Results for the Year Ended 31 March 2018

RNS Number : 1000P

Urban Logistics REIT PLC

24 May 2018

 

Urban Logistics REIT plc

("Urban Logistics", the "Company" or the "Group")

Results for the Year Ended 31 March 2018

Strong underlying performance during transformational year

Urban Logistics, (AIM: SHED) the specialist UK logistics REIT, issues its results for the year ended 31 March 2018.

§ Portfolio valuation at 31 March 2018 of £131.9m, representing a 12.9% like-for-like increase across the financial year (2017: 9.8%)

§ Net initial yield of 5.9% (6.6% at 31 March 2017)

§ Portfolio occupancy of 93.3% (96.2% at 31 March 2017)

§ 29 assets in the portfolio at 31 March 2018, high-quality tenant base includes: DHL, Culina, XPO, Sainsbury's, Travis Perkins and Puma

§ £53.0m of equity capital raised from new and existing investors in August 2017

§ £82.9m invested in off-market acquisitions of 17 logistics assets at 7.6% blended net initial yield

§ A further equity capital raise was undertaken in April 2018 with gross proceeds of £20.4m. Proceeds will be invested in a portfolio of 6 logistics assets for an acquisition cost of £36.0m

§ Disposal of site in Bedford for £5.8m, representing an IRR of c.43% and a net initial yield of 6.0%

Highlights	31 March 18 (£m)	31 March 17 (£m)	Change (%)
Income Statement
Rental income (£m)	5.6	2.3	+ 144.4
EPRA Earnings (£m)	2.5	1.1	+ 121.5
EPRA Earnings per share (p) *	4.91	7.82	- 37.2
Balance Sheet
EPRA NAV per share (p)	122.49	116.11	+5.5
Revaluation uplift on investment properties (£m)	7.2	3.9	+ 85.4
Net borrowing (£m)	47.7	18.2	+ 162.0
LTV (%)	36.9	42.4	- 5.5
Dividends
Total dividend per share paid in respect of the financial year (p)	6.32	6.23	+1.4

* reflecting the issuance of new shares in August 2017, the benefit of being fully invested by 31 December 2017 to come through in the financial year to 31 March 2019

Nigel Rich, Chairman of Urban Logistics, commented:

"This has been a transformational period for the Company, which underwent a significant capital raise, increasing its market capitalisation to over £100 million. We further diversified the shareholder base and the proceeds were well invested in a timely manner.

"The fundamentals of our market remain attractive and we are confident of delivering excellent returns for our shareholders. In line with our focus and strategy, we recently underwent a name change, and are now known as "Urban Logistics REIT plc (ticker: SHED)"

For further information contact: 

Urban Logistics REIT plc Richard Moffitt	[phone]
Montfort - Financial PR and IR adviser Olly Scott	[phone]
Canaccord Genuity - Nominated Adviser and Broker Simon Bridges Charlie Foster Andrew Buchanan	[phone]
Radnor Capital Partners Joshua Cryer Ben Gillen	[phone]

Chairman's Statement

I am pleased to present the Group's consolidated results for its annual reporting year to 31 March 2018.

Overview

The past financial year has been an exciting time in the development of your Company. We continue to build a portfolio that offers secure income from good quality logistics tenants, with the prospect of an attractive total return through asset management initiatives undertaken by the Manager.

In August 2017 we raised £53 million of gross proceeds, which were used together with bank financing for the purchase of £83 million (excluding acquisition costs) of logistics assets. More recently in April 2018 we completed a further £20 million fundraise, which will be used with financing to purchase £36 million of assets in July and September of this year.

At the time of writing, our market capitalisation stands at just over £108 million compared with £25 million at 31 March 2017. We now own a portfolio of assets which at 31 March 2018 was valued at £132 million, compared with £43 million at 31 March 2017. Including assets scheduled to be purchased in July and September of this year, the portfolio will be approximately £168 million.

Finally, with the approval of Shareholders we have changed the name of the Company to "Urban Logistics REIT plc", which more accurately reflects what we do.

The Market

The business of logistics is about the delivery of essential product to businesses and consumers. This activity is a critical part of the ongoing commercial revolution changing the way goods are sourced, bought, stored and delivered.

Our tenants typically require warehousing near, or adjacent to, cities with good transport infrastructure. We look to buy 25,000 - 150,000 sq ft properties with single tenants who are involved in the supply of goods to an end user. The leases will usually have an upcoming lease event such as break clause, an impending rent review, or a termination/vacancy which allows the Manager the opportunity to increase rents or improve the yield.

Financial Results

Turning to our results for the year ended 31 March 2018, contracted rent increased from £3.2 million to £7.6 million and EPRA earnings from £1.1 million to £2.5 million. EPRA earnings per share decreased from 7.82p in the prior year to 4.91p, reflecting the issuance of new shares in August 2017 and the timing of the portfolio purchases enabled by this fundraising. The first portfolio purchase following last summer's raise was completed in September 2017 and the second in December 2017. It was therefore only in the last quarter of the financial year that the full benefit of the rents from these purchases flowed through to earnings.

The assets under management of the Group increased from £43.4 million to £131.9 million during the year. There was little increase in the value of more recently acquired properties. On a like-for-like basis for those properties still owned on 31 March 2018, values increased by 12.9% reinforcing the Manager's investment strategy. The LTV was 36.9% at the year end, versus 42.4% at the end of the prior year - well within our target range of 35-40%.

We have paid four dividends over the course of the financial year, amounting to 6.32 pence per share, of which 3.23 pence per share related to the prior financial year. A further dividend of 3.20 pence per share was paid on 4 May 2018 to shareholders on the register on 20 April 2018. Taking total dividends paid and declared for the financial year to 31 March 2018 to 6.32 pence per share (2017: 6.23 pence per share).

The Manager

Our Manager, Pacific Capital Partners Limited, has continued to serve us very well. Richard Moffitt and Christopher Turner are responsible for asset acquisitions, management and disposals. They remain very successful in finding suitable properties to acquire, and occasionally dispose of when full value has been extracted. Their skills are critical to the success of the Company. Following the acquisition of properties, asset management is vital in both securing and enhancing income. Examples of both are covered in the Manager's Report.

On the financial and administrative front, including the work required on the recent share issues, the Manager's staff have performed extremely well.

Prior to the August 2017 fundraise, the independent directors collectively agreed to changes to the management contract. The annual management fee was replaced with a fee that is now 0.95% of the Group's EPRA NAV, payable quarterly in arrears. The LTIP was also amended and is now linked to both NAV and share price and has a higher hurdle rate. Consideration is being given to the term of the contract.

Outlook

Earnings in the 2019 financial year will benefit from the full effect of the acquisitions made in the 2018 financial year and from the forthcoming LondonMetric acquisition. We are confident that the high-quality portfolio of urban logistic assets will continue to deliver good total returns to shareholders.

Nigel Rich CBE, Chairman

23 May 2018

Manager's Report

Overview

The Group's name change to "Urban Logistics REIT plc" (formerly Pacific Industrial & Logistics REIT plc), effective from 25 April 2018, neatly reflects our investment focus and is consistent with both our investment policy and growth strategy.

The term 'logistics' means a number of different things to different people - to us it is about the delivery of essential products to UK businesses and consumers and includes an array of items - from dairy products to pharmaceuticals to sports apparel. All these items are housed across our portfolio of properties.

In the UK we are undergoing a 'business revolution' whereby a structural change is underway with e-commerce in particular driving changes to logistics and how individuals and businesses go about buying and distributing products.

Investor interest is driven by structural changes, e-commerce as well as modern technology according to CBRE. In 2017, third-party logistics providers (3PLs) and online accounted for 41% of all industrial and logistics space take up, maintaining the strongest market shares respectively.

The FT reported in January 2018, that online UK sales for non-food items have increased markedly over the last five years, from 11.6% of the total market in December 2012 to 24.1% in December 2017 and demand for regional warehouse space remains high as a result whilst supply is constrained. This in turn drives rental growth with 2.3% noted across the UK in the six months to end of December 2017 (Source: CBRE Logistics Property Perspective H2 2017).

Whilst stores continue to support retailers' online sales, albeit with more of a focus on being a showroom or service centre as opposed to a traditional 'shop', we expect more flexible arrangements going forward. We are seeing an increasing role for "Click and Collect" for example which underpins a continuing role for a store network. This is convenient for consumers and in turn makes life easier for retailers in recycling stock - we note that approximately 45% of online customers returned at least one item in 2017 (source: Mintel).

