPRA like-for-like
rental growth in the year.
The table below shows a breakdown of these reviews by type:
Number
% of
contracted
rent
Growth in
passing rent
Index linked 12 21.7% 5.7%
Open market/hybrid 5 6.3% 12.9%
Fixed 3 5.0% 5.5%
Lease review sub-total 20 33.0% 7.0%
Lease renewal 1 1.2% 23.1%
Total 21 34.2% 7.6%
During 2022, 23 leases representing 35% of our portfolio rent
roll were due for rent review. Of these reviews, we settled 17,
representing 28% of the 35% expected. The six unsettled open
market reviews along with one from 2021, representing 7% of the
portfolio, are expected to be settled during 2023.
Lease renewal negotiations are currently ongoing with three
customers whose leases expire in 2023 and 2024. We continue
tonegotiate a wide range of other lease proposals with customers,
including new mezzanine floors and ESG initiatives (see below).
Delivering ESG performance through integration,
engagement and active management
Our ESG strategy and performance criteria fundamentally underpin
our investment philosophy and approach to active management.
Delivering ESG performance in partnership with customers is a
key part of our active asset management. Through these ESG
initiatives, we can increase income and capital values, prolong
an asset’s life, improve its liquidity and reduce obsolescence
risk. Customers can also reduce their operating costs and make
progress towards their ESG targets, such as net zero.
ESG is embedded across the asset lifecycle and our supply
chain. Our investment decisions are made in line with our ESG
targets and KPIs, using both data and evidence. This approach
is achieved through due diligence, development, asset and
supply chain management and asset disposals. Our ESG
performance is validated and evidenced using third-party global
frameworks and benchmarks such as GRESB, Sustainalytics,
MSCI, EPRA and BREEAM. This robust approach to governance
allows us to maximise our environmental and social impact.
Our active management priorities for 2023 are to:
•
settle the outstanding open market rent reviews;
•
continue to progress lease extension and renewal discussions
withcustomers;
•
in addition to the disposal of three assets exchanged subsequent
to the year end, make further selective asset disposals, in line with
our annual target of £100 million to £200 million;
•
continue to evaluate opportunities for acquisitions; and
•
work with customers on further initiatives to enhance the assets,
including their ESG credentials.
3
Insight driven development
We control the UK’s largest land portfolio for logistics development,
capable of delivering approximately 39.7 million sq ft of new logistics
space, which has the potential to more than double the size of our
business. Most of the land portfolio is held through long-term option
agreements, which include hard-coded discounts to prevailing land
prices upon land drawdown. Controlling land through options is
capital efficient and gives us the flexibility to align the pace, scale
and location of our development activity to market demand. In other
words, we typically buy in land when risk is reduced through receipt
of planning and when we are in a position to add value. We commit
to construction on a building-by-building basis and construction
times are short, typically 9–12 months. This means we have flexibility
with our capital commitments, allowing for good visibility over our
exposure to changes in market conditions during the construction
phase given these short timescales.
The land portfolio provides us with an important competitive advantage.
It has taken over a decade to assemble and nurture to a point where it
is capable of delivering significant value to our business and its scale,
diversity and strategically important locations would be extremely
difficult to replicate. The consented land within the portfolio also gives
us an edge over competitors who may be constrained by uncertain
planning timescales. We actively manage the land portfolio to ensure
that land that is utilised and developed is replaced from time to time
with new sites.
Our team has a long, proven track record of successfully obtaining
planning consents and delivering new buildings. This provides a
pipeline of new, quality assets, across a range of building sizes for
our investment portfolio, and is a key driver of returns, delivering
a target yield on cost of 6–8% through a blend of pre-let and
speculative developments. The development pipeline is diversified
geographically and provides a high degree of flexibility in terms of
size and location, enabling us to match our customers’ requirements
for urban or last mile assets all the way through to “mega-boxes”.
Aswe implement our strategy, the balance of the investment portfolio
will gradually evolve to reflect this broader mix of building sizes and
attractive blend of lease profiles.
Our commitment to sustainable development encompasses our
standards for construction, which includes achieving a minimum
of BREEAM Very Good, an EPC A grade and consideration for
achieving our net zero carbon pathways. We continue to look for
ways to improve our performance and reduce embodied carbon
in our new buildings. As part of this, we have enhanced the
collection and verification of data around carbon performance in
our developments, to give us a clear baseline to work from and set
effective targets.
Tritax Big Box REIT plc Annual Report 202244
Manager’s Report continued
Case study – a customer-centric
approach to development
Iron Mountain is the global leader for storage and information
management services. Over the last 12 months, Iron Mountain
has partnered with us to support their ongoing UK growth
strategy. We are delivering a campus solution at Symmetry Park,
Rugby, which will provide approximately 1.0 million sq ft across
four units along with a further 0.3 million sq ft unit at Symmetry
Park, Kettering. Iron Mountain took occupation of their new
Kettering DC in February and the first two units at Rugby are due
to complete construction in the summer of 2023. All leases are
15 years in length with five-yearly open market rent reviews. The
ESG credentials of the Tritax developments both in construction
and during operation has been a key focus for Iron Mountain to
support their objective to achieve net zero emissions by 2040.
Insight driven development and innovation continued
Our priorities for 2022
We set the following priorities for 2022 in relation to our
developmentprogramme:
Priority Progress
Commence construction of
3–4 million sq ft of high-performing,
sustainable buildings.
Started construction of 2.9 million
sq ft, moderating our activity in
the second half of the year in
response to changes in the
investment market.
Continue to identify pre-lets
andoccupiers to lease the
speculativeprogramme.
Achieved lettings on 3.1 million sq ft
of developments, of which 53%
was pre-let, adding £23.3 million
or 11.9% to contracted annual
rent. 82% of constructions starts
commenced in 2022 have been
successfully let.
Position the development portfolio
to deliver 2–3 million sq ft of
logistics space over the longer
term, but be ready to respond
tohigher levels of demand in
thenear term.
Continuing to secure additional
planning consents and transitioning
land to a “credible delivery state”
in support of our 2–3 million sq ft
long-term annual run rate.
Secure further planning consents
to ensure the targeted level of
development can be maintained.
Secured planning on 1.6 million
sq ft across four sites in 2022.
Secure further options on land, to
replenish the overall development
land portfolio.
Continued to add to the land
portfolio, securing options over a
further 201 acres, capable of
delivering over 4 million sq ft on
completion of land assembly.
Significant development activity in 2022
We made excellent progress with our development programme
during the year, delivering:
•
3.1 million sq ft of development lettings, increasing contracted
annual rent by £23.3 million or 11.9%;
•
2.9 million sq ft of construction starts, of which 82% has either
been pre-let or let during construction comprising:
•
1.6 million sq ft of developments that are pre-let build to suits,
adding £11.4 million to contracted annual rent; and
•
1.3 million sq ft of speculative developments, with the potential
to add £12 million to contracted annual rent, 61% of which has
been let during construction (or sold in the case of the MLI units
at Littlebrook); and
•
new planning consents for a further 1.6 million sq ft, across
four sites.
Tritax Big Box REIT plc Annual Report 2022 45
STRATEGIC REPORT
Development lettings enhancing investment portfolio
Development lettings secured in 2022 have continued to enhance
our investment portfolio, providing brand new, highly sustainable
buildings in a range of sizes, let to a diverse range of strong customers
on various lease lengths and structures.
The 3.1 million sq ft of development lettings secured:
•
delivered an average new lease term of 14.7 years;
•
48% represented open market rent reviews, 10% hybrid (offering
the higher of open market or inflation) and 42% inflation linked (with
average floor and cap of 2.1% and 4.4% respectively);
•
250,000 sq ft average building size with an overall range of 75,000
sq ft to 552,000 sq ft; and
•
geographically diversified across key strategic distribution locations
throughout the UK.
The development pipeline comprises the:
•
current development pipeline of buildings under construction,
which totals 3.0 million sq ft, with 2.6 million sq ft (86%) pre-let or
let during construction;
•
near-term development pipeline, with the potential to deliver
around 10.8 million sq ft within the next 36 months, with the
potential to add £87.6 million to contracted annual rent; and
•
future development pipeline (approximately 1,340 net acres),
capable of accommodating 28.4 million sq ft of development over
the longer term.
“ Development lettings secured
our investment portfolio,
providing brand new, highly
sustainable buildings in a range
of sizes, let to a diverse selection
of strong customers on various
A carefully considered and low-risk approach to development
Development is an attractive way to significantly enhance
our returns, while carefully managing the associated risks. Our
Investment Policy limits land and development exposure to 15% of
GAV, including a maximum exposure to speculative development
of 5% of GAV. At the year end:
•
land and development exposure was 7.5% of GAV; and
•
speculative exposure (based on aggregated costs) was 1.1%.
Below we outline how we manage the risks associated with our
development activities:
a) The role of speculative development
We favour pre-let development but will consider speculative
development, as it provides a range of benefits, including:
•
meeting the needs of customers with near-term occupational
requirements, through a geographically diverse range
of product;
•
opening up new sites and establishing them in the marketplace
with prospective customers and agents; and
•
providing faster delivery of rental income from the point
of securing a letting as much of the construction period is
already past.
As we hold options over the majority of our land portfolio, we have
the flexibility to adapt our speculative development programme
to changing market conditions. Our approach is considered and
analytical and we only develop speculatively in locations where:
•
the supply of competing buildings is low;
•
occupational demand is high; and
•
we have identified at least one occupier requiring the size of
building we intend to construct in that location.
Our speculative development performance track record is strong.
In 2022, 61% of our speculative development starts were let ahead
of practical completion and at rental levels in excess of appraisals.
b) Managing build costs
Having come through a period of rapidly increasing build costs,
we have seen a more stable cost environment in recent months
and significantly improved availability of key materials such as steel
and cladding. We continue to have excellent relationships with key
suppliers and the scale of our development programme means we
have considerable buying power.
Looking to 2023, it is likely that some developers will delay
developments or reduce their programmes because of economic
conditions, which may further improve the cost and availability of
both materials and contracting services.
During the period of tight material supply and rapidly rising
costs, we worked collaboratively with individual contractors on a
negotiated basis to ensure we could secure materials and labour
in a timely fashion and therefore have firmer programme delivery
timescales. With the improvement in material supplies and easing
pressures on pricing, we are now reverting to contractor tenders
across our projects to ensure best pricing is secured on our
fixed-price build contracts.
Consequently, we continue to maintain our guidance of delivering a
6–8% yield on cost on our overall development programme.
c) Careful selection and monitoring of contractors
We closely monitor the financial strength of our contractors and
place our main building contracts with a panel of contractors
that are experienced in logistics warehousing and have robust
balance sheets.
Tritax Big Box REIT plc Annual Report 202246
Manager’s Report continued
Insight driven development and innovation continued
The UK’s largest land portfolio for logistics development
The Group’s land portfolio comprises:
•
sites that we own or where we are in the process of exercising options, with capacity for 3.8 million sq ft of development; and
•
sites we control through long-term option agreements, with capacity for a further 35.9 million sq ft.
We categorise our development portfolio based on the timing of opportunities:
1) Current development pipeline – assets that have received planning consent and are under construction. These assets are either pre-let or
speculative developments. The Group owns these sites.
2) Near-term development pipeline – sites with planning consent received or expected to be received in the near term, and where we aim to
begin construction in the next three years. The Group will own some of these sites, with others held under option pending planning consent.
3) Future development pipeline – longer-term land opportunities, which are principally held under option.
1) Current development pipeline – assets under construction to be delivered in next 12 months
As at 31 December 2022, the Group had the following assets in the current development pipeline, all of which were under construction.
Thetotal estimated cost to complete is £99.9 million.
Estimated costs to completion
Period
Contractual
Total H1 2023 H2 2023 H1 2024 Total sq ft rent/ERV
£m £m £m £m m £m
Current speculative development 9.7 9.4 0.3 — 0.4 4.7
Current let/pre-let development 90.2 45.6 44.6 — 2.6 18.9
Total 99.9 55.0 44.9 — 3.0 23.6
Of the current development pipeline of 3.0 million sq ft, 86%, representing £18.9 million of annual contracted rent has been pre-let or let
duringconstruction.
When negotiating new leases, we are increasingly looking to maximise our future income growth by incorporating hybrid rent reviews, where
rental increases are the higher of open market or inflation. If this is not possible, we currently favour open market rent reviews due to the
current balance across the portfolio. However, this remains under constant review, with the merits of different rent review types depending
oneconomic conditions, while we also look to ensure a balance of review types across the portfolio.
In addition, on certain pre-let developments, where there is a delay between signing an “agreement to lease” prior to construction start
(and sometimes receipt of detailed planning consent) and completion of the unit, we are looking where possible to incorporate a rent
review upon completion of the construction in order to capture any rental growth that has occurred in the market during the intervening
construction period.
2) Near-term development pipeline – construction expected to commence in next 12–36 months
At the year end, the near-term development pipeline consisted of land capable of accommodating 10.8 million sq ft and delivering £87.6million
of annual rent. Of this:
•
5.3 million sq ft relates to land with detailed or outline planning consent; and
•
2.3 million sq ft relates to sites where we have submitted a planning application.
As at 31 December 2022, the Group was awaiting decisions on planning applications totalling 4.9 million sq ft on previously unconsented land.
The table below presents the near-term development pipeline at the year end. Movements in the figures are driven by construction starting
(which will move space to the current development pipeline), or changes in our view on likely timing starts, resulting in movements between
thetwo categories below. All schemes are expected to be delivered within our 6–8% yield on cost guidance:
Current book
value
Estimated cost
to completion ERV
Total sq ft £m £m £m
Near-term starts in 2023 2.3m 47.3 244.9 18.2
Near-term starts in the following 12–24 months 8.5m 109.2 932.5 69.4
10.8m 156.5 1,177.4 87.6
Tritax Big Box REIT plc Annual Report 2022 47
STRATEGIC REPORT
3) Future development pipeline – construction expected to start
after 36 months
The future development pipeline has sites at various stages of the
planning process, with multiple sites being currently promoted
through local plans. We look to replenish the pipeline as we exercise
options and let buildings. At 31 December 2022, the future development
pipeline comprised approximately 1,340 net acres with the potential
to support up to 28.4 million sq ft of development.
The future development pipeline is predominantly controlled under
longer-term option agreements. Most option agreements contain
an extension clause, allowing the option expiry date to be extended
where necessary.
Development Management Agreements (“DMAs”)
Under a DMA, the Group typically manages the development of an
asset for a third-party funder, in return for a fee and/or profit share.
The Group will not typically own the asset and DMAs are therefore
not included in the Group’s portfolio value. DMAs can provide the
Group with an attractive but variable source of other operating
income for Shareholders, with no capital funding requirements.
Income from DMAs can vary over time. The treatment and impact
ofDMA income is discussed in the Financial Review.
Priorities for 2023
Our priorities for 2023 are to:
•
commence construction of between 2 to 3 million sq ft of new
developments while keeping a close eye on the macroeconomic
backdrop, within our yield on cost guidance of 6–8%;
•
secure a blend of pre-let and speculative lettings;
•
progress planning consents and ensure sufficient consented land
is in a credible delivery state to support our long-term development
activity, and aim to replenish land once developed; and
•
continue to develop our low-carbon baseline specification
and work towards embedded and whole life carbon
performance targets.
Tritax Big Box REIT plc Annual Report 202248
Financial Review
The Group delivered further growth in net rental income and
Adjusted earnings
1
, as we benefited from the successful delivery of
our strategy and continued like-for-like rental growth underpinned by
strong market fundamentals. The total dividend declared for the year
was 7.00 pence per share (2021: 6.70 pence), representing annual
growth of 4.5%. The decline in asset valuations across the market
in the second half of the year was stimulated by a short and sharp
adjustment to underlying interest rates – the Bank of England base
rate moved from 0.25% to 3.5% during the year, with property yields
increasing to accommodate a higher risk-free rate and higher cost
of capital for investors. This led to an overall reduction in EPRA Net
Tangible Assets per share of 19.0%, to 180.37 pence (2021: 222.60
pence) and a Total Accounting Return of -15.9% (2021: 30.5%).
Importantly, we have continued to drive our contracted rental income
through development and asset management, which has increased
by 14.5% over the year to £224.0 million (2021: £195.6 million). With
a lot of this increase in contracted income, but not yet passing, due
to a number of assets remaining under construction, this provides us
with confidence in the overall growth in our earnings through 2023
and 2024. In addition our portfolio rental reversion grew to 19.1%
or £42.7 million as at the year end, which includes 2.1% of recently
developed vacant space, and offers opportunity for further income
capture over the short to medium term.
We continue to exercise rigorous capital discipline and the balance
sheet remains strong. The LTV at the year end was 31.2% (31
December 2021: 23.5%), within our guidance range and well below
the maximum stipulated in our corporate banking covenants of 60%.
We also have significant borrowing headroom in our facilities, with
liquidity in excess of £500 million at year end. This will enable us
to continue to implement our development strategy and consider
asset acquisitions, alongside the careful recycling of assets
through disposal.
Our priorities for 2022
We set the following priorities for 2022 in relation to our
financialperformance:
Priority
Progress
Target further growth in both
earnings and net asset value,
and therefore provide attractive
Total Accounting Returns to
Shareholders.
Adjusted EPS
3
increased by 1.8%.
However, the reduction in asset
valuations in the second half of the
year resulted in a fall in net asset
value and Total Accounting Return.
Maintain a strong balance sheet
and loan to value within the
guidance of up to 35%.
We maintained a strong balance
sheet, within guidance, as our
loan to value at year end was
31.2%.
Increase capital expenditure
deployed into development,
witha 2022 target of
£350–400million.
Capital expenditure deployed was
£339 million.
Presentation of financial information
The financial information is prepared under IFRS. The Group’s
subsidiaries are consolidated at 100% and its interests in joint
ventures are equity accounted for.
The Board continues to see Adjusted EPS as the most relevant
measure when assessing dividend distributions. Adjusted EPS
1
is based on EPRA earnings per share with exclusion of items
considered to be exceptional, not in the ordinary course of business
or not supported by cash flows.
Financial results
Net rental income
Net rental income for the year increased by 11.6% to £206.0 million
(2021: £184.6 million). The growth was primarily the result of a full
year’s income recognised for both development completions in 2021
and the Avonmouth asset acquired in April 2021, alongside income
generated from development completions in 2022 and uplifts from
rent reviews. EPRA like-for-like rental growth was 3.6%, reflecting the
indexation inherent in many of the leases and the benefits of open
market rent reviews settled in the year. See Growing and lengthening
income on page 43 for further details.
At the year end, the contracted annual rent roll was £224.0 million
across 79 assets (31 December 2021: £195.6 million across 62 assets).
The passing rent at 31 December 2022 was £205.1 million (which
includes £6.3 million currently within a rent-free period), with the
difference reflecting those new lettings secured during the year on
assets which remain under construction, but which will complete
andtherefore support earnings growth through 2023 and into 2024.
1. Excluding additional Development Management Agreement income.
Delivering attractive and
sustainable performance
Frankie Whitehead
Chief Financial Officer for Tritax Big Box REIT plc
Tritax Big Box REIT plc Annual Report 2022 49
STRATEGIC REPORT
Administrative and other expenses
Administrative and other expenses, which includes all the operational
costs of running the Group, totalled £32.2 million (2021: £25.5 million).
The investment management fee for the year was £26.0 million
(2021: £20.7 million). The changes to the Investment Management
Agreement during the year (see below) reduced the fee scale from
1July 2022. The combination of the revised fee scale and the decline
in net asset value at the end of 2022 are expected to result in cost
savings for the Group in 2023.
The Group’s operating cost base remains low and transparent.
The EPRA Cost Ratio (including and excluding vacancy cost) for
the year was 15.7% (2021: 13.9%). The increase was due to greater
administrative costs as EPRA NTA grew through early 2022, while the
positive impact on gross rental income is yet to be fully recognised
due to a significant number of assets remaining under construction.
The pro-forma investment management fee for 2023 reduces to
£21.9 million based on the 2023 opening EPRA NTA, a pro forma
reduction in fee of 16.0%. When applying the same reduction in fee,
the pro-forma EPRA Cost Ratio would be 13.7%.
Investment Management Agreement
During the year, Shareholders approved certain key changes to
the Investment Management Agreement (“IMA”). These include a
reduction in the investment management fee scale and an extension
to the term of the IMA. The term extension, along with an expansion
of key person principles, gives the Group additional security in
relation to its main service provider, as well as supporting the
Manager in recruiting and retaining key people.
From 1 July 2022, the new investment fee scale is as follows:
EPRA NTA value Relevant percentage
Up to and including £2 billion 0.7%
Above £2 billion and up to
andincluding£3 billion 0.6%
Above £3 billion and up to
andincluding£3.5 billion 0.5%
Above £3.5 billion 0.4%
Details of the main amendments to the IMA are set out in the 2022
AGM Notice, which is available on the Group’s website.
Operating profit
Operating profit before changes in fair value and other adjustments
was £183.1 million (2021: £178.0 million).
The Group earns DMA income from managing developments for third
parties. DMA income is more variable than property rental income,
and we include it within Adjusted earnings as it is supported by cash
flows. The Group recognised £9.3 million of other operating income
from these agreements in the year (2021: £18.9 million). Excluding
DMA income in excess of our longer-term guidance of £4.0 million
per annum (like for like), operating profit before changes in fair value
and other adjustments increased by £14.8 million, or 9.1%.
Given the variability of DMA income, and the fact that this income
was significantly above our expected run rate in the prior year, we
have highlighted the impact on earnings within the profit and earnings
section below.
Share-based payment charge and contingent consideration
The acquisition of Tritax Symmetry resulted in senior members of the
Symmetry team becoming B and C Shareholders in Tritax Symmetry
Limited. Under IFRS, the structure of this transaction has led to the B
and C Shareholders’ value being split between:
i) contingent consideration, which is determined by certain
provisions under the Shareholder agreement between Tritax
Symmetry HoldCo and the Tritax Symmetry Management
Shareholders; and
ii) a share-based payment charge, which is the compensation the
B and C Shareholders will receive as a result of their economic
right to a share of the future performance of Tritax Symmetry
Development Assets.
During 2022, £1.9 million (2021: £5.5 million) was charged to the Group
Statement of Comprehensive Income in respect of share-based
payment charges.
Financing costs
Net financing costs for the year were £37.8 million (2021: £40.1million),
excluding the improvement in the fair value of interest rate derivatives
of £14.9 million (2021: £2.8 million improvement). The average cost of
debt at the year end was 2.57% (2021: 2.26%). SONIA rose by c.320
bps during the course of the year and while this affected the cost of
our variable rate debt, the impact was limited by the interest rate caps
we hold as part of our hedging policy (see below).
Alongside the average cost of debt increasing modestly and with the
average drawn debt during the year relatively consistent with that
of the prior year, the movement in net financing costs also reflects
an increase to £4.7 million (2021: £0.7 million) in interest expense
capitalised. As a policy, interest is only capitalised upon construction
commencement, and therefore due to the timing of development
starts in 2021 and due to the greater level of development activity this
year, the weighted average capital invested into construction activity
has increased significantly compared with 2021.
The interest cover ratio, being operating profit before changes in fair
value and other adjustments over net finance expense, was 4.8x for
the year (2021: 4.4x).
Tax
The Group has continued to comply with its obligations as a UK REIT
and is exempt from corporation tax on its property rental business.
A tax charge of £0.4 million arose on the DMA income in the year.
In2022, a reversal of a provision made against tax payable in 2021
of£2.0 million resulted in an overall credit of £1.6 million for the year.
Tritax Big Box REIT plc Annual Report 202250
Financial Review continued
Financial results continued
Profit and earnings
The loss before tax was significantly influenced by the movement
in property valuations (see below) and was a loss of £601.0 million
(2021: profit of £971.1 million). The calculation of earnings per share
(“EPS”) for 2022 was also affected by the issue of 147.1 million new
Ordinary Shares in September 2021, which increased the Company’s
weighted average number of shares in issue by 6.4%. Basic EPS
was therefore -32.08 pence (2021: 55.39 pence). Basic EPRA EPS,
which excludes the impact of fair value movements, was 7.92 pence
(2021:7.47 pence).
Adjusted EPS for 2022 was 7.79 pence (2021: 8.23 pence). The
calculation of Adjusted EPS can be found in note 13. When removing
DMA income in excess of the anticipated run rate, which we see as
our KPI most aligned to recurring earnings, Adjusted EPS grew 1.8%
to 7.51 pence (2021: 7.38 pence), which also reflects the increase in
average share count during the year. On an absolute basis, Adjusted
earnings excluding excess DMA income increased by 8.3% to
£140.3million (2021: £129.6 million) – see note 1 of Notes to the
EPRA and Other Key Performance Indicators below.
As noted above, the contracted annual rent of £224.0 million rests
9.2% above the passing rent at the year end. As the associated
developments reach practical completion, which will largely occur
by the end of Q3 2023, this additional rent will enhance gross rental
income. Alongside the rental reversion of 19.1% across the portfolio,
and the reduction to the investment management fee, we believe that
these factors will lead to an increase in earnings through FY 2023
and FY 2024.
Dividends
We aim to deliver an attractive and progressive dividend. Our policy
is for the first three quarterly dividends to each represent 25% of the
previous full year dividend. We then use the fourth-quarter dividend
to determine any progression and aim to achieve an overall pay-out
ratio in excess of 90% of Adjusted earnings. In line with this policy,
the Board has declared the following interim dividends in respect
of the year:
Amount In respect of
Declared per share three months to Paid/to be paid
4 May 2022 1.675p 31 March 2022 1 June 2022
28 July 2022 1.675p 30 June 2022 25 August 2022
11 October 2022 1.675p 30 September 2022 3 November 2022
1 March 2023 1.975p 31 December 2022 30 March 2023
The total dividend for the year was therefore 7.00 pence per share,
an increase of 4.5% on the 6.70 pence paid in respect of 2021.
Thepay-out ratio was 93% of Adjusted EPS.
Portfolio valuation
CBRE independently values the Group’s assets that are leased,
pre-leased or are under construction. These assets are recognised
in the Group Statement of Financial Position at fair value. Colliers
independently values all optioned land and owned land. Land options
and any other property assets are recognised at cost, with an annual
assessment of impairment required under IFRS.
The share of joint ventures relates to 50% interests in two sites at
Middlewich and Northampton, relating to land and land options.
These two sites are equity accounted for and appear as a single line
item in the Statement of Comprehensive Income and Statement of
Financial Position.
The total portfolio value at 31 December 2022 was £5.06 billion,
including the Group’s share of joint ventures:
31 December 2022 31 December 2021
£m £m
Investment properties 4,847.3 5,249.1
Other property assets 2.3 4.0
Land options (at cost) 157.4 201.5
Share of joint ventures 27.2 25.6
Held for sale 25.1 —
Portfolio value 5,059.3 5,480.2
The loss recognised on revaluation of the Group’s investment
properties was £759.5 million (2021: £840.9 million gain). The main
driver of this movement was an approximate 120 bps increase in
the portfolio equivalent yield during the second half of the year, to
5.3% (2021: 4.1%), in response to rising interest rates and a higher
inflationary environment across the UK economy. The annual like-for-like
reduction across the investment assets within the portfolio was -15.2%;
however, this was partially offset by the benefits of our continued
progress with the development programme, generating an overall
portfolio capital value deficit of -13.1%.
Capital expenditure
Capital expenditure for 2022 was £339 million, across 2.9 million sq ft
of construction starts. This compares with our guidance of £350–400
million for the year, based on an expected range of 3–4 million sq ft
of construction starts. Due to the heightened market volatility through
H2 2022, we were more cautious with our approach towards capital
deployment during this period.
Embedded value within land options
Under IFRS, land options are recognised at cost and subject to
impairment review. As at 31 December 2022, the Group’s investment
in land options totalled £157.4 million (31 December 2021: £201.5 million)
with £57.1 million being transferred to investment property during the
year as certain options were exercised.
As the land under option approaches the point of receiving planning
consent, any associated risk should reduce and the fair value should
increase. When calculating its EPRA NTA, the Group therefore makes
a fair value mark-to-market adjustment for land options. Attheperiod end,
1. Excluding exceptional development income.
Tritax Big Box REIT plc Annual Report 2022 51
STRATEGIC REPORT
the fair value of land options was £20.4 million greater (31December
2021: £66.0 million greater) than costs expended to date. This movement
in the fair value of the land options in the year is due to the adverse
market conditions, although this impact is significantly lower than
would be experienced had we owned this land outright.
Net assets
The EPRA NTA per share at 31 December 2022 fell to 180.37 pence
(31 December 2021: 222.60 pence), as a result of the reduction in the
property portfolio valuation, as described above.
The Total Accounting Return for the year, which is the change in
EPRA NTA plus dividends paid, was -15.9% (2021: 30.5%).
Debt capital
At 31 December 2022, the Group had the following borrowings:
Lender Maturity
Loan
commitment
£m
Amount drawn
at 31 December
2022
£m
Loan notes
2.625% Bonds 2026 Dec 2026 250.0 249.6
2.86% Loan Notes 2028 Feb 2028 250.0 250.0
2.98% Loan Notes 2030 Feb 2030 150.0 150.0
3.125% Bonds 2031 Dec 2031 250.0 247.8
1.5% Green Bonds 2033 Nov 2033 250.0 246.8
Bank borrowings
RCF (syndicate of eight banks) Dec 2024 450.0 164.0
RCF (syndicate of seven banks) Jun 2026 300.0 103.0
Helaba Jul 2028 50.9 50.9
PGIM Real Estate Finance Mar 2027 90.0 90.0
Canada Life Apr 2029 72.0 72.0
Total 2,112.9 1,624.1
During the first half of the year, the Group extended the facility with
Helaba by three years to a July 2028 maturity, while JP Morgan
replaced HSBC in the Group’s RCF syndicates, aligning the maturities
of its respective holdings with the maturity of the remainder of the
facilities. In December 2022, the Group agreed increases of £100 million
to each of its RCF commitments, with the facilities now standing at
£450 million and £300 million respectively. The terms of the RCFs
were unchanged, with the full commitments maturing in December
2024 and June 2026 respectively. The Group ended the year with
total liquidity available in excess of £500 million.
Interest rates and hedging
Of the Group’s debt commitments, 62% is at fixed interest rates.
For its variable rate debt, the Group’s hedging strategy is to use
interest rate caps which run coterminous with its respective floating
rate facilities. These protect the Group from significant increases in
interest rates.
Combined with the fixed-rate debt, the Group’s derivative instruments
hedged 99.0% of its drawn debt as at the year end. The cost of debt
as at 31 December 2022 was 2.57% (31 December 2021: 2.26%).
Debt maturity
At 31 December 2022, the Group’s debt had an average maturity
of 5.4 years (31 December 2021: 6.5 years), with its earliest next
maturity requiring refinancing due in approximately two years and
thefarthest maturity falling due in more than 10 years.
Loan to value (“LTV”)
The Group has a conservative leverage policy, with a medium-term LTV
target of 30–35%. At the year end, the LTV was 31.2% (31December
2021: 23.5%), reflecting both the increase in level of debt drawn at the
year end and the lower valuation of the Group’s assets.
Subsequent to the year end, the Company exchanged on the sale of
three assets for a gross consideration of £125 million. When including
the proceeds from this disposal and the completion of the Littlebrook
disposal, the pro-forma balance sheet LTV reduces to 29.0%.
Net debt and operating cash flow
Net debt at the year end was £1,576.4 million, comprising
£1,624.0million of gross debt less £47.6 million of cash
(31December2021: £1,356.3million gross debt, £71.1 million cash).
Net operating cash flow plus licence fees received was £177.4 million
for the year (2021: £196.1 million).
Tritax Big Box REIT plc Annual Report 202252
Financial Review continued
Going concern
We continue to have a healthy liquidity position, with strong levels
of rent collection, a favourable debt maturity profile and substantial
headroom against our financial covenants.
The Directors have reviewed our current and projected financial
position over a five-year period, making reasonable assumptions
about our future trading performance. Various forms of sensitivity
analysis have been performed, in particular regarding the financial
performance of our customers, and the value of our portfolio, whilst
taking into account the current macroeconomic environment including
the outlook over inflation and interest rates. As at 31 December 2022,
our property values would have to fall by more than 45% before our
loan covenants are breached at the corporate level.
At the year end, we had an aggregate of £483.0 million of undrawn
commitments under our senior debt facilities and £47.6 million of
cash, of which £99.9 million (see note 34) was committed under
various development contracts. Our loan to value ratio stood at
31.2%, with the debt portfolio having an average maturity term of
approximately 5.4 years.
As at the date of approval of this report, we had substantial headroom
within our financial loan covenants. Our financial covenants have
been complied with for all loans throughout the year and up to the date
of approval of these financial statements. As a result, the Directors
have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the
foreseeable future, which is considered to be to 31 March 2024.
Credit rating
The Group has a Baa1 long-term credit rating and positive
outlook from Moody’s Investor Services, which was unchanged
during the year.
Priorities for 2023
Our priorities for 2023, in relation to our financial performance and
position, are to:
•
maintain the Group’s strong balance sheet and liquidity, and keep
the LTV within guidance of 30 to 35%;
•
target further growth in income and earnings and therefore
enhance the dividend on a sustainable basis; and
•
refinance the £450 million RCF maturing in December 2024.
Alternative Investment Fund Manager (“AIFM”)
The Manager is authorised and regulated by the Financial Conduct
Authority as a full-scope AIFM. The Manager is therefore authorised
to provide services to the Group and the Group benefits from the
rigorous reporting and ongoing compliance applicable to AIFMs
in the UK.
As part of this regulatory process, Langham Hall UK Depositary LLP
(Langham Hall) is responsible for cash monitoring, asset verification
and oversight of the Company and the Manager. In performing its
function, Langham Hall conducts a quarterly review during which it
monitors and verifies all new acquisitions, share issues, loan facilities
and other key events, together with Shareholder distributions, the
quarterly management accounts, bank reconciliations and the
Company’s general controls and processes. Langham Hall provides
a written report of its findings to the Company and to the Manager,
and to date it has not identified any issues. The Company therefore
benefits from a continuous real-time audit check on its processes
and controls.
Tritax Big Box REIT plc Annual Report 2022 53
STRATEGIC REPORT
Principal Risks and Uncertainties
Managing risk
The Board has overall responsibility for risk management and internal
controls, with the Audit and Risk Committee reviewing the effectiveness
of the risk management process on its behalf. We aim to operate in
a low-risk environment, focusing on a single sub-sector of the UK real
estate market to deliver an attractive, growing and secure income for
Shareholders, together with the opportunity for capital appreciation.
The Board recognises that effective risk management is important to
our success. Risk management ensures a defined approach to decision
making that decreases uncertainty surrounding anticipated outcomes,
balanced against the objective of creating value forShareholders.
Approach to managing risk
Our risk management process is designed to identify, evaluate,
manage and mitigate (rather than eliminate) the significant risks we
face. The process can therefore only provide reasonable, and not
absolute, assurance. As an investment Company, we outsource
key services to the Manager, the Administrator and other service
providers, and rely on their systems and controls.
At least twice a year, the Board undertakes a formal risk review,
with the assistance of the Audit and Risk Committee, to assess the
effectiveness of our risk management and internal control systems.
During these reviews, the Board has not identified or been advised
ofany failings or weaknesses which it has determined to be material.
Property risk
1. Tenant default
2. Portfolio strategy and industry competition
3. Performance of the UK retail sector and
the continued growth of online retail
4. Execution of development business plan
Financial risk
5. Debt financing – LTV, availability and
cost of debt
Corporate risk
6. We rely on the continuance
oftheManager
Taxation risk
7. UK REIT status
Other risk
8. Severe economic downturn
9. Physical and transition risks from climate
change
Negligible Slight Moderate Severe
Negligible Slight Moderate Severe
Probability
Impact
TBBR
Board
TBBR Audit
and Risk Committee
TMLLP Executive Committee
TMLLP Risk Committee
Reporting and escalation
Direction and oversight
1
3
7
5
9
6
2
4
8
Risk matrix – December 2021 to December 2022 net
risk movements
Tritax Big Box REIT plc Annual Report 202254
Principal Risks and Uncertainties continued
Risk appetite
We have a specific Investment Policy, which we adhere to and for
which the Board has overall responsibility. We have a limit within
our Investment Policy, which allows our exposure to land and unlet
development to be up to 15% of gross asset value, of which up to
5%can be invested in speculative development.
Principal risks and uncertainties
Further details of our principal risks and uncertainties are set out
below. They have the potential to materially affect our business.
Some risks are currently unknown, while others that we currently
regard as immaterial, and have therefore not included here, may turn
out to be material in the future. The principal risks are predominantly
the same as detailed in the 2021 Annual Report, with the key
changes being i) the removal of a specific Brexit disruption risk, and
ii) the consolidation of two risks in relation to portfolio strategy and
industry competition into one risk (Risk 2).
