Tritax Big Box Reit PLC

LSE:BBOX

Earnings Call Transcript 2021-Q4

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Good

morning

and

welcome

to

Tritax

Big

Box's

Results

Presentation

for

the

Financial

Year

Ended

31st of

December

2021.

I'm

Ian

Brown,

the

Head

of

Investor

Relations

for

Tritax.

Before

I

hand

over

to

Aubrey, our

Chairman,

I

will

quickly

run

through

some

housekeeping

points.

Firstly,

today's

presentation

is

being

recorded,

and

a

replay

and

transcript

will

be

available

on

our website.

And

secondly,

there

will

be

an

opportunity

for

investors

and

analysts

for

questions

to the

team

at

the

end

of

the presentation.

To

submit

a

question,

please

use

the

text

box

in

the

webcast

for you

to

type

your

question.

I'll

now

hand

over

to

Aubrey

to

kick

off

proceedings.

Thank

you.

[Aubrey John Adams, Chairman, Tritax Big Box REIT Plc]

Good

morning,

everyone,

and

welcome

to

Tritax

Big

Box

REIT's

results

presentation

for

the

year

ended

31

December

2021.

And

what

a

year

it

was.

We

are

today

reporting

an

outstanding

set

of

results

which

demonstrate

that

our

strategy

is

working.

Long-term

shifts

in

behavioral

patterns

resulting

from

the

COVID

pandemic

and

exacerbated

by

Brexit

have

increased

the

importance

of

logistics

and

quality

supply

chains.

Being

in

the

right

location

with

the

right

infrastructure

in

place

is

now

mission-critical

for

businesses.

With

demand

set

to

continue

to

outstrip

supply,

we

have

a

clear

vision

for

the

future,

which

would

enable

us

to

further

capitalize

on

this

huge

opportunity

available

to

us.

We

are

accelerating

the

development

of

our

existing

substantial

land

platform,

the

biggest

in

the

UK

for

logistics.

To

address

this

demand,

we

target

starting

3 million

to

4

million

square

feet

of

development

in

the

year

ahead,

and

we

have

the

potential

to

accelerate

this

development

program

further.

This

will

also

create

further

asset

management

opportunities

as

we

continue

to

focus

on

delivering

strong,

attractive,

and

sustainable

total

returns

for

our

shareholders

from

our

complementary

development

and

investment

portfolio.

There have

been

some

changes

to

the

board

over

the

year.

I'm

delighted

to

be

here

today

for

the

first

time

as

Chair

of

the

Board,

having

previously

acted

as

a

Senior

Independent

Director.

Alastair

Hughes

has

replaced

me

in

this

role.

We're

also

pleased

to

welcome

two

hugely

experienced

Non-Executive

Directors,

Wu

Gang

and

Elizabeth

Brown,

who

we

will

look

to

introduce

to

you

during

the

year

ahead.

Richard

Jewson

and

Susanne

Given

have

stepped

down

from

the

board.

I

want

to

personally

thank

them for

their

huge

contribution

and

wish

them

every

success

for

the

future.

It

just

leaves

me

to

thank

you,

our

shareholders

and

the

wider

Tritax

team,

for

your

support

during

the

year.

We're

excited

about

the

opportunity

ahead

in

logistics

and

have

the

team,

the

strategy,

and

the

appetite,

and

supportive

market

fundamentals

for

future

delivery.

Thank

you

again

for

joining

us

today.

I

will

now

hand

over

to

Colin

and

Frankie

for

the

formal

part

of

the

results

presentation.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Thank

you,

Aubrey,

and

good

morning,

everyone.

I'm

really

pleased

to

be

presenting

the

2021

full-year

results

for

Tritax

Big

Box

and

to

provide

you

with

an

update

on

the

further

excellent

progress

that

we're

making.

My

name

is

Colin

Godfrey,

and

I

am

CEO

to

Tritax

Big

Box.

I'm

pleased

to

be

joined

in

the

presentation

today

by

Frankie

Whitehead,

Chief

Financial

Officer.

I'll

kick

off

the

presentation

with

a

brief

introduction.

Frankie

will

then

run

through

our

financial

results,

and

I'll

return

with

a

strategic

update.

Ian

will

then

coordinate

Q&A.

In

2021,

we

delivered

the

strongest

performance

in

our

history.

Looking

forward

today,

we

remain

very

excited

about

the

outlook

for

our

market

and

the

ability

of

our

business

to

deliver

attractive

returns

because

we're

implementing

a clear

strategy

that

anticipated

the

market

conditions

that

we're

experiencing

today.

This

combines

the

resilient

income

from

our

high-quality

investment

portfolio,

together

with

the

ability

to

produce

attractive

returns

from

development,

which

is

delivering

sustainable

investments

in-house.

And

there's a

terrific

runway

of

opportunity

embedded

within

our

land

portfolio,

the

UK's

largest,

with

the

potential

to

deliver

over

40 million

square

feet

of

logistics

facilities.

And

this is

all

captured

in

the

key

messages

from

today's

presentation.

A

set

of

record

results

in

terms

of

earnings

growth,

NAV

growth,

and

total

returns.

A

clear

and

compelling

strategy

that's

delivering

now

but

is

also

positioned

to

take

advantage

of

the

market

dynamics

to

deliver

into

the

longer

term.

Powerful

fundamentals

noting

a

highly

favorable

occupier,

supply-and-demand

imbalance,

barriers

to

entry,

and

a

strong

investment

market.

And

finally,

the

combination

of

our

investment

and

development

portfolios

are

producing

excellent

returns,

not

just

now

but

also

offering

the

opportunity

to

capture

strengthening

income

growth

and

accelerate

development

activity

to

enhance

capital

growth.