Online only retailers will no doubt continue to gain traction, e.g. Asos, Boohoo and Amazon. However, it is important in the current climate to keep an eye on general retail, in particular fashion retail, with retail sales contracting (source: ONS April 2018) and declines in all sectors noted over recent months except for non-store retailing.

As occupiers increase their use of smart technology, for example transport automation and robotics, warehouse occupiers will need to find locations close to city centres as consumers expect same day delivery. This rise in same-day delivery across the UK, driven by consumers, has led to an increase in demand for smaller distribution warehouses that are closer to the customer. Our focus is on smaller single-let logistics sites, rather than multi-let, as we believe in the attractions of minimal service charges and a more stream-lined, less onerous approach to asset management led initiatives.

The Group will continue to benefit from the significant opportunity in this sub-sector of the UK industrial and logistics market due to strong tenant demand, limited stock and current lack of speculative development. Through the Manager's knowledge of the sector, track record and experience, we are well-placed to continue sourcing attractive new opportunities, whilst remaining disciplined in our investment approach.

Financial commentary

The financial year to 31 March 2018 was a period of significant growth for the Company with a focus on both asset management and investment activity. The results demonstrate some substantial achievements, demonstrating how the Group's strategy of adding scale whilst focusing on investment returns, continues to bear fruit. We expect the results to continue to improve as the Group scales and the effect of asset management initiatives are reflected in cash flow and portfolio value.

Investment activity

The Group acquired 17 assets during the year. The Group's portfolio comprised the properties in the table below as at 31 March 2018. These have proven to be quality logistics investments, with a good geographical spread and diverse tenancies. The new properties all present a variety of asset management opportunities, which have the potential to drive both income growth and capital appreciation.

The average size of the properties in the portfolio at 31 March 2018 was 55,225 sq ft. The weighted average unexpired lease term at the same date was 5.0 years, at 31 March 2017 this was 4.4 years.

Portfolio summary at 31 March 2018:

Tenant	Location	Acquired	Acquisition Cost	Net Book Value	Size
			(£000)*	(£000)	(sq ft)
Price's Patent Candles	Bedford	Apr 16	2,200	3,170	44,195
Jas Bowman & Sons	Bedford	Apr 16	2,675	3,750	39,306
The BSS Group	Northampton	Apr 16	750	900	13,633
ACO Technologies	Bedford	Apr 16	1,675	3,200	41,603
Blackburn Metals	Bedford	Apr 16	1,250	1,840	24,380
Ball and Young	Bedford	Apr 16	1,100	1,730	22,535
Ideal Industries	Bedford	Apr 16	2,850	2,300	42,392
Marshall Thermo King	Dunstable	Apr 16	600	1,000	9,912
Winit Corporation	Bardon	Apr 16	6,000	6,350	73,791
Void ¹	Bedford	Apr 16	1,393	1,930	21,137
Professional Fulfilment	Bedford	Apr 16	1,394	1,932	21,161
Arqadia	Bedford	Apr 16	2,813	3,898	42,700
Void ²	Chesterfield	Jan 17	4,659	5,200	108,873
PUMA United Kingdom	Leeds	Mar 17	6,050	6,300	63,979
HID Corporation Ltd	Haverhill	Sep 17	4,090	4,910	37,355
Culina Logistics Ltd	Haverhill	Sep 17	14,150	15,950	194,965
XPO Transport Solutions	Leigh	Sep 17	3,340	3,760	39,720
XPO Transport Solutions	Motherwell	Sep 17	2,420	2,590	100,832
Void ³	Nuneaton	Sep 17	6,710	6,840	130,508
XPO Supply Chain UK	Hinckley	Sep 17	3,280	3,280	62,082
XPO Transport Solutions	Normanton	Sep 17	6,110	6,110	94,102
J Sainsburys Plc	Hoddesdon	Sep 17	3,950	4,040	45,018
Travis Perkins	Hoddesdon	Sep 17	1,480	1,560	10,935
Komori	Leeds	Nov 17	1,570	1,573	22,460
Pharmacy 2U	Leeds	Nov 17	1,325	1,327	18,960
Panther Warehousing	Northampton	Dec 17	3,025	3,000	42,553
Manitowoc Crane Group	Buckingham	Dec 17	6,286	8,550	29,378
GoCompare.com	Newport	Dec 17	4,644	4,200	26,672
DHL	Hebburn	Dec 17	3,157	3,320	77,430
DHL	Norwich	Dec 17	2,176	2,250	31,410
Void 4	Leigh	Dec 17	7,154	7,040	110,729
DHL	Runcorn	Dec 17	8,083	8,050	122,478
Total			118,359	131,850	1,767,184

* excluding purchaser costs

1. Void from 24 March 2017

2. Void - rental guarantee expired 31 December 2017

3. Void from 28 September 2017 - rental guarantee in place until 27 September 2019

4. Void from 22 December 2017 - rental guarantee in place until 21 December 2018

Valuation and portfolio growth

CBRE independently valued the portfolio at 31 March 2018, in accordance with the RICS Valuation - Professional Standards. The portfolio's market value was £131.9 million, compared with the assets' combined purchase price of £118.4 million, excluding purchaser costs. This represents an increase of £13.5 million or 11.4%, when compared to the purchase prices. The valuation increase reflects our focus on asset management and buying well-located sites. It also highlights our success in sourcing off-market deals at attractive prices.

Like-for-like across the financial year, property values increased by 12.9%, supporting our growth conviction. As the Company was so acquisitive during the year, with a number of new properties purchased from September 2017 onwards, we expect to see the benefit of these properties being revalued following asset management initiatives from this financial year onwards.

Current Portfolio Analysis

The Group has invested in 29 assets, comprising 32 properties and 28 tenants as at 31 March 2018. Select asset management across the financial year:

1. P W Gates, Bedford

Annual passing rent - £375,050, Size (sq ft) - 59,607

Rent per sq ft - £6.29, Tenure - Freehold

The property is located to the north west of Bedford, within the Elms Farm Industrial Estate. It is a 59,607 sq ft logistics unit that sits c. 1.0 miles from the A421. It is a well maintained and configured warehouse.

During the year, the Manager introduced a new tenant at £6.29 per sq ft on a 10-year lease with a five year break and subsequently completed the sale of the property for £5.8 million (excluding sales costs). This was at a net initial yield of 6.0% and reflects an IRR on equity invested of 43.0%. 

2.   Price's Candles, Bedford

Annual passing rent - £265,000, Size (sq ft) - 44,195

Rent per sq ft - £6.00, Tenure - Leasehold

This is a well configured warehouse with two bays and a trade counter. It is located in an established commercial location, with good access and circulation.

During the year a rent review was settled and a head lease extension to 150 years was agreed with Bedford Borough Council. The property was under offer to a purchaser at 31 March 2018 and subsequently sold on 6 April 2018 for £3.2 million, an IRR on equity invested of 55.8%. 

3.   Komori / Pharmacy2u, Leeds

Annual passing rent - £213,000, Size (sq ft) - 41,420

Rent per sq ft -  £5.14 (Komori/Pharmacy2u), Tenure - Freehold

This is a well configured warehouse comprising two units in an established strategic location, with good access and circulation. The site was acquired in November 2017.

The acquisition is consistent with the Company's investment strategy of identifying attractively priced stock with asset management potential; and is well located to the north east of Leeds City Centre, close to the A64. It comprises a modern logistics warehouse which is let on leases through to 2020 and 2022 respectively. Both have outstanding rent reviews which are currently being negotiated and both tenants are seeking to extend their lease terms by a further five years.

4.   HID, Haverhill

Annual passing rent - £320,366, Size (sq ft) - 37,355

Rent per sq ft - £8.58, Tenure - Freehold

This is a smaller warehouse with an office element in an established strategic location, with good access to main arterial routes and full circulation.

There is potential to extend on land to the rear and the tenant's break option recently lapsed so there is now a five-year unexpired term. There is also an outstanding rent review currently being negotiated.

Financing

As at 31 March 2018, the Group has a senior debt facility with Santander totalling £48.6 million. This facility has a term of five years and reflects an LTV of 36.9%. In the medium term the Group's target LTV is 35-40%. Net financing costs were £0.9 million for the year.

A new term facility is under negotiation with both Santander and another lender on a club basis. This is expected to be completed in September 2018.

Investment Activity

Acquisitions and disposals across the financial year comprised:

Portfolio Acquisitions

A portfolio of nine logistics assets was purchased for £45.5 million (excluding acquisition costs) in September 2017. The acquisition was sourced off-market at a net initial yield of 7.3%. The portfolio's logistics occupiers include Culina, XPO, Sainsbury's and Travis Perkins. The assets are close to established regional transport hubs in urban or last-mile locations where there is strong occupier demand.