Emerging risks
As well as the principal risks, the Directors have identified a number
of emerging risks which are considered as part of the formal risk
review. Emerging risks encompass those that are rapidly evolving,
for which the probability or severity are not yet fully understood. As
a result, any appropriate mitigations are also still evolving. However,
these emerging risk are not considered to pose a material threat
to the Company in the short term. This could, however, change
depending on how these risks evolve over time. Senior members
of the Manager are responsible for day-to-day matters and have
a breadth of experience across all corporate areas; they consider
emerging risks and any appropriate mitigation measures required.
These emerging risks are then raised as part of the bi-annual
risk assessment where it is considered whether these emerging
“ We have a healthy liquidity
position, with strong levels of
rent collection, a favourable debt
maturity profile and substantial
risks have the potential to have a materially adverse affect on the
Company. The emerging risks that could impact the Company’s
performance cover a range of subjects which include but are not
restricted to technological advancement, inflation and supply chain
disruption. The Board is mindful that current events involving Russia
and Ukraine are not yet over; this event still has the potential to cause
great uncertainty in a short space of time, particularly around the
global supply and cost of energy, which in turn could lead to further
supply chain and inflationary pressure.
Tritax Big Box REIT plc Annual Report 2022 55
STRATEGIC REPORT
PROPERTY RISK
1. Tenant default
The risk around one or more of our tenants defaulting.
Gross risk Mitigation Net probability Net impact
Medium –
High
Our Investment Policy limits the exposure to any one tenant
to 20% of gross assets or, where tenants are members
of the FTSE, up to 30% each for two such tenants. This
prevents significant exposure to a single retailer. To mitigate
geographical shifts in tenants’ focus, we invest in assets in
a range of locations, with easy access to large ports and
key motorway junctions. Before investing, we undertake
thorough due diligence, particularly over the strength of
the underlying covenant and the group of the covenants.
We select assets with strong property fundamentals (good
location, modern design, sound fabric), which should be
attractive to other tenants if the current tenant fails. We
continually monitor and keep the strength of our tenant
covenants under review. In addition, we focus on assets
let to tenants with strong financial covenant strength,
and assets that are strategically important to the tenant’s
business. Our maximum exposure to any one tenant
(calculated by contracted rental income) was less than
14.5% as at 31 December 2022.
Medium Medium – The default of one or more of
our tenants would immediately reduce
revenue from the relevant asset(s). If the
tenant cannot remedy the default and we
have to evict the tenant, there may be a
continuing reduction in revenues until we are
able to find a suitable replacement tenant,
which may affect our ability to pay dividends
to Shareholders. The macroeconomic
environment may lead to certain sectors
including certain parts of the retail sector
being negatively impacted; this will impact
the financial strength of some of ourcustomers.
2. Portfolio strategy and industry competition
The ability of the Company to execute on its strategy and deliver performance.
Gross risk Mitigation Net probability Net impact
Slight –
High
The Group is focused on a single sector of the commercial
property market; the investment portfolio is 98% let, with long
unexpired weighted average lease terms and an institutional-
grade tenant base. All the leases contain upward-only rent
reviews, which are either fixed, RPI/CPI linked or at open
market value. These factors help support our asset values
and overall portfolio performance. We undertake ongoing
reviews of asset performance along with a review over the
balance of our portfolio, split between Foundation, Value
Add and Land, as well as considerations over covenant,
location and building type. Our asset performance is regularly
appraised and where we feel the assets are mature in terms
of performance, they are ear-marked for potential disposal.
Our development portfolio is executed in a low-risk manner,
with significant capital targeted for deployment once we have
secured a pre-let agreement.
In recent years, the investment market was particularly
strong; this saw increased competition bid down investment
yields to record low levels. Despite the recent market
turbulence, the long-term fundamentals of the sector has
increased the number of investors seeking UK logistics
assets. We also maintain close relationships with a number
of investors and developers in the sector, giving us the best
possible opportunity to secure future acquisitions. We are not
exclusively reliant on acquisitions to grow the portfolio. Our
leases contain upward-only rent review clauses and we have
a large development pipeline and a number of current asset
management initiatives within the portfolio, which means we
can generate additional income and value from the existing
portfolio. We own and control one of the largest development
land banks in the UK, which significantly reduces the risk that
competition will impact our ability to grow.
Medium Medium – An adverse change in the
performance of our property portfolio may
lead to lower returns for Shareholders or a
breach of our banking covenants. Market
conditions may lead to a reduction in the
revenues we earn from our property assets,
which may affect our ability to pay dividends
to Shareholders. A severe fall in values may
result in a fall in our NAV as well as a need to
sell assets to repay our loan commitments.
Competitors in the sector may be better
placed to secure property acquisitions, as
they may have greater financial resources,
thereby partly restricting the ability to grow
our NAV, deliver value to Shareholders and
further diversify the portfolio. The recent
impact of inflation and increasing interest
rates on transactions and investment
pricing has reduced transactional activity
in H2 2022. However, post the effects of
Covid-19, logistics assets are arguably even
more sought after than before and therefore
competition is likely to remain strong over
the long term for the prime assets.
Tritax Big Box REIT plc Annual Report 202256
Principal Risks and Uncertainties continued
PROPERTY RISK continued
3. Performance of the UK retail sector and the continued growth of online retail
Gross risk Mitigation Net probability Net impact
Severe –
Medium
The higher levels of inflation and interest rates are having
an effect on UK economic growth. The diversity of our
institutional-grade tenant base means the impact of default
from any one of our tenants is low-moderate. In addition to
our due diligence on tenants before an acquisition or letting,
we regularly review the performance of the retail sector,
the position of our tenants against their competitors and,
in particular, the financial performance of our tenants. We
have also increasingly been diversifying our tenant exposure
to various sub-sectors of the retail sector, i.e. online, food,
homeware, fashion and other. The risk around traditional
retail is mitigated by the increase in online retail sales and
supply chain concerns which has driven occupational
demand in 2022. Our portfolio is modern and of a high-
quality nature and therefore is attractive to those with an
online presence.
High Medium – Our focus on the UK logistics
sector means we directly rely on the
distribution requirements of UK retailers and
manufacturers in particular. Insolvencies
and CVAs among the larger retailers and
online retailers could affect our revenues
and property valuations. Poor performance
and low profitability could affect our ability
to collect rental income and the overall
level of demand for space. This could in
turn impact future rental growth. A greater
proportion of sales being made online to
some degree compensates for this, as
orders are fulfilled from the strategically
important assets that we invest in.
4. Execution of development business plan
There may be a higher degree of risk within our development portfolio.
Gross risk Mitigation Net probability Net impact
Moderate –
High
The Company has a significant development pipeline; it
represents 7.5% of our gross assets as of 31 December
2022. Our development strategy is low risk and we target
investing capital into a development project either once a
pre-let agreement has been secured, or where we have good
visibility over occupier requirements in the location that we
are developing. Our appetite for speculative development is
low and we have a limit of 5% of GAV exposed to speculative
developments within our Investment Policy. The risk of cost
overruns is mitigated by our experienced development team
which includes a thorough procurement and tender process
on all contracts, including agreeing fixed-priced contracts. We
undertake thorough covenant analysis and ongoing reviews
of our contractors and secure guarantees in relation to build
contracts where possible. In respect of pre-let forward funded
developments, any risk is low, and mitigated by the fact the
developer takes on a significant amount of construction risk and
the risk of cost overruns.
Low Low – Our development activities are likely
to involve a higher degree of risk than is
associated with standing assets. This could
include general construction risks, delays
in the development or the development
not being completed, cost overruns or
developer/contractor default. If any of the
risks associated with our developments
materialise, this could affect the value of
these assets or result in a delay to lease
commencement and therefore rental income
recognition. The occupational market is very
strong and the UK is experiencing a low
level of vacancy; this should be positive from
a development perspective for TBBR.
FINANCIAL RISK
5. Debt financing – LTV, availability and cost of debt
Gross risk Mitigation Net probability Net impact
Slight –
Medium
The Group has diversified sources of long-term unsecured
borrowings in the form of £500 million in Public Bonds,
£400 million in Unsecured Private Loan Notes and £250
million in Green Bonds. We also have £750 million of bank
finance available split across two revolving credit facilities,
and £212.9 million of secured debt across three separate
facilities. This helps keep lending terms competitive. This
access to multiple debt markets should enable the Group
to raise future liquidity in a more efficient and effective
manner via an unsecured platform whilst at competitive
rates. The Board keeps liquidity and gearing levels under
review, as well as monitoring the bank covenants and any
associated headroom within covenant levels. We have
undrawn headroom of £483 million within our current debt
commitments at 31 December 2022. The Group aims,
where reasonable, to minimise the level of unhedged
variable debt, by using interest rate hedging with a view to
keeping variable rate debt approximately 90%+ of drawn
debt either fixed or hedged.
Medium Medium – Without sufficient debt funding,
we may be unable to pursue suitable
investment opportunities in line with our
investment objectives. If we cannot source
debt funding at appropriate rates, either
to increase the level of debt or refinance
existing debt, this may impair our ability to
maintain our targeted dividend level and
deliver attractive returns to Shareholders.
Interest rates on the majority of our debt
facilities are fixed term; however, we do have
an exposure to variable rate debt. Noting the
current environment with interest rates on
the rise (UK base rate at Q1 2023 – 4.00%),
this is likely to mean that any new debt
entered into is more expensive than our
average cost of borrowing.
Tritax Big Box REIT plc Annual Report 2022 57
STRATEGIC REPORT
CORPORATE RISK
6. We rely on the continuance of the Manager
Gross risk Mitigation Net probability Net impact
Slight –
High
Unless there is a default, either party may terminate the
Investment Management Agreement by giving not less than
24 months’ written notice. The Management Engagement
Committee regularly reviews and monitors the Manager’s
performance. In addition, the Board meets regularly with
the Manager, to ensure we maintain a positive working
relationship. Following the acquisition of 60% of the
Manager by abrdn, this enhances the resources available
to the Manager. In May 2022, Shareholders approved the
extension of the agreement with a new five-year term. A
24-month written notice cannot be served by either party,
unless there is a default, prior to May 2025.
Low Medium – We continue to rely on the
Manager’s services and its reputation in the
property market. As a result, the Company’s
performance will, to a large extent, be
underpinned by the Manager’s abilities in
the property market and its ability to asset
manage and develop its property portfolio.
Termination of the Investment Management
Agreement would severely affect the
Company’s ability to effectively manage its
operations and may have a negative impact
on the share price of the Company.
TAXATION RISK
7. UK REIT status
We are a UK REIT and have a tax-efficient corporate structure, which is advantageous for UK Shareholders. Any change to our tax status
orinUK tax legislation could affect our ability to achieve our investment objectives and provide favourable returns to Shareholders.
Gross risk Mitigation Net probability Net impact
Severe –
High
The Board is ultimately responsible for ensuring we adhere
to the UK REIT regime. It monitors the REIT compliance
reports provided by:
•
the Manager on potential transactions;
•
the Administrator on asset levels; and
•
our Registrar and broker on shareholdings.
The Board has also engaged third-party tax advisers and
Auditors to help monitor REIT compliance requirements.
Low Low – If the Company fails to remain a
REIT for UK tax purposes, our property
profits and gains will be subject to UK
corporation tax.
OTHER RISK
8. Severe economic downturn
Gross risk Mitigation Net probability Net impact
Severe –
High
A severe economic downturn could be caused by
civil unrest, terrorism or a pandemic. In 2022 we have
experienced global supply chain issues (post Covid-19) and
the Russia invasion into Ukraine, which has caused inflation
to soar with interest rates rising to try and curb inflation.
Inflationary pressures are affecting the consumer which is
leading to a weaker outlook for the UK economy.
The Group mitigates the impact of this macro volatility by
investing in high-quality investment assets that operate in a
sector that has strong structural drivers and a supply–demand
imbalance in favour of landlords. The Group monitors its
customers’ financial health regularly and where possible
enters into long leases.
The Manager continues to monitor the business continuity
plan of its suppliers to ensure the impact to the Group and
its service providers is minimised.
The Manager continues to monitor the impact that the
current economic uncertainty and higher inflationary
pressures are having on the Group’s customers in order
to protect the Group’s cash flow regarding rent collection,
impact on dividends and banking covenants.
Covid-19 has accelerated behavioural patterns such
as online shopping, which, coupled with supply chain
concerns, has resulted in high levels of occupational
demand. This is highly supportive of our business model.
High Medium – A severe downturn in the
economy could impact a number of the
Group’s tenants, contractors, and service
providers, which could mean a loss of
rental income and disruption to operations.
Covid-19 and Russia/Ukraine have caused
severe pressure on supply chains which
has led to high levels of inflation. The main
effects of this are leading to higher prices,
particularly around energy, transport
and labour, which is putting pressure
onprofitability.
Tritax Big Box REIT plc Annual Report 202258
OTHER RISK continued
9. Physical and transition risks from climate change
Gross risk Mitigation Net probability Net impact
Moderate –
Medium
The Manager operates with a dedicated ESG team as well
as an ESG Committee which take operational responsibility
for the Company’s ESG matters. The Manager regularly
reports to the Board, including monitoring against the
Company’s stated ESG targets and providing updates on
future initiatives.
The Company has a modern portfolio, with strong ESG
credentials which include 98% of the portfolio having
an EPC rating of A–C; these properties should be more
appealing to occupiers and therefore perform well relative
to others.
ESG is embedded within our investment and development
processes such that climate-related risks are looked at when
purchasing assets and minimum standards of BREEAM Very
Good and net zero carbon are targeted for development. We
are also confident that due diligence assessments, internal
procedures and insurance cover adequately mitigate these
ESG risks.
We also actively participate and engage in several real estate
and sustainability organisations such as EPRA, the UK
Green Building Council and the Better Buildings Partnership
to ensure we are aware of future initiatives and challenges.
We measure and report annually on our key ESG metrics
todemonstrate how we are managing our ESG risks.
We engaged with a third party to conduct climate change
risk assessments in 2021 to understand the impacts of
climate change on the portfolio, using scenario analysis.
From a physical risk perspective, the findings suggested
that the portfolio is unlikely to be materially affected under
a2.0°C global warming scenario.
We are conducting ongoing work to update our physical
risk assessments on an annual basis and integrate the
outcomes of the analysis into our asset and property
managementactivities.
Medium Medium – There is a risk of physical
damage to the property portfolio as a result
of climate-related factors such as flood risk
and rising temperatures.
As institutional investors focus their capital
towards more energy efficient buildings,
there is the risk that less energy efficient
buildings do not perform as well as those
with the highest ESG credentials.
ESG requirements are likely to increase over
time and therefore the impact of a failure to
comply with regulatory standards has the
potential to affect the performance of the
Company in the future.
The costs of carbon pricing could increase
in the future therefore increasing the
future construction costs associated with
our development pipeline and therefore
reducing development profits.
Principal Risks and Uncertainties continued
Tritax Big Box REIT plc Annual Report 2022 59
STRATEGIC REPORT
Statement of the extent
of consistency with the
TCFD framework
All climate-related financial disclosures can be found below, following the TCFD’s four pillars – governance, strategy, risk management, and
metrics and targets. Where disclosures do not currently fully align with the TCFD recommendations, we provide a rationale for why and outline
the steps being taken to make consistent disclosures in the future in the relevant sections below.
We have voluntarily prepared our annual climate-related financial disclosure consistent with
recommended disclosures. The disclosure also reflects the Annex to the Recommendations of
the TCFD “Implementing the Recommendations of the Task Force on Climate-related Financial
in future reporting periods are noted where relevant, particularly in Strategy – Recommended
TCFD consistency table
Thematic area Recommended disclosure Consistency note Signposting beyond TCFD report
Governance
Describe the Board’s oversight of climate-related risks
andopportunities.
Consistent Corporate Governance Report
on pages 70 to 106
Describe management’s role in assessing and managing
climate-related risks and opportunities.
Consistent Corporate Governance Report
on pages 70 to 106
Strategy
Describe the climate-related risks and opportunities the
organisation has identified over the short, medium, and
longterm.
Consistent
Describe the impact of climate-related risks and opportunities
on the organisation’s business, strategy and financial planning.
Developing quantitative
approach to impact of
risks and opportunities
Describe the resilience of the organisation’s strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario.
Consistent
Risk
management
Describe the organisation’s processes for identifying and
assessing climate-related risks.
Consistent
Describe the organisation’s processes for managing
climate-related risks.
Consistent Risk Management section
Describe how processes for identifying, assessing and
managing climate-related risks are integrated into the
organisation’s overall risk management.
Consistent Physical and transition risks are included as
part of the Company’s Principal Risks and
Uncertainties section on pages 53 to 58
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.
Developing further
metrics and targets
In the TCFD metrics table, we signpost
torelevant sections of the Annual Report
where climate-related metrics are disclosed
Disclose Scope 1, Scope 2 and, if appropriate, Scope 3
greenhouse gas (“GHG”) emissions and the related risks.
Developing further
metrics and targets
Scope 1, Scope 2 and material Scope 3
emissions are disclosed in the SECR
disclosure on page 36
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets.
Developing further
metrics and targets
The updated ESG targets, including
updated net zero carbon targets, are
disclosed in the ESG section on page 38
Task Force on Climate-related Financial Disclosures (“TCFD”) Report
Tritax Big Box REIT plc Annual Report 202260
Task Force on Climate-related Financial Disclosures (“TCFD”) Report continued
Governance of climate-related risks and opportunities
The Board
Audit and Risk Committee
TMLLP
Risk Committee
TMLLP
ESG Committee
The Board
Sets the ESG strategy of
the Company and has
oversight of climate-
related strategy and
performance against
key goals and targets.
Audit and Risk
Committee
Monitors climate-related
risks and opportunities
and other emerging
climate risks.
TMLLP Executive
Committee
Jointly responsible
for preparing the
ESG strategy,
implementation
and priorities
including climate-
related strategy.
TMLLP Investment
Committee
Ensures capital
expenditure is in line
with climate-related
strategy and targets.
TMLLP Risk
Committee
Conducts horizon
scanning of emerging
climate-related risks.
TMLLP ESG
Committee
Jointly responsible
for preparing the
ESG strategy,
implementation and
priorities including
climate-related strategy.
TMLLP Investment CommitteeTMLLP Executive Committee
TritaxManagement LLP (“TMLLP”)
Tritax Big Box REIT plc Annual Report 2022 61
STRATEGIC REPORT
Governance
Describe the Board’s oversight of climate-related
risks and opportunities
The Board is responsible for setting the strategy of the Company
and in May 2020 agreed a three-year ESG strategy and framework,
which encompassed ESG goals and metrics. The targets were
refreshed and brought forward in 2023 in order to more greatly align
with the Company’s peers and customer base. Climate change was
ranked as the most material ESG issue for the Company. This was
determined through a materiality exercise undertaken by a third party
that included engagement with the Board and Tritax Management
LLP (the “Manager”). Climate change remains a principal risk to
thebusiness.
The Manager’s ESG Committee is responsible for monitoring
trends, developments, risks and opportunities in relation to climate-
related issues and any material changes are ultimately reported
up to the Board through the Manager’s ESG Director. The Board
receives updates from the Manager’s ESG Director at every Board
meeting, which occur at least quarterly, where climate change
and the progress against the Company’s ESG targets and goals
are discussed and monitored. The Board receives other relevant
briefings, such as market updates, regulatory updates, and investor
and analyst feedback. Initiative progress reports are also provided
and include updates on the ESG programme, including ESG rating
submissions, green building certifications, green finance and climate
transition planning, as well as renewable energy opportunities and
carbon risk analysis. The Manager’s ESG Director, legal counsel,
secretariat and Risk & Compliance Officer monitor climate-related
transition risks relating to legislation and regulation and update the
Manger’s Executive Committee and Audit and Risk Committee at
least bi-annually on climate-related risks and opportunities facing
the Company, which forms part of the Audit and Risk Committee’s
ongoing work on risk. The Board demonstrated its commitment
to ESG issues by raising a specialised Green Bond in November
2020, which focuses on investments aligned with our Green Finance
Framework. The Manager’s Green Finance Committee approves
the allocation of the Green Bond funds and an update is provided
to the Board periodically. As of December 2021, all funds had been
allocated to green eligible projects, and both the Green Finance
Framework and the last Allocation and Impact Report can be found
on the Company’s website.
The Board undertakes a detailed analysis of its ESG strategy once
a year and completes monthly ESG reviews with Karen Whitworth,
Senior Independent Director of the Company determined as the
Board’s “ESG Champion”. The ESG Champion regularly meets with
the Manager’s ESG Director to discuss ESG issues including climate-
related risks and opportunities facing the Company and reports back
to the wider Board as necessary.
Through the process of regular informing and reporting by the ESG
Director and ESG Champion to the Board, in addition to ad hoc
training, the Board considers climate-related issues when reviewing
and guiding strategy, risk management policies, annual budget and
business plans. In addition, climate-related issues are considered
when setting performance objectives within the Manager.
The Manager engages specialist consultants to provide executive
briefings on sustainability and climate change. The Board and the
Manager have undertaken impact investing, carbon risk and CRREM
analysis training to support their understanding of climate change
and other ESG risks and opportunities to aid the appraisal of these
issues in overseeing the Company’s activities.
Describe management’s role in assessing and
managing climate-related risks and opportunities
The Manager has an established ESG Committee which is jointly
responsible with the Manger’s Executive Committee for the delivery
of the ESG strategy, including climate change and its associated risks
and opportunities. The ESG Committee is chaired by the Head of
Asset Management, Petrina Austin, who is ultimately responsible for
climate change amongst the management team. The ESG Director
is an integral member of the Committee with onward reporting to
the Company’s Board and to the Manager’s Executive Committee.
The ESG Committee also oversees the activities of several sub-
committees which focus on different topics related to ESG –
Property, Governance, Green Finance and Wellbeing.
The ESG Director is responsible for the assessment and management
of climate-related risks and opportunities on a day-to-day basis,
where appropriate engaging internal stakeholders (e.g. asset and
property managers) or external parties (e.g. customers and investors)
to support this effort. Monitoring of climate change issues is
supplemented by executive briefings from specialist consultants such
as CEN-ESG and through the Company’s membership of the UK
Green Building Council (“UKGBC”) and participation in ESG-related
investor working groups, such as the Better Buildings Partnership’s
(“BBP”) Net Zero Working Group.
Climate-related risks and opportunities are embedded into the
Manager’s investment processes through technical due diligence
assessments undertaken on each asset by specialised property
consultants, which inform the investment decisions of the business.
Any specific risks and opportunities relating to climate change,
such as flooding or solar capabilities, are raised with the relevant
asset manager and reported to the Investment Committee, through
Investment Committee and Acquisitions Reports. As part of the TCFD
workstream, an expert third party has also analysed the greenhouse
gas emissions performance and stranding risk of individual assets
using the Carbon Risk Real Estate Monitor (“CRREM”) tool, and this
will be undertaken for any acquisitions going forward.
Tritax Symmetry Management Limited undertakes project specific
and ongoing risk assessments which incorporate climate-related
risks and opportunities into the planning for new developments
and sites. The risks feed into the development risk register which
is reported and reviewed by the Tritax Symmetry Holdings Limited
board which is a major subsidiary of the Company.
Tritax Big Box REIT plc Annual Report 202262
Task Force on Climate-related Financial Disclosures (“TCFD”) Report continued
Strategy
Describe the climate-related risks and opportunities
the organisation has identified over the short,
medium and long term
Climate change is inherently uncertain and early planning for
adaptation reduces the vulnerability to climate change and allows
for the creation of appropriate responses to tackle the problem
at the right time. By considering potential risks towards 2030 and
2050 climate scenario time horizons, we have been better able
to understand the likely spread of physical climate risk across the
portfolio and identify shorter term actions that can feed into the
Company’s traditional decision-making timescales, but also prepare
us for dealing with longer-term risks that may manifest beyond
those timescales. For physical climate risks, 2030 was selected to
align with the Tritax hold period and the average lease term on new
buildings, to better understand the risks when these leases end.
2050 was selected to better understand what longer-term risks may
materialise and ensure our strategy does not lock in measures that
could exacerbate potential physical risks later in the 21st century. For
transition risk, 2030 and 2050 also align with the net zero goals set
by the Company during the reporting period. Please see the ESG
section on pages 32 to 38 for more information on how our net zero
goals and targets are developing in the future. In terms of strategy,
planning and informing business decisions, we consider climate-
related transition and physical risks and opportunities within the
following time horizons:
•
short-term: up to one year – aligned with the going concern period;
•
medium-term: from two to five years – aligned with the viability
period, and the period used for the Group’s medium-term business
plans and individual asset performance analysis; and
•
long-term: from six to fifteen years – aligned with our usual hold
period, our WAULT (12.6 years) and the average lease term on
newbuildings.
Although these climate-related risks may not materialise whilst an
asset is part of the Company’s portfolio, it is anticipated that markets
will increasingly begin to price in climate risk over asset lifetimes.
Theclimate resilience assessment considered three scenarios, in line
with the recommendations set out in the TCFD. RCP2.6 to represent
a Paris-aligned 2°C or lower scenario, RCP4.5, a medium emissions
scenario, which aligns with the commitments made by countries
as part of their nationally determined contributions (“NDCs”), and
RCP8.5 which represents the high emissions scenario for physical
risk should net zero targets not be met.
The Company has undertaken a climate resilience assessment to
identify the physical risks to its portfolio by 2030 and 2050. Last
year, the DNV assessment modelled two future scenarios using the
IPCC’s Representative Concentration Pathways (“RCPs”), a medium
emissions scenario (RCP4.5) which reflects 3°C of warming by 2100
and a high emissions scenario (RCP8.5) where temperatures are
projected to increase by 4–5°C by 2100. This year, in order to align
with TCFD recommendations, a Paris-aligned emissions scenario
(RCP2.6) where temperatures increase by 1.5–2°C by 2100 was also
used to undertake a qualitative assessment of physical risk and a
quantitative assessment of transition risk.
Physical risks
Risk was assessed based on the likelihood of the climate hazard
occurring and the consequence of the potential climate impact on
our assets. A portfolio-level assessment was completed for the entire
portfolio in 2021 to identify the material risks to be incorporated into
investment decisions for a medium emissions (RCP4.5) and a high
emissions (RCP8.5) scenario. In 2022, we updated the previous
year’s assessment to include any new assets and reviewed the
potential risks in light of any new information or mitigation measures
that have been undertaken throughout the reporting year. We have
also completed a qualitative assessment of the material physical
climate risks to our portfolio under a Paris-aligned scenario (RCP2.6).
Determination of physical risks having a material impact on the
Company was undertaken by taking into account climate hazard,
asset vulnerability and consulting asset and property managers to
better understand the existing measures in place to reduce the risk to
our assets from climate change events.
Our assessment concluded that our exposure to all climate-related
risks is relatively low up to 2030. Based on a medium emissions
scenario (RCP4.5) looking at risk exposure in 2050, the assessment
shows that flood risk and hydro multi-hazard risks are considered
the most material acute physical climate risks to the Company’s
portfolio. In addition, two assets are expected to be exposed to
sea level rise by 2050. However, these risks do not account for the
existing mitigation or adaptation measures at a site level. For each of
the identified risk areas, Table 1 below (see Strategy b) outlines the
measures in place to mitigate the risk and vulnerability of our portfolio
to physical climate risks.
In addition, the physical risks from the level of warming associated
with the Paris-aligned scenario (RCP2.6) were considered low, based
on the location and quality of our assets, and no further risks were
identified above and beyond those captured in the physical climate
risk assessment for the RCP4.5 and RCP8.5 scenarios.
Finally, a supplementary riverine flood risk assessment of the
portfolio was conducted using the WRI’s Aqueduct Water Risk Atlas
tool which concluded that none of the assets were located within
100-year flood zones.
Transition risks
The Company has also conducted a transition risk assessment of
the portfolio using the Carbon Risk Real Estate Monitor (“CRREM”),
using the current net zero target date for Scope 1 and 2 emissions
(2030) and the year 2050 as the time horizons for the analysis. The
assessment uses a decarbonisation scenario in line with 1.5°C
of warming by 2100 (we do not use 2100 as a time horizon in the
assessment of transition risk due to uncertainty), as this represents
a conservative estimate of transition risk – a more ambitious
decarbonisation scenario will mean higher risks associated with the
shift to a low-carbon economy. Assets identified as being at risk of
stranding – whereby energy upgrades become financially unviable
due to regulation and market conditions – have been identified to
allow the Company to manage risks appropriately. Determination of
transition risks and opportunities having a material financial impact on
the Company was undertaken in consultation with the Manager’s ESG
Director and Savills, which undertook the transition risk assessment.
Currently, this approach is qualitative although future disclosures will
aim to include a quantitative approach to the characterisation of the
material financial impact of transition risk and opportunity.
Tritax Big Box REIT plc Annual Report 2022 63
STRATEGIC REPORT
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning
Climate change is a critical risk. In response, we had previously set
a 1.5°C Paris Agreement-aligned target to achieve net zero carbon
across all direct and indirect activities by 2050, including direct
landlord impacts (Scope 1 and 2 emissions) by 2030, construction
impacts by 2040 and tenant operational impacts by 2050. Our
updated net zero carbon targets can be found in the ESG section.
We are focused on reducing our carbon footprint, using energy more
efficiently to make our assets more resilient in the long term, and
reducing operating costs for our customers.
Given the growing importance of understanding the risks and
opportunities climate change has on the Company’s business
strategy, the Company has utilised industry tools and frameworks
to assess the potential risks that climate change may pose on
the business. It has assessed potential investment risks using the
Carbon Risk Real Estate Monitor (“CRREM”) tool and undertaken a
physical climate risk analysis in line with the TCFD recommendations.
With an increased focus on engaging and working with our customers,
we have been able to collect a substantial proportion of our portfolio’s
asset-level environmental data (e.g. energy, GHG, waste, water).
Asoccupiers have operational control, the landlord operational
emissions are negligible in comparison to emissions from customer
operations. This year, the Company has taken several steps to support
its net zero carbon objective, such as continuing to install further
renewable energy infrastructure on our assets, with our total solar PV
installed capacity now standing at 14.6 MW across the portfolio.
The portfolio-wide assessments of physical and transition risks and
opportunities summarised in this report will inform the organisation’s
financial planning in the next reporting period; these assessments
will be carried out at regular intervals to ensure risk identification
remains current and can be integrated with our planning processes.
As the Company’s assets are all located within the United Kingdom,
we have not chosen to report risks and opportunities by geography
– physical risk is assessed at the local scale, and transition risks at
both the asset level and the UK scale in the case of regulatory and
market risks. If regulatory regimes diverge significantly across the UK,
we may revise this reporting structure.
Scenario analysis has been completed to identify the impacts of
climate-related risks and opportunities on the Company’s business,
strategy and financial planning. The findings are presented in the
tables below. Under the medium and high emissions scenarios
(RCP4.5 and RCP8.5), the largest climate-related risks to the
Company’s business are related to physical climate risks, as greater
temperature increases will see more extreme weather events
materialise and longer-term impacts of climate change are realised
such as sea level rise, whilst the transition to a low-carbon economy
will be much slower and thus transition risks will have less of an
impact. In contrast, under the Paris-aligned scenario the business will
be subject to a greater level of transition risk as it shifts its business
to a low-carbon economy, leading to a lower level of warming that will
result in less physical climate impacts manifesting.
All identified climate-related risks and opportunities are covered by
appropriate management and/or mitigation strategies.
Table 1 Climate-related physical risks
Risk Time horizon Risks to Tritax Big Box portfolio Financial impacts Planning and strategy
Acute
physical risk
Flood risk,
hydro,
multi-hazard
risk, high
winds
Short to
medium
term
Flooding of assets and need
for increased flood protection
and drainage measures
Increased maintenance and
repair costs from flooding or
high winds
Negative impacts on
assetvaluations
Extreme weather events
such as wind storms or
flooding could also interrupt
operations for occupiers
Cost of repairing assets,
increased maintenance
and building costs
Increased insurance
costs from extreme
weather events such as
flooding and damage
fromhigh winds
Loss of value of buildings
Mitigation measures for flood and drought risks are
incorporated into design of planned developments
including raising assets above ground level, including
surface runoff measures and inclusion of rainwater
harvesting equipment
Flood risk assessments are undertaken as part of the
acquisition process for all new investments and as part
of Tritax Symmetry’s development process
Asset management have proactive plans in place to
deal with events if they arise and asset managers carry
out annual monitoring processes at all assets to check
for signs of damage from extreme weather events
Chronic
physical risk
Rising
temperatures,
water stress,
aridity
Medium to
long term
Increased investment in
cooling requirements
Reduced thermal comfort of
staff leading to lower levels
of wellbeing and productivity
of workforce
Higher operating costs for
occupiers from increased
cooling demand
Cost of additional cooling
requirements
Upgrading
cooling equipment
The Manager’s New Construction Sustainability Brief
sets out design measures to maximise adaptation to
extreme heat, including optimising the buildings for
thermal regulation, investing in natural cooling and
passive ventilation systems and prioritising the use
oflow-energy LED lighting
Sustainable construction commitments also include
reducing water use through rainwater harvesting,
installing water efficient fittings and leak detection
and monitoring systems to check and proactively
manage water consumption
Chronic
physical risk
Sea level rise
Long term Risk of flooding from sea level
rise was identified at two assets
by the 2050s. Flooding could
result in building damage.
However, given the uncertainty
surrounding future projections
of sea level, it is unlikely that
impacts will materialise in
theshort term
The long-term risk of
sea level rise may result
in increased insurance
costs for the assets over
the long term and could
result in stranded assets
should sea level rise
increase more quickly
than projected
Financial appraisals of acquisitions, refurbishments
and development include mitigations to physical
climate risks, including flood risk assessments for
allnew investments
The Company has worked with the Environment
Agency to develop flood defences with multiple
benefits including protection of Big Box assets
aswell as the surrounding area
Tritax Big Box REIT plc Annual Report 202264
Task Force on Climate-related Financial Disclosures (“TCFD”) Report continued
Describe the impact of climate-related risks and opportunities on the organisation’s businesses,
strategyand financial planning continued
Table 2 Climate-related transition risks
Risk Time horizon Risks to Tritax Big Box portfolio Financial impacts Planning and strategy
Policy and
Legal
transition risk
Carbon pricing
Medium to
long term
Costs could increase as carbon
pricing is factored into construction
and operating costs (from embodied
carbon and cost of carbon-intensive
energy for occupiers)
Direct cost associated with
emissions pricing
Increased capex costs
duringconstruction
We continue to deploy on-site
renewable energy across the
portfolio (see total solar PV capacity
installed in the ESG section)
Policy and
Legal
transition risk
Reporting
compliance
Short to
medium
term
Various new reporting requirements for
companies and financial organisations
introduced within the UK, including
proposed legislation regarding climate
transition plans from the Transition
Plan Taskforce. Risk of litigation/
enforcement action for non-compliant
disclosures and incorrect information
Increased costs resulting from
fines and judgements
We continue to integrate the
collection of accurate ESG data
points into our operational business
Working with our advisers and
industry bodies, we keep closely
informed of all changes in reporting
requirements and the disclosure
obligations which result
Policy and
Legal
transition risk
Asset
performance
compliance
Medium
term
Assets become stranded and
unlettable due to changing energy
efficiency regulation, particularly
tightening MEES regulation governing
minimum EPC standards
Upgrading of existing assets in
order to comply with increasingly
stringent national and regional energy
performance standards
Higher development costs for
new buildings to construct
to more stringent energy
performance standards
Cost of procuring low-carbon
materials for developments and
refurbishments due to regulation on
embodied carbon limits, including
impacts from the EU Carbon Border
Adjustment Mechanism
Write-offs and early retirement
ofexisting assets
Increased capital costs for
development and refurbishment
Increased costs resulting from
fines and judgements
The large majority of the
Company’s assets have an EPC
rating of A to C (see ESG section)
The ESG policy of the fund sets
out the targeted environmental
performance of assets being
acquired, and asset management
plans incorporate measures
to improve environmental
performance if it is below the
targetperformance
New developments incorporate
measures to mitigate the physical
and transition risks of assets
Market
transition risk
Occupier
behaviour
Short to
long term
Prospective occupiers have higher
energy performance requirements due
to their own energy costs, regulation
affecting their sectors and customer
demand for net zero business
operations
Increased capital costs
Write-offs and early retirement of
exist
ing assets
We regularly engage with occupiers
to identify low-carbon solutions
which may help alleviate costs
and improve their own ESG
performance
Market
transition risk
Growth of
green finance
Short to
long term
Investors place stricter requirements
on asset managers
Access to, and cost of, capital
become increasingly contingent on
sustainability performance
Increased capital costs
Write-offs and early retirement of
existing assets
The ESG policy of the fund sets
out the targeted environmental
performance of assets being
acquired, and asset management
plans incorporate measures
to improve environmental
performance if it is below the target
performance
Market
transition risk
Climate action
failure
Short to
medium
term
Continued failure to transition to a net
zero carbon economy will increase the
impacts of climate change, resulting in
higher levels of adaptation
This will also have negative impacts on
occupiers who are increasingly looking
for green and sustainable credentials
Greater capex and opex costs
to implement a higher level of
adaptation to provide assets with
the required level of mitigation
needed to ensure assets are
resilient to future climate change
Loss of value for assets that don’t
have sustainable credentials
as occupier demand for these
buildings decreases
The Company has disclosed its
revised net zero targets in the
ESG section, and the net zero
carbon pathway will be published
in 2023. These will support the
decarbonisation of the fund and
support global efforts to reach
net zero in line with the goals of
theParis Agreement
Tritax Big Box REIT plc Annual Report 2022 65
STRATEGIC REPORT
Table 3 Climate-related opportunities
Climate-related
opportunities Time horizon Potential opportunities to business Potential financial impacts Planning and strategy
Energy
source
Short to
medium
term
Deployment of lower emissions
sources of energy
Use of supportive policy incentives
Use of new technologies
Shift toward decentralised energy
generation
Increased energy security and resilience
Greater visibility of asset performance
Upfront costs of installing low-
carbon infrastructure
Additional revenue through the sale
of renewable energy to customers
and the grid
Continue to deploy on-site
renewable energy in partnership
with our customers, where possible
(see installed solar PV capacity in
the metrics and targets section)
Regularly engage with our
customers to understand their low-
carbon infrastructure requirements
(e.g. in relation to the deployment of
low-carbon transport solutions)
EV charging spaces are currently
available at 54% of our assets
(based on floorspace)
Markets Short to
medium
term
Use of public-sector incentives
Access to new assets and locations
Retention and enhancement of
Shareholder relationships – alignment
with ESG objectives
New opportunities to align capital
deployment with climate change
mitigation can be captured through
underwriting or financing green
initiatives and infrastructure through
green finance instruments (e.g. low
emission energy production, energy
efficiency)
ESG investors – new source of
investment
Green debt/green finance/green
bonds – new sources of capital
Increased diversification of financial
assets (e.g. green bonds and
infrastructure)
Defensive play against negative
impact on value/liquidity
Positive play – green buildings
vs brown buildings – capital and
rental growth
Following the issuance and full
allocation of proceeds related to
the Company’s last green bond,
we continue to assess future
opportunities related to ESG-linked
capital raises
The Company has identified potential opportunities to its business and associated financial impacts. We plan to review the climate-related
opportunities to our business under different emissions scenarios as part of the next round of TCFD reporting.