Put

simply,

we've

never

been

more

excited

than

we

are

today

about

the

long-term

prospects

for

our

business.

Critically,

the

strong

performance

we've

announced

this

morning

has

been

underpinned

by

delivery.

We're

consistent

doing

what

we

said

we

would

do.

Looking

at

the

left-hand

column,

we

said

that

we

would

produce

2

million to

3

million

square

feet

of

developments,

grow

rents,

improve

our

leading

ESG

credentials,

and

deliver

attractive

performance.

Turning

to

the

middle

column,

in

2021,

we

exceeded

expectations,

having

delivered

3.7

million

square

feet

of

development

starts,

grown

our

income

at

a

faster

rate,

achieved

improved

ratings

across

all

major

ESG

indices,

and

delivered

record

total

returns.

And

on

the

right-hand

column,

looking

forward,

we

see

even

more

to

come

with

significant

opportunity

to

enhance

sustainability,

accelerate

our

development

activity

and

CapEx,

and

capture

strengthening

market

rental

growth,

all

supported

by

a

market

which

we

believe

will

underpin

attractive

returns

into

the

longer

term.

And

as

I

said,

this

is

possible

because

of

our

strategy

and

how

we

position

the

business

to

take

advantage.

We'll

return

to

the

theme

of

delivering

our

strategy

in

a

few

minutes,

but,

first,

I'll

hand

over

to

Frankie

to

run

you

through

the

financial

results.

Frankie?

[Frankie Whitehead, Finance Director, Tritax Big Box REIT Plc]

Thank

you,

Colin;

and

good

morning,

everyone.

2021

really

has

been

an

outstanding

year

for

the

company

in

terms

of

its

financial

performance.

I'm

pleased to

be

presenting

our

strongest

set

of

results

ever,

and

we

are

confident

that

our

strategy

of

combining

high-quality

investment

assets

with

our

significant

development

pipeline

is

one

that

will

continue

to

deliver

attractive

returns

to

shareholders

both

over

the

short

and

longer

term.

And

you

can

see

this

outstanding

performance

from

our

headline

figures

here.

The

adjusted

EPS

is

up

nearly

15%

to

£0.0823,

driven

by

development

completions,

rental

growth

across

the

investment

portfolio,

and

higher

levels

of

DMA profit

recorded

in

the

year.

You'll

hear

from

Colin

in

a

moment

that

our

market

fundamentals

are

exceptionally

strong,

which

has

helped

us

deliver

a

record

27%

increase

in

NAV

to

£2.226.

And

that

has

resulted

in

a

total

accounting

return

of

30.5%

for

the

year.

Again,

another

record

for

the

company.

And

finally,

our

balance

sheet

remains

extremely

well positioned

to

support

and

finance

our

near-term

development

and

value-add

opportunities.

In

January

of

this

year,

due

to

the

increased

levels of

visibility

on

our near-term

development

pipeline,

we

increased

our

development

CapEx

target

for

2022.

And

we

expect

that

to

translate

into

further

attractive

growth

for

shareholders

this

coming

year.

On

this

slide,

we

can

see

that

our

delivery

of

net

rental

income

growth

along

with

our

efficient

cost

base

is

leading

to

strong

underlying

earnings

growth.

The

group

net

rental

income

increased

by

14.3%.

As

expected,

this

was

predominately

driven

by

in-year development

completions

which

added

£24

million

to

annual

passing

rent.

The

total

contracted

annual

rent

grew

to over

£195

million

as

at

the

end

of

December.

Our

operating

costs

have

again

shown

further

improvement

on

a

relative

basis.

The

operational

benefits

of

further

scale

have

been

seen

through

our

EPRA cost

ratio

reducing

to

13.9%,

which

remains

one

of

the

lowest

within

the

REIT

sector.

The

adjusted

earnings

per

share

has

increased

by

nearly

15%

to

£

0.0823,

which

is

inclusive

of

the

full

amount

of

development

management income

recognized

during

the

year.

As

in

previous

periods,

we

also

look

through

to

our

adjusted

earnings,

which

we

consider

to

be

recurring.

This

is

by

stripping

out

the

exceptional

element

of

the

DMA

income.

On

this

basis,

adjusted

EPS

has

risen

to

£0.0738,

which is an

increase

of just

under

7%.

And

in

terms

of

the

dividend

per

share,

we

have

declared

a

£0.019

dividend

this

morning

for

quarter

four,

taking

the

total

dividend

to

£0.067,

an

increase

of

just

under

5%.

This

translates

into

a

dividend

payout

ratio

of

91%

as

we

look

to

deliver

attractive

and

sustainable

dividend

progression

over

the

long term.

When

we

look

at

the

2021

earnings

bridge,

it

clearly

sets

out

the

drivers

to

our

strong

underlying

EPS

growth.

It

also

sets

out

the

scale

of

the

development management

income

received

in

the

year.

A

key

driver

of

income

growth

is

through

our

development

activity.

As

expected,

it's

the

3.7

million

square

feet

of

development

completions

this

year,

which

has

had

the

biggest

effect

on

underlying

earnings

with

£0.009

added

from

our

development

activity.

The

like-for-like

rental

growth

across

the

portfolio

was

3.3%.

And

this

has

added

a

further

£0.003

to

current-year

earnings.

Elsewhere,

the

impact

of

our

disposal

activity

in

2020

outweighs

our

investment

activity

during

the

course

of

this

year.

We

also

note

the

reduction

in

license

fee

income,

as

this

has

now

converted

into

rental

income

as

those

buildings

have

reached

their

practical

completions.