In December 2017, the Company purchased another portfolio of assets totalling £31.5 million (excluding acquisition costs), reflecting a 7.1% net initial yield. The portfolio had a low average rent of £4.46 per sq ft, reflecting significant reversionary potential. The sites are well-located single-let assets across the UK and three of the sites are let to DHL.

Asset Acquisitions

A logistics asset at Victoria Road, Seacroft, Leeds was purchased for a total consideration of £2.8 million in November 2017. The purchase price represents a net initial yield of 6.8% and comprises a modern 41,420 sq ft logistics warehouse let to Komori UK Limited and Pharmacy2u Limited on leases through to 2020 and 2022 respectively. There are outstanding rent reviews on both units. This site recently won best 'New Facility' at The Logistics Awards 2017, which recognises operational excellence among companies within the logistics and supply chain sectors.

The Company completed the acquisition of a site in Northampton in December 2017 for £3.0m at a net initial yield of 6.4%. The site located at Moulton Park, Northampton is located close to the A43. It is a 42,553 sq. ft. logistics unit let to Panther Logistics.

Post Year End Acquisitions

Following the equity raise in April 2018, which raised gross proceeds of £20.4 million, the Group exchanged contracts on a portfolio of six urban logistics assets for an acquisition cost of £36.0 million (excluding acquisition costs). The combined portfolio represents a blended net initial yield of 5.9%.

Disposals

The Company completed the sale of a site located at Hammond Road, Bedford, in November 2017 for a total consideration of £5.8 million (excluding sales costs), representing a net initial yield of 6.0%. The disposal follows the recent letting of the property on a 10-year lease to P W Gates (mentioned above) and the total consideration is a 64% gain on the asset's cost, representing an IRR of approximately 43%.

In February 2018, the Company commenced discussions regarding the sale of an asset located at Hudson Road, Bedford. The sale completed post year end on 5 April 2018 for £3.2 million. Taken together with the income returns generated during the Company's ownership this sale price represents an IRR on equity invested of 55.8%.

Market Overview

The industrial and logistics market in the UK continues to see resilient occupier demand outweighing available supply. This is due to on-going under-investment in the sector which is principally due to some substantial barriers to entry, namely: the cost of construction; availability of land; planning constraints; and letting risk. This results in an ongoing supply constraint regarding quality industrial and logistics assets across the UK.

Strong occupier demand, owing in particular to the growth in e-commerce and investment by retailers and suppliers in e-fulfilment supply chain capability, also means that there is sustained low void across key locations.

During 2017 we saw total return potential supported by structural growth, particularly strong rental growth. Sterling's depreciation post the EU referendum should continue to prove a boost to exports and the manufacturing sector. This combined with e-commerce growth is expected to provide strong cyclical and structural support, despite any perceived weakness due to the ongoing negotiations with the EU.

The logistics total return in H2 2017 was 9.3%, a marked uplift on H1 2017 (5.0%). This improvement was driven by stronger capital growth with rental growth stable over the period (Source: CBRE Logistics Property Perspective H2 2017).

A wider range of facilities will underpin the sector's transformation going forward, notably XXL warehouses (with several floors) and urban logistics centres, where we are focused. Speculative development remains subdued as occupiers shift to purpose-built factories and development finance remains limited.

Market Outlook

The Board and the Manager believe that this part of the property sector continues to show resilience in a context of wider economic uncertainty. Underlying market conditions remain favourable for UK business and we see ongoing activity across our occupier base which is centred proportionately across SMEs, logistics firms and larger occupiers. 

The UK continues to be one of the fastest growing adopters of online retail and there is a requirement for tenants to develop their e-fulfilment capability accordingly. As such, key geographic regions across the UK are seeing improvements year-on-year in leasing activity. In the longer-term, demand for sites will fluctuate with economic drivers such as the value of Sterling, manufacturing and production, exports, domestic consumption and Brexit. However, the UK has relatively high barriers to entry (compared to other European markets) with respect to planning and development, so we expect sustainable growth for the foreseeable future.

For the rest of 2018 and beyond, we expect the demands that occupiers place on their units to become more advanced. Power demand has become of increasing importance to many occupiers, particularly given the growing level of automation utilised across different supply chains. With electric vehicles (both trucks and cars) increasingly being considered, the ability to accommodate and charge these vehicles on site will become important. Meanwhile, with unemployment reaching record lows, sourcing labour will become an increasing issue.

Supply

Whilst there have been recent tentative steps towards the speculative development of smaller floorplate buildings, this has yet to result in availability matching the requirement for take-up across the UK. Indeed, supply is focussing more on second-hand space with new and early marketed space (units within six month of practical completion) contracting (Source: CBRE Logistics Report H1 2017 - The Property Perspective). Supply remains low by historical standards and there remains a lack of land allocated for warehouse development, particularly across the Midlands where interest and enquiries are being registered on schemes that have yet to secure planning permission. There remain very few large strategic sites across the Midlands that are in a position to complete quickly and meet demand. We also note that since the EU referendum there has been a reduction in speculative commitments by developers whilst good quality demand has held up.

The logistics sector will also be impacted by the introduction of the Minimum Energy Efficiency Standard (MEES) regulations from April 2018 which will prevent 'substandard' property, where an EPC falls below the minimum standard of an E banding, from being let. None of the properties across the Group's portfolio fall into this category.

Demand

Demand for smaller lot size warehouses in recent years has been strong. The underlying driver being a lack of new building availability and high replacement cost. The Manager will continue to focus on purchasing sites below replacement cost.

One of the other key features of demand is the emergence of new locations, traditionally seen as more secondary. These locations have come to the fore due to the limited supply in many prime areas around London and the notable rental growth within the M25. For example, in the South East the lack of supply has led to occupiers considering alternative locations elsewhere - with the South West and West Midlands achieving take-up well above long-run averages.

Acquisitions

The Manager will continue to focus on acquiring attractive assets and implementing asset management initiatives to drive rental growth in light of the current market dynamic of diminishing supply and increasing occupier demand.

The Manager is focussed on maintaining and building existing tenant relationships with a view to extending the Group's reputation as a leader in the smaller lot size logistics market.

Investment volumes remain high and the sector is undeniably popular. The sector's superior returns in 2017 allied to projected rental growth prospects have proven highly attractive to both existing and new entrants. With alternative assets generally providing low returns there is continued search for yield and growth. We are well positioned to continue to achieve our target returns for our investors. 

Richard Moffitt

23 May 2018

Consolidated Statement of Comprehensive Income

		31 Mar 18	31 Mar 17
	Note	£'000	£'000
Rental income	5	5,564	2,277
Cost of sales		(561)	(25)
Gross income		5,003	2,252
Administrative and other expenses		(1,074)	(499)
Other income		133	-
Long-term incentive plan charge	11	(657)	(34)
Operating profit before changes in fair value of
investment properties		3,405	1,719
			-
Changes in fair value of investment property	13	7,194	3,881
Profit on disposal of investment property		57
Operating profit	6	10,656	5,600
Finance income		4	2
Finance expense	8	(929)	(600)
Changes in fair value of interest rate derivatives	20	134	(115)
Profit before taxation		9,865	4,887
Tax credit/(charge) for the year	9	-	-
Profit and total comprehensive income (attributable to the shareholders)		9,865	4,887
Earnings per share - basic	10	19.54p	46.80p
Earnings per share - diluted	10	19.51p	46.40p
EPRA earnings per share - diluted	10	4.91p	7.82p

Consolidated Statement of Financial Position

		31 Mar 18	31 Mar 17
	Note	£'000	£'000
Non-current assets
Investment property	13	131,850	43,420
Interest rate derivatives	20	19	-
Total non-current assets		131,869	43,420
Current assets
Trade and other receivables	16	585	535
Cash and cash equivalents	17	3,280	1,680
Total current assets		3,865	2,215
Total assets		135,734	45,635
Current liabilities
Trade and other payables	18	(1,490)	(632)
Deferred rental income		(1,694)	(676)
Total current liabilities		(3,184)	(1,308)
Non-current liabilities
Long term rental deposits		(672)	(645)
Interest rate derivatives	20	-	(115)
Bank borrowings	19	(47,672)	(18,196)
Total non-current liabilities		(48,344)	(18,956)
Total liabilities		(51,528)	(20,264)
Total net assets		84,206	25,371
Equity
Share capital	23	681	215
Share premium	24	71,832	20,454
Share warrant reserve	25	89	91
Other reserves		75	34
Retained earnings	27	11,529	4,577
Total equity		84,206	25,371
Net Asset Value per share basic	29	123.62p	118.26p
Net Asset Value per share diluted	29	122.51p	115.64p
EPRA Net asset Value - diluted	29	122.49p	116.11p