Describe the resilience of the organisation’s
strategy, taking into consideration different climate
scenarios including a 2°C or lower scenario
The physical climate risk analysis has used three scenarios to assess
the impact of physical climate risks across the Company’s portfolio
tothe end of the century. The scenarios used were as follows:
•
RCP8.5: a high emissions scenario, consistent with a future with
no policy changes to reduce emissions and characterised by
increasing GHG concentrations and a temperature increase of
around 4°C relative to the pre-industrial period (1850–1900);
•
RCP4.5: a medium emissions scenario, consistent with relatively
ambitious emissions reduction, that likely overshoots the Paris
Agreement temperature target of 1.5°C/2°C relative to the pre-
industrial period (1850–1900); and.
•
RCP2.6: a Paris-aligned scenario that sees emissions peak
early on in the 21st century and then decline after. This scenario
assumes a warming of less than 2°C by the end of the century.
These scenarios were selected as they are based on internationally
recognised datasets and consider the potential physical risks of a
changing climate and transition to a net zero economy. We believe
that they provide good coverage across all possible future scenarios,
allowing us to understand the range of physical impacts that may
occur and align with the recommendations of the TCFD which states
that more than one scenario should be considered, one of which
should be aligned with the Paris Agreement.
Transition risks have been assessed using CRREM’s 1.5°C scenario,
aligned with warming of less than 1.5°C by the end of the century,
and CRREM’s 2°C scenario. A 1.5°C scenario will identify the greatest
risks and allow for a conservative degree of planning in this regard,
ensuring maximum resilience of the portfolio to transition risk – this
is therefore the scenario used to characterise exposure to stranding
risk. Detail of the analytical methods and sensitivities is provided
in the Risk Management section of this disclosure, and outputs
will be disclosed along with the portfolio transition plan in thenext
reporting period.
We are continually evolving our strategy to reflect the profile of transition
and physical risks across our portfolio and have announced the
development of our revised ESG targets, which include revised net
zero carbon targets (see the ESG section). The Company’s updated
net zero transition plan, due to be published later this year, will
provide more detail on how our transition risk strategy may change
toaddress potential risks and opportunities.
Tritax Big Box REIT plc Annual Report 202266
Task Force on Climate-related Financial Disclosures (“TCFD”) Report continued
Risk
management
Climate change is identified as a long-term emerging risk to the
business (e.g. physical changes – increased likelihood of flooding or
heat stress related events) for which we have undertaken appropriate
research to mitigate the worst effects. The Company recognises
that failure to adequately identify and mitigate for such risk poses
a multitude of threats to our portfolio that includes risk of assets
stranding, reduced rental attractiveness to tenants and diminished
portfolio value in the future.
Describe the organisation’s processes for
identifying and assessing climate-related risks
To support the principal risk analysis process outlined in the Principal
Risks and Uncertainties section, which describes the Company’s
approach to managing risk and the significant risks it faces, we have
worked with a panel of independent experts (CBRE, Savills, DNV)
to identify and assess the relative significance of climate-related
physical and transition risks and opportunities in line with our existing
risk management process. These processes are set out below.
Physical risk process
Last year, a physical climate risk assessment for medium (RCP4.5)
and high (RCP8.5) emissions scenarios was completed for all assets
toassess the short- (2030s) and medium- (2050s) term risks of
physical climate hazards to the Company’s portfolio. The climate
risk analysis has been reviewed and where new information has
become available risks have been downgraded. The process
involvedassessing potential physical climate risks to new assets
in the portfolio. In addition, we have also completed a qualitative
climaterisk analysis for a Paris-aligned low emissions (RCP2.6)
scenario to understand what our physical climate risks might be
under a lower level of warming.
The following risk terminology has been used in the assessment.
Risk has been defined as the potential for adverse consequences
of a climate-related hazard on the lives, livelihoods, health and
wellbeing, ecosystems, assets, services and infrastructure. It results
from the interaction between vulnerability of an affected system, its
exposure over time, the climate-related hazard and the likelihood of
its occurrence. For this assessment, hazard has been defined as the
potential occurrence of a natural or human-induced event that may
cause the loss of life, injury, damage loss of property, infrastructure,
livelihoods, services ecosystems or environmental resources
1
. Whilst
vulnerability is defined as the propensity of an asset to be damaged
or undergo a period of downtime after having been adversely
affected by a climate event
1
. This is based on the risk definition
defined in the International Panel of Climate Change (“IPCC”) report
2
.
The portfolio-level risk analysis has used the likelihood of the climate
hazard and the severity of the impacts of the Company’s assets on
terms of their ability to remain operation under adverse conditions.
The portfolio-level assessment was not asset specific and focused
on the material risks. The potential climate-related risks on the
business have been identified including potential financial risks.
The Munich Re risk platform has been used to inform the likelihood
assessment and expert judgement has been used to inform the
vulnerability assessment.
Transition risk process
A portfolio transition risk assessment has been carried out, using
energy consumption and carbon emission information for the
Company’s assets to assess the alignment of the portfolio with the
decarbonisation pathways outlined by the Carbon Risk Real Estate
Monitor (“CRREM”) tool, completed by Savills Plc. The assessment
has been based on data gathered for the Company’s 2022 GRESB
submission, with data covering the 2021 financial year.
The CRREM analysis considers the CRREM 1.5°C pathway for
alignment and a time horizon to 2050. Risk associated with this
portfolio transition risk assessment is therefore stranding risk, defined
by CRREM as the risk of owning or managing an asset “that will not
meet future energy efficiency standards and whose energy upgrade
will not be financially viable”. The market participant may face a
situation where properties do not meet future market expectations
and therefore will be exposed to write downs.
Sector and country-specific pathways have been used to assess
pathway alignment and risk has been considered for both energy
use and carbon emissions, with high-priority assets identified
which represent significant absolute emissions and also have high
normalised energy use (per m
2
) – also referred to as energy use
intensity (“EUI”).
New developments
For all new development projects, Tritax Symmetry undertakes
lifecycle assessments to review the upfront carbon, in alignment with
the RICS Whole Life Carbon Guidance and using the One Click LCA
assessment software, which include the consideration of material use
and future operational energy demand. In addition, each new Tritax
Symmetry development project is assessed against various physical
climate-related risks, including the following:
•
Flood Risk Assessment and drainage strategy, which reviews the
site risk against all sources of flooding and includes within the
calculations a climate change uplift;
•
Adaption to Climate Change study, which identifies and assesses
climate change hazards, estimates and evaluates risk associated
with these hazards and identifies risk management measures; and
•
Thermal Comfort Analysis which also includes evaluation against
a future climate weather file, to determine whether the projects will
maintain thermal comfort in climate change conditions.
Describe the organisation’s processes for managing
climate-related risks
The Board recognises the importance of identifying and monitoring
climate-related risks, which feature on our principal risk register.
The Audit and Risk Committee formally considers and assesses
the risks that may be relevant to the Company on a bi-annual basis
as reported by the Manager’s Executive Committee. The Audit
and Risk Committee also undertakes a review of the effectiveness
of the risk management systems. Ownership and management of
all risks is assigned to relevant members of the Manager who are
responsible for ensuring the operating effectiveness of the internal
control systems and for implementing key risk mitigation plans. The
risk management process is designed to identify, evaluate, manage
and mitigate (rather than eliminate) the significant risks faced. The
vulnerability of high-risk assets, for example, is analysed by studying
mitigation measures currently in place (e.g. flood barriers). If assets
are deemed both highly exposed and highly vulnerable, we aim to
implement appropriate mitigation measures necessary to improve the
resilience of the asset. During this reporting year, the asset manager
has undertaken annual monitoring in the form of site walkovers at
each asset to identify any site-level vulnerabilities to potential climate
hazards that could result in material impacts to the Company should
Tritax Big Box REIT plc Annual Report 2022 67
STRATEGIC REPORT
the climate hazard occur. We intend to increase the frequency
of this monitoring to twice per year in the next reporting year.
These measures set out how we mitigate and control our physical
climate risks and where the risk is deemed acceptable, we accept
those risks.
An external expert has been utilised to review last year’s climate
change risk assessment (2021), updating risks and opportunities in
line with any progress that has been made to mitigate risks over the
past 12 months. A qualitative assessment of the physical impacts of
climate change under a low emissions scenario (RCP2.6) has also
been completed to better understand the possible physical climate
risks associated with a Paris-aligned scenario.
Our physical climate risk assessments are reviewed on a yearly basis
to re-evaluate the exposure of our assets in light of new climate
data and the incorporation of adaptation measures that have been
implemented in response to identifying a potential vulnerability
at site level during annual monitoring processes. This proactive
approach allows us to focus mitigation efforts on our highest risk
assets and ensure resilience is prioritised in business planning
for the coming year, reducing the overall risk to our assets should
a climate hazard impact the site. Any risks identified at the asset
level are communicated to the asset manager through a formal
reporting process. Processes for managing physical climate risks are
incorporated into asset management plans.
Our due diligence assessments, internal procedures and insurance
cover, therefore, mitigate ESG risks to a high standard. Going
forward, the Company will undertake asset-level transition and
physical risk audits to prioritise climate-related risks identified at the
portfolio level, covering asset vulnerability, net zero potential and
associated capital costs.
The outcomes of the climate-related assessments undertaken for
new developments enable Tritax Symmetry to manage any potential
risks which are identified:
•
Flood Risk Assessment and drainage strategy – the outcomes
of the study are intended to either indicate that the site chosen is
at low risk from all foreseeable sources of flooding, or to identify
measures to incorporate into the scheme to reduce the risk. The
drainage strategy is also informed by the climate change enhanced
run-off calculations, to ensure the design allows for additional,
more intense storm events;
•
the Adaption to Climate Change study concludes with a series of
risk management measures, which are subsequently incorporated
into the design of the scheme; and
•
the Thermal Comfort Analysis study confirms whether the
design will maintain thermal comfort in the future, and if there are
failuresthe study is also required to identify how passive measures
could be incorporated in the future to ensure that thermal comfort
ismaintained.
Describe how processes for identifying, assessing
and managing climate-related risks are integrated
into the organisation’s overall risk management
The Audit and Risk Committee formally considers and assesses the
risks that may be relevant to the Company on a bi-annual basis as
reported by the Manager’s Executive Committee, including climate-
related risks. The risks highlight the potential impact on the Company
along with any mitigating factors. The risks are also reviewed and
assessed by the key representatives of the Manager including the
Manager’s Executive Committee on an ad hoc basis. As part of this
process, the Company recognises the importance of identifying
and monitoring climate-related risks, which feature on our principal
riskregister.
The Manager has also established a Risk Committee which conducts
periodic horizon scanning, on a quarterly basis, for new risks which
may impact funds under management including the Company. Over
the past 12 months, no new physical or transitional risks have been
identified by this process.
The Investment Committee of the Manager also assesses the
climate-related risks and opportunities. Acquisitions are subject to
ESG due diligence assessments which inform the members of the
Investment Committee of any climate-related risks, such as flooding,
to inform the investment decisions on climate-related risks. Once an
asset is acquired, as part of the annual insurance renewal process,
an assessment of the physical climate change risks of the assets
within the portfolio are assessed and the results are shared with
the Partners. The Partner responsible for asset management and
property management ensures that any material risks are considered
for the Fund.
1. Intergovernmental Panel on Climate Change (no data) Annex II Glossary,
https://www.ipcc.ch/site/assets/uploads/2018/02/WGIIAR5-AnnexII_FINAL.
pdf (Accessed: 6 February 2023).
2. Intergovernmental Panel on Climate Change (2012) Managing the Risks
of Extreme Events and Disasters to Advance Climate Change Adaptation:
A Special Report of Working Groups I and II of the Intergovernmental
Panel on Climate Change. C.B. Field, V. Barros, T.F. Stocker, D. Qin, D.J.
Dokken, K.L. Ebi, M.D. Mastrandrea, K.J. Mach, G.-K. Plattner, S.K. Allen,
M. Tignor and P.M. Midgley (eds.) Cambridge, Cambridge University Press.
https://www.ipcc.ch/site/assets/uploads/2018/03/SREX_Full_Report-1.pdf
(Accessed: 6February 2023).
Tritax Big Box REIT plc Annual Report 202268
Task Force on Climate-related Financial Disclosures (“TCFD”) Report continued
Metrics and targets
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line
withits strategy and risk management process
The Company employs a holistic set of metrics in order to assess climate-related risks and opportunities, in line with the recommendations of
the TCFD. These metrics are outlined below. Note that at the present time, reporting against some of these metrics is in development; where
this is the case, this is clearly noted. For other metrics, both current and past years’ performance is reported where possible.
Metric category Metric FY 2021 FY 2022 2022 target
GHG emissions Absolute Scope 1 GHG emissions See SECR disclosure
on page 36
See SECR disclosure
on page 36
Currently net zero
by 2030 (see revised
target page 38)
Absolute Scope 2 GHG emissions See SECR disclosure
on page 36
See SECR disclosure
on page 36
Currently net zero
by 2030 (see revised
target page 38)
Scope 3: Absolute construction-related
GHG emissions
N/A See SECR disclosure
on page 36
Currently net zero
by 2040 (see revised
target page 38)
Scope 3: Absolute tenant operational
GHG emissions (Tenant Scope 1 & 2)
See SECR disclosure
on page 36
To be disclosed 2023 Currently net zero
by 2050 (see revised
target page 38)
Transition risks % EPCs of existing portfolio A–C Grade See ESG section on
pages 32 to 38
See ESG section on
pages 32 to 38
Improve all EPCs to at
least a C grade by 2023
and B grade by 2026
Physical risks % priority assets with climate resilience
plan in place
See ESG section on
pages 32 to 38
See ESG section on
pages 32 to 38
All priority assets have
climate resilience
plans in place
Climate-related
opportunities
On-site renewable energy generation
projects – capacity installed (MW)
N/A See ESG section on
pages 32 to 38
Progress with
on-site renewable
energy generation
projects in place
% of new buildings developed to
netzerostandards
100% 100% All new developments
within the land portfolio
acquired through the Tritax
Symmetry portfolio will be
constructed to net zero
carbon, as defined by the
UK GBC from June 2020
Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (“GHG”) emissions and the
related risks.
Scope 1, 2 and selected Scope 3 GHG emissions are disclosed in the SECR disclosure. The Scope 3 emissions reported relate to our
customers’ emissions
3
(category 13, downstream leased assets) and the emissions associated with Tritax Symmetry’s development programme.
Describe the targets used by the organisation to manage climate-related risks and opportunities and
performance against targets.
Targets can be found reported alongside the relevant metric to allow progress to be assessed against the target over time.
3. Customer emissions are categorised under Scope 3, category 13 (downstream leased assets). Asset-level ESG data (e.g. energy, GHG emissions, water,
waste) is collected from our customers annually from February to June. Therefore, we disclose our Scope 3 GHG emissions related to our customers’ activities
for the 2021 financial year. Emissions relating to the 2022 financial year will be disclosed later in the year.
Tritax Big Box REIT plc Annual Report 2022 69
STRATEGIC REPORT
Going Concern and Viability Statement
The Strategic Report describes the Group’s financial position,
cash flows, liquidity position and borrowing facilities. The Group’s
cash balance as at 31 December 2022 was £47.6 million, of which
£47.4million was readily available. It also had a further £483 million
of undrawn commitments under its senior debt facilities, of which
£99.9million (see note 34) was committed under various construction
contracts at the year end.
The Group currently has substantial headroom against its borrowing
covenants, with a Group LTV of 31.2% as at 31 December 2022.
A significant part of the Group’s borrowings are on an unsecured
basis, providing the Group with a deeper pool of liquidity and with
more flexibility over its arrangements. In December 2022, the Group
agreed an increase of £200 million to its level of RCF commitments,
providing it with greater available liquidity. This assisted the Group
in positioning its weighted average maturity across its borrowings
of 5.4 years as at 31 December 2022 (2021: 6.4 years). As a result
and following rigorous stress testing of financial forecasts in relation
tofuture viability, the Directors believe that the Group is well placed
tomanage its current and future financial commitments.
The Group benefits from a secure income stream of leases with an
average unexpired term of 12.6 years, containing upward-only rent
reviews, which are not overly reliant on any one tenant and present
a well-diversified risk. The portfolio was 98% let (2021: 100%) at
the year end.
The Directors believe that there are currently no material uncertainties
in relation to the Company and the Group’s ability to continue for
aperiod of at least 12 months from the date of approval of the Company
and the Group’s financial statements. The Board is, therefore, of the
opinion that the going concern basis adopted in the preparation
ofthe Annual Report is appropriate.
Assessment of viability
The period over which the Directors consider it feasible and
appropriate to report on the Group’s viability is the five-year period
to 2 March 2028. This period has been selected because it is the
period that is used for the Group’s medium-term business plans
andindividual asset performance analysis.
The assumptions underpinning these forecast cash flows and
covenant compliance forecasts were sensitised to explore the
resilience of the Group to the potential impact of the Group’s
significant risks, or a combination of those risks. The key
assumptions sensitised for the forecast cash flows in downside
scenarios were portfolio value, which was sensitised by up to a
25% reduction or to vacant possession value upon lease expiry,
occupation of buildings where assumptions were made over certain
lease events and tenant defaults with sensitivities, rental uplifts
assumed to be between 0% and 6% per annum upon reviews, cost
inflation was assumed to be up to 10% per annum and debt cost
assumptions varied upon refinancing.
The principal risks on pages 53 to 58 summarise those matters that
could prevent the Group from delivering on its strategy. A number
of these principal risks, because of their nature or potential impact,
could also threaten the Group’s ability to continue in business in its
current form if they were to occur.
The Directors paid particular attention to the risk of a deterioration
in economic outlook which would impact property fundamentals,
including investor and occupier demand which could have a
negative impact on valuations, and give rise to a reduction in the
availability of finance. The Board also paid attention to the impact
of either a delay to the receipt of planning permission or the risk of
not achieving planning consent as well as the impact of inflationary
costs on raw materials in the current environment. Given the flexibility
within the land portfolio, in a downturn scenario the Group could
effectively pause all uncommitted development. The remaining
principal risks, whilst having an impact on the Group’s business
model, are not considered by the Directors to have a reasonable
likelihood of impacting the Group’s viability over the five-year period
to 2March 2028.
The sensitivities performed were designed to be severe but plausible;
and to take full account of the availability of mitigating actions that
could be taken to avoid or reduce the impact or occurrence of the
underlying risks:
Downturn in economic outlook: Key assumptions including
occupancy, void periods, planning risk, rental growth and yields
were sensitised to reflect reasonably plausible levels associated
with an economic downturn. The assumptions were considered in
light of thecurrent inflationary environment and associated impact
on interest rates in particular. Various forms of sensitivity analysis
have been performed, in particular with regard to the financial
performance of the Group’s customers, taking into account any
discussions held with customers surrounding their operational
performance, including their current status on rent collection.
Restricted availability of finance: The Group does not have
a significant refinancing event occurring until December 2024.
Financing is arranged in advance of expected requirements
and theDirectors have reasonable confidence that additional or
replacement debt facilities will be put in place when the need arises.
Some assurance can be taken from the increase in the RCF agreement
in December 2022, from a supportive set of lenders to the Group.
Furthermore, the Group has the ability to make disposals of investment
properties to meet the future financing requirements under the
development portfolio.
Viability Statement
Having considered the forecast cash flows and covenant compliance
and the impact of the sensitivities in combination, the Directors
confirm that 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 period ending 2 March 2028.
The Strategic Report was approved by the Board and signed on its
behalf by:
Aubrey Adams
Chairman
1 March 2023
70 Tritax Big Box REIT plc Annual Report 2022
Chairman’s Governance Overview
Aubrey Adams OBE, FCA, FRICS
Chairman
Governance highlights for 2022
• Further developed and enhanced the Board’s composition
and succession planning including the appointment
of KarenWhitworth as Senior Independent Director
and Elizabeth Brown as the Chair of the Management
Engagement Committee with effect from November 2022.
• Complied with all of the principles and provisions of the 2019
AIC Code applicable to the Company. Please see pages
77 and 78.
• Met all of the requirements set out in the Financial Reporting
Council’s Guidance on Risk, Internal Control and Related
Financial and Business Reporting. Please see page 95.
• Conducted a comprehensive external Board evaluation
exercise. Please see page 90.
• Further enhanced processes and procedures across the
business and its supply chain in compliance with the Modern
Slavery Act 2015 and prepared our annual statement which
appears on our website. Please see page 93.
• Updated the ESG framework including new ESG targets.
Please see pages 32 to 38.
• Conducted a strategic review of the business at the strategy
meeting in May 2022.
• Shareholder approval given for the amended Investment
Management Agreement (“IMA”) on 4 May 2022.
Good governance is central
This report seeks to demonstrate and explain the Company’s core
governance-related processes and procedures, and highlights
the key governance actions which have taken place during the
period. The Board continues to believe that sound corporate
governance plays a key role in shaping the long-term success
oftheCompany and provides a strong foundation for the delivery
ofits strategicobjectives.
Board priorities
One of our key priorities as a Board is to oversee the successful
implementation of the business’ strategy and ensure it is positioned
for long-term success. The Board continues to support the Manager
in any potential investment and divestment decisions and ensures
ongoing compliance with the Company’s Investment Policy and
Objectives. The Board held an off-site strategy day in May 2022
which provided an opportunity to focus on the strategic opportunities
as well as the prevailing macroeconomic climate outside the routine
consideration of the Board. We were also pleased to be able to visit
some of our development sites following the easing of the Covid-19
restrictions, including our sites in Kettering and Biggleswade.
The Board worked with the Manager to finalise the renegotiation of
the IMA to amend certain aspects of the agreement to reflect the
growth of the business and support its ongoing strategy. The Board
consulted with major Shareholders throughout the process and
voluntarily sought, and was pleased to receive, Shareholder approval
at the Company’s AGM in May 2022. For further details, please
see pages 82.
We continued to make good progress on our ESG strategy, including
improved collection of ESG data and ESG integration across the
asset lifecycle. Further to our first TCFD disclosure in our 2021
Annual Report, we continued to embed climate reporting into our
governance framework and align the carbon performance of the
portfolio to the Paris Agreement decarbonisation pathways. Karen
Whitworth remains our “ESG Champion” and engages directly with
the Manager’s ESG Director on various ESG topics. For further
information please see page 80.
Board and Committee composition
The Board continued to focus on succession planning over the year.
Following the appointment of Elizabeth Brown and Wu Gang in late
2021, the Board has focused on integrating the new Non-Executive
Directors into the Board. The Nomination Committee conducted a
thorough review of the Committee and Board membership during
the year which concluded with Karen Whitworth taking over the
role of Senior Independent Director from Alastair Hughes, who has
remained on the Board as a Non-Executive Director. As a result, the
Nomination Committee recommended a refresh in the core Board
Committee membership which resulted in Elizabeth Brown taking
over as Chair of the Management Engagement Committee, effective
from November 2022.
71Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Board development and evaluation
We continue to receive regular updates and briefings on corporate
governance as well as wider regulatory changes within the market,
such as on TCFD, to ensure we comply with all applicable laws
andregulations.
During the year, the Board completed several training sessions, the
first with a focus on occupiers, which included information around
their business focus and challenges with Brexit, labour shortages and
drive for growth. The second training session was on the Manager’s
Occupier Hub (an in-house client relationship management tool),
which allows the Company to manage customer contacts, with
primary focus on the development and asset management teams.
Further to this, another training session was dedicated to learning
about the elements of the power system, local energy generation
options and potential areas of impact for the business.
The sessions help to inform and upskill the Board and ensure we
have sufficient knowledge to discharge our duties effectively, further
details of which can be found on page 89.
Towards the end of 2022, we conducted an externally facilitated
Board evaluation which reviewed the performance of the Board, its
committees and my Chairmanship. We are pleased to report that
the review was positive, demonstrated a high level of challenge
and critical thinking in the boardroom, and highlighted a few
priorities for the Board to focus on over the next period, as well as
a few recommendations on areas for development, which will help
structure our 2023 internal performance evaluation. Further details
can be found on page 90.
Board engagement
We believe that our positive engagement and working relationship
with the Manager is key to enhancing the Company’s governance
arrangements and ensuring that they are robust and fit for purpose.
We work closely with the Manager to identify areas for improvement
and best practice which promotes an open and collaborative culture.
This year, we reviewed a number of our policies and procedures,
including refreshing the Board Diversity and Inclusion Policy, the
Non-Audit Services Policy and the Share Dealing Code in line with
best practice.
We regularly engage with the Company’s advisers, Jefferies
(Joint Financial Adviser and Joint Corporate Broker), JP Morgan
Cazenove Limited (Joint Corporate Broker), Taylor Wessing LLP
(Legal Adviser) and Akur Limited (Joint Financial Adviser), to discuss
investor feedback they have received and/or gauge their views on
corporate strategy and performance. We also provide investors with
regular updates on significant business events, specifically financial
performance and investment activity, through announcements
via the Regulatory News Service of the London Stock Exchange
(“RNS”). These updates are also uploaded to the Company’s website
(https://www.tritaxbigbox.co.uk/investors/regulatory-news).
Priorities for 2023
Looking ahead to 2023, the Board is focused on progressing with the
next phase of the ESG strategy including working towards our 2023
targets. The Board will also work towards meeting the targets on
Board diversity included in Listing Rule 9.8.6R(9).
Aubrey Adams OBE, FCA, FRICS
Chairman
1 March 2023
Statement of compliance
The Board of Tritax Big Box REIT plc has considered the Principles
and Provisions of the 2019 AIC Code of Corporate Governance
(the “AIC Code”). The AIC Code addresses the Principles and
Provisions set out in the UK Corporate Governance Code (the
“UK Code”), and sets out additional Provisions on issues that are
of specific relevance to investment companies.
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
toShareholders.
The Company has fully complied with the Principles and
Provisions of the AIC Code.
The AIC Code is available on 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
Code to make them relevant for investment companies.
X For further details please see pages 77 and 78
72 Tritax Big Box REIT plc Annual Report 2022
Board of Directors
Aubrey Adams OBE, FCA, FRICS
Independent Chairman
Appointed Tenure
11 September 2017 5 years 6 months
Relevant skills and experience
• Almost 40 years’ experience at board level
in the real estate industry, including part
of his executive career as chief executive
ofSavills plc
• Extensive experience as a chairman
and non-executive director, including as
senior independent director of Associated
British Ports plc and chairman of Max
Property Group plc
• Fellow of the Institute of Chartered
Accountants in England and Wales
• Fellow of the Royal Institution of
Chartered Surveyors
Key external appointments
• Chairman of the board of trustees of
Wigmore Hall since May 2011
• Group chair of L&Q Housing Trust, a leading
housing association since September 2015
• Director of Nameco (No.522) Ltd since 2015
Karen Whitworth FCA
Senior Independent Director
Appointed Tenure
21 October 2019 3 years 5 months
Relevant skills and experience
• Significant retail, strategic, financial and
logistics experience gained through several
commercial, operational and governance roles
• Over 20 years of board level experience in
public and private organisations
• Fellow of the Institute of Chartered
Accountants in England and Wales
• Managing director of Whitworth Holdings
Limited from 2012 to 2022, when the
business was sold
• Non-executive director and chair of the audit
and risk committee of Pets at Home Group plc
until May 2021
• Various operational, strategic and
commercial roles at J Sainsbury’s PLC, from
2007 to 2018, ultimately becoming a member
of the commercial board and director of non-
food grocery and new business for the last
three years
• Supervisory member and audit committee
member of GS1 UK Limited from 2013 to 2018
• Chairman’s adviser/finance director at BGS
Holdings Limited (trading as “Tunetribe”) from
2005 to 2007
• Various roles at Intercontinental Hotel Group
plc from 2000 to 2005, including senior vice
president of strategy and transformation and
senior vice president of investor relations
Key external appointments
• Non-executive director and member
of the audit committee and corporate
responsibility committee of Tesco plc since
December 2020
• Non-executive director and audit committee
chair of The Rank Group Plc since November
2019 and senior independent director since
January 2022
• Independent adviser to Growup Farms
Limited since 2019
Richard Laing FCA
Independent Non-Executive Director
Appointed Tenure
16 May 2018 4 years 10 months
Relevant skills and experience
• Experienced non-executive director and
non-executive chairman of quoted and
unquoted businesses
• In-depth knowledge of financial matters
through his previous roles as finance director
and chief executive of CDC Group plc for
11 years; as finance director of De La Rue
plc; as financial analyst and manager at
Bookers Group plc; and from five years at
PricewaterhouseCoopers
• Fellow of the Institute of Chartered
Accountants in England and Wales
Key external appointments
• Chairman of 3i Infrastructure plc since
January 2016
• Non-executive director and chairman of
the audit and risk committee of JP Morgan
Emerging Markets Investment Trust plc since
January 2015
• Deputy chairman of the Board of Trustees
of Leeds Castle since September 2012,
chairman of the audit and risk committee
andmember of the investment committee
M N
AA MM N
73Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Elizabeth Brown
Independent Non-Executive Director
Appointed Tenure
15 December 2021 1 year 3 months
Relevant skills and experience
• Brings a clear focus on consumer trends
and market insights, identifying growth
opportunities and translating these into
value-creating strategies
• 20 years’ experience in strategy and M&A,
as a former strategy consultant with L.E.K.
Consulting from 2002-2005; an investment
director at the RBS Special Opportunities
Fund from 2005-2012; and was a core
member of the team that negotiated the
merger of Dixons Retail and Carphone
Warehouse, one of the largest retail mergers
of all time
• Group strategy director at Diageo from 2019-
2022, leading the strategic agenda across
the business to drive shareholder value
• Strategy director of Services from 2016 to
2017 and head of corporate development
from 2013 to 2017 at Currys (formerly
Dixons Carphone)
Key external appointments
• Chief Strategy officer at Inchcape plc since
February 2023
Wu Gang
Independent Non-Executive Director
Appointed Tenure
1 October 2021 1 year 5 months
Relevant skills and experience
• A strong strategic and financial advisory
background and a wealth of international
experience gained from a career of over
25 years in investment banking in Asia
and Europe
• Set up and led the European investment
banking team at CLSA Securities, the
international investment banking platform of
CITIC Securities, from 2015 to January 2019
• Prior to CLSA Securities, was head of M&A
and general industrials at ICBC International
• Held senior level positions at The Royal Bank
of Scotland, HSBC and Merrill Lynch in Hong
Kong and London
• Served as a non-executive director of Laird
Plc from January 2017 to June 2018
Key external appointments
• Non-executive director and chair of the risk
committee of Ashurst LLP since April 2019
• Non-executive director and member of the
risk and nomination committees of IG Group
Holdings plc since October 2020
• Senior adviser at Rothschild & Co (Hong
Kong) Limited since January 2019
Alastair Hughes FRICS
Independent Non-Executive Director
Appointed Tenure
1 February 2019 4 years 1 month
Relevant skills and experience
• Over 30 years’ experience in the UK and
international real estate markets both at an
operational and strategic level
• Former director and global executive
board member of Jones LaSalle Inc (“JLL”),
previously serving as managing director of
JLL in the UK, before becoming CEO for
Europe, Middle East and Africa and most
recently CEO for Asia Pacific
• Fellow of the Royal Institution of
Chartered Surveyors
Key external appointments
• Chair of Schroder Real Estate Investment Trust
Limited since October 2021, non-executive
director since April 2017
• Non-executive director of The British Land
Company plc since January 2018
• Non-executive director of QuadReal since
October 2019
AM AMN M
Audit and Risk Committee
Management Engagement Committee
Nomination Committee
Chair
A
M
N
74 Tritax Big Box REIT plc Annual Report 2022
Key Representatives of the Manager
Tritax Management LLP (the “Manager”) acts as the Company’s
Alternative Investment Fund Manager (“AIFM”) for the purposes of
the Alternative Investment Fund Manager Directive (“AIFMD”) and as
such the Board has delegated authority to the Manager to conduct
portfolio and risk management services on behalf of the Company.
Whilst the Manager has the ultimate responsibility to make the final
decision over portfolio and risk management services, the Board
actively discusses potential investments and divestments with the
Manager and ensures ongoing compliance with the Company’s
Investment Policy and Investment Objectives.
This complies with the European Securities and Markets Authority
(“ESMA”) guidelines published on 13 August 2013 in respect of the
AIFMD and ensures that the Company continues to adopt best
governance practice.
X To read more about our colleagues please go to
https://www.tritaxbigbox.co.uk/about/people-and-culture/
Petrina Austin
Head of Asset Management
Relevant skills and experience
Petrina leads the Group’s asset and property
management service, incorporating ESG and
insurance functions. She has developed the
capabilities of the team to extend the skills in
logistics and industrial operations, integrating
ESG and power considerations into analysis.
Petrina began her career at Carter Jonas before
moving to King Sturge (now JLL) to concentrate
on institutional portfolio management. In 2002,
Petrina joined Knight Frank before joining Tritax
Group in 2007, and becoming a partner of Tritax
Group in 2017.
Henry Franklin
Chief Operating Officer
Relevant skills and experience
Henry is responsible for tax, legal and
compliance activities, working closely with the
Board, the management team and external
advisers to ensure the robustness of the tax and
legal structure. Henry is a qualified solicitor who
completed his articles with Ashurst LLP in 2001,
qualifying as a chartered tax adviser in 2004
before moving to Fladgate LLP in 2005. Henry
joined the Tritax Group as a partner in 2008.
Colin Godfrey
CEO for Tritax Big Box REIT plc
Relevant skills and experience
Colin is responsible for leading the Group’s
fund management function and has overall
responsibility for the provision of strategic
investment advice to the Group. Colin began his
career with Barclays Bank before joining Conran
Roche in the late 1980s. Once qualified as a
chartered surveyor, Colin specialised in portfolio
fund management, with particular responsibility
for the £1 billion assets of the British Gas Staff
Pension Scheme. In 2000, Colin was a founding
Director of SG Commercial and became a
partner of Tritax Group in 2004.
Bjorn Hobart
Investment Director
Relevant skills and experience
Bjorn is responsible for managing the
Company’s investment portfolio and serves
as Chairman of the Investment Committee.
Bjorn started his career at Faber Maunsell
(now AECOM) and went on to undertake an
MA in Property Valuation and Law. In 2007,
Bjorn joined SG Commercial and joined Tritax
Group in 2011, becoming a partner of Tritax
Group in 2017.
Frankie Whitehead
CFO for Tritax Big Box REIT plc
Relevant skills and experience
Frankie is responsible for all aspects of the
Group’s finance and corporate reporting.
Frankie is a Fellow of the Institute of Chartered
Accountants in England and Wales. He
joined Tritax in 2014 following the Company’s
IPO. Frankie previously performed the role
of Financial Controller at Primary Health
Properties PLC and trained and qualified at
PKF (UK) LLP which subsequently merged with
BDO LLP. Frankie became a partner of Tritax
Group in2020.
