Real estate
for reliable
income
Annual Report and
Accounts 2024
Strategic report 01
An overview, purpose and strategy
Introduction 01
Performance highlights 02
Adapt and evolve 03
Chair’s statement 10
At a glance 12
Chief Executive’s review 15
The world around us 24
Creating value
Our markets 26
Key market trends 28
Business model 30
Key performance indicators 32
A review of our performance
Property review 34
Financial review 47
Our sustainability performance
Responsible Business and ESG review 55
TCFD Recommendation and Alignment 77
A review of our risk
Risk management and internal controls 86
A review of our principal risks 92
Going concern and viability 99
Governance 101
Chair’s introduction 102
Governance overview 104
Board leadership and Company purpose
Board of Directors 106
Management team 108
Our purpose, strategy, values and culture 110
How we monitor culture 111
The Board in action 113
Section 172 Statement 116
Stakeholders 117
Board meetings and attendance 118
Division of responsibilities
Leadership framework 119
Leadership roles and responsibilities 120
Committee Reports
Nomination Committee report 122
Audit Committee report 130
Remuneration Committee report 137
Report of the Directors 156
Directors’ Responsibilities Statement 159
Financial statements 160
In this report
p03
Adapt & evolve
p15
Chief Executive’s review
p34
A review of our performance
p104
Governance overview
04
Reliable income, lowest cost
08
Fit for the future
06
Shaped by market trends
LondonMetric Property Plc Annual Report and Accounts 2024
is a real estate company that owns
£6.0 billion of structurally supported
assets. It is the UK’s leading Triple Net
Lease REIT with contracted rent of
£340 million per annum.
LondonMetric
Our aim is to build on our position as the UKs leading
Triple Net Lease REIT. By investing in mission critical and
key real estate assets that benefit from structural drivers,
we will deliver reliable, repetitive and growing income
over the long term.
Our approach focuses on our four strategic pillars of
owning the right real estate, managing and enhancing
our assets, collaborating with our stakeholders and
generating strong income-led returns.
Financial
statements
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Financial
statements
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Strategic
report
LondonMetric Property Plc Annual Report and Accounts 202401
Performance Highlights 2024
118.7
-506.3
734.5
257.3
IFRS reported profit (for equity shareholders)
£
118.7m
£625m
2
024
2
023
2
022
2
021
10.2
9.5
9.25
8.65
Dividend per share
10.2
p
7.4%
2024
2023
2022
2021
3,969.5
1,995.2
2,569.8
1,731.7
IFRS net assets
£3,969.5
m
99%
2024
2023
2022
2021
4.7
-12.0
28.2
13.4
Total property return
4.7
%
2024
2023
2022
2021
1670bps
3.9
3.4
2.6
2.5
Cost of debt
3.9
%
2024
2023
2022
2021
50bps
5.4
6.0
6.5
4.2
Average debt maturity
5.4
yrs
2024
2023
2022
2021
0.6 years
19.4
11.9
11.9
11.4
WAULT
19.4
yrs
7.5 yrs
2024
2023
2022
2021
Alternative performance measures
The Group financial statements are prepared in accordance with
IFRS. Management reviews the performance of the business
principally on a proportionately consolidated basis which
includes the Group’s share of joint ventures and excludes any
non-controlling interest.
Alternative performance measures are financial measures not
specified under IFRS but are used by management as they
highlight the underlying performance of the Group’s property
rental business and are based on the EPRA Best Practice
Recommendations ('BPR') reporting framework.
Therefore, unless specifically stated, the performance metrics
and financial results reflected in the Strategic report and on this
page, reflect the proportionately consolidated results of the
Group and the EPRA BPR reporting framework. Further details
can be found on page 48 of the Financial review and definitions
are set out in the Glossary from page 212.
191.7
198.9
261.1
190.3
EPRA net tangible assets per share
191.7
p
2024
2023
2022
2021
3.6%
10.9
10.3
10.0
9.5
EPRA EPS
10.9
p
5.4%
2024
2023
2022
2021
33.2
32.8
28.8
32.3
Loan to value ratio
33.2
%
2024
2023
2022
2021
40bps
11.6
11.7
12.5
13.6
EPRA cost ratio
11.6
%
2024
2023
2022
2021
10bps
LondonMetric Property Plc Annual Report and Accounts 202402
The key to success.
In a dynamic world that is constantly
changing, businesses that succeed are
not necessarily the biggest, but the
ones who continually adapt.
In real estate, this means that the
shape and structure of the portfolio is
continually focused on owning assets
that have enduring occupier appeal.
£830m merger of
London & Stamford and
Metric Property creating
LondonMetric Property
Portfolio repositioned away
from offices and retail parks
increase logistics exposure
Further repositioning of
portfolio into logistics with
strong emphasis on urban
logistics, including the
£413m merger with
A&J Mucklow in 2019
Disciplined approach to
creating the UK’s leading
NNN lease REIT aligned
to structurally supported
sectors through LXi Merger
and CT Property Trust
acquisition
evolve
Adapt &
+46%
Dividend per share growth
since formation in 2013
+157%
Total Accounting Return
since 2013
+223%
Total Shareholder Return
since 2013
2023-
2024
2014-
2017
2013
2018-
2022
Financial
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Strategic
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LondonMetric Property Plc Annual Report and Accounts 202403
The Triple Net REIT advantage
A Real Estate Investment Trust that primarily
invests in properties wholly leased to tenants
where the occupier is responsible for paying
the property’s operating expenses including
property taxes, insurance and maintenance
costs in addition to rent.
A Triple Net REIT invests in long leases from
creditworthy tenants where the building
expenses are met by the occupier under
the lease contract. This structure delivers
stable returns with growing income through
a combination of inflation-linked, fixed uplift
or open market rent reviews to drive income
and give the greatest potential for long term
capital appreciation.
Adapt and evolve
lowest
cost.
Reliable
income,
LondonMetric Property Plc Annual Report and Accounts 202404
Reliable and
growing income
High cost efficiency
with low operating
expenses
Long term
leases with guaranteed
rental growth
Creditworthy
and structurally
supported occupiers
lowest
cost.
Financial
statements
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Financial
statements
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Strategic
report
LondonMetric Property Plc Annual Report and Accounts 202405
Continued focus on macro trends
Our focus on the macro trends and how
they define the winners and losers in real
estate has served us well over the years.
This continues to shape our business with
the LXi merger doubling the value of our
portfolio in mission critical assets that are
aligned to long term structural drivers in
the marketplace. The recent LXi merger
gives us ownership of significant assets
across sectors, but logistics remains a
core focus.
Adapt and evolve
market
trends.
Shaped by
LondonMetric Property Plc Annual Report and Accounts 202406
market
trends.
Urban
-24%
loss of industrial land in London
to alternative uses over 20 years
Mega & regional
+22%
growth in online sales
penetration from 2022 to 2027
Logistics
Long income
Entertainment & leisure
+10%
growth in spend on UK hospitality
and leisure spend in 2023
Convenience
+24%
growth in UK convenience channel
spend over five years to 2028
Healthcare & education
+19%
growth in over 60 year olds
in the UK by 2030
Financial
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statements
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Strategic
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LondonMetric Property Plc Annual Report and Accounts 202407
Adapt and evolve
Playing a leading role in decarbonising
Most stakeholders – from shareholders, to
employees, to occupiers, to communities, and
governments – now expect companies to act
with integrity and long term vision.
Opinion and reputation can impact capital
allocation decisions, and potentially even the
long term value of a company. We look to
bring together our approach, market trends
and desirable assets to ensure reliable income
and fit for the future assets.
Our responsible approach
Where our actions take into
consideration the long-term interests
of all our stakeholders and ensure
that we maintain a high standard of
business conduct.
Read more Responsible Business
and ESG review page 55
Fit for
the
future.
LondonMetric Property Plc Annual Report and Accounts 202408
Responsible focus
#1
Own sustainable buildings
#2
Collaborate with occupiers
#3
Manage climate risks
Financial
statements
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Financial
statements
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Strategic
report
LondonMetric Property Plc Annual Report and Accounts 202409
Alistair Elliott
Chairman
We were highly appreciative of the
overwhelming shareholder support that we
received for the LXi deal and the trust that
shareholders have put in the LondonMetric
team to deliver on the transaction.
The structurally supported portfolio we acquired
is very strong and the team has already set
to work in implementing asset management
plans across the LXi assets as well as readying
certain non core assets for sale to ensure that
the Company remains aligned to the winning
sectors and the best assets.
Over the last five years, excluding the two
mergers this year, LondonMetric has bought
and sold £2.5 billion of assets, proving its
ability to monetise ex-growth and non core
assets and recycle capital into higher growth
opportunities. The scale of the Company
today should provide it with an even better
platform to access attractive deals – finding and
transacting on attractive opportunities is in the
management’s DNA.
Our financial results for the year to 31 March
2024 again reflect the strength of the portfolio,
the efficiency with which it is run and our focus
on income growth and cost control.
After nearly a year in my position as Chair of
LondonMetric, it is with great privilege that I
write to you for the first time. I would like to
take this opportunity to thank my predecessor,
Patrick Vaughan, for his long and successful
leadership of the Company.
The year has been exceptionally busy for
LondonMetric following the merger with LXi
REIT plc and the acquisition of CT Property Trust
Limited. These are excellent transactions for the
Company which have materially transformed
the portfolio.
The ability of the management team to identify,
execute and integrate these opportunities has
been highly impressive and is a testament to
the strength and depth of the wider team that
has been built up.
The Company has become the UK’s leading
Triple Net Lease REIT and the third largest
UK REIT by market capitalisation with a
portfolio that has doubled in size over the year
to £6.0 billion. In addition, the Company’s
credentials have been enhanced across key
metrics which has resulted in an even stronger
earnings and dividend growth outlook, greater
certainty of income and income growth and a
business model that is the most cost efficient in
the sector.
Net rental income was up 20.6% whilst our
EPRA earnings per share increased by 5.4% to
10.9 pence, which is a material increase from
3.9 pence at the time of our formation in 2013
and represents a 10% compounded annual
growth rate.
This has given us confidence to increase our
dividend per share for the ninth year in a row, up
7.4% on 2023 to 10.2p which is 107% covered
by EPRA earnings per share. Furthermore,
reflecting the material earnings growth that
we expect from the LXi transaction, we have
indicated that our first quarterly dividend for the
next financial year will be 19% higher than the
prior year comparative, in line with our target
of paying a 12 pence per share dividend for the
full year.
An overview, purpose and strategy
The Company has
become the UK’s leading
Triple Net Lease REIT
and the third largest
UK REIT by market
capitalisation.”
Chair’s
statement
LondonMetric Property Plc Annual Report and Accounts 202410
Over the year, our portfolio’s valuations were
largely flat, but our strong income performance
enabled us to deliver a total property
return of 4.7% which represents a 570 bps
outperformance of MSCI All Property.
Whilst EPRA NTA per share fell by 3.6% over
the year, this was largely down to one off
transaction costs associated with the merger
activity and we still reported a positive total
accounting return of 1.3% and, over a longer
term, the Company has delivered a TAR
of 35.3% over five years and 126.5% over
ten years.
From a financing perspective, we have
continued to strengthen our debt facilities
by improving flexibility, increasing duration
and looking for cost efficiencies. We signed a
new £700 million unsecured bank facility to
refinance £625 million of LXi secured bank
facilities and extended the term on £675 million
of pre-existing LondonMetric debt. In addition
to strong support from existing LondonMetric
lenders, we are benefiting from new lending
relationships gained as part of the process.
As a result, our debt metrics are in great shape
and we have been able to report at the year end
a debt maturity of 5.4 years, an average cost of
debt of 3.9% and significant undrawn facilities.
We also continue to maintain a conservative
LTV of 33.2% post the merger.
I have enjoyed working with the team over the
last year. It is clear to me that we have a well
aligned and high-grade management team
with strong occupier and property relationships.
I would like to thank all of our employees and
the Board for their hard work and dedication
over the past year.
We have strengthened the Board over the year
with the appointment of Nick Leslau and Sandy
Gumm, who I would like to welcome on your
behalf. Their insight to the portfolio and broader
industry is undoubted, as is their alignment
with shareholders having rolled all of their LXi
shares into LondonMetric. Their shareholding
is significant and increases management’s
overall shareholding to 3.1% of the Company.
In addition, Suzy Neubert has been appointed
as Senior Independent Director.
I would also like to thank both James Dean and
Rosalyn Wilton who retired as Non Executive
Directors in the year. Their contribution to the
Company was invaluable and we are delighted
that James will be continuing in his role as a
consultant to the Company.
I am genuinely excited by the prospects for the
Company which I believe is very well placed
to deliver reliable and growing dividends over
the long term from its high class portfolio, long
leases and guaranteed rental growth.
Alistair Elliott
Chair
4 June 2024
I am genuinely excited
by the prospects for
the Company, which
I believe is very well
placed to deliver reliable
and growing dividends.”
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202411
Financial
statements
Governance
Strategic
report
An overview, purpose and strategy
Key Facts
LondonMetric is the
UK’s leading Triple Net
REIT with a portfolio
aligned to structurally
supported sectors of
logistics, convenience,
entertainment &
leisure and healthcare
& education¹.
1 Ramsay Health Care 11.0%
2 Merlin Entertainments 9.0%
3 Travelodge 6.4%
4 Primark 1.8%
5 Tesco 1.7%
6 Great Bear 1.6%
7 Amazon 1.4%
8 SMG Europe 1.4%
9 Q-Park 1.4%
10 Co-op 1.3%
37% of contracted rent
Top 10 Occupiers
(%)
1
2
3
4
6
8
9
10
7
5
A portfolio aligned to
structurally supported real estate
Asset value
£6.0bn
Assets
572
Sq ft
26m
WAULT
19.4 yrs
Occupancy
99%
Employees
47
At a glance
Our portfolio
Property value
£6.0bn
£6.0bn
£3.0bn
£3.6bn
£2.6bn
2024
2023
2022
2021
WAULT
19.4 yrs
19.4 yrs
11.9 yrs
11.9 yrs
11.4 yrs
2024
2023
2022
2021
Net contracted rent
£340m
£340m
£145m
£143m
£124m
2024
2023
2022
2021
1 The acquisition of LXi REIT plc resulted in a change to the Group’s portfolio mix and
consequently a change in the way we report our operating segments, with the previous
year’s mix also reclassified. Retail parks, offices and residential properties have been
grouped together and reflected as ‘other’. Included within ‘logistics’ are the sub-categories
of urban, regional and mega distribution and within ‘long income’ are the sub-categories
of convenience, entertainment and leisure and healthcare and education
LondonMetric Property Plc Annual Report and Accounts 202412
43%
Logistics
— Disruptive technologies driving modern
shopping habits
— Continued occupier and investment demand
— Remains our leading sector with ambition to
grow exposure
17%
Convenience
— Convenience, essentials and value
continue to win-out
— Operationally light assets with
dependable income characteristics
21%
Entertainment
& leisure
— Economic & generational shifts driving
memories over materiality
— High barriers to entry to replicate
exclusive real estate
16%
Healthcare
& education
— Demographics & ageing population
drives health consciousness
— Hospitals providing essential healthcare
3%
Other
A structurally
supported portfolio
Logistics
Long Income
Financial
statements
Governance
Financial
statements
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Strategic
report
LondonMetric Property Plc Annual Report and Accounts 202413
It creates the UK’s leading Triple Net Lease
REIT with full occupancy, exceptional income
longevity and certainty of income growth.
Material economies of scale
Significant cost synergies with a sector leading EPRA cost ratio
Improved terms in both the debt and equity markets
Better access to new opportunities of scale
Ultimately driving accelerated earnings and dividend progression
Our merger
with LXi REIT is a
transformational deal
LondonMetric Property Plc Annual Report and Accounts 202414
Andrew Jones
Chief Executive
An overview, purpose and strategy
Chief Executive’s review
2024/25 priority
— Minimise gross to net income leakage
— Bringing all our actions together to deliver
dependable NNN cash flows underpinning
highly attractive total returns
— Assess new portfolio shape for long
term fit
— Grow logistics exposure to 50%
of portfolio
Own
Invest in real estate
aligned to structural trends
— Manage the granularity and
diversification of income
— Make disposals of assets not fit
for future
Manage
Disciplined, low cost and
responsible management
of our assets
Generate
A focus on reliable, repetitive
and growing income
— Integrate and create one team
with common values
— Adopting a partner of choice mindset,
collaborating with all stakeholders
Collaborate
Leverage our expertise
to benefit from strong
relationships
Our strategy and priorities
Learn more on pages 30 to 31
Our approach to
business remains
unchanged following
the LXi transaction with
a management focus
on delivering strong
income-led total returns
to shareholders through
four strategic pillars.”
Financial
statements
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LondonMetric Property Plc Annual Report and Accounts 202415
Financial
statements
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Strategic
report
An overview, purpose and strategy
Chief Executive’s review
continued
Overview
Financial markets continue to be defined by
elevated interest rates and higher borrowing
costs. Whilst long term interest rates peaked
last summer, higher levels of inflation persist
and expectations of numerous rate cuts this
year have proven to be overly optimistic, with
markets now not pricing in a rate cut until later
this year.
The uncertainty of interest rates continues
to loom large over the sector. This is severely
impacting liquidity across the real estate market,
especially for larger assets and those sectors
impacted by changing consumer behaviour. It is
particularly impacting the office sector and parts
of retail where there are few buyers and price
discovery is almost impossible.
Conversely, we are seeing price stability in
structurally supported sectors where income
security and rental growth is more assured.
Liquidity levels are also better for smaller assets,
where debt is not required.
We expect this polarisation between the
winning and losing sectors to continue as
refinancing and redemption pressures force
more legacy assets onto the market.
Our focus on the macro trends has served us
well and continues to influence our capital
allocation. We are a high conviction triple
net income (‘NNN’) investor in structurally
supported sectors benefiting from consumer
tailwinds of online shopping, convenience
retail, social experiences, healthcare and quicker
gratification. We will consciously avoid the
troubled legacy sectors where income security
and growth is less assured.
+19%
Increase in Q1 dividend for FY 2025 as a result
of a material increase in our expected earnings
We have been very active over the year both in
the direct market and with M&A, and have not
been waiting for the discounts to narrow or ‘all
clear’ signs to appear.
The LXi deal in the year has been
transformational, giving us material scale and
affording us significant cost synergies, debt
optionality and much increased liquidity in our
shares. Whilst smaller, the CTPT transaction
added to our strongest conviction call of urban
logistics where we are benefiting from long
term structural shifts and capturing elevated
levels of rental growth.
We firmly believe that the macro will always
outdo the micro and so will continue to lean
into winning sectors and the best properties
that are mission critical to an occupier’s business
and where investment values are well below
replacement costs.
Our total return model focuses on NNN
income compounding with strong shareholder
alignment ensuring that we remain disciplined,
rational and active, looking to continually
improve our portfolio, financing and net
operating income. This approach is allowing us
to materially progress our earnings and covered
dividend, which is why we expect to increase
our Q1 dividend for FY 2025 by 19%.
The acquisition of LXi has cemented our
position as the UK’s leading NNN income
compounder and accelerated our ambition
of becoming a dividend aristocrat.”
LondonMetric Property Plc Annual Report and Accounts 202416
£340m
Net contracted rent roll following the
LXi merger which is up from £145 million
a year ago
Generate income
As the UK’s leading NNN REIT we
aim to deliver reliable, repetitive and
growing income
We continue to believe that income and income
growth are the defining characteristics of long
term investment returns. We appreciate the
true benefit of income compounding over the
longer term, focusing on the quantity, quality
and timing of when cash will be returned.
Compounding is not intuitive and, as a result, is
often misunderstood and under appreciated.
Even with elevated interest rates, the right real
estate can offer excellent inflation protection
and total returns materially higher than many
alternatives, with the added security of the
intrinsic value of the property. After all, ten year
indexed gilts are trading at 0.5%.
NNN REITs that invest in quality assets, with
high occupier contentment with the certainty of
income growth, are very well placed to deliver
long term compounded returns. This model
has been highly successful in the US and is a
scalable, low cost proposition that does not
require great activity, people or risky decision
making. We believe that this is the right way
to invest – low cost, high quality, reliably and
efficiently delivered.
The LXi deal delivered on our ambition to be the
UK’s leading NNN REIT and further enhances
our reliable, repetitive and growing income
streams. Our rent roll over the year increased
from £145 million per annum to £340 million
per annum and our income metrics were
enhanced with our WAULT increasing to
19 years, occupancy higher at 99.4% and,
reflecting minimal property costs, our gross to
net income ratio rose to 99.0%. Our high levels
of contractual rental uplifts are also providing
high certainty of income growth.
Our NNN income compounding model means
that we are highly focused on net operating
income and our sector leading low EPRA cost
ratio is expected to fall further. Our target for
FY 2025 is 8%. Following full integration of
LXi, we expect to have achieved £15 million of
cost savings on top of the £4 million achieved
from CTPT.
Own desirable real estate
Our strategy is to own quality assets
in winning sectors underpinned by
strong income
Our job is to allocate capital into real estate
sectors where it will be treated best. We are
constantly looking for new trends and changes
in direction that might create new opportunities.
There is no substitute for being aware and
always prepared to pivot.
We continue to prioritise asset selection and
occupier contentment in structurally supported
sectors that are benefiting from consumer
tailwinds. We have deliberately avoided offices
and have largely exited operational retail assets
where capex requirements are growing faster
than net rents. In our view, a sector that requires
capex to grow is much less attractive than a
sector that grows without the need for capex.
When you choose real estate where the wind
is at your back, you are more likely to be a price
setter than a price taker. Occupiers will need you
more, you can attract quality occupiers, charge
higher rents and be more confident of rental
growth. The best thing we can do is provide
buildings that our occupiers love; they will stay
longer, invest more in the property and will be
prepared to pay more rent.
Our disciplined approach ensures that we
pursue quality returns over long periods of time.
Our model is about long term compounding
equity value, rather than simply growing
assets under management. This tempers
our acquisition activity, limits speculative
development exposure and frames our disposal
decisions. Buying lowly rated assets cheaply is
not our strategy, as these assets will at some
point become a problem and add unnecessary
risk, stress and take up valuable thinking time.
Whilst we are happy to get rich slowly, we are
equally prepared to speed up the process,
where management initiatives can create
additional value or attractive opportunities
present themselves. With many REITs trading
at material discounts, we have been actively
looking at and executing on M&A using our
more highly rated shares.
Through the LXi merger, we acquired £2.9 billion
of assets with an annual rent roll of £178 million.
These high quality assets are aligned to NNN
themes of convenience, entertainment & leisure
and healthcare & education with very long
leases and with 98% of the income benefiting
from fixed or inflation linked rent reviews.
Through the CTPT merger, we added a
£0.3 billion portfolio of complementary and
high quality assets with material reversion
potential from a high urban logistics weighting
and strong South East bias. The deal also
brought an attractive debt structure with a low
LTV, cash and an attractive cost of debt. We are
excited by the wider prospects of the CTPT
portfolio and are already achieving strong rental
uplifts from asset management.
As with most portfolios, you can never love all
of the assets and we have quickly set to work
on selling some of the non core assets from
both portfolios.
Over the year, we sold £185 million at just 1%
below book values and these comprised mainly
non core offices, retail and multi-let industrial.
Since the year end, we have sold £75 million
with a further £107 million under offer.
Our disposals are often characterised by a
long period of attractive returns and a growing
expectation that these may flatten or even
reverse as a building grows older and leases
get shorter.
Increased scale gives us a larger platform to
leverage. With swap rates remaining high,
significant amounts of real estate debt requiring
refinancing, highly restricted availability of
debt and material REIT discounts, we expect
further attractive investment opportunities to
present themselves.
We remain active, interested and open minded.
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202417
Financial
statements
Governance
Strategic
report
LXi REIT merger
• £2.9 billion of assets acquired with an
annual rent roll of £178 million
• Aligned to NNN themes of convenience,
entertainment & leisure and healthcare
• High quality assets that are mission
critical to occupiers and acquired at a NIY
of 5.7%
• WAULT of 26 years with 98% of income
benefiting from fixed or inflation linked
rent reviews
• £15 million of annualised cost savings
targeted with ten employees joining and
buyout of the management contract
• Materially earnings enhancing in the first
full year post the merger
• 0.9 billion LondonMetric shares issued
as consideration in March 2024, strong
shareholder overlap
1 Logistics 8%
2 Convenience 15%
3 Healthcare & education 32%
4 Entertainment & leisure 42%
5 Other 3%
+£2.9bn
Assets acquired
26 years
WAULT
CT Property Trust merger
• £0.3 billion of assets acquired with an
annual rent roll of £17.7 million
• 57% aligned to urban logistics with a
further 23% in convenience
• High quality assets with 79% located in
London & South East and a WAULT of
seven years
• Acquired at a NIY of 6.0% with material
reversionary potential and high
proportion of income linked to open
market reviews
• £4 million of cost savings and no
additional staff joined LondonMetric
• 106 million LondonMetric shares issued
as consideration in August 2023
• Low LTV at 20.5%, attractive debt cost
• £33 million of disposals since acquisition
1 Logistics 57%
2 Convenience 23%
3 Other (mainly offices) 20%
An overview, purpose and strategy
Chief Executive’s review
continued
+£0.3bn
Assets acquired
23%
Reversion on urban logistics assets
Logistics
Long income
5
4
3
2
1
Logistics
Long income
3
2
1
LondonMetric Property Plc Annual Report and Accounts 202418
Our ambition in logistics, particularly
urban, remains undiminished
We believe that the longer term demand/
supply dynamics for logistics remains attractive,
which is why urban logistics remains our
strongest conviction call for NNN investing.
The structural tailwinds for the logistic sector
remain strong, namely continued online sales
growth, reshoring activities, rewiring of supply
chains and warehouse automation.
After several years of materially stronger than
average occupational demand for logistics in
the UK, take up for 2023 fell back to be more
in line with pre-Covid levels. Most apparent has
been the reduced demand for big box logistics
whilst demand for smaller units of 100,000-
300,000 sq ft has been more resilient.
On the supply side, a material increase in
speculative development completions over the
past two years pushed availability up to a ten
year high. Accordingly, the UK logistics vacancy
rate has increased from 2.7% at the start of
2023 to 5.3% in March 2024. However, the
vacancy rate is expected to fall as speculative
development starts to reduce materially in
response to higher financing costs and rising
build costs.
After many years of strong market rental
growth, further growth in logistics rents is
expected with rents predicted to grow by
between 2% to 3% per annum over the next
four years. We continue to believe that urban
logistics remains the most attractive sub sector
of logistics and has the greatest demand/supply
tension and rental growth potential.
Occupier demand is highly granular and is
benefiting from an ongoing need for occupiers
to evolve operationally by locating closer to the
end customer, minimise delivery times, increase
accuracy of delivery and satisfy consumer
demands for instant gratification.
Over the year, our logistics assets saw ERV
growth of 6% with rent reviews settled at
21% above previous passing on a five yearly
equivalent basis. Urban rent reviews were
the strongest, achieving 40% uplifts on open
market reviews, helped by our urban portfolio’s
high weighting towards London and the South
East. Our logistics portfolio remains highly
reversionary with average ERVs 26% above
average passing rents and this is expected to
provide superior returns as we capture the
embedded reversion.