Company Statement of Financial Position

		31 Mar 18	31 Mar 17
	Note	£'000	£'000
Non-current assets
Investment in subsidiaries	14	11,800	11,800
Total non-current assets		11,800	11,800
Current assets
Trade and other receivables	16	62,816	11,314
Cash and cash equivalents	17	41	66
Total current assets		62,857	11,380
Total assets		74,657	23,180
Current liabilities
Trade and other payables	18	(346)	(232)
Total current liabilities		(346)	(232)
Total liabilities		(346)	(232)
Total net assets		74,311	22,948
Equity
Share capital	23	681	215
Share premium	24	71,832	20,454
Share warrant reserve	25	89	91
Other reserves		75	34
Retained earnings	27	1,634	2,154
Total equity		74,311	22,948

Consolidated Cash Flow Statement

		31 Mar 18	31 Mar 17
	Note	£'000	£'000
Cash flows from operating activities
Profit for the year (attributable to equity shareholders)		9,865	4,887
Less: changes in fair value of investment property		(7,194)	(3,881)
(Less)/add: changes in fair value of interest rate derivatives		(134)	115
Less: profit on disposal of investment property		(57)	-
Less: finance income		(4)	(2)
Add: finance expense		929	600
Long-term incentive plan		657	34
Decrease in trade and other receivables		(45)	(513)
Increase in trade and other payables		1,443	551
Cash generated from operations		5,460	1,791
Net cash flow generated from operating activities		5,460	1,791
Investing activities
Purchase of investment properties	13	(12,236)	(12,022)
Disposal of investment properties	13	5,542	-
Acquisition of subsidies, net of cash acquired	15	(74,031)	(26,135)
Net cash flow used in investing activities		(80,725)	(38,157)
Financing activities
Proceeds from issue of ordinary share capital		53,053	21,453
Proceeds from issue of preference shares		-	2,000
Redemption of preference shares and interest payment		-	(2,076)
Cost of share issue		(1,826)	(693)
Bank borrowings drawn		32,582	20,475
Bank borrowings repaid		(2,394)	(2,070)
Loan arrangement fees paid		(860)	(287)
Interest paid		(781)	(446)
Interest received		4	-
Dividends paid to equity holders	12	(2,913)	(310)
Net cash flow generated from financing activities		76,865	38,046
Net increase in cash and cash equivalents for the year		1,600	1,680
Cash and cash equivalents at start of year		1,680	-
Cash and cash equivalents at end of year		3,280	1,680

Company Cash Flow Statement

		31 Mar 18	31 Mar 17
	Note	£'000	£'000
Cash flows from operating activities
Profit for the year (attributable to equity shareholders)		2,393	2,464
Less: finance income		(2)	-
Add: finance expense		-	76
Long-term incentive plan		657	34
Increase in trade and other receivables		(4)	(4)
Increase in trade and other payables		114	230
Cash generated from operations		3,158	2,800
Net cash flow generated from operating activities		3,158	2,800
Investing activities
Acquisition of a subsidiary, net of cash acquired	14	-	(11,800)
Increase in loan due from group undertakings		(51,499)	(11,308)
Net cash flow used in investing activities		(51,499)	(23,108)
Financing activities
Proceeds from issue of ordinary share capital		53,053	21,453
Proceeds from issue of preference shares		-	2,000
Redemption of preference shares and interest payment		-	(2,076)
Cost of share issue		(1,826)	(693)
Interest received		2	-
Dividends paid to equity holders	12	(2,913)	(310)
Net cash flow generated from financing activities		48,316	20,374
Net increase in cash and cash equivalents for the year		(25)	66
Cash and cash equivalents at start of year		66	-
Cash and cash equivalents at end of year		41	66

Consolidated Statement of Changes in Equity

	Share capital	Share premium	Share warrant reserves	Other reserves	Retained earnings	Total
Year ended 31 March 2018	£'000	£'000	£'000	£'000	£'000	£'000
1 April 2017	215	20,454	91	34	4,577	25,371
Profit for the year	-	-	-	-	9,865	9,865
Total comprehensive income	-	-	-	-	9,865	9,865
Dividends to shareholders	-	-	-	-	(2,913)	(2,913)
Long term incentive plan	-	-	-	657	-	657
Crystallisation of long term incentive plan	5	611	-	(616)	-	-
Issue of Ordinary Shares	461	50,767	-	-	-	51,228
Redemption of Warrant Shares	-	-	(2)	-	-	(2)
31 March 2018	681	71,832	89	75	11,529	84,206
Period ended 31 March 2017
8 December 2015	-	-	-	-	-	-
Profit for the period	-	-	-	-	4,887	4,887
Total comprehensive income	-	-	-	-	4,887	4,887
Dividends to shareholders	-	-	-	-	(310)	(310)
Long term incentive plan	-	-	-	34	-	34
Issue of Ordinary Shares	215	20,454	91	-	-	20,760
31 March 2017	215	20,454	91	34	4,577	25,371

	Share capital	Share premium	Share warrant reserves	Other reserves	Retained earnings
						Total
	£'000	£'000	£'000	£'000	£'000	£'000
1 April 2017	215	20,454	91	34	2,154	22,948
Profit for the year	-	-	-	-	2,393	2,393
Total comprehensive income	-	-	-	-	2,393	2,393
Dividends to shareholders	-	-	-	-	(2,913)	(2,913)
Long term incentive plan	-	-	-	657	-	657
Crystallisation of long term incentive plan	5	611	-	(616)	-	-
Issue of Ordinary Shares	461	50,767	-	-	-	51,228
Redemption of Warrant Shares	-	-	(2)	-	-	(2)
31 March 2018	681	71,832	89	75	1,634	74,311
Period ended 31 March 2017
8 December 2015	-	-	-	-	-	-
Profit for the period	-	-	-	-	2,464	2,464
Total comprehensive income	-	-	-	-	2,464	2,464
Dividends to shareholders	-	-	-	-	(310)	(310)
Long term incentive plan	-	-		34	-	34
Issue of Ordinary Shares	215	20,454	91	-	-	20,760
31 March 2017	215	20,454	91	34	2,154	22,948

Notes to the Preliminary Results

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of Companies Act 2006 (the "Act").

The financial information set out in this announcement does not comprise the Group's statutory accounts for the year ended 31 March 2018.

The statutory accounts for the year ended 31 March 2018 have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them.

1. Corporate information

Urban Logistics REIT plc, previously Pacific Industrial & Logistics REIT plc, (the "Company") and its subsidiaries (the "Group") carry on the business of property lettings throughout the United Kingdom. The Company is a public limited company incorporated and domiciled in England and Wales and listed on the AIM Market of The London Stock Exchange. The registered office address is 124 Sloane Street, London, SW1X 9BW.

2. Basis of preparation

The financial statements have been prepared in accordance with IFRS as adopted by the European Union and, as regards the parent company financial statements, applied in accordance with the provisions of the Companies Act 2006.

The Group's financial information has been prepared on a historical cost basis, except for investment property and derivative interest rate caps which have been measured at fair value.

The functional currency of the Group is considered to be pounds sterling as this is the currency of the primary environment in which the company operates.

The Company has not presented its own Statement of Comprehensive Income, as permitted by Section 408 of the Companies Act 2006. The Company made a profit of £2.39 million.

Going concern

The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance. As part of the review, the Group has considered its cash balances, its debt maturity profile, including undrawn facilities, and the long-term nature of the tenant leases.

On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis is preparing the Annual Report and financial statements.

Standards issued but not yet effective

The company has not yet applied the following new and revised IFRSs that have been issued but are not yet effective:

§ IFRS 9 "Financial instruments" will be effective for the year ending March 2019 onwards.

§ IFRS 15 "Revenue from contracts with customers" will be effective for the year ended March 2019 onwards.

§ IFRS 16 "Leases" will be effective for the year ending March 2020 onwards.

§ Amendments to IFRS 2 "Classification and measurement of share-based payment" will be effective for the year ending March 2019 onwards.

§ Amendments to IAS 40 "Transfers of Investment Property" will be effective for the year ended March 2019 onwards.

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application, other than on presentation and disclosure.

3. Significant accounting judgements, estimates and assumptions

The preparation of the financial statements in conformity with the generally accepted accounting practices requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the statement of financial position date and the reported amounts of revenue and expenses during the reporting period.