And

these

items

get

us

the

majority

of

the

way

to

the

adjusted

earnings,

excluding

exceptional

DMA,

of

£0.0738,

which

is

a growth

of

just

under

7%.

It's

worth

pointing

out

that

both

the

£0.069

starting

position

and

the

£0.0738

include

£4

million

of

DMA

income,

which

is

the

midpoint

of

our

medium-term

guidance

range.

In

terms

of

the

development management

income

for

2021,

we

have

recognized

an

additional £15

million

of

profit

this

year.

This

has

principally

come

from

one

contract

which

has

now

been

fully

delivered

and,

for

this

reason,

is

considered

nonrecurring.

We,

therefore,

base

our

dividend

assessment

against

the

£0.0738.

And

the

surplus

DMA

income

is

effectively

reinvested

into

opportunities

to

create

recurring

earnings

growth

into

the

future.

The

strong

income

performance

is

mirrored

in

our

delivery

of

capital

growth

where

we

have

delivered

improvement

across

all

key

balance

sheet

performance

metrics.

The

total

portfolio

value

grew

to

approximately

£5.5

billion

at

December.

The

valuation

surplus

recorded

across

the

portfolio

totaled

19.1%,

which

contributed

£840

million

to

NAV

growth.

We

have

deployed

£372

million

of

capital

during

the

period.

And

as

targeted,

the

majority

of

this

has

been

channeled

towards

our

attractive

development

pipeline.

Our

EPRA

NTA increases

to over

£4

billion,

which

equates

to

£2.226.

This

is

an

increase

of

27%

over

the

12

months.

With

an LTV

positioned

at

23.5%,

this

allows

us

to

approach

our

near-term

opportunities

with

conviction.

Having

secured

new

financing

in

the

year

to

support

it

with

its

delivery,

the

balance

sheet

position

now

allows

us

to

focus

heavily

on

execution,

whilst

also

being

reactive

to

other

opportunities

as

they

present

themselves.

Put

simply,

we

have

had

a

fantastic

year

with

the

financial

performance

culminating

in

a

record

total accounting

return

for

the

company

of

over

30%.

Turning

to

the

detail

behind

our

strong

NAV

growth.

The

continuing

strength

and

weight

of

capital

in

the

investment

market

has

caused

yields to

tighten

by

approximately

45

basis

points

across

our

portfolio.

Now

with

an

equivalent

yield

positioned

at

4.1%,

we

still

feel

there

is

opportunity

for

further

value

growth

to

come.

The

portfolio

ERV

growth

has

also

accelerated

in

the

second

half,

increasing

by

7.5%

across

the

year.

This

investment

portfolio

performance

has

allowed

us

to

add

£0.39

to

our

NAV.

Our

development

assets

have

added

a

further

£0.06

to

performance,

and

we

are

expecting

to

be

able

to

improve

on

this

component

as

our

development

activity

increases.

When

noting

the

impact

of

the

operating

profit

and

dividends

paid

in

the

period,

this

takes

us

to

the

closing

EPRA

NTA

of

£2.23

per

share.

So,

we've

had

a

year

of

compelling

financial

performance,

but

the

really

exciting

thing

for

us

is

the

huge

opportunity

ahead

and

the

ability

to

significantly

accelerate

our

income

growth.

This

rental

income

bridge

illustrates

the

potential

we

have

to

grow

today's

passing

rent

from

£195

million,

as

shown

on

the

left-hand

side,

by

approximately

2.5

times,

up

to

an

estimated

£480

million.

So,

moving

from

left

to

right,

the

current-year

ERV

growth

has

increased

our

portfolio

rental

reversion

to

an

attractive

11%

or

£21

million.

As

set

out

at

the

recent

investor

seminar,

the

increase

in

occupational

demand has

led

to

an

acceleration

in

activity

within

our

near-term

pipeline.

And

you

can

see

this

coming

through

within

the

green

bars

on

the

chart.

Starting

with

those

items

in

green,

we

can

add

£10 million

of

potential

rent

from

our

current

development

pipeline,

£2.5

million

of

which

has

been

secured.

Quarter

one 2022 has

already

started

well

with

over

1.8

million

square

feet

of

construction

having

already

commenced.

These

assets

have

the

potential

to

add

a

further

£13

million

to

passing

rent,

of

which

approximately

half

has

been

pre-let.

And

looking

at

the

final

green

bar,

a

further

potential

£14

million

could

be

added

from

the

remainder

of

our

targeted

2022

development

starts.

Taking

all

of

this

into

account,

this

gets

us

to

the

bar

totaling

£253

million.

So,

including

our

current

development

pipeline,

the

targeted

2022

development

starts

and

the

rental

reversion,

we

have

the

opportunity

to

grow

passing

rent

by

£58

million

or

30%

over

the

near term,

which

from

a

timing

perspective,

we

would

expect

to

translate

into

acceleration

in

our

earnings

growth

from

2023

onwards.

The

scale

of

our

medium-

and

longer-term

future

pipeline

is

unique

to

us

and

unique

to

the

UK.

And

without

factoring

in

any

future

rental

income

growth

into

these

figures,

the

land

portfolio

has

significant

embedded

potential,

which

means

we

have

confidence

in

the

shorter

and

longer

term

over

our

delivery

of

future

income

growth.

Moving

on,

and

our

balance

sheet

also

really

is

in

great

shape.

Noting

the

increase

in

visibility

we

now

have

over

the

near-term

pipeline,

as

I

have

just

walked

you

through,

we

took

the

decision

to

remove

the

associated

near-term

financing

risk.

Last

September,

we

issued

£300

million

of

new

equity

in

what

was

a

significantly

oversubscribed

issuance.