Investment activity over the year added
£394 million of logistics through the CTPT and
LXi mergers as well as £36 million of direct
investments from opportunistic acquisitions.
Logistics disposals in the year totalled
£109 million and were characterised by shorter
let assets with a WAULT of four years.
As at the year end, our logistics portfolio was
valued at £2.6 billion, accounting for 43% of
the portfolio which has risen post year end with
investment activity. We expect this weighting to
exceed 50% over the next year as we execute
on further acquisitions and capital recycling.
Urban logistics remains
our strongest conviction
call for NNN investing”
+40%
Rental uplift on open market urban logistics
rent reviews in the year
£430m
logistics assets acquired in the year
Own desirable real estate
Our £13m
logistics
investment
in Crewe in
the year. For
further detail
see page 41
Logistics
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202419
Financial
statements
Governance
Strategic
report
An overview, purpose and strategy
Chief Executive’s review
continued
Own desirable real estate
Long income
Our long income portfolio is 100% let, offers
an attractive topped up NIY of 5.8%, a WAULT
of 24 years and contractual rental uplifts on
90% of income. This provides incredibly strong
income with inflation protection and attractive
income compounding qualities forming the
bedrock of our attractive dividend.
The LXi merger added £2.6 billion of long
income assets, increasing the value of our long
income portfolio to £3.2 billion at the year
end, representing 54% of our total portfolio.
Our long income exposure has previously
focused on convenience retail, and the LXi
merger has added to this exposure as well as
provided material access to new sectors of
entertainment, budget hotels and healthcare.
As detailed further below, these sectors are
benefiting from changes in consumer behaviour
as the population continues to pivot its
expenditure towards convenience, experience
and better healthcare. We are attracted by
the strong demand/ supply dynamics and the
strong replacement metrics which ensure that
these assets are mission critical operating assets
for our occupiers.
In the year, we sold £43 million of long income
assets and have made further disposals
since the year end including some from the
LXi portfolio. It is inevitable that we will look
to trim our long income exposure further,
particularly in respect of individual credits
where we feel the portfolio would benefit from
greater diversification.
Despite the growth in online shopping, the
store network still remains integral to retailers.
Well located, stand-alone or cluster properties
that are fit for purpose, right sized and
right rented and let on long NNN leases to
grocers, discounters, home and DIY operators
continue to be attractive.
These occupiers have resilient business
models that are less exposed to the impact
of the migration of shopping online, offering
essential goods and omni-channel optionality
in a convenient format.
Roadside convenience has been an area
of focus for us through drive-thrus but also
the need to service customers using electric
vehicle charging points.
The trend towards experiences, the recovery
in foreign international travel and greater
consumer preferences for staycations given
growing household financial pressures has
supported favourable growth in certain parts
of the UK entertainment and leisure sector.
The UK hotel sector, in particular, has seen
a strong recovery following the pandemic
and is experiencing favourable demand/
supply dynamics following years of
supply contraction.
Visitor attraction operators, including theme
parks, have also benefitted from these trends,
proving to be non-cyclical performers and
beneficiaries of consumers’ unwillingness
to cut back on discretionary spend in this
area. Theme parks also have significant
barriers to entry in the UK which adds to its
defensive characteristics.
The property sector for healthcare continues
to be underpinned by strong demand drivers
from an ageing and growing population as
well as improvements in medical technology.
UK private hospitals are particularly well
placed. They are increasingly taking on NHS
patients as a result of the growing NHS
waiting lists where nearly eight million people
in the UK are awaiting treatment.
Unsurprisingly, they are also seeing a strong
growth in patients treated through private
medical insurance as well as self-pay as they
seek better and faster care. 2023 saw a record
growth in insured patient volumes across
the independent healthcare provider sector
and, in its last half year set of results, Ramsay
Health Care saw 10% growth in admissions in
the UK acute hospital business which resulted
in a 15% increase in its UK turnover.
Healthcare
& education
Convenience Entertainment
& leisure
Long income assets continue to
deliver attractive income returns
Long income assets with low operational
requirements have always been an important
part of our portfolio. These are assets in
structurally supported sectors let on long leases,
to strong operators, where the real estate is
considered mission critical.
LondonMetric Property Plc Annual Report and Accounts 202420
Manage & enhance responsibly
Embedding sustainability
Upgrading through investment
and development
Our investments are focused on high quality
buildings or assets where we can use our
expertise to materially upgrade the building.
Our developments are typically BREEAM
Very Good or Excellent and we work with
contractors to ensure sustainability is
properly considered as part of the project.
Extending the economic life of our assets
through environmental improvements
Cost effective improvements such as LED
lighting, new HVAC systems, removing gas,
better insulation and glazing are helping
to significantly improve EPC ratings.
Working with our occupiers to add solar PVs
across our portfolio is helping to address
their ambitions to be Net Zero Carbon and
mitigate energy costs.
We continue to enhance our income
and the quality of our assets
During the year, occupier initiatives added
£7.5 million per annum of rent and delivered
like for like income growth of 5.5%. Lettings
and regears added £2.7 million and were
signed on average lease lengths of 12 years,
with regears on logistics achieving rents 37%
ahead of previous passing. Rent reviews added
£4.8 million of rent, representing a 19% uplift
on a five yearly equivalent basis. Post year end,
we have signed deals that add £2.4 million per
annum of rent.
Looking forward, with high reversionary
potential on our logistics and a high proportion
of guaranteed uplifts on long income assets,
we have visibility on c.£23 million per annum of
rental uplifts from rent reviews and regears over
the next two years. We expect to materially
increase this rental uplift as we continue
to actively asset manage the portfolio and
enhance the LXi assets.
We continue to embed sustainability and high
ESG standards across our activities, driven by
our own aspirations as well as those of our
customers and stakeholders. In the year, we
materially improved our GRESB score from
64 to 76, which resulted in us being awarded
a three star rating. A further three solar PV
installations were added in the year which,
together with two projects that completed
post year end, have increased total installed
capacity from 3.6 MWp in March 2023 to
7.6 MWp. Over the year, we also installed 25
EV charging points across our convenience
portfolio. We continue to engage with occupiers
on sustainability initiatives including further near
term potential solar PV installations that total
3.2 MWp.
We have made good progress in better
understanding the LXi assets from a property
as well as a sustainability perspective. We are
incorporating the LXi portfolio into our action
plans and are actively refining our approach
to properly consider the implications of the
merger on our ESG strategy.
Case Study
Leicester
Our strategy supports a
low-carbon approach
The portfolio is operationally light and
exposed to real estate sub-sectors which
have a lower carbon intensity
We are a strong steward of
underinvested assets, with the necessary
expertise and capital to improve them
7.6 MWp
solar PV installed across portfolio
85%
of the portfolio has
an EPC rating of A-C
The 125,000 sq ft logistics forward fund development in Leicester that completed in the year was
BREEAM Very Good certified and EPC A rated. The building is let to EM Pharma on a 15 year lease
and we are in discussions with the occupier to install 0.3 MWp of solar PV.
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202421
Financial
statements
Governance
Strategic
report
An overview, purpose and strategy
Chief Executive’s review
continued
We continue to benefit from our
strong team and its relationships
Our team’s economic alignment to the
Company’s success ensures an ownership
culture and a strong conviction to make the
right property and financial decisions. We work
with all stakeholders to deliver longer term
benefits to our investors, occupiers, people,
local communities and contractors.
We were pleased that our occupier survey
again showed high contentment with an
average score of 9.0 out of 10.0 for whether our
occupiers would recommend LondonMetric
as a landlord, up from a score of 8.7 in 2023.
In terms of satisfaction with our properties, our
score also increased from 8.1 to 8.5.
We also received a high score in our latest
employee survey with 97% of employees
saying that they are proud to work for the
Company, which is up from 94% last year.
The team has worked incredibly hard over
the year, has embraced our ‘work from work’
culture and I am hugely grateful for their
efforts. This appreciation extends to our
ten new colleagues who have joined from
LXi, not only for their contribution and hard
work, but also their faith and commitment in
joining LondonMetric.
Whilst our team of 47 employees is well placed,
we will continue to strengthen our team’s
capabilities. In addition, I am delighted to report
that we have promoted Will Evers to Joint Head
of Investments alongside Valentine Beresford.
Will has been with us since inception and is
integral to our activities.
Our investor and banking relationships have
been crucial to delivering on our M&A during
the year. The support from, and level of
engagement with, these relationships has been
exceptional and our well positioned balance
sheet and our proactive approach places us in a
good position.
Occupiers
Strong customer focus
We recognise that when our occupiers’
businesses thrive, our business also thrives.
We treat our occupiers as customers and put
them at the centre of our decision making.
Our occupier-led approach provides us with
market knowledge to better understand
future trends and make informed decisions.
Our high occupancy rate, strong rent collection
and customer satisfaction scores demonstrate
the strength of these relationships.
Extending existing relationships and
developing new contacts continue
to be a key focus for us.
Outcomes
99.4%
Portfolio occupancy
9.0/10.0
Landlord recommendation score
People
Our people are critical to the
success of the Company
The Company is highly focused with
47 employees and eight Non Executive
Directors. Since merger in 2013, employee
numbers have fallen despite a significant
increase in assets managed. This reflects
improved efficiencies and the lower
operational requirements of our portfolio.
Culture and approach
We have successfully attracted and retained
a talented and loyal team. This is reflected
in our low annual voluntary staff turnover
rate which has averaged 6% since merger
in 2013.
We believe that this reflects a culture of
empowerment and teamwork as well as fair
and performance based remuneration.
Outcomes
6%
Annual staff turnover since 2013
97%
Of staff are proud to
work for LondonMetric
Expertise and relationships
LondonMetric Property Plc Annual Report and Accounts 202422
We have embraced the NNN income model
for many years, delivering strong income,
elevated levels of rental growth, with a low
cost platform and only minor income leakage.
We believe that this is the right way to invest
– high quality, guaranteed growth, low cost
efficiently delivered. Internally, we refer to it as
the three Cs – collect, compound and watch the
yields compress.
Scale is becoming increasingly important
and the LXi merger has allowed us improved
liquidity, access to bigger deals and economies
in terms of overheads, earnings efficiency and
debt optionality. We have one of the lowest
EPRA cost ratios across the sector which we
expect to fall further as we deliver on cost
synergies in the enlarged Group, and with this
strong cost control and limited income leakage,
we are able to further increase our net rental
income, earnings per share and progress our
covered dividend. This puts us on track for our
tenth consecutive year of dividend progression;
a performance that puts us in a rarefied club.
Our decisions remain heavily influenced by
the macro environment, consumer behaviour
and demand/supply dynamics. As we have
demonstrated over the last ten years, our
deep experiences and confidence to position
the portfolio where we see best growth will
ensure that our portfolio remains fit for purpose
– we will never stop exercising. Therefore, it
is inevitable that we will look to improve the
quality of our assets and income stream by
trimming our exposure to certain sub-sectors
and individual credits.
Dislocation both in the real estate and equity
markets is presenting new opportunities to grow
our business and cement our position as the
UK’s leading NNN income compounder. The
urban logistics market remains our strongest
conviction for accelerated rental growth and
so we will look to reinvest sale receipts into this
segment of the market.
We are fully aligned with a shared mission and
will be ruthlessly efficient in how we operate
our business and how we allocate capital in our
quest towards dividend aristocracy. After all,
income compounding is the eighth Wonder of
the World – the secret sauce and the rocket fuel
that creates wealth.
Investors
Our investors are critical to the Company
and its ability to access capital, efficiently
and quickly.
We value our good relationships with
our shareholders. Over the year, we met
with 380 equity investors and feedback
remains very supportive of our strategy
and the Company.
Access to debt financing is highly important
to us and we continue to enjoy very strong
banking relationships, as evidenced by our
successful debt refinancing in the year.
Outcomes
380
Investors seen in the year
Contractors
and Advisors
We rely on the support of a diverse group
of contractors and property advisors.
Our contractor relationships are highly
important in allowing us to deliver on
our developments and refurbishments.
In conjunction with our external project
managers, our development team ensures
that we select high quality and robust
contractors with a proven track record.
During the year, there was 100%
compliance with our Responsible
Development Requirements checklist.
Outcomes
100%
Contractor compliance
Communities
We recognise the importance of supporting
our local communities and engaging with all
local stakeholders.
Our Charity and Communities Working
Group implements charity giving and co-
ordinates community involvement.
LondonMetric has allocated a minimum of
£100,000 per year for charitable giving.
In addition, we require our contractors to
focus on community initiatives as part of our
development and refurbishment activity.
Outcomes
£153K
Charitable giving in
year across 72 causes
Outlook
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202423
Financial
statements
Governance
Strategic
report
The world
around us
For high growth real
estate sectors there has
been much improved
liquidity”
Macro events continue to dominate
the investment backdrop
Global economic and geopolitical uncertainty
continues to dominate the investment market
backdrop. Although the markets are taking the
conflicts in the Middle East and Ukraine as well
as tensions with China largely in their stride,
there is still considerable uncertainty on the
horizon with general elections in both the US
and UK later this year.
As has been the case for a while, the future path
of interest rates has been the main driver of
market sentiment. Central banks continue to
play a delicate balancing act of keeping inflation
in check without stifling growth and, whilst
current economic data suggests that the global
economy is far healthier than some perceive,
we expect central banks to start cutting rates
this summer. Usually these two factors are
mutually contradictory conditions.
For the UK, we have a resilient economy with
no imminent threat of a recession. However,
growth has proven more elusive and has
essentially flatlined with unemployment
and inactivity rates rising. Whilst interest rate
increases are now having the desired impact
of dampening inflation (CPI of 2.3% at the last
print compared to 9-10% a year ago), service
sector inflation and wage growth remain
high which may temper the number of rate
reductions this year.
Whilst the cost of living in the UK is
undoubtedly impacting the consumer and
consumer confidence remains cautious, we
believe that it is well positioned to navigate
the current economic climate, helped by low
unemployment levels, good savings ratios,
strong wage growth and lower household
budget inflation (particularly with energy prices
falling back).
Liquidity in real estate
remains limited
Interest rates remain the yardstick by which our
assets are valued. Whilst liquidity for real estate
has improved, the property market remains
a long way from functioning normally as
evidenced by the 30% decline in transactional
activities in 2023 and subdued activity so far
this year.
Elevated interest rates and swap rates are
effectively ruling out the debt buyers and we
remain of the view that normal liquidity won’t
return until five year swap rates fall materially
towards 300bps.
For high growth real estate sectors, liquidity is
much improved, with good volumes for smaller
lot sizes where debt is not required. The logistics
sector has been one of the few sectors
transacting helped by more assured income
security and rental growth.
For lower growth real estate sectors such as
offices and shopping centres, there remains a
gulf in buyer and seller expectations. Whilst the
values of some of these assets have fallen
60%+ and greater pricing realism has crept into
valuations there still appears to be further to go.
We are also now operating in a new paradigm
where, if the property market won’t offer price
discovery, then the debt market inevitably will.
There is a significant amount of debt
expiring and loans to be refinanced over the
coming years. The overall property market
remains over-leveraged or under-equitised
and the banks are becoming increasingly
active in forcing assets to the market.
Refinancings are exposing proper price
transparency and highlighting to owners and
debt providers that assets that once yielded
a positive carry and attractive cash on cash
metrics are now seeing equity holders being
wiped out and lenders taking a loss. This is
particularly acute in parts of the office sector.
Andrew Jones
Chief Executive
An overview, purpose and strategy
LondonMetric Property Plc Annual Report and Accounts 202424
The UK listed sector remains in a much
better place to ride out the current higher rate
environment than the private sector or indeed
many of the European REITs, where leverage is
materially higher. Many of the lessons learned
from the global financial crisis were forgotten,
but, in the UK, lower leverage was not one
of them.
However, that is not to say the UK listed space
isn’t without its issues. Legacy investment
strategies and poor structures have been
exposed. When debt was free, REIT investing
seemed like a one-way bet. However, as
interest rates have normalised, portfolio quality,
debt management, management alignment
and liquidity have come sharply into focus.
Whilst we have already seen some sector
consolidation there are still a number of
listed REITs who are no longer ‘fit for purpose’.
More often, these are small cap, externally
managed with limited sectoral focus and little
shareholder alignment of interest.
We continue to believe that the market will
offer up further opportunities for consolidation
and that as confidence returns, we believe that
public real estate can once again grow. After all,
boards have a duty of care to the shareholders
and investors deserve scalable and efficient
structures that provide opportunities for them
to deploy their significant sums of capital.
Polarisation across real estate
will continue
Technological disruption remains a powerful
force that continues to affect our daily lives in
how we communicate, travel, work and shop.
This will continue to have a profound and
permanent impact on which real estate sectors
win and which ones lose.
As I have already mentioned, we believe
that the structural tailwinds will continue
to provide strong support for logistics,
convenience, healthcare and experiences.
Student accommodation and build-to-rent
seems like it also has longer term structural
support but these are operational sectors that
do not meet our NNN criteria. Data centres
are also an interesting growth sector aligned
to the need for a growing digital infrastructure.
We have some data centres but it is a complex
area with many variables, not least power
constraints and evolving technology.
For the troubled sectors, there remains
significant headwinds. Operational retail
property continues to face challenges as the
consumer pivots further towards an omni-
channel and convenience shopping model.
The shift in spending over the last decade has
resulted in massive value destruction across
large parts of retail real estate, with department
store and shopping centre values largely
decimated. Despite a good recovery from the
pandemic, we still have too much physical
retail property which means that supply often
exceeds demand and the true rental values
are still materially lower than history suggests.
Whilst many landlords will trumpet their
achievements in settling new rents above ERV,
these are mostly set below previous passing
rents or have been materially inflated by capital
contributions and long rent free periods...
much like the London office market.
The adoption of omni-channel models however
continues to afford the retail park market some
stability with rising occupancy, reduced supply
and pricing equilibrium. Whilst these conditions
are not uniform, it is particularly the case around
the strongest geographies, where existing space
is being lost to other higher value alternatives,
like residential. We therefore remain alert and
wide eyed to individual opportunities where
demand/supply metrics are attractive and
asset management initiatives are available to
enhance the NNN income characteristics.
In the retail grocery convenience sector, online
penetration is much lower than that of general
merchandise. As a result, the grocery store
retains its important role in essential spending.
However, performances across grocery real
estate are already polarising as over-sized,
over-rented larger format supermarkets
continue to fight strong competition from
the smaller, right rented, fit for purpose
convenience and discount stores. After years
of rental compounding, we believe that the
best days for larger format supermarkets look
like they are behind them. Shortening leases
are beginning to expose their values; much as
department store valuations did when they
were exposed to true market fundamentals and
their credits failed.
For the office market, outside of London’s
West End, the sector is seeing strong parallels
to shopping centres nearly ten years ago.
New technology, increasing obsolescence and
changing workers’ preferences are creating
structural disruption for offices as work from
home and growing ESG demands impact the
amount, flexibility and quality of office space
that companies require. Hybrid working is going
nowhere and so companies are conscious that
it requires a carrot and stick approach. They are
therefore intensifying their offer with modern
environments and better facilities incorporating
new sustainability requirements. The problem
is that the capital expenditure required is rising
faster than the rents and so this will inevitably
lead to a polarisation of performances and a
large gap between the winners and losers.
Whilst many owners will confidently talk about
their ability to repurpose obsolete offices, in
much the same way as they did with shopping
centres, the outcome is likely to be the same.
Conversion into labs, gyms, nurseries, health
clinics, etc., has limits and more often than
not they don’t justify the capex. After all, most
offices are unsuitable for residential conversion
due to floorplates, staircases and ceiling height
restrictions. The value destruction will be
enormous and, much like the shopping centre
market, the lending banks will end up holding
the keys.
As a result, rental outlook, capex risks and
depreciation will continue to come in to sharp
focus for investors and lenders. We continue to
live in a fast changing world that shows no sign
of slowing down and being on the right side
of structural change is key. After all, you never
know when you need liquidity until it’s too late.
We continue to believe
that the market will offer
up further opportunities
for consolidation.”
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202425
Financial
statements
Governance
Strategic
report
Creating value
Our markets
There are many macro trends and structural
forces affecting real estate including demographic,
economic, political, regulatory and environmental
changes. These trends continue to influence the
investment decisions that we make to shape our
real estate portfolio.
1
Geopolitical
& economic
15 year
High interest rates
2
Interest rates &
borrowing costs
11%
2022 peak inflation
3
Demographic
changes
19%
Growth in over
60 year olds by 2030
The UK real estate capital market continues to
be defined by geopolitical uncertainties and
economic instability. This macro environment
has led to plummeting volumes of real estate
investment which has resulted in decade low
volumes as investors grapple with declining
asset values and increased borrowing costs.
Globally, conflicts in Ukraine and the Middle
East together with tensions and increased tariffs
with China have impacted global supply chains
leading to heightened inflation and 15 year
high interest rates leading to a ‘risk-off’ investor
sentiment for assets that are deemed to be
a bond proxy. Domestically, the forthcoming
general election is likely to be a focal point.
Our portfolio is aligned to structural drivers
thereby best placed to navigate wider macro
economic uncertainty. We look to invest in the
right sectors benefiting from superior demand/
supply characteristics and ensure enduring
occupier appeal generating reliable, repetitive
and growing income streams. Our approach to
recycling capital and capital allocation ensures
we actively manage the portfolio to improve
the underlying asset quality by selling out of
mature assets into higher quality ones delivering
an ‘all weather’ portfolio.
UK interest rates have remained at historic
lows for an extended period of time to support
the economy through the financial crisis and
recovery in 2008, Brexit in 2016 and the
pandemic in 2020.
However, in response to accelerating inflation,
which peaked at 11% towards the end of 2022,
and the need to temper the economy, interest
rates began to increase from December 2021
onwards. By August 2023, the UK interest rate
had risen 14 consecutive times, reaching a peak
of 5.25%. Inflation remains higher than target
but has decelerated from its peak giving room
for potential cuts to interest rates in the second
half of 2024.
As an income focused REIT, we believe interest
rates and swap rates are an important yardstick
by which our assets are valued. The movement
in interest rates resulted in a significant re-rating
of our assets in our previous financial year but
valuations have stabilised this year.
Our income benefits from a high proportion
of contractual rental uplifts with the remainder
largely exposed to open market rental
uplifts from the highest growth real estate
sectors. This allows us to deliver attractive
positive income-led returns even without
asset appreciation.
The UK population is expected to see
significant changes over the next few decades.
The population is projected to increase from
c.67 million in 2021 to c.74 million by 2036,
representing 9.9% growth over 15 years
(ONS). The growth is largely driven by net
international migration.
In common with many global countries, the
UK will see a rise in ageing population with
projections suggesting those over 60 year old
are expected to grow by 19% in the ten year
period to 2030 (Statista) and those over 85
years to nearly double by 2045 (ONS).
Coupled with a decline in fertility rates, these
changes will have implications for various
sectors that service retirees including healthcare,
housing and more efficient urban infrastructure.
An increase in retirees is also likely to increase
demand for real assets that deliver income and
pension qualities.
Reliable, repetitive and growing income is a key
focal point for LondonMetric. We recognise the
shifts in demographics and the value to society
in providing a viable investment proposition
by delivering income-led total shareholder
returns. Following the merger with LXi, we have
significantly increased our exposure to the
healthcare sector allowing us to gain valuable
insight in to this structurally supported sector.
Macro trends
LondonMetric Property Plc Annual Report and Accounts 202426
1
Technology
disrupting
30%
of all retail sales expected
to be online by 2030
3
Sustainability
98%
of our top 20 occupiers have
a Net Zero Carbon ambition
2
Value
& Quality
+14%
growth in Travelodge
revenue in 2023
Technology continues to reshape consumer
behaviour across how we work, shop and live
with profound impacts on real estate.
There is a clear divide between finite space and
infinite space where technology has allowed us
to work and shop from anywhere and where
infinite space is under continued pressure.
Adoption of online shopping continues its long
term upward trajectory, with 30% of all retail
sales expected to be online by 2030, up from
26% in 2023. This is resulting in less physical
retail space required. Equally, office space
demand has shifted to reflect hybrid working
patterns following the realisation through covid
that technology allows workers to be more
nomadic than ever before.
There are clear winners out of this structural
shift where space required to store, move and
manufacture becomes increasingly important.
Space for essential items which can not be
fulfilled through a technology alternative or
platform remains a key operating asset.
Overall, technology’s disruption of consumer
behaviour is leading to more informed, efficient
and customised consumer experiences
pushing industries to innovate and evolve
and adapt their strategies to meet new digital
standards and expectations. We are conscious
of technological change and adapt our
portfolio accordingly.
Sustainability has emerged as a top priority
across the world economy. Businesses,
governments and consumers are increasingly
recognising the importance of sustainable
practices and playing their role in decarbonising
the global economy through a broad range
of activities including preserving natural
resource and fostering economic and social
value. This shift is reflected in the rise of green
technologies, sustainable urban planning
and corporate strategies that are increasingly
mindful of environmental stewardship
alongside profitability.
The integration of sustainability into core
business practices is not just about mitigating
risk, it is also about creating opportunities for
innovation and competitive advantage in a
rapidly evolving marketplace. As awareness and
regulations increase, sustainability is becoming
a critical factor for occupiers and investors
in decision-making, influencing demand
and supply of buildings and future rental
growth trajectories.
The real estate sector has always looked to
refurbish and regenerate buildings and now,
more than ever, owning fit for purpose assets
is key to ensuring enduring occupier and
investor appeal.
The cost of living crisis with high levels of
inflation and elevated interest rates have
impacted consumer spending and pushed the
consumer to economise and prioritise spending
with value a much greater consideration.
This has benefited discount and essential
retailers who have expanded their propositions
and strengthened their businesses. Similarly,
whilst certain leisure sectors, such as casual
dining, have suffered from a reduction in
consumer discretionary spend, in-person leisure
activities that cater for social experiences have
proven to be highly resilient as people have
seemed unwilling to forego quality time with
friends, family and colleagues.
The trend towards staycations as a more
affordable holiday option has also supported
favourable growth for some hospitality sectors
including hotel and visitor attraction operators.
Consumers are also prioritising health and
bypassing long state waiting lists or reduced
care services to seek better quality levels
of healthcare.
Aligning to occupiers that can meet future
consumer needs and thrive is important to
our business.
Structural trends
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202427
Financial
statements
Governance
Strategic
report
Creating value
Key market trends
Our key focus is to ensure
we own desirable assets with
enduring occupier appeal.
Logistics
Consumers continue to embrace online
shopping with online retail penetration
continuing to take market share with 22%
growth expected from 2022 to 2027,
at which point it is expected that online
penetration will reach 28.4%.
‘Onshoring’ is being driven by consumer
demand for ‘everything now’, a shift towards
reduced free trade and the need to cut
emissions in line with regulation (45% cut by
2030, 65% by 2035 and 90% by 2040).
This is likely to lead to renewed demand for
logistics warehousing which, after a number
of years of above average take-up, paused
for breath last year. Therefore, the industry
expects continued rental growth to occur
of c.3% p.a.
Convenience
Urbanisation and busy lifestyles have
moved consumers towards a ‘grab and go’
culture.