James Dunlop
CEO – Investment
Relevant skills and experience
James is responsible for identifying, sourcing
and structuring suitable investment assets
for the Company. James started his career at
Weatherall Green and Smith (now BNP Paribas
Real Estate) where he qualified as a chartered
surveyor in its Investment Development and
Agency division in 1991. In 2000, James formed
SG Commercial, then became a partner of
Tritax Group in 2005.
Executive Committee
Investment Committee
Operations Committee
Risk Committee
ESG Committee
Green Finance Committee
Chair
EX
I
O
R
E
G
EX
EX
I
I
I
EX
O
O
EXG I
EXE
EXO
I
E
R
75Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Male 67%
Female 33%
Board gender split
Board relevant
The Board has a complementary range of
skills which are relevant to the Group’s
medium and longer-term objectives.
The Board considers Richard Laing to have
recent and relevant financial expertise to
Chair the Audit and Risk Committee.
Financial
Property
Retail
ESG
Logistics
Governance/PLC
E-Commerce
Risk Management
Strategy
Green Finance
Committee
Disclosure
Committee
ESG
Committee
Operations
Committee
Executive
Committee
Investment
Committee
Audit and Risk
Committee
Nomination
Committee
Management
Engagement
Committee
Risk
Committee
I
n
d
e
p
e
n
d
e
n
t
o
v
e
r
s
i
g
h
t
a
n
d
r
i
g
o
r
o
u
s
c
h
a
l
l
e
n
g
e
Board of Directors
Manager has delegated
authority to these
Committees
M
a
n
a
g
e
r
Non-Executive Director tenure
Years
Board member
2
1
1
1
1
1 2 3 4 5 6
n
Board Committee
n
Manager Committee
76 Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Key Activities of 2022
Post year end
• Agreed action plan following Board and Committee evaluation to focus on in 2023.
• Declared an interim dividend of 1.975 pence per share, in respect of the three months to 31 December 2022.
• Approved the Annual Report and Accounts 2022.
• Approved revised and updated 2023 ESG targets and KPIs.
January to March 2022
• Declared an interim dividend
of 1.90 pence per share, in
respect of the three months to
31 December 2021.
• Approved the Annual Report
and Accounts 2021.
July to September 2022
• Declared an interim dividend
of 1.675 pence per share, in
respect of the three months to
30 June 2022.
• Approved the interim
results 2022.
• Conducted the performance
review of the Manager.
October to December
2022
• Declared an interim dividend
of 1.675 pence per share, in
respect of the three months
to30 September 2022.
• Conducted the Board and
Committee evaluation.
• Appointed Karen Whitworth
as Senior Independent
Director of the Company and
Elizabeth Brown as Chair of
the Management Engagement
Committee.
April to June 2022
• Declared an interim dividend
of 1.675 pence per share, in
respect of the three months to
31 March 2022.
• Negotiated and agreed
amendments to the IMA.
• Held the Company’s Annual
General Meeting.
• Conducted the performance
review of the Company’s
keysuppliers.
• Strategy Meeting held
off-site and Board asset
tour to the Kettering and
Biggleswade sites.
Our stakeholders
The Manager and its employees Our customers Government, regulators andlocalcouncils
Our Shareholders Our lenders Our communities
Our suppliers
Key activities of the
77Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
The AIC Code, and the underlying UK Code, have placed increased emphasis on “comply or explain” with regard to the principles of the
Code. Our explanations of how we have applied the main principles of the AIC Code can be found below.
Board leadership and Company purpose
Principle A. A successful company is led by an effective board,
whose role is to promote the long-term sustainable success of the
company, generating value for Shareholders and contributing to
wider society.
• Strategic Report pages 1 to 69
• Board Leadership and Company Purpose pages 79 to 81
Principle B. The board should establish the company’s purpose,
values and strategy, and satisfy itself that these and its culture are
aligned. All Directors must act with integrity, lead by example and
promote the desired culture.
• Strategic Report pages 1 to 69
• Board Leadership and Company Purpose pages 79 to 81
• Division of Responsibilities pages 84 to 87
Principle C. The board should ensure that the necessary resources
are in place for the company to meet its objectives and measure
performance against them. The board should also establish a
framework of prudent and effective controls, which enable risk to be
assessed and managed.
• Principal Risks and Uncertainties pages 53 to 58
• Section 172 Statement page 25
• Audit, Risk and Internal Control pages 92 and 93
• Audit and Risk Committee Report pages 94 to 97
Principle D. In order for the company to meet its responsibilities to
Shareholders and stakeholders, the board should ensure effective
engagement with, and encourage participation from, these parties.
• Stakeholders pages 22 to 25
• Section 172 Statement page 25
Division of responsibilities
Principle F. The chair leads the board and is responsible for
its overall effectiveness in directing the company. They should
demonstrate objective judgement throughout their tenure and
promote a culture of openness and debate. In addition, the chair
facilitates constructive board relations and the effective contribution
of all non-executive directors, and ensures that Directors receive
accurate, timely and clear information.
• Board Leadership and Company Purpose pages 79 to 81
• Division of Responsibilities pages 84 to 87
Principle G. The board should consist of an appropriate
combination of Directors (and, in particular, independent non-
executive Directors) such that no one individual or small group of
individuals dominates the board’s decision making.
• Division of Responsibilities pages 84 to 87
• Composition, Succession and Evaluation pages 72 and 73 and 88 to 91
Principle H. Non-executive Directors should have sufficient time to
meet their board responsibilities. They should provide constructive
challenge, strategic guidance, offer specialist advice and hold third-
party service providers to account.
• Board Leadership and Company Purpose pages 79 to 81
• Division of Responsibilities pages 84 to 87
• Audit and Risk Committee Report pages 94 to 97
• Management Engagement Committee Report pages 98 to 100
Principle I. The board, supported by the company secretary, should
ensure that it has the policies, processes, information, time and
resources it needs in order to function effectively and efficiently.
• Division of Responsibilities pages 84 to 87
• Nomination Committee Report pages 88 to 91
Composition, succession and evaluation
Principle J. Appointments to the board should be subject to
a formal, rigorous and transparent procedure, and an effective
succession plan should be maintained. Both appointments and
succession plans should be based on merit and objective criteria
and, within this context, should promote diversity of gender, social
and ethnic backgrounds, cognitive and personal strengths.
• Nomination Committee Report pages 88 to 91
Principle K. The board and its committees should have a
combination of skills, experience and knowledge. Consideration
should be given to the length of service of the board as a whole and
membership regularly refreshed.
• Composition, Succession and Evaluation pages 72 and 73 and 88 to 91
Principle L. Annual evaluation of the board should consider its
composition, diversity and how effectively members work together to
achieve objectives. Individual evaluation should demonstrate whether
each director continues to contribute effectively.
• Nomination Committee Report pages 88 to 91
Application of Code
78 Tritax Big Box REIT plc Annual Report 2022
Audit, risk and internal control
Principle M. The board should establish formal and transparent
policies and procedures to ensure the independence and
effectiveness of external audit functions and satisfy itself on the
integrity of financial and narrative statements.
• Audit, Risk and Internal Control pages 92 and 93
• Audit and Risk Committee Report pages 94 to 97
Principle N. The board should present a fair, balanced and
understandable assessment of the company’s position and prospects.
• Audit and Risk Committee Report pages 94 to 97
• Directors’ Responsibilities Statements page 106
Principle O. The board should establish procedures to manage risk,
oversee the internal control framework, and determine the nature and
extent of the principal risks the company is willing to take in order to
achieve its long-term strategic objectives.
• Principal Risks and Uncertainties pages 53 to 58
• Viability Statement page 69
• Audit, Risk and Internal control pages 92 and 93
• Audit and Risk Committee Report pages 94 to 97
• Notes to the Consolidated Accounts pages 117 to 140
Remuneration
Principle P. Remuneration policies and practices should
be designed to support strategy and promote long-term
sustainable success.
• Management Engagement Committee Report pages 98 to 100
• Directors’ Remuneration Report pages 101 to 103
Principle Q. A formal and transparent procedure for developing policy
on remuneration should be established. No director should be
involved in deciding their own remuneration outcome.
• Directors’ Remuneration Report pages 101 to 103
Principle R. Directors should exercise independent judgement and
discretion when authorising remuneration outcomes, taking account
of company and individual performance, and wider circumstances.
• Directors’ Remuneration Report pages 101 to 103
Key Board statements
Requirement Board statement Where to find further information
Going concern basis The Board is of the opinion that the going concern basis
adopted in the preparation of the Annual Report is appropriate.
Further details are set out on page 69 of
the Strategic Report.
Viability Statement The Board is of the opinion that the Viability Statement
adopted in the preparation of the Annual Report is appropriate.
Further details are set out on page 69 of
the Strategic Report.
Annual review of systems of risk
management and internal control
A continuing process for identifying, evaluating and
managing the risks the Company faces has been
established and the Board has reviewed the effectiveness
of the internal control systems.
Further details are set out in Audit, Risk and
Internal Controls on pages 92 and 93 of
this Corporate Governance Report.
Robust assessment of the Company’s
emerging and principal risks to the
business model, future performance,
solvency and liquidity of the Company
The Audit and Risk Committee and the Board undertake a
full risk review twice a year where all the emerging and
principal risks and uncertainties facing the Company and
the Group are considered.
Further details can be found in Principal
Risks and Uncertainties on pages 53 to 58
of the Strategic Report.
Fair, balanced and understandable The Directors confirm that to the best of their knowledge
the Annual Report and Accounts taken as a whole is fair,
balanced and understandable and provides the
information necessary for Shareholders to assess the
Company’s performance, business model and strategy.
Further details of the fair, balanced and
understandable statement can be found in
the Audit and Risk Committee Report on
pages 94 to 97.
Appointment of the Manager The Directors consider the continuing appointment of the
Manager on the terms agreed in the Investment Management
Agreement dated 11 September 2017, as amended on 4
May 2022, to be in the best interests of the Company.
Further details are set out in the
Management Engagement Committee
Report on pages 98 to 100.
S172 of the Companies Act 2006 The Directors have considered the requirements of S172
when making strategic decisions.
Further details are set out on page 25 of
the Strategic Report.
TCFD The Directors have voluntarily reported on the TCFD
requirements.
Further details are set out on pages 59 to
68 of the Strategic Report.
Application of Code continued
79Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
How we govern the Company
The Board is responsible for promoting the long-term sustainable
success of the Company and generating value for its Shareholders
and other stakeholders through effective leadership. The Board and
the Manager work closely together to maintain the highest standards
of corporate governance. We believe that our positive engagement
and working relationship with the Manager are key to enhancing
the Company’s governance arrangements and ensuring that they
are robust and fit for purpose. We work closely with the Manager to
identify areas for improvement and best practice which creates an
open and collaborative culture. The Company’s success is based
upon the effective implementation of its strategy by the Manager and
third-party service providers under the leadership of the Board. The
Board’s culture provides a forum for constructive and robust debate,
which the Board believes has been crucial to the success of the
Company to date.
The Company’s purpose is to deliver sustainable logistics solutions
that create compelling opportunities for our stakeholders and provide
our customers with the space to succeed. In order to achieve this,
the Board has determined the Company’s Investment Objectives
and Investment Policy. It has overall responsibility for the Company’s
activities, including reviewing investment activity, performance,
business conduct and strategy, in compliance with the principles of
good corporate governance. The Board has delegated the day-to-
day operational aspects of running the Company to the Manager and
approved a schedule of matters reserved for its consideration and
approval, which are set out on this page. Although the Board does
not formally approve investment proposals or decisions, as this is
a matter delegated to the Manager, the Board is kept fully informed
and notified of investment proposals and decisions to enable the
Directors to undertake their responsibilities and duties appropriately.
As well as regular Board meetings, the Board also meets for dedicated
strategy meetings, in which the Company’s immediate, medium-
and long-term strategy is discussed, and holds ad hoc meetings to
consider specific issues, the market generally and its stakeholders.
There is frequent engagement and interaction between the Manager
and Tritax Symmetry Management Ltd (“Tritax Symmetry”) regarding
the development pipeline and the status of current projects and the
Board is kept abreast of any notable updates to ensure appropriate
oversight and governance. During the course of the year, Tritax
Symmetry implemented a change of management structure in order
to futureproof the succession of the business. Regular meetings
are being held to provide a forum for reporting on detailed project
matters by Tritax Symmetry to the Manager and for discussion of the
wider business strategy.
The Manager retains approval rights in relation to transactional
documentation proposed to be entered into by Tritax Symmetry and
subsidiaries within the Group.
A typical Board agenda includes:
• a review of investment performance;
• a review of investments, divestments and asset
managementinitiatives;
• a report on the development activities of the Group;
• an update on investment opportunities available in the market and
how they fit within the Company’s strategy;
• a report on the property market;
• a review of the Company’s financial performance;
• an update on ESG targets and KPIs;
• a review of the Company’s financial forecast, cash flow and
ability to meet targets, including a review of the Company’s debt
covenants and debt maturity;
• a review of the Company’s financial and regulatory compliance;
• updates on Shareholder and stakeholder relations;
• updates on the Company’s capital market activity and share
priceperformance;
• specific regulatory, compliance or corporate governance updates;
• a bi-annual risk management review;
• investor relations update; and
• marketing and communications update.
Board Leadership and Company Purpose
Board reserved matters
• Reviewing and approving Board composition, including the
appointment of Directors.
• Approving and implementing the Company’s strategy.
• Approving the budget, financial plans and Annual and Interim
financial reports.
• Approving the dividend policy.
• Reviewing property valuations and valuations of its interest
rate derivatives.
• Overseeing treasury policy and managing the Company’s
capital structure.
• Reviewing and monitoring the Manager’s ongoing
compliance with the Company’s Investment Objectives and
Investment Policy.
• Overseeing the services provided by the Manager and, in
conjunction with the Manager, the Company’s principal
service providers.
• Reviewing and approving all compliance and
governance matters.
• Approving the issuance of new Ordinary Share capital.
80 Tritax Big Box REIT plc Annual Report 2022
Board Leadership and Company Purpose continued
Culture
The culture and ethos of the Company are integral to its success.
The Board promotes open dialogue and frequent, honest and open
communication between the Manager and other key providers and
advisers to the Company. Whilst the Company is externally managed,
the Board is confident that the culture within the Manager is aligned
with that of the Board.
The Board believes that its positive engagement and working relationship
with the Manager helps the business achieve its objectives by
creating an open and collaborative culture, whilst allowing for
constructive challenge. The Non-Executive Directors meet regularly
with members of the Manager outside of Board meetings to discuss
various key issues relating to Company matters.
The Company’s success is based upon the effective implementation
of its strategy by the Manager and third-party providers under the
leadership of the Board. The Board’s culture provides a forum for
constructive and robust debate, and the Board believes that this has
been fundamental to the success of the Company to date.
ESG
Managing ESG performance is core to our business. The ESG
Committee of the Manager regularly reports to and engages with
the Board on its ESG activities. The ESG Committee has ultimate
responsibility for all ESG related policies of the Manager and
recommends them to the Operations Committee, who include
these as part of their full review of all policies. For full details of all
policies please refer to the Manager’s website. During the year,
the Board continued to embed the ESG Strategy and refreshed
the 2023 targets to ensure greater focus and measurability.
The Company received a GRESB score of 83/100 which
represents an increase of 11 points since 2020 and achieved
four Green Stars out of five for our standing portfolio. In addition,
the Company was also awarded the GRESB 2022 Leader
for Development in the European and Global Industrial Listed
Sectors, achieving the highest score for the industrial sector
with a score of 99/100 and the maximum five Green Stars. We
also achieved a Sustainalytics score of 8.3 for which we were
recognised in Sustainalytics’ 2023 top rated ESG companies list
by region and sector, and improved our MSCI rating from BBB
to AA. Further to the issuance of the Company’s Green Bond
in 2020, the Green Finance Committee has fully allocated all
proceeds from the Bond to eligible Green initiatives.
X For further information on our ESG strategy please refer to
pages 32 to 38
The Company has made a commitment to achieve net zero
carbon for its direct activities (Scope 1 and 2 emissions) by
2025, for Scope 3 emissions related to construction by 2030,
and for its total Scope 3 emissions by 2040.
X Please see pages 32 to 38 for the ESG Report and updated targets
The Board ESG Champion meets regularly with the Manager’s
ESG Director to discuss progress on the ESG Strategy and have
deep dives into key ESG issues relevant to the Board. This year,
key matters discussed included:
• climate change risk and how the Company will report against
the TCFD recommendations; and
• carbon reporting.
To demonstrate its own commitment to sustainability, the
Manager procures renewable energy and sends zero waste to
landfill. It also achieved ISO 14001 accreditation in late 2020,
which also applies to the Company’s activities.
X For further information on how the Company reports against
TCFD please see page 59 to 68
Strategy
The 2022 strategy meeting took place off-site in May 2022
and focused on assessing whether the Company’s strategy
remained fit for purpose to ensure the Company’s long-term
success. The meeting involved the full Board, key members of
the Manager and some of the Company’s key advisers. The
forum allowed for an open discussion on the current equities
and property market as well as overall investment and ESG
strategic targets for the year ahead in light of the current
macroeconomic environment. The Board agreed to continue to
monitor the performance of the investment portfolio and where
appropriate, recycle capital into opportunities that would aid in
improving performance. The Board also agreed to continue to
fund the development portfolio, based on the Company’s risk
return analysis. In addition, the Board agreed to undertake some
initial analysis with a view to diversifying its portfolio further with
regards to asset size.
The Board requested that the Manager continue to explore
additional income streams for the Company through asset
management initiatives and further nurturing occupier relationships.
X Please see pages 26 to 27 for more details on strategy in the
Strategic Report
Given the current dynamics of the logistics market, with strong
demand but limited supply of suitable assets, the Board believes
that the Company is well positioned to capture further value
through the Group’s development pipeline.
Our focus in 2023 and beyond
Our focus for the coming year will be on achieving planning
consents, securing pre-lettings for our development assets and
acquiring investment assets in order to grow the Group’s strong
asset base, deliver enhanced returns to Shareholders and
maintain the Company’s balance sheet strength.
X For further details of the Company’s strategy see pages 1 to
69 of the Strategic Report
81Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Relations with Shareholders and other stakeholders
Maintaining strong relationships with the Company’s Shareholders
and other stakeholders with an understanding of their priorities
and concerns is a key objective of the Board. The Chairman and
the Senior Independent Director (“SID”), alongside the CEO, CFO
for Tritax Big Box REIT plc and Head of Investor Relations of the
Manager are the Company’s principal spokespersons who regularly
communicate with the Company’s Shareholders, the press, analysts,
investors and other stakeholders. All Directors are available to speak
to Shareholders on any matters relating to the Company.
During the year, the Manager devoted time to meeting with existing
Shareholders and prospective new investors virtually and in person
from the UK, Continental Europe, the USA and South Africa.
InJanuary 2022, the Manager held a capital markets day with a
focus on the market, the Company’s current strategy and current
development pipeline. The Manager also attended a number of
conferences throughout the year, which provided an opportunity
toengage with some of the Company’s key Shareholders. Finally in
December 2022, the Manager held an investor lunch which provided
an opportunity for the current Shareholders to ask questions of the
Manager and the Board and share their priorities. The key themes
toemerge from the meetings and lunch were a growing focus on
the balance sheet and the impact of lower valuations as well as the
current market drivers.
X Further details of the Company’s engagement with our other key
stakeholders can be found on pages 22 to 24 and 82 and 83
Site visits
There is continued demand from Shareholders and prospective
investors to visit our assets and development sites. In December 2022,
the Manager undertook a site visit with analysts to Biggleswade and
Kettering and the Manager, alongside the Investor Relations team,
plans to host a programme of site visits in 2023. The Board also
visited the Company’s sites in Kettering and Biggleswade in May
2022, as part of the annual strategy day. The site visit provided the
opportunity for the Board to not only visit both assets, but to meet
some of the key members of the Tritax Symmetry team and one of
the Company’s occupiers. We balance the desire for Shareholders
tovisit sites with the need to avoid disruption to our customers.
Annual General Meeting (“AGM”)
The Company’s general meetings provide the Board and the Manager
with a valuable opportunity to engage with its Shareholders on
governance and strategy. All the Directors usually attend the AGM
and make themselves available to answer Shareholders’ questions.
The Chairman also makes himself available outside of these meetings
to speak to Shareholders.
The SID is available for Shareholders to contact if other channels
of communication with the Company are not available or are
inappropriate. Non-Executive Directors also regularly attend
Shareholder events such as the lunch in December 2022.
We encourage Shareholders to attend and vote at the AGM and
take the opportunity to engage with the Board and the Manager.
The Board considers it important that Shareholders continue to
have opportunities to engage with them and Shareholders were
encouraged to ask questions or raise matters of concern by emailing
the Company Secretary.
The Chairman and the SID as well as other Non-Executive
Directors can be contacted by emailing the Company Secretary on
cosec@tritaxbigbox.co.uk, who will pass the communication directly
to the relevant person, or by post to the Company’s registered office.
Public communications
The Company ensures that any price sensitive information is
released to all Shareholders at the same time and in accordance with
regulatory requirements. All Company announcements which are
released through the London Stock Exchange’s Regulatory News
Service (“RNS”) are also made available on the Company’s website.
The website also holds the semi-annual fact sheets, share price and
dividend information, investor presentations, the Key Information
Document required by PRIIPS regulations and the Annual Report;
all are available for download. The Company’s Annual Report is
dispatched to Shareholders upon request.
82 Tritax Big Box REIT plc Annual Report 2022
Stakeholder Engagement
In late 2020, following a pause in negotiations due to the Covid-19
pandemic, the Management Engagement Committee decided
that it would be an opportune time to restart the renegotiation of
the Investment Management Agreement between the Company
and the Manager. The IMA dated 11 September 2017 allowed for
renegotiation post 31 December 2019. It was the Board’s view that
certain aspects should be reviewed and renegotiated to benchmark
the agreement with the rest of the sector, reflect the growth of the
business and support its ongoing strategy whilst providing continued
value to Shareholders. The Management Engagement Committee
led the process and was advised by some of the Company’s
independent advisers who provided reports and benchmarking
analysis for review.
Throughout the process the Chairman and SID held several calls with
the Company’s key Shareholders to obtain their views on the current
performance of the business and sector as well as the proposed
changes to the IMA. The feedback received from the interaction
with Shareholders was positive and they were supportive of the
futureproofing of the contract. The key changes include a reduction
in the overall investment management fee payable, which is expected
to have a beneficial effect on the Company’s EPRA Cost Ratio over
time, and an extension to the term of the agreement. The extension,
along with an expansion of key person principles, provides additional
security to the Company in terms of its main service provider as
well as supporting the recruitment and retention of key personnel in
the Manager.
These material amendments to the IMA were set out in the notice of
the Company’s AGM in 2022, and the amendments were approved
by Shareholders present and voting at the AGM.
How were stakeholders’ views taken
into account?
Several meetings were held
between the Board and
the Manager
Calls were held between
the Chairman, SID and key
Shareholders
Impact – what actions were taken as
a result of this engagement/taking
concerns into account?
Following Shareholder support,
the Board concluded the IMA
renegotiation
Long-term effects of the decision?
The terms of the IMA remain aligned
to the Company’s peers and
market practice
Reduction in the overall investment
management fee payable
Beneficial effect on the Company’s
EPRA Cost Ratio
Extension to the term provides
additional security to stakeholders
Stakeholders considered
83Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
During the course of the year, the Manager on behalf of the Board
undertook a peer analysis exercise to benchmark the Company’s
current ESG targets with market peers. In addition, the Manager’s
ESG Director conducted annual engagement with the Company’s
customers in relation to the GRESB submission as well as regular
engagement with ESG representatives within our customer base to
develop a greater understanding of their ESG targets and strategy
as well as the rationale behind these. The dialogue also included
discussions around customer preference on greener buildings and
the need for potential additional ESG focused asset management
initiatives such as Solar PV and EV charging. The Manager and the
Board held regular conversations with the Company’s Shareholders
to understand their perspective on the matter. The communication
has enabled the Manager and the Board to develop a greater
understanding of our peers’ priorities and allowed the Board
to review their ESG related targets and strategy. As such, the
Board agreed an update of the 2023 ESG targets to ensure they
remained inline with the market and allowed greater granularity and
measurability by internal and external stakeholders. For further details
please see pages 32 to 38.
How were stakeholders’
views taken into account?
Ongoing engagement with
customers on ESG priorities
and targets
Ongoing dialogue with Shareholders
Long-term effects of the decision?
Aligned with the Company’s peers
Earlier carbon net zero targets
which demonstrates the Company’s
commitment to its ESG strategy
Impact – what actions were taken
as a result of this engagement/taking
concerns into account?
Following review of the peer analysis
and discussions with customers and
Shareholders, the ESG Strategy and
targets were refreshed
Stakeholders considered
Our stakeholders
The Manager and its employees Our customers Government, regulators andlocalcouncils
Our Shareholders Our lenders Our communities
Our suppliers
X For further information on the Company’s stakeholders, please see pages 22 to 24
84 Tritax Big Box REIT plc Annual Report 2022
Division of Responsibilities
The Board
The Board is responsible for promoting the long-term sustainable
success of the Company, working towards strategic objectives and
generating value for Shareholders and other stakeholders.
X To read more see pages 72 and 73
Chairman
Key roles and responsibilities
• Responsible for the leadership and effectiveness of the Board and for
setting the Board agenda.
• Ensuring effective communication so that the Board is aware of the
viewsof Shareholders and other stakeholders, and demonstrates
objectivejudgement.
• Promoting a culture of openness and debate.
Senior Independent Director
Key roles and responsibilities
• Acting as a sounding board for the Chairman and a trusted intermediary for
other Directors.
• Available to discuss with Shareholders any concerns that cannot
be resolved through the normal channels of communication with
the Chairman.
• Leading the other Directors in evaluating the performance of the Chairman.
The Manager
Day-to-day running of the Company including: making the final
decision, in consultation with the Board, in respect of investments
and divestments, financial management, asset management and
investor relations. Colin Godfrey as CEO for Tritax Big Box REIT
plc, James Dunlop as CEO of Investments, Henry Franklin as COO
of the Manager, and Frankie Whitehead as CFO for Tritax Big Box
REIT plc, oversee the Manager’s relationship with the Company.
X To read more see pages 74
The Manager
Key roles and responsibilities
• Making the final decisions in respect of investments and divestments.
• Financial management.
• Asset management.
• Investor relations.
X To read more see pages 39 to 47 and 74 and 75
Company Secretariat andCompliance
Key roles and responsibilities
• Overseeing the Company’s governance structure and managing the
Company’s regulatory compliance.
• Administering the Group’s subsidiaries.
Tritax Symmetry Holdings Board Meeting
• Chaired by Frankie Whitehead, comprising other members of the
Manager and representatives of Tritax Symmetry.
• Responsible for the wider business strategy of Tritax Symmetry Holdings
Limited including determining, implementing and reviewing the investment
and management strategy to deliver the Group’s objectives.
• The Board is also responsible for corporate matters such as detailed
financial reviews, risk reviews, tracking and monitoring against the
investment mandate and DMA compliance.
Board Committees
The Board has delegated some of its responsibilities to its
three formal Committees: the Nomination, Audit and Risk, and
Management Engagement Committees. The Board has also
established a Disclosure Committee which meets as and when
required. The Company ensures that all of the Board Committees
have sufficient resources and skills to carry out their obligations.
These Committees are each chaired by a different Non-Executive
Director and have their own Terms of Reference which can be
found on the Company’s website (or copies are available on
request from the Company Secretary).
The Terms of Reference are reviewed as necessary by the Board
as a whole. The Company Secretary acts as secretary to these
Committees and each Committee Chair reports the outcome of
themeetings to the Board.
X To read more see pages 88 to 100
Audit and Risk Committee
• Reviewing the integrity of the Group’s financial statements and any
significant financial reporting judgements.
• Reviewing and monitoring the relationship with the Auditor.
• Reviewing the internal controls of the Administrator.
• Overseeing the Company’s risk management process.
• Advising the Board on whether the Annual Report and Accounts provide
a fair, balanced and understandable view of the Company’s performance,
position and strategy.
• Considering and reviewing the Company’s Viability and Going
ConcernStatements.
X To read more see pages 94 to 97
Nomination Committee
• Reviewing the Board composition and assessing whether the balance of
skills, experience, knowledge, diversity and independence is appropriate to
enable the Board to operate effectively.
• Managing succession planning and ensuring that the Directors receive
necessary training, including ESG topics.
• Board and Committee evaluations.
X To read more see pages 88 and 89
Disclosure Committee
• Identifying inside information and maintaining disclosure registers in the form
of insider lists.
• Determining whether delayed disclosure is appropriate on a case-by-case
basis and liaising with the FCA as necessary.
• Supervising and overseeing the preparation of disclosures to the market.
• Chaired by Aubrey Adams and comprises various members of the Manager.
Management Engagement Committee
• Reviewing the Company’s main suppliers including the Manager, the Joint
Financial Advisers and Brokers, the valuers and the Registrar to ensure
that the Company is receiving a high level of performance along with
value for money.
• Overseeing re-tenders and new appointments.
• Reviewing the performance of the Manager.
X To read more see pages 98 to 100
Manager Committees
The Company’s investment manager has delegated some of
its responsibility to five Committees: the Investment, Executive,
Operations, Risk and ESG Committees. The ESG Committee has
also established a Sub-Committee, the Green Finance Committee.
Investment Committee
• Chaired by Bjorn Hobart and attended by various members of
the Manager.
• Reviewing and recommending investments and divestments.
• Reviewing, approving and monitoring activities within the development
portfolio.
Executive Committee
• Chaired by Colin Godfrey, comprising various members of the Manager.
• Oversight of the Group as a whole and is responsible for reviewing the
corporate and capital strategy and activity of the Company and making
recommendations to the Board as necessary.
Operations Committee
• Chaired by Henry Franklin and comprising various members of
the Manager.
• Oversight of the internal controls of Tritax Management LLP and statutory
audit process.
• Approval of all Tritax Management LLP policies and procedures.
ESG Committee
• Chaired by Petrina Austin, comprising various members of the Manager.
• Responsible for oversight of ESG and sustainability matters.
• Reviewing and making recommendations to the Manager’s Executive
Committee and the Company’s Board, regarding progress on integrating
ESG factors into business strategy and decision making.
• Providing oversight of the Manager’s policies in terms of performance,
communication and engagement on ESG and sustainability matters, to
ensure the Manager and the Company are effective in meeting their social
and regulatory requirements and achieving their objective of being socially
responsible corporate entities.
Risk Committee
• Chaired by Henry Franklin, comprising the Chief Financial Officer of the
Manager and Head of Risk and Compliance of the Manager.
• Responsible for identifying, recording and measuring risks to the
Manager‘s Executive Committee and implementing controls to mitigate
such risks.
• Oversight of the risk assessments made by the Company as well as other
real estate funds to amplify the focus on risk and to ensure the Company
is alerted to any new risks identified by the Manager.
Green Finance Committee (Sub-Committee ofESG
Committee)
• Chaired by the Manager’s CFO and comprised of members of the
Manager’s asset management and finance teams.
• Review the Green Portfolio of the Company to confirm that the assets
andprojects included in the Green Portfolio meet the criteria set out in
theFramework.
• Review the Framework to reflect any changes with regards to the
Company’s sustainability strategy and market standards.
• Approve the Annual Green Finance Report ahead of circulation to investors.
• Monitor evolution of the capital markets in terms of disclosure and
reporting in order to be in line with market best practices.
85Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
The Board
The Board is responsible for promoting the long-term sustainable
success of the Company, working towards strategic objectives and
generating value for Shareholders and other stakeholders.
X To read more see pages 72 and 73
Chairman
Key roles and responsibilities
• Responsible for the leadership and effectiveness of the Board and for
setting the Board agenda.
• Ensuring effective communication so that the Board is aware of the
viewsof Shareholders and other stakeholders, and demonstrates
objectivejudgement.
• Promoting a culture of openness and debate.
Senior Independent Director
Key roles and responsibilities
• Acting as a sounding board for the Chairman and a trusted intermediary for
other Directors.
• Available to discuss with Shareholders any concerns that cannot
be resolved through the normal channels of communication with
the Chairman.
• Leading the other Directors in evaluating the performance of the Chairman.
The Manager
Day-to-day running of the Company including: making the final
decision, in consultation with the Board, in respect of investments
and divestments, financial management, asset management and
investor relations. Colin Godfrey as CEO for Tritax Big Box REIT
plc, James Dunlop as CEO of Investments, Henry Franklin as COO
of the Manager, and Frankie Whitehead as CFO for Tritax Big Box
REIT plc, oversee the Manager’s relationship with the Company.
X To read more see pages 74
The Manager
Key roles and responsibilities
• Making the final decisions in respect of investments and divestments.
• Financial management.
• Asset management.
• Investor relations.
X To read more see pages 39 to 47 and 74 and 75
Company Secretariat andCompliance
Key roles and responsibilities
• Overseeing the Company’s governance structure and managing the
Company’s regulatory compliance.
• Administering the Group’s subsidiaries.
Tritax Symmetry Holdings Board Meeting
• Chaired by Frankie Whitehead, comprising other members of the
Manager and representatives of Tritax Symmetry.
• Responsible for the wider business strategy of Tritax Symmetry Holdings
Limited including determining, implementing and reviewing the investment
and management strategy to deliver the Group’s objectives.
• The Board is also responsible for corporate matters such as detailed
financial reviews, risk reviews, tracking and monitoring against the
investment mandate and DMA compliance.
Board Committees
The Board has delegated some of its responsibilities to its
three formal Committees: the Nomination, Audit and Risk, and
Management Engagement Committees. The Board has also
established a Disclosure Committee which meets as and when
required. The Company ensures that all of the Board Committees
have sufficient resources and skills to carry out their obligations.
These Committees are each chaired by a different Non-Executive
Director and have their own Terms of Reference which can be
found on the Company’s website (or copies are available on
request from the Company Secretary).
The Terms of Reference are reviewed as necessary by the Board
as a whole. The Company Secretary acts as secretary to these
Committees and each Committee Chair reports the outcome of
themeetings to the Board.
X To read more see pages 88 to 100
Audit and Risk Committee
• Reviewing the integrity of the Group’s financial statements and any
significant financial reporting judgements.
• Reviewing and monitoring the relationship with the Auditor.
• Reviewing the internal controls of the Administrator.
• Overseeing the Company’s risk management process.
• Advising the Board on whether the Annual Report and Accounts provide
a fair, balanced and understandable view of the Company’s performance,
position and strategy.
• Considering and reviewing the Company’s Viability and Going
ConcernStatements.
X To read more see pages 94 to 97
Nomination Committee
• Reviewing the Board composition and assessing whether the balance of
skills, experience, knowledge, diversity and independence is appropriate to
enable the Board to operate effectively.
• Managing succession planning and ensuring that the Directors receive
necessary training, including ESG topics.
• Board and Committee evaluations.
X To read more see pages 88 and 89
Disclosure Committee
• Identifying inside information and maintaining disclosure registers in the form
of insider lists.
• Determining whether delayed disclosure is appropriate on a case-by-case
basis and liaising with the FCA as necessary.
• Supervising and overseeing the preparation of disclosures to the market.
• Chaired by Aubrey Adams and comprises various members of the Manager.
Management Engagement Committee
• Reviewing the Company’s main suppliers including the Manager, the Joint
Financial Advisers and Brokers, the valuers and the Registrar to ensure
that the Company is receiving a high level of performance along with
value for money.
• Overseeing re-tenders and new appointments.
• Reviewing the performance of the Manager.
X To read more see pages 98 to 100
Manager Committees
The Company’s investment manager has delegated some of
its responsibility to five Committees: the Investment, Executive,
Operations, Risk and ESG Committees. The ESG Committee has
also established a Sub-Committee, the Green Finance Committee.
Investment Committee
• Chaired by Bjorn Hobart and attended by various members of
the Manager.
• Reviewing and recommending investments and divestments.
• Reviewing, approving and monitoring activities within the development
portfolio.
Executive Committee
• Chaired by Colin Godfrey, comprising various members of the Manager.
• Oversight of the Group as a whole and is responsible for reviewing the
corporate and capital strategy and activity of the Company and making
recommendations to the Board as necessary.
Operations Committee
• Chaired by Henry Franklin and comprising various members of
the Manager.
• Oversight of the internal controls of Tritax Management LLP and statutory
audit process.
• Approval of all Tritax Management LLP policies and procedures.
ESG Committee
• Chaired by Petrina Austin, comprising various members of the Manager.
• Responsible for oversight of ESG and sustainability matters.
• Reviewing and making recommendations to the Manager’s Executive
Committee and the Company’s Board, regarding progress on integrating
ESG factors into business strategy and decision making.
• Providing oversight of the Manager’s policies in terms of performance,
communication and engagement on ESG and sustainability matters, to
ensure the Manager and the Company are effective in meeting their social
and regulatory requirements and achieving their objective of being socially
responsible corporate entities.