Reflecting

the

confidence

we

have

in

the

deployment

of

this

into

attractive

opportunities,

we

are

now

extremely

well positioned

with

a

loan-to-value

at

24%

and

over

£600

million

of

available

liquidity.

This

means

that

we

can

run

hard

and

focus

on

the

execution

across

that

near-term

pipeline,

while

still

providing

flexibility

within

our

capital

structure

to

run

even

harder

should

further

opportunities

present

themselves

beyond

what

we

anticipate

today.

I

just

want

to

finish

by providing

some

guidance

and

set

out

how

I

see

our

positive

long-term

outlook.

The

investment

portfolio

provides

our

core

income

return,

and

we

are

confident

that

it

will

deliver

sustainable

earnings

growth.

This

includes

over

50%

of

our

rent

roll

which

is

subject

to

review

over

the

next

two

years,

alongside

an

ability to capture

the

significant

rental

reversion.

We

have

plans

to

recycle

capital

this

year,

but

it's

about

optimizing

the performance

of

the

portfolio

and

managing

investment

disposal

timings

with

the

delivery

of

income

from

our

developments.

Our

longer-term

guidance

on

disposals

is

£100 million

to

£200

million per

annum.

We

will

continue

to

manage

our

balance

sheet

efficiently,

ensuring

we

maintain

financial

discipline

as

we

have

done

during

2021.

Investment

purchases

will

be

looked

at

in

an

opportunistic

manner,

but

these

will

have

to

meet

our

strict

returns

criteria.

We

intend

to

continue

investing

for

growth.

We

have

increased

our

development

CapEx

guidance

for

2022,

targeting

£350

million

to

£400 million

of

CapEx

into

development

this

year.

From

a

yield-on-cost

perspective,

we

continue

to

manage

cost/price

pressures

well

internally.

Both

rental

growth

and

yield

compression

are

mitigating

a

lot

of

this

from

feeding

through

into

performance.

But

there's

been

some

downward

pressure

on

our

yield

on

cost

compared

to 12

months

ago.

We

remain

within

the

6%

to

8%

range

across

the

portfolio

and

expect

to deliver

between

6%

and

7% on

the

on

the

near-term

pipeline,

noting

that

there

is

still

a

very

attractive

arbitrage

here

between

this

and

prime

investment yields.

And

we

expect

to

deliver

attractive

future

accounting

returns.

From

an

earnings

perspective,

I've

set

out

how

we

expect

to

grow

our

income

through

our

near-term

development

pipeline.

Remembering

that

the

timing

of

income

delivery

will

be

linked

to

construction

timelines

and,

therefore,

earnings

growth

is

likely

to

steepen

as

we

move

into

2023

and

2024.

And

finally,

we

expect

that

to

translate

into

sustainable,

attractive

dividend

growth

for

shareholders

with

a

policy

of

paying

out

at

least 90%

of

our

recurring

adjusted

earnings.

So,

that

concludes

the

financial

review

where

we

are

looking

to

build

upon

a

very

strong

set

of

results,

capitalizing

on

extremely

favorable

market

backdrop

for

the

development

portfolio

that

provides

us with

a

real

competitive

advantage

to

drive

returns.

And

I shall now hand you back to Colin.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Thanks,

Frankie.

So,

Frankie's

described

our

record

performance

in

2021,

the

momentum

we

have

taking

us

forward,

and

why

we

are

financially

well positioned

for

the

future.

I'll

now

explain

the

market

dynamics,

demonstrate

our

strategy

and

action,

look

at

the

growth

opportunity,

and

consider

why

we're

well positioned

to

deliver

a

consistent,

strong

performance

into

the

long

term.

Essentially,

as

you've

heard

us

say

before,

it's

about

the

enduring

strength

of

our

market

and

how

our

strategy

and

our

expertise

are

aligned

to

take

advantage.

Three

of

the

key

drivers

to

occupational demand

are

continued

growth

in

e-commerce,

increasingly

complex

supply

chains,

which

need

to

be

resilient

in

the

face

of

continued

disruption,

and

occupiers

seeking

operational

efficiencies

through

consolidation

into

larger,

modern

and

more

efficient

facilities. And

with

that

backdrop,

let's

look

at

the

themes

that

we're

seeing

in

the

market

that

are

contributing

to

the

success

of

our

business.

In

the

top

left

chart,

we

see

2021

was

another

very

strong

year

for

lettings

at

42.4

million

square

feet,

broadly

on

par

with

the

previous

year.

But

that

was

undoubtedly

suppressed

by

constrained

supply.

You'll

see

also

depicted

by

the

terracotta

bar

that

unsatisfied

demand

is

equivalent

to

around

four

years

of

average

take-up,

which

bodes

very

well

given

the

supply

of

new

buildings

remains

constrained.

It

also

explains

our

confidence

because

the

structural

changes

we're

seeing

are

still

in

their

infancy,

underpinning

the

significant

scale

and

duration

of

the

opportunity,

which

is

very

positive

for

our

future.

Turning

to

the

top

right

chart,

as

just

mentioned,

supply

has

significantly

lagged

demand,

producing

the

lowest

vacancy

rate

ever

reported

of

only

1.6%.

And

there

are

now

only

two

buildings

available

to

let

that

are

over

0.5

million

square

feet,

one

of

which

is

in

the

course

of

speculative

development

and

the

other

is older

second-hand

space.

Bottom

left,

we

see

that

the

increasingly

acute

supply/demand

imbalance

continues

to

drive

rental

growth

and

agency

forecasts

have strengthened

for

the

next

few

years.

And

this is

reflected

in

our

own

development

portfolio,

where

we've

witnessed

strong

double-digit

rental

growth

in

some

locations

well

ahead

of

our

original

expectations.

