Londonmetric Property Plc · LSE:LMP
Londonmetric Property — FY2023 Earnings Presentation
35 slides from Londonmetric Property's earnings presentation, May 24, 2023
Slide 1: Full Year 2023 Results
Full Year 2023 Results Year Ended 31 March 2023 www.londonmetric.com
Slide 2: Agenda
AGENDA Highlights Financial Review Property Review Outlook Q&A 2
Slide 3: Overview
Overview Sector calls, asset selection and income focus delivering rental growth • Macro investment backdrop stabilised Logistics – Economy showing resilience and outlook improving 73% of portfolio Urban logistics at 43% – Real estate capital markets recalibrating at different speeds ERVg on Urban •
Slide 4: Financial Highlights
Financial Highlights Full Year to 31 March 2023 Income Statement March 2023 March 2022 Change FY 23 dividend cover Net Rental Income £146.8m £133.1m +10.3% 109% EPRA Earnings £101.1m £93.5m +8.1% Expect Q1 24 dividend: +4.3% EPRA Earnings (pps) 10.33p 10.04p +2.9% NTA March 2021 Dividend (pps) 9.50p
Slide 5: Financial Review
LONDONMETRIC lay PROPERTY PLC FINANCIAL REVIEW
Slide 6: Income Statement
Income Statement1 31 March 31 March Change Net rental income 2023 2022 +10% Net rental income £146.8m £133.1m +10.3% +27% over 3 years Administrative costs £(16.5)m £(16.1)m EPRA cost ratio Net Finance costs £(29.9)m £(24.7)m 12% -80 bps over last 12 months EPRA Earnings £101.1m £93.5m +8.1% Income
Slide 7: Balance Sheet
Balance Sheet1 31 March 2023 31 March 2022 Change Property portfolio2 £3,000.9m £3,598.4m Cash £36.5m £54.3m Debt £(1,030.5)m £(1,053.7)m Fair value of derivatives £11.1m £0.1m Other3 £(22.8)m £(29.3)m IFRS Net Assets £1,995.2m £2,569.8m EPRA Adjustments £(39.0)m £(10.2)m EPRA Net Tangible Assets (N
Slide 8: Financing
Financing Debt facilities expiry profile1 (£m) • Existing debt facilities enhanced 1,600 – £400m lengthened maturity in year 78 1,400 40 – Further debt lengthened PPE 1,200 275 • New debt facilities of £275m 1,000 225 – New RCF facility at existing RCF rate 800 – Sustainability linked 1,408 175 600
Slide 9: Debt Metrics
Debt Metrics1 31 March 2023 31 March 2022 Total facilities £1,408m £1,297m Gross Debt £1,031m £1,054m Headroom £417m £299m Average maturity2 6.0 years 6.5 years Hedging2 93% 71% Average cost of finance 3.4% 2.6% LTV 32.8% 28.8% Interest Cover 4.7x 5.2x 1. Proportionally consolidated basis 2. Based o
Slide 10: Contracted Income Progression
Contracted Income Progression 160.0 2.1 150.0 10.9 -5.9 7.8 £m -1.5 140.0 156.7 145.2 143.7 143.3 130.0 1 120.0 1 2 Mar-22 Asset Investment Mar-23 Investment activity Near term LFL ERV of Voids & Pro forma management Activity & Other rental growth 3 future 4 developments 1. March 2023 rent includes
Slide 11: Delivering Long Term Shareholder Returns
Delivering Long Term Shareholder Returns Consistently delivering attractive compound led returns Net Rental Income Earnings Total Property Return Total Shareholder Return (£m) (pps) (rebased to 100)1 (rebased to 100)2 160 11.0 320 400 Dividend 10.0 300 Share price 140 350 9.0 280 120 8.0 260 300 100
Slide 12: Property Review
LONDONMETRIC lay PROPERTY PLC PROPERTY REVIEW
Slide 13: Our Portfolio
Our Portfolio Aligned to structurally supported sectors Value1 EY2 EY mvmt TPR3 ERVg (£m) (%) (bps) (%) (%) 31 March 23 Urban, Urban 1,287 5.2 +119 -11.6 11.6 43.1% Regional 586 5.4 +118 -17.0 8.1 Mega 312 5.4 +168 -23.6 15.1 Distribution Grocery-led 73.1% long income, 23.8% All Distribution 2,185 5
Slide 14: Distribution
Distribution Aligned to a structurally supported sector enjoying highly favourable demand/supply dynamics Urban Regional Mega Value £2,185m Down from £2,684m Occupancy 99% Mega & regional: 100% WAULT 11.7 years • 118 assets • 13 assets • 3 assets Up from 11.3 years • £56m rent (£8.30 psf) • £28m ren
Slide 15: Long Income & Retail Parks
Long Income & Retail Parks Segment split (by value) Operationally light assets let to high quality occupiers with long and strong income characteristics Convenience 38% NNN Retail 29% Value2 Occupancy WAULT NIY1 Contractual uplifts London & SE TPR Trade & DIY 15% £783m 100% 13 years 5.4% 69% 44% -3.