Risk Committee
• Chaired by Henry Franklin, comprising the Chief Financial Officer of the
Manager and Head of Risk and Compliance of the Manager.
• Responsible for identifying, recording and measuring risks to the
Manager‘s Executive Committee and implementing controls to mitigate
such risks.
• Oversight of the risk assessments made by the Company as well as other
real estate funds to amplify the focus on risk and to ensure the Company
is alerted to any new risks identified by the Manager.
Green Finance Committee (Sub-Committee ofESG
Committee)
• Chaired by the Manager’s CFO and comprised of members of the
Manager’s asset management and finance teams.
• Review the Green Portfolio of the Company to confirm that the assets
andprojects included in the Green Portfolio meet the criteria set out in
theFramework.
• Review the Framework to reflect any changes with regards to the
Company’s sustainability strategy and market standards.
• Approve the Annual Green Finance Report ahead of circulation to investors.
• Monitor evolution of the capital markets in terms of disclosure and
reporting in order to be in line with market best practices.
86 Tritax Big Box REIT plc Annual Report 2022
The Board and its Committees
The Board currently consists of six Non-Executive Directors, all
independent of the Manager. All Directors are also considered to
be independent by the Board when considering the matters set
out in Provision 13 of the AIC Code. We believe that the Board is
well balanced and possesses a sufficient breadth of skills, variety
of backgrounds, relevant experience and knowledge to ensure it
functions effectively and promotes the long-term sustainable success
of the Company, whilst generating Shareholder value and keeping in
mind wider stakeholder interests.
X Further details can be found on page 75
Directors’ biographies are set out on pages 72 and 73. In accordance
with the requirements of the AIC Code, all of the Directors will stand
for re-election at the Company’s AGM on 3 May 2023.
We have not established a Remuneration Committee as the
Board has no Executive Directors and the Company has no other
employees. The Board as a whole is responsible for reviewing the
scale and structure of the Directors’ remuneration. Details of the
Directors’ remuneration for the year ended 31 December 2022 are
included in the Directors’ Remuneration Report on pages 101 to 103.
Conflicts of interest
Each Director has a duty to avoid a situation in which he or she has
a direct or indirect interest that may conflict with the interests of the
Company. The Board may authorise any potential conflicts, where
appropriate, in accordance with the Articles of Association. Where a
potential conflict of interest arises, a Director will declare their interest
at the relevant Board meeting and not participate in the decision
making in respect of the relevant business.
Board meetings
During 2022, seven scheduled Board meetings were held, plus two
further
ad hoc meetings which dealt with transactional and other specific
events such as the SID appointment and dividend declaration.
The Board meetings follow a formal agenda, which is approved by
the Chairman and circulated by the Company Secretary in advance
of the meeting to all Non-Executive Directors and other attendees.
At each Board meeting, every agenda item is considered against the
Company’s strategy, its Investment Objectives, its Investment Policy,
S172 and all Directors’ duties.
The Board is kept fully informed of potential investment opportunities,
along with wider property market intelligence, through a comprehensive
set of Board papers prepared by the Manager prior to each meeting.
Included within this pack are the investment reports prepared by
the Manager’s Investment Committee for each acquisition, disposal,
asset management and development opportunity. Representatives
of the Manager are invited to attend the Board meetings as are
representatives of the Company’s other advisers as required,
particularly representatives from Jefferies, JP Morgan Cazenove,
Akur Capital and Taylor Wessing LLP.
Outside the Board meetings, the Manager shares recommendations
around investment opportunities and keeps the Directors fully
informed on the progress of transactions. The Board also has full
access to the Management team and the Company Secretarial
team at all times to discuss any specific matters outside of
formal meetings.
Board reporting
Following the initial July 2021 workshop with Board Intelligence
(“BI”) to review the Board and Committee packs, BI provided
recommendations on how Board papers could be further
improved to align to BI’s best in class reporting template.
Clearer and more concise reports were implemented across
the business which has helped to refine and focus Board
reporting further. During the year, this work continued with
further refinement of template reports, including the addition of a
stakeholder impact section and new employees of the Manager
undertook the BI workshop. The Manager continues to work
with BI to develop further efficiencies in corporate reporting and
utilise the knowledge and resources of the BI offering.
The Chairman and the Senior Independent Director
Our Independent Chairman, Aubrey Adams, has no relationships that
could create a conflict of interest between his interest and those of
Shareholders or the Manager.
As we are subject to the AIC Code, there is no requirement for a
limitation on the length of tenure of the Chairman. However, we
recognise that there is a significant body of opinion that tenure
should be limited to nine years and take this into account in our
succession planning.
The Chairman’s other significant commitments include chairmanship
of L&Q Housing Trust and board of Trustees of Wigmore Hall. For the
Chairman’s full biography please refer to page 72 and the Company
website. The Board believes he dedicates sufficient time to his
Chairmanship of the Company. The Board has adopted a Policy on
Tenure and Re-election; for more information please refer to page 88.
As Chairman, he sets the agenda for Board meetings with assistance
from the Company Secretary, manages the meeting timetable and
facilitates open and constructive dialogue during the meetings.
Karen Whitworth took over the role of SID from Alastair Hughes in
November 2022. Karen will continue to act as ESG Champion of
the Board.
The SID and the other Directors met during the year, without the Chairman,
to appraise his performance. The outcome of this meeting is detailed
on page 90.
Division of Responsibilities continued
87Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Attendance at Board and Committee meetings during the year ended 31 December 2022
All Non-Executive Directors are expected to devote sufficient time to the Company’s affairs to fulfil their duties as Directors and to attend all
scheduled meetings of the Board and of the Committees on which they serve. Where Non-Executive Directors are unable to attend a meeting,
they will provide their comments on the Board papers received in advance of the meeting to the Chairman, who will share such input with the
rest of the Board and the Manager. The Nomination Committee is satisfied that all the Non-Executive Directors, including the Chairman, have
sufficient time to meet their commitments.
The table below sets out the Board and Committee attendance at scheduled meetings during the year.
Aubrey
Adams
Alastair
Hughes
Karen
Whitworth
Richard
Laing
Wu Gang
Elizabeth
Brown
Board 7/7 7/7 7/7 7/7 7/7 7/7
Audit and Risk Committee N/A N/A 7/7 7/7 7/7 7/7
Management Engagement Committee 2/2 2/2 2/2 2/2 2/2 2/2
Nomination Committee 2/2 2/2 2/2 N/A N/A N/A
Strategy meeting 1/1 1/1 1/1 1/1 1/1 1/1
How did you find your first year on the Board?
It was eventful if I had to summarise the experience in one word.
When I joined the Board, we had the tailwind as the industrial
logistics market benefited from the structural shift in favour of
e-commerce as well as the demand and supply imbalance due
to the scarcity of modern warehouse space. The Company is well
positioned to exploit this growth potential given its strong investment
portfolio, development pipeline, high quality customer base and its
highly skilled and experienced management team. Totake advantage
of this, we raised equity of £300 million in September 2021 to help
accelerate our development programme. While those structural
tailwinds continued, over the past six months or so, we suffered
a sharp correction in the investment market, principally due to
high inflation and the rise in interest rates. The Company was well
positioned to ride out this adjustment, and hopefully the worst is now
behind us. The convictions that I had leading me to join the Board
remain unchanged. As demonstrated in the most recent trading
update, the Company has a resilient portfolio. The market dynamics
and structure remain favourable in the long term and we are fortunate
to have a very high quality management team that has a long and
successful track record.
How did you find your induction and the Directors’
training over the past year?
I had a very good induction. Everyone was very welcoming and
was eager to share their experience with me. While I have extensive
financial and capital markets experience, I am a novice to real
estate and at times I have felt a bit lost with the terminology. I
wish there were a Google Translate for real estate! Apart from
the formal induction sessions, I had several informal teach-ins
and everyone has been generous with their time. We also have
regular Directors’ training sessions with wide ranging topics. One
memorable experience that I had was when we visited one location
after our strategy day last May. We toured the warehouse which was
expansive and ended up in the cold room. The warehouse manager
was so enthusiastic in telling us all the details that we were effectively
detained in the cold room for over 10 minutes. We had to star-jump to
keep warm!
What would you say are the key challenges facing
the Board over the next reporting period?
I think that in the short term it is about supporting the management
team in continuing the excellent operational performance, and
carefully navigating the volatility we have seen in the investment
market, in particular exploring a variety of options to fund the
development programme. We also have various ESG-related
initiatives under way to position the Company as one of the market
leaders in this field. I think that the market correction provides us with
an opportunity to analyse and think how the Company could benefit
strategically and what it could look like in the medium term. I look
forward to our next strategy day but hopefully there will be no star-
jumping this time.
88 Tritax Big Box REIT plc Annual Report 2022
Nomination Committee Report
Aubrey Adams OBE, FCA, FRICS
Chair of the Nomination Committee
Dear Shareholders,
I am pleased to present the Nomination Committee Report for the
year ended 31 December 2022.
The Committee’s role is to review the size, structure and composition
of the Board, including succession planning, and to ensure that it has
the right mix of skills, experience, knowledge and diversity to enable
the Company to fulfil its strategic objectives. The Committee is also
responsible for making recommendations for new appointments
to the Board and for reviewing the performance and terms of
engagement for the existing Directors. The Committee operates
within defined Terms of Reference which are available on the
Company’s website or from the Company Secretary.
Board changes
We met for two scheduled and two ad hoc meetings during 2022.
During the course of the year, the Committee reviewed the skills and
experience of the Board as well as the size and wider succession
plans and recommended that Karen Whitworth replace Alastair
Hughes as SID with effect from November 2022. Alastair Hughes
remains on the Board as a Non-Executive Director. As part of the
changes to the role of SID, Elizabeth Brown took over the role of
Chair of the Management Engagement Committee. As a result, the
membership of the Committees is as follows:
Committee Membership
Audit and Risk Committee Richard Laing (Chair)
Karen Whitworth
Elizabeth Brown
Wu Gang
Nomination Committee Aubrey Adams (Chair)
Karen Whitworth
Alastair Hughes
Management Engagement Committee Elizabeth Brown (Chair)
Karen Whitworth
Richard Laing
Aubrey Adams
Alastair Hughes
Wu Gang
Membership
Aubrey Adams, Chair
Alastair Hughes
Karen Whitworth
X For full details on Committee attendance please refer
topage87
Key areas of focus in 2022:
• the size, structure and composition of the Board;
• reviewed the new Listing Rules on diversity, created an
implementation plan for disclosure and refreshed the Diversity
and Inclusion Policy;
• Board and Committee evaluation;
• the proposal for re-election of the Directors at the AGM which
we plan to hold on 3 May 2023; and
• appointed Karen Whitworth as SID and Elizabeth Brown
as Chair of the Management Engagement Committee and
refreshed Committee membership.
89Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Policy on tenure and succession planning
The Board has implemented a policy on tenure and re-election, and
in accordance with the Provisions of the AIC Code, all the Directors
will offer themselves for re-election at each AGM. We considered
the ongoing independence of each of the Directors, their respective
skills, experience and time commitment, as well as any other external
appointments held by the Directors. We believe that each Director
has contributed a significant amount during the year. Following the
advice of the Committee and in line with the AIC Code, the Board will
recommend the re-election of each Director at the forthcoming AGM.
Directors are appointed for an initial period of three years and their
performance is evaluated at least annually during the Board and
Committee evaluation. In accordance with the Principles of the AIC
Code, we do not consider it necessary to mandatorily replace a
Director after a predetermined period of tenure. We are, however,
mindful of the circumstances of each Director and implement
succession planning accordingly.
Board diversity and inclusion
The Board welcomes the recommendations set out within the FTSE
Women Leaders Review (which supersedes the Hampton-Alexander
Review) and the Parker Review targets and recognises the benefits
of diversity in the broadest sense. As at the date of this report, the
Board consisted of two female and four male Directors meaning we
have met the 33% female Board representation and we intend to use
all reasonable endeavours to comply with the remaining Listing Rule
diversity targets by the deadline. The Company is reporting against
the Listing Rule targets and has included a statement of compliance
on page 91.
The Board is not looking to appoint an additional Non-Executive
Director at this time due to the size and corporate structure of the
Company but is mindful of the new Listing Rule regulations and will
consider them during the next recruitment process.
The Company does not have any employees. In respect of
appointments to the Board, we consider that each candidate should
be appointed on merit to make sure that the best candidate for the
role is appointed every time. We commit to diversity and inclusion with
respect to all protected characteristics, including gender, at Board
level and encourage candidates from all education backgrounds and
all walks of life. No candidate will face discrimination due to their race,
ethnicity, country of origin, nationality, cultural background, gender or
any other protected characteristic in the Board nomination process.
What is important to us is professional achievement and the ability to
be a successful Non-Executive Director based on the individual’s skill
set and experience.
Qualifications are considered when necessary to ensure compliance
with regulation such as in relation to appointments to the Audit and
Risk Committee, where we consider Richard Laing, Karen Whitworth
andWu Gang to have significant financial experience. We regularly
review the Company’s Diversity and Inclusion Policy. The Policy was
refreshed in September 2022 to take into account the new Listing Rule
diversity targets.
Director training programme
We recognise that it is essential to keep abreast of regulatory and
compliance changes, including ESG-related issues. Accordingly, a
bespoke training programme is agreed and arranged for Non-Executive
Directors. Annually, the Board receives regular training and updates
from the Company’s external service providers as well as the Manager’s
Head of Research, the ESG Director, the Head of Risk and Compliance
and many others, on corporate governance developments, financial
regulatory changes, and on relevant issues including ESG topics,
industrial logistics market updates and so on.
The Board received formal training sessions and updates, including an
occupier focused session, where one of our key customers came to
present to the Board on information around their business focus and
challenges with, amongst other things, Brexit, labour shortages and drive
for growth. The Board also received training on the Manager’s Occupier
hub (an in-house client relationship management tool), which allows
the Company to manage customer contacts, with primary focus on the
development and asset management teams. Further to this, another
training session was dedicated to learning about the elements of the
power system, local energy generation options and potential areas of
impact for the business.
The 2022 Board evaluation confirmed that the training programme is
well structured and the Company Secretary would work on creating a
formal training plan for 2023.
In addition to the bespoke training programme, each Director
is expected to maintain their individual professional skills and is
responsible for identifying any training needs to help them ensure
that they maintain the requisite knowledge to be able to consider
andunderstand the Company’s responsibilities, business and
strategy. All Non-Executive Directors have access to the advice
andservices of the Company Secretary.
The Non-Executive Directors are also entitled to take independent
advice at the Company’s reasonable expense at any time.
Director induction
The Company Secretary conducts a comprehensive induction
process for all new Board members which aims to provide a broad
introduction to the Group. Each new appointment receives a tailored
programme comprising one-to-one meetings with current Board
Directors, representatives of the Manager, the Company’s key
advisers and BDO LLP, the Company’s Auditor. This is supported
by a comprehensive library of corporate documentation, Board
packs and key financial and operational information. All new
Non-Executive Directors are also invited on a site visit to one of
theCompany’s assets.
Committee evaluation
The overall performance of the Nomination Committee was rated
highly, particularly its review of Board composition and its handling
ofsuccession and appointment decisions.
Priorities for 2023
2023 will see the Nomination Committee continue to focus on wider
succession planning of the Board and on making progress towards
satisfying the Listing Rule diversity targets.
Aubrey Adams OBE, FCA, FRICS
Chair of the Nomination Committee
1 March 2023
90 Tritax Big Box REIT plc Annual Report 2022
Following the appointment of Elizabeth Brown and Wu Gang to the
Board in late 2021, the Board decided to delay the full external
Board evaluation until 2022 to allow sufficient time for the new
Non-Executive Directors to settle into their positions. In 2022, the
Board engaged Lintstock to undertake the Board & Committee
evaluation. Lintstock has no connection with the Company apart
from conducting the Board evaluation. The previous Board
evaluations provided a benchmark for the 2022 evaluation and
enabled Lintstock to understand the Board, the relationships
between the Non-Executive Directors and between the Board and
the Manager, the Company Secretary and other key stakeholders
tothe Company as well as the Company’s Shareholders.
Three-year evaluation cycle
Year one and two
Internal review is conducted via Lintstock through the use of
questionnaires which are based off information in the prior year
external evaluation and any new subjects arising. The process
for internal review is determined on a year-on-year basis.
Year three – stage two
In-person interviews between Lintstock and each Director and/
or representative of the Manager followed. The Board were
asked to consider the following topics:
• Board composition and dynamics;
• stakeholder engagement;
• management and focus of meetings;
• Board support;
• Board Committees;
• strategic oversight;
• risk management and internal control;
• top strategic issues; and
• specific questions relating to abrdn and the industrial
logistics market.
Stage three
Lintstock presented to the Board at the February 2023 Board
Meeting and an action plan for the year ahead was agreed.
Outcome
The outcome of the 2022 Board evaluation was very positive,
displaying a strong working relationship between the Board
members and the Manager, which is reflected in the effective
challenge by the Board and a constructive atmosphere in
Boardmeetings.
Actions
The Board met in February 2023 to discuss Lintstock’s 2022
Board Evaluation Report and the following priorities for 2023
wereidentified:
• the Board will continue to focus on key strategic questions with
aregular cadence throughout the year;
• the Board will continue its transparent communication with the
Manager and abrdn with a view to positively developing these
relationships for the benefit of the Company’s stakeholders;
• the Board will continue to monitor the property and equities
markets. This is especially important, in light of the current
macroeconomic and geopolitical volatility in the market; and
• understanding stakeholder views and continuing to engage with
a range of the Company’s stakeholders. The Board agreed to
consider conducting a Shareholder perception study over the
coming year.
Led by Karen Whitworth, the Senior Independent Director, the
Directors met without me present to appraise my performance as
Chairman. The review was very positive. The Directors believed
that the Board benefits from my informed, and experienced
leadership, which promotes collegial and constructive dynamic in the
boardroom, whilst maintaining constructive challenge. In addition,
the Non-Executive Directors expressed the desire for more informal,
Board only meetings.
The Board notes the ICSA principles of good practice for listed
companies using external board reviewers as set out in January 2022,
and confirms compliance with all principles.
Year three – stage one
Comprehensive questionnaires were sent to each of the
Directors and four key representatives of the Manager.
The questionnaires contained a section to appraise the
performance of the Chairman.
Nomination Committee Report continued
91Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Identifying what we need
The Board places great emphasis on ensuring that its own
membership reflects diversity in its broadest sense. The
Board intends to use all reasonable endeavours to comply
with the Listing Rule diversity targets. The Company has
included for the first time this year a statement in its Annual
Report (below), confirming whether such diversity targets
are achieved, and provided an explanation as to why one
ofthe diversity targets has not been achieved.
Furthermore, the Board supports the recommendations
set out in the FTSE Women Leaders Review and the
encompassing Listing Rules, and the Board and the
Nomination Committee intend to use all reasonable
endeavours to comply with these.
Recognising what we have
The Nomination Committee continually reviews the
Directors’ skills matrix ensuring that the Board and its
Committees maintain the necessary skills to deliver
theCompany’s strategic priorities.
The Board recognises the need to increase female
representation on the Board and will take steps towards
achieving further female diversity in future appointments.
Asat the date of this report, 33% of the Board is female.
The Board has met the recommendations of the Parker
Review. The Company continues to review its Diversity and
Inclusion Policy, as well as its training and development
programme to ensure an inclusive and well-balanced Board.
Actions to help us get there
The Committee refreshed and expanded the Board Diversity and Inclusion Policy in line with the targets on Board diversity referenced
in Listing Rule 9.8.6R(9). The Committee will continue to monitor the skills and diversity of the Board and endeavour to meet the Listing
Rule 9.8.6R(9) diversity targets by 2024 and in its wider Board succession planning.
Statement of compliance
The Company complied with two of three Listing Rule diversity targets, namely one woman in a senior Board role and one Director of
anethnic minority background. The Board will take steps towards achieving the 40% female diversity target in future appointments.
Table for reporting on gender identity or sex
Number
of Board
members
Percentage
of Board
Number
of senior
positions
Men 4 67% 1
Women 2 33% 1
Other categories — 0% —
Not specified/prefer not to say — 0% —
Table for reporting on ethnic background
Number
of Board
members
Percentage
of Board
Number
of senior
positions *
White British or other white (including minority white groups) 5 83% 2
Mixed/multiple ethnic groups — 0% —
Asian/Asian British 1 17% —
Black/African/Caribbean/Black British — 0% —
Other ethnic group, including Arab — 0% —
Not specified/prefer not to say — 0% —
* In accordance with the Listing Rules, as an externally managed investment Company we consider these rules inapplicable as we do not have any executive
management, including the roles of CEO or CFO, who are Directors of the Company. The Company considers the SID and Chairman to be the only applicable
senior roles within the business and have reported against these in the table above.
How we collected data
On appointment to the Board, the Directors are asked to complete a New Directors’ Questionnaire.
Audit, Risk and Internal Control
92 Tritax Big Box REIT plc Annual Report 2022
The Board is responsible for delivering robust and sustainable value
to its Shareholders and wider stakeholders by setting and working
towards strategic objectives. In order to do so we undertake robust
assessments of the risks which the Group faces and ensure controls
and mitigations are in place to manage those risks. The Company’s
key risks are set out on pages 53 to 58 of the Strategic Report.
The Audit and Risk Committee reviewed the principal and emerging
business risks of the Company on behalf of the Board, with a
specific focus on inflation and interest rate risk, in light of the current
macroeconomic climate and indirect consequences such as the
impact of the war in Ukraine and mini Budget on the economy and
supply chains, as described on pages 4 and 53 to 58.
The Board and Audit and Risk Committee regularly review the
financial position of the Company and perform an assessment of
any risks in relation to the Company’s business model, the Group’s
future performance, liquidity and solvency as well as any risks relating
to specific or proposed investments and customers or initiatives
relating to assets. To facilitate this process, the Manager produces
financial reports, which include the latest management accounts,
a review andreport on the Company’s financial forecast, a report
on proposed and existing investment, asset management and
development initiatives, substantiation of any dividend payments
anda general update on the financial health of the Company.
As the Company’s AIFM, the Manager is subject to reporting and
ongoing compliance under the AIFMD. As part of this regulatory
process, Langham Hall UK Depositary LLP has been retained by the
Company and is responsible for cash monitoring, asset verification
and oversight of the Company and the Manager including TSL.
Langham Hall UK Depositary LLP reports quarterly to the Board
andthe Manager.
The Manager also employs a Head of Risk and Compliance to assist
with the discharge of the Manager’s obligations in accordance with
the AIFMD.
Risk management and internal controls review
The Company’s internal control and risk management systems
and processes are designed to identify, manage and mitigate the
financial, operational and compliance risks that are inherent to the
Group and safeguard the Group’s assets. These safeguards and
systems in place are designed to manage (rather than eliminate)
the risk of failure to achieve business objectives and can only
provide reasonable, but not absolute, assurance against material
misstatement or loss.
The Board and the Manager have, together, reviewed all financial
performance and results notifications. Non-financial internal
controls include the systems of operational and compliance controls
maintained by the Company’s administrator, Link Asset Services (the
“Administrator”), and by the Manager in relation to the Company’s
business, as well as the management of key risks referred to in the
Strategic Report on pages 53 to 58.
The Board has contractually delegated responsibility for administrative
and accounting services to the Administrator and for Company
secretarial services to the Manager. These suppliers have their own
internal control systems relating to these matters, which we have
reviewed as part of the Company’s Financial Position and Prospects
Procedures document, which was reviewed, updated andapproved
in December 2022.
The Company has engaged Grant Thornton to provide certain
internal audit services. During the year, Grant Thornton undertook an
internal controls review on specific operations.
X For further details on the review please see page 96
The Company is managed externally by the Manager. All payments of
Company funds are authorised by the Manager in accordance with
the duties delegated to it pursuant to the terms of the Investment
Management Agreement (“IMA”) and in accordance with the provisions
of the AIFMD. The Manager instructs the Administrator to make the
duly authorised payment and Langham Hall UK Depositary LLP,
as part of its role as Depositary, reviews each material payment in
relation to the specific test areas as mentioned in the report overleaf.
The Audit and Risk Committee considers that the internal controls in
place and the function undertaken by Langham Hall UK Depositary
LLP, alongside the external audit, provides the appropriate rigour and
assurance over the managing of Company funds. In addition to this,
the Administrator has its own internal audit performed on an annual
basis by BDO, from which the Company reviews any findings. The
2021 audit did not raise any significant findings and whilst the 2022
audit is in the process of being finalised, no significant findings have
been raised to date.
Internal control and risk assessment process
In accordance with the AIC Code, the Board has established a
continuing process for identifying, evaluating and managing the risks
the Company faces and has reviewed the effectiveness of the internal
control systems.
This includes reviewing reports from the Auditor (details of which are
included in the Audit and Risk Committee Report), regular reports
from the Company Secretary (outlining corporate activity within the
Group and outlining the Company’s compliance with the AIC Code)
and proposed future initiatives relating to the Company’s governance
and compliance framework. The Audit and Risk Committee also
receives quarterly compliance reports prepared by Langham Hall UK
Depositary LLP and reviews the formal risk assessment conducted
by the Audit and Risk Committee and the Manager twice a year.
Furthermore, we actively consider investment opportunities, asset
management initiatives, debt and equity fundraisings and other
financial matters against the requirements of the Company’s
Investment Objectives and Investment Policy.
The Audit and Risk Committee also conducts a robust assessment
of the emerging and principal risks to the business model, future
performance, solvency and liquidity of the Company at least twice a
year and reports its findings to the Board. The Manager is asked to
analyse and report on the risks which the Company may encounter
on specific transactions including, for example, an adverse decision
regarding the development of an asset at the planning stages or a
sudden change in market conditions before the launch of an equity
raise or debt issue. We then consider each risk in turn, probing
the Manager’s assumptions and analysing whether the risk factors
attributed to each individual risk are fair and accurate, and the effect
of any mitigating factors.
We also consider this as part of our biannual risk review and at each
strategy meeting, and challenge the Manager to actively review
the risks it includes. Please see pages 53 to 58 for more details on
emerging and principal risks.
The Manager maintains a risk register, where perceived risks and
associated mitigations are recorded, and this is shared with the
Board for approval.
The Manager also reports to the Board twice a year on the Company’s
longer-term viability which includes financial sensitivities and stress
testing of the business to ensure that the adoption of the going
concern basis and longer-term viability are appropriate.
93Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Anti-bribery and corruption
The Board has a zero tolerance policy towards bribery and corruption
and is committed to carrying out business fairly, honestly and openly.
In considering the Bribery Act 2010, at the date of this report, the
Board had assessed the perceived risks to the Company arising from
bribery and corruption and identified aspects of the business, which
may be improved to mitigate such risks. The Manager actively reviews
and monitors perceived risks. Responsibility for anti-bribery and
corruption has been assigned to the Head of Risk and Compliance
within the Manager. The Head of Risk and Compliance reports to the
Committee biannually on any compliance matters.
All employees of the Manager are required to undertake certain
e-training on anti-bribery and other topics such as conflicts of
interests and anti-money laundering.
Modern slavery and human trafficking policy
The Group is committed to maintaining the highest standards of
ethical behaviour and expects the same of its business partners.
Slavery and human trafficking are entirely incompatible with the
Group’s business ethics.
We recognise that the real estate and construction sectors rank
highly for modern slavery risks. We believe that every effort should
be made to eliminate slavery and human trafficking from the Group’s
supply chain. We seek to mitigate the Group’s exposure by engaging
with reputable professional service firms, which adhere to the
Modern Slavery Act 2015.
We also regularly request formal governance information from the
Group’s suppliers, to enable ongoing monitoring of business and
supply chain risk and conduct due diligence and risk assessment
onpotential new suppliers.
This year, we have reviewed our processes and incorporated
requests for details of suppliers’ modern slavery policies in our
contract procurement process. Our property and asset managers
undertake on-site inspections, which enables us to check supplier
practices, and this is recorded in the inspection proforma. We will
continue to monitor and collaborate with the Group’s suppliers,
customers and developers, to ensure that they have systems and
controls that reduce the risk of facilitating modern slavery and
humantrafficking.
Depositary statement
Established in 2013, Langham Hall UK Depositary LLP is an
FCA regulated firm that works in conjunction with the Manager
and the Company to act as depositary. Consisting exclusively of
qualified and trainee accountants and alternative specialists, the
entity represents net assets of US$110 billion and we deploy our
services to over 120 alternative investment funds across various
jurisdictions worldwide. Our role as depositary primarily involves
oversight of the control environment of the Company, in line with
the requirements of the Alternative Investment Fund Managers
Directive (the “AIFMD”).
Our cash monitoring activity provides oversight of all the
Company held bank accounts with specific testing of bank
transactions triggered by share issues, property income
distributions via dividend payments, acquisitions and
third-party financing. We review whether cash transactions are
appropriately authorised and timely. The objective of our asset
verification process is to perform a review of the legal title of all
properties held by the Company, and shareholding of special
purpose vehicles beneath the Company.
We test whether on an ongoing basis the Company is being
operated by the Manager in line with the Company’s prospectus,
and the internal control environment of the Manager. This
includes a review of the Company’s and its subsidiaries’
decision papers and minutes.
We work with the Manager in discharging our duties, holding
formal meetings with senior staff on a quarterly basis, and
submit quarterly reports to the Manager and the Company,
which are then presented to the Board of Directors, setting
out our work performed and the corresponding findings for
the period.
In the year ended 31 December 2022, our work included the
review of one management share issue and four property
income distributions. Based on the work performed during
this period, we confirm that no issues came to our attention
toindicate that controls are not operating appropriately.
Joe Hime
Head of UK
For and on behalf of Langham Hall UK Depositary LLP,
London, UK
1 March 2023
Langham Hall UK Depositary LLP is a limited liability
partnershipregistered in England and Wales
(with registered number OC388007).
94 Tritax Big Box REIT plc Annual Report 2022
Audit and Risk Committee ReportAudit and Risk Committee Report
Membership
Richard Laing, Chair
Karen Whitworth
Wu Gang
Elizabeth Brown
X For full details on Committee attendance please refer
topage87
Key areas of focus in 2022:
• recommended to the Board that the Annual Report and Accounts for
2022, taken as whole, is fair, balanced and understandable and that
it provides the information necessary for Shareholders to assess the
Company’s position and performance, business model and strategy;
• reviewed the interim results for 2022 and recommended these to the
Board for approval;
• monitored the integrity of the financial statements of the Company
and any formal announcements relating to the Company’s financial
performance and reviewed any significant financial reporting
judgements contained in them;
• monitored the effectiveness of the Group’s assessment of
risk to ensure actions are being taken to mitigate the Group’s
exposure to risk;
• reviewed the robustness of the Company’s internal financial controls
and the efficiency of the internal control and risk management systems
used by the Company;
• assessed the quality of the annual and interim property valuations
prepared by the Company’s independent valuers and challenged the
assumptions used by the valuers in preparing the valuation;
• reviewed and considered the basis of the Viability and Going Concern
Statements made by the Directors;
• reviewed and monitored the Company’s relationship with its Auditor;
• reviewed the accounting and reporting implications of changes in
standards or best practice;
• evaluated the Company’s key climate-related risks in preparation for
TCFD reporting;
• oversight of new reporting requirements, including ESEF
reporting; and
• monitored development of the BEIS audit reform.
Dear Shareholders,
I am pleased to present the Audit and Risk Committee Report for the
year ended 31 December 2022. The Audit and Risk Committee’s role
is to oversee the Company’s financial reporting process, including the
risk management and internal financial controls in place within the
Manager and key suppliers, the valuation of the property portfolio,
the Group’s compliance with accepted accounting standards and
other regulatory requirements as well as the activities of the Auditor.
We operate within defined Terms of Reference, which are available
on the Company’s website and on request from the Company
Secretary. All Audit and Risk Committee members are independent
Non-Executive Directors of the Company, not connected to the
Manager nor the Auditor. The Committee believes that its members
have the right balance of skills and experience to be able to function
effectively. I am a Fellow of the Institute of Chartered Accountants
in England and Wales, and have extensive, recent and relevant
experience gained as Finance Director of CDC Group plc and De La
Rue plc as well as my other Non-Executive positions. The Committee
considers Karen Whitworth and me to be financial industry experts
given our financial backgrounds with Wu Gang bringing a wealth
of financial expertise from his career in investment banking. As
such we consider 75% of the Committee to have significant
financialexperience.
Further details of each Directors’ experience can be found in the
biographies on pages 72 and 73. We met for seven scheduled
meetings during 2022, following the Company’s corporate calendar,
which ensures that the meetings are aligned to the Company’s
financial reporting timetable. The Company Secretary and I ensure
that the meetings are of sufficient length to allow the Committee
to consider all important matters and the Committee is satisfied
that it receives full information in a timely manner to allow it to fulfil
its obligations. These meetings are attended by the Committee
members, as well as representatives of the Manager, the Company
Secretary and where necessary the Auditor, BDO LLP, and, on
occasion, the Company’s Chairman. We also met with the Auditor
without any representative ofthe Manager present. The Committee
also met with the Company’s independent valuers, CBRE and
Colliers, in July 2022 and January 2023 as part of the interim and
year-end audit processes. As the Committee Chair, I have had regular
communications with the Company Secretary, the Company’s
CFO and the Auditor. In addition, the Committee has discussions
throughout the year outside of the formal Committee meetings.
Richard Laing FCA
Chair of the Audit and Risk Committee
“ Given the recent volatility
across the financial markets,
the appropriateness of the
property valuations, balance
sheet strength and liquidity was
95Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Financial reporting and significant judgements:
• monitored the effectiveness of the Group’s assessment of
risk to ensure actions are being taken to mitigate the Group’s
exposure to risk;
• reviewed the robustness of the Company’s internal financial
controls and the efficiency of the internal control and risk
management systems used by the Company;
• assessed the quality of the annual and interim property valuations
prepared by the Company’s independent valuers and challenged
the assumptions used by the valuers in preparing the valuation;
• reviewed and considered the basis of the Viability and Going
Concern Statements made by the Directors;
• reviewed and monitored the Company’s relationship with
its Auditor;
• reviewed the accounting and reporting implications of changes in
standards or best practice;
• evaluated the Company’s key climate-related risks in preparation
for TCFD reporting; and
• monitored the integrity of the financial information published in the
Interim and Annual Reports and considered whether suitable and
appropriate estimates and judgements have been made in respect
of areas which could have a material impact on the financial
statements. We also considered the processes undertaken by the
Manager to ensure that the financial statements are fair, balanced
and understandable.
A variety of financial information and reports were prepared by the
Manager and provided to the Board and to the Committee over the
course of the year. These included budgets, periodic re-forecasting
following acquisitions or corporate activity, papers to support raising
of additional finance and general compliance.
As part of the FRC’s standard review in respect of public and large
private companies’ accounts and reports, the FRC conducted a
procedural review of the Company’s 31 December 2021 Annual
Report and Accounts, and the Committee is pleased to report that
there were no immediate questions to raise with the Company. The
Committee and the Manager have addressed a small number of
suggestions in the 2022 Annual Report.
The Committee undertook an exercise to review and formally record
the Company’s risk appetite and risk tolerance for each of the
principal risks facing the business which have been integrated into
the risk management framework and policies.
During the course of the year, Akur presented on the processes and
controls surrounding the preparation of the financial model in relation
to the Going Concern and Viability Statements of the Company. This
provided an opportunity for the Committee to challenge and review
the processes and were able to take comfort in the level of scrutiny
involved within the process from both the Manager and Akur.
We also regularly review the Company’s ability to continue to pay a
progressive dividend. This financial information was fully reviewed
and debated both at Committee and Board level across a number
of meetings.
The Manager and the Auditor update us on changes to accounting
policies, legislation and best practice and areas of significant
judgement by the Manager. They pay particular attention to
transactions which they deem important due to size or complexity.
We have expanded on the following matters in further detail as they
are determined as some of the most significant risks of material
misstatement in the financial statements.
Audit process
Planning meeting
We meet with the Auditor
and the Manager before the
preparation of each of the interim
and annual results, to plan and
discuss the scope of the audit
or review as appropriate, and
challenge where necessary to
ensure its rigour.
Scope
At these meetings the Auditor
prepares a detailed audit or
review plan which is discussed
and questioned by us and
the Manager to ensure that
all areas of the business are
appropriately reviewed and that
the materiality thresholds are set
at the appropriate level, which
varies depending on the matter
in question.
Challenge
We discuss with the Auditor its
views over significant risk areas
and why it considers these to
be risk areas. The Committee,
where appropriate, continues to
challenge and seek comfort from
the Auditor over those areas
which drive audit quality.
Ongoing review
We meet with the Auditor again
just prior to the conclusion of
the review or audit to consider,
challenge and evaluate its
findings in depth.
1.
Planning
meeting
3.
Challenge
4.
Ongoing
review
2.
Scope
96 Tritax Big Box REIT plc Annual Report 2022
Valuation of property portfolio
We have separated the valuation appointments, such that CBRE
values our investment assets and Colliers values our development
assets, both on a biannual basis. The Group’s portfolio value was
£5.06 billion on 31 December 2022 (compared to £5.48 billion on
31December 2021), reflecting a decrease of 7.7% for the year.