And

bottom

right,

strengthening

and

resilient

rental

growth

has

encouraged

increased

investment

demand,

with

2021

producing

the

highest

level

of

investment

activity

recorded

for

industrial

and

logistics

property.

There

remains

a

wall

of

unsatisfied

capital,

and

we

do

expect

to

see

further

yield-induced

value

gains

in

2022.

That

would

be good

news

for

investment

assets,

our

land

and

the

assets

that

we're

developing.

So

for

us,

this

slide

demonstrates

the

growing

and

long-term

need

for

high

quality

logistics

space,

which

is

capable

of

helping

our

customers

respond

to

these

dynamics,

and

these

drivers

are

part

of

the

ongoing

market

backdrop

which

support

our

strong

performance.

It's

worth

reminding

you

that

we

designed

our

strategy

in

anticipation

of

these

long-term

trends

in

our

market.

And

again,

you'll

be

familiar

with

our

strategy

by

now,

but I'd

just

highlight

the

key

points.

In

essence,

there

are

three

key

components.

You

can

see

at

the

top

of

the

triangle

that

we've

deliberately

built

a

portfolio

of

high-quality

assets

attracting

great

customers.

We've

also built

the

capabilities

to

add

value

to

these

assets

through

direct

and

active

management.

And

we

apply

our

skills,

insights

and

innovation

gained

from

being

the

UK's

largest

investor

in

logistics

to

develop

our

land

portfolio

at

a

very

attractive

yield

on

cost.

And

I

really

want

to

emphasize

the

point

at

the

bottom

here.

This

strategy

is

underpinned

by

a

very

disciplined

approach

to

capital

allocation,

with

sustainability

being

embedded

right

across

the

portfolio.

Now,

this

case

study

is

a

really

great

example

of

our

strategy

in

action:

high-quality

customers,

proactive

management

and

development

working

together

to

create

opportunities

for

growth.

Now, B&Q is

an

existing

customer

of

ours

at Worksop

in

Nottinghamshire.

And

over

several

years,

we've

built

a

strong

relationship

with B&Q.

We've

grown

our

understanding

of

their

operations.

As

part

of

this,

we

undertook

an

in-depth

analysis

of

their

supply

chain

network,

and

we

shared

our

findings

with

the

senior

team

of B&Q.

This

highlighted

a

requirement

for

additional

space

in

the

Yorkshire

area

to

support

their

growing

leisure

business.

Our

geographically

diverse

land

portfolio

included

the

site

at

Doncaster,

the

fulfilled

the

brief

for

a

large

cross dock

facility.

We

already

secured

detailed

planning

consent,

so

this

enabled

us

to

offer

a

swift

delivery

of

the

building.

B&Q

felt

this

met

their

requirements

in

terms

of

location,

scale

and

timing,

and

subsequently

committed

to

a

new

15-year

pre-let

of

430,000

square

feet,

the

development

of

which

has

already

started

and

practical

completion

is

targeted

for

December

this

year.

The

building

will

be

constructed

to

BREEAM

Very

Good

and

an

EPC

rating

of

A.

It

will

have

20% solar

PV

panels,

and

will

be

net

zero

carbon

in

construction.

So

you

can

see

that

this

encapsulates

the

full

journey

of

our

strategy

from

investment

through

active

and

direct

asset

management

to

development

and

producing

new

high

quality

and

sustainable

investment.

This

brings

me

on

to

how

we

are

leading

in

ESG

across

our

business.

ESG

is

a

key

strategic

priority

for

our

business.

And

here

I

want

to

provide

an

update

on

our

strong

sustainability

position

and

the

progress

that

we

continue

to

make.

We've

handpicked

and

built

a

modern

and

sustainable

portfolio

and

its

modern

buildings

that

occupiers

are

demanding.

95%

of

our

floor

space

has

an

EPC

rating

of

A

to

C.

Also,

approximately

half

of

total

floor

space

is

certified

to

BREEAM

Very

Good

or

Excellent,

well

above

the

industry

average.

And

this

is

reflected

in

our

leading

ESG

position.

This

is

a

critical

factor

because

our

portfolio

modernity

means

that

we

don't

face

significant

future

CapEx

requirements

to

enhance environmental

performance

and

meet

government

targets.

This

reduces

the

risk

of

brown

discounts

to

capture

value

and

ensures

that

our

buildings

are

fit

for

future

occupiers

and

purchasers.

Our development

activities

allow

us

to

integrate

ESG

performance

throughout

the

lifecycle

of

a

building,

from

design

to

construction

to

asset

management.

Our

net

zero

carbon

pathway

targets

are

set

to

reduce

embedded

carbon

and

deliver

new

buildings,

which

are

net

zero

in

construction,

the

new

building

at

Doncaster

being

a

good

example.

Our

focus

on

social

impact

is

to

support

local

communities

through

job

creation

and

local

charity

partnerships.

And

in

tandem,

we're

working

hard

to

implement

initiatives

which

produce

biodiversity

net

gains

on

our

sites

and

in

the

local

area.

We're

implementing

increased

levels

of

renewable

power,

and

in

2021,

we

generated

903

megawatts

of

solar

PV

power

for

our

customers,

avoiding

over

208

tonnes

of

carbon

emissions.

Now,

every

year

we

poll

our

occupiers

on

what's

important

to

them. And

we've

seen

a

notable

increase

in

ESG

as

a

factor

within

their

decision-making,

with

nearly 70%

saying

it

was

very

important

to

them.

And

that's up

from

50%

four

years

ago.

This

activity

is

being

recognized

within

our

ESG

scores

with

improvements

in

our

ratings

from

every

major

agency.