Business combinations

The Group acquires subsidiaries that own real estate. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property.

Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather the cost to acquire the corporate entity is allocated between identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

Long-term incentive plan

In determining the fair value of the long-term incentive plan and the related charge to the statement of comprehensive income, the group makes assumptions about future events and market conditions.

In particular, judgement must be formed as to the likely number of shares that will vest, and the fair value of each award granted.

The fair value is determined using a valuation model which is dependent on a number of assumptions of the Group's future dividend policy and the future volatility in the price of the group's shares. Such assumptions are based on publicly available information and reflects market expectation. Different assumptions about these factors to those made by the group could materially affect the reported value of long-term investment plan.

Details of the Group's long-term incentive plan can be found in note 11.

Fair value of investment property

The market value of investment property is determined by real estate valuation experts, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Each property has been valued on an individual basis. The valuation experts use recognised valuation techniques and the principles of IFRS 13.

The valuations have been prepared in accordance with RICS Valuation - Professional Standards UK January 2014 (revised April 2015) (the "Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths and location. The significant methods and assumptions used by the valuers in estimating the fair value of investment property are set out in note 13.

4. Principal accounting policies

The principal accounting policies applied in the preparation of these interim financial statements are set out below. These policies, which are also applicable to the financial statements of the Company, have been consistently applied to all the years presented.

Basis of consolidation

The financial statements consolidate the accounts of the Company and all subsidiary undertakings drawn up to the same year end.

Business combinations

The acquisition of subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. At the Group level, acquisition costs are recognised in the Statement of Comprehensive income as incurred.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date.

Subsidiaries are entities which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than 50% of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiary entities are consolidated from the date on which control is transferred to the Group and are deconsolidated from the date on which control ceases. In respect of subsidiaries, inter-company transactions and unrealised gains on intra-group transactions are eliminated on consolidation.

The financial information of the subsidiaries is prepared for the same reporting periods as the parent company, using consistent accounting policies.

Investment in subsidiaries

Investments in subsidiaries are stated at cost less any provision for permanent diminution in value. Realised gains and losses are dealt with through the Statement of Comprehensive Income. A review for impairment is carried out if events or changes in circumstances indicate that the carrying amount may not be recoverable, in which case an impairment provision is recognised and charged to the Statement of Comprehensive Income.

Borrowing costs

Borrowing costs in relation to interest charges on bank borrowings are expensed in the period to which they relate. Fees incurred in relation to the arrangement of bank borrowings are capitalised and expensed on a straight-line basis over the term of the loan.

Segmental reporting

IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reported to the chief operating decision maker to allocate resources to the segments and to assess their performance. Following the strategic review, the directors consider there to be only one reportable segment, being the investment in the United Kingdom of medium size industrial warehouses.

Investment properties

Investment properties comprises completed property that is held to earn rentals or for capital appreciation or both.

Investment properties are initially recognised at cost including transactions costs. Transaction costs include transfer taxes and professional fees for legal services. Subsequent to initial recognition investment properties are carried at fair value, as determined by real estate valuation experts. Gains or losses arising from change in fair value is recognised in the statement of comprehensive income in the period in which they arise.

On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is recognised in the statement of comprehensive income.

Financial instruments

Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, using the effective interest rate method.

A provision is established for irrecoverable amounts when there is objective evidence that amounts due under the original payment terms will not be collected. The amount of any provision is recognised in the statement of comprehensive income.

Cash and cash equivalents are recognised initially at fair value and subsequently measured at amortised cost. Cash and cash equivalents comprise cash in hand, deposits held with banks and other short-term, highly liquid investments with original maturities of three months or less.

Financial liabilities

Financial liabilities, equity instruments and warrant instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method.

Derivative financial instruments

Derivative financial instruments, comprising interest rate caps and swaps for hedging purposes, are initially recognised at cost and are subsequently measured at fair value being the estimated amount that the Group would receive or pay to terminate the agreement at the period end date, taking into account current interest rate expectations and the current credit rating of the Group and its counterparties. The gain or loss at each fair value measurement date is recognised in the statement of comprehensive income. Premiums payable under such arrangements are initially capitalised into the statement of financial position, subsequently they are remeasured and held at their fair values.

Hedge accounting has not been applied in these financial statements.

Revenue recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duties.

Rental income from operating leases on properties owned by the Company is accounted for on a straight-line basis over the term on the lease. Rental income excludes service charges and other costs directly recoverable from tenants.

Lease incentives are amortised on a straight-line basis over the term of the lease.

Leases

Leases where substantially all of the risks and rewards of ownership are transferred to the lessee are classified as finance leases. All others are deemed operating leases. Property interests held under operating leases which meet the definition of investment properties are carried, as such, at fair value with the related lease treated as a finance lease.

Long-term incentive plan

There is a Long-Term Incentive Plan ("LTIP") in place whereby Pacific Industrial LLP, an affiliate of Pacific Capital Partners Limited (the "Manager") has subscribed for B Ordinary shares and C Ordinary shares issued in Pacific Industrial & Logistics Limited. Under the terms of the LTIP, the Company is obliged to acquire the B Ordinary share and C Ordinary shares in Pacific Industrial & Logistics Limited, in return for services provided by Pacific Industrial LLP, subject to certain conditions.

The fair value of the long-term incentive plan is calculated at the grant date using the Monte Carlo Model. The resulting cost is charged to the Statement of Comprehensive Income over the vesting period. The value of the charge is adjusted to reflect expected and actual levels of vesting.

Taxation

Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Current tax is expected tax payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the period end date, and any adjustment to tax payable in respect of previous years.

Dividends

Dividends on equity shares are recognised when they become legally payable. In the case of interim dividends, this is when paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.

5. Revenue

The Group is involved in UK property ownership and letting and is considered to operate in a single geographical and business segment. The total revenue of the Group for the year was derived from its principal activity, being that of property lettings.

For the year to 31 March 2018, no single tenant accounted for more than 10% of the Group's gross rental income.

6. Operating profit

Operating profit is stated after charging:

		31 Mar 18	31 Mar 17
		£'000	£'000
Directors' remuneration (note 7)		128	41
Long-term incentive plan (note 11)		657	34
Auditor's fees
- Fees payable for the audit of the Company's annual accounts		15	11
- Fees payable for the audit of the Company's interim accounts		13	19
- Fees payable for the audit of the Company's subsidiaries		56	12
- Fees payable for other services		4	7
Total Auditor's fee		88	49

In addition to the above, Smith & Williamson received £466k for advice and assistance in relation to a specific property transaction involving the acquisition of a corporate structure which required a significant amount of restructuring to transfer the assets into our continuing business and liquidate companies no longer required. The fees incurred were shared equally with the vendor, by way of a price reduction, therefore, the true economic burden of these costs was £233k. These fees were capitalised as part of the acquisition process.

Smith & Williamson also received £25k in respect of providing reporting accountant services in connection with the Company's public offering in August 2017. These fees have been treated as share issue expenses and offset against share premium.

7. Directors' remuneration

		31 Mar 18	31 Mar 17
		£'000	£'000
Directors' fees		114	97
Employer's National Insurance		14	3
		128	100

A summary of the Directors' emoluments, including the disclosures required by the Companies Act 2006, is set out in the Directors' Report. Two directors are also set to benefit from the Long-term incentive plan (LTIP). For further information refer to related party transactions in note 28.

8. Finance expense

		31 Mar 18	31 Mar 17
		£'000	£'000
Interest on bank borrowings		781	446
Amortisation of loan arrangement fees		148	78
Interest on preference shares		-	76
		929	600

9. Taxation

As a REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it continues to meet certain conditions as per REIT regulations. For the year ending 31 March 2018, the Group did not have any non-qualifying profits and accordingly there is no tax charge in the period. Any non-qualifying profits and gains however will continue to be subject to corporation tax.

10. Earnings per share

The calculation of the basic earnings per share ("EPS") was based on the profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding during the period, in accordance with IAS 33.

		31 Mar 18	31 Mar 17
		£'000	£'000
Profit attributable to Ordinary Shareholders
Total comprehensive income (£'000)		9,865	4,887
Weighted average number of Ordinary Shares in issue		50,473,801	10,441,474
Basic earnings per share (pence)		19.54p	46.80p
Number of diluted shares under option/warrant		88,860	90,510
Weighted average number of Ordinary Shares for the purpose of dilutive earnings per share		50,562,661	10,531,984
Diluted earnings per share (pence)		19.51p	46.40p
Adjustments to remove:
Changes in fair value of investment property (£'000)		(7,166)	(3,881)
Changes in fair value of interest rate derivatives (£'000)		(134)	115
Profit on disposal of investment properties		(57)	-
EPRA earnings (£'000)		2,480	1,121
EPRA diluted earnings per share		4.91p	7.82p
Adjustments to add back:
LTIP crystallisation		616	-
Adjusted earnings (£'000)		3,096	1,121
Adjusted earnings per share		6.12p	7.82p

The ordinary number of shares is based on the time weighted average number of shares throughout the period.