Convenience and essential retailers have
adapted their estates towards smaller
format stores that accommodate this new
consumer behaviour. Whereas the top four
grocers had 74% market share in 2014,
this has fallen to 65% today, driven by
the steady growth from discount grocers,
principally Aldi and Lidl.
The convenience channel is expected
to grow by 4% p.a. CAGR over five years
to 2028 from £48.5 billion of sales
to £59.9bn.
These strong fundamentals are ensuring
there is good demand for convenience
related property investments.
28.4%
online retail market
share by 2027
3% p.a.
rental growth
to 2028
+4% p.a.
in convenience sales by
2028 to £60bn
25%
of all retail property
investment activity
in 2023 was
grocery related
LondonMetric Property Plc Annual Report and Accounts 202428
7.6 million
on the NHS waiting list
39%
increase in self-
funded treatment
in Q4 2023
Healthcare
& education
Demographic and ageing populations
are driving health consciousness. Over 60
year olds are expected to grow by 19% by
2030 (Statista) adding strain to the existing
healthcare sector.
UK NHS waiting list currently stands at
7.6 million (NHS England) with increasing
numbers of people seeking private
medical assistance as an alternative
with an increase of 39% self funded
treatments in Q4 2023 (PHIN).
Entertainment
& leisure
Economic and generational shifts are
driving consumer behaviour towards
making memories over buying
material things.
Hospitality and leisure spend continues
to remain strong in the aftermath of the
pandemic with Barclaycard data reflecting
a 10.3% increase for this category in 2023.
The trend towards staycations as a more
affordable holiday option has supported
particularly favourable growth for hotel and
visitor attraction operators.
+35%
increase in domestic
holidays p.a. from
2015 to 2022
+10%
increase in spend on
hospitality and leisure
in 2023
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202429
Financial
statements
Governance
Strategic
report
Our people
Our success is dependent on
employing a talented, motivated
and diverse team with strong
property and finance expertise.
Our occupiers
We engage with occupiers across
all of our activities to provide real
estate solutions that deliver mutually
beneficial outcomes, adopting a
partner of choice mindset.
Our local communities
We recognise the importance of
engaging with local communities,
working closely with local authorities,
residents and businesses.
Our investors
We value our good relationships with
investors, debt providers and joint
venture partners.
Our contractors & advisers
We depend on a diverse group
of key suppliers including
professional advisers
and contractors.
Our key stakeholders
are critical to our success
Own
Invest in real estate
aligned to structural trends
Manage
Disciplined, low cost and responsible
management of our assets
Our strategy drives our income
growth and value creation
What’s changed?
Our portfolio is underpinned by
structural trends with exposure to
logistics, convenience, healthcare,
education, entertainment and leisure.
Our wider sector exposure gives
diversification and portfolio resilience in
an evolving world.
Our desirable, mission critical and key
operating assets ensure that we benefit
from certainty of income and strong
prospects for income growth. Logistics
remains our main sector focus, particularly
urban logistics which remains our
‘conviction call’, and we intend this sector
exposure to grow to 50% of the portfolio.
Read more on page 17
What’s changed?
As a Triple Net Lease REIT the operating
and maintenance costs of our assets are
the responsibility of the occupier. The
longer lease lengths on our portfolio as a
result of the LXi merger means that our
assets require even less time and resource
to manage.
But we will still continue to take a
disciplined approach to actively manage
the shape of the portfolio to ensure that
our buildings provide fit for purpose
and sustainable spaces that can deliver
attractive rental growth. Where assets do
not meet our investment criteria we will
look to dispose of those assets.
Creating value
Business model
As a leading Triple Net Lease REIT our low operating costs,
strong shareholder alignment and structurally supported
portfolio is generating dependable long-term income growth.
Read more on page 63
LondonMetric Property Plc Annual Report and Accounts 202430
Collaborate
Leverage our expertise to
benefit from strong relationships
Generate
A focus on reliable, repetitive
and growing income
What’s changed?
Very little has changed. We have a
team of property and finance experts
who work closely with occupiers and
wider stakeholders to understand
their needs and ensure high levels of
satisfaction and occupancy.
We will continue to integrate our new
team members from the LXi merger to
build one team with common values.
What’s changed?
Income and income growth remain
central to our business model.
Our exposure to a wider number
of structurally supported sectors,
significantly larger portfolio and our
lower operating cost model underpins
our ability to deliver long-term income
growth to pay our shareholders
progressive dividends.
Generating value
and long term returns
+7%
Dividend growth in year, our ninth
consecutive year of progression
+£195m
Growth in net contracted rent over the year
+7.5 years
Increase in WAULT over the year
to 19.4 years
Financial
statements
Governance
Financial
statements
Governance
Strategic
report
LondonMetric Property Plc Annual Report and Accounts 202431
We track eight key performance indicators (‘KPIs’) to monitor
the performance of the business, which includes our share of
joint ventures. The KPIs are also used to determine how Executive
Directors and senior management are evaluated and remunerated.
Objective
Deliver long term
shareholder returns
Maximise long term
total accounting return
Maximise property
portfolio returns
Deliver sustainable
growth in EPRA
earnings
Drive like for like
income growth
Maintain a higher than
market benchmark
WAULT
Maintain strong
occupier contentment
EPC rating
KPI
22.1
-33.1
33.7
Total shareholder return in the year (%)
2024
2023
2022
1.3
-20.2
41.9
Total accounting return (%)
2024
2023
2022
4.7
-12.0
28.2
Total property return (%)
2024
2023
2022
10.9
10.3
10.0
EPRA earnings per share (p)
2024
2023
2022
5.5
5.0
5.4
Like for like income growth (%)
2024
2023
2022
19.4
11.9
11.9
WAULT (years)
2024
2023
2022
0.6
0.9
1.3
EPRA vacancy (%)
2024
2023
2022
91%
90%
85%
EPC rating (%)
2024
2023
2022
Performance Total Shareholder Return (‘TSR’), being the
share price movement together with the
dividend, delivered 22.1% growth in the year
compared to the FTSE 350 Real Estate Super
Sector index movement of 9.3%.
Since our merger in 2013 TSR growth was
223%, over four times that of the FTSE 350
Real Estate Super Sector index movement
of 48%.
Total Accounting Return (‘TAR’) of EPRA net
tangible assets per share movement together
with dividend paid in the year.
12 month TAR delivered a return of 1.3%.
The full calculation can be found in
Supplementary note viii.
Unlevered Total Property Return (‘TPR’),
including capital and income return, of the
portfolio as calculated by MSCI.
12 months TPR delivered a return of
4.7% compared to the MSCI All Property
benchmark of -1.0%.
EPRA earnings per share from
operational activities have
grown by 5.4% over the last
12 months.
Since our merger in 2013,
EPRA earnings per share has
grown by 179% from 3.9p to
10.9p per share.
The movement in the
contracted rental income
on properties owned through
the period increased by 5.5%.
Additional income of £7.5
million was generated from
asset management activity
following lettings, regears
and rent reviews.
Weighted average unexpired
lease term across the
investment portfolio of 19.4
years as at 31 March 2024.
The significant increase in the
year was due to the LXi merger
and portfolio on acquisition
with a WAULT of 26 years.
Occupancy rate of investment
portfolio at 31 March 2024
was 99.4%, reducing
our vacancy to 0.6%.
The proportion of our portfolio
with an EPC rating of A to C.
As at 31 March 2024, and on a
like for like basis excluding the
impact of the LXi merger, this
was 91%.
Incorporating LXi reduces our
EPC rating of A to C to 85%.
Remuneration Under the Remuneration Policy 37.5%
of LTIP awards are subject to TSR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
99.8% of the TSR component of the 2020
LTIP award vested in the year and the
TSR component of the 2021 LTIP award is
expected to vest in full.
The three year TSR for the 2021 LTIP was
4.8% compared to the FTSE 350 Real
Estate Super Sector excluding agencies
and operators of -9.1%.
Under the Remuneration Policy 37.5%
of LTIP awards are subject to TAR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
The TAR component of the 2020 LTIP
award vested in full in the year and the
TAR component of the 2021 LTIP award is
expected to vest in full.
The three year TAR for the 2021 LTIP was
15.4% compared to the FTSE 350 Real Estate
Sector excluding agencies and operators of
2.1%.
30% of this year's annual bonus award is
subject to TPR outperforming the MSCI
benchmark.
This year TPR outperformed the benchmark
delivering an 88% bonus payout.
The three year All Property TPR delivered
a return of 5.8% compared to the MSCI All
Property benchmark of 1.1%.
30% of this year's annual
bonus award is subject to an
EPRA EPS growth target. This
year EPRA EPS outperformed
its growth target securing a full
bonus payout.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 39% of the
2020 LTIP award vested in the
year and 61% of the EPRA EPS
component of the 2021 LTIP
award is expected to vest.
Forms part of EPRA earnings
per share, which as noted
above, is a key financial
performance measure for the
Company’s variable incentive
arrangements.
Under the 2023 Remuneration
Policy, 30% of this year’s
annual bonus is subject to
Strategic objectives.
One of these is that WAULT is
more than ten years as set out
on page 150.
Under the 2023 Remuneration
Policy, 30% of this year’s
annual bonus is subject to
Strategic objectives.
One of these is that occupancy
is greater than 96% as set out
on page 150.
Under the new Remuneration
Policy, 10% of the annual
bonus is subject to ESG
objectives.
2024/25
ambition
Three year TSR performance to be in
the upper quartile of the FTSE 350 Real
Estate Super Sector, excluding agencies
and operators.
Three year total accounting return to be in the
upper quartile of FTSE 350 Real Estate Super
Sector, excluding agencies and operators.
One year TPR outperformance against
MSCI benchmark.
Deliver and sustain EPRA
earnings per share growth
and dividend progression.
Deliver like for like
income growth.
Maintain high weighted
average unexpired lease
term targeting >ten years.
Maintain high occupancy
across the investment
portfolio, targeting in excess
of 95%.
Improve the proportion of our
portfolio with an EPC rating of
A to C to above 90%.
Creating value
Key performance
indicators
Full details of our strategic
pillars are set out on page 30
Disciplined, low cost and
responsible management
of our assets
Leverage our expertise
to benefit from strong
relationships
A focus on reliable, repetitive
and growing income
Collaborate GenerateManageOwn
Invest in real estate aligned to
structural trends
LondonMetric Property Plc Annual Report and Accounts 202432
Objective
Deliver long term
shareholder returns
Maximise long term
total accounting return
Maximise property
portfolio returns
Deliver sustainable
growth in EPRA
earnings
Drive like for like
income growth
Maintain a higher than
market benchmark
WAULT
Maintain strong
occupier contentment
EPC rating
KPI
22.1
-33.1
33.7
Total shareholder return in the year (%)
2024
2023
2022
1.3
-20.2
41.9
Total accounting return (%)
2024
2023
2022
4.7
-12.0
28.2
Total property return (%)
2024
2023
2022
10.9
10.3
10.0
EPRA earnings per share (p)
2024
2023
2022
5.5
5.0
5.4
Like for like income growth (%)
2024
2023
2022
19.4
11.9
11.9
WAULT (years)
2024
2023
2022
0.6
0.9
1.3
EPRA vacancy (%)
2024
2023
2022
91%
90%
85%
EPC rating (%)
2024
2023
2022
Performance Total Shareholder Return (‘TSR’), being the
share price movement together with the
dividend, delivered 22.1% growth in the year
compared to the FTSE 350 Real Estate Super
Sector index movement of 9.3%.
Since our merger in 2013 TSR growth was
223%, over four times that of the FTSE 350
Real Estate Super Sector index movement
of 48%.
Total Accounting Return (‘TAR’) of EPRA net
tangible assets per share movement together
with dividend paid in the year.
12 month TAR delivered a return of 1.3%.
The full calculation can be found in
Supplementary note viii.
Unlevered Total Property Return (‘TPR’),
including capital and income return, of the
portfolio as calculated by MSCI.
12 months TPR delivered a return of
4.7% compared to the MSCI All Property
benchmark of -1.0%.
EPRA earnings per share from
operational activities have
grown by 5.4% over the last
12 months.
Since our merger in 2013,
EPRA earnings per share has
grown by 179% from 3.9p to
10.9p per share.
The movement in the
contracted rental income
on properties owned through
the period increased by 5.5%.
Additional income of £7.5
million was generated from
asset management activity
following lettings, regears
and rent reviews.
Weighted average unexpired
lease term across the
investment portfolio of 19.4
years as at 31 March 2024.
The significant increase in the
year was due to the LXi merger
and portfolio on acquisition
with a WAULT of 26 years.
Occupancy rate of investment
portfolio at 31 March 2024
was 99.4%, reducing
our vacancy to 0.6%.
The proportion of our portfolio
with an EPC rating of A to C.
As at 31 March 2024, and on a
like for like basis excluding the
impact of the LXi merger, this
was 91%.
Incorporating LXi reduces our
EPC rating of A to C to 85%.
Remuneration Under the Remuneration Policy 37.5%
of LTIP awards are subject to TSR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
99.8% of the TSR component of the 2020
LTIP award vested in the year and the
TSR component of the 2021 LTIP award is
expected to vest in full.
The three year TSR for the 2021 LTIP was
4.8% compared to the FTSE 350 Real
Estate Super Sector excluding agencies
and operators of -9.1%.
Under the Remuneration Policy 37.5%
of LTIP awards are subject to TAR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
The TAR component of the 2020 LTIP
award vested in full in the year and the
TAR component of the 2021 LTIP award is
expected to vest in full.
The three year TAR for the 2021 LTIP was
15.4% compared to the FTSE 350 Real Estate
Sector excluding agencies and operators of
2.1%.
30% of this year's annual bonus award is
subject to TPR outperforming the MSCI
benchmark.
This year TPR outperformed the benchmark
delivering an 88% bonus payout.
The three year All Property TPR delivered
a return of 5.8% compared to the MSCI All
Property benchmark of 1.1%.
30% of this year's annual
bonus award is subject to an
EPRA EPS growth target. This
year EPRA EPS outperformed
its growth target securing a full
bonus payout.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 39% of the
2020 LTIP award vested in the
year and 61% of the EPRA EPS
component of the 2021 LTIP
award is expected to vest.
Forms part of EPRA earnings
per share, which as noted
above, is a key financial
performance measure for the
Company’s variable incentive
arrangements.
Under the 2023 Remuneration
Policy, 30% of this year’s
annual bonus is subject to
Strategic objectives.
One of these is that WAULT is
more than ten years as set out
on page 150.
Under the 2023 Remuneration
Policy, 30% of this year’s
annual bonus is subject to
Strategic objectives.
One of these is that occupancy
is greater than 96% as set out
on page 150.
Under the new Remuneration
Policy, 10% of the annual
bonus is subject to ESG
objectives.
2024/25
ambition
Three year TSR performance to be in
the upper quartile of the FTSE 350 Real
Estate Super Sector, excluding agencies
and operators.
Three year total accounting return to be in the
upper quartile of FTSE 350 Real Estate Super
Sector, excluding agencies and operators.
One year TPR outperformance against
MSCI benchmark.
Deliver and sustain EPRA
earnings per share growth
and dividend progression.
Deliver like for like
income growth.
Maintain high weighted
average unexpired lease
term targeting >ten years.
Maintain high occupancy
across the investment
portfolio, targeting in excess
of 95%.
Improve the proportion of our
portfolio with an EPC rating of
A to C to above 90%.
Financial performance
indicators
We monitor other financial
performance indicators in
respect of LTV, debt maturity
and cost of borrowing.
Risk management
The achievement of our
eight KPIs is influenced
by the identification
and management of risks
which might otherwise
prevent the attainment
of our strategic priorities.
The relationship between
our principal risks,
strategic priorities and
KPIs is reviewed in the Risk
management section.
Remuneration
The table on page 143
shows how our KPIs are
reflected in and therefore
aligned to remuneration and
incentive arrangements.
ESG and Sustainability
Our Responsible Business
and ESG review on pages
55 to 85 sets out our
performance over the
year including information
on our Net Zero Carbon
ambitions, green financing,
EPC ratings, BREEAM
rating on our portfolio and
developments and carbon
reduction performance.
ESG Key performance
indicator
Last year we introduced a
new KPI that measures the
proportion of our portfolio
with an EPC rating of A to
C. This is one of the targets
under our sustainability-
linked revolving credit
facilities and a good measure
of our ESG progress.
Read more in
Financial review
page 47
Read more in Risk
management and internal
controls page 86
Read more in
Remuneration Committee
report page 143
Read more in Responsible
Business and ESG review
page 55
Read more in Responsible
Business and ESG review
page 60
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202433
Financial
statements
Governance
Strategic
report
A review of our performance
Property
Mark Stirling
Asset Director
Valentine Beresford
Investment Director
review
Portfolio highlights Investment highlights
19 years
WAULT
£3.2bn
Assets added in year
£340m
Net contracted rent p.a.
£185m
Disposals in year
Our activity has delivered
strong like for like rental
growth and enhanced our
income metrics and income
growth prospects.”
Mark Stirling
Asset Director
Our investment activity in the
year has added £3.2bn of high
quality assets and doubled the
size of our portfolio.”
Valentine Beresford
Investment Director
Read more about our portfolio on page 35
LondonMetric Property Plc Annual Report and Accounts 202434
Investment activity
Investment activity in the year was
dominated by opportunistic M&A
The merger with LXi REIT plc (‘LXi’) added
£2.9 billion of assets with a rent roll of
£178 million per annum and a very long WAULT
of 26 years. The 280 properties focus on our
long income sectors of entertainment and
leisure, healthcare and convenience, and were
acquired at a NIY of 5.7% with high certainty
of income growth from fixed or inflation linked
rent reviews which apply to 98% of the income.
The CT Property Trust (‘CTPT’) acquisition added
a complementary portfolio of 33 assets valued
at £285 million, with 57% weighted to logistics,
23% to long income and the remainder
predominantly in offices. The portfolio had a
WAULT of seven years and was acquired at a
NIY of 6.0% with strong reversionary potential
through open market rent reviews and asset
management initiatives. 79% of the assets
acquired were located in London and the
South East.
All other acquisitions related to opportunistic
logistics purchases of £36 million, transacted at
a NIY of 8.0%.
Disposals in the year totalled £185 million,
reflecting a NIY of 5.3% and with a WAULT
of six years. These were transacted at 1%
below prevailing book value. Two thirds of
the sales related to logistics assets. Sales also
included foodstores as well as non core assets
comprising six offices, sold for £23.4 million,
and four retail parks, sold for £9.7 million.
These non core assets had been acquired either
through the CTPT transaction or the Mucklow
merger in 2019.
Post year end, we have sold £75 million at a
7% premium to book value. In addition, we
have £107 million of sales in legals. We have
now sold £33 million of assets from the CTPT
portfolio, representing 47% of the CTPT assets
that we deemed non core, and have also sold
£55 million from the LXi portfolio. We have also
acquired £51 million of assets post year end.
1 Logistics 43%
2 Entertainment & leisure 21%
3 Convenience 17%
4 Healthcare & education 16%
5 Other 3%
Our portfolio
(by value)
£6.0bn
Our investment activity during the year
resulted in the portfolio doubling in size from
£3.0 billion to £6.0 billion, a reduction in our
logistics exposure from 73% to 43% and an
increase in our long income weighting from
24% to 54%.
Within long income, our entertainment and
leisure weighting grew materially following
the addition of a number of theme parks and
hotels from the LXi transaction, which also
added exposure to the healthcare sector for the
first time, primarily through the addition of a
number of hospitals. The remaining 3% of the
portfolio mainly consists of two multi-let retail
parks and 13 offices, the latter falling to nine
following post year end sales which includes the
sale of two former LXi offices in Scotland for
£36.6 million.
Portfolio delivered a TPR
of 4.7%
The portfolio delivered a total property return of
4.7% over the year outperforming MSCI by 570
bps. ERV growth was 5.7%, offsetting 26 bps
of yield expansion to deliver a 0.2% property
valuation decrease.
The portfolio’s EPRA topped up net initial yield
is 5.3% (2023: 4.6%) and its equivalent yield
is 6.3% (2023: 5.4%). The yield increases
were mostly due to the addition of LXi’s higher
yielding assets.
Cumulative Property Return
(Rebased, 2018=100)
109
2019
115
2020 2021
130
2022
166
2023 2024
147
100
110
120
130
140
150
160
170
153
Structurally aligned portfolio
5
4
3
2
1
Logistics
Long income
Portfolio aligned to structurally supported sectors
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202435
Financial
statements
Governance
Strategic
report
A review of our performance
Property review
continued
+£7.5m
Rental uplift (p.a.) from asset management in
the year
+40%
rental uplift on urban logistics open market
rent reviews
Our portfolio metrics have been
enhanced in the year
Net contracted rent increased over the year
from £145.2 million to £339.7 million whilst the
portfolio’s WAULT increased from 12 years to
19 years (18 years to first break), providing very
strong income security with only 6% of income
expiring within the next three years.
Occupancy also increased to 99.4% and our
gross to net income ratio of 99.0% continues
to reflect the portfolio’s very low property costs
and minimal operational requirements.
Contractual rental uplifts apply to 79% of our
income, which has increased from 63% a year
ago, providing high certainty of income growth:
• 53% is index linked: 28% is RPI linked, whilst
25% is CPI or CPIH linked; and
• 26% is subject to fixed uplifts, with a
weighted average uplift of 2.6% per annum.
At 41% of income, a significant number of
contractual reviews are annually compounded,
compared to just 16% in 2023.
The remaining 38% of contractual rent is
reviewed on a five yearly basis with index linked
rent reviews subject to a range of collars and
caps which are typically between 1% to 4%
over a five year period such that:
• For RPI linked reviews, at 22% inflation over
a five year period (equivalent to 4% p.a.),
94% of inflation is captured; and
• For CPI linked reviews, at 16% inflation over
a five year period (equivalent to 3% p.a.),
100% of inflation is captured.
The remaining 21% of our income is subject to
market rents and relates mainly to our urban
logistics portfolio where we are capturing
average rental growth of 5%+ per annum.
Asset management continues to grow
our rental income materially
During the year, we undertook 151 occupier
initiatives adding £7.5 million per annum of rent
and delivering like for like income growth of
5.5%.
Leasing activity consisted of 53 new leases or
regears, mostly on our urban logistics assets,
adding £2.7 million p.a. of rent with a WAULT of
12 years. Regears on urban logistics delivered an
average rental uplift of 37%.
98 rent reviews were settled adding £4.8 million
p.a. of rent at an average of 19% above previous
passing on a five yearly equivalent basis:
• Contractual rental uplifts, where 77 fixed and
index linked reviews were settled, delivered
an uplift of £2.5 million at an average of 17%
above passing on a five yearly equivalent
basis; and
• Open market rent reviews, where 21
reviews were settled, delivered an uplift of
£2.3 million at an average of 30% above
passing. Open market reviews on urban
logistics continued to see substantial
increases and were settled on average at
40% above passing.
Looking forward, with the benefit of a high
proportion of contractual uplifts, we have
visibility on £23 million of rental growth over the
next two years from rent reviews and regears.
Since the year end, we have signed lettings and
rent reviews that add £2.4 million p.a. of rent.
The portfolio’s WAULT
increased from 12 years
to 19 years, providing
very strong income
security.”
Reliable, repetitive & growing Income
Rent reviews by type
1
2
3
4
1 RPI linked 28%
2 CPI linked 25%
3 Fixed uplifts 26%
4 Market reviews 21%
LondonMetric Property Plc Annual Report and Accounts 202436
Our investment and asset management actions
over a number of years have increased the
resilience of our portfolio by aligning our income
to structurally supported sectors and assets that
are in demand. The LXi deal has increased our
income diversification through the addition of
new sectors where we believe there are strong
structural tailwinds.
A major focus for us over recent years has also
been to diversify our income and improve the
granularity of our occupier base with our top
ten occupiers representing just 28% of our
income at the start of the year. The LXi deal
has increased our top ten exposure to 37%
and added Ramsay Health Care and Merlin
Entertainments as our two largest occupiers,
accounting for 20% of net contracted rent.
These are strong credits with highly robust
business models occupying key operating
assets and investing materially in their estate.
Engagement with all of LXi’s top occupiers
since the merger has been very positive and we
expect to develop these relationships through
further asset management activity which
should enhance our real estate. Equally, we will
look to reduce our exposure to these occupiers
over time through our disposal activity.
Occupier survey
Our latest occupier survey in March 2024
again demonstrated strong contentment.
We continue to receive very strong feedback.
91% of occupiers (weighted by income prior
to the LXi merger completing) were contacted
and 77 responses were received representing
46% of income.
We scored an average of 9.0 out of 10.0 for
whether occupiers would recommend us as a
landlord, which is up from 8.7 in the previous
year. In terms of satisfaction with our properties,
the score was also higher at 8.5 (2023: 8.1)
underscoring our desire to be a partner
of choice.
Strong and diversified income with high satisfaction
Occupier base by
type of occupier
(% of income)
Top ten occupiers (% of income)
Ramsay Health Care 11.0%
Merlin Entertainments 9.0%
Travelodge 6.4%
Primark 1.8%
Tesco 1.7%
Great Bear 1.6%
Amazon 1.4%
SMG Europe 1.4%
Q-Park 1.4%
Co-op 1.3%
Total 37.0%
Merlin Entertainments
Merlin is the global leader in branded entertainment
destinations with 62 million guests per annum.
It operates 141 attractions in over 20 countries, including
Alton Towers, Thorpe Park and Warwick Castle that
are owned by LondonMetric. It recorded revenues of
£2.1 billion in 2023. Merlin has an investment grade
rating of ‘Baa2’ from Moody’s and ‘BBB+’ by S&P Global.
It is majority owned by the Lego family with other
investors including Blackstone, Wellcome Trust and
Canada Pension Plan Investment Board.
Ramsay Health Care
Ramsay provides quality healthcare globally with
over eleven million admissions and patient visits per
annum in over 500 locations. Ramsay is listed on the
Australian Stock Exchange valued at £6 billion. In the
UK, Ramsay has 34 acute hospitals caring for over
200,000 patients p.a. and employing 7,000 people.
UK revenues in the last financial year were £1.1 billion
and, in the last six month period, it reported 15%
revenue growth driven by a strong increase in NHS
admissions as well as private patient volumes.
22%
27%
18%
16%
3%
14%
Mega & regional logistics
Urban logistics
Entertainment & leisure
Convenience
Healthcare & education
Other
Logistics
Long Income
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202437
Financial
statements
Governance
Strategic
report
Impact of LXi merger on our ESG strategy
In order to implement environmental initiatives
and ultimately achieve net zero carbon on our
buildings, we are reliant to a certain extent on
our occupiers sharing similar environmental
ambitions to us. Our full repair and insuring
(‘FRI’)/NNN lease structure and our long lease
lengths mean that if our occupiers are not pro-
actively improving buildings then we could only
really intervene at expiry.
The acquisition of the LXi assets has increased
our reliance on our occupiers’ environmental
ambitions materially given that their WAULT
of 26 years is twice that of the LondonMetric
only portfolio. It has also introduced assets that
require great intensity of management by the
occupier, as well as properties that have lower
EPC ratings and fewer building certifications.