And

as

mentioned,

our

portfolio

already

screens

well,

but

we

will

continue

to

improve

these

ESG

credentials

both

for

our

investment

properties

and

for

our

developments.

As

I

said

earlier,

the

first

key

element

of

our

strategy

is

our

modern,

long-let

investment

portfolio.

But

we

don't

just

sit

back.

We

actively

manage

our

portfolio

to

optimize

its

performance,

the

second

key

element

of

our

strategy.

All

of

our

investment

assets

are

regularly

reviewed

for

opportunities

and

threats.

Our

objective

is

to

maximize

total

returns

whilst

optimizing

our

income

growth

and

ensuring

that

we

maintain

a

balanced

portfolio

with

low

underlying

risk.

We

will

seek

to

dispose

of

assets

which

we

believe

have

maximized

value

in

our

hands

and

acquire

investments

that

we

believe

will

be

accretive

to

the

portfolio

performance.

Investment

sales

will

also

help

fund

the

opportunity

in

our

development

portfolio,

which

is

accelerating.

Turning

to

income

composition

and

timing,

the

first

thing

to

say

is

that

all

of

lease

rent

reviews

are

upwards

only.

And

you

can

see

here

on

the

pie

graphs

that

we've

created

an

attractive

blend

of

rent

review

types.

About

half

of

our

investments

are

subject

to

inflation-linked

rent

reviews,

which

have

cap

and

floor

arrangements

with

around

a

third

being

open

market-linked

and

the

remainder

fixed

or

hybrid.

As

for

timing,

20%

of

our

rents

are

subject

to

annual

rent

reviews,

providing

attractive

and

regular

compounded

growth

with

the

remainder

reviewed

five-yearly.

And

the

recent

growth

in

market

rents

is

embedding

within

our

portfolio,

and

this

is

demonstrated

by

the

growing

rental

reversion,

up

from

6%

in

2020

to

11%

in

2021,

which

I'll

come

back

to in

a

moment.

So

let's

look

at

how

we're

putting

this

into

practice.

This

slide

captures

the

way

that

we

are

complementing

rental

growth

with

active

management.

During

the

period,

we

negotiated

the

lengthening

of

two

leases,

one

by

2

years,

and

other

by

10 years.

Of

the

37%

of

our

rents

up

for

review

in

2021,

we

concluded

32%.

This

delivered

a £5

million

per

annum

increase

in

passing

rent

and

reflected

like-for-like

rental

growth

of

3.3%

annualized.

We

expect

further

progress

as

we

conclude

the

remaining

reviews

this

year,

with

the

5%

carried

over

from

last

year

added

to

the

35%

due

for

review

in

2022,

as

shown

on

the

chart. So,

this

positive

active

management

momentum

is

going

to

be

yet

another

driver

of

both

income

and

capital

growth

in

our

investment

portfolio,

but

also

for

our

development

activities

and

our

land

assets.

Now,

to

update

you

on

the

great

progress that

we've

been

making

in

the

third

key

element

of

our

strategy,

development.

In

January,

we

held

an

investor

seminar

focused

on

the

detail

of

our

development

activities, and

this

can

be

viewed

on

our

website.

At

the

year-end,

our

investment

portfolio

comprised

around

92%

of

GAV

and

the

development

portfolio

approximately

8%.

This

balance

has

been

a

conscious

decision,

so

that

our

development activities

are

supported

by

high

quality

and

robust

income

from

our

investment

assets.

So,

let's

now

look

at

what

we're

seeing

on

the

ground.

Well,

we're

seeing

significant

and

accelerating

demand

for

a

range

of

building

sizes

and

locations,

which

plays

to

our

strength

because

we've

got

a

geographically

diverse

portfolio

and

flexibility

within

our

sites.

But

of

particular

value

is

the

ability

to

offer

larger

format

buildings

which

competitor

sites

often

cannot.

And

this

is

paying

off

because

you'll

see

on

the

left-hand

pie

chart

that

most

inquiries

received

have

been

for

buildings

of

over

300,000

square feet

in

size.

Equally

positive

for

us

is

a

broad

range

of

occupier

types,

as

shown

by

the

middle

pie

chart,

with

online

inquiries

remaining

strong

at

nearly

half

of

the

total,

but

also

store

retail

and

third

party

logistics

operators

being

particularly

active.

Now,

Savills

recently

reported

that

over

the

last

two

years,

257

companies

had

leased

new

space,

indicating

a

significant

breadth

to

the

occupational

market

demand.

Strong

relationships

with

existing

customers

are

creating

repeat

business

for

our

development

activities.

But

we're

also

expanding

our

customer

diversity

with

a

healthy

list

of

high

caliber

new

inquiries.

And

in

2021,

we

added

DPD,

HarperCollins,

IKEA

and

even

Apple

as

new

customers.

This

all

translates

into

unprecedented

inquiry

levels.

At

the

year-end,

we

had

over

26

million

square

feet

of

live

inquiries.

Now,

this

breaks

down

into

over

60

million

square

feet

of

high-level

discussions

and

over

10 million

square

feet

of

negotiations

in

final

stages,

which

includes

deals

where

terms

are

agreed

or

which

are

in

solicitors'

hands.

So

how

can

we

fulfill

this

demand?

Here,

we've

presented

our

development

pipeline,

which

is

matching

up

market

demand

with

our

available

land.

Now

you've

heard me

say

before

that

there

are

barriers

to

entry,

and

it

can

take

many

years

to

achieve

planning

consent.

Our

own

portfolio

has

taken

over

10

years

to

assemble

and

to

finesse

to

get

to

a

position

where

it

can

fulfill

the

levels

of

demand

that

we

see.