The profit before tax for the year ended 31 March 2018 includes a £0.62m charge in relation to the crystallisation of the Long-Term Incentive Plan ("LTIP"). The Directors believe that a more appropriate measure to assess the underlying operating performance of the business is to add back the LTIP crystallisation charge to EPRA earnings for the year.

At 31 March 2018, the Company had 2,962,000 warrant shares in issue. Each warrant holder has the right to subscribe for new Ordinary shares on the basis of one new Ordinary share for each warrant held at a strike price of 97.0 pence per Ordinary share. The dilutive nature of the share is 3.0 pence per share.

11. Long-Term Incentive Plan ("LTIP")

The Company has a Long-Term Incentive Plan ("LTIP"), accounted for as an equity settled share-based payment. At 31 March 2018, Pacific industrial LLP, an affiliate of Pacific Investments Limited, has subscribed for 1,000 B Ordinary Shares of £0.01 each and 1,000 C Ordinary Shares of £0.01 each issued in Pacific Industrial & Logistics Limited, a subsidiary of the Company, as detailed.

Date options granted		Class of Share	Fair Value at Grant	Charge for the Year
			£'000	£'000
April 2016		A Ordinary	76	556
April 2016		B Ordinary	307	77
August 2017		C Ordinary	131	24
				657

On 13 July 2017, the A Ordinary Shares were crystallised and the resulting value was paid by way of the issue of 520,557 Ordinary Shares to Pacific Industrial LLP, an affiliate of the Manager.

Following the completion of the placement of Ordinary Shares in Urban Logistics REIT plc (the "Company") on 17 August 2017, the Company amended the existing LTIP adopted at the time of IPO.

The new LTIP has an EPRA NAV element and a share price element and will be assessed on: i) 30 September 2020 (the "First Calculation Date") and ii) 30 September 2023 (the "Second Calculation Date"). The EPRA NAV element will be 10 per cent. of the excess of the EPRA NAV per Ordinary share return over an annualised 9 per cent. hurdle, multiplied by the number of Ordinary shares in issue at the relevant calculation date. The share price element will be 10 per cent. of the excess of the share price return over an annualised 9 per cent. hurdle, multiplied by the number of Ordinary shares in issue at the relevant calculation date.

At the First Calculation Date, the share price element and the EPRA NAV element hurdle will be calculated by reference to the Placing Price.

At the Second Calculation Date, if a payment has been made at the First Calculation Date under either element, the hurdle for that element at the Second Calculation Date will be re-set to be based on the prevailing EPRA NAV per Ordinary Share/share price as at the First Calculation Date (as applicable). If no payment is made under an element at the First Calculation Date, then the hurdle for that element will continue to be calculated by reference to the Placing Price.

The LTIP will be paid in shares or, at the Board's discretion, cash.

12. Dividends

			31 Mar 18	31 Mar 17
			£'000	£'000
Ordinary dividends paid
2017 Interim dividend: 3.00p per share			-	310
2017 Second interim dividend: 3.00p per share			644	-
2017 Third interim dividend: 0.23p per share			157	-
2018 Interim dividend: 1.00p per share			681	-
2018 Special interim dividend: 2.10p per share			1,431	-
Total dividends paid			2,913	310

On 6 April 2018, the Company announced the declaration of a third interim dividend in respect of the financial year ended 31 March 2018 of 3.2 pence per Ordinary share. This has not been recognised in the financial statements and was paid on or around 4 May 2018.

13. Investment properties

In accordance with IAS 40 "Investment Property", investment property is carried at its fair value as determined by an external valuer. This valuation has been conducted by CBRE and has been prepared as at 31 March 2018, in accordance with the RICS valuation - Professional Standards UK January 2017 (revised April 2015) (the "Red Book").

The valuations have been prepared in accordance with those recommended by the International Valuation Standards Committee and are consistent with the principles in IFRS 13.

		Investment properties freehold	Investment properties leasehold
				Total
		£'000	£'000	£'000
As at 1 April 2017		41,040	2,380	43,420
Property additions through acquisitions of subsidiaries		50,791	23,694	74,485
Property additions through acquisitions		12,226	10	12,236
Disposals in year		(5,485)	-	(5,485)
Change in fair value during the year		7,528	(334)	7,194
As at 31 March 2018		106,100	25,750	131,850

Total rental income for the year recognised in the Consolidated Statement of Comprehensive Income amounted to £5.6 million.

Further information relating to property valuation techniques have been disclosed in note 21.

14. Investments

Investments are analysed as follows:

		Group	Company
		£'000	£'000
At 1 April 2017		-	11,800
Increase in investments via share purchase		-	-
At 31 March 2018		-	11,800

Details of the Group's subsidiary undertakings as at 31 March 2018, all of which are included in the consolidated financial statements, are given below:

Company Name	Country of Incorporation	Principal Activity	Effective Group Interest
Pacific Industrial & Logistics Limited	England and Wales	Holding Company	99.98%
Pacific Industrial & Logistics Acquisitions (1) Limited	England and Wales	Holding Company	99.98%
Pacific Industrial & Logistics Acquisitions 2 Limited	England and Wales	Property Investment	99.98%
Alanchoice Limited	England and Wales	Property Investment	99.98%
Sheds General Partner 2 Limited	England and Wales	Holding Company	99.98%
Sheds GP Nominee Co. 1 Limited	England and Wales	Holding Company	99.98%
Sheds GP Nominee Co. 2 Limited	England and Wales	Holding Company	99.98%
Sheds Prop 4 S.a.r.l	Luxembourg	Holding Company	99.98%
Sheds YPL (Investments) Limited	Guernsey	Investment Property	99.98%
Sheds YPL (Investments II) Limited	Guernsey	Investment Property	99.98%
Sheds YPL (Investments III) Limited	Guernsey	Investment Property	99.98%

Registered office address for companies incorporated in England and Wales; 124 Sloane Street, London, SW1 X9BW

Registered office address for companies incorporated in Guernsey companies; 11 New Street, St Peter Port, Guernsey GY1 2PF

Registered office address for companies incorporated in Luxembourg companies: 14, Rue Edward Steichen, L-2540 Luxembourg

Pacific Industrial LLP, an affiliate of the Manager, owns 0.02% of the issued share capital in Pacific Industrial & Logistics Limited. These shares have no right to dividends, therefore, no amounts have been recognised within non-controlling interests.

15. Acquisition of subsidiaries

On 28 September 2017, the Group obtained sole control of Sheds Prop 4 Sarl, Sheds General Partner 2 Limited and Sheds Haverhill Limited, property investment companies incorporation in Luxembourg, England and Wales and Jersey respectively, through the acquisition of the entire issued share capital in the companies.

On 22 December, the Group obtained sole control of Sheds YPL (Investments) Limited, Sheds YPL (Investments II) Limited and Sheds YPL (Investments III) Limited, property investment companies in Guernsey, through the acquisition of the entire issued share capital in the companies.

These acquisitions are not judged to be the acquisition of a business and are not treated as business combinations. Rather the cost to acquire the corporate entity is allocated between identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred tax arises.

The table below sets out the initial fair values to the Group in respect of these acquisitions.

	Book Value	Redemption of Liabilities	Fair Value Adjustments	Total
	£'000	£'000	£'000	£'000
Investment properties	72,365	-	2,120	74,485
Other receivables	725	-	(719)	6
Finance liabilities	(60,547)	60,547	-	-
Other liabilities	(460)	-	-	(460)
Total	12,083	60,547	1,401	74,031
Net cash outflow arising on acquisition:
Total consideration				74,031
Cash and cash equivalents acquired				-
Cash consideration net of cash acquired				74,031

16. Trade and other receivables

			Group	Company	Group	Company
			31 Mar 18	31 Mar 18	31 Mar 17	31 Mar 17
			£'000	£'000	£'000	£'000
Trade receivables			194	-	492	-
Other receivables			34	-	6	-
Amounts due from group undertakings			-	62,807	-	11,308
Prepayments and accrued income			357	9	37	6
			585	62,816	535	11,314

Trade receivables are due within 30 days of the date at which the invoice is generated and are not interest bearing in nature. All trade receivables relate to amounts that are less than 30 days overdue as at the year end date. Due to their short maturities, the fair value of trade and other receivables approximates their fair value.