Slide 16: Investment market
Investment market As long term investors, we look to pick the right place to invest even in dislocated markets LondonMetric disposals • Interest rates remain most important yardstick to asset pricing £273m NIY 4.7%, WAULT 7 years – Increase in risk-free rate has had a profound impact on real estate
Slide 17: Occupier market - logistics
Occupier market - logistics Logistics take up Q1 20231 Demand/supply dynamics continue to generate organic rental growth 6.6m sq ft In line with five year average • Demand remains strong across all logistics Logistics take up (2022)5 – Structural tailwinds remain on track: online, localisation & ons
Slide 18: Our occupier activity
Our occupier activity Like for like income growth (FY23) Portfolio delivering sustainable & growing income 5.0% 167 transactions • Occupier activity delivered £8m pa rental uplift Rent Reviews (FY 23)1 – Lettings: £3.8m, WAULT 10 years 21% CPI 22% 17% – Regears: £1.3m, Term extended by 5 years 17% –
Slide 19: Actively improving the portfolio quality
Actively improving the portfolio quality Strong stewards of underinvested assets and improving the portfolio’s sustainability through our activities • De-risked developments adding high quality income BREEAM Very Good1 – 713k sq ft completed: +£5.5m income 97% On developments in FY 23 – 202k sq ft u
Slide 20: Outlook
LONDONMETRIC lay PROPERTY PLC OUTLOOK
Slide 21: Outlook
Outlook No matter how hard the effort or how great the intelligence, the macro will always outperform the micro • Challenging macro investment environment will settle – UK consumer remains resilient with full employment and good savings ratios – Inflation rates will fall creating an inflection point
Slide 22: Appendices
LONDONMETRIC lay PROPERTY PLC APPENDICES
Slide 23: Portfolio Metrics
Portfolio Metrics Valuation Revaluation MSCI WAULT Contracted Rent Average Area (Share) Surplus/(Deficit) CVg2,4 Occupancy NIY1 (years) Rent Uplifts Rent As at 31 March 2023 (m sq ft) (£m) (£m) (%) (%) (%) (%) Expiry Break (£m) (%) (£psf) Mega distribution 2.4 311.5 (114.0) (26.8) (26.5) 100.0 4.3 1
Slide 24: Swap rates driving sentiment
Swap rates driving sentiment Borrowing costs increased significantly over the year 6 5 10Y Gilt 4 5Y Swap 3 2 1 0 24
Slide 25: Warehouse Affordability
Warehouse Affordability¹ Occupiers are less sensitive to rent rises than other costs • Transport & labour are majority of total operating costs – 85% for parcel operators & 77% for ecommerce companies Breakdown of operating costs – Rent represents just 8% & 13% respectively for logistics operators –
Slide 26: Total Property Returns over 5 years (LondonMetric)
Total Property Returns1 over 5 years (LondonMetric) 200 180 Urban (+77%) Regional (+62%) 160 LMP All (+46%) 140 120 Mega (+22%) Long Income (+18%) MSCI IPD2 (+10%) 100 FY18 FY19 FY20 FY21 FY22 FY23 IPD Urban Regional Mega Long Income LMP All 1. Source: MSCI, Rebased 2018 = 100. 26 2. MSCI Benchmark
Slide 27: Income Breakdown