Following production of the draft valuation by the valuers, the
Manager meets with the valuers to discuss and challenge various
elements of the property valuation, if necessary. The Auditor, in
fulfilling its function as independent Auditor to the Company, also
meets with the valuers to discuss, and where necessary, challenge
the assumptions within the property valuations. The Committee
meets with both valuers to discuss and challenge the valuation
and to ensure it was conducted properly, independently and
could be fully supported. Subject to reviewing and agreeing any
subsequent changes, the Committee also receives a copy of the
property valuations for the portfolio once they have been reviewed
by the Manager and after the Auditor has met with the valuers. The
performance of the valuers is assessed on an annual basis by the
Management Engagement Committee. In line with best practice and
to ensure the continued independence of the valuers, CBRE rotated
Ben Thomas for the June 2022 valuation and Nick Knight for the
December 2022 valuation.
As explained in note 15 to the financial statements, CBRE and
Colliers independently valued the properties in accordance with
IAS 40 “Investment Property”. We have reviewed the underlying
assumptions within the property valuations and discussed these with
the Manager and the valuers, and have concluded that the valuation
is appropriate with a particular regard to the current environment,
particularly given the volatility experienced across the investment
market in H2 2022.
The Board approved both the CBRE and the Colliers valuations
in August 2022 and March 2023 in respect of the interim and
annualvaluations.
B and C Shares
Subject to certain conditions, the B and C Shares of Tritax Symmetry
entitle the holders to 13% of the adjusted NAV of Tritax Symmetry.
These conditions include bad leaver provisions which, as a result,
has led to 50% of Adjusted NAV being recognised as contingent
consideration in accordance with IFRS 3. Any further value paid
to the B and C Shareholders will therefore be accounted for as a
payment for post-combination services and therefore recognised
asa share-based payment.
Land options
As we consider that land options do not meet the definition of
investment property, land options will be classified as a non-financial
asset and measured at cost less provision for impairment under
IFRS in the Group Statement of Financial Position. Land options are
measured at fair value and included as such within EPRA NTA.
Fair, balanced and understandable financial statements
The production and audit of the Group’s Annual Report is a
comprehensive process, requiring input from a number of
contributors. To reach a conclusion on whether the Annual Report is
fair, balanced and understandable, as required under the AIC Code,
the Board has requested that the Committee advise on whether
it considers that the Annual Report fulfils these requirements. In
outlining our advice, we have considered the following:
• the comprehensive documentation that outlines the controls
in place for the production of the Annual Report, including the
verification processes to confirm the factual content;
• the detailed reviews undertaken at various stages of the
production process by the Manager, Administrator, Joint Financial
Advisers, Auditor and Committee, which are intended to ensure
consistency and overall balance;
• controls enforced by the Manager, Administrator and other third-
party service providers, to ensure complete and accurate financial
records and security of the Company’s assets;
• the satisfactory ISAE 3402 control report produced by the
Administrator for the year ended 31 December 2021, which has
been reviewed and reported upon by the Administrator’s external
Auditor, to verify the effectiveness of the Administrator’s internal
controls; and
• a letter provided by the Administrator that there have been no
changes to its control environment since 31 December 2021
and that all internal controls in place at the time of the last review
remain active.
As a result of the work performed, we have concluded and reported
to the Board that the Annual Report for the year ended 31 December
2022, taken as a whole, is fair, balanced and understandable and
provides the information necessary for Shareholders to assess the
Company’s position, performance, business model and strategy.
Task Force on Climate-related Financial Disclosures
(“TCFD”)
Further to our first voluntary TCFD disclosure in the 2021 Annual Report
and Accounts, the Company has built on the scenario planning
and climate risk reporting to further develop our disclosure and
further embed climate risk into the current risk framework of the
businessstrategy.
Please refer to pages 59 to 68 for our 2022 TCFD disclosure.
Internal audit
The Company does not have an internal audit function but has
engaged Grant Thornton UK LLP to perform certain internal audit
services and reviews. In the year Grant Thornton performed a
review over the risk management and health and safety processes
within the Tritax Symmetry Portfolio. The findings report was based
on information received from discussions with the Manager and
Tritax Symmetry management as well as walk through testing
of processes and controls. Grant Thornton identified several
recommendations throughout both reviews which were presented
to the Committee for review and discussion. The health and safety
process recommendations have been implemented with the help of
an external consultant. The risk management processes have been
implemented and are in the process of being formally documented.
Audit and Risk Committee Report continued
97Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
External audit
The Audit and Risk Committee recommended that BDO be reappointed
following a re-tender in 2017. The period of total uninterrupted engagemen
t
is nine years, covering the years ending 31 December 2014 to
31December 2022. Geraint Jones has been the Lead Audit Partner
since 2019.
This year is the sixth year that BDO has conducted the audit post
its re-tender in 2017. The Company confirms that it has complied
with the Competition and Markets Authority’s Order in the year. The
Committee was satisfied that it was not optimal to tender external
audit services in the current year. The Committee noted that a
competitive tender for the external Auditor must be held no later
than 2027. The Committee has assessed and values the quality and
stability of the relationship with BDO as current Auditor and remains
overall satisfied with the level of service received.
The Committee monitors the performance of the external Auditor,
providing an in-depth evaluation of its performance following the
external audit, and then makes a recommendation to the Board.
When considering the appropriateness of the reappointment of BDO,
we also consider in our review, the ratio of audit to non-audit fees and
the effectiveness of the audit process, together with other relevant
review processes. We were satisfied that we should recommend the
reappointment of BDO.
The Committee has met with the key members of the audit team
over the course of the year and BDO has formally confirmed its
independence as part of the reporting process.
We consider that the audit team assigned to the Company by BDO
has a good understanding of the Company’s business which enables
it to produce a detailed, high-quality, in-depth audit and permits the
team to scrutinise and challenge the Company’s financial procedures
and significant judgements. We ask the Auditor to explain the key
audit risks and how these have been addressed. We also considered
BDO’s internal quality control procedures and transparency report
and found them to be sufficient. BDO’s audit for the year ended
31December 2020 was reviewed by the FRC’s Audit Quality Review
team as part of their annual inspection of the firm’s audit work. The
committee received a copy of the report and discussed it with BDO.
None of these matters were considered by either the FRC or the
Committee to be significant. Overall, the Committee is satisfied that
the audit process is transparent and of good quality and that the
Auditor has met the agreed audit plan.
Please refer to note 8 in the financial statements for a summary of
fees paid to the Auditor.
We continue to believe that, in some circumstances, the external
Auditor’s understanding of the Company’s business can be beneficial
in improving the efficiency and effectiveness of advisory work. For
this reason we continue to engage BDO as reporting accountants on
the Company’s issues of equity and debt capital in the normal course
of the Company’s business. PricewaterhouseCoopers is appointed to
assist with financial and tax due diligence on corporate acquisitions
and to provide general tax compliance advice.
To help safeguard BDO’s objectivity and independence, we operate a
Non-Audit Services Policy which requires approval by the Committee
above a certain threshold before the external Auditor is engaged
to provide any permitted non-audit services and outlines certain
prohibited services.
The Company paid £62,440 in fees to the Auditor for non-audit
services during 2022. These fees are set out in the table below.
Work undertaken
Rationale for using
the external Auditor
Fee
£
Interim review Work is normally performed
by anexternal Auditor
49,000
Agreed upon procedures
over theAdjusted NAV
Extension of audit
procedures
13,440
Total 62,440
The ratio of audit to non-audit services received in the year was 12%
(2021: 12%). The Committee periodically monitors the ratio to ensure
that any fees for permissible non-audit services do not exceed 70%
of the average audit fees paid in the last three years.
Non-audit 12%
Audit 88%
Ratio of audit to
non-audit services
Committee evaluation
The overall performance of the Audit and Risk Committee was rated
highly, in particular addressing the issues within its remit, led by its
experienced Chair.
Priorities for 2023
The Committee will focus on continuing to develop its approach to
risk appetite, in order to provide a framework for grading the Board’s
tolerance for key threats, keeping close to the valuers and Auditors
and continuing to subject the valuation exercise to a particularly
rigorous review, given the volatile market conditions.
Richard Laing FCA
Chair of the Audit and Risk Committee
1 March 2023
98 Tritax Big Box REIT plc Annual Report 2022
Management Engagement Committee Report
Elizabeth Brown
Chair of the Management Engagement Committee
Dear Shareholders,
I am pleased to present the Management Engagement Committee
Report for the year ended 31 December 2022. I took over the Chair
of the Committee from Karen Whitworth with effect from 4November
2022. The Management Engagement Committee’s roleis to review
the performance of the Manager and the Company’s key service
providers and if required to recommend the re-tender of their
services for consideration by the Board. The Committee is also
responsible for overseeing any amendments to the IMA.
During the period we met for two scheduled and two ad hoc meetings.
Over the year, the Committee focused on completing the Investment
Management Agreement (“IMA”) review in order to protect the
longer-term interests of the Company, whilst ensuring that it offers
good value to stakeholders, positioning the Company as an attractive
investment opportunity in the market. The Committee met several
times without the Manager present and enlisted the help of Akur,
Jefferies and Alvarez & Marsal Tax and UK LLP in providing detailed
analysis and various market comparison reports to assist in its
discussions. Following a number of formal and informal meetings
held to negotiate the terms of the IMA with the Manager, the review
culminated in several voluntary amendments being made to the
IMA provisions, and the revised IMA was put for approval to the
Company’s Shareholders at the May 2022 AGM.
To ensure open and regular communication between the Manager
and the Board, certain key representatives of the Manager are invited
to attend all Board meetings to update the Board on the Company’s
portfolio activity and discuss the general market conditions and the
financial performance and strategy of the Company. Details of the
Company’s performance in 2022 have been set out in the Strategic
Report. During the year, the Committee conducted a thorough review
of the Manager’s performance to ensure that it remained in line with
the IMA and KPIs as outlined in the service level agreement between
the Company and the Manager. The Committee concluded that the
Manager continued to perform well and no concerns were raised.
Suppliers
The Manager prepared a Key Supplier Review report. Following a
thorough review, we agreed with the Manager that the performance
of the Company’s current service providers for the past year continued
to be satisfactory, and in several cases exceptional. During the year,
the Company re-tendered the Company’s depositary services and
appointed Kekst CNC as the Company’s corporate communications
agency. We are satisfied that the Company is benefiting from added
value in respect of the services it procures and do not suggest
any material changes to the engagement terms of the Company’s
advisers or service providers other than those outlined above. Receipt
of the tender schedule does not prevent the Committee from taking
action
at an earlier stage if necessary and in the interests of the Company.
Membership
Elizabeth Brown, Chair
Karen Whitworth
Aubrey Adams
Alastair Hughes
Richard Laing
Wu Gang
X For full details on Committee attendance please refer to
page87
Key areas of focus in 2022:
• reviewed, amended and presented for voluntary Shareholder
approval, the Investment Management Agreement between
the Company and the Manager;
• reviewed the performance of the Manager;
• reviewed the Manager’s key suppliers and their
performance; and
• appointed new suppliers.
“ We are pleased to have
concluded the IMA renegotiation
99Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Depositary re-tender
In August 2022, the incumbent depositary provider was tendered to
benchmark the fees and level of service currently being provided, as
this service provider had not been re-tendered since the Company’s
IPO in 2013. The Manager undertook the tender on behalf of the
Committee given their close working relationship, and invited five
providers including the incumbent to submit proposals for the
provision of depositary services and Annex IV reporting. Following
aninitial review, a shortlist of providers was invited to present to
certain representatives of the Manager including representatives
fromthe finance and secretariat teams. Following the pitch presentations,
it was decided to retain Langham Hall. The Committee believes that
the key outcomes of the tender, including additional controls and
processes implemented by the service provider, will reduce costs
and improve performance and efficiencies.
We will review the continuing appointment of all of the Company’s
principal service providers and the performance of the Manager on
an annual basis, in order to ensure they are in the best interest of
the Company.
The Manager
Under the terms of the IMA and in accordance with the ESMA guidance,
as to the interpretation of the rules under AIFMD, the Board has
delegated the day-to-day responsibility for running the Company to
the Manager. The Manager is responsible for making investment and
divestment decisions in accordance with the Company’s Investment
Policy along with asset management of the existing portfolio. The
negotiation of debt facilities within the parameters of the Company’s
policy on gearing and liaising with the Company’s advisers on proposed
equity fundraisings require approval from the Board prior to execution.
All of the Company’s subsidiaries and therefore all of its assets are
wholly owned and controlled by the Company as at 31 December 2022,
except certain assets which are held in joint venture vehicles, and
theBoard exercises direct control in respect of the Group’s holdings.
The Board continues to review all investment and divestment decisions
and development activity, as well as the asset management policy
established by the Manager, and remains responsible for ensuring
that these decisions are made in accordance with the Company’s
Investment Policy.
The Committee also reviews the Manager’s culture and
organisational structure. The Manager increased the number of
employees during 2022 to ensure that the Company is well served,
including the appointment of a new ESG Director, Head of People
Development, and Director of Marketing and Communications.
The Manager’s COO regularly updates the Board on the internal
operations of the Manager and the Committee continues to monitor
this on an ongoing basis.
As such we consider that all the policies of the Manager relate to all
their employees, suppliers and operating partners. The Company is
a REIT with no employees, hence all data and metrics covering the
employees of our Manager are deemed relevant.
IMA terms review
During the year, the Board finalised the review of the IMA.
The IMA continues on a rolling basis, with either party having the right
to terminate the IMA by giving at least 24 months’ notice, no earlier
than 4 May 2025.
The existing IMA allowed for an opportunity for renegotiation from
31 December 2019. As a result, the Management Engagement
Committee conducted a detailed review of the IMA and concluded
that certain aspects of the agreement should be updated to reflect
the growth of the business and to support its ongoing strategy. It
was recognised that the industry has evolved since the agreement
was initially signed and the Board was mindful to ensure that the
terms of the IMA remained aligned to the Company’s peers and
market practice. The key changes included a reduction in the overall
investment management fee payable (as set out below), which is
expected to have a beneficial effect on the Company’s EPRA Cost
Ratio, and an extension to the term of the agreement. Termination
cannot be served prior to 4 May 2025 (end of the new three-year term),
at which point a 24-month notice period applies. The extension,
along with an expansion of key person principles, provides additional
security to the Company in terms of its main service provider as
well as supporting the recruitment and retention of key personnel
in the Manager. For full details please see the Company’s 2022
Notice of AGM.
There are provisions allowing the parties to terminate without notice
in certain circumstances, including material breach and/or loss of
keypersonnel.
Conflict management
The IMA contains robust conflict provisions and the Manager is
not permitted in any circumstance to manage another fund with an
exclusive investment strategy focusing on distribution or logistics
assets in excess of 300,000 sq ft located within the UK. The Manager
is permitted to acquire and manage UK distribution or logistics assets
which provide less than 300,000 sq ft of accommodation on behalf
of other funds subject to certain caveats designed to ensure that any
assets which may be of interest to the Company are offered to the
Company in priority to other funds managed by the Manager.
Management fee
Under the terms of the IMA, the Manager is entitled to a management
fee in consideration for its services. This is payable in cash by the
Company each quarter and is calculated based on a percentage of
the Company’s EPRA Net Tangible Assets (“EPRA NTA”) disregarding
cash or cash equivalents. The fee is payable quarterly in arrears
and the Manager is obliged to apply 25% of the fee in shares of the
Company (“Management Shares”) (see below for further detail). If the
Group buys or sells any assets after the date at which the relevant
EPRA NTA is calculated, the EPRA NTA is adjusted pro rata for the
net purchase or sale price, less any third-party debt drawn or repaid
whilst remaining capped at EPRA NTA.
The revised management fee, applicable from 1 July 2022, is as set
out below:
EPRA NTA value
Relevant
percentage
Up to and including £2 billion 0.7%
Above £2 billion and up to and including £3 billion 0.6%
Above £3 billion and up to and including £3.5 billion 0.5%
Above £3.5 billion 0.4%
100 Tritax Big Box REIT plc Annual Report 2022
Management fee continued
During specified periods after publication of the Company’s annual
orinterim results the members of the Manager are obliged to use
25% of the management fee (net of any VAT, personal taxation liabilities
and dealing costs, including stamp duty or stamp duty reserve tax)
(the “net cash amount”), to acquire Management Shares through
the subscription for new Ordinary Shares in the Company. This is
done ata price equivalent to the prevailing EPRA NTA per share,
adjusted for any dividend declared after the EPRA NTA per share
is announced, if the new shares do not qualify for receipt of this
dividend. Where the EPRA NTA is below the prevailing share price,
new Ordinary Shares will be issued at the prevailing EPRA NTA. In
thecircumstances where the EPRA NTA is above the prevailing share
price, the Company’s Broker will be instructed to acquire Ordinary
Shares in the market for those persons, to the value as near as possible
equal to the net cash amount.
The Management Shares may be allocated to any of the Partners of
the Manager, and all employees of the Manager are eligible to receive
share allocations at the discretion of the Manager.
On 4 March 2022, the Company issued 997,210 Ordinary Shares to
the Manager, which were allocated to the Manager’s Partners, its staff and
abrdn in respect of the net cash amount, relating to the six-month
period to 31 December 2021. The issue price was 218.26 pence per
Ordinary Share, being the most recent published NAV per Ordinary
Share as at 31 December 2021.
On 4 August 2022, the Manager purchased 1,267,246 Ordinary Shares
in the market which were allocated to the Manager’s Partners,
its staff and abrdn in respect of the net cash amount, relating
to the six-month period to 30 June 2022. The purchase price was
193.86pence per Ordinary Share.
Partners of the Manager and its staff had the following beneficial
interests as at the date of this report:
PDMR or person
closely associated
Number of
Ordinary
Shares held
Percentage of
issued share
capital as at
1 March 2022
Colin Godfrey 2,581,369 0.1381%
James Dunlop 2,519,008 0.1348%
Henry Franklin 1,885,553 0.1009%
Bjorn Hobart 369,298 0.0198%
Petrina Austin 323,895 0.0173%
Frankie Whitehead 159,253 0.0085%
Tritax Management LLP 95,275 0.0051%
Staff of Tritax Management LLP
1
723,404 0.0387%
Aberdeen Asset Management plc
2
1,967,415 0.1053%
Total 10,624,470 0.5685%
1. The figure comprises Ordinary Shares issued to staff of Tritax Management
LLP under the terms of the IMA and at IPO, and does not include other
shares that may have otherwise been acquired by staff.
2. The figure comprises Ordinary Shares issued to abrdn under the terms of
the IMA and it does not include other shares that may have been acquired
by abrdn.
AIFM Directive
The AIFMD became part of UK law in 2013. It regulates AIFMs and
imposes obligations on managers of alternative investment funds
(“AIFs”) in the EU or who market shares in AIFs to EU investors.
Under the AIFMD, the AIFM must comply with various organisational,
operational and transparency obligations.
The Manager is authorised by the FCA as an AIFM and provides
all relevant investment management and advisory services to the
Company, including regulated activities. The Manager is responsible
for making investment and divestment decisions in respect of the
Company’s assets as part of its regulatory responsibility for the
overall portfolio and risk management of the Company. This is in line
with published ESMA guidance on the application of the AIFMD.
AIFM remuneration policy applied by the Manager
As a full scope AIFM, the Manager must apply a remuneration policy
in line with its business strategy, objectives, values and interests, as
well as those of the AIFs it manages or its investors. The policy must
include measures to avoid conflicts of interest. This ensures that the
Partners have a vested interest in ensuring the Manager remains
financially sound.
The annual fee paid by the Company is based on a percentage of
its EPRA NTA, as set out on page 99. In addition, the Manager’s
Partners are required to apply 25% of that fee (net of tax and certain
other costs, as described on the previous page) to the purchase
of Management Shares. Management Shares are subject to a
12-month lock-in period. This aligns the interests of the Manager and
its Partners with the strategy and interests of the Company and its
Shareholders. The Manager and its Partners are able to allocate a
proportion of the Management Shares to key members of staff, which
they have once again done in respect of both Management Share
issue and purchase in 2022.
The Manager’s partnership board meets at least twice a year to
discuss the remuneration of its entire staff. Staff are remunerated in
accordance with their seniority, expertise, professional qualifications,
responsibilities and performance. They are paid salaries in line with
market rates and, in profitable years, awarded a discretionary bonus
from a bonus pool worth, in aggregate, at least 5% of the Manager’s
profits. The discretionary bonus may consist of cash or Ordinary
Shares in the Company allocated to certain members of staff out
of the Management Shares. This means that staff remuneration
is predominantly fixed and the variable element is determined by
the Manager’s overall profitability, rather than the performance of
aparticular AIF.
The Manager’s Partners are entitled to their partnership share of its
profits and losses. None of the Partners are entitled to additional
partnership drawings that depend on the performance of any AIF
managed by the partnership. The Partner’s remuneration therefore
depends on the Manager’s overall profitability, rather than the
performance of any AIF.
Committee evaluation
The overall performance on the Management Engagement
Committee for the period was positively rated, in particular its review
of the Manager’s and the Company’s service providers’ performance,
and the negotiation of the Investment Management Agreement.
Priorities for 2023
The Committee will focus on the review and performance of the
Manager and its key suppliers, including an ongoing detailed
understanding of the operations and employees within the Manager.
Elizabeth Brown
Chair of the Management Engagement Committee
1 March 2023
Management Engagement Committee Report continued
101Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Annual statement
The Company only has Non-Executive Directors and therefore does
not consider it necessary to establish a separate Remuneration
Committee. The Directors’ remuneration is disclosed below. The
Remuneration Report will be presented at the AGM on 3 May 2023
for Shareholder consideration and approval. No remuneration decision
took place in the year under review, however the Non-Executive
Director base fee level was increased with effect from 1January
2022 from £50,000 to £54,000 per annum. This was approved by
the Board on 14 December 2021. The Directors’ remuneration is
disclosed below.
Directors’ Remuneration Policy
The Company’s policy is to determine the level of Directors’ fees with
regard to those payable to Non-Executive Directors of comparable
REITs and the time each Director dedicates to the Company’s affairs.
The Remuneration Policy is set out in the Company’s 2020 Annual
Report, which is available on the Company’s website. The next time it
is intended that Shareholders will be asked to approve the Directors’
Remuneration Policy will be at the Company’s AGM in 2024 and the
Remuneration Policy approved at the Company’s 2021 AGM will
continue to apply until such time.
The Directors are entitled to their annual fee and reasonable
expenses. No element of the Directors’ remuneration is performance
related, nor does any Director have any entitlement to pensions,
share options or any Long Term Incentive Plans from the Company.
Under the Company’s Articles, all Directors are entitled to the
remuneration determined from time to time by the Board. There were
no revisions to the policy during the period.
Each Director has been appointed pursuant to a Letter of
Appointment. All Directors are appointed for a three-year term,
subject to annual re-election at the Company’s AGM. No Director
has a service contract with the Company, nor are any such contracts
proposed. The Directors’ appointments can be terminated in
accordance with the notice provisions and the Articles and, in certain
circumstances, without compensation. The terms of appointment of
the Directors are set out in the below table.
Director Letter of appointment dated
Expected and actual
date of expiry
Unexpired term as at
31 December 2022 Notice period
Aubrey Adams 11 September 2017 11 September 2024 45 months 3 months
11 September 2019
11 September 2021
Richard Laing 16 May 2018 16 May 2025 17 months 3 months
16 May 2020
4 May 2022
Alastair Hughes 1 February 2019 1 February 2026 26 months 3 months
1 February 2021
1 February 2023
Karen Whitworth 21 October 2019
21 October 2021
21 October 2024 46 months 3 months
Wu Gang 1 October 2021 1 October 2024 45 months 3 months
Elizabeth Brown 15 December 2021 15 December 2024 48 months 3 months
Statement of consideration of Shareholder views
The Board will seek Shareholder views when evaluating and setting ongoing remuneration strategy and prior to any significant changes to
the Remuneration Policy, where appropriate. The Company is committed to ongoing Shareholder dialogue and takes an active interest in
voting outcomes.
Annual Report on Remuneration (audited)
The fees paid to the past and current Directors in the year to 31 December 2022, which have been audited, are set out below. In addition,
each Director is entitled to recover all reasonable expenses incurred in connection with performing his or her duties as a Director. Directors’
expenses for the year to 31 December 2022 totalled £628 (2021: £nil). No other remuneration was paid or payable during the year to any Director.
Annual fee Expenses Total fixed remuneration
Director
For year
ended
31.12.2022
1
£
For year
ended
31.12.2021
£
For year
ended
31.12.2022
£
For year
ended
31.12.2021
£
For year
ended
31.12.2022
£
For year
ended
31.12.2021
£
Aubrey Adams
2
120,000 97,526 N/A N/A 120,000 97,526
Richard Laing 64,000 60,000 563 N/A 64,563 60,000
Alastair Hughes
3
58,086 53,154 N/A N/A 58,095 53,154
Karen Whitworth
4
59,000 51,250 N/A N/A 59,000 51,250
Wu Gang 54,000 12,500 65 N/A 54,065 12,500
Elizabeth Brown
5
54,624 2,500 N/A N/A 54,624 2,500
1. The Non-Executive Director base fee level was increased with effect from 1 January 2022 from £50,000 to £54,000 per annum.
2. Aubrey Adams was appointed Chair effective 5 May 2021.
3. Alastair Hughes resigned as Senior Independent Director effective 4 November 2022.
4. Karen Whitworth was appointed Senior Independent Director effective 4 November 2022.
5. Elizabeth Brown was appointed Chair of the Management Engagement Committee effective 4 November 2022.
Directors’ Remuneration Report
102 Tritax Big Box REIT plc Annual Report 2022
Annual change in remuneration
Director 2022
1
2021
Aubrey Adams
2
0% 118%
Richard Laing 7% 0%
Alastair Hughes
3
(2)% 10%
Karen Whitworth
4
7% 10%
Wu Gang 8% N/A
Elizabeth Brown
5
18% N/A
1. The Non-Executive Director base fee level was increased with effect from 1 January 2022 from £50,000 to £54,000 per annum.
2. Aubrey Adams was appointed Chair effective 5 May 2021.
3. Alastair Hughes resigned as Senior Independent Director effective 4 November 2022.
4. Karen Whitworth was appointed Senior Independent Director effective 4 November 2022.
5. Elizabeth Brown was appointed Chair of the Management Engagement Committee effective 4 November 2022.
External advisers
The Board and its Committees have access to sufficient resources to discharge their duties.
Statement of voting at general meeting
The Company is committed to ongoing Shareholder dialogue and takes an active interest in voting outcomes. If there are substantial votes
against any resolutions, the Company will consult with Shareholders in order to understand the reasons for any such vote. The Company will
provide an update on the views received from Shareholders no later than six months after the meeting and any resulting action will be detailed
in the next Annual Report. Ordinary resolutions require a simple majority of 50% and special resolutions require 75% to be passed.
The Directors’ Remuneration Policy and the Directors’ Remuneration Report were approved by Shareholders at the Company’s AGMs held on
5 May 2021 and 4 May 2022, respectively. The voting on the respective resolutions was as shown below:
Resolution For %
1
Against % Votes withheld
Directors’ Remuneration Policy 99.65% 0.35% 33,272,869
Directors’ Remuneration Report 99.95% 0.05% 5,560,015
1. Including votes in favour and discretion.
Total Shareholder Return
The graph below shows the Total Shareholder Return (as required by Company Law) of the Company’s Ordinary Shares relative to a return on
a hypothetical holding over the same period in the FTSE 250 and the FTSE All-Share REIT Index.
Directors’ Remuneration Report continued
Total Shareholder Return is the measure of returns provided by a company to Shareholders reflecting share price movements and assuming
reinvestment of dividends.
400
350
300
250
200
150
100
50
Dec 13 Dec 15 Dec 17 Dec 19 Dec 20Dec 14 Dec 16 Dec 18 Dec 22Dec 21
Tritax Big Box FTSE 250 FTSE All-Share REIT
Pence
103Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Directors’/PDMR shareholdings (audited)
There is no requirement for the Directors of the Company to own shares in the Company. As at 1 March 2023, the Directors and their persons
closely associated held the shareholdings listed below.
Director
1
Number of
shares
held
Percentage
of issued
share capital
Dividends
received
31 December
2022
£
Aubrey Adams 240,000 0.013% 16,240
Richard Laing 50,000 0.003% 3,463
Alastair Hughes 46,483 0.002% 3,001
Karen Whitworth 30,705 0.002% 2,126
Elizabeth Brown 9,340 0.0005% 469
Wu Gang 2,600 0.0001% 87
1. Includes shareholdings of Directors and persons closely associated (as defined by the UK Market Abuse Regulation).
The shareholdings of these Directors are not significant and, therefore, do not compromise their independence.
Relative importance on spend on pay
2022
£m
2021
£m
Change
%
Directors’ remuneration 0.5 0.4 12.5%
Investment management fees 26.0 20.7 25.6%
Dividends paid to Shareholders 129.4 114.4 13.1%
Other items
The Company maintains Directors’ and Officers’ liability insurance cover, at its expense, on the Directors’ behalf.
Aubrey Adams OBE, FCA, FRICS
Chairman
1 March 2023
104 Tritax Big Box REIT plc Annual Report 2022
Directors’ Report
Introduction
The Directors are pleased to present the Annual Report, including
the Company’s audited financial statements as at, and for the year
ended, 31 December 2022.
The Directors’ Report and the Strategic Report comprise the
“Management Report” for the purposes of Disclosure Guidance
andTransparency Rule 4.1.5R.
Statutory information contained elsewhere in the
Annual Report
Information required to be part of this Directors’ Report can be found
elsewhere in the Annual Report and is incorporated into this report by
reference, as indicated in the relevant section.
Information Location in Annual Report
Directors Pages 72 and 73
S172 Page 25
Business relationships Pages 1 to 69
Directors’ interest in shares Page 103
Future developments of the Company Page 20
Financial instruments Note 4.6 on page 120
Corporate Governance Statement Pages 71 and 77 and 78
Going Concern and Viability Page 69
Disclosure of information to Auditor Page 105
Share capital Page 104
TCFD Pages 59 to 68
SECR reporting Page 36
Incorporation by reference
The Corporate Governance Report (pages 70 to 106 of this Annual
Report and Accounts for the year ended 31 December 2022) is
incorporated by reference into this Directors’ Report.
Financial results and dividends
The financial results for the year can be found in the Group Statement
of Comprehensive Income on page 113.
The following interim dividends amounting to, in aggregate,
7.00pence per share were declared in respect of the year ended
31December 2022:
On 4 May 2022, we declared an interim dividend in respect of the
period from 1 January 2022 to 31 March 2022 of 1.675 pence per
Ordinary Share, paid on 1 June 2022 to Shareholders on the register
on 13 May 2022.
On 28 July 2022, we declared an interim dividend in respect of
the period from 1 April 2022 to 30 June 2022 of 1.675 pence per
Ordinary Share, paid on 25 August 2022 to Shareholders on the
register on 5 August 2022.
On 11 October 2022, we declared an interim dividend in respect of
the period from 1 July 2022 to 30 September 2022 of 1.675 pence
per Ordinary Share, paid on 3 November 2022 to Shareholders on
the register on 21 October 2022.
A fourth interim dividend in respect of the three months ended
31 December 2022 of 1.975 pence per share, was approved for
declaration on 1 March 2023, payable on 30 March 2023.
Political donations
No political donations were made during the year.
Employees
The Group has no employees and therefore no employee share
scheme or policies on equal opportunities and disabilities.
Share capital
On 4 March 2022, the Manager issued 1,045,682 Ordinary Shares
in accordance with the terms of the IMA and Symmetry ManCo deal
bonus agreement.
As at 31 December 2022, there were 1,868,826,992 Ordinary
Shares in issue.
Ordinary Shares Number
Gross proceeds
£
Balance at the start of the year 1,867,781,310 N/A
Shares issued in accordance
withthe terms of the IMA
andSymmetry ManCo deal
bonusagreement 1,045,682 N/A
Balance at end of the year 1,868,826,992
Restrictions on transfer of securities in the Company
There are no restrictions on the transfer of securities in the Company,
except as a result of:
• the FCA’s Listing Rules, which require certain individuals to have
approval to deal in the Company’s shares; and
• the Company’s Articles of Association, which allow the Board
to decline to register a transfer of shares or otherwise impose a
restriction on shares, to prevent the Company or the Manager
breaching any law or regulation.
The Company is not aware of any agreements between holders of
securities that may result in restrictions on transferring securities in
the Company.
105Tritax Big Box REIT plc Annual Report 2022
CORPORATE GOVERNANCE
Securities carrying special rights
No person holds securities in the Company carrying special rights
with regard to control of the Company.
Substantial shareholdings
As at 7 February 2023, the Company is aware of the following
substantial shareholdings, which were directly or indirectly interested
in 3% or more of the total voting rights in the Company’s issued share
capital. As at 7 February 2023, the issued share capital remained the
same as at 31 December 2022 with 1,868,826,992 shares in issue.
Shareholder name
Holding as at
7 February 2023 %
BlackRock 158,529,967 8.48
Vanguard Group 93,704,638 5.01
Aviva Investors 90,469,818 4.84
Legal & General Investment Management 76,523,826 4.09
SSGA 63,860,522 3.42
Brewin Dolphin, stockbrokers 61,273,507 3.28
Amendment of Articles of Association
The Articles may be amended by a special resolution of the
Company’s Shareholders.
Powers of the Directors
The Board will manage the Company’s business and may exercise all
the Company’s powers, subject to the Articles, the Companies Act
and any directions given by the Company by special resolution.
Powers in relation to the Company issuing its shares
At the AGM held on 4 May 2022, the Directors were granted a
renewed general authority to allot Ordinary Shares in accordance
with Section 551 of the Companies Act 2006, up to an aggregate
nominal amount of £12,458,846. Of those Ordinary Shares, the
Directors were granted authority to issue up to an aggregate nominal
amount of £934,413 (which is equivalent to 5% of the Company’s
issued share capital as at that date) non-pre-emptively and wholly for
cash and authority to issue up to an aggregate nominal amount of
£934,413 to be used only for the purpose of financing (or refinancing,
if the authority is to be used within six months after the original
transaction), a transaction which the Directors determine to be an
acquisition or other capital investment of a kind contemplated by the
Statement of Principles on Disapplying Pre-Emption Rights. These
authorities replaced the equivalent authorities given to the Directors
at the AGM held on 5 May 2021.
These authorities expire at the next AGM in Q2 2023.
Change of control
Under the Group’s financing facilities, any change of control at the borrower
or immediate Parent Company level may trigger a repayment of the
outstanding amounts to the lending banks or institutions.
In certain facilities including the issue of recent loan notes, the
change of control provisions also include a change of control at the
ultimate Parent Company level.
Appointment and replacement of Directors
Details of the process by which Directors can be appointed or
replaced are included in the Nomination Committee Report on
pages88 to 91.
Disclosure of information to the Auditor
The Directors, who were members of the Board at the time of
approving the Directors’ Report, have confirmed that:
• so far as each Director is aware, there is no relevant audit
information of which the Company’s Auditor is not aware; and
• each Director has taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Company’s Auditor is
aware of that information.
Events subsequent to the year-end date
For details of events since the year-end date, please refer to note 35
on page 140 to the consolidated financial statements.
Independent Auditor
BDO LLP has expressed its willingness to continue as Auditor for the
financial year ending 31 December 2023.
Manager and service providers
The Manager during the year was Tritax Management LLP. Details of
the Manager and certain elements of the Investment Management
Agreement are set out in the Management Engagement Committee
Report on pages 98 to 100.
Additional information
In accordance with Listing Rule (“LR”) 9.8.4C R, the only disclosure
requirement required under LR 9.8.4 R is the disclosure of capitalised
interest, which is disclosed in note 8 on page 152.
Annual General Meeting
It is planned for the Company’s AGM to be held on 3 May 2023 at the
offices of Taylor Wessing LLP, 5 New Street Square, London EC4A
3TW. Further details will be provided in the Notice of Meeting.
This report was approved by the Board on 1 March 2023.
Tritax Management LLP
Company Secretary
1 March 2023
Company Registration Number: 08215888
106 Tritax Big Box REIT plc Annual Report 2022
Directors’ Responsibilities
In respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with UK adopted international
accounting standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required
to prepare the Group financial statements in accordance with UK
adopted international accounting standards and have elected
to prepare the Company financial statements in accordance
with UnitedKingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law).
Under Company Law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
viewof the state of affairs of the Group and Company and of the
profit or loss for the Group for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether the Group financial statements have been prepared
in accordance with UK adopted international accounting
standards, subject to any material departures disclosed and
explained in the financial statements;
• state whether the Company financial statements have been
prepared in accordance with Financial Reporting Standard 101
“Reduced Disclosure Framework” (“FRS 101”) subject to any
materialdepartures disclosed and explained in the Company
financial statements;
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and the Company will
continue in business; and
• prepare a Directors’ Report, a Strategic Report and Directors’
Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities. The
Directors are responsible for ensuring that the Annual Report and
Accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for Shareholders to assess
the Group’s performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company’s website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing integrity of
thefinancial statements contained therein.