Amounts due from group undertakings have been issued without terms and are interest free, therefore, the full amount has been recognised within trade and other receivables due within one year.

17. Cash and cash equivalents

			Group	Company	Group	Company
			31 Mar 18	31 Mar 18	31 Mar 17	31 Mar 17
			£'000	£'000	£'000	£'000
Cash and cash equivalents			3,280	41	1,680	66
			3,280	41	1,680	66

Group cash and cash equivalents include £0.67 million of restricted cash in the form of rental deposits held on behalf of tenants.

18. Trade and other payables

		Group	Company	Group	Company
		31 Mar 18	31 Mar 18	31 Mar 17	31 Mar 17
		£'000	£'000	£'000	£'000
Falling due in less than one year
Trade and other payables		693	302	284	95
Social security and other taxes		110	10	87	22
Accruals		647	34	235	10
Other creditors		40	-	-	105
Rent deposits		-	-	26	-
		1,490	346	632	232

The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. Due to their short maturities, the fair value of trade and other payables approximates their fair value.

19. Bank borrowings and reconciliation of liabilities to cash flows from financing activities

			£'000
Balance at 1 April 2017			18,196
Bank borrowings drawn in the year			32,582
Bank borrowings repaid in the year			(2,394)
Loan arrangement fees paid			(860)
Non-cash movements:
Amortisation of loan arrangement fees			148
Total bank borrowings per the Consolidated Group Statement of Financial Position			47,672

On 22 December 2017, the Group and Santander UK plc entered into a facility agreement pursuant to which Santander UK plc has agreed to provide the Group with a loan facility of £48.6 million for a term of five years.

Bank borrowings are secured by charges over investment properties held by certain asset holding subsidiaries, providing the lender with a maximum loan to value of 55% on those properties specifically charged to it and the interest cover will be at least 200%. Under the terms of the loan, the Group pays interest of 2.1% above three-month LIBOR pa on the outstanding utilised under the terms of the agreement. At 31 March 2018, £48.6 million was drawn to fund business and property acquisitions.

20. Interest rate derivatives

The Group has used interest rate swaps to mitigate exposure to interest rate risk. The total fair value of these contracts are recorded in the statement of financial position. The interest rate derivatives are marked to market by the relevant counterparty banks on a quarterly basis in accordance with IAS 39. Any movement in the fair value of the interest rate derivatives are taken to finance costs in the statement of comprehensive income.

		Year ended	Year ended
		31 Mar 18	31 Mar 17
		£'000	£'000
Non-current liabilities: derivative interest rate swaps:
At beginning of year		(115)	-
Change in fair value in the year		134	(115)
		19	(115)

21. Financial risk management

Financial instruments - Group

The Group's financial instruments comprise financial assets and liabilities that arise directly from its operations; cash and cash equivalents, trade and other receivables, trade and other payables, interest rate derivative and bank borrowings. The main purpose of these financial instruments is to provide finance for the acquisition and development of the Group's investment property portfolio.

			Book Value	Fair Value	Book Value	Fair Value
			31 Mar 18	31 Mar 18	31 Mar 17	31 Mar 17
			£'000	£'000	£'000	£'000
Financial assets
Trade and other receivables			228	228	498	498
Cash and short-term deposits			3,280	3,280	1,680	1,680
Interest rate derivatives			19	19	-	-
Financial liabilities
Trade and other payables			2,052	2,052	(1,190)	(1,190)
Bank loans			(48,593)	(48,593)	(18,405)	(18,405)
Interest rate derivatives			-	-	(115)	(115)

Credit risk

Credit risk is the risk of financial loss to the Group if a client or counterparty fails to meet it contractual obligations.

The Group's credit risk is primarily attributable to its trade receivables. The Group has implemented policies that require appropriate credit checks on potential tenants before lease agreements are signed. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the board.

Outstanding trade receivables are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial asset.

Interest rate risk

The Group has both interest-bearing assets and interest-bearing liabilities. Interest bearing assets comprise only cash and cash equivalents which earn interest at a variable rate. The Group's debt strategy is to minimise the effect of a significant rise in underlying interest rates by utilising interest rate swaps.

The directors will revisit the appropriateness of this policy should the Group's operations change in size or nature.

Details of the terms of the Group's borrowings are disclosed in note 19.

Market risk

Market risk is the risk that the fair values of financial instruments will fluctuate due to changes in market prices. The financial instruments held by the Group that are affected by market risk are principally the Group's cash balances along with an interest rate cap entered into to mitigate interest rate risk.

Liquidity risk

The Group actively maintains a medium-term debt finance that is designed to ensure it has sufficient available funds for operations and committed investments. The Group monitors its levels of working capital to ensure that it can meet its debt repayments as they fall due.

The following table shows the contractual maturities of the Group's financial liabilities, all of which are measured at amortised cost:

	6 months or less	6-12 months	1-2 years	2-5 years	More than 5 years
						Total
	£'000	£'000	£'000	£'000	£'000	£'000
31 March 2018
Bank borrowings	733	734	1,436	52,858	-	55,761
Trade and other payables	1,490	-	-	672	-	2,162
	2,223	734	1,436	52,530	-	57,923
31 March 2017
Bank borrowings	217	243	481	18,520	-	19,461
Trade and other payables	631	-	-	646	-	1,227
	848	243	481	19,166	-	20,738

Included within the contracted payments is £7.17 million bank interest payable up to the point of maturity across the facility

Financial instruments - Company

The Company's financial instruments comprise amounts due from group undertakings, cash and cash equivalents and trade and other payables.

			Book Value	Fair Value	Book Value	Fair Value
			31 Mar 18	31 Mar 18	31 Mar 17	31 Mar 17
			£'000	£'000	£'000	£'000
Financial assets
Trade and other receivables			62,807	62,807	11,308	11,308
Cash and short-term deposits			41	41	66	66
Financial liabilities
Trade and other payables			345	345	(210)	(210)

Fair value hierarchy

The company uses the following hierarchy for determining the fair value of financial instruments:

Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities.

Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: inputs for the asset or liability that are derived from formal valuation techniques that include inputs for the asset or liability that are not based on observable market data.

Investment property - level 3

The Group's investment property assets are classified as level 3, as defined by IFRS 13, in the fair value hierarchy. Level 3 inputs for the asset or liability that are derived from formal valuation techniques that include inputs for the asset or liability that are not based on observable market data.

The valuation has been prepared on the basis of Fair Value (FV), in accordance with IFRS 13, which is defined as:

"The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."

Fair value, for the purpose of financial reporting under IFRS 13, is effectively the same as Market Value, which is defined as:

"The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after property marketing and where the parties had acted knowledgeably, prudently and without compulsion."

Various assumptions were made in the determination of the Market Value, namely; tenure, letting, taxation, town planning and the condition and repair of the properties and sites.

A 5% increase in Estimated Rental Value ("ERV") would increase the property portfolio valuation by £6.59m and a 5% decrease would decrease the property portfolio valuation by £6.59m. Similarly, a decrease in Net Initial Yield ("NIY") by 0.25% would increase the property portfolio valuation by £5.87m and an increase of 0.25% would decrease the property portfolio valuation by £5.39m.

22. Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and continues to qualify for UK REIT status.

The Group defines capital as being share capital plus reserves. The Board of Directors monitors the level of capital as compared to the Group's debt facility and adjusted the ratio of debt to capital as is determined to be necessary, by issuing new shares, reducing or increasing debt, paying dividends and returning capital to shareholders.

The Directors intend that the Group will maintain a conservative level of aggregate borrowings with a medium-term target of 40% of the Group's gross assets.

23. Share capital

		31 Mar 18	31 Mar 18
		Number	£'000
Issued and fully paid up at £0.01 each		68,114,724	681
At beginning of year		21,452,210	214
Issued and fully paid - 11 May 2017		55,000	1
Issued and fully paid - 17 August 2017		46,607,514	466
At 31 March 2018		68,114,724	681

On 11 May 2017, 55,000 warrant shares were redeemed for an issue price of 97.0 pence per share.

On 17 August 2017, Urban Logistics REIT plc raise £53.0 million through the issue of 46,086,957 Ordinary shares at an issue price of 115.0 pence per share.

On 17 August 2017, Urban Logistics REIT plc issued 520,557 shares as a result of the crystallisation of the LTIP.

24. Share premium

Share premium relates to amounts subscribed for share capital in excess of nominal value less any associated issue costs that have been capitalised.