Consequently, the portfolio’s EPC ratings fell
over the year with ‘A’–‘C’ ratings falling from
90% to 85%, with those rated ‘A’–‘B’ also
falling from 51% to 49%. However, excluding
LXi assets, the portfolio ‘A’-’C’ rating actually
increased to 91%. Whilst not a specific target
for us, the proportion of assets with BREEAM
‘in construction’ certification of ‘Very Good’ or
‘Excellent’ has also fallen from 31% to 19%.
Whilst we are still reviewing the LXi portfolio,
there has been a significant amount of work
and energy audits undertaken to assess EPC
improvements and understand our ability to
reach net zero carbon. With a greater occupier
concentration, it is easier to collaborate more
strategically with occupiers and we have good
ongoing dialogue with key LXi occupiers, which
will allow us to further understand and shape
asset interventions. This should translate into
better ratings over time and we are encouraged
by the net zero carbon commitments of
these occupiers.
In terms of LondonMetric’s wider ESG strategy
and targets, the LXi merger has necessitated
a delay to publishing our net zero pathway
which was planned this year. We will revisit our
previous Net Zero ambition to take account of
the LXi transaction and the outputs of LXi’s net
zero pathway that had been published before
the merger. In addition, we will look to reset our
ESG approach and targets.
Progress in the year
Net zero (in operations) – We had set an
ambition to be net zero in operations by the
end of 2023, with any residual landlord (Scope
1&2) carbon emissions offset. We have made
good progress in reducing our own emissions
as far as possible and ensuring that 97% of our
energy supplies are from renewable sources.
In order to incorporate LXi, we are reviewing our
ambition, instead targeting carbon neutrality for
calendar year 2024.
EPCs – We undertook EPC assessments on
1.2 million sq ft (excluding LXi assets) which
included some enhanced energy assessments.
So that we comply with anticipated MEES
regulation, we have progressed action plans for
all assets rated below ‘C’ and have mandated
that a minimum ‘B’ rating is achievable on all
new leases, regears and refurbishments.
Net zero audits – As we focus on understanding
how our buildings can achieve net zero, we
undertook net zero audits across 0.4 million sq
ft, in addition to the 2.5 million sq ft of audits
obtained on the CTPT and LXi portfolios.
Occupier data – As part of measuring our
occupiers’ emissions at our buildings (our Scope
3 emissions which represent most of our overall
emissions), we increased occupier energy data
coverage from 68% last year to 72%. In the
year, we put in place a dedicated ESG platform
that will help us to access data automatically,
achieve higher data coverage and provide
better analysis. Using this data, we have also
expanded CRREM analysis across our portfolio
to further understand how it aligns with key net
zero pathways.
Green lease clauses – 80% of our leases signed
in the year contained green lease clauses.
Solar PV – We continue to engage with
occupiers on adding further solar installations
to our portfolio, adding three PV systems in the
year. See the next page for further details.
Physical risks – We continue to embed climate
risk analysis and portfolio management,
and plan to undertake an updated portfolio
assessment in the next year.
Further reporting on ESG is provided
on pages 55 to 85
We continue to improve our ESG
focus and sustainability credentials
We recognise the importance of a
comprehensive ESG strategy which includes
minimising the environmental impact of
our business, maximising energy efficiency
of our assets and improving the climate
resilience of our portfolio.
As part of our drive to upgrade the quality of
our assets, we have invested in high quality
buildings as well as focused on working
with our occupiers to progress energy
efficiency and clean energy initiatives,
mainly from solar PV, LED lighting upgrades,
roof improvements and degasification.
We see ourselves as strong stewards of
underinvested or poorer quality assets with
the necessary expertise and appetite to
materially improve buildings.
The alignment of our portfolio to NNN
income assets has meant that our landlord
Scope 1 and 2 emissions have fallen
considerably to very low levels, the energy
intensity of our buildings has been lower
than for many other property sectors and
the ability to improve assets’ energy ratings
and carbon emissions has been relatively
easier and typically funded by our occupiers.
This has been reflected in our portfolio’s
EPC rating improvements over the years
and our de minimis defensive capital
expenditure required for environmental
upgrades, with any capex achieving higher
rents or paid for through normal lease
incentive arrangements.
Our portfolio improvements as well as our
focus on ESG has been rewarded through
a material improvement in our Global Real
Estate Sustainability Benchmark (‘GRESB’)
survey score in the year from 64 to 76, which
resulted in a three star rating. In other ESG
benchmark assessments, we increased our
rating by MSCI to ‘AA’, received a ‘C-’ score
from ISS, which is above the peer group,
maintained our Gold Award by EPRA sBPR,
continue to be included in the FTSE4Good
Index and responded to CDP for the first
time in the year.
ESG
A review of our performance
Property review
continued
LondonMetric Property Plc Annual Report and Accounts 202438
Huntingdon
1.9 MWp of solar has been
installed on a warehouse let to
AM Fresh that LondonMetric
funded the development of
in 2022.
The system will provide AM
Fresh with c.28% of its annual
energy needs and is expected
to save c.500 tonnes p.a.
of CO
2
emissions.
Bicester
302 kWp has been installed on
a warehouse let to Greencore
Homes, a builder of climate
positive homes.
The SmartGrid system, which
includes a 100kW/200kWh
battery storage system, is
expected to meet c.40% of
Greencore’s annual energy
needs. The installation is
expected to save c.39 tonnes p.a.
of CO
2
emissions.
Coventry
275 kWp of solar has been
installed on a warehouse let to
Aubrey Allen.
The system will provide Aubrey
Allen with c.25% of its annual
energy needs.
Future projects
3.2 MWp
Further potential additional
solar from near term
initiatives
Solar PV installations provide
our occupiers with the benefit
of lower energy costs while
meeting their own ESG and
Net Zero ambitions through
using renewable energy.
ESG in action
In the year, three solar PV systems were added to our urban logistics portfolio in Coventry,
Bicester and Ely totalling 0.8 MWp capacity, which together with two projects in Huntingdon
(1.9MWp) and Biggin Hill (1.2MWp) that completed post year end, have increased total installed
capacity from 3.6MWp last year to 7.6 MWp today. Key projects that completed recently are
shown below.
0.8MWp
Solar added in the year
7.6MWp
Installed across portfolio
Case Study
Solar PV installations
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202439
Financial
statements
Governance
Strategic
report
Overview
Our logistics assets are spread across the urban,
regional and mega sub-sectors and valued at
£2,563 million, with a WAULT of 12.4 years and
occupancy of 99.4%.
Urban logistics has been our strongest
conviction call for a number of years and our
urban assets are now valued at £1,563 million,
located across 147 locations and accounts for
61% of our logistics portfolio.
Our logistics assets delivered a total property
return over the year of 4.6%, with urban and
regional at 4.9% and 4.3% respectively, whilst
mega was 4.1%.
Over the year, we saw a small outward yield
expansion of 28bps across our logistics
portfolio. However, our actions and continued
market rental growth, as reflected in the logistics
portfolio’s ERV growth of 6.0%, resulted in a
valuation decrease of just 0.2% for logistics.
Our logistics assets are valued at a topped up
NIY of 4.7% and an equivalent yield of 5.7%.
Strong rental growth potential
Logistics continues to experience high occupier
demand and attractive rental growth with
material reversionary potential embedded.
In urban logistics, rental growth remains strong,
driven by severely restricted supply as well as
ongoing broad occupier demand. Whilst the
WAULT on our urban assets of 11 years is lower
than for mega or regional, these assets benefit
from significant near term rental reversion, with
average ERVs 25% above average passing rents
and a high proportion of open market reviews.
Furthermore, with 65% of our urban portfolio
located in London and the South East and a
further 22% in the Midlands, we expect these
locations to experience attractive ongoing
ERV growth.
Our regional and mega assets also have high
reversionary potential with ERVs 26% above
average passing rents. However, with most of
these reviews either inflation linked or fixed, our
ability to capture the full reversionary potential
over the short to medium term is more limited
given the longer leases on these assets.
Our logistics asset management added
£6.4 million of rent in the year, with regears and
rent reviews delivering rental growth of 23%
ahead of previous passing on a five yearly basis.
As at 31 March 2024
1
2
3
Urban Regional Mega
Typical warehouse size
Up to
100,000 sq ft
100,000 to
500,000 sq ft
In excess of
500,000 sq ft
Value
1
£1,563m £690m £310m
WAULT 11 years 15 years 16 years
Average rent (psf) £8.60 £6.80 £5.90
ERV (psf) £10.80 £8.20 £8.20
ERV growth 6.8% 4.7% 5.7%
Topped up NIY 4.6% 5.1% 4.3%
Contractual uplifts 49% 82% 100%
Total property return 4.9% 4.3% 4.1%
1 Including developments
Logistics investment activity
dominated by M&A
Logistics acquisitions in the year totalled
£429.9 million. The CTPT and LXi transactions
added £394.0 million and comprised 27
logistics assets acquired with a NIY of 5.1%, a
reversionary yield of 5.7% and with a WAULT of
15 years. Other logistics acquisitions comprised
three opportunistic deals which totalled
£35.9 million at a net initial yield of 8.0%.
Logistics disposals in the year totalled
£109 million, reflecting a NIY of 4.7% and sold
with a WAULT of four years. These sales were
in response to attractive offers and reflected
a conscious effort in the first half of the year
to sell down shorter let assets, predominantly
multi-let industrial, where capex risks were
heightened and rental growth was less certain.
Post year end, we have acquired £51.4 million
of urban logistics across eight assets at a NIY
of 6.0% and a reversionary yield of 6.5%.
The assets are located in Cardiff, Milton Keynes,
York, Reading, Derby, Bolton and Huntingdon.
Logistics
Logistics portfolio
1
2
3
1 Urban Logistics 61%
2 Regional Logistics 27%
3 Mega Logistics 12%
A review of our performance
Property review
continued
LondonMetric Property Plc Annual Report and Accounts 202440
Other logistics investments
LXi’s logistics assets – 2.0 million sq ft
£231.7 million of logistics was acquired
through the LXi merger. The 17 assets
generate £13.2 million p.a. of rent. They were
acquired at a NIY of 5.3% and all of the rent
benefits from contractual uplifts. The assets
have a WAULT of 22 years and key occupiers
include Bombardier, Gestamp, Stobart and
Great Bear. 37% are located in London and
the South East
Doncaster – 264,000 sq ft
A regional logistics warehouse was acquired
for £21.2 million, reflecting a NIY of 6.3%,
with a WAULT of 13 years. The warehouse
is let to Next at a rent of £1.4 million p.a.,
which equates to a low rent of £5.37 psf.
The lease benefits from annual fixed rental
uplifts of 2.5%
Crewe – 213,000 sq ft
A regional logistics development was
acquired for £13.0 million. It consists of five
units ranging from 18,000 to 60,000 sq
ft. The developer has taken a three year
leaseback of the site at a rent of £1.5 million
p.a., reflecting a net initial yield of c.11%.
A yield on cost of c.8% is expected once the
development is completed and fully let
Leeds – 15,000 sq ft
An urban logistics warehouse was acquired
for £1.7 million with a WAULT of six years
THE HARROW WAY
St Michaels Retail Park
(developed 2018)
HOUNDMILLS
INDUSTRIAL ESTATE
BASINGSTOKE
TOWN CENTRE
Winchester Road (A30)
connects with the M3
Lister Road
LISTER ROAD
INDUSTRIAL ESTATE
LondonMetric’s 59,000 sq ft
urban warehouse let to BUNZL
The ten urban assets comprise 0.8 million sq ft and generate £8.4 million p.a. of rent.
They were acquired at a NIY of 4.8% and a reversionary yield of 5.9%.
We expect this portfolio to generate strong income growth, particularly given that all of the
assets are located in the South East, where rental growth continues to be high, and 100% of
rent reviews are on an open market basis.
The assets acquired had a WAULT of seven years and key occupiers include Booker, Bidvest,
Bunzl and Diebold Nixdorf.
CT Property Trust (CTPT)
Logistics acquisitions
South East locations
– Basingstoke
– Bracknell
– Colnbrook
– Slough
– Southampton
– Eastleigh
– Banbury
– Hemel
– Milton Keynes
– Theale
Our merger with CTPT added £162.3 million of high quality urban logistics assets. Two of
the assets are let to BUNZL, a specialist international distribution and services group. One of
these warehouses is a modern 59,000 sq ft warehouse on Lister Road in Basingstoke which
has three years left on the lease and is highly reversionary, providing near term opportunity
to extend the lease and increase the rent.
£430m
Logistics assets added in the year
Key logistics occupiers
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202441
Financial
statements
Governance
Strategic
report
£109m
Logistics sold in the year
4 years
WAULT on sales
Project STAG
Disposal
Logistics disposals
A £41 million portfolio of four multi-let industrial estates was sold in the year
Midlands – 435,000 sq ft
Four multi-let urban properties in
Birmingham and Rugby were sold as part of
a portfolio comprising 47 units. They were
sold for £40.5 million, reflecting a NIY of
6.2%, with a WAULT of five years and had
been previously acquired as part of the
Mucklow acquisition in 2019 (see opposite)
Solihull – 142,000 sq ft
A DHL warehouse was sold for
£20.5 million, reflecting a NIY of 4.2% and
with a WAULT of six years
Croydon & Oxford – 52,000 sq ft
Multi-let urban warehousing across two
properties were sold for £17.5 million.
They comprised 25 units with a WAULT of
five years and had been acquired through
the Savills IM portfolio in 2021
Stoke – 141,000 sq ft
A warehouse let to Pets at Home was sold
for £14.2 million, reflecting a NIY of 5.5%
and with a WAULT of less than six months
Croydon – 28,000 sq ft
An urban warehouse let to HTC with a
WAULT of two years was sold for £8.1 million
Leyton – 21,000 sq ft
A vacant urban warehouse in Leyton was
sold for £8.3 million
Our logistics disposals in the year were
largely in response to attractive offers and
reflected a conscious effort in the first half
of the year to sell down shorter let assets,
predominantly multi-let industrial.”
The estates totalled 435,000 sq ft across 47 units and generated £2.7 million p.a. of rent, with
a WAULT to first break of 2.9 years. The Midlands based properties were previously acquired
as part of the Mucklow acquisition for £30.9 million. The sales crystallised an ungeared IRR
of 13% and were in line with book values. They delivered returns materially above our initial
expectations and represented our exit from highly operational multi-let industrial estates.
A review of our performance
Property review
continued
LondonMetric Property Plc Annual Report and Accounts 202442
Logistics lettings and regears
Logistics lettings and regears in the year were
signed on 0.8 million sq ft of urban logistics,
adding £2.0 million per annum of income,
with a WAULT of 12 years. Regears contributed
£1.5 million, representing an uplift of 37%
against previous passing rent.
The largest deals comprised:
• A 190,000 sq ft regear with Tesco at
Croydon where the lease was extended
by ten years to 15 years and a rent review
was settled;
• A 70,000 sq ft regear at Maidstone where
the WAULT was extended by four years to
six years and the rent increased by 20%;
• A 66,000 sq ft letting at Castle Donnington
where the occupier vacated and a new
ten year lease was signed at 37% ahead of
previous passing;
• A 61,000 sq ft regear with Bunzl at Theale, a
CTPT asset, where the lease was extended
to ten years at a rent 44% higher than
previous passing;
• A 51,000 sq ft regear with Fedex at Crawley
where the lease was extended to ten years
at a rent 47% higher than previous passing.
As part of the regear, we agreed to contribute
towards the cost of new roof which has the
ability to take solar PV. This would have the
potential to mitigate the occupier’s energy
usage and allow gas to be removed from
the site. Reflecting the importance of the
building to the occupier, it is also making
further improvements to the building itself;
• A 50,000 sq ft letting to Nyetimber in
Uckfield with a lease length of 15 years; and
• A 49,000 sq ft regear with Flender in Leeds
where the lease was extended to ten years.
Crawley
case study
1
Space Gatwick, Faraday Road
At our three unit BREEAM Excellent logistics
asset of 109,000 sq ft that we developed in
2018, we settled a five yearly RPI linked rent
review in the year with Boeing which increased
the rent by 19%.
Post year end, we have agreed a five year
regear with Amazon and increased the rent
by 36%.
2
FedEx, Newton Road
Our 51,000 sq ft warehouse let to FedEx
was acquired by us in 2017 at a 4.8% NIY,
reflecting a rent of £6.40psf. A rent review
was settled in 2019 at £9.00psf and, with
the lease close to expiry, we extended
the lease to ten years at a rent of over
£13.00psf, an uplift of 107% since acquisition.
Environmental upgrades are expected to
materially improve the asset’s EPC rating and
allow the occupier to advance its Net Zero
Carbon ambition at the property.
Logistics Asset Management
Logistics rent reviews
Logistics rent reviews in the year were settled
across 4.2 million sq ft, adding £4.4 million
per annum of income at 21% above previous
passing rent, on a five yearly equivalent basis.
These reviews comprised:
• 27 urban reviews settled at 31% above
passing rent on a five yearly equivalent basis
with open market urban reviews delivering a
40% uplift;
• Nine regional contractual reviews settled at
18% above previous passing on a five yearly
equivalent basis; and
• One fixed mega review settled at 8% above
passing rent on a five yearly equivalent basis.
+£6.4m
Additional rent on logistics deals
+21%
Increase in rent from logistics rent reviews
Our investment in urban logistics has seen us acquire and develop several warehouses in
Crawley with a value of nearly £100 million. They have delivered strong rental growth as
shown in recent asset management activity.
1
2
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202443
Financial
statements
Governance
Strategic
report
Overview
Long income assets with low operational
requirements have always represented an
important part of the portfolio.
These assets are let on long leases, to strong
operators in structurally supported sectors that
are benefiting from the changes in the way
people live and shop and are insulated from
structural dislocation.
Over the year, the value of our long income
assets grew from £713 million to £3,244 million,
representing 54% of our total portfolio which is
up from 24% last year. These assets are 100%
occupied, let with a WAULT of 24 years and
generate an attractive topped up NIY of 5.8%
with 90% of income subject to contractual
rental uplifts.
Long income delivered a total property return in
the year of 4.9% with ERV growth of 5.0% and
22 bps of equivalent yield outward movement.
M&A has added exposure to attractive
new long income sectors
The LXi merger added 260 long income assets
valued at £2,570 million with a NIY of 5.8% and
a WAULT of 26 years. Almost three quarters
of these assets related to sectors in which we
had no prior exposure, specifically theme parks,
budget hotels and hospitals, but where we see
attractive tailwinds from the trends towards
staycations, experiences and the need for
private healthcare provision.
As well as benefiting from these tailwinds,
we believe that these assets are also seen
as mission critical or key operating assets by
occupiers who are investing heavily in their
estate to ensure that their businesses remain fit
for purpose.
In addition to the LXi merger, the CTPT
acquisition also added £65.1 million of long
income assets in the year. These were acquired
at a NIY of 6.6% and with a WAULT of seven
years. Key occupiers included Halfords, Aldi,
Wickes, B&M and Pets at Home.
As at 31 March 2024
1
2
3
Entertainment &
leisure Convenience
Healthcare &
education
Value
1
£1,272m £1,012m £960m
Contracted rent £83m £61m £55m
WAULT 36 years 14 years 16 years
Topped up NIY 6.1% 5.9% 5.4%
Contractual uplifts 97% 72% 100%
Total property return 7.7% 4.3% 27.8%
1 Including developments
Disposals activity
We sold £42.8 million of long income
properties largely in response to opportunistic
bids for our assets, particularly convenience
properties, and as part of our continued sell
down of non core assets previously acquired
through portfolio acquisitions. These assets
were sold at a NIY of 5.5% and with a WAULT of
13 years. They comprised:
• Three foodstores in Durham (primarily
LIDL), Malmesbury (Waitrose) and Leicester
(Aldi), sold for £14.1 million, £9.6 million and
£6.0 million respectively;
• A B&Q store in Nelson, sold for £4.7 million;
• A car show room in Newbury, sold for
£3.8 million;
• An asset at London Bridge, sold for
£3.1 million;
• A roadside asset in Harrogate, sold for
£1.1 million; and
• A pub, sold for £0.6 million.
Post year end, we have sold a further
£29.0 million of long income assets including
a 106,000 sq ft Asda foodstore in Scotland (a
former LXi asset) and a 41,000 sq ft asset in
Ipswich let to Wickes, Topps Tiles, McDonalds
and Costa.
Long income portfolio review
Long income portfolio
1
2
3
1 Entertainment & leisure 39%
2 Convenience 31%
3 Healthcare & education 30%
A review of our performance
Property review
continued
LondonMetric Property Plc Annual Report and Accounts 202444
Entertainment & leisure represents 39%
of our long income portfolio:
Theme parks – Consists of Thorpe Park, Alton
Towers, Warwick Castle and Heide Park (in
Germany). These assets represent 45% of
this sub sector’s weighting and are let with a
WAULT of 53 years to Merlin Entertainments
with a mixture of annual CPI+0.5% rent
reviews and annual fixed rent reviews of 3.3%
per annum. See page 37 for further details
on Merlin.
Hotels – Consists of 78 budget hotels, with
69 let to Travelodge. These assets represent
32% of this sub sector’s weighting and are
let with a WAULT of 25 years, mainly on
five yearly CPI+0.5% / RPI linked reviews.
They are located nationwide but focused on
roadside locations.
Other – Comprises pubs, cinemas, garden
centres and events venues including the AO
Manchester Arena mostly let to SMG Europe
for a further 21 years.
Convenience assets represents 31%
of our long income portfolio:
Foodstores – 48 assets let at an average rent
of £17.50 psf with key occupiers including
Waitrose, Co-op, Costco, Tesco and Aldi.
These are predominantly smaller format
grocery with an average area of c.30,000 sq
ft. Foodstores represent 45% of convenience.
NNN retail – 32 assets, primarily single
or cluster assets let to discount, essential,
electrical and home retail occupiers such as
B&M, Currys, DFS, Dunelm, Home Bargains,
Pets at Home and The Range at an average
rent of £18.30 psf. These assets typically
benefit from high alternative use values.
NNN retail represents 26% of convenience.
Roadside – 69 assets, primarily convenience
stores with attached petrol filling stations,
drive-thru coffee outlets and automated
car washes. Key occupiers include Co-
op, IMO, BP, McDonalds, MFG and
Starbucks. Roadside represents 15% of
convenience weighting.
Other – Comprises 34 trade/DIY stores and
autocentres (with key occupiers including
Halfords, Kwik Fit, Topps Tiles and Wickes)
as well as ten car parks let to Q-Parks with a
WAULT of 30 years and annual rent reviews
linked to RPI.
Healthcare & education represents 30%
of our long income portfolio:
Hospitals – 12 private hospitals make up
78% of this sub-sector. 11 are let to Ramsay
Health Care with a WAULT of 13 years and
annual fixed rent reviews of 2.75%. The two
largest hospitals are in Sawbridgeworth
and Chelmsford.
Ramsay is one of the leading independent
healthcare providers in England. Ramsay UK
has a network of 34 acute hospitals and
day procedure clinics in England providing a
comprehensive range of clinical specialities
to private and self-insured patients, as well
as patients referred by the NHS. Ramsay UK
cares for over 200,000 patients per year
and employs more than 7,000 people. It is
seeing strong growth in both private and NHS
volumes. 97% of its facilities are rated ‘Good’
by the Care Quality Commission in the UK.
Care Homes – 27 care homes represent
9% of the sub sector with the key occupiers
comprising Bupa and Priory.
Education – Comprises two training centres
in Milton Keynes and the West Midlands let
to Compass as well as a number of children’s
nurseries and adventure centres, and one
student accommodation asset.
Healthcare
& education
Key Occupiers
– Merlin
– Travelodge
– SMG Europe
– Odeon
– Premier Inn
Key Occupiers
– B&M
– Co-op
– Costco
– DFS
– Dunelm
– Halfords
– Home Bargains
– Starbucks
– Wickes
– Waitrose
Key Occupiers
– Ramsay
– Nightingale Hospital
– Bupa
– Priory
Entertainment
& leisure
Convenience
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202445
Financial
statements
Governance
Strategic
report
At our Bedford Logistics Park, where we have
developed five logistics warehouses, we identified
the potential for a coffee drive-thru outlet.
Planning was submitted in 2023 for the 1,500
sq ft drive-thru to be located on an area that was
previously used as the site compound for the
logistics development.
The council approved the development and we
signed a 20 year lease with Starbucks at a rent of
£0.1 million p.a.
The building is expected to have an EPC rating of
‘A’ and will provide 20 car parking spaces and up
to eight ultra-fast electric car charging bays which
we have leased to InstaVolt. The development will
improve the local landscaping with mixed planting
to encourage biodiversity.
+£0.8m
Additional rent from long income asset
management
In the year we signed 72 deals which added
£0.8 million per annum of additional rent.
Lettings and regears
15 lettings or regears were signed with a WAULT
of 11 years, adding £0.4 million per annum of
income. The deals comprised:
• Three lettings signed with a WAULT of 14
years, comprising two new Starbucks at
Bedford and Birmingham and a McDonalds
in Ipswich;
• Eight regears signed with a WAULT of 11 years
including deals with Dunelm, Argos and Pets
at Home; and
• Four EV charging lettings to InstaVolt and
MFG with a WAULT of 20 years.
Rent reviews
Rent reviews were settled on 57 long income
assets in the year generating an uplift of
£0.4 million per annum at 16% above previous
passing on a five yearly equivalent basis.
Most of the reviews were annual inflation linked
or fixed uplifts.
Post year end, we have settled fixed uplift rent
reviews across all of our 12 hospitals adding
£1.1 million of additional rent.
Bedford Starbucks
Case study
We have recently partnered with InstaVolt and
MFG to deliver EV chargers across our long income
portfolio. The partnership with InstaVolt included
an initial ten sites and, over the year, they installed
25 new chargers across five of our properties in
Birmingham, Evesham, Gateshead, Telford and
Burton-on-Trent. The partnership is currently
providing a rental income of £0.1 million p.a.
to LondonMetric.
At the Birmingham site, eight new rapid chargers
were installed in the year (see picture above). The EV
hub is located at Apex Retail Park which is only ten
minutes from Birmingham City centre. The chargers
are available 24/7 and are ideally situated for drivers
heading in and out of the city.
EV charging
Case study
A review of our performance
Property review
continued
Long income asset management
LondonMetric Property Plc Annual Report and Accounts 202446
Financial
review
A review of our performance
Martin McGann
Finance Director
Our corporate
acquisitions of
CTPT and LXi have
transformed the
portfolio, doubling
in size to £6.0 billion
and increasing our net
contracted rent roll by
134% to £340 million.”
Highlights
£121.6m
EPRA earnings
10.9p
EPRA EPS per share
We have continued to operate within a
challenging macroeconomic environment this
year, where elevated interest rates and higher
borrowing costs have persisted for longer than
expected, severely impacting liquidity across
the real estate market. We have responded by
focusing our attention on disposals to provide
optionality and manage our LTV and the M&A
market, where through the support of our
shareholders, we have had notable successes.
Our corporate acquisitions of CTPT and LXi
have transformed the portfolio, doubling in
size to £6.0 billion and increasing our net
contracted rent roll by 134% to £340 million.
Our merger with LXi provides better access to
capital through scale, cost synergies and income
security and longevity that continues to support
our progressive dividend.
Our earnings for the year include the benefit
of our M&A activity from acquisition; 7 August
2023 for CTPT and 5 March 2024 for LXi,
helping to grow EPRA earnings by 20.3% to
£121.6 million or by 5.4% on a per share basis
to 10.9p per share, and enabling us to increase
our dividend by 7.4% to 10.2p per share whilst
maintaining cover of 107%.