Our

team

is

highly

experienced,

has

excellent

relationships

with

the

local

authorities

and

landowners

built

up

over

many

years,

and

a

tremendous

success

record

on

planning.

Our

land

portfolio

is

constantly

evolving

as

sites

and

projects

move

through

the

planning

and

development

process,

from

allocation

to

planning

consents.

The

goal

of

this

dynamic

model

is

to

create

a

rolling

program

of

consented

land,

which

runs

off

the

planning

conveyor

belt,

ultimately

producing

a

continuous

flow

of

buildings

under

construction

and

development.

Now,

to

help

provide

a

bit

more

granularity,

this

chart

breaks

down

the

development

pipeline

into

three

buckets

that

you'll

be

familiar

with

from

previous

reporting:

the

current

development

pipeline

including

projects

under

construction;

the

near-term

pipeline,

which

we've

now

split

into

anticipated

development

starts

over

the

next

12

months

and

starts

over

the

following

24

months;

and

then

finally,

the

future

development

pipeline

which

comprises

the

strategic

land

portfolio

that

is

further

back

in

the

planning

process.

Now, as

you

can

see,

in

addition

to

the

1.3

million

square

feet

already

under

construction

and

in

response

to

the

greater

visibility

of

occupier

demand,

we

expect

to

accelerate

development

starts

in

2022

to

around

3.7

million

square

feet.

In

the

following

two years

of

the

near-term

pipeline,

we

expect

activity

to

revert

more

in

line

with

the

long-run

average

or

around

2 million

to

3

million

square

feet

per

annum.

We

will,

however,

be

looking

to

bring

forward

planning

consents

where

possible

and

also

consider

enlarging

the

quantum

of

land

drawdowns

where

this

flexibility

exists

and

if

occupier

demand

remains

strong.

In

other

words,

we

will

seek

to

maximize

the

opportunity

that's

in

front

of

us

now,

whilst

also

carefully

managing

the

risk.

And

as

you'll

see

in

the

bottom

of

this

chart,

the

potential

additional

income

generation

at

each

stage.

Key

here

is

that

we

have

sites

at

all

stages

of

the

evolutionary

process.

That

is

a

really

optimal

position

in

our

view.

So,

that's

the

timeline.

Now

let's

look

at

how

we're

going

to

capture

the

opportunity.

So,

what

are

we

capable

of achieving

from

our

development

land

portfolio?

Well,

as

you

can

see

on

the

left,

we

have

all

of

the

attributes

for

long-term

success.

And

I'm

pleased

to report that

we're

making

very

good

progress

consistent

with

our

guidance.

This

is

now

showing

through

in

both

what

we've

achieved

and

increased

confidence

in

our

near-term

delivery.

2021

was

the

year

that our

development

activities

really

came

of

age.

We

delivered

3.7

million

square

feet

of

lease

completions,

added

£24

million

to

our

rent

roll,

commenced

construction

of

1.3

million

square

feet,

and

secured

a

further

3

million

square

feet

of

further

planning

consents.

Now

turning

to

2022, we've

made

a

really

terrific

start.

We've

already

commenced

1.8

million

square

feet

of

development.

And

because

of

the

heightened

level

of

demand

and

our

ability

to

respond,

we

are

messaging

an

acceleration

from

2 million

to

3

million

square

feet

of

development

starts

up

to

a

level

of

3

million to

4

million

square

feet

this

year.

The

1.3

million

square

feet

of

developments

under

construction

will

complete

in

2022

which,

when

added

to

the

3.7

million

square

feet

of

lease

completions

in

2021,

provide

visibility

on

£36

million

of

potential

additional

rent.

So

to close

on

development,

I

just

want

to

say

that

we

are

in

a

unique

position,

and

we

will

look

to

exploit

the

development

opportunity

within

our

business

to

take

advantage

of

our

expertise

and

market

dynamics

whilst

employing

a

risk-controlled

approach

to

our

activities.

So

to

sum

up

and

before

we

get

to

Q&A,

I

just

want

to

emphasize

the

hugely

positive

key

points

from

today.

We

have

a

strong

balance

sheet,

a

number

of funding

options,

and

the

financial

discipline

to

deliver

attractive

and

sustainable

performance.

Our

clear

strategy

is

now

delivering

both

for

investment

and

development

assets,

and

we expect

enhanced

activity

in

both

areas

of

our

business

in

2022,

taking

advantage

of

the

very

favorable

market

conditions.

Structural

change

is

and

will

continue

to

benefit

our

market

with

inelastic

supply

and

unprecedented

occupier

demand,

driving

strong

rental

growth

and

attracting

increased

inflows

from

world

capital.

And

we

control

the

UK's

largest

logistics-focused

land

portfolio

capable

of

delivering

over

40

million

square

feet

at

very

attractive

yields

with

the

objective

of

enhanced

earnings

growth

and

the

creation

of

new

high-quality

investments.

So

our

excitement

and

our

enthusiasm

stem

from

being

at

the

right

place

at

the

right

time

with

the

right

strategy

and

the

right

product

with

the

right

team

to

unlock

value.

And

we're

doing

so

right

now.

Thank

you

for

listening.

That

concludes

today's

presentation.

I

will

now

hand

over

to

Ian.

He

will

coordinate

the

audio

Q&A

session.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Thank

you,

Colin.

That

concludes

our

presentation,

and

we'll

now

turn

to

Q&A.

[Operator Instructions]



Thank you

very

much.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great.

So

we've had

a

couple

of

questions

come

in

through

the

webcast

through

the

course

of

the

presentation,

a

number

relating

to

rental

growth,

the

first

being,

could

you

expand

upon

the

prospects

for

future

rental

growth

from

the

portfolio?