		31 Mar 18	31 Mar 17
		£'000	£'000
Balance brought forward		20,454	-
Share premium on the issue of ordinary shares		52,593	21,147
Crystallisation of LTIP - Ordinary A shares		611	-
Share issue costs		(1,826)	(693)
		71,832	20,454

25. Share warrant reserve

		31 Mar 18	31 Mar 18
		Number	£'000
At beginning of the year		3,017,000	91
Redeemed - 11 May 2017		(55,000)	(2)
At 31 March 2018		2,962,000	89

At 31 March 2018, there were 2,962,000 (2017: 3,017,000) warrant shares in issue. Each warrant holder has the right to subscribe for new Ordinary shares on the basis of one new Ordinary share for each warrant held at a strike price of 97.0 pence per Ordinary share.

26. Operating leases

The Group as lessor

Future aggregate minimum rentals receivable under non-cancellable operating leases are:

	< 1 year	2 - 5 years	> 5 years	Total
	£'000	£'000	£'000	£'000
31 March 2018	7,599	23,082	7,020	37,701

27. Retained earnings

Retained earnings relates to all other net gains and losses and transactions with owner (e.g. dividends) not recognised elsewhere.

			Group	Company
			31 Mar 18	31 Mar 18
			£'000	£'000
Balance at the beginning of the year			4,577	2,154
Retained profit for the year			9,865	2,393
Second interim dividend for the period ended 31 March 2017			(644)	(644)
Third interim dividend for the period ended 31 March 2017			(157)	(157)
First interim dividend for the year ended 31 March 2018			(681)	(681)
Special interim dividend for the year ended 31 March 2018			(1,431)	(1,431)
Balance at end of the year			11,529	1,634

28. Related party transactions

The terms and conditions of the Investment Management Agreement are described in the Management Engagement Committee Report. During the year, the amount paid for services provided by Pacific Capital Partners Limited (the "Manager") totalled £0.58 million. The total amount outstanding at the year end relating to the Investment Management Agreement was £0.24 million.

Long-term incentive plan

Under the terms of the Company's long-term incentive plan, at 31 March 2018 Pacific Industrial LLP, an affiliate of Pacific Investments Limited has subscribed for shares in Pacific Industrial & Logistics Limited. Further details have been provided in note 11.

Acquisition of investment properties

During the year, the Group incurred fees totalling £636,480 from M1 Agency LLP, a partnership in Richard Moffitt is a designated member, in relation to the acquisition of two investment property portfolios, sale of one investment property and one re-letting. The fees were charged in line with standard commercial property terms.

For the transactions listed above, Richard Moffitt's benefit is derived from the profit allocation he receives from M1 Agency LLP as a member and not from the transaction, which has been approved by the board.

The Manager and the Board, excluding Richard Moffitt, review and approve each fee payable to M1 Agency LLP.

Transactions with subsidiaries

Under IFRS, we are required to disclose all inter-company transactions that took place for all subsidiary undertakings of the Company. Transactions between the Company and its subsidiaries are in the normal course of business. Such transactions are eliminated on consolidation.

During the year fees of £1,032,313 were charged to Pacific Industrial & Logistics Acquisitions (1) Limited, a subsidiary undertaking incorporated in England and Wales, from Urban Logistics REIT plc. At 31 March 2018, £nil was due from Pacific Industrial & Logistics Acquisitions (1) Limited.

During the year, Urban Logistics REIT plc carried out transactions with Pacific Industrial & Logistics Limited, a subsidiary undertaking incorporated in England and Wales. The total amount of these transactions was a net loan increase of £51,499,288. At 31 March 2018, Urban Logistics REIT plc was due £62,806,879 from Pacific Industrial & Logistics Limited.

During the year, Urban Logistics REIT plc received a dividend of £3,000,000 from Pacific Industrial & Logistics Limited.

29. Net asset value per share (NAV)

Basic NAV per share is calculated by dividing net assets in the Consolidated Statement of Financial Position attributable to Ordinary shareholders by the number of Ordinary shares outstanding at the end of the period.

Net Asset Values have been calculated as follows:

		31 Mar 18	31 Mar 17
Net assets per Condensed Statement of Financial Position (£'000)		84,206	25,371
Add:
Cash received from issued share warrants (£'000)		2,873	2,926
Diluted NAV (£'000)		87,079	28,297
Adjustment for:
Fair value of interest rate derivatives (£'000)		(19)	115
EPRA NAV (£'000) - basic		84,187	25,486
EPRA NAV (£'000) - diluted		87,060	28,412
Ordinary shares:
Number of Ordinary shares in issue at period end		68,114,724	21,452,210
Number of Ordinary shares for the purposes of dilutive Net Asset Value per share at period end		71,076,724	24,469,210
Basic NAV		123.62p	118.26p
EPRA NAV - basic		123.60p	118.80p
Diluted NAV		122.51p	115.64p
EPRA NAV - diluted		122.49p	116.11p

30. Post Balance Sheet Events

On 5 April 2018, the Group completed on the sale of 16 Hudson Road for a consideration of £3.2 million. This represented an IRR on equity invested of 55.8%.

On 6 April 2018, the Company announced the placing of 17,071,130 Ordinary shares of £0.01 each at an issue price of 119.50 pence per share.

On 11 April 2018, the Group exchanged contracts on a portfolio of six urban logistics assets with an aggregate acquisition price of £36.0 million from LondonMetric.

On 8 May 2018, the Company announced the issue of 521,964 Ordinary shares of £0.01 each pursuant to the exercise of 521,964 warrants.

Supplementary information

i. EPRA performance measures summary

			31 Mar 18	31 Mar 17
EPRA earnings per share (diluted)			4.91p	7.82p
EPRA net asset value per share (diluted)			122.49p	116.11p
EPRA triple net asset value per share (diluted)			122.51p	115.65p
EPRA net initial yield			5.9%	6.5%
EPRA 'topped up' net initial yield			6.1%	7.1%
EPRA vacancy rate			6.7%	3.8%
EPRA cost ratio (including vacant property costs)			29.0%	22.3%
EPRA cost ratio (excluding vacant property costs)			20.1%	22.3%

ii. Income statement

			31 Mar 18	31 Mar 17
			£'000	£'000
Gross rental income			5,564	2,277
Property operating costs			(561)	(25)
Net rental income			5,003	2,252
Administrative expenses			(1,074)	(499)
Other income			133	-
Long-term incentive plan charge			(657)	(34)
Operating profit before interest and tax			3,405	1,719
Net finance costs			(925)	(598)
Profit before tax			2,480	1,121
Tax on EPRA earnings			-	-
EPRA earnings			2,480	1,121

iii. Balance sheet

			31 Mar 18	31 Mar 17
			£'000	£'000
Investment property			131,850	43,420
Other net assets			9	262
Net borrowings			(47,672)	(18,196)
EPRA net assets			84,187	25,486

iv. EPRA net initial yield and 'topped up' net initial yield

			31 Mar 18	31 Mar 17
			£'000	£'000
Investment property - wholly owned			131,850	43,420
Completed property portfolio			131,850	43,420
Add:
Allowance for estimated purchasers' costs			8,646	2,808
EPRA property portfolio valuation (A)			140,496	46,228
Annualised passing rent			8,960	3,068
Less irrecoverable property costs			(714)	(43)
Annualised net rents (B)			8,246	3,025
Contractual rental increased for rent free year			380	257
'Topped up' annualised net rent ('C)			8,626	3,282
EPRA net initial yield (B/A)			5.9%	6.5%
EPRA 'topped up' net initial yield (C/A)			6.1%	7.1%

v. EPRA vacancy rate

			31 Mar 18	31 Mar 17
			£'000	£'000
Annualised potential rental value of vacant properties			649	132
Annualised potential rental value for the completed property portfolio			9,665	3,475
EPRA vacancy rate			6.7%	3.8%

vi. EPRA cost ratio

			31 Mar 18	31 Mar 17
			£'000	£'000
Costs
Property operating expenses			561	25
Administrative expenses			1,074	499
Less:
Ground rents			(34)	(22)
Total costs including vacant property costs (A)			1,601	502
Group vacant property costs			(492)	-
Total costs excluding vacant property costs (B)			1,109	502
Gross rental income			5,564	2,277
Less:
Ground rents			(34)	(22)
Total gross rental income (C')			5,530	2,255
Total EPRA cost ration (including vacant property costs) (A/C)			29.0%	22.3%
Total EPRA cost ration (excluding vacant property costs) (B/C)			20.1%	22.3%

 

END

 

 

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