Income Breakdown Delivering long term reliable, repetitive & growing income with diversification Top 10 occupiers Contractual Uplifts 63.0% 4.1% Primark Fixed 8.2% Uplift 3.4% Market 13.1% Amazon Review 3.4% 37.0% Mar 2023 – 28% 2.9% RPI Linked Argos 30.4% 3.4% Mar 2021 – 36%1 CPI Linked 2.9% THG 19
Slide 28: Inflation captured through index linked rent reviews
Inflation captured through index linked rent reviews Warrington Our index linked reviews across our portfolio have a range of collars and caps typically between 1% to 4% over a five year period: • At 22% inflation over a five year period (4% p.a.), 86% of CPI inflation is captured under our index-li
Slide 29: Distribution Assets
Distribution Assets Top 10 assets Occupier Annualised (by value) rent (£m) Dagenham 1 Eddie Stobart 4.1 Islip 2 Primark 5.9 Bedford 3 Argos 4.1 Other Warrington 4 THG 4.1 North East 5% & Yorkshire Croydon 5 Tesco 1.9 4&7 4% North West Bedford 6 Movianto 2.8 7% Warrington 7 Amazon 2.4 Swindon 8 Oak F
Slide 30: Net Zero Carbon Ambition
Net Zero Carbon Ambition #1 Operations to be net #2 Developments to be #3 Buildings to be zero by end 2023 net zero by 2030 net zero by 2035 Assets where we have control & Reduce emissions from Help occupiers to lease NZC ready management will be NZC by 2023 development & offset residual buildings,
Slide 31: Developments Summary
Developments Summary Sq ft PC1 BREEAM Rent/ YOC Total Up to 31 FY FY Comment 000 Very Good uplift (%) cost Mar 23 24 25 £m £m £m £m £m Huntington 300 Q4 22 100% 2.0 3.7 56 51 5 - Pre Let to AM Fresh Ipswich 296 Q3 22 100% 1.8 4.6 40 40 - - Weymouth 51 Q4 22 100% 0.9 6.4 14 14 - - 100% pre let Long I
Slide 32: Acquisitions - FY 2023
Acquisitions - FY 2023 Name Sector Geography Value Yield WAULT (LM share) (years) £m NIY(%) RY1 (%) Expiry 1B Colliers Wood Urban Logistics London & South East 4.1 4.3 4.3 0.0 0.0 Stratford Urban Logistics London & South East 6.0 4.5 4.5 0.0 0.0 Hackney Urban Logistics London & South East 2.6 4.3 5.
Slide 33: Disposals - FY 2023
Disposals - FY 2023 Name Sector Geography Value (LM share) WAULT (years) £m NIY (%) Expiry 1B Reading Regional London & South East 60.6 3.5 3.1 3.1 X3 Multi-let assets in Birmingham Urban Logistics Midlands 21.6 5.7 3.2 2.6 Greenwich Leisure & Hotel London & South East 4.6 4.4 22.0 22.0 Cardiff NNN
Slide 34: Debt Facilities (31 March 2023)
Debt Facilities (31 March 2023) Lender Facility Maturity1 Expiry (£m) (years) Wholly-owned portfolio Unsecured RCF (2021) Syndicate 225.0 2.1 2025 Unsecured RCF (2021) Wells Fargo 175.0 4.1 2027 Unsecured RCF (2022) Syndicate 275.0 2.6 2025 Private Placement (2021) Syndicate 380.0 9.2 2028-36 Privat
Slide 35: Historic Debt Metrics
Historic Debt Metrics Warrington Bedford Loan to Value Ratio Cost of Debt Debt Maturity Interest Cover Ratio (%) (%) (years) (x) 40 4.0 8.0 6.0 38 5.5 35 36 5.2 3.5 3.5 6.4 6.5 5.0 5.0 35 3.5 3.4 5.0 6.0 4.7 4.7 32 33 6.0 4.5 32 5.6 4.3 3.1 5.2 30 4.8 30 29 3.0 2.9 4.7 4.0 2.8 4.2 2.6 4.0 2.5 25 2.5