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Sure.

So

as

I

mentioned

in

the presentation,

32%

of

our

portfolio

was

reviewed

in

2021,

delivering

a

like-for-like

rental

growth

of

3.3%.

Now,

this

is

obviously

backward

looking,

over

a

five-year

time

horizon,

typically,

which

incorporated

a

period

with

lower

inflation

and

lower

market

rental

growth.

Obviously,

rental

growth

has

been

increasing

in

the

intervening

period

of time.

And

I

think

that's

evidenced,

as

I've

mentioned

in

our

strong

ERV

growth

in

the

portfolio,

up

7.5%.

Just

noting

how

we

can

access

that

and

the

11%

reversion

that

we

now

have

in

our

portfolio.

Firstly,

we've

got a

good

balance

of

rent

reviews,

index-linked

reviews,

broadly

half

of our

portfolio

providing

a

natural

hedge.

And

of

course,

open

market

rent

reviews,

which

together

with

the

hybrids,

which are

the

higher

of,

around

about

40%

enable

us

to

capture

that

true

market

rental

tone.

In

addition

to

that,

of

course,

we

do

have, you

know,

our

development pipeline,

which

enables

us

to

capture

market-leading

rents

at

the

coalface

on

brand-new

buildings.

And

there's

across

REIT

from

that, of

course,

against

our

investment

portfolio,

which

further

allows

us

to

drive

income

growth,

and

that's part

of

the

power

of

the

development portfolio.

And

of

course,

the

very

low

occupancy

levels

that

we're

seeing

across

the

market

are

allowing

us

to

beat

the

levels

which

we've

embedded

into

our

development

appraisals.

So,

that's

very

positive.

And

finally,

just to

mention

that

around

19%

of

our

income

expires

within

the

next

five

years.

And

again,

this

will

enable

us

to

capture

that

rental

reversion

in

the

near

term

on

new

lettings

for

some

of

our

existing

stock. Hopefully,

that

covers

the

point.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great. Thanks,

Colin.

The

next

question

relates

to

inflation

and

sort of

the

experience

we

have

within

cost inflation

within

the

development

pipeline.

[Frankie Whitehead, Finance Director, Tritax Big Box REIT Plc]

Thank

you, Ian.

So,

yes,

we

have

been

experiencing

certain

cost

price

pressures

with

regards

to materials

and

to

labor.

I

would

say

we're

seeing

some

stabilization in

that

of

late

in

the

last

few

months,

but

we

continue

to

monitor

that

closely.

We're

mitigating

where

we

can,

and

that

includes

the

entry

of

the

fixed

priced

build

contracts

on

all

of

our

developments.

I

would

say

rental

growth

and

[indiscernible]



(00:45:31)

shift

continues

to

prevent

a

large part

of

that

from impacting

on

our

performance

metrics.

So

as

we

iterated

today,

we're

still

confident

in

delivering

within

that

6%

to

8%

yield

on

cost

range

for

future

developments

and

note that

we

expect

to

be

in

the

in

the

lower

half of

that

range

for

our

near-term

portfolio.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great.

Thank

you.

Next

question

then

is

from

[indiscernible]



(00:45:58)

at

Bank

of

America, who

asks

if

we

have

any

exposure

to

Eastern

European

tenants.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

The

short

answer

is

no,

we don't.

Obviously,

we

are

concerned

about

events

in

Ukraine.

Our

thoughts

are

very much

with

the

people

that

are

being

impacted.

And

it's clearly

a

very

uncertain

situation.

It's

moving

day

by day

and

we're

monitoring

it

closely.

But

we

don't

have

any

Eastern

European

exposure,

and

we're

not

seeing

any

significant

impact

on

our

business

operations

because

we're

fortunate

enough

to

have

a

highly

resilient portfolio.

I

think,

that

was just

demonstrated

during

COVID

where

we've

had

100%

rent

collection.

And

I

think

that's

because

our

buildings

are

obviously

UK

only

but

they're

intrinsically

important

to our

customers.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Thank

you.

The

next

question

from

[ph]



Chan at Winterflood

(00:46:55)

who

asks, is

the

conversion

of license

fee

to

rent

recognized

in

the

adjusted

earnings?

And does

the

impact

net

off

the

loss

of

license

income?

[Frankie Whitehead, Finance Director, Tritax Big Box REIT Plc]

Thank

you,

Chan.

Yes.

The

answer to that is

yes,

the

license

fee

reduction in

the

year

is

essentially

netted

off

the

adjusted

earnings

figure. So

yes,

it's

all

reflected.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great. Next

question

from

Paul

May

at

Barclays,

how

up-to-date

do you

feel

your

valuations

are.

While

the

ERV

growth

of

7.5%,

45

basis

points

yield

compression

and

valuation

growth

were

strong,

they

appear

conservative

relative

to the

underlying

market

moves

especially

the

4.1%

equivalent

yield.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Thanks,

Paul.

So,

good

question.

Look,

the

CBRE

prime

yield

at

the

year-end

was

3.5%

for

15-year

income.

Valuation is

a

backward-looking

exercise,

picking

up

comparable

evidence.

We

were

–

where

for

instance,

at

the

year-end

or

very

close

to

the

year-end,

there

was

a

deal

done

for

an

Amazon

15-year

lease

it

for

a new

building

at

Peterborough.

From

memory, it

was

done at around

about

the

3.2% mark.

We

are

aware

of

assets

and

indeed

portfolios

which

are

currently

being

marketed

and/or

are

under

offer

off-market,

and

they

are

at

term – I

mean,

assuming

that

they

progressed

to

completion,

they're

at

terms

which