Driving this increase was a 20.6% increase
in net rental income, continued exceptional
rent collection rates and a strong culture of
cost control.
IFRS net assets increased significantly as a result
of our corporate acquisitions to £4.0 billion,
whilst EPRA NTA per share fell by 3.6% to
191.7p (2023: 198.9p), largely due to the one
off impact of costs arising on our M&A activity
which is set out on page 48.
As part of the LXi transaction, we acquired
a basket of secured debt which exceeded
the maximum amount permitted under our
existing unsecured facilities. We were delighted
with the strong support and flexibility of our
existing lenders, allowing us immediately post
completion to refinance £625 million of LXi’s
secured facilities with a new £700 million
unsecured facility on more favourable terms
and with the ability to draw up to £100 million
in euros allowing us to naturally hedge currency
movements on our German asset.
We also increased the permissible secured debt
basket on our unsecured facilities to provide
headroom and avoid costly loan prepayments.
20.3%
5.4%
10.2p
Dividend per share
7.4%
191.7p
EPRA NTA per share
3.6%
Financial
statements
Governance
Financial
statements
Governance
Strategic
report
LondonMetric Property Plc Annual Report and Accounts 202447
A review of our performance
Financial review
continued
Our other debt metrics remain strong, with
debt maturity of 5.4 years (2023: 6.0 years)
reflecting the one-year extensions we agreed
on £675 million of unsecured facilities during
the year, and average cost of debt of 3.9%, still
significantly below current base rates.
We mitigated our exposure to interest rate
movements by retaining all of the LXi hedging
we acquired such that our drawn debt at the
year-end was fully hedged.
We have prioritised net divestment of non core
assets to protect our loan to value from adverse
valuation movements and enhance the quality
of the portfolio.
At the year end, our loan to value remained
modest at 33.2% (2023: 32.8%), providing
flexibility to execute transactions whilst
maintaining ample headroom under our
banking covenants. With available debt facilities
and cash of £794.9 million, we are in a strong
financial position and well protected, with
refinancing risk mitigated until FY 2026 and
optionality to continue to execute transactions
as opportunities arise.
Presentation of financial information
The Group financial statements have been prepared
in accordance with IFRS. Management monitors
the performance of the business principally on a
proportionately consolidated basis, which includes
the Group’s share of joint ventures (‘JV’) and excludes
any non-controlling interest (‘NCI’) on a line by line
basis. The figures and commentary in this review
are presented on a proportionately consolidated
basis, consistent with our management approach,
as we believe this provides a meaningful analysis of
overall performance. These measures are alternative
performance measures, as they are not defined
under IFRS.
The Group uses alternative performance
measures based on the European Public Real
Estate Association (‘EPRA’) Best Practice
Recommendations (‘BPR’) to supplement IFRS, in
line with best practice in our sector, as they highlight
the underlying performance of the Group’s property
rental business and exclude property and derivative
valuation movements, profits and losses on
disposal, financing break costs, net gains on business
combinations and acquisition costs, all of which may
fluctuate considerably from year to year. These are
adopted throughout this report and are key business
metrics supporting the level of dividend payments.
Further details, definitions and reconciliations
between EPRA measures and the IFRS financial
statements can be found in note 8 to the financial
statements, Supplementary notes i to vii and xviii
and in the Glossary.
M&A activity
CTPT
As reported in our Half Year Announcement, our
all share offer for CTPT was sanctioned by the
Guernsey Court on 7 August 2023. We issued
105.6 million shares as consideration at 183.3p
per share, totalling £193.6 million and incurred
transaction costs of £5.4 million. The fair value
of net assets acquired was £222.3 million with
the portfolio of 33 assets being valued on
acquisition at £285.2 million.
The acquisition has been accounted for as a
property acquisition and the difference between
the consideration paid and the net assets acquired,
representing a price discount of £23.3 million,
has reduced the cost of the property assets
acquired. The price discount was largely a result
of the exchange ratio being based on the
Company’s prior year end net asset value
of 198.9p, and the final consideration being
determined by the Company’s share price
of 183.3p.
CTPT
£m
Consideration paid Shares 193.6
Transaction costs 5.4
199.0
Net assets acquired Investment property 285.2
Cash 31.4
Bank debt (86.6)
Other (7.7)
222.3
Price discount on acquisition (23.3)
LXi
The all share offer for the LXi group completed
by way of a Scheme of Arrangement on
5 March 2024 through the issue of 943 million
new shares at 185.8p, reflecting consideration
paid of £1,752.0 million and an exchange ratio
of 0.55 LondonMetric shares for every LXi
ordinary share held, based on an adjusted NTA
approach. The fair value of assets acquired of
£1,828.9 million is set out below and in note
15a to the financial statements and reflects
fair value movements to debt, prepaid finance
costs and other financial liabilities.
Alongside this on 6 March 2024, we completed
the acquisition of the LXi group’s investment
advisor, its team of ten employees and net
liabilities of £0.7 million, for a cash consideration
of £26.8 million. The two acquisitions have
been accounted for as business combinations in
accordance with IFRS 3.
The difference between the total consideration
paid of £1,778.8 million and the total net
assets acquired of £1,828.2 million totalling
£49.4 million has been recognised in the
income statement as a gain on acquisition.
Transaction costs of £29.8 million have been
recognised separately in the income statement.
Read more on our LXi merger and acquisition
of £2.9bn of assets in the Chief Executive’s review
from page 14
LXi REIT plc
£m
LXi REIT
Advisors Ltd
£m
Total LXi
£m
Consideration paid Shares 1,752.0 – 1,752.0
Cash
1
– 26.8 26.8
1,752.0 26.8 1,778.8
Net assets acquired Investment property 3,102.0 – 3,102.0
Cash 73.2 – 73.2
Bank debt (1,083.1) – (1,083.1)
Other (263.2) (0.7) (263.9)
1,828.9 (0.7) 1,828.2
Gain/(loss) on acquisition 76.9 (27.5) 49.4
Acquisition costs (28.5) (1.3) (29.8)
1 Includes contingent consideration for LXi REIT Advisors Limited of £1.5 million
LondonMetric Property Plc Annual Report and Accounts 202448
Income statement
EPRA earnings for the Group and its share of joint ventures are detailed as follows:
For the year to 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2024
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
Gross rental income 177.0 4.3 (2.4) 178.9 145.6 4.3 (1.5) 148.4
Property costs (1.7) (0.1) – (1.8) (1.5) (0.1) – (1.6)
Net rental income 175.3 4.2 (2.4) 177.1 144.1 4.2 (1.5) 146.8
Management fees 1.1 (0.6) 0.1 0.6 1.1 (0.5) 0.1 0.7
Administrative costs (19.7) – – (19.7) (16.4) (0.1) – (16.5)
Net finance costs (37.4) – 0.6 (36.8) (29.5) (0.6) 0.2 (29.9)
Other – – 0.4 0.4 (0.1) – 0.1 –
EPRA earnings 119.3 3.6 (1.3) 121.6 99.2 3.0 (1.1) 101.1
Net rental income
As the UK’s leading NNN lease REIT, our aim
is to deliver reliable, repetitive and growing
income for our shareholders over the long
term. Sustained growth in net rental income
underpins dividend progression and we are
pleased to report a 20.6% increase in net rental
income this year to £177.1 million. This reflects
strong performance across our existing portfolio
through rent reviews and asset management
initiatives alongside income from our corporate
acquisitions and completed developments
which offset income lost through disposals as
set out in the table below.
£m £m
Net rental income in the year
to 31 March 2023 146.8
Additional rent from existing
properties 8.3
Additional rent from
developments 3.6
Movement in surrender
premium income (0.1)
Additional rent from
acquisitions
1
32.9
Rent lost through disposals
(14.2)
Additional rent from net
acquisitions 18.7
Movement in property costs (0.2)
Net rental income in the year
to 31 March 2024 177.1
1 Includes rent from CTPT of £11.1 million, from LXi of
£16.9 million and from other acquisitions of £4.9 million
The detailed movements in net rental income
this year are categorised in the table based
on properties held, developed, acquired or
disposed since 1 April 2022.
Although property costs are marginally higher
than last year at £1.8 million, our cost leakage
ratio has fallen to 1.0% (2023: 1.1%).
Rent collection
Our rent collection rates continue to be
exceptionally strong, reflecting the importance
we place on credit control and the quality
of our covenants. We have collected 99.9%
of rent due in the year and only £0.1 million
remains unpaid.
Administrative costs and EPRA
cost ratio
Administrative costs are £19.7 million,
an increase of £3.2 million over the year.
Alongside inflationary cost increases and higher
professional advisory fees reflecting our merger
activity, capitalised staff costs have fallen
by £1.0 million as our development activity
has reduced.
Notwithstanding this increase, our EPRA cost
ratio, which is used to monitor and manage
our operational cost levels, has fallen 10bps
to 11.6% and remains one of the lowest in
the sector. This is due to our focus on cost
control alongside the growth in our income
and is expected to fall further following the full
integration of LXi.
For the year to 31 March
2024
%
2023
%
EPRA cost ratio including
direct vacancy costs 11.6 11.7
EPRA cost ratio excluding
direct vacancy costs 11.1 11.3
The ratio reflects total operating costs as a
percentage of gross rental income. The full
calculation is shown in Supplementary note iv.
20.6%
Increase in net rental income
1.0%
Cost leakage ratio
99.9%
of rent due collected in the year
11.6%
EPRA cost ratio
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202449
Financial
statements
Governance
Strategic
report
A review of our performance
Financial review
continued
Net finance costs
Our net finance costs have increased by 23.1%
over the year to £36.8 million, incorporating the
cost of debt acquired through the LXi merger
which was at an average rate of 5.3%. Whilst our
£700 million refinancing of LXi’s secured debt
was on more favourable terms, the combined
Group’s average debt cost at the year end
is 3.9%, up from 3.4% last year but lower
than on merger as a result of the subsequent
refinancing. We have used proceeds from our
disposals to repay more expensive floating
rate debt and have mitigated our exposure
to elevated interest rates by retaining all of
the existing LXi caps, which together with our
existing fixed rates and swap derivatives, has
enabled us to fully hedge all debt drawn at the
year end.
The £6.9 million increase in net finance costs,
excluding fair value movements in derivatives
and financing break costs, reflects a higher
average debt balance over the year compared
to last year, increased interest charges of
£1.7 million, increased commitment and
other fees of £3.0 million, lower coupon
and capitalised interest on developments
of £3.1 million offset by higher bank interest
receivable of £0.9 million.
Further detail is provided in notes 5 and 10 to
the financial statements.
Share of joint ventures
EPRA earnings from our MIPP joint venture
were £3.6 million, an increase of £0.6 million
over last year due to interest cost savings
following the repayment of bank debt in April.
The Group received net management fees
of £0.6 million for acting as property advisor
to MIPP.
Taxation
As the Group is a UK REIT, any income and
capital gains from our qualifying property rental
business are exempt from UK corporation
tax. Any UK income that does not qualify as
property income within the REIT regulations
is subject to UK tax in the normal way.
We acquired one German asset as part of
the LXi merger which is subject to German
corporate income tax.
The Group’s tax strategy is compliance oriented;
to account for tax on an accurate and timely
basis and meet all REIT compliance and
reporting obligations. We seek to minimise the
level of tax risk and to structure our affairs based
on sound commercial principles. We strive to
maintain an open dialogue with HMRC with a
view to identifying and solving issues as they
arise. There were no issues raised in the year.
We continue to monitor and comfortably
comply with the REIT balance of business tests
and distribute as a Property Income Distribution
(‘PID’) 90% of REIT relevant earnings to ensure
our REIT status is maintained. The Group paid
the required PID for the year to 31 March 2023
ahead of the 12 month deadline and has already
paid a large part of its expected PID for the year
to 31 March 2024.
Our tax strategy was updated and approved by
the Board in the year and can be found on our
website at www.londonmetric.com.
IFRS reported profit
A reconciliation between EPRA earnings and the IFRS reported profit/(loss) is given in note 8(a) to the accounts and is summarised in the table below.
For the year to 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2024
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
EPRA earnings 119.3 3.6 (1.3) 121.6 99.2 3.0 (1.1) 101.1
Gain on acquisition 49.4 – – 49.4 – – – –
Acquisition costs (29.8) – – (29.8) – – – –
Revaluation of property (7.5) (3.7) 0.1 (11.1) (577.4) (12.5) 2.4 (587.5)
Fair value of derivatives (3.9) – – (3.9) (4.0) (0.1) – (4.1)
Loss on disposal (7.4) – – (7.4) (14.7) (0.7) – (15.4)
Debt/hedging costs – – – – (0.4) – – (0.4)
Deferred tax (0.1) – – (0.1) – – – –
IFRS reported
profit/(loss) 120.0 (0.1) (1.2) 118.7 (497.3) (10.3) 1.3 (506.3)
The Group’s reported profit for the year was £118.7 million compared with a loss of £506.3 million last year. The movement reflects an increase in
EPRA earnings of £20.5 million, a net gain after transaction costs of £19.6 million relating to the LXi merger and a reduction in the revaluation deficit of
£576.4 million.
LondonMetric Property Plc Annual Report and Accounts 202450
EPRA net tangible assets (‘NTA’) is a key
performance measure that includes both
income and capital returns but excludes the
fair valuation of derivative instruments that are
reported in IFRS net assets.
A reconciliation between IFRS and EPRA NTA
is detailed in the table above and in note 8(c) to
the financial statements.
IFRS reported net assets have increased
by £1,974.3 million or 99% over the year to
£4.0 billion.
Similarly, EPRA NTA, which excludes the
derivative financial instruments asset of
£32.6 million, has increased by £1,952.7 million.
The movement is due to the all share
acquisitions of CTPT and LXi as reflected in the
table opposite.
Balance sheet
As at 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2024
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
Investment property 6,232.2 67.1 (36.4) 6,262.9 2,944.9 70.8 (35.7) 2,980.0
Assets held for sale 8.5 – – 8.5 19.8 – – 19.8
Trading property 1.1 – – 1.1 1.1 – – 1.1
6,241.8 67.1 (36.4) 6,272.5 2,965.8 70.8 (35.7) 3,000.9
Gross debt (2,087.4) – – (2,087.4) (1,017.0) (13.5) – (1,030.5)
Cash 111.9 3.0 (0.8) 114.1 32.6 5.4 (1.5) 36.5
Other net liabilities (398.6) (0.9) 9.2 (390.3) (58.8) (1.2) 9.3 (50.7)
EPRA NTA 3,867.7 69.2 (28.0) 3,908.9 1,922.6 61.5 (27.9) 1,956.2
Derivatives 32.6 – – 32.6 11.1 – – 11.1
IFRS equity shareholders'
funds 3,900.3 69.2 (28.0) 3,941.5 1,933.7 61.5 (27.9) 1,967.3
IFRS net assets 3,900.3 69.2 – 3,969.5 1,933.7 61.5 – 1,995.2
£m
EPRA NTA at 1 April 2023 1,956.2
EPRA earnings 121.6
Dividends paid¹ (90.5)
Property revaluation movement (11.1)
Corporate acquisitions CTPT Share issue 193.6
LXi Share issue 1,752.0
LXi
Gain on business
combination
2
24.0
LXi Acquisition costs
3
(30.4)
1,939.2
Other movements
4
(6.5)
EPRA NTA at 31 March 2024 3,908.9
1 Dividend charge of £100.2 million less scrip savings of £9.7 million
2 Net gain on business combinations of £49.4 million as reflected in the Group income statement less fair value of derivatives acquired
of £25.4 million
3 Acquisition costs of £29.8 million reflected in the Group income statement and £0.6 million charged to reserves
4 Other movements include loss on sales (-£7.4 million), share based awards (£0.5 million), foreign currency movements
(£0.5 million) and deferred tax (-£0.1 million)
Our M&A activity increased EPRA NTA by £1.9 billion. EPRA earnings in the year covered the
dividend paid and the deficit on our portfolio valuation was broadly flat.
The movement in EPRA NTA per share, together with the dividend paid in the year, results in a total
accounting return of 1.3%. Over the three year LTIP period our total accounting return was 15.4%.
The full calculation can be found in Supplementary note viii.
£6bn
Portfolio value
1.3%
Total accounting return
£4bn
IFRS net assets
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202451
Financial
statements
Governance
Strategic
report
A review of our performance
Financial review
continued
Portfolio valuation
Our property portfolio including share of joint ventures doubled in value over the year to £6.0 billion as a result of our M&A activity as reflected in
the table below. The portfolio closing valuation includes the value of assets held for sale and trading properties that are reflected separately in the
balance sheet.
For the year to 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2024
£m
Total
2023
£m
Opening valuation 2,958.7 70.8 (35.7) 2,993.8 3,593.9
Acquisitions
1
CTPT 261.9 – – 261.9 –
LXi⁵ 2,853.3 – – 2,853.3 –
Other 42.7 – – 42.7 164.6
3,157.9 – – 3,157.9 164.6
Developments
2,4
43.9 – – 43.9 87.4
Capital expenditure
3
22.5 – (0.8) 21.7 18.1
Disposals (203.6) – – (203.6) (282.7)
Revaluation (7.5) (3.7) 0.1 (11.1) (587.5)
Foreign currency 0.8 – – 0.8 –
Property portfolio value 5,972.7 67.1 (36.4) 6,003.4 2,993.8
Income strip asset 221.5 – – 221.5 –
Head lease and right of use assets 47.6 – – 47.6 7.1
Closing valuation 6,241.8 67.1 (36.4) 6,272.5 3,000.9
1 Group acquisitions include purchase costs and represent completed investment properties as shown in note 9 to the financial statements. The acquisition cost of CTPT reflects the property valuation of
£285.2 million less the price discount on acquisition of £23.3 million
2 Group developments include acquisitions, capital expenditure and lease incentive movements on properties under development as reflected in note 9
3 Group capital expenditure and lease incentive movements on completed properties as reflected in note 9 to the financial statements
4 Includes LXi developments acquired of £27.2 million and capitalised interest of £2.2 million
5 Excludes income strip asset of £221.5 million and developments acquired of £27.2 million
Acquisitions added £3.2 billion of property to
our portfolio, largely through the corporate
acquisitions of CTPT and LXi, and we spent
£65.6 million on developments and other
capital expenditure, including those acquired
from LXi.
We generated net sales proceeds of
£198.7 million which reduced the book value of
property by £206.1 million (including the cost
of lease incentives written off for the Group of
£2.5 million). Two disposals which generated
proceeds of £19.6 million had exchanged last
year. We also exchanged to sell four assets
for £9.3 million and these transactions will
be accounted for on completion next year.
A full reconciliation between transactions
exchanged and completed in the year is set out
in Supplementary note xix.
Investment in our preferred sectors of
distribution and long income is in line with last
year at 97% of the total portfolio, however
following the LXi merger the sector weighting
has changed as discussed in detail in the
Property review.
A breakdown of the property portfolio by sector is reflected in the table below.
As at 31 March
2024
£m
2024
%
2023
£m
2023
%
Mega distribution 310.2 5.2 311.5 10.4
Regional distribution 689.7 11.5 586.1 19.6
Urban logistics 1,557.2 25.9 1,262.3 42.2
Distribution 2,557.1 42.6 2,159.9 72.2
Convenience 995.2 16.5 637.1 21.3
Entertainment & leisure 1,271.3 21.2 55.5 1.9
Healthcare & education 960.2 16.0 14.8 0.5
Long income 3,226.7 53.7 707.4 23.7
Other 180.3 3.0 92.8 3.0
Investment portfolio 5,964.1 99.3 2,960.1 98.9
Development¹ 39.3 0.7 33.7 1.1
Property portfolio value 6,003.4 100.0 2,993.8 100.0
Income strip asset 221.5 –
Head lease and right of use assets 47.6 7.1
6,272.5 3,000.9
1 Represents urban logistics £6.0 million (0.1%), convenience £16.9 million (0.3%), other £16.4 million (0.3%) at 31 March 2024.
Split of prior year comparatives was urban logistics £25.3 million (0.9%), convenience £5.6 million (0.1%), other £2.8 million (0.1%)
LondonMetric Property Plc Annual Report and Accounts 202452
Dividend
Our policy of paying a sustainable and
progressive dividend remains unchanged
and the dividend declared this year is
107% covered by EPRA earnings. We have
continued to declare quarterly dividends
and offer shareholders a scrip alternative to
cash payments.
In the year to 31 March 2024, the Company
paid the third and fourth quarterly dividends
for the year to 31 March 2023 and the first two
quarterly dividends for the year to 31 March
2024, at a total cost of £100.2 million or
9.7p per share as reflected in note 7 to the
financial statements.
The Company issued 5.3 million ordinary
shares under the terms of the Scrip Dividend
Scheme, which reduced the cash dividend
payment by £9.7 million to £90.5 million.
The first two quarterly payments for the
current year of 4.8p per share were paid as
Property Income Distributions (‘PIDs’) in
the year.
The third quarterly dividend of 2.4p per
share was paid as a PID in April 2024 and the
Company has approved a fourth quarterly
payment of 3.0p per share to be paid in July
2024, of which 1.5p will be a PID.
The total dividend payable for 2024 of 10.2p
represents an increase of 7.4% over the
previous year.
The Board took the following into account
when considering its dividend payments:
• Its REIT obligations to distribute 90% of
property rental business profits;
• Its desire to pay a sustainable, covered and
progressive return to shareholders;
• Its EPRA earnings for 2024; and
• The outlook for 2025.
At the year end, the Company had
distributable reserves of £1,164.9 million
(2023: £1,270.6 million), providing substantial
cover for the dividend payable for the
year. When required and at least six
monthly, the Company receives dividends
from its subsidiaries which increase its
distributable reserves.
Financing
The key performance indicators used to
monitor the Group’s debt and liquidity position
are shown in the table below.
The Group and joint venture split is shown in
Supplementary note iii.
As at 31 March
2024
£m
2023
£m
Gross debt 2,087.4 1,030.5
Cash 114.1 36.5
Net debt 1,973.3 994.0
Loan to value
1
33.2% 32.8%
Cost of debt
2
3.9% 3.4%
Interest cover³ (times) 4.5 4.7
Undrawn facilities 680.8 380.0
Average debt maturity 5.4 years 6.0 years
Hedging
4
100% 93%
1 LTV includes the impact of sales and acquisitions that have
exchanged and excludes the fair value of debt as reflected in
Supplementary note xviii
2 Cost of debt is based on gross debt including amortised costs
but excluding commitment fees
3 Net income divided by net interest payable as defined by the
Group’s private placement and RCF funding arrangements
4 Based on the notional amount of existing hedges and total
debt drawn
Financing activity in the year
Our merger with LXi added £1.1 billion of
secured debt to our balance sheet at an average
cost of 5.3%, increasing our total gross debt
to £2.1 billion at the year end. The combined
Group’s basket of secured debt exceeded
the maximum amount permitted under our
existing unsecured facilities and consequently,
immediately post completion in March, we
refinanced £625 million of LXi’s secured
facilities with a new £700 million unsecured
facility on more favourable terms. The new
facility introduced a new lender, diversifying our
exposure and included the ability to draw up to
£100 million in euros allowing us to naturally
hedge currency movements on our German
asset. We also increased the permissible
secured debt basket on our unsecured
facilities to provide headroom and avoid costly
loan prepayments.
Through our acquisition of CTPT, we secured
an additional £90 million fixed rate loan
with Canada Life at a favourable rate of
3.36%. CTPT’s attractive debt structure and
exceptionally low loan to value of 20.5% also
helped to reduce our Group LTV.
During the year, we have also repaid our MIPP
JV debt facility in full and £65 million of our
private placement debt and have extended
the maturity on our revolving credit facilities
totalling £675 million for a further year.
Hedging
The Group’s policy is to limit our exposure
to volatility in interest rates by entering into
hedging and fixed rate arrangements.
We mitigated our exposure to interest rate
movements further this year by retaining all
of the LXi hedging we acquired such that our
drawn debt at the year-end was fully hedged.
We received £6.7 million from the interest rate
swaps and caps we had in place during the
year. We are advised by Chatham Financial and
continue to monitor our hedging profile in light
of interest rate projections.
Financial position at 31 March 2024
We have prioritised net divestment of non core
assets to provide optionality, protect our loan to
value from adverse valuation movements and
enhance the quality of our portfolio.
At the year end, our loan to value remained
modest at 33.2% (2023: 32.8%), providing
flexibility to execute transactions whilst
maintaining ample headroom under our
banking covenants.
With available debt facilities and cash of
£794.9 million, we are in a strong financial
position and well protected with refinancing
risk mitigated until FY 2026 and optionality
to continue to execute transactions as
opportunities arise.
Our other debt metrics remain strong, with
debt maturity of 5.4 years (2023: 6.0 years) and
average cost of debt of 3.9% (2023: 3.4%), still
significantly below current base rates.
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202453
Financial
statements
Governance
Strategic
report
Financial loan covenants
The Group has comfortably complied
throughout the year with the financial
covenants contained in its debt funding
arrangements and has substantial levels of
headroom within these. Covenant compliance
is regularly stress tested for changes in capital
values and income. The Group’s unsecured
facilities and private placement loan notes,
which together account for 61% of debt drawn
at the year end, contain gearing and interest
cover financial covenants.
At 31 March 2024, the Group’s gearing ratio as
defined within these funding arrangements
was 58% which is significantly lower than the
maximum limit of 125%, and its interest cover
ratio was 4.5 times, comfortably higher than the
minimum level of 1.5 times.
Property values would have to fall by 33% to
reach the banking gearing threshold which
would equate to an LTV ratio of 54%. Similarly,
rents would have to fall by 61% or interest
costs rise by 172% before the banking interest
covenant is breached.
33.2%
Loan to value percentage
5.4 years
Debt maturity
3.9%
Cost of debt
£794.9m
Debt and cash facilities
Average debt maturity
(based on debt drawn)
5.4 years
1
2
3
1 Debt expiring within 0-2 years 25%
2 Debt expiring within 3-10 years 63%
3 Debt expiring 10+ years 12%
Cash flow
During the year, the Group’s cash balances
increased by £79.3 million as reflected in the
table below.
For the year to 31 March
2024
£m
2023
£m
Net cash from operating activities 123.1 133.0
Net cash from/(used in) investing
activities 206.1 (17.4)
Net cash used in financing
activities (249.9) (134.3)
Net increase/(decrease) in cash
and cash equivalents 79.3 (18.7)
The net cash inflow from operating activities
of £123.1 million is stated after charging LXi
acquisition related costs paid of £29.8 million.
After adjusting for these one off costs,
cash flows from operating activities were
£152.9 million, representing an increase of
£19.9 million or 15.0% compared to last year.
The Group spent £65.4 million acquiring and
developing property in the year and invested
£7.8 million into joint ventures. It received net
cash proceeds of £271.6 million from property
disposals and corporate acquisitions and
£7.7 million in interest.
Cash outflows from financing activities reflect
net loan repayments of £100.0 million,
dividend payments and distributions of
£91.6 million, financing costs of £55.3 million
and share purchases and awards of £3.0 million.
Further detail is provided in the Group Cash
Flow Statement.