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• the Group financial statements have been prepared in accordance
with the applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit and loss of
the Group; and
• the Annual Report includes a fair review of the development and
performance of the business and the financial position of the
Group and Parent Company, together with a description of the
principal risks and uncertainties that they face.
Aubrey Adams OBE, FCA, FRICS
Chairman
1 March 2023
107Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2022
and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards
and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Tritax Big Box REIT plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 December 2022 which comprise the Group Statement of Comprehensive income, the Group and Company Statement of Financial Position,
the Group and Company Statement of Changes in Equity, the Group Cash Flow Statement and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and
UK adopted international accounting standards and as regards the Parent Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with
the additional report to the audit committee.
Independence
Following the recommendation of the Audit Committee we were initially appointed by the Directors in November 2013 to audit the financial
statements for the year ended of the Company for the period ending 31 December 2014 and subsequent financial periods. We were reappointed by
the members at the Annual General Meeting on 4 May 2022 to audit the financial statements for the year ending 31 December 2022 and
subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is nine years, covering
the years ending 31 December 2014 to 31 December 2022. We remain independent of the Group and the Parent Company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The
non-audit services prohibited by that standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to
adopt the going concern basis of accounting included:
• using our knowledge of the Group and its market sector together with the current general economic environment to assess the Directors identification
of the inherent risks to the Group’s business and how these might impact the Group’s ability to remain a going concern for the going
concern period, being the period to 31 March 2024, which is at least 12 months from when the financial statements are authorised for issue;
• obtaining an understanding of the Directors process for assessing going concern including an understanding of the key assumptions used;
• obtaining the Directors going concern assessment; and
• assessing the Group’s forecasts cash flows with reference to historic performance and challenging the Directors’ forecast assumptions in
comparison to the current performance of the Group;
• testing the inputs into the forecasts for reasonableness based on historic activity and corroboration to contractual agreements;
• agreeing the Group’s available borrowing facilities and the related terms and covenants to loan agreements; and
• obtaining covenant calculations and forecast calculations to test for any potential future covenant breaches. We also considered the
covenant compliance headroom for sensitivity to both future changes in property valuations and the Group’s future financial performance;
• considering Board minutes, and evidence obtained through the audit and challenging the Directors on the identification of any contradictory
information in the forecasts and the resulting impacting on the going concern assessment;
• analysing the Directors’ stress testing calculations and challenging the assumptions made using our knowledge of the business and of the
current economic climate, to assess the reasonableness of the downside scenarios selected; and
• reviewing the disclosures in the financial statements relating to going concern to check that the disclosure is consistent with the Directors’
going concern assessment.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and Parent’s Company’s ability to continue as a going concern for a period of at least
12months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Independent Auditor’s Report
To the members of Tritax Big Box REIT plc
108 Tritax Big Box REIT plc Annual Report 2022
An overview of the scope of our audit
Overview
Coverage
1
100% (2021: 100%) of Group profit before tax
100% (2021: 100%) of Group revenue
100% (2021: 100%) of Group total assets
Key audit matters Valuation of investment property portfolio, including
properties under construction (forward funded assets)
2022
2021
Materiality Group financial statements as a whole
£51 million (2021: £55 million) based on 1% (2021: 1%) of total assets
1. These are areas which have been subject to a full scope audit by the Group engagement team.
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
The Group operates solely in the United Kingdom, and all audit procedures were performed by the Group audit team. We identified two
significant components, in addition to the Parent Company, for which full scope audits were performed being:
• The investment property component of the Group directly managed by the Tritax Manager; and
• The Tritax Symmetry Holdings component of the Group, which is managed directly by the Tritax Symmetry Holdings Limited Manager and
overseen by the Tritax Manager.
There were no non-significant components.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of
the engagement team. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this matter.
Independent Auditor’s Report continued
To the members of Tritax Big Box REIT plc
109Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
An overview of the scope of our audit continued
Key audit matters continued
Key audit matter How the scope of our audit addressed the
keyaudit matter
Valuation of investment
property portfolio,
including properties
under construction
(including forwarded
funded assets)
Refer to note 3 and 4 in
relation to accounting
policies over significant
estimates and judgements.
Refer to note 15 in relation
toinvestment property.
The Group’s investment property portfolio includes:
• Standing assets: these are existing properties
that are currently let or available to let. They are
valued using the income capitalisation method.
• Properties under construction: these are
properties being built, some of which are under
forward funded agreements with developers and
which have agreed pre-lets with tenants.
Properties under construction have a different risk
and investment profile to the standing assets. They
are valued using the residual method, being
estimating the fair value of the completed project
using the income capitalisation method less
estimated costs to completion.
The valuation of investment property requires
significant judgement and estimates by the
Directors and their appointed independent valuer
(“the Valuer”) and is therefore considered a
significant risk due to the subjective nature of
certain assumptions inherent in each valuation.
Any input inaccuracies or unreasonable bases used
in the valuation judgements (such as capitalisation
yields, future lease income, and in the case of
properties under construction, costs to complete)
could result in a material misstatement of
investment property asset, therefore impacting the
financial statements.
There is also a risk that the Directors may unduly
influence the significant judgements and estimates
in respect of property valuations in order to achieve
property valuation or other performance or financial
targets or to meet market expectations.
For these reasons we consider the valuation of the
investment property portfolio, including properties
under construction (including forward funded
assets) to be a key audit matter.
We read the external valuation reports prepared by
the Group’s Valuer and checked that the
approaches used were consistent with the
requirements of relevant accounting standards.
We assessed the Valuer’s competence and
capabilities and read their terms of engagement
with the Group, to determine that there were no
matters that affected their independence and
objectivity, including any influence from Directors
over the significant judgements and estimates, or
imposed scope limitations upon their work.
We checked the data provided to the Valuer by the
Group and found that it was consistent with the
information we audited. This data included inputs
such as current rent and lease terms, which we
have agreed on a sample basis to executed lease
agreements as part of our audit work.
Alongside our internal valuations experts we met
with the Valuer and gained an understanding of the
valuation methods and assumptions used. We
challenged the assumptions utilised by the Valuer
within the valuation by benchmarking the valuation
to our expectations developed using independent
data around the year end.
We assessed the project costs and progress of
development for properties under construction by
agreeing total costs and other relevant details to the
underlying agreements. We then verified costs
already incurred to our additions testing (tested on
a sample basis), with the remainder being costs to
complete. The forecast costs to complete included
in the valuations were also agreed to the project
costing reports.
We checked that the property valuations have been
properly included in the financial statements. We
also assessed whether the disclosures in the
financial statements are appropriate and in
accordance with relevant accounting standards.
Key observation:
Our testing indicated that the estimates and
judgements used by the Directors in the valuation
of the investment property portfolio were appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as
immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating
their effect on the financial statements as a whole.
110 Tritax Big Box REIT plc Annual Report 2022
Independent Auditor’s Report continued
To the members of Tritax Big Box REIT plc
Our application of materiality continued
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements Parent Company financial statements
2022
£m
2021
£m
2022
£m
2021
£m
Materiality 51.0 55.0 36.0 35.0
Basis for determining materiality 1% of total assets 1% of total assets 1% of total assets 1% of total assets
Rationale for the benchmark applied We determined that total assets would be
the most appropriate basis for determining
overall materiality as we consider it to be
one of the principal considerations for users
of the financial statements in assessing the
financial performance of the Group.
We determined that total assets would be
the most appropriate basis for determining
overall materiality as we consider it to be
one of the principal considerations for
users of the financial statements in
assessing the financial performance
oftheParent Company.
Performance materiality 38.25 41.25 27.0 26.25
Basis for determining
performancemateriality
75% of materiality – based on the low number of components, low value of brought
forward adjustments impacting the current year and low value of expected
misstatements, past on past experience.
Specific materiality
We determined that for both the Group and Parent Company, a misstatement of less than materiality for the financial statements as a whole,
specific materiality, could influence the economic decisions of users.
For the Group we determined specific materiality to apply to all financial statement areas that would impact European Public Real Estate
Association (“EPRA”) earnings. EPRA earnings excludes the impact of the net surplus on revaluation of Investment properties, any impairment
of land options and interest rate derivatives, and we consider this to be a key performance measure of the Group. On this basis we determined
specific materiality to be 5% of EPRA Earnings, being £7.2 million (2021: £6.4 million based on 5% of EPRA Earnings).
For the Parent Company we determined specific materiality to be 5% of Parent Company profit before tax being £6.6 million (2021: £3.1 million
based on 5% of Parent Company profit before tax).
We further applied a performance materiality level of 75% (2021: 75%) of specific materiality to ensure that the risk of errors exceeding specific
materiality was appropriately mitigated.
Component materiality
We set materiality for each significant component of the Group, apart from the Parent Company whose materiality is set out above, based on
a percentage of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component.
Component materiality for these two components were £20.1 million and £49.7 million (2021: £21.5 million and £53.8m) respectively and we
further applied performance materiality levels of 75% (2021: 75%) of the overall component materiality to our testing to ensure that the risk of
errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences impacting the Group in excess of £1.53million
(2021: £1.65 million) for the financial statements as a whole differences, and for those items impacting the calculation of EPRA earnings, all
individual audit differences in excess of £0.36 million (2021: £0.32 million) and regarding the Parent Company, all individual audit differences in excess
of £1.08 million (2021: £1.05 million). We also agreed to report differences below these thresholds that, in our view, warranted reporting on
qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility
is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements
or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
111Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Parent Company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and longer-term viability • The Directors’ statement with regards the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified set out on
page69; and
• The Directors’ explanation as to its assessment of the entity’s prospects, the period
this assessment covers and why they period is appropriate set out on page 69.
Other Code provisions
• Directors’ statement on fair, balanced and understandable set out on page 96;
• Board’s confirmation that it has carried out a robust assessment of the emerging
andprincipal risks set out on page 54;
• The section of the Annual Report that describes the review of effectiveness of risk
management and internal control systems set out on page 92; and
• The section describing the work of the Audit and Risk Committee set out on page 94.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006
and ISAs (UK) to report on certain opinions and matters as described below.
Strategic Report and Directors’ Report In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial
year for which the financial statements are prepared is consistent with the financial
statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and
its environment obtained in the course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.
Directors’ remuneration In our opinion, the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which we are required
toreport by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
112 Tritax Big Box REIT plc Annual Report 2022
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an Auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
Through our knowledge of the Group and its sector we obtained an understanding of the legal and regulatory framework applicable to the
Group and the sector in which it operates and considered the risk of acts by the Group that were contrary to applicable laws and regulations,
including fraud. We performed our own checks of compliance with relevant requirements including, but not limited to, the Companies Act
2006, the UK Listing Rules, the REIT tax regime requirements and legislation relevant to the rental of properties. We considered the Group’s
own control environment for monitoring its compliance with laws and regulation and obtained and reviewed their papers on compliance, in
addition to performing our own procedures.
Our procedures included agreeing the financial statement disclosures to underlying supporting documentation where relevant, review of Board
and Committee meeting minutes, and enquiries with management and the Audit Committee as to their identification of any non-compliance with
laws and regulations.
With the use of our internal tax experts we reviewed the Group’s calculations in order to address the risk of non-compliance with the REIT regime.
We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud risk areas to be
revenue recognition, investment property valuations, and management override of controls. Our responses to the valuation of investment
properties risk are set out in the key audit matters section above.
We addressed the risk of management override of controls, by testing a sample of journals processed during the year to supporting
documentation and evaluating whether there was evidence of bias by management or the Directors that represented a risk of material
misstatement due to fraud.
Regarding the risk of intentional misstatement of revenue, our procedures included setting expectations for the annual revenue to be
recognised for the year for each property, comparing it to the actual amounts recognised and investigating variances. We confirmed lease
details back to the underlying signed agreements and a sample to receipt of cash (where amounts had been received prior to the year end).
We also tested the rent smoothing adjustments to supporting documentation.
We agreed all bank balances and loans to direct bank confirmations and agreements.
We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to
any indications of fraud or non-compliance with laws and regulations throughout the audit
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures
performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our Auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them
inan Auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Geraint Jones (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
United Kingdom
1 March 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Independent Auditor’s Report continued
To the members of Tritax Big Box REIT plc
113Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
For the year ended 31 December 2022
Note
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Gross rental income 6 206.2 184.7
Service charge income 6 6.3 5.1
Service charge expense 7 (6.5 ) (5.2 )
Net rental income 206.0 184.6
Gross operating income 18.3 24.7
Other operating costs (9.0 ) (5.8 )
Other operating income 6 9.3 18.9
Administrative and other expenses 8 (32.2 ) (25.5 )
Operating profit before changes in fair value and other adjustments
1
Changes in fair value of investment properties 15 (759.5 ) 840.9
Gain on disposal of investment properties 15 — 2.0
Share of profit/(loss) from joint ventures 17 0.5 0.1
Impairment of intangible and other property assets (1.4 ) (2.9 )
Share-based payment charge 24 (1.9 ) (5.5 )
Changes in fair value of contingent consideration payable 24 1.1 (4.2 )
Operating profit/(loss) (578.1 ) 1,008.4
Finance income 10 1.6 —
Finance expense 11 (39.4 ) (40.1 )
Changes in fair value of interest rate derivatives 26 14.9 2.8
Profit/(loss) before taxation (601.0 ) 971.1
Taxation 12 1.6 1.5
Profit/(loss) and total comprehensive income/(expense) (599.4 972.6
Earnings per share – basic 13 (32.08 )p 55.39 p
Earnings per share – diluted 13 (32.08 )p 55.31 p
1. Operating profit/(loss) before changes in fair value of investment properties and contingent consideration payable, gain on disposal of investment properties,
share of profit/(loss) from joint ventures, impairment of intangible and other property assets and share-based payment charges.
114 Tritax Big Box REIT plc Annual Report 2022
Group Statement of Financial Position
As at 31 December 2022
Note
At
31 December
2022
£m
At
31 December
2021
£m
Non-current assets
Intangible assets 1.4 1.7
Investment property 15 4,847.3 5,249.1
Investment in land options 16 157.4 201.5
Investment in joint ventures 17 27.2 25.6
Other property assets 23 2.3 4.0
Trade and other receivables 20 2.0 2.0
Interest rate derivatives 26 19.9 1.8
Total non-current assets 5,057.5 5,485.7
Current assets
Trade and other receivables 20 24.9 37.1
Assets held for sale 18 25.1 —
Cash at bank 21 47.6 71.1
Total current assets 97.6 108.2
Total assets 5,155.1 5,593.9
Current liabilities
Deferred rental income (34.7 ) (38.6 )
Trade and other payables 22 (111.2 ) (85.9 )
Tax liabilities 12 (1.1 ) (4.3 )
Total current liabilities (147.0 ) (128.8 )
Non-current liabilities
Trade and other payables 22 (2.0 ) (2.0 )
Bank borrowings 25 (474.8 ) (207.6 )
Loan notes 25 (1,139.1 ) (1,137.6 )
Amounts due to B and C Shareholders 24 (42.2 ) (41.4 )
Total non-current liabilities (1,658.1 ) (1,388.6 )
Total liabilities (1,805.1 ) (1,517.4 )
Total net assets 3,350.0 4,076.5
Equity
Share capital 29 18.7 18.7
Share premium reserve 29 764.3 762.0
Capital reduction reserve 29 835.1 964.5
Retained earnings 29 1,731.9 2,331.3
Total equity 3,350.0 4,076.5
Net asset value per share – basic 30 179.25 p 218.26 p
Net asset value per share – diluted 30 179.25 p 218.18 p
EPRA net tangible asset per share – basic 30 180.37 p 222.60 p
EPRA net tangible asset per share – diluted 30
These financial statements were approved by the Board of Directors on 1 March 2023 and signed on its behalf by:
Aubrey Adams
Chairman
115Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Group Statement of Changes in Equity
For the year ended 31 December 2022
Note
Share
capital
£m
Share
premium
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
£m
1 January 2022 18.7 762.0 964.5 2,331.3 4,076.5
Loss for the year and total comprehensive income — — — 599.4 599.4
Contributions and distributions:
Shares issued in relation to management contract 29 — 2.3 — — 2.3
Share-based payments — — — 5.3 5.3
Transfer of share-based payments to liabilities to reflect settlement — — — (5.3 ) (5.3 )
Dividends paid 14 — — (129.4 ) — (129.4 )
31 December 2022 18.7 764.3 835.1 1,731.9 3,350.0
Note
Share
capital
£m
Share
premium
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
£m
1 January 2021 17.2 466.5 1,078.9 1,358.7 2,921.3
Profit for the year and total comprehensive income — — — 972.6 972.6
Contributions and distributions:
Shares issued in relation to equity issue 29 1.4 298.5 — — 299.9
Share issue costs — (5.8 ) — — (5.8 )
Shares issued in relation to management contract 29 0.1 2.8 — — 2.9
Share-based payments — — — 2.7 2.7
Transfer of share-based payments to liabilities to reflect settlement — — — (2.7 ) (2.7 )
Dividends paid 14 — — (114.4 ) — (114.4 )
31 December 2021 18.7 762.0 964.5 2,331.3 4,076.5
116 Tritax Big Box REIT plc Annual Report 2022
Group Cash Flow Statement
For the year ended 31 December 2022
Note
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Cash flows from operating activities
Profits/(losses) for the period (attributable to the Shareholders) (599.4 ) 972.6
Add: tax credit (1.6 ) (1.5 )
Add: changes in fair value of contingent consideration payable (1.1 ) 4.2
Add: finance expense 39.4 40.1
Add: changes in fair value of interest rate derivatives (14.9 ) (2.8 )
Add: share-based payment charges 1.9 5.5
Add: impairment of intangible and other property assets 1.4 2.9
Add: amortisation of other property assets 1.7 5.4
Add: share of (profit)/loss from joint ventures (0.5 ) (0.1 )
Less: changes in fair value of investment properties 759.5 (840.9 )
Less: gain on disposal of investment properties — (2.0 )
Finance income (1.6 ) —
Accretion of tenant lease incentive 15 (11.1 ) (7.2 )
(Increase)/decrease in trade and other receivables 12.1 (12.0 )
Increase/(decrease) in deferred income (3.9 ) 1.7
Increase/(decrease) in trade and other payables (2.9 ) 26.2
Cash generated from operations 179.0 192.1
Taxation credit/(charge) 12 (1.6 ) 4.0
Net cash flow generated from operating activities 177.4 196.1
Investing activities
Additions to investment properties (286.8 ) (316.9 )
Additions to land options (13.1 ) (15.0 )
Additions to joint ventures (2.8 ) (0.5 )
Net proceeds from disposal of investment properties — 4.2
Licence fees received — —
Interest received 0.1 —
Dividends received from joint ventures 0.5 0.9
Net cash flow used in investing activities (302.1 ) (327.3 )
Financing activities
Proceeds from issue of Ordinary Share capital 2.3 302.8
Cost of share issues — (5.8 )
Bank borrowings drawn 25 319.0 245.5
Bank and other borrowings repaid 25 (52.0 ) (245.5 )
Interest derivatives received 10 1.5 —
Loan arrangement fees paid (1.4 ) (0.7 )
Bank interest paid (35.8 ) (37.5 )
Interest cap premium paid (3.2 ) —
Dividends paid to equity holders (129.2 ) (114.3 )
Net cash flow generated from financing activities 101.2 144.5
Net increase in cash and cash equivalents for the year (23.5 ) 13.3
Cash and cash equivalents at start of year 21 70.9
Cash and cash equivalents at end of year 21 47.4 70.9
117Tritax Big Box REIT plc Annual Report 2022
140 Tritax Big Box REIT plc Annual Report 2022
141Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Company Statement of Financial Position
As at 31 December 2022
Company Registration Number: 08215888
Note
At
31 December
2022
£m
At
31 December
2021 (restated)
£m
Fixed assets
Investment in subsidiaries 5 2,243.3 2,243.3
Total fixed assets 2,243.3 2,243.3
Current assets
Trade and other receivables 6 1,394.7 1,268.5
Cash held at bank 7 2.2 2.8
Total current assets 1396.9 1,271.3
Total assets 3,640.2 3,514.6
Current liabilities
Trade and other payables 8 (17.0) (15.3)
Loans from Group companies (88.2) (71.9)
Total current liabilities (105.2) (87.2)
Non-current liabilities
Bank borrowings 9 (101.1) —
Loan notes 9 (1,139.1) (1,137.6)
Total non-current liabilities (1,240.2) (1,137.6)
Total liabilities (1,345.4) (1,224.8)
Total net assets 2,294.8 2,289.8
Equity
Share capital 10 18.7 18.7
Share premium reserve 764.4 762.0
Capital reduction reserve 835.1 964.5
Retained earnings 676.6 544.6
Total equity 2,294.8 2,289.8
The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own
profit and loss account in these financial statements. The profit attributable to the Parent Company for the year ended 31 December 2022
amounted to £132.1 million (31 December 2021: £61.4 million).
These financial statements were approved by the Board of Directors on 1 March 2023 and signed on its behalf by:
Aubrey Adams
Chairman
142 Tritax Big Box REIT plc Annual Report 2022
Company Statement of Changes in Equity
For the year ended 31 December 2022
Undistributable reserves Distributable reserves
Note
Share
capital
£m
Share
premium
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
£m
1 January 2022 18.7 762.0 964.5 544.6 2,289.8
Profit for the year and total
comprehensive income — — — 132.1 132.1
18.7 762.0 964.5 676.7 2,421.9
Contributions and distributions
Shares issued in relation to
management contract — 2.3 — — 2.3
Share-based payments — — — 5.3 5.3
Transfer of share-based payments to
liabilities to reflect settlement — — — (5.3) (5.3)
Dividends paid 4 — — (129.4) — (129.4)
31 December 2022 18.7 764.3 835.1 676.7 2,294.8
Undistributable reserves Distributable reserves
Note
Share
capital
£m
Share
premium
£m
Capital
reduction
reserve
£m
Retained
earnings
£m
Total
£m
1 January 2021 17.2 466.5 1,078.9 483.2 2,045.8
Profit for the year and total
comprehensive income — — — 61.4 61.4
17.2 466.5 1,078.9 544.6 2,107.2
Contributions and distributions
Shares issued in relation to further
equity issue 10 1.4 298.5 — — 299.9
Share issue costs in relation to further
equity issue — (5.8) — — (5.8)
Shares issued in relation to
management contract 0.1 2.8 — — 2.9
Share-based payments — — — 2.7 2.7
Transfer of share-based payments to
liabilities to reflect settlement — — — (2.7) (2.7)
Dividends paid 4 — — (114.4) — (114.4)
31 December 2021 18.7 762.0 964.5 544.6 2,289.8
143Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Notes to the Company Accounts
1. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
Assets are classified in accordance with the definitions of fixed and current assets in the Companies Act 2006.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore these
financial statements do not include:
• Certain comparative information as otherwise required by adopted IFRS;
• Certain disclosures regarding the Company’s capital;
• A statement of cash flows;
• The effect of future accounting standards not yet adopted;
• The disclosure of the remuneration of key management personnel; and
• Disclosure of related party transactions with other wholly owned members of Tritax Big Box REIT plc.
In addition, and in accordance with FRS 101, further disclosure exemptions have been adopted because equivalent disclosures are included in
the Company’s consolidated financial statements. These financial statements do not include certain disclosures in respect of:
• Share-based payments;
• Financial instruments; and
• Fair value measurement other than certain disclosures required as a result of recording financial instruments at fair value.
Principal accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
Basis of accounting
These financial statements have been presented as required by the Companies Act 2006 and have been prepared under the historical cost
convention and in accordance with applicable Accounting Standards and policies in the United Kingdom (“UK GAAP”).
Currency
The Company financial statements are presented in Sterling which is also the Company’s functional currency and all values are rounded to the
nearest 0.1 million (£m), except where otherwise indicated.
Other income
Other income represents dividend income which has been declared by its subsidiaries and is recognised when it is received.
Dividends payable for Shareholders
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends
are recognised when approved by the Shareholders at an Annual General Meeting.
1.1 Financial assets
The Company classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The Company’s accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative intrinsic value.
Theyare carried in the Company Balance Sheet at fair value with changes in fair value recognised in the profit or loss in the finance income or
expense line. Other than derivative financial instruments which are not designated as hedging instruments, the Company does not have any
assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss.
Amortised cost
These assets arise principally from the provision of goods and services to customers (such as trade receivables), but also incorporate other
types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and contractual cash flows are
solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost being the effective interest rate method, less provision for impairment.
Impairment provisions for current receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit
loss for the trade receivables. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written
off against the associated provision.
Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-looking expected
credit loss model. The methodology used to determine the amount of provision is based on whether there has been a significant increase in
credit risk since initial recognition of the financial asset, 12-month expected credit losses along with gross interest income are recognised.
Forthose for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised.
For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.
144 Tritax Big Box REIT plc Annual Report 2022
1. Accounting policies continued
1.1. Financial assets continued
Amortised cost continued
The Company’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the
Company Balance Sheet.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original
maturities of three months or less.
Investments in subsidiaries
The investments in subsidiary companies are included in the Company’s Balance Sheet at cost less provision for impairment.
Share-based payments
The expense relating to share-based payments is accrued over the year in which the service is received and is measured at the fair value of
those services received. The extent to which the expense is not settled at the reporting period end is recognised as a liability as any shares
outstanding remain contingently issuable. Contingently issuable shares are treated as dilutive to the extent that, based on market factors
prevalent at the reporting year end, the shares would be issuable.
Significant accounting judgements, estimates and assumptions
The preparation of the Company’s financial statements require management to make judgements, estimates and assumptions that affect
thereported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the reporting date. However,
uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of
theasset or liability affected in future years. There were no significant accounting judgements, estimates or assumptions in preparing these
financial statements.
Prior year restatement
The amounts in the Company balance sheet at 31 December 2021 have been restated to increase fixed asset investment in subsidiaries by
£55 million and reduce current asset trade and other receivables by £55 million to correct a misclassification discovered in recording the
Parent Company’s subscription for shares in a direct subsidiary. There is no impact on net assets or profit in either the Company or Group.
2. Standards issued and effective from 1 January 2022
There was no material effect from the adoption of other amendments to IFRS effective in the year. They have no impact to the Company
significantly as they are either not relevant to the Company’s activities or require accounting which is consistent with the Company’s current
accounting policies.
3. Taxation
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
UK corporation tax — —
The UK corporation tax rate for the financial year is 19%. Accordingly, this rate has been applied in the measurement of the Group’s tax liability
at 31 December 2022.
4. Dividends paid
For detail of dividends paid by the Company during the year, refer to note 14 of the Group’s financial statements.
5. Investment in subsidiaries
Shares
£m
Loan
£m
Total
£m
As at 1 January 2022 (restated) 2,243.3 — 2,243.3
Increase in investments via share purchase — — —
As at 31 December 2022 2,243.3 — 2,243.3
As at 1 January 2021 2,188.3 — 2,188.3
Increase in investments via share purchase 55.0 — 55.0
As at 31 December 2021 (restated) 2,243.3 — 2,243.3
The increase in investments were as a result of capitalisation of inter-Company loans and to fund the acquisitions made in the periods.
The amounts at 31 December 2021 have been restated to increase fixed asset investment in subsidiaries by £55 million and reduce current
asset trade and other receivables by £55 million to correct a misclassification discovered in recording the Parent Company’s subscription for
shares in a direct subsidiary.
Notes to the Company Accounts continued
145Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
5. Investment in subsidiaries
The Company has the following subsidiary undertakings as at 31 December 2022:
Principal activity Country of Incorporation Ownership %
TBBR Holdings 1 Limited Investment holding company Jersey 100%*
TBBR Holdings 2 Limited Investment holding company Jersey 100%
Baljean Properties Limited Property investment Isle of Man 100%
Tritax Acquisition 2 Limited Investment holding company Jersey 100%
Tritax Acquisition 2 (SPV) Limited Investment holding company Jersey 100%
The Sherburn RDC Unit Trust Property investment Jersey 100%
KG (Jersey) Limited
#
Investment holding company Jersey 100%
KL (Jersey) Limited
#
Investment holding company Jersey 100%
G Avonmouth Unit Trust
#
Property Investment Jersey 100%
Tritax Acquisition 4 Limited Property investment Jersey 100%
Tritax Acquisition 5 Limited Property investment Jersey 100%
Sonoma Ventures Limited Property investment BVI 100%
Tritax REIT Acquisition 8 Limited Investment holding company UK¹ 100%*
Tritax REIT Acquisition 9 Limited Investment holding company UK¹ 100%*
Tritax Acquisition 9 Limited Property investment Jersey 100%
Tritax Acquisition 10 Limited Property investment Jersey 100%
Tritax Acquisition 11 Limited Property investment Jersey 100%
Tritax Acquisition 12 Limited Property investment Jersey 100%
Tritax Acquisition 13 Limited Property investment Jersey 100%
Tritax Acquisition 14 Limited Property investment Jersey 100%
Tritax Worksop Limited Property investment BVI 100%
Tritax REIT Acquisition 16 Limited Investment holding company UK¹ 100%*
Tritax Acquisition 16 Limited Property investment Jersey 100%
Tritax Acquisition 17 Limited Property investment Jersey 100%
Tritax Acquisition 18 Limited Property investment Jersey 100%
Tritax Harlow Limited Property investment Guernsey 100%
Tritax Lymedale Limited Property investment Guernsey 100%
Tritax Acquisition 21 Limited Property investment Jersey 100%
Tritax Acquisition 22 Limited Property investment Jersey 100%
Tritax Acquisition 23 Limited Property investment Jersey 100%
Tritax Acquisition 24 Limited Property investment Jersey 100%
Tritax Knowsley Limited Property investment Isle of Man 100%
Tritax Burton Upon Trent Limited Property investment BVI 100%
Tritax Acquisition 28 Limited Property investment Jersey 100%
Tritax Peterborough Limited Property investment Jersey 100%
Tritax Littlebrook 2 Limited Property investment Jersey 100%
Tritax Littlebrook 4 Limited Property investment Jersey 100%
Tritax Atherstone (UK) Limited Property investment UK¹ 100%
Tritax Stoke DC1&2 Limited Investment holding company Jersey 100%*
Tritax Stoke DC3 Limited Investment holding company Jersey 100%*
Tritax Holdings CL Debt Limited Investment holding company Jersey 100%*
Tritax Portbury Limited Property investment Jersey 100%
Tritax Newark Limited Property investment Jersey 100%
Tritax Carlisle Limited Investment holding company Jersey 100%*
Tritax Worksop 18 Limited Property investment Jersey 100%*
Tritax Stoke Management Limited Management company UK¹ 100%
Tritax Holdings PGIM Debt Limited Investment holding company Jersey 100%*
Tritax Merlin 310 Trafford Park Limited Property investment Jersey 100%*
Tritax West Thurrock Limited Property investment Jersey 100%
Tritax Tamworth Limited Property investment Jersey 100%
Tritax Acquisition 35 Limited Property investment Jersey 100%
Tritax Acquisition 36 Limited Property investment Jersey 100%*
Tritax Acquisition 37 Limited Property investment Jersey 100%*
Tritax Acquisition 38 Limited Property investment Jersey 100%*
Tritax Acquisition 39 Limited Property investment Jersey 100%*
146 Tritax Big Box REIT plc Annual Report 2022
Notes to the Company Accounts continued
Principal activity Country of Incorporation Ownership %
Tritax Acquisition 40 Limited Property investment Jersey 100%*
Tritax Acquisition 41 Limited Property investment Jersey 100%*
Tritax Littlebrook 1 Limited Property investment Jersey 100%
Tritax Littlebrook 3 Limited Property investment Jersey 100%
Tritax Atherstone Limited Investment holding company Jersey 100%*
Tritax Acquisition 42 Limited Property investment Jersey 100%*
Tritax Acquisition 43 Limited Property investment Jersey 100%*
Tritax Carlisle UK Limited Investment holding company UK¹ 100%
Tritax Edinburgh Way Harlow Limited Property investment Jersey 100%*
Tritax Crewe Limited Investment holding company Jersey 100%*
Tritax Acquisition 44 Limited Property investment Jersey 100%*
Tritax Acquisition 45 Limited Property investment Jersey 100%*
Tritax Acquisition 46 Limited Property investment Jersey 100%*
Tritax Acquisition 47 Limited Property investment Jersey 100%*
Tritax Acquisition 48 Limited Property investment Jersey 100%*
Tritax Acquisition 49 Limited
#
Property investment Jersey 100%*
Tritax Littlebrook Management Limited
#
Property investment UK¹ 100%*
Tritax Symmetry Holdings Limited (formerly known as Tritax
Symmetry Limited) Investment holding company Jersey 100%*
db Symmetry Group Ltd Investment holding company UK² 100%
db Symmetry Ltd Investment holding company UK² 100%
Tritax Symmetry Power Limited
#
Investment holding company UK² 100%
Tritax Symmetry Power Biggleswade Limited
#
Investment holding company UK² 100%
Tritax Symmetry (BVI) Ltd Investment holding company British Virgin Islands 100%
Tritax Symmetry Holdings (Biggleswade) Co Ltd Investment holding company British Virgin Islands 100%
Tritax Symmetry Properties (Biggleswade) Co Ltd Property investment British Virgin Islands 100%
Tritax Symmetry Holdings (Blyth) Co Ltd Investment holding company British Virgin Islands 100%
Tritax Symmetry Properties (Blyth) Co. Ltd Property investment British Virgin Islands 100%
Tritax Symmetry Holdings (Middlewich) Co. Ltd Investment holding company British Virgin Islands 100%
Tritax Symmetry Properties (Middlewich) Co. Ltd Investment holding company British Virgin Islands 100%
Tritax Symmetry Development (Blyth) UK Ltd Property development UK² 100%
Tritax Symmetry Development (Biggleswade) UK Ltd Property development UK² 100%
Tritax Symmetry Ardley Limited Property investment
Jersey 100%
Tritax Symmetry Bicester 2 Limited Property investment Jersey 100%
Tritax Symmetry Northampton West Ltd Property investment Jersey 100%
Tritax Symmetry Rugby South Ltd Property investment Jersey 100%
Tritax Symmetry St Helens Ltd Property investment Jersey 100%
Tritax Symmetry Wigan Ltd Property investment Jersey 100%
Tritax Symmetry Oxford North Ltd Property investment Jersey 100%
Tritax Symmetry Northampton Ltd Property investment Jersey 100%
Tritax Symmetry Merseyside 1 Ltd Property investment Jersey 100%
Tritax Symmetry South Elmsall Ltd Property investment Jersey 100%
Tritax Symmetry (Goole) Ltd Property investment UK² 100%
Tritax Symmetry (Midlands) Ltd Investment holding company UK² 100%
Tritax Symmetry (Aston Clinton) Ltd Property investment UK² 100%
Tritax Symmetry Leicester South Ltd Property investment Jersey 100%
Tritax Symmetry Gloucester Ltd Property investment Jersey 100%
Tritax Symmetry (Speke) Ltd Property investment UK² 100%
Tritax Symmetry (Barwell) Ltd Property investment UK² 100%
Tritax Symmetry (Rugby) Ltd Property investment UK² 100%
Tritax Symmetry (Hinckley) Ltd Property investment UK² 100%
Tritax Symmetry (Darlington) Ltd Property investment UK² 100%
Tritax Symmetry (Blyth) Ltd Property investment UK² 100%
Tritax Symmetry (Bicester Reid) Ltd Property investment UK² 100%
Tritax Symmetry (Wigan) Ltd Property investment UK² 100%
Tritax Symmetry (Land) LLP Investment holding company UK² 100%
Tritax Symmetry (Kettering) LLP Property investment UK² 100%
5. Investment in subsidiaries continued
147Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Principal activity Country of Incorporation Ownership %
Tritax Symmetry (Lutterworth) LLP Property investment UK² 100%
Tritax Symmetry (Northampton) LLP Investment holding company UK² 100%
Symmetry Park Darlington Management
Company Ltd Management company UK² 100%
Symmetry Park Aston Clinton Management Company Limited Management company UK² 100%
Tritax Symmetry Glasgow East Limited Property investment Jersey 100%
Symmetry Park Biggleswade Management Company Limited Management company UK² 100%
Tritax Symmetry Biggleswade 2 Limited Property investment Jersey 100%
Tritax Symmetry Biggleswade 3 Limited Property investment Jersey 100%
Tritax Symmetry Middlewich 1 Limited Property investment Jersey 100%
Tritax Symmetry Biggleswade 4 Limited Property investment Jersey 100%
Tritax Symmetry Biggleswade Land Limited Property investment UK² 100%
Symmetry Park Merseyside Management Company Limited
#
Management company UK² 100%
Symmetry Park Kettering Management Company Limited
#
Management company UK² 100%
Symmetry Park Wigan Management Company Limited
#
Management company UK² 100%
Symmetry Park Rugby Management Company Limited
#
Management company UK² 100%
Tritax Symmetry Merseyside Land Limited
#
Property investment UK² 100%
Tritax Symmetry West Limited
#
Property investment Jersey 100%
* These are direct subsidiaries of the Company.