Total facilities
£2.8bn
1
2
3
1 Unsecured facilities 50%
2 Private placement 21%
3 Secured facilities 29%
A review of our performance
Financial review
continued
0
600
1200
1800
2400
3000
Debt facility expiry profile
1
(£m)
FY24 FY25 FY26 FY27 FY28 FY29 FY30+
2,790
44
488
765
560
210
723
1 Based on debt facilities as at 31 March 2024
LondonMetric Property Plc Annual Report and Accounts 202454
Our sustainability performance
Responsible Business
and ESG review
Overview and progress 56
Environmental 57
Social 63
Governance and TCFD disclosure 76
The Company recognises the need to consider
and address all environmental, social and
governance matters relevant to its business.
As well as meeting legislation, environmental
improvements are starting to translate into real
asset value enhancement as occupiers value
these improvements more highly than before,
and valuers begin to differentiate between
assets based on environmental attributes.
Our Responsible Business framework
guides us in mitigating climate-related risks,
identifying and progressing environmental
and stakeholder-related opportunities as
well as ensuring a high standard of corporate
governance. Responsible Business is embedded
across all of our corporate, investment, asset
management and development activities.
We have shifted our approach from core
focus on ‘top down’’ analysis to incorporating
‘bottom up’ asset-specific risk and opportunity
assessment and case-by-case actions.
Our Responsible Business and Environmental
Policy sets out our approach and ESG targets
are set every year. Progress against those targets
is monitored at Working Group meetings
held monthly and attended by key business
representatives and a Board member.
ESG performance is reported to the Board at
regular intervals with the Audit Committee
responsible for overseeing ESG progress.
Executive Directors and relevant employees are
set individual ESG targets and remuneration is
linked to achieving those targets.
Regular ESG training for our property team is
undertaken throughout the year.
The merger with LXi represents a material
change to our portfolio, and we intend to
reassess our overall ESG Strategy, Framework,
and objectives. This is to ensure they are still
suitable and aligned with industry standards.
Environmental
Through our activities we look
to minimise the environmental
impact of our business, maximise
opportunities to improve the
efficiency of our assets and
improve the resilience of our
assets to climate change and
the impact of transitioning to
a low carbon economy.
Read more on page 57
Social
Our actions consider the long term
interests of all our stakeholders
including those of our employees,
suppliers, customers and local
communities as well as ensuring
that we maintain a high standard
of business conduct.
Read more on page 63
Governance
The Board is committed to
upholding high standards of
corporate governance. In particular,
it ensures that appropriate health
and safety procedures and supply
chains are in place.
Read more on page 76
Our ESG objectives UN’s SDGs
Reducing portfolio's carbon intensity
& embodied carbon from our activities
Addressing climate change through
our Net Zero Carbon ambition
Helping cities to develop
sustainable infrastructure
Enhancing and supporting local communities
and wellbeing of stakeholders
Improving the natural environment
Promoting good working conditions
and equality for all
LondonMetric supports
the UN’s 17 Sustainable
Development Goals ('SDGs').
The goals shown above
represent those that we
feel are the most relevant
to our business.”
Martin McGann
Finance Director
Our Responsible Business activities
aim to address our material ESG
risks and opportunities.
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202455
Financial
statements
Governance
Strategic
report
Our sustainability performance
Responsible Business
and ESG review
continued
Overview and progress
We have improved our ratings in external benchmarks, made good progress against
our ESG targets and are integrating the assets acquired through the LXi merger.
External benchmarking
Maintained our Green Star and achieved
a 3 Star rating
Increased score from 64 to 76 in the 2023
Global Real Estate Sustainability Benchmark
survey (GRESB), achieving 3 Green Star rating
and coming 2nd in our peer group.
Continued inclusion in the FTSE4Good Index
In the latest assessment, we achieved a score
of 3.5 out of 5.0 compared to 2.9 for the
peer group.
Improved to 'AA' rating
In the latest assessment we increased our
rating to ‘AA’ from 'A', which is above the
sector average.
Maintained our Gold Award
In EPRA’s last review, we maintained our
Gold Award in the Sustainability assessment,
showcasing our efforts to integrate sustainability
into their core operations.
Other benchmarks
In the latest ISS review, we maintained our ‘C-’
score, which remains above the peer group
average. In addition, we responded to CDP for
the first time, scoring a ‘D’ which demonstrates
that we are transparent about climate issues.
76
GRESB score,
up from 64 in prior year
85%
of portfolio EPC rated ‘A’-’C’
2.9m sq ft
of net zero audits obtained in year
72%
of occupier energy data captured
0.8MWp
Solar PV added in year
9.0/10
landlord recommendation score
97%
of employees are proud to
work for LondonMetric
ESG progress in the year
We made good progress against our 12
corporate ESG targets. The data opposite sets
out outcomes for some of our main ESG targets
and further detail on our progress is detailed on
the following pages and on page 85 in respect
of environmental metrics and targets. Full detail
will be set out in our separate Responsible
Business and ESG report, which will be made
available on our website by early July 2024.
The merger with LXi has materially altered
our portfolio. To implement environmental
initiatives and ultimately achieve Net Zero
Carbon on our buildings, we are now more
reliant than before on our occupiers sharing
similar environmental ambitions to us.
We will therefore need to review the impact
of the transaction on our Net Zero Carbon
ambition and our wider ESG targets over the
coming year.
Sustainability linked financing
£675 million of financing is sustainability-
linked and structured in accordance with the
Loan Market Association’s Sustainability Linked
Loan Principles.
Sustainability performance targets (‘Targets’)
are set and aligned to LondonMetric’s corporate
ESG targets focused on:
• Improvements in EPC ratings;
• Adding renewable installations; and
• Developments meeting a minimum
BREEAM Very Good standard or,
where not applicable, an alternative
minimum standard.
During the prior year, two of the three Targets
for the sustainability linked loans were
achieved. We receive a margin improvement
of up to 2bps on our debt costs which is
allocated to additional spend on LondonMetric
charitable causes.
LondonMetric Property Plc Annual Report and Accounts 202456
Through our activities we aim to minimise our
business’s environmental impact, maximise
building efficiency opportunities, and improve
business and asset resilience to climate change
and the impact of transitioning to a low-
carbon economy.
We understand the importance of addressing
climate change and the significant impact that
reducing emissions from real estate can have on
the UK’s 2050 Net Zero target.
LondonMetric recognises that it can have a
material impact by reducing its emissions as
well as supporting its occupiers in reducing
theirs and helping them to meet their net zero
carbon (NZC) ambitions.
In 2021, we formalised our Net Zero Carbon
Framework and, in 2023/2024, we had intended
to map out our Net Zero Pathway. However,
the merger with LXi has increased our reliance
on our occupiers’ environmental ambitions
materially in meeting our Scope 3 emissions
reductions. LXi’s WAULT of 26 years (twice
that of the LondonMetric only portfolio)
creates more barriers for us to instigate asset
improvement initiatives in the medium term.
The merger has also introduced some additional
operational assets, as well as properties with lower
EPC ratings and fewer building certifications.
Therefore, we have decided to delay the
publication of our Net Zero Pathway, which
was planned for the year. We will revisit our
previous NZC ambition to take account of the
LXi transaction and the outputs of LXi’s Net
Zero Pathway that had been published before
the merger.
In the year, we implemented a dedicated
ESG platform to better track and capture
energy performance at our assets, model
interventions on assets, and track ongoing
and completed energy reduction initiatives.
This is a material investment for us and will
support us along our journey of minimising
our environmental impact.
Overview
LondonMetric’s emissions split
1
3 Our occupiers’ operations (Scope 3)
Collaborating with our occupiers to achieve
NZC on our buildings
Emissions from our occupiers’ activities
(Scope 3) are the main source of our carbon
emissions. So, in order to implement
environmental initiatives and ultimately
achieve NZC on our buildings, we are
reliant on our occupiers sharing similar
environmental ambitions to us.
Our full repair and insuring (‘FRI’)/NNN lease
structure and our long lease lengths mean
that if our occupiers are not proactively
improving buildings, then we are only able to
intervene at lease expiry.
We are collaborating with our occupiers to
help them meet their NZC target and ensure
our buildings are as sustainable as possible.
We had set an ambition for our buildings
to be NZC by 2035, but the LXi merger has
brought potential barriers to achieving this.
We will be reviewing our target as part of our
wider Net Zero Pathway in the coming year.
2 Our developments
Minimising our emissions
Whilst development activity is minimal,
we continue to reduce emissions from
development activity, challenging our
supply chains to select low carbon
materials. We set an ambition of achieving
NZC on developments by 2030 and will
review this as we look to set our wider Net
Zero Pathway in the coming year.
1 Our operations
Carbon Neutral for 2024
We had set a NZC in operations by the end
of 2023 and had made good progress in
minimising our own emissions. We have
exhausted most opportunities to reduce
emissions from our landlord managed
supplies, which are now minimal. The LXi
merger has required us to review our NZC
ambition, and instead we are targeting
carbon neutrality for calendar year 2024.
Environmental
2
3
1
1. Our operations 0.3%
2. Our developments 13.1%
3. Our occupiers’ operations 86.6%
1 Operations emissions include Scope 1 & 2 emissions and business travel.
Development emissions include embodied carbon for both direct and
forward funded developments complete in the year. Occupiers emissions
have been extrapolated based on 72% actual data received
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202457
Financial
statements
Governance
Strategic
report
Our sustainability performance
Responsible Business
and ESG review
continued
The alignment of our portfolio to single
tenanted NNN Income assets, where the
occupier is responsible for the operations of a
property, and away from operational offices
and retail parks has meant that the energy
consumption and greenhouse gas emissions for
which LondonMetric is responsible has fallen
significantly over recent years.
Since 2015, LondonMetric’s absolute energy
consumption has fallen by 88% from
9,056 MWh to 1,071 MWh today and we have
worked hard to minimise consumption where
there is landlord supply. This minimal level of
consumption had allowed us to set an ambition
of reaching NZC for Scope 1 and 2 emissions
(corporate head office and assets with landlord
supplies and voids, as well as Scope 3 emissions
related to our operations).
The LXi merger has required us to push this
target back. Whilst the LXi portfolio is similar in
nature, we will need to assess its ‘operational’
emissions and so are now aiming to be NZC
in operations by no later than end of 2025.
Notwithstanding the above, we are still
aiming to be Carbon Neutral in operations for
calendar 2024.
Carbon Neutral for 2024
Over the past year, we have worked closely with
our managing agents to monitor our landlord
supplies and reduce emissions where possible.
Our energy consumption was reduced by 2%
on a like for like basis over the year, achieved
through energy efficiency improvements.
Our like for like emissions have, however,
increased by 3% compared to the previous year.
This is influenced by higher gas consumption at
one of our office assets.
Our absolute consumption increased
considerably in the year due to the acquisition
of the CTPT portfolio, which included offices
with high landlord-supplied energy. Moreover,
since acquisition, we have sold several CTPT
assets that contributed to our consumption.
Although we have made significant efforts
to reduce our emissions, there are still some
emissions that are difficult to eliminate or are
not within our control. We will utilise carbon
offset projects to make up for these remaining
emissions and aim to be Carbon Neutral across
our Scope 1 and 2, for 2024. The offsets will
be Gold Standard Certified, which focuses
on providing lasting social, economic and
environmental benefits.
We are also currently exploring options to use
the renewable energy generated by our solar
projects where we have PPAs in place, to offset
our emissions.
Actions undertaken to reduce
Scope 1 & 2 emissions
Our actions to reduce emissions mainly
relate to upgrading LED lighting in common
areas for which we are responsible.
• Several LED replacements were
undertaken in the year. As a result of the
replacements, our Victoria Retail Park
and the Stargate Industrial Park saw a
like-for-like energy reduction of 9% and
3% respectively.
• Energy audits have been undertaken at
five of our managed assets, as part of our
ESOS compliance.
Outcomes
88%
reduction in absolute energy
consumption since 2015
2%
like for like reduction in energy
consumption over the last year
97%
of landlord electricity supplies
from renewable sources
Operations (Scope 1 & 2)
Our energy consumption (MWh)
1
0
500
1000
1500
2000
2500
3000
3500
2023202220212020201920182017
1 Graph shows data according to calendar year. Data for 2017-
2021 is presented in financial years ending on 31 March with data
from 2022 onwards representing calendar years ending on
31 December
LondonMetric Property Plc Annual Report and Accounts 202458
Outcomes in the year
2.9 m sq ft
of net zero audits obtained
72%
of occupier energy data captured
*
80%
of leases signed with green lease clauses
Top 10 assets
CRREM analysis undertaken
*
7.6MWp
of solar now installed across portfolio
* On assets held as at 31 December 2023
Overview
As part of our drive to upgrade the portfolio’s
quality, we have focused on working with our
occupiers to progress energy efficiency and
clean energy initiatives. We see ourselves as
strong stewards of underinvested or poorer
quality assets with the necessary expertise and
appetite to materially improve buildings.
Our focus on NNN Income sectors and
buildings which typically have a lower energy
intensity and relatively easier potential to
achieve carbon reduction compared to other
property sectors means that it should be easier
to achieve NZC at our buildings. Occupiers are
typically funding environmental improvements
and this is being reflected in our EPC rating
improvements and our de-minimis defensive
capex required for environmental upgrades.
Any of our capex is typically achieving higher
rents or is paid for in lieu of normal lease
incentive arrangements.
Impact of LXi merger on our NZC ambition
As mentioned on page 58 we are having to
review our NZC ambition in light of the LXi
merger. Whilst we are still reviewing the LXi
portfolio, there has been a significant amount
of work and energy audits undertaken to assess
EPC improvements and understand our ability
to reach NZC on the LXi assets. With a greater
occupier concentration, it is easier to collaborate
more strategically with occupiers and we have
good ongoing dialogue with key LXi occupiers,
which will allow us to further understand and
shape asset interventions. We are encouraged
by the NZC commitments of these occupiers.
Progress in year
As we focus on understanding how our
buildings can achieve NZC, we undertook net
zero audits across 0.4 million sq ft, in addition
to 2.5 million sq ft of audits obtained from the
CTPT and LXi portfolios. The net zero audits
provide valuable insight into our buildings’
energy use and associated greenhouse gas
emissions, as well as identify carbon reduction
interventions to effectively achieve NZC.
As part of measuring our occupiers’ emissions
(Scope 3), we increased occupier energy data
coverage from 68% last year to 72%. Our new
ESG platform is helping us to access data
automatically, achieve higher data coverage
and allow us to better analyse our portfolio.
Using this data, we have also expanded Carbon
Risk Real Estate Monitor ‘CRREM’ analysis
across the largest assets in our portfolio to
further understand how they align to key
Net Zero Pathways. Green lease clauses and
promoting environmental improvements at
leasing events have been key ways in which
we have engaged with our occupiers towards
improving the sustainability of our buildings.
We continue to engage with occupiers on
adding further solar installations to our portfolio,
adding three PV systems in the year. For further
detail see page 39.
Our occupiers’ emissions (our Scope 3)
Aligning our NZC framework to occupier’s
Scope 1 and 2 ambitions¹ - top 20 occupiers
Reaching NZC across our buildings is dependent
on our occupiers’ operations and their own
Net Zero ambition. We have reviewed the NZC
targets of our top 20 occupiers, represented
in the graph below, and 98% (by income)
have targets to reach meaningful Scope 1 & 2
emissions reduction.
2030
2035
2040
2050
25% Rent Roll
1 Timeline denotes occupiers’ target dates to achieve
meaningful Scope 1 and 2 emission reductions.
Based on publicly available information
8% Rent Roll
5% Rent Roll
8% Rent Roll
Financial
statements
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LondonMetric Property Plc Annual Report and Accounts 202459
Financial
statements
Governance
Strategic
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Our sustainability performance
Responsible Business
and ESG review
continued
EPC rating of portfolio
We are committed to following regulatory
standards and ensuring that our properties
meet Minimum Energy Efficiency Standard
(MEES) Regulations. The proposed
regulations set a target of a minimum ‘C’
rating by 2027/2028. The merger with LXi
has impacted our rating, and 85% of our
assets now have an EPC rating of ‘A’ - ‘C’,
which is down from 90% last year but
materially up from 59% in 2015 and 74%
in 2021.
Excluding LXi assets, the LondonMetric like
for like portfolio ‘A’-’C’ rating was 91%.
We have developed action plans for all
assets rated below ‘C’ and aim to improve
our portfolio performance through acquiring
or developing higher rated assets and
disposing of poorer buildings. We also take
advantage of lease events to bring buildings
up to standard and have mandated that a
minimum ‘B’ rating is achievable on all new
leases, regears and refurbishments.
In the year, we undertook EPC assessments
on 1.2 million sq ft (excluding LXi assets)
which included some enhanced energy
assessments. We recognise that better EPC
ratings can act as first step towards achieving
NZC and so we are also undertaking NZC
assessments on certain assets, particularly
ahead of refurbishment works. In the
year, we undertook 0.4 million sq ft of
net zero audits, in addition to 2.5 million
sq ft of audits obtained on the CTPT and
LXi portfolios.
49%
36%
8%
1%
5%
A&B
C
D
E
Invalid
Occupier emissions (Scope 3) continued
Solar PV installations
In the year, 0.8MWp of solar PV was installed,
which, together with a further 3.1MWp installed
post year end, takes our total capacity to
7.6 MWp. In our occupier survey, 60% of
occupiers said they were looking at installing
solar PVs and we are in discussion on a number
of near term projects with potential to add
3.2 MWp of solar. See page 39 for further detail.
Improving energy efficiency at Crawley
Following a vacancy at a unit in Crawley, the
unit was refurbished with the roof upgraded
to be solar PV ready, new energy-efficient
heat pumps replacing gas and LED lighting
installed. The works have improved the EPC
to ‘B’, up from ‘C’. Similarly, at our FedEx unit
in Crawley, an incentive package as part of a
regear included a new solar-enabled roof which,
together with other occupier works, should
result in an EPC improvement to ‘B’. See page
43 for the FedEx case study.
EV car charging
As part of two EV Charging partnerships with
Motor Fuel Group and InstaVolt, we have
added an additional 25 chargers across five
assets to our portfolio, in the year. EV chargers
provide a dual benefit of driving traffic to
our sites as well as supporting the wider UK
target of decarbonising the transport industry.
26 additional chargers across four sites are
currently in development.
Measure emissions
across all of the portfolio
by increasing occupier
data coverage
Continued inclusion
of green leases on
letting events
Follow up with occupiers
on solar PV installations
across the portfolio
Consider sustainability
improvements and
incentives on regears
Key current & future actions
LondonMetric Property Plc Annual Report and Accounts 202460
Climate risk
Understanding the climate risks that impact
our portfolio has been an increasing focus area
for us.
In 2022, we undertook a significant assessment
of our business and asset resilience against
climate-related risks. The third-party
assessment concluded that our sustainability
strategy is well-positioned to manage climate
related risks and opportunities.
For the portfolio assessment, two climate
change scenarios were used to test a range of
outcomes and identify material climate-related
risks over the short (1-2 years), medium (3-9
years) and long term (10+ years) with likelihood
and impact scores assigned to each risk.
The table opposite shows that under the less
extreme scenario (RCP4.5), transition risks are
the most significant for our business, whereas
under the more extreme scenario (RCP8.5),
physical risks are the most prevalent and will
have a greater impact. For further details on our
material risks and mitigation strategies, please
see our TCFD disclosure on pages 77 to 85.
At the asset level, an in-depth review was
undertaken on representative assets, assessing
their resilience to physical and transition risks.
Again, transition risks were higher for the assets
we assessed.
We continue to embed climate risk analysis in
our acquisitions and our portfolio management
and challenge our advisors and the team to
incorporate greater assessment of climate risk.
Our plan is to now undertake an updated
assessment of our enlarged portfolio following
the LXi merger. In the forthcoming year, we will:
• Update our risk analysis of the portfolio to
include LXi assets;
• Extend the transition risk analysis based on
energy performance and occupier data;
• Work with our environmental experts
to further include climate risk analysis in
our procedures;
• Enhance our climate-risk due-diligence
process for acquisitions and disposals; and
Portfolio flood risk
We continue to improve our assessment of
the potential impact of physical changes on
our portfolio, such as extreme weather and
longer term shifts in climate pattern.
During the year, we continued to manage
and mitigate our current portfolio flood risk.
Through our asset management activities,
we strategically sold one asset that was at
high risk of flooding.
We believe that, in most instances, proper
flood mapping or better consideration of
building levels would lower the risk profile
further, both across our ‘high’ risk assets but
also our ‘medium’ risk assets. We continue to
look at risk reduction actions.
Our current risk profile shows that the
majority of our assets have a low risk of
flooding. Following the merger, we will
need to review the LXi portfolio flood risk
and include it in our analysis. However, we
believe that the combined portfolio will have
a similar risk profile.
86%
12%
2%
Low risk
Medium risk
High risk
• Only 2% of properties rated high risk
• Full portfolio review to be conducted in
the year, to include LXi assets
• Detailed flood reviews undertaken on
acquisitions and developments
• Work with our environmental experts to
further include climate risk analysis in our
procedures; and enhance on our climate-
risk due-diligence process for acquisitions
and disposals.
Physical risks (risk scoring on key risks)
IPCC RCP4.5 global emissions scenario
(1.7-3.2°C of warming by 2100)
IPCC RCP8.5 global emissions scenario
(3.2-5.4°C of warming by 2100)
8.4
Extreme weather events
Heat Stress
Flooding (coastal, fluvial)
Heavy rainfall & pluvial flooding
13.3
9.9
13.913.9
12.8
16.6
13.1
17.1
Long term
Transition risks
1
(risk scoring on key risks)
13.8
Occupier/market demand changes
Increased building standards
Financial markets impact
Fuel source transition
7.5
15.1
16.4
7.6
17.6
13.7
19.0
Short termMedium term
1 Risks shown in graphs are top risks for IPCC RCP 4.5.
Under RCP 8.5, risks from insurance challenges and increased
energy demand and cost would have been included as top
four transition risk with scores of 14.0 and 13.0
See pages 78 to 80 for further detail
on climate change scenarios
Financial
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LondonMetric Property Plc Annual Report and Accounts 202461
Financial
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Data qualifying notes
This is the Company’s fourth year of disclosure
under the Streamlined Energy and Carbon
Reporting regulations. An operational control
consolidation approach has been adopted.
This statement has been prepared in
accordance with the requirements of the GHG
Protocol Corporate Accounting and Reporting
Standard, the GHG Protocol Value Chain (Scope
3) Standard, and ISO 14064- 1:2006. Our data
quality is reviewed and improved every year, so
previous year’s figures are updated if more data
becomes available.
A third party assesses our carbon emissions and
methodology each year to confirm accuracy
and transparency. Our Scope 1 and 2 emissions
are externally assured, in line with AA1000AS.
We provide the full findings annually in our
Responsible Business Report.
Sources of greenhouse gas emissions
3
Year to 31 December 2023 Year to 31 December 2022
Tonnes
of CO
2
e
(location-
based
calculation)
1
Tonnes
of CO
2
e
(market-
based
calculation)
2
Tonnes
of CO
2
e
(location-
based
calculation)¹
Tonnes
of CO
2
e
(market-
based
calculation)²
Scope 1
Energy Landlord-controlled gas 20 20 15 15
Void Energy Void asset gas 0.03 0.03 7 7
Fugitive
emissions Refrigerant emissions De minimis De minimis De minimis De minimis
Scope 2
Energy Landlord-controlled electricity 172 1 100 0.2
Void Energy Void asset electricity 7 8 13 12
Scope 3
Energy
Transmission and
distribution losses 15 15 10 10
Travel Emissions from employee business
travel, in third party vehicles 9 9 9 9
Tenant Energy Tenant energy consumed at our
buildings 39,369 - 31,338 -
Total (Scope 1 & 2) 199 30 136 35
Total (Ex voids) 192 22 116 16
Intensity (Scope 1 & 2)
tCO
2
e/£m net income after administration costs 1.35 0.20 0.92 0.23
1 For the ‘location-based’ method of emissions calculations, standard emissions factors from the UK Government Emissions
Conversion Factors for Greenhouse Gas Company Reporting 2022 and 2023 were used
2 For the ‘market-based’ method, the Company’s contractual instruments for the purchase of certified renewable electricity were
accounted for
3 Disclosed emissions are 100% UK based
Energy consumption
-2%
Over the year on a like for like basis
Landlord obtained energy consumption
fell by 2% to 509 MWh on assets that
were owned during both 2022 and 2023
(calendar years). The reduction can be
attributed to the ongoing asset upgrades to
incorporate energy efficiency measures.
Absolute energy consumption increased by
37%, due to the acquisition of CTPT assets.
Greenhouse gas (GHG) emissions
3%
Over the year on a like for like basis
(location-based)
Emissions increased by 3% on assets that
were owned during both the 2022 and 2023
periods, for Scope 1 and 2.
Absolute emissions have increased overall
from 136tCO
2
e to 199tCO
2
e.
Within Scope 1 emissions, refrigerant-related
emissions for the period were de minimis.
Scope 2 dual reporting is undertaken, disclosing
emission figures using both location-based and
market-based methods.
For the ‘location-based’ method, standard
emissions factors from the UK Government
Emissions Conversion Factors for Greenhouse
Gas Company Reporting 2022/2023 were used.
For the ‘market-based’ method, the Company’s
contractual instruments for the purchase of
certified renewable electricity were accounted
for. For the remainder of electricity which is not
REGO backed, UK’s residual mix factor was used
to calculate the associated emissions.
The breakdown of void asset emissions in
both Scope 1 and Scope 2 provides additional
information. This clearly demonstrates
where LondonMetric has operational control
throughout the year and how void data impacts
the overall total emissions.
Emissions from employee business travel (by
vehicle) have been calculated on a distance
travelled basis, where the relevant vehicle
emissions factor has been applied to expensed
mileage. Scope 3 Tenants’ energy is provided,
and it’s based on actual data that we have been
able to obtain from our occupiers. This also
includes a small amount of landlord obtained
energy sub-metered to our tenants. In the
year, we collected Scope 3 data on 72% of
the portfolio.
Our sustainability performance
Responsible Business
and ESG review
continued
LondonMetric Property Plc Annual Report and Accounts 202462
Building and nurturing relationships
with our stakeholders is integral to our
business model and the way we work.
Occupiers
We work closely with our
occupiers to create high
occupational contentment
People
Our employees are
critical to our success
and delivering on
our strategy
Contractors
and Advisors
We rely on the support
of a diverse group of
contractors and advisors
Investors
Strong relationships
with our investors are
critical to us accessing
capital efficiently
Communities
Supporting local
communities and charities
is highly important to us
Learn more
on page 72
Learn more
on page 70
Learn more
on page 64
Learn more
on page 74
Learn more
on page 66
Our
stakeholders
Social
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202463
Financial
statements
Governance
Strategic
report
Our sustainability performance
Responsible Business
and ESG review
continued
Occupiers
Why they are important to us
— Drivers of income and capital growth
— Lie at the heart of our business purpose
What is important to them
— Fit for purpose real estate
— Lease terms that suit their business model
— Well designed and sustainable buildings
— Approachable and trustworthy landlord
Outcomes
99.4%
portfolio occupancy
9.0/10.0
landlord recommendation score
99.9%
of rent collected
151
occupier transactions
Occupier survey results page 65
Strong customer focus
We recognise that when our occupiers’
businesses thrive, our business also thrives.
We treat our occupiers as customers and put
them at the centre of our decision making.
Our occupier-led approach provides us with
market knowledge to better understand
future trends and make informed decisions.
Our customer satisfaction scores, high
occupancy rate and rent collection demonstrate
the strength of these relationships.
Extending existing relationships and developing
new contacts continue to be a key focus for us.
Develop trusted relationships
Our customer focused approach reflects
our differentiated proposition where we:
• Are approachable and actively engage
with our occupiers;
• Strive to listen, fully understand
occupier requirements and create solutions
that are mutually beneficial; and
• Make quick decisions, act swiftly
and deliver on our promises.
Customer satisfaction
We undertake regular surveys across our key
occupiers and undertook our fifth occupier
survey in March 2024.
Responses were received from occupiers
representing 46% of our income and the
feedback continued to be strong with
an average score of 9.0 out of 10.0 for
whether our occupiers would recommend
LondonMetric as a landlord.
The survey continued to provide very helpful
insight for us to follow up on and include in our
wider decision making.
We are focused on owning
assets that have enduring
occupier appeal.”
Mark Stirling
Asset Director
How we engage with our occupiers
Annual occupier surveys
Leasing and regear activity
Regular site visits and inspections
Energy saving discussions
Wider property needs discussions
Board Engagement
• Board provided with detailed analysis
of occupier transactional activity on
a regular basis
• Executive Directors feedback results
of rent collection to the Board
• Results of the annual occupier survey
presented to Audit Committee each year
• Site visits provide an opportunity for
the Board to engage with customers
LondonMetric Property Plc Annual Report and Accounts 202464
Occupier survey (March 2024)
194 of our occupiers were surveyed,
representing 91% of rent. Responses were
received from 77 occupiers representing
46% of rent.
Questions were asked about occupiers’
satisfaction with our properties and their
locations, how satisfied they were with
LondonMetric and whether they would
recommend us as a landlord. We also
asked specific environmental questions.
As for the previous year’s survey, we will
address the results of the survey and any
specific feedback through our ongoing
occupier engagement.
Encouragingly, wider sentiment from our
occupiers was upbeat, with 35% saying that
they are looking to increase their UK property
footprint. A further 58% said that they expect
their footprint to stay the same, whilst those
looking to reduce space was only 7%.
Average
9.0/10
Recommend LondonMetric as a landlord
We scored an average of 9.0 out of 10.0 for
whether our occupiers would recommend
LondonMetric as a landlord. This compares
with the 2023 result of 8.7.
For our top ten occupiers, the average
was higher at 9.1.
Average
8.5/10
Satisfaction with our properties
We scored an average of 8.5 out of
10.0 for satisfaction with our properties.
This compares with the 2023 result of 8.1.
For our top ten occupiers, the average
was higher at 8.7 compared to 8.2 in 2023.
A proactive landlord who develops
strong proactive relationships.”
Feedback from Tesco as part of the
occupier survey
As an occupier we are pleased to
work with LondonMetric within our
existing relationship and would be
happy to extend that relationship
when the right opportunities arise.”
Feedback from FedEx as part of the
occupier survey
Always genuinely positive,
collaborative and pragmatic
conversations - a true partner
landlord and tenant relationship.”
Feedback from DFS as part of the
occupier survey
Occupier survey feedback
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202465
Financial
statements
Governance
Strategic
report
Our sustainability performance
Responsible Business
and ESG review
continued
People
Why they are important to us
— Build relationships with our occupiers
and the property industry
— Allow us to execute on investment, asset
management and development strategies
— Responsibility for their wellbeing
What is important to them
— Flexibility and wellbeing
— Progression and career development
— Reward and recognition
— Fairness and equality
Outcomes
6%
average staff turnover since
merger in 2013
97%
of staff feel proud to
work for the Company
Employee survey results page 68
Overview
The Company is highly focused with
47 employees and eight Non Executive
Directors. Since 2013, employee numbers have
fallen despite a significant increase in assets
managed. This reflects improved efficiencies
and the lower operational requirements
of our portfolio.
Culture and approach
We have successfully attracted and retained
a talented and loyal team.
This is reflected in our low annual voluntary
staff turnover rate which has averaged
6% since merger in 2013. We believe this
reflects our:
• Culture of empowerment, inclusion,
openness and teamwork;
• Fair and performance based remuneration;
and
• Small number of staff, which allows a flexible
and individual approach.
We also have a flat management structure
with clear responsibilities and decision
making processes.
Following the merger with LXi and the
acquisition of LXi REIT Advisors Ltd we
welcomed ten new employees across finance
and property functions.
We are confident that our culture and approach
will be fully embraced by our new colleagues as
we look to fully leverage their skills, contacts and
expertise to drive the business further forward.
We have successfully attracted
and retained a loyal and
talented team.”
Martin McGann
Finance Director
How we engage with our people
Annual employee surveys
Annual appraisals
Training
Committee meetings
Regular business updates
Board engagement
• Clear communication and regular
updates from the Chief Executive
• Direct interaction between the Board
and employees on an informal and
also formal basis at specific meetings
• Site visits for Non Executive
Directors facilitated and attended
by key employees
• Liaison with workforce Non Executive
Director through employee events
LondonMetric Property Plc Annual Report and Accounts 202466
How we address employee needs
Flexibility, wellbeing, satisfaction & safety
Our 2024 employee survey reflects ongoing high levels of satisfaction.
We have implemented more flexible working arrangements over
recent years covering dress code, holiday buy back, improved hybrid
systems to enable home working and a core hours policy. We have
also significantly reduced office space, undertaken a major office
refurbishment and modernisation. Health & Safety is a key priority
for us and our policy provides for appropriate equipment, workplace
assessments, operational processes and safe systems of work.
Reward & recognition
Remuneration is aligned to personal and Company performance
with LTIPs that replicate arrangements for Executive Directors.
All employees receive a pension contribution of 10% of salary and
medical insurance with access to childcare, cycle to work vouchers
and a car scheme, which allows employees to access electric and
hybrid vehicles.
Progression & career development
An annual appraisal process is undertaken where training needs
and performance are discussed.
We actively encourage training and we continue to monitor our
staff training each year.
We continue to undertake ESG training across our employees,
encourage participation in Young Property Professionals’ groups
and offer secondment and work placement opportunities.
Inclusion, fairness & equality
We strongly encourage input on decision making from all staff, wide
participation in Committee meetings and collaboration across teams.
Regular business updates are provided by Executive Directors.
We promote diversity across knowledge, experience, gender, age
and ethnicity with a published diversity and inclusion policy in place
and support of the Real Estate Balance group. Whilst overall female
employee representation is good, we recognised that we needed to
specifically promote greater gender diversity. We continue to increase
female representation in our property team, supporting a recent
graduate joiner as she gains her relevant real estate qualifications.
Employee gender diversity
Directors
The number of Directors
by gender:
6
4
Senior Leadership Team
The number of members of the
Senior Leadership Team
by gender:
6
2
All employees
The number of employees
by gender:
23
24
Female
Male
For more information
on diversity, see page 126
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202467
Financial
statements
Governance
Strategic
report
Our sustainability performance
Responsible Business
and ESG review
continued
People
2024 Staff survey
97%
staff survey engagement level
97%
are proud to work for
LondonMetric
84%
agree the Company supports and
promotes social responsibility
94%
agree there is a strong culture of
teamwork and collaboration at
the Company
Overview of satisfaction survey
In February 2024, we undertook our seventh
annual employee survey to track changes
in staff satisfaction.
In total, we asked 43 questions, focusing on the
Company, the working environment, and the
individual. Responses were received from 97%
of staff members in line with 2023.
Survey Findings
Overall the survey is positive with 97%
of employees feeling proud to work at
LondonMetric. Employees remain highly
supportive of the Company and working
environment. It was noted that most scores
were up on previous years. There were isolated
cases of scores down on previous highs,
however it was felt that these reflected a year
focused on large transactional activity rather
than a shift in employees’ view and attitudes.
The highest scores were achieved as follows:
• Employees feel proud to work for
this organisation;
• Employees enjoy working at LondonMetric;
• Employees believe they can make a
valuable contribution to the success of this
organisation; and
• Employees believe the leaders demonstrate
that people are important to the
company’s success.
The three most positive changes from 2023 are
as follows:
• The leaders of LondonMetric value and act
on employee feedback;
• The Company is open to change and
innovation; and
• Employees believe everyone is treated fairly.
The Company does not operate a formal
work from home policy recognising the
benefits of collaboration and problem
solving when all together and driving a strong
entrepreneurial spirit.
On the question on a scale of 1-10 how likely are
you to recommend LondonMetric to a friend, a
score of 9 was achieved which is up from 8 last
year. This confirms that we remain a friendly
and positive employer.
Enjoy working at LondonMetric
Company is considerate of life outside work
The leaders demonstrate that people are
important to the company’s success
Work gives a sense of personal achievement
Feel involved in decisions that affect my work
I believe I can make a valuable contribution
to the success of this organisation
Employee Company
2024
2023
94
85
2024
2023
75
79
2024
2023
91
79
2024
2023
91
82
2024
2023
75
73
2024
2023
91
94
Survey breakdown of scores (percentage
of employees that responded with agree
or strongly agree)
LondonMetric Property Plc Annual Report and Accounts 202468
Andrew Livingston is our designated workforce
Non Executive Director and will keep providing
feedback from this survey and informal
meetings and discussions with staff in the
coming year.
As Chief Executive of Howden Joinery Group
Plc, Andrew has experience of managing and
motivating a large team of employees. His work
as designated workforce NED ensures that the
Board has access to the views of the workforce,
regardless of their role or position, and provides
meaningful information that can be used by the
Board when considering the potential impact
of key decisions on employees.
Each year since his appointment, Andrew
has hosted an informal off site session for a
select group of employees. The Remuneration
Committee Chair attended the meeting
to welcome any questions from staff on
executive pay.
The meeting is an opportunity for people
to speak freely and openly and ask about topics
discussed in the boardroom and share their day
to day working experiences. Topics discussed
included retaining the existing culture where the
business continues to grow through corporate
transactions, the LXi integration and any
resource requirements including systems as
well as the positives of being in the office full
time, work life balance, personal growth and
celebrations. Non attributable feedback was
relayed to the Board at its next meeting.
As a result of this feedback and subsequent
discussion, alongside the results of the
annual staff survey, the Board will continue
to focus on the following actions to
support the wellbeing of employees:
• Provide internal and external training and
development opportunities for staff, both
professionally and personally;
• Retain existing culture following
corporate activity; and
• Ensure employees remain informed
of relevant business activities on an
ongoing basis.
The work of the designated workforce Non Executive Director
Andrew Livingston was appointed as designated workforce
Non Executive Director by the Board in 2019.
How does the designated workforce
NED consult with the wider workforce?
• Consults directly with members
of the Senior Leadership Team
• Holds own meetings with a small and
diverse group of employees
• Reviews results of staff surveys
• Staff liaison at Board and
Committee meetings
His role was set out by the Board
to include the following:
• Engage with workforce to give staff the
opportunity to get to know and liaise
with him
• Monitor the results of employee
engagement surveys and any
actions arising
• Feedback to the Board at meetings any
staff concerns and the results of surveys
and other liaison at least annually
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202469
Financial
statements
Governance
Strategic
report
Contractors and Advisors
Why they are important to us
Being a small team we are dependent on
a diverse group of key suppliers including
professional advisors and contractors
What is important to them
— Fair payment terms
and prompt settlement
— Good, effective and
stable working relationship
— Long term partnerships
Outcomes
14 days
average payment
100%
compliance with our
Responsible Development
Requirements checklist
Our Responsible Procurement Policy
Our policy outlines our approach to
implementing supply chain and procurement
standards on developments and our existing
estate through our contractors and suppliers.
It focuses on areas such as labour, human
rights, health and safety, resource, pollution
risk and community.
Contractors
Our contractor relationships are highly
important in allowing us to deliver on
our developments and refurbishments.
In conjunction with our external project
managers, our development team ensures that
we select high quality and robust contractors
with a proven track record. We regularly review
the financial robustness of our contractors and
work closely with them throughout projects.
Our development team monitors progress and
tracks all elements of our projects including sub-
contracted works. We stay in close contact with
our contractors and arrange regular visits and
detailed reviews and checks of their systems
and processes.
Our Responsible Development Requirements
checklist is used on all projects and sets
minimum requirements for contractors.
Compliance with this checklist is mandatory for
all projects and sets minimum standards that
our contractors must meet. The checklist covers
environmental, responsible supply chain and
H&S standards. We also specify compliance by
contractors with the Considerate Constructors
Scheme on most of our projects where we
deem it appropriate.
At project meetings, we challenge all of our
contractors to consider the environment,
biodiversity, local community involvement
and local sourcing.
We value contractors that we
can trust and develop long
term partnerships with.”
Nick Heath
Head of Development
How we engage with our
contractors & suppliers
Regular project meetings
Annual reviews and audits on projects
Regular meetings with property
and managing agents
Sharing of learning between
different suppliers
Board engagement
• The Board or its Committees receive
regular presentations and reports from
its advisors
• The Board continues to advocate the
Prompt Payment Code and promote
responsible development standards
• The Board visit sites with the
Development team
Our sustainability performance
Responsible Business
and ESG review
continued
LondonMetric Property Plc Annual Report and Accounts 202470
Managing Agents
Managing Agents are an important part of
the supply chain on our assets where there
are multiple occupiers in place. We select a
few highly competent companies to deliver
our managing agent services.
Whilst our spend on these services is relatively
small, we continue to monitor their compliance
against our Managing Agents’ policies and
ensure that their sub-contractors are properly
appointed and compliant with our standards,
including responsible supply chain/anti-slavery
and human trafficking.
c.70
Properties managed by
five managing agents
Over recent years, we have undertaken a
number of reviews of material sub-contractors
employed by our key Managing Agents with
a specific focus on sustainability, community,
legislation and employment.
Other Suppliers
We also rely on many other advisor
relationships as part of our activities.
These include investment agents, external
auditors, valuers, remuneration consultants,
tax advisors, environmental experts and
legal advisors.
Annual contractor review of Deeley
Each year we undertake a detailed review of systems and processes
at one of our contractors, looking in particular at compliance with our
standards, local sourcing, modern slavery and minimum wage.
During the year we reviewed Deeley Construction, a Midlands based
contractor with whom we have a longstanding relationship. Deeley
recently completed a new build Starbucks drive-thru in Birmingham
(as pictured opposite) for LondonMetric and are currently tendering
for further projects. Deeley has robust policies in place and it is
clear that it shares the same core values as LondonMetric. The
contractor maintains strong relationships with its clients and its key
supply chain, with senior management having a very active role in all
business activities.
Uckfield development
Uckfield was seen as an excellent opportunity to team up with a well
known developer, BrideHall, with occupiers we also knew well, on a
site adjacent to an asset we already owned.
The scheme comprised of a 21,500 sq ft new format M&S Simply
Food store and a 20,000 sq ft Home Bargains store. It was delivered
to achieve BREEAM ‘Good’ with both units achieving EPC ‘A’ ratings.
The total funding provided was £14.6m and the scheme was PC’d in
September 2023.
M&S completed their subsequent fit out to open for Christmas 2023
trading, followed by Home Bargains who opened in the New Year.
The feedback from both the occupiers and locals is positive.
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202471
Financial
statements
Governance
Strategic
report
Investors
Why they are important to us
— Continued investment and support
— Feedback and direction
— Maintaining a flexible and attractive
debt structure
What is important to them
— Financial performance and progression
— Scale and liquidity
— Structurally supported assets with growth
— Well covered and growing dividend
— Clear strategy, execution and reporting
— ESG fully considered
Outcomes in the year
380
investors met
£1.4bn
debt facilities arranged or
extended
£3.2bn
Assets added through M&A
Equity Investors
We value our good relationships with our
shareholders. Understanding their views
continues to be a top priority for the Board and
is vital to the Company’s strategic direction.
The Company’s principal representatives
continue to be the Chief Executive and Finance
Director who, along with the Head of Investor
Relations and Sustainability, hold meetings
throughout the year and particularly following
results announcements.
Over the year, we met with c.380 equity
investors and brokers through one to one and
group meetings. Unsurprisingly, with continued
market uncertainty and our M&A activity, we
saw a significant increase in investor interaction
compared to the previous year when we saw
241 investors.
A breakdown of meetings by type of investor
is shown in the chart opposite and key
investor activities are shown on the next
page. The Company continues to place great
importance on and engage with its private
wealth shareholders, who represented 38% of
investors met in the year. We continue to enjoy
strong analyst coverage and interaction with the
12 brokers that cover our stock and we expect to
see even greater broker coverage going forward
given our increased scale and liquidity.
Feedback remains very supportive and, as
would be expected, we continue to focus
on ESG matters. Feedback on our ESG
performance remains very positive.
Following further investor requests, we
responded to CDP (a global disclosure system
for investors and corporates on environmental
issues) for the first time in their 2023
annual assessment.
Our sustainability performance
Responsible Business
and ESG review
continued
How we engage with our investors
Investor roadshows & conferences
Results presentations to analysts
Annual General Meeting
Chair attendance at investor meetings
Debt refinancing activity
Site visits
Equity investors met (by type)
1
2
3
4
1 Private wealth 38%
2 Sector specialists 29%
3 Generalists 26%
4 Brokers 7%
Board Engagement
• Investor feedback provided regularly to
the Board by the Chief Executive
• Chair participated in half yearly and other
roadshow meetings, attending five
investor meetings during the year
• Board attended the Annual
General Meeting
• Board consulted with shareholders
on the Company’s Remuneration
Policy proposals
LondonMetric Property Plc Annual Report and Accounts 202472
Our investor relations framework
The framework is set around our half yearly
results, and at other times in response to
ad hoc requests and where we undertake
UK regional and overseas roadshows and
investor conferences. Meetings and roadshows
keep investors informed of the Company’s
performance and plans and allows them
to ask questions. Specific topics discussed
during the year included development and
implementation of strategy, financial and
operational performance, the property
market, the strength of our occupiers, our M&A
transactions and other opportunities, our debt
structure and ESG considerations.
Shareholders are kept informed
through results statements and other
regulatory announcements.
These are published on our website, affording all
shareholders full access to material information.
The website also includes an investor relations
section containing all RNS announcements,
share price data, investor presentations,
factsheets and Annual Reports.
A live and on demand webcast of results and
a CEO interview is posted twice a year on our
website. Individual shareholders can also raise
questions directly at any time through a facility
on the website. We complied with the European
Single Electronic Format (‘ESEF’) regulations for
filing our Annual Report.
We continue to offer a scrip dividend alternative
to shareholders, which enables them to opt for
shares rather than cash with no dealing costs
or stamp duty. This scheme was renewed for
a further three years in 2022 and we continue
to have good levels of take up.
LXi merger investor activity
Our merger with LXi required significant
shareholder dialogue and we undertook
75 meetings over the two-month period
prior to merger completion in early March
2024. 118 institutions and private wealth
management companies were seen
including a number of LXi only investors.
75
meetings held
There was a significant overlap of registers
and the transaction received overwhelming
support from both sets of shareholders.
The merger further diversified our investor
base, introduced two new top 15 shareholders,
and materially increased liquidity in our shares.
118
investors seen
Debt investors and joint ventures
We continue to enjoy good relationships
across the debt capital markets and
continue to broaden our base of debt
providers. In addition, we continue to
enjoy strong relationships with our joint
venture partners.
Further information on our financing activity
in the year is set out on page 53, including
details on our sustainability-linked debt
arrangements and also refinancing activity
undertaken both on existing LondonMetric
debt but also LXi debt facilities.
Key investor activity in year
Q1
Australian investors calls
Full year results announcement/roadshow
Private wealth meetings (Leeds & York)
Conferences with EPRA, Kempen &
Morgan Stanley
US roadshow (New York & Boston)
Q2
Societe Generale conference
Equity & Debt Site visit to Dagenham
Ad hoc analysts and investor meetings
Q3
Shareholder consultation on remuneration
Private wealth meetings (Bristol)
Half year results announcement & roadshow,
including discussions on CTPT merger
Amsterdam roadshow
UBS investor conference
Q4
LXi merger investor meetings
Barclays investor conference
Bank of America conference
Citi investor conference (US)
US roadshow (New York)
Equity site visit to Crawley
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202473
Financial
statements
Governance
Strategic
report
Communities
Why they are important to us
— Considering communities local to our
activities is an important part of our
responsible Business approach to doing
business and delivering our strategy.
What is important to them
— Environmental and social impact of
our activities
— Employment opportunities
— Investment into local infrastructure
Outcomes
£153k
Charitable giving in year, a 46%
increase on 2023
72
Charitable causes
supported in year
We recognise the importance of supporting
our local communities and engaging
with all local stakeholders. Our published
Community Policy outlines our approach
and we aim to maximise the local benefits
of our activities through:
• Investing in local infrastructure through
regeneration and creation of fit for
purpose buildings;
• Creating jobs during development and
refurbishment, typically using local
contractors and employment;
• Bringing in long term occupiers who create
significant local employment;
• Partnering with local authorities and councils;
• Engaging with local residents and
communities, particularly during and
post developments to ensure that
they are fully involved; and
• Ongoing involvement in areas local to our
properties by funding of local events and
facilities and engaging with schools.
Our Charity and Communities Working Group
implements charity giving and co-ordinates
community involvement. We aim to allocate a
minimum of £100,000 per year for charitable
giving across four key areas:
• Specific causes identified at a corporate level;
• Charitable causes identified by employees
with all employees able to nominate
charities of their choice or allocate funds
to match their own charitable activity; and
• Occupier or asset related giving, supporting
causes in conjunction with occupiers or near
our local assets and developments.
This year, under our banking arrangements an
extra £48,000 was added to our charity budget
as a result of us hitting our banking related ESG
targets on our sustainability linked financings.
How we engage with our communities
Supporting local charities
Encouraging local sourcing on projects
Planning consultations
Resident updates on projects
Engagement with local authorities
Supporting local occupier initiatives
Breakdown of charitable giving
1
2
3
1 Corporate giving 37%
2 Employee giving 29%
3 Community giving 34%
Board engagement
• Participation in charitable events
organised by LondonMetric
• Updates on charitable work
• Understanding of development
related community matters
through project updates
Our sustainability performance
Responsible Business
and ESG review
continued
LondonMetric Property Plc Annual Report and Accounts 202474
Highlight charitable activity in the year
Employee giving
Over the year, the Company supported its employees charitable giving
initiatives donating £44,448 across a wide range of charities including
localised community initiatives.
Employee charitable giving included supporting individuals
personal charitable initiatives including endurance swimming and
cycling events.
During the year, employees also spent their own time volunteering at
local foodbanks in their local communities. In addition, the Company
has also supported its employees local communities with small
donations to local community sport clubs.
Corporate giving – real estate led
We continue to support LandAid, the property industry charity and
contributed £10,000 to LandAid in the year, some of which related to
employee giving. Our participation in various LandAid initiatives means
that we remain a Foundation Partner.
This year we ran an internal step challenge for two weeks raising
money to prevent youth homelessness bringing out the competitive
side in everyone. 89% of our employees participated in the Steptober
event, taking over 6 million steps for the challenge, over two weeks.
Local communities giving and initiatives
We continue to support local communities where we have large
investment exposure. In total we donated £51,612 to charities including
foodbanks, the National Energy Action and defibrillators.
As the cost of living continues to put pressure on families, during the
year we continued our contribution to foodbanks in communities local
to our assets and people including in Kingston, Tyseley, Weymouth,
Bedford and Dagenham.
As part of our roll out of defibrillators across our properties, we installed
eight defibrillators in the year at a total cost of £28,012. See below for
further details.
Corporate giving – wider initiatives
The Company supported global, national and local charities,
supporting causes close to its heart.
During the year, we donated £25,000 to Youth Beyond Borders
who develop inclusive programmes for children form disadvantaged
backgrounds. This six month programme will involve up to 100 young
people from inner cities and take them on a transformational journey
to end with a trail running race in the French Alps.
In the previous year, we committed to install a number of defibrillators
across our assets in conjunction with Fidum, one of managing agents.
We installed eight defibrillators in the year at our sites in New Malden
(pictured opposite), Weymouth, Dartford, Eastbourne, Hertford and
London (x3). Total spend has been £28,012 and we have another three
locations earmarked for additional defibrillators.
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202475
Financial
statements
Governance
Strategic
report
Our sustainability performance
Responsible Business
and ESG review
continued
Governance and compliance
The Board is committed to upholding
high standards of corporate governance
and Responsible Business is an important
part of ensuring that we deliver on those
high standards.
Overview
Board representation for Responsible Business
Martin McGann, Finance Director, represents
the Board at Responsible Business Working
Group meetings and his remuneration is linked
to the Company achieving certain Responsible
Business related objectives.
Policies and statements
The Company’s overall Responsible
Business policy is available on its website along
with other related documents including:
• The Responsible Business Working
Group’s terms of reference;
• Responsible Business targets;
• Full Responsible Business reports;
• Our approach to health and safety;
• Compliance and anti-corruption procedures;
• Responsible Procurement Policy;
• Community Policy; and
• Modern Slavery Act Statement.
Confirmations
The Company confirms that no human rights
concerns have arisen within its direct operations
or supply chains and that it has not incurred
any fines, penalties or settlements in relation
to corruption.
The Company continually reviews and updates
all of these documents as required.
Health and safety in focus
Responsibility and procedures
The Board is responsible for ensuring that
appropriate health and safety procedures
are in place. Mark Stirling, Asset Director,
is responsible for overseeing implementation of
our procedures and reporting back to the Board.
RP&P Management Ltd (‘RP&P’) acts as our
Corporate Health and Safety Advisor.
H&S risks assessment and training
Where risks need to be assessed under a
specific duty or regulation, we ensure that an
assessment is carried out and that all necessary
actions are implemented. Health and safety
training is carried out for employees and
additional training is considered on a case
by case basis.
Health and safety policy
Our policy is regularly reviewed and addresses
three key areas of:
I. Employment – The policy ensures our
employees are offered a safe and healthy
working environment.
II. Construction – Procedures and processes
have been developed to ensure we comply
with current legislation with a Project
Manager, Principal Designer and Principal
Contractor appointed on all projects
to oversee, manage and monitor health
and safety.
III. Managed properties – The majority of
our assets are let on full repairing and
insuring leases. For single occupier assets,
the occupier is responsible for managing
health and safety matters at the property
and the wider estate.
Where there are multiple occupiers on
the same estate, we appoint a Managing Agent
to manage health and safety matters relating
to common parts. The Managing Agent is
responsible for ensuring health and safety
assessments are completed and regularly
reported back to us.
Our contractor requirements
We have implemented robust processes
to ensure that our contractors uphold our high
standards and minimise the environmental
impact from developments.
All of our contractors adhere to our Responsible
Development Requirements checklist, which
sets minimum requirements for our main
developments on areas including:
• Health and safety;
• BREEAM Very Good or better standard
(where appropriate);
• Considerate Constructors
Scheme compliance;
• Environmental impact monitoring;
• Management and reporting of progress;
• Promoting local employment
opportunities; and
• Fair remuneration for workers.
We continue to monitor compliance and
look at ways of improving our contractors’
performance. During 2024, as part of our
annual contractor compliance audit, we
met with Deeley Construction Limited, who
are a medium sized contractor we typically
engage for smaller Midlands based projects.
Their Responsible Business policies and
processes are very robust and their senior
management has a highly active role in all
business activities.
See page 71 for further details on our audit
Health and safety in 2024
Quarterly internal meetings
Half yearly project audits on two sites
Zero reportable incidents on projects
Zero accident rate for employees
No prosecutions or enforcements
Health & safety policy reviewed annually
Governance
LondonMetric Property Plc Annual Report and Accounts 202476
LondonMetric has complied with the requirements of Listing Rule 9.8.6R by including its Task Force on Climate-Related Financial Disclosures (‘TCFD’)
Statement below. Our statement is consistent with the four overarching disclosures and eight of the 11 specific disclosures, demonstrating our
commitment to transparent and comprehensive climate-related reporting. LondonMetric is dedicated to enhancing its reporting practices year on year.
Our focus areas will be on enhancing alignment in the three specific disclosures where we are not fully consistent with the recommendations, which
include strengthening the financial quantification aspects of our disclosure (Strategy B and Strategy C), improving the measurement and coverage of
Scope 3 emissions generated by our occupiers (Metrics & Targets B), and conducting a climate risk assessment for our enlarged portfolio following the
merger with LXi REIT Plc, which completed in March 2024.
Below are all our climate-related financial disclosures, structured according to the four TCFD pillars. For the three specific disclosures where we may
not fully align with the recommendations, we provide a clear rationale for any deviations and outline the steps we plan to take to address these gaps in
future reporting.
1. Governance
A) Describe the board’s oversight of climate-related risks and opportunities.
The Board. assisted by the Audit Committee, provides oversight of the Company’s Environmental, Social, and Governance (‘ESG’) matters and has overall responsibility for
the risk management framework, which integrates climate-related risks and opportunities.
The Senior Leadership Team (‘SLT’) and the Company’s Responsible Business Working Group (‘Working Group’) are responsible for identifying and managing risks and
opportunities related to climate-related issues, including implementing measures to address those risks and opportunities.
LondonMetric’s governance structure regarding climate risks and opportunities is summarised in Figure 1. For a description of the roles and responsibilities of the Board and
its sub-committees, see pages 119 to 121 of the Governance section of the Annual Report.
Process and frequency of information transfer and consideration of climate-related issues.
The Board considers climate-related risks at a strategic level during Board meetings, ensuring that new and emerging risks, including those that are climate-related, are
identified and appropriate action is taken to remove or reduce their likelihood and impact. The Board typically meets six times a year, with ESG and climate-related risks
addressed when necessary.
The Audit Committee reviews the Company risk register (in which climate-related risks are included) annually and provides assurance to the Board on the robustness
of the systems in place for the identification, assessment, and mitigation of the principal risks. The Audit Committee is informed by the Working Group, which provides
feedback on climate-related issues, facilitates proactive climate-related risk management and is a sub-committee of the Finance Committee. The Audit Committee
meets six times a year, with ESG and climate-related risks addressed when necessary.
The Board receives climate-related information on the Company through:
1. Audit Committee updates – delivered by the Audit Committee on an annual basis;
2. Board papers – written by the SLT and delivered quarterly;
3. ESG papers – written by the Working Group at least annually; and
4. Regular ad-hoc updates on specific matters - including investment and asset management initiatives, where environmental and climate-related risks are addressed.
Climate-related issues are considered by the Board and the Audit Committee when reviewing and guiding strategy, risk management, budgeting, performance, and
spending. Board members are expected to identify and develop their own individual training needs, skills and knowledge and ensure they are adequately informed about
the Group’s strategy, business, and responsibilities. They are encouraged to attend relevant seminars and conferences and receive technical update material from advisors
and are offered training and guidance at the Company’s expense. The Deloitte Academy is also available, which includes briefings on sustainability and climate. The Board
is considered well-equipped to make climate-related decisions based on the above.
Progress against targets
The Audit Committee is responsible for monitoring and overseeing progress against climate-related objectives and targets, escalating matters to the Board as necessary.
The Committee considers the Company’s ESG performance against the KPIs shown in the Metrics and Targets section of this report (see Table 3). Additionally, in achieving
the Company’s strategy and overall corporate objectives, Executive Directors are entitled to a bonus each year, with 10% of this bonus relating to achieving specified ESG
objectives that are aligned with delivering the Company’s ESG KPIs.
Our sustainability performance
TCFD Recommendation and Alignment
Financial
statements
Governance
LondonMetric Property Plc Annual Report and Accounts 202477
Financial
statements
Governance
Strategic
report
1. Governance continued
B) Describe management’s role in assessing and managing climate-related risks and opportunities.
Certain members of the SLT and the Working Group are responsible for managing and monitoring climate-related risks. They report directly to the Audit Committee.
This collaboration is led by the Head of Investor Relations and Sustainability and the Finance Director, who are members of the SLT and the Working Group and are
ultimately responsible for implementing Responsible Business matters.
The SLT is responsible for ongoing risk identification, and the design, implementation, and maintenance of internal controls to mitigate identified risks. Certain members
of the SLT attend the Investment, Asset Management and Finance sub-committees to ensure that climate-related issues are monitored and escalated where appropriate
as well as to ensure that opportunities are considered and captured. These sub-committees typically meet every four to six weeks or more frequently, depending on
business needs and activity.
The Working Group supports the SLT in identifying wider climate-related risks by reporting on and escalating potential risks. It also ensures the business is properly
considering opportunities, with interaction at least on a weekly basis. The Working Group typically meets once a month.
LondonMetric has recently become a member of the Better Building Partnership (‘BBP’) and actively participates in BBP’s activities, including working groups, research
projects, and knowledge sharing, thereby demonstrating a commitment to sustainability. LondonMetric also works with consultants at an asset level to identify
sustainability risks and upgrade opportunities and employs the services of an ESG consultant at the corporate level to assist in its overall ESG strategy and implementation.
Figure 1: LondonMetric Climate-Related Risk Governance Structure
Governance of climate-related risks and opportunities
Board
of Directors
Audit
Committee
Senior
Leadership Team
Investment
Committee
Asset Management
Committee
Finance
Committee
Responsible Business
Working Group
2. Strategy
A) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term; and
B) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.
When identifying risks and opportunities, we looked at the short term (1 – 2 years), medium term (3 – 9 years) and long term (10+ years). In selecting time horizons, we
considered the fact that climate-related issues often manifest over the medium and longer term. The time horizons are based on the profile of risks associated with real
estate asset lifecycles in line with the Climate Change Act.
Identifying climate risks and opportunities
As part of the climate risk assessment carried out in 2022 by JLL, we identified our potential climate risks and opportunities. For a summary of the assessment, see page
61. Climate scenario analysis was utilised to model our climate-related risks in two likely scenarios based on the Intergovernmental Panel on Climate Change (‘IPCC’)
Representative Concentration Pathways (IPCC RCP). The assessment tested a range of outcomes at the portfolio level under (i) the RCP4.5 (stabilised emissions) and
(ii) RCP8.5 (high emissions) climate scenarios up until 2100 to identify material risks. These scenarios represent a realistic range that emissions could reach, therefore
informing financial planning.
Each risk was assigned an overall Climate Risk Score based on a combination of two headline sub-categories: impact and likelihood. Impact scoring considers overall
business and financial impact, and the ease/cost of mitigation. Likelihood considers risk likelihood, frequency, duration of impact and how quickly the risk materialises.
Overall Climate Risk Scores were calculated by multiplying the impact and likelihood scores (on a scale of 1-5), such that the minimum overall score is 1 and the maximum
is 25. Based on each discrete climate risk plotted on an impact/likelihood matrix (with a score of 3 sitting in the middle of each axis), overall Climate Risk Scores of 9 or
greater or which fall in the top risk quadrant are considered material, suggesting a significant financial impact requiring appropriate management and mitigation.
It was identified that transition risks are more prominent in the near term under the stabilised emission RCP4.5 scenario. Physical risks materialise in the largest severity
over the longer term under the high-emission RCP8.5 scenario.
Our sustainability performance
TCFD Recommendation and Alignment
continued
LondonMetric Property Plc Annual Report and Accounts 202478
2. Strategy continued
Climate risks under the two IPCC RCPs, both transition and physical, are summarised in Table 1, along with an assessment of potential financial impact and risk management
and mitigation strategies. The table also highlights which of LondonMetric’s wider strategic pillars are impacted by each risk (details on strategic pillars and priorities can be
found on page 15 of the Annual Report). Following the merger with LXi, a broader climate risk assessment will be conducted next year across the enlarged portfolio.
Table 1: Climate-related material risks with mitigation and financial impact (risk scores under the two IPCC RCPs shown in brackets)
Risk Transition risk Strategic Pillar Management/Mitigation Financial Impact
Short term (1 -2 years)
R1: Occupier/market demand
(RCP 4.5 – 17.6; RCP 8.5 – 13.7)
Occupier and market demand is shifting towards low or net
zero carbon assets with embedded on-site climate resilience.
Demand may also shift from certain geographies or sectors,
while changing consumer preferences could create occupier risk.
Assets not meeting
occupier needs or not let to
resilient occupiers may not
be considered ‘desirable’.
Ongoing occupier engagement
to understand their sustainability
commitments, and business
model resilience. Continue
to improve buildings in
conjunction with occupiers
on lettings/lease extensions.
Increased capital expenditure
without income/value accretion.
Lower occupancy levels due to a
move away from less sustainable
buildings, leading to reduced
rental income.
R2: Increased building standards/regulation
(RCP 4.5 – 16.4; RCP 8.5 – 7.6)
Increasing policy mandates in the built environment that improve
energy and resource efficiency and on-site climate resilience,
may potentially result in significant capital expenditure costs
to meet the new standards. The main risk concern is meeting
Minimum Energy Efficiency Standards (‘MEES’).
Poor management of
assets and EPC ratings
could result in illiquidity.
Continued understanding of
and alignment with the latest
regulations required, building
on asset-level plans to ensure
compliance with standards or
other appropriate actions such
as disposals.
Increasing costs to meet
regulation falls on the Company
as landlord. Asset values many
fall, and assets become less liquid
with a ‘brown discount’ priced in.
Medium term (3 – 9 years)
R3: Financial market impacts/access to capital
(RCP 4.5 – 15.1; RCP 8.5 – 19.0)
Market shifts in favour of low-carbon solutions and climate resilience
as well as climate events impacting our portfolio could create a
competitive risk, particularly with respect to meeting stakeholder
expectations and access to the equity and debt markets.
Low commitment to
sustainability could affect
investor perception.
Continue to ensure our
assets are fit for purpose and
maintain high-level dialogue
with investors on our
commitment to sustainability
and climate resilience.
Higher cost of equity and debt or
even inability to refinance existing
debt or raise capital for future
opportunities. This would affect
profitability and equity market
rating.
R4: Increased energy demand/costs
(RCP 4.5 – 17.6; RCP 8.5 – 13.7)
Changes to seasonal patterns, temperature extremes and carbon
taxation each could increase the operational costs of buildings
and impact the rental value of inefficient assets as occupiers seek
lower operational costs and in-built energy resilience.
Lack of sustainable
initiatives increase
occupiers’ operational
costs.
In conjunction with
occupiers, plan property
energy performance reviews
to assess interventions such
as solar PV to help occupiers
save energy costs and build
energy supply resilience.
The expense of asset
interventions to lower occupiers’
operational costs falls increasingly
on us as the landlord, affecting
our profitability and values.
R5: Supply chain & resources
(RCP 4.5 – 10.4; RCP 8.5 – 14.0)
Physical impacts may cause widespread disruption to production
within supply chains and resources, potentially resulting in
business disruption and tenant default risk.
Low understanding
of occupier resilience
could add risk.
Occupier supply chain/business
model reviews undertaken on
acquisitions and key occupiers/
sectors to assess resilience against
disruption. Occupier and sector
diversification was reviewed and
assessed at a strategic level.
Potential for occupiers to default
on rent, which would impact
profitability and asset valuations.
R6: Exposure to litigation
(Risk score: RCP 4.5 – <9; RCP 8.5 – >9)
Increased policy and legislation requirements to meet transition
requirements of a low-carbon economy could create additional
risks of legal action for breaches of compliance. Further tightening of
legislation on MEES or UK’s Net Zero targets could add to the risk.
Failure to meet legislation
can lead to fines and
reputational damage.
See mitigation under R2 above.
ESOS Phase 3 compliance
work was undertaken to identify
reduction opportunities across
operational assets.
Legal action and penalties.
Reputational damage could
lead to reduced financing
opportunities, such as higher
costs of equity and debt.
Long term (10+ years)
R7: Insurance challenges
(RCP 4.5 – 10.9; RCP 8.5 – 14.0)
Physical climate events or risks may cause the insurance industry
to reassess premiums, which could rise or become difficult to
secure. Assets in areas prone to climate-related hazards would
be affected most. Insurance is often a lender requirement, which
could impact the ability to raise debt against assets located in
higher-risk areas.
Failure to own assets with
low physical risk could
increase premiums and
risk of portfolio illiquidity.
Continue to ensure existing
insurance policies provide
adequate protection from
climate-related risks and
increase awareness of material
physical risks across the portfolio
with external advice to ensure
appropriate action is taken.
Increased premiums could
increase our operating costs.
Invalid insurance policies
could result in unpaid claims
and expose the Company to
material reinstatement costs.
Where insurance products are
withdrawn, this could increase the
Company’s risk profile.
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Risk Physical risks Strategic Pillar Management/Mitigation Financial Impact
Long term (10+ years)
R8: Flooding (coastal, fluvial)
(Risk score: RCP 4.5 – 9.9; RCP 8.5 – 13.9)
Rising sea levels threaten coastal regions with
flooding, erosion, salinisation and permanent land
loss; excessive rainfall or snow melt may cause rivers
to exceed their capacity.
Assets prone to flooding could
be less investible and desirable.
During the acquisition process,
flood risk assessments are
conducted. Portfolio-wide
reviews are undertaken every
3-4 years, and medium to
high-risk assets are assessed
for mitigation measures and/
or exit strategies. 2% of
assets have high flood risk.
We are increasingly focused
on ensuring that occupiers
maintain adequate attenuation
and drainage to accommodate
greater rainfall intensity.
Assets with greater flood risk
may become uninsurable,
unsellable, and unlettable, which
could impact the Company’s
profitability and asset values.
Increased investment may be
required to address flooding risk.
R9: Heavy rainfall & pluvial flooding
(Risk score: RCP 4.5 – 8.4; RCP 8.5 – 13.3)
There are increases in annual mean rainfall, where typically
wet periods of the year see a further increase in daily
rainfall. Heavy rainfall or rainfall over a prolonged period
may lead to more regular pluvial flooding (surface water
flooding) events.
Assets prone to surface
flooding could be less
investible and desirable.
R10: Heat stress
(Risk score: RCP 4.5 – 12.8; RCP 8.5 – 16.6)
Rising mean temperatures and extreme temperature
highs put pressure on people and infrastructure and
may increase the frequency of wildfires.
Urban and other assets
prone to heating up may
be less marketable.
We are increasingly focused on
ensuring occupiers maintain
properties to ensure fire risk is
mitigated, tracking heat stress
across assets and working with
occupiers to assist them in
minimising heat stress.
Assets with poor cooling systems
that are at higher risk of heat
stress may suffer from higher
vacancy and the need for greater
capital investment, which might
affect profitability and asset
valuations.
R11: Extreme weather events
(Risk score: RCP 4.5 – 13.1; RCP 8.5 – 17.1)
Storms, heavy winds, heavy precipitation, droughts and
snow are more frequent and severe and can lead to
stranded asset risk for at-risk assets.
Assets susceptible to
extreme weather could
be less investible/desirable.
In addition to previous climate
risk assessments on assets,
we will be undertaking further
asset-level assessments to
assess the portfolio’s resilience
to extreme weather.
Assets at greatest risk may
become uninsurable and
unlettable, which could impact
profitability and asset values.
Increased investment may be
required to address extreme
weather risks.
Transition risks were distributed evenly across geographies. However, assets within the retail and office sectors are more likely to be impacted by these risks. Physical risks
were found to be distributed across all sectors and geographies.
Climate-related opportunities
While the transition to a low-carbon economy presents significant risk, it also creates significant opportunities, allowing LondonMetric to gain a capital advantage through
a focus on climate change mitigation and adaptation solutions.
The assessment carried out by JLL concluded that transition opportunities are more prominent in the near term under the stabilised emission RCP4.5 scenario, while
physical risk mitigation opportunities arise under both RCP4.5 and RCP8.5 scenarios.
Table 2 summarises the identified climate-related opportunities that are material to LondonMetric. Each opportunity is described, along with an assessment of potential
financial impact.
Opportunities are distributed evenly across geographies, while the logistics sector, which represents majority of the LondonMetric portfolio, presents greater opportunities
along with attractive yield costs.
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2. Strategy continued
Table 2: Climate-related opportunities and financial impact
Opportunity Description of Opportunity Financial Impact
1. Securing a diverse range
of premium tenants that
have net zero carbon
ambitions
By attracting tenants with net zero carbon ambitions, the Company demonstrates
a commitment to reducing greenhouse gas emissions and contributing to climate
change mitigation efforts. As market demand shifts and tenants become more
sustainability aware, they will seek to occupy climate-resilient, sustainable buildings
and avoid cheaper buildings with poorer sustainability credentials.
Tenants may be willing to pay ‘green premiums’ on
rent for better-quality assets, which would allow us
to grow our rental income and profits and increase
asset values. Higher-quality occupiers are more likely
to collaborate on asset improvements or indeed self-
fund improvements.
2. Installing renewable
technology
Roof space on our logistics assets lends itself well to solar PV, and charging occupiers
additional rent to use the energy generated has the potential to generate attractive
cost yields.
Yields on cost vary, but typically, we achieve minimum
yields of 8-9%. Whether we fund the installation
or the occupiers self-fund, adding solar PVs should
enhance the asset’s value.
3. Acquiring poorer
quality assets
As strong stewards of underinvested assets with the expertise and capital to
improve buildings, we continue to see opportunities to acquire poorer-quality assets
from less active investors, where we can make material improvements and increase
income and value.
Discounted acquisition prices through the application
of a ‘brown discount’.
High initial investment cost but long term value
appreciation through asset improvement.
4. Improving our
cost of capital
Further improving our asset and business strategy on climate resilience should give
us a competitive advantage through a more attractive cost of capital. Leveraging
sustainable finance instruments (such as green bonds or sustainability-linked loans)
should also help us tighten banking margins and diversify our sources of investment.
Borrowing incentives such as lower interest rates,
longer loan terms or reduced fees could be accessed
to enhance our lending arrangements.
Integration of climate-related risks in financial planning and risk prioritisation
A key aspect of LondonMetric’s asset management strategy is sustainability performance improvement. As well as reducing carbon emissions from the small number of
assets where we have ongoing control, we are helping to improve assets under occupier control. Our focus is on resilience to climate change through maintenance, energy
efficiency upgrades and the provision of renewable energy, mitigating both physical and transition risks. During our investment process, and on an ongoing basis, we
assess flood risk along with building fabric and energy efficiency to understand the climate and carbon-related risks and costs involved in mitigation. Prior to the merger, a
high-level review of the LXi portfolio was undertaken, which included flood risk analysis and energy efficiency. Over the next year, we will be conducting a more detailed
asset-level review, which will inform the material impact on our NZC strategy and targets.
With regards to MEES legislation compliance, the cost of bringing all our assets to an EPC rating of ‘B’ was previously estimated by us in 2023 to be c.£25 million. Further analysis is
currently underway to understand the financial impact of improving the LXi assets, and we will provide an update on the enlarged portfolio next year. However, we do not
expect MEES compliance to have a material business impact as the upgrade costs would, in most instances, either be offset through higher rents, paid for through normal occupier
incentive arrangements or paid for by the occupier as part of their building upgrades. In 2021, we developed a Net Zero Carbon (‘NZC’) strategy, where we set a target for net
zero carbon for our operations (Scope 1 & 2 emissions) for the end of 2023, for our developments by 2030 and for our tenant emissions (Scope 3 emissions) by 2035.
We were due to have progressed a Net Zero Pathway this year, but as a result of the LXi merger, we have paused this work to allow us time to consider the impact of the
merger on our NZC strategy and wider targets. We intend to reshape our NZC strategy over the next year. Notwithstanding the merger, we made further progress on our
Strategy. We undertook net zero audits across 0.4 million sq ft, in addition to 2.5 million sq ft of audits obtained on the CTPT and LXi portfolios. In respect of operational
target, our Scope 1 and 2 emissions will be Carbon Neutral for 2024, and we aim to be Net Zero no later than end of 2025.
LondonMetric has completed CRREM analysis on its ten largest assets (excluding LXi assets), where it has available data, to determine stranding risk and potential
exposure to write-downs resulting from misalignment with the 1.5°C pathway. High-level findings include:
• Three of these assets are already aligned with the CRREM 1.5 pathway or nearly 1.5 ready, mostly thanks to a combination of low gas usage and low intensity of
the occupier’s operations. A further two are currently flagged as “not aligned to the 1.5 pathway” by CRREM but will have re-aligned with the 1.5 pathway by 2030
through the projected decarbonisation of the UK National grid. Emissions in the intervening period can be reduced by introducing/increasing solar PV capacity; and
• Across the five remaining assets, the focus will be on fully understanding building use through engagement with our occupiers. This will further inform which sites
would benefit from a more in-depth net zero audit to understand key interventions needed for alignment.
This analysis is being rolled out across the wider portfolio, and we will utilise the initial analysis undertaken on LXi’s assets before the merger, which covered over 60% of their
portfolio, to assist that work. As part of our strategy, we are collaborating with occupiers to assist with the mitigation of their own exposure to climate risks through measures such as
greater adoption of green lease agreements and encouragement to improve the green credentials of buildings they lease from us, particularly on leasing or lease extension events.
Whilst development is only a small part of our activities, we are focusing on enhancing the sustainability features of our developments by building to high standards and
minimising upfront embodied carbon. Where we acquire assets with future redevelopment potential, embodied carbon offset costs are factored into our acquisition
appraisals. These actions help future-proof our buildings and allow us to take advantage of opportunities from the shift to a low-carbon economy by improving occupier
contentment, rental values, and the value of our assets.
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C) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.
Organisation resilience
As part of the 2022 JLL risk assessment, an analysis of a representative selection of assets within the portfolio was used to assess the physical and transitional risk rating
and inform key action recommendations for the organisation. Those recommendations, alongside additional actions defined by LondonMetric, have been identified in
Table 1.
The findings of the report stated that LondonMetric is well-positioned to mitigate climate-related risks. Key findings identified were:
• LondonMetric’s Net Zero Carbon Framework and approach to asset improvement are well-developed and contribute towards mitigating less severe climate-related
risks. However, there are some asset vulnerabilities, such as heat stress not being a current consideration and some assets being near or within areas susceptible
to flooding;
• LondonMetric could conduct portfolio-level climate risk modelling to better understand the impacts of climate risks and opportunities at an asset, asset type and
geographic level. This will help determine which assets are most at risk and where to focus mitigation efforts; and
• By addressing the identified gaps in the TCFD gap analysis, LondonMetric can ensure that it has a robust governance structure, policies, and procedures in place to
manage climate-related risks.
A new assessment will be conducted over the next year to include the LXi assets to understand the wider portfolio’s climate resilience. Additionally, our revised NZC strategy
implementation will mitigate against several climate scenarios. To fully assess resilience, we plan to continue conducting CRREM analysis to quantify stranding risk.
Our investment strategy is to be agile in response to shifting market conditions to ensure climate resilience. The Company’s shift out of multi-let retail parks and offices
into distribution assets and other long let assets with lower energy requirements means that the overall carbon footprint of our buildings is significantly lower today.
Furthermore, our significant investment and disposal activity over recent years, along with our ongoing upgrade work to buildings, has upscaled the environmental quality
of our portfolio. Where we have acquired assets over recent years, principally in urban logistics, our approach has ensured that asset improvement is embedded in our
business case and/or there is a high intrinsic value of the land, which makes highly sustainable redevelopment or repurposing commercially attractive. The merger with LXi
added some assets that don’t fully align with this strategy, which we expect to address in the coming years.
Currently consulted MEES regulation enhancements stipulate commercial properties would require an EPC rating of ‘C’ or higher by 2027/28, and ‘B’ or better by 2030
(with some exemptions). As a result of this regulation, we continue to review our portfolio, as well as the recently acquired LXi assets, to understand which are at risk of not
meeting the proposed regulation. Over the last 12 months alone, we have re-assessed the EPCs on 1.2 million sq ft of assets, and we continue to ensure that all assets have
a plan and that a minimum EPC of ‘B’ is achievable on new lettings, regears and refurbishments. It is the responsibility of the Working Group to remain informed about
changing regulations and share this with the Board to ensure the business’ assets remain compliant.
3. Risk Management
A) Describe the organisation’s processes for identifying and assessing climate-related risks.
LondonMetric’s overall risk management process is centred around the SLT, whose members are closely involved in day to day matters and have a breadth of operational
experience. They support the process of identifying emerging risks and consider emerging climate-related risks that have the potential to impact the business and
stakeholders adversely. These climate-related risks are then evaluated and monitored along with the other risk categories through the SLT and Working Group meetings.
Any significant emerging risks are raised and discussed at the Audit Committee and Board level.
Climate-related risks come under the ‘Responsible Business and Sustainability’ corporate risk, which has been identified as a principal risk to LondonMetric. Principal risks
refer to risks that have the potential to cause material harm to operations and stakeholders and could affect the Company’s ability to execute its strategic priorities or
exceed the Board’s risk appetite.
We are currently assessing the risk impact of the merger with LXi, given the material shift in our portfolio composition. Our Triple Net Lease model, with full repair and
insurance leases that are now materially longer in duration as a result of the merger, presents increased challenges as there is less scope for near term direct intervention
by us to improve assets and reduce Scope 3 emissions. Instead, it places greater reliance on our occupiers’ environmental ambitions and their willingness to work in
conjunction with us. However, we do not believe this to have materially increased our risk profile.
Two climate-related risk exercises have previously been conducted in parallel to gain a detailed understanding of exposure to risks. For a summary of the assessment,
see page 61. One exercise was conducted at the portfolio level to assess portfolio resilience to these climate-related risks, while the second parallel exercise looked at the
resilience of certain representative portfolio assets.
In assessing the risk at the portfolio level, an in-depth analysis of up-to-date, peer-reviewed scientific literature was conducted and was used to determine the frequency,
duration, velocity and financial impacts of a range of potential climate-related risks. An overall likelihood and impact score was assigned to our business’ principal climate
risks. A summary of our scoring on key risks under the different scenarios is shown in Table 1.
At the asset-specific level, an in-depth review of representative assets’ characteristics and geographic location was conducted to determine resilience to physical and
transition risks and identify where those assets are most at risk. The representative list of assets was based on the property type, construction year, and size, amongst other
variables. Following LondonMetric’s acquisition of LXi assets, a new climate risk assessment is planned to include the acquired assets.
Our sustainability performance
TCFD Recommendation and Alignment
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