# These are new investments of the Company in the year.
The registered addresses for subsidiaries across the Group are consistent based on their country of incorporation and are as follows:
Jersey entities: 26 New Street, St Helier, Jersey JE2 3RA
Guernsey entities: PO Box 286, Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 4LY
Isle of Man entities: 33-37 Athol Street, Douglas, Isle of Man IM1 1LB
British Virgin Islands entities: Jayla Place, Wickhams Cay 1, Road Town, Tortola, BVI VG1110
UK¹ entities: 3rd Floor, 6 Duke Street St James’s, London SW1Y 6BN
UK² entities: Unit B, Grange Park Court, Roman Way, Northampton, England NN4 5EA
The Company also has interests in the following joint arrangements as at 31 December 2021:
Principal activity Country of incorporation Ownership %
Symmetry Park Doncaster Management Company Limited Management company UK² 50%
Symmetry Park Bicester Management Company Limited Management company UK² 33%
All of the companies registered offshore are managed onshore and are UK residents for UK corporation tax purposes, save for the Sherburn
Unit Trust and G Avonmouth Trust.
6. Trade and other receivables
31 December
2022
£m
31 December
2021
£m (restated)
Amounts receivable from Group companies 1,393.8 1,264.8
Prepayments 0.1 0.3
Other receivables 0.8 3.4
1,394.7 1,268.5
All amounts that fall due for repayment within one year and are presented within current assets as required by the Companies Act. The loans to
Group companies are repayable on demand with no fixed repayment date although it is noted that a significant proportion of the amounts may not
be sought for repayment within one year depending on activity in the Group companies. Interest is charged between 0%–10% (2021: 0%–10%).
The amounts at 31 December 2021 have been restated to increase fixed asset investment in subsidiaries by £55 million and reduce current asset trade
and other receivables by £55 million to correct a misclassification discovered in recording the Parent Company’s subscription for shares in a direct
subsidiary.
5. Investment in subsidiaries continued
148 Tritax Big Box REIT plc Annual Report 2022
7. Cash held at bank
31 December
2022
£m
31 December
2021
£m
Cash held at bank 2.2 2.8
8. Trade and other payables
31 December
2022
£m
31 December
2021
£m
Trade and other payables 9.3 8.8
Accruals 7.7 6.5
17.0 15.3
9. Borrowings
Bank borrowings drawn
31 December
2022
£m
31 December
2021
£m
Bank borrowings drawn: due in more than one year 103.0 212.9
Less: unamortised costs on bank borrowings (1.9) (5.3)
101.1 207.6
Loan notes
Bonds
31 December
2022
£m
31 December
2021
£m
2.625% Bonds 2026 249.6 249.5
3.125% Bonds 2031 247.8 247.5
2.860% USPP 2028 250.0 250.0
2.980% USPP 2030 150.0 150.0
1.500% Green Bonds 2033 246.7 246.4
Less: unamortised costs on loan notes (5.0) (5.8)
Non-current liabilities: net borrowings 1,139.1 1,137.6
Maturity of loan notes
31 December
2022
£m
31 December
2021
£m
Repayable between one and two years — —
Repayable between two and five years 249.6 249.5
Repayable in over five years 894.6 893.9
1,144.2 1,143.4
10. Equity reserves
Refer to note 29 of the Group’s financial statements.
11. Related party transactions
The Company has taken advantage of the exemption not to disclose transactions with other members of the Group as the Company’s own
financial statements are presented together with its consolidated financial statements.
For all other related party transactions make reference to note 32 of the Group’s financial statements.
12. Directors’ remuneration
Refer to note 9 of the Group’s financial statements.
13. Subsequent events
Refer to note 35 of the Group’s financial statements.
Notes to the Company Accounts continued
149Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
1. Adjusted earnings income statement
The Adjusted earning reflects our ability to generate earnings from our portfolio, which ultimately underpins dividend payments.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Gross rental income 206.2 184.7
Service charge income 6.3 5.1
Service charge expense (6.5) (5.2)
Fixed rental uplift adjustments (6.1) (6.3)
Net rental income 199.9 178.3
Other operating income 9.3 18.9
Administrative expenses (32.2) (25.5)
Licence fee receivable on forward funded developments — 7.3
Amortisation of other property assets 1.7 5.4
Adjusted operating profit before interest and tax 178.7 184.4
Net finance costs (37.8) (40.0)
Amortisation of loan arrangement fees 3.1 2.5
Adjusted earnings before tax 144.0 146.9
Tax on adjusted profit 1.6 (2.4)
Adjusted earnings after tax 145.6 144.5
Adjustment to remove additional DMA income (5.3) (14.9)
Adjusted earnings (exc. additional DMA income) 140.3 129.6
Weighted average number of Ordinary Shares 1,868,637,910 1,755,926,756
Adjusted earnings per share 7.79p 8.23p
Adjusted earnings per share (exc. additional DMA income) 7.51p 7.38p
2. EPRA earnings per share
A key measure of a company’s underlying operating results and an indication of the extent to which current dividend payments are supported
by earnings.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Total comprehensive income (attributable to Shareholders) (599.4) 972.6
Adjustments to remove:
Changes in fair value of investment properties 759.5 (840.9)
Changes in fair value of interest rate derivatives (14.9) (2.8)
Share of loss/(profits) from joint ventures (0.5) (0.1)
Gain on disposal of investment properties — (2.0)
Amortisation of other property assets 1.7 5.4
Impairment of intangible and other property assets 1.5 2.9
Tax refund — (3.9)
Profits to calculate EPRA earnings per share 147.9 131.2
Add back: Dilutive share based payment charge (2.0) —
Fair value movement in contingent consideration (1.1) —
Profits to calculate EPRA diluted earnings per share 144.8 131.2
Weighted average number of Ordinary Shares 1,868,637,910 1,755,926,756
EPRA earnings per share – basic 7.91p 7.47p
Shares to be issued on outstanding investment manager’s fees 22,814,350 668,309
EPRA earnings per share – diluted 7.66p 7.47p
Notes to the EPRA and Other Key Performance Indicators
150 Tritax Big Box REIT plc Annual Report 2022
3. EPRA NAV per share
A net asset value per share calculated in accordance with EPRA’s methodology.
31 December 2022 Note
EPRA NTA
£m
EPRA NRV
£m
EPRA NDV
£m
NAV attributable to Shareholders 3,350.0 3,350.0 3,350.0
Revaluation of land options 20.4 20.4 20.4
Mark-to-market adjustments of derivatives 1.8 1.8 —
Intangibles (1.4) — —
Fair value of debt — — 221.1
Real estate transfer tax
1
— 387.4 —
At 31 December 2022 28 3,370.8 3,759.6 3,591.5
NAV per share 180.37 201.17 192.17
180.37 201.17 192.17
31 December 2021 Note
EPRA NTA
£m
EPRA NRV
£m
EPRA NDV
£m
NAV attributable to Shareholders 4,076.5 4,076.5 4,076.5
Revaluation of land options 66.0 66.0 66.0
Mark-to-market adjustments of derivatives 16.9 16.9 —
Intangibles (1.7) — —
Fair value of debt — — (47.0)
Real estate transfer tax
1
— 376.3 —
At 31 December 2021 28 4,157.7 4,535.7 4,095.5
NAV per share 222.60p 242.84p 219.27p
Dilutive NAV per share 222.52p 242.75p 219.19p
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of RETT. RETT are added back when calculating EPRA NRV.
4. EPRA net initial yield (“NIY”) and EPRA “topped up” NIY
A measure to make it easier for investors to judge for themselves how the valuations of two portfolios compare.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Investment property – wholly owned 4,872.4 5,123.7
Investment property – share of joint ventures 4.2 2.5
Less: development properties (403.2) (105.0)
Completed property portfolio 4,473.4 5,021.2
Allowance for estimated purchasers’ costs 303.3 340.4
Gross up completed property portfolio valuation (B) 4,776.7 5,361.6
Annualised passing rental income 224.0 195.9
Less: contracted rental income in respect of development properties (18.8) —
Property outgoings (0.2) (0.2)
Less: contracted rent under rent-free period (4.9) (4.8)
Annualised net rents (A) 200.1 190.9
Contractual increases for fixed uplifts 9.7 10.2
Topped up annualised net rents (C) 209.8 201.1
EPRA net initial yield (A/B) 4.19% 3.56%
EPRA topped up net initial yield (C/B) 4.39% 3.75%
Notes to the EPRA and Other Key Performance Indicators continued
151Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
5. EPRA vacancy rate
Estimated market rental value (ERV) of vacant space divided by the ERV of the whole portfolio.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Annualised estimated rental value of vacant premises 5.3 –
Portfolio estimated rental value
1
247.2 216.2
EPRA vacancy rate 2.1% 0%
1. Excludes land held for development.
6. EPRA Cost Ratio
A key measure to enable meaningful measurement of the changes in a company’s operating costs.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Property operating costs 0.2 0.2
Administration expenses 32.2 25.5
Service charge costs recovered through rents but not separately invoiced — —
Total costs including and excluding vacant property costs (A)/(B) 32.4 25.7
Vacant property cost — —
Total costs excluding vacant property costs (B) 32.4 25.7
Gross rental income – per IFRS 206.2 184.7
Less: Service charge cost components of gross rental income — —
Gross rental income (C) 206.2 184.7
Total EPRA Cost Ratio (including vacant property costs) 15.7% 13.9%
Total EPRA Cost Ratio (excluding vacant property costs) 15.7% 13.9%
7. EPRA like-for-like rental income
Like-for-like net rental growth compares the growth of the net rental income of the portfolio that has been consistently in operation, and not
under development, during the two full preceding periods that are described.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Change
£m
Change
%
Like-for-like rental income 168.0 162.2
Other rental income 0.2 0.1
Like-for-like Gross rental income 168.2 162.3 5.9 3.6
Irrecoverable property expenditure (0.2) (0.1)
Like-for-like Net rental income 168.0 162.2 5.8 3.6
Reconciliation to Net rental income per
StatementofComprehensive Income:
Development properties 22.3 11.7
Properties acquired 4.6 3.3
Properties disposed 0.2 0.2
Properties under rent free periods — (2.6)
Spreading of tenant incentives and guaranteed rental uplifts 11.1 7.2
Total per statement of comprehensive income 206.2 184.6
152 Tritax Big Box REIT plc Annual Report 2022
8. EPRA property-related capital expenditure
Year end
31 December
2022
£m
Year ended
31 December
2021
£m
Acquisition
1
4.9 89.6
Development
2
375.1 274.3
Transfers to Investment Property
2
(57.1) (41.6)
Investment properties:
Tenant incentives
3
11.1 7.2
Capitalised interest 4.7 0.7
Total 338.7 330.3
1. See note 15.
2. See note 15 and note 16.
3. Fixed rental uplift and tenant lease incentives after adjusting for amortisation on rental uplift and tenant lease incentives.
9. Total Accounting Return (“TAR”)
Net total return, being the percentage change in EPRA NTA over the relevant period plus dividends paid.
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Opening EPRA NTA 222.60p 175.61p
Closing EPRA NTA 180.37p 222.60p
Change in EPRA NTA (42.23p) 46.99p
Dividends paid 6.93p 6.51p
Total growth in EPRA NTA plus dividends paid (35.30p) 53.50p
Total return (15.9%) 30.5%
One-off transactional costs — —
Total return excluding one-off transactional costs (15.9%) 30.5%
10. Total expense ratio
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Total operating costs 32.2 25.5
Average net assets over the period 4,219.2 3,231.0
Total expense ratio 0.76% 0.79%
11. Loan to value ratio
Year ended
31 December
2022
£m
Year ended
31 December
2021
£m
Gross debt drawn 1,624.0 1,356.3
Less: Cash (47.6) (71.1)
Net Debt 1,576.4 1,285.2
Gross property value 5,059.3 5,480.2
Loan to value ratio 31.2% 23.5%
The financial information contained in this results announcement has been prepared on the basis of the accounting policies set out in the
statutory financial statements for the year ended 31 December 2022 which are consistent with policies those adopted in the year ended
31December 2021. Whilst the financial information included in this announcement has been computed in accordance with UK adopted
international accounting standards, this announcement does not itself contain sufficient disclosures to comply with IFRS. The financial
information does not constitute the Group’s statutory financial statements for the years ended 31 December 2022 or 31 December 2021, but
is derived from those financial statements. Financial statements for the year ended 31 December 2021 have been delivered to the Registrar of
Companies and those for the year ended 31 December 2022 will be delivered following the Company’s Annual General Meeting. The Auditor’s
reports on both the 31 December 2022 and 31 December 2021 financial statements were unqualified; did not draw attention to any matters by
way of emphasis; and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.
Notes to the EPRA and Other Key Performance Indicators continued
153Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Five Year Summary
Group Statement of Comprehensive Income
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
Gross rental income 206.2 184.7 161.6 144.4 133.9
Service charge income 6.3 5.1 4.6 4.1 3.9
Service charge expense (6.5) (5.2) (4.7) (4.2) (5.0)
Net rental income 206.0 184.6 161.5 144.3 132.8
Other operating income 9.3 18.9 8.6 4.1 —
Administrative and other expenses (32.2) (25.5) (22.6) (21.7) (18.1)
Acquisition related costs — — — (4.2) (1.0)
Operating profit before changes in fair value of investment properties,
share of profit from joint ventures and share-based payment charges 183.1 178.0 147.5 122.5 113.7
Changes in fair value of investment properties (759.5) 840.9 351.1 54.5 163.0
Gain on disposal of investment properties — 2.0 0.1 — —
Share of profit/(loss) from joint ventures after tax 0.5 0.1 (0.1) — —
Impairment of intangible and other property assets (1.4) (2.9) (0.4) (0.6) —
Share-based payment charge (1.9) (5.5) (5.9) (3.3) —
Changes in fair value of contingent consideration payable 1.1 (4.2) (2.9) (0.5) —
Gain on bargain purchase — — — 7.8 —
Operating profit (578.1) 1,008.4 489.4 180.4 276.7
Finance income 1.6 — — 0.4 0.2
Finance expense (39.4) (40.1) (37.6) (34.4) (23.1)
Changes in fair value of interest rate derivatives 14.9 2.8 (2.3) (5.2) (1.2)
Changes in fair value of amounts due to third parties — — — — —
Profit before taxation (601.0) 971.1
449.5 141.2 252.6
Tax on profit for the period 1.6 1.5 (0.1) — —
Profit and total comprehensive income (599.4) 972.6 449.4 141.2 252.6
Earnings per share – basic (32.08)p 55.4p 26.3p 8.40p 17.54p
Earnings per share – diluted (32.08)p 55.3p 26.3p 8.38p 17.54p
154 Tritax Big Box REIT plc Annual Report 2022
Group Statement of Financial Position
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
Non-current assets
Intangible assets 1.4 1.7 2.0 2.3 —
Investment property 4,847.3 5,249.1 4,053.5 3,541.2 3,038.3
Investment in land options 157.4 201.5 228.1 226.0 —
Investment in joint ventures 27.2 25.6 28.5 30.1 —
Other property assets 2.3 4.0 9.4 13.9 —
Trade and other receivables 2.0 2.0 2.0 — —
Interest rate derivatives 19.9 1.8 0.1 1.3 5.2
Total non-current assets 5,057.5 5,485.7 4,323.6 3,814.8 3,043.5
Current assets
Rent and other receivables 24.9 37.1 25.1 25.7 42.3
Assets held for sale 25.1 — — — —
Cash at bank 47.6 71.1 57.8 21.4 48.3
Total current assets 97.6 108.2 82.9 47.1 90.6
Total assets 5,155.1 5,593.9 4,406.5 3,861.9 3,134.1
Current liabilities
Deferred rental income (34.7) (38.6) (36.1) (35.3) (30.2)
Trade and other payables (111.2) (85.9) (69.3) (76.1) (42.5)
Tax liabilities (1.1) (4.3) (1.9) (18.7) —
Total current liabilities (147.0) (128.8) (107.3) (130.1) (72.7)
Non-current liabilities
Trade and other payables (2.0) (2.0) (2.0) — —
Interest rate derivatives — — (1.1) — —
Bank borrowings (474.8) (207.6) (206.7) (256.2) (327.8)
Loan notes (1,139.1) (1,137.6) (1,136.4) (891.5) (492.7)
Amounts due to third parties (42.2) (41.4) (31.7) (22.9) —
Total non-current liabilities (1,658.1) (1,388.6) (1,377.9) (1,170.6) (820.5)
Total liabilities (1,805.1) (1,517.4) (1,485.2) (1,300.7) (893.2)
Total net assets 3,350.0 4,076.5 2,921.3 2,561.2 2,240.9
Equity
Share capital 18.7 18.7 17.2 17.1 14.8
Share premium reserve 764.3 762.0 466.5 446.7 153.6
Capital reduction reserve 835.1 964.5 1,078.9 1,188.1 1,304.4
Retained earnings 1,731.9 2,331.3 1,358.7 909.3 768.1
Total equity 3,350.0 4,076.5 2,921.3 2,561.2 2,240.9
Net asset value per share – basic 179.25p 218.26p 169.92p 150.04p 152.00p
Net asset value per share – diluted 179.25p 218.18p 169.92p 150.04p 152.00p
EPRA net asset value per share – diluted 180.37p 222.52p 175.61p 151.79p 152.83p
Five Year Summary continued
155Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Glossary of Terms
“Adjusted earnings”
Post-tax earnings attributable to Shareholders, adjusted to include
licence fees receivable on forward funded development assets and
adjusts for other earnings not supported by cash flows. “Adjusted
earnings per share” or “Adjusted EPS” on a per share basis.
“B and C Shares”
The B and C Shares in Tritax Symmetry issued to the Symmetry
Management Shareholders.
“Big Box”
A “Big Box” property or asset refers to a specific subsegment of the
logistics sector of the real estate market, relating to very largelogistics
warehouses (each with typically over 500,000 sq ft of floor area) with
the primary function of holding and distributing finished goods, either
downstream in the supply chain or direct to consumers, and typically
having the following characteristics: generally a modern constructed
building with eaves height exceeding 12 metres; let on long leases
with institutional-grade tenants; with regular, upward-only rental
reviews; having a prime geographical position to allow both efficient
stocking (generally with close links to sea ports or rail freight hubs)
and efficient downstream distribution; and increasingly with
sophisticated automation systems or a highly bespoke fit out.
“Board”
The Directors of the Company.
“BREEAM”
The Building Research Establishment Environmental Assessment
Method certification of an asset’s environmental, social and economic
sustainability performance, using globally recognised standards.
“Company”
Tritax Big Box REIT plc (Company number 08215888).
“CPI”
Consumer Price Index, a measure that examines the weighted
average of prices of a basket of consumer goods and services, such
as transportation, food and medical care as calculated on a monthly
basis by the Office of National Statistics.
“Current development pipeline”
Assets that are in the course of construction or assets for which we
have made a construction commitment.
“CVA”
A company voluntary liquidation, a legally binding agreement
between a business and its creditors which sets out a debt
repayment plan and enables a viable business to avoid insolvency.
“db Symmetry”
db Symmetry Group Ltd and db symmetry BVI Limited, together with
their subsidiary undertakings and joint venture interests, which were
acquired by the Group in February 2019.
“Directors”
The Directors of the Company as of the date of this report being:
Aubrey Adams, Alastair Hughes, Elizabeth Brown, Wu Gang,
RichardLaing and Karen Whitworth.
“Development Management Agreement” or “DMA”
An agreement between the Group and a developer setting out the
terms in respect of the development of an asset. In particular, the
development of the Symmetry Portfolio is the subject of a DMA
between Tritax Symmetry and Symmetry ManCo.
“Development portfolio” or “Development assets”
The Group’s Development portfolio comprises its property assets
which are not Investment assets, including land, options over land
aswell as any assets under construction on a speculative basis.
“Embodied Carbon”
The amount of carbon emitted during the construction of a building.
This includes extraction of raw materials, manufacturing and
refinement of materials, transport, building phase, deconstruction,
and disposal.
“EPC rating”
A review of a property’s energy efficiency.
“EPRA”
European Public Real Estate Association.
“EPRA Earnings”
Earnings from operational activities (which excludes the licence
feesreceivable on our Forward Funded Development assets).
“EPRA NAV” or “EPRA Net Asset Value”
The Basic Net Asset Value adjusted to meet EPRA Best Practices
Recommendations Guidelines (2016) requirements by excluding the
impact of any fair value adjustments to debt and related derivatives
and other adjustments and reflecting the diluted number of Ordinary
Shares in issue.
“EPRA Triple Net Asset Value (NNNAV)”
EPRA NAV adjusted to include the fair values of financial instruments,
debt and deferred taxes.
“EPRA Net Tangible Asset (NTA)”
The Basic Net Asset Value adjusted to meet EPRA Best Practices
Recommendations Guidelines (2019) requirements by excluding
intangibles and the impact of any fair value adjustments to related
derivatives. This includes the revaluation of land options.
“EPRA Net Reinstatement Value (NRV)”
IFRS NAV adjusted to exclude the impact of any fair value
adjustments to related derivatives. This includes the revaluation
ofland options and the Real estate transfer tax (RETT).
“EPRA Net Disposal Value (NDV)”
IFRS NAV adjusted to include the fair values of debt and the
revaluation of land options.
“EPRA Net Initial Yield (NIY)”
Annualised rental income based on the cash rents passing at the
balance sheet date, less non-recoverable property operating
expenses, divided by the market value of the property, increased
with(estimated) purchaser’s costs.
“EPRA ‘Topped-Up’ NIY”
This measure incorporates an adjustment to the EPRA NIY in respect
of the expiration of rent-free periods (or other unexpired lease
incentives, such as discounted rent periods and step rents).
156 Tritax Big Box REIT plc Annual Report 2022
“EPRA Vacancy”
Estimated market rental value (ERV) of vacant space divided by the
ERV of the whole portfolio.
“EPRA Cost Ratio”
Administrative and operating costs (including and excluding costs
ofdirect vacancy) divided by gross rental income.
“Estimated cost to completion”
Costs still to be expended on a development or redevelopment
topractical completion, including attributable interest.
“Estimated rental value” or “ERV”
The estimated annual market rental value of lettable space as
determined biannually by the Group’s valuers. This will normally
bedifferent from the rent being paid.
“FCA”
The United Kingdom Financial Conduct Authority (or any successor
entity or entities).
“Forward Funded Development”
Where the Company invests in an asset which is either ready for, or in
the course of, construction, pre-let to an acceptable counterparty. In
such circumstances, the Company seeks to negotiate the receipt of
immediate income from the asset, such that the developer is paying
the Company a return on its investment during the construction
phase and prior to the tenant commencing rental payments under
the terms of the lease. Expert developers are appointed to run the
development process.
“Foundation asset”
Foundation assets provide the core, low-risk income that underpins
our business. They are usually let on long leases to customers
withexcellent covenant strength. These buildings are commonly
newormodern and in prime locations, and the leases have
regularupward-only rent reviews, often either fixed or linked
toInflation Indices.
“FRI Lease”
Full Repairing and Insuring Lease. During the lease term, the tenant
isresponsible for all repairs and decoration to the property, inside
and out, and the building insurance premium is recoverable from
thetenant.
“Future development pipeline”
The Group’s land bank for future development typically controlled
under option agreements which do not form part of the Current
orNear Term development pipeline.
“Gearing”
Net borrowings divided by total Shareholders’ equity excluding
intangible assets and deferred tax provision.
“GIA”
Under the RICS Code of Measuring Practice (6th Edition) the Gross
Internal Area (GIA) is the basis of measurement for valuation of
industrial buildings (including ancillary offices) and warehouses.
The area of a building measured to the internal face of the perimeter
walls at each floor level (including the thickness of any internal walls).
All references to building sizes in this document are to the GIA.
“GAV”
The Group’s gross asset value.
“GRESB Assessment”
GRESB assesses the ESG performance of real estate and
infrastructure portfolios and assets worldwide, providing
standardised and validated data to the capital markets.
“Gross rental income”
Contracted rental income recognised in the period, in the income
statement, including surrender premiums and interest receivable
onfinance leases. Lease incentives, initial costs and any contracted
future rental increases are amortised on a straight-line basis over
thelease term.
“Group” or “REIT Group”
The Company and all of its subsidiary undertakings.
“Growth Covenant asset”
Growth Covenant assets are fundamentally sound assets in good
locations, let to customers we perceive to be undervalued at the
point of purchase and who have the potential to improve their
financial strength, such as young e-retailers or other companies
withgrowth prospects. These assets offer value enhancement
through yield compression.
“IMA”
The Investment Management Agreement between the Manager
andthe Company.
“Investment portfolio” or “Investment assets”
The Group’s Investment Portfolio comprises let or pre-let (in the
caseof Forward Funded Developments) assets which are income
generating, as well as any speculative development assets which
have reached practical completion but remain unlet.
“Investment property”
Completed land and buildings held for rental income return and/or
capital appreciation.
“Land asset”
Opportunities identified in land which the Manager believes will
enable the Company to secure, typically, pre-let Forward Funded
Developments in locations which might otherwise attract lower
yieldsthan the Company would want to pay, delivering enhanced
returns but controlling risk.
“LIBOR”
London Interbank Offered Rate.
Glossary of Terms continued
157Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
“Link” or “Link Asset Services”
A trading name of Link Market Services Limited
(companynumber2605568).
“Listing Rules”
The listing rules made by the Financial Conduct Authority under
section 73A of FSMA.
“Loan Notes”
The loan notes issued by the Company on 4 December 2018.
“Loan to Value (LTV)”
The proportion of our gross asset value that is funded by
netborrowings.
“London Stock Exchange”
London Stock Exchange plc.
“Manager”
Tritax Management LLP (partnership number 0C326500).
“Minimum Energy Efficiency Standards (MEES)”
The legal standard for minimum energy efficiency which applies to
rented commercial buildings as regulated by the Energy Efficiency
(Private Rented Property) (England and Wales) Regulations 2015.
“Near-term development pipeline”
Sites which have either received planning consent or sites where
planning applications have been submitted prior to the year end.
“Net equivalent yield”
The internal rate of return from an Investment property, based on the
value of the property assuming the current passing rent reverts to
ERV and assuming the property becomes fully occupied over time.
“Net initial yield”
The annual rent from a property divided by the combined total of
itsacquisition price and expenses.
“Net rental income”
Gross rental income less ground rents paid, net service charge
expenses and property operating expenses.
“Net zero carbon”
Highly energy efficient and powered from on-site and/or off-site
renewable energy sources, with any remaining carbon balance offset.
“Net Zero Carbon – Construction”
When the amount of carbon emissions associated with a buildings
construction up to practical completion is zero through use of offsets
or the export of onsite renewables.
“Net Zero Carbon – Operational Energy”
When the amount of carbon emissions associated with a building’s
operational energy on an annual basis is zero.
“Net Zero Carbon – Whole Life”
When the amount of carbon emissions associated with a buildings
embodied and operational impacts over the life of the building
arezero.
“Non-PID Dividend”
A dividend received by a Shareholder of the principal Company that
is not a PID.
“Operational Carbon”
The carbon emissions arising from all energy consumed and from
water supply and waste water treatment for an asset in-use, over
itslife cycle.
“Ordinary Shares”
Ordinary Shares of £0.01 each in the capital of the Company.
“Passing rent”
The annual rental income currently receivable on a property as at the
balance sheet date (which may be more or less than the ERV).
Excludes rental income where a rent-free period is in operation.
Excludes service charge income (which is netted off against service
charge expenses).
“PID” or “Property income distribution”
A dividend received by a Shareholder of the principal Company in
respect of profits and gains of the Property Rental Business of the
UK resident members of the REIT group or in respect of the profits or
gains of a non-UK resident member of the REIT group insofar as they
derive from their UK Property Rental Business.
“Portfolio”
The overall portfolio of the Company including both the Investment
and Development portfolios.
“Portfolio Value”
The value of the Portfolio which, as well as the Group’s standing
assets, includes capital commitments on Forward Funded
Developments, Land Assets held at cost, the Group’s share of joint
venture assets and other property assets.
“Pre-let”
A lease signed with a customer prior to commencement of
adevelopment.
“REIT”
A qualifying entity which has elected to be treated as a Real Estate
Investment Trust for tax purposes. In the UK, such entities must be
listed on a recognised stock exchange, must be predominantly
engaged in property investment activities and must meet certain
ongoing qualifications.
158 Tritax Big Box REIT plc Annual Report 2022
“Rent roll”
See “Passing rent”.
“RPI”
Retail price index, an inflationary indicator that measures the change
in the cost of a fixed basket of retail goods as calculated on a monthly
basis by the Office of National Statistics.
“Scope 1 Emissions”
Direct carbon emissions from owned or controlled sources.
“Scope 2 Emissions”
Indirect emissions from the generation of purchased electricity,
steam, heating and cooling.
“Scope 3 Emissions”
All other indirect emissions that occur in a company’s value chain.
“SDLT”
Stamp Duty Land Tax – the tax imposed by the UK Government on the
purchase of land and properties with values over a certain threshold.
“Shareholders”
The holders of Ordinary Shares.
“SONIA”
Sterling Overnight Index Average.
“Speculative development”
Where a development has commenced prior to a lease agreement
being signed in relation to that development.
“sq ft”
Square foot or square feet, as the context may require.
“Symmetry Management Shareholders”
The holders of B and C Shares in Tritax Symmetry.
“Symmetry ManCo”
Tritax Symmetry Management Limited, a private limited company
incorporated in England and Wales (registered number 11685402)
which has an exclusive development management agreement
withTritax Symmetry to manage the development of the Tritax
Symmetry Portfolio.
“Topped up net initial yield”
Net initial yield adjusted to include notional rent in respect of let
properties which are subject to a rent-free period at the valuation
date thereby providing the Group with income during the
rent-freeperiod. This is in accordance with EPRA’s Best
PracticesRecommendations.
“Total Expense Ratio” or “TER”
The ratio of total administration and property operating costs
expressed as a percentage of average net asset value throughout
theperiod.
“Total Accounting Return”
Net total return, being the percentage change in EPRA NTA over
therelevant period plus dividends paid.
“Total Shareholder Return”
A measure of the return based upon share price movement over
theperiod and assuming reinvestment of dividends.
“Tritax Symmetry”
Tritax Symmetry Holdings Limited, a limited company incorporated
inJersey (registered number 127784).
“Tritax Symmetry Portfolio”
The portfolio of assets held through Tritax Symmetry following
theacquisition of db Symmetry in February 2019, including land,
options over land and a number of assets under development.
“UK AIFMD Rules”
The laws, rules and regulations implementing AIFMD in the UK,
including without limitation, the Alternative Investment Fund
Managers Regulations 2013 and the Investment Funds sourcebook
of the FCA.
“Value Add asset”
These assets are typically let to customers with good covenants and
offer the chance to grow the assets’ capital value or rental income,
through lease engineering or physical improvements to the property.
We do this using our asset management capabilities and
understanding of customer requirements. These are usually highly
re-lettable. It also includes assets developed on a speculative basis
which have reached practical completion but remain unlet at the
period end.
“WAULT” or “Weighted Average Unexpired
LeaseTerm”
The income for each property applied to the remaining life for an
individual property or the lease and expressed as a portfolio average
in years. In respect of Forward Funded Developments, the unexpired
term from lease start date.
“Yield on cost”
The expected gross yield based on the estimated current market
rental value (ERV) of the developments when fully let or actual rental
value for completed developments or those pre-let, as appropriate,
divided by the estimated or actual total costs of the development.
Glossary of Terms continued
159Tritax Big Box REIT plc Annual Report 2022
FINANCIAL STATEMENTS
Company Information
Company Registration Number: 08215888
Incorporated in the United Kingdom
Directors, Management and Advisers
Directors
Aubrey Adams OBE, FCA, FRICS
Non-Executive Chairman
Karen Whitworth FCA
Senior Independent Director
Alastair Hughes FRICS
Non-Executive Director
Elizabeth Brown
Non-Executive Director
Wu Gang
Non-Executive Director
Richard Laing FCA
Non-Executive Director
Registered office
3rd Floor
6 Duke Street
St James’s
London
SW1Y 6BN
Manager
Tritax Management LLP
280 Bishopsgate
London
EC2M 4AG
Joint Financial Adviser
Akur Limited
66 St James’s Street
London
SW1A 1NE
Joint Financial Adviser and Joint
CorporateBroker
Jefferies International Limited
100 Bishopsgate
London
EC2N 4JL
Joint Corporate Broker
JP Morgan Cazenove Limited
27th Floor
25 Bank Street
London
E14 5JP
Legal Advisers to the Company
Taylor Wessing LLP
5 New Street Square
London
EC4A 3TW
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Company Secretary
Tritax Management LLP
c/o 3rd Floor
6 Duke Street, St James’s
London
SW1Y 6BN
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Administrator
Link Asset Services
Beaufort House
51 New North Road
Exeter
EX4 4EP
Depository
Langham Hall UK Depositary LLP
8th Floor
1 Fleet Place
London
EC4M 7RA
Valuers
CBRE Limited
Henrietta House Henrietta Place
London
W1G 0NB
Colliers International Valuation UK LLP
50 George Street
London
W1U 7GA
Bankers
Bank of China Limited
London Branch
1 Lothbury
London
EC2R 7DB
Barclays Bank PLC
PO Box 3333
One Snowhill
Snow Hill Queensway
Birmingham
B3 2WN
BNP Paribas
10 Harewood Avenue
London
NW1 6AA
Canada Life Investments
1-6 Lombard Street
London
EC3V 9JU
Helaba Landesbank Hessen-Thüringen
Girozentrale
3rd Floor
95 Queen Victoria Street
London
EC4V 4HN
HSBC Bank plc
Level 2, 8 Canada Square
Canary Wharf
London
E14 5HQ
J. P. Morgan Chase Bank N.A.
25 Bank Street
London
E14 5JP
PGIM Real Estate Finance
8th Floor
One London Bridge
London
SE1 9BG
Royal Bank of Scotland
250 Bishopsgate
London
EC2M 4AA
Santander
2 Triton Square
Regent’s Place
London
NW1 3AN
SMBC Bank International plc
100 Liverpool Street
London
EC2M 2AT
Sumitomo Mitsui Trust Bank
155 Bishopsgate
London
EC2M 3XU
Wells Fargo Bank, N.A.
33 King William Street
London
EC4R 9AT
160 Tritax Big Box REIT plc Annual Report 2022
Company Information continued
Company Registration Number: 08215888
Incorporated in the United Kingdom
Cautionary statement
This Annual Report and the Tritax Big Box REIT plc website may contain certain ‘forward-looking statements’ with respect toTritax Big Box
REIT plc’s (“Company”) financial condition, results of itsoperations and business, and certain plans, strategy, objectives, goals and
expectations with respect to these items and the economies and markets in which the Company operates. Forward-looking statements are
sometimes, but not always, identified by their use of a date in the future or such words as ‘anticipates’, ‘aims’, ‘due’, ‘could’, ‘may’, ‘should’,
‘will’, ‘would’, ‘expects’, ‘believes’, ‘intends’, ‘plans’, ‘targets’, ‘goal’ or ‘estimates’ or, in each case, their negative orother variations or
comparable terminology. Forward-looking statements arenot guarantees of future performance. Bytheir very nature forward-looking
statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend
oncircumstances that will occur in the future.
Many of these assumptions, risks and uncertainties relate to factors that are beyond the Company’s ability to control or estimate precisely.
There are anumber of such factorsthat could cause actual results and developments to differ materially from those expressed or implied by
these forward-looking statements. These factors include, but arenot limited to, changes in the economies and markets in which the Company
operates; changes in the legal, regulatory and competition frameworks in which the Company operates; changes in the markets from which
the Company raisesfinance; the impact of legal or other proceedings against or which affect the Company; changes in accounting practices
and interpretation of accounting standards under IFRS, and changes in interest and exchange rates. Any forward-looking statements made in
this Annual Report or Tritax Big Box REIT plc website, or made subsequently, which are attributable to the Company, or persons acting on
their behalf, are expressly qualified in their entirety by thefactors referred to above. Each forward-looking statement speaks only as of the
dateit is made.
Except as required by its legal or statutory obligations, the Company does not intend to update any forward-looking statements. Nothing
inthis Annual Report or the Tritax Big Box REIT plc website should be construed as a profit forecast or an invitation to deal in the securities
ofthe Company.
Tritax Big Box REIT plc’s commitment to environmental
issues is reflected in this Annual Report, which has been
printed on Revive 100% Silk, an FSC
®
certified material.
This document was printed by Park Communications
using its environmental print technology, which minimises
the impact of printing on the environment, with 99% of
dry waste diverted from landfill. Both the printer and the
paper mill are registered to ISO 14001.
CBP017731
Tritax Big Box REIT plc
3rd Floor
6 Duke Street St James’s
London
SW1Y 6BN
www.tritaxbigbox.co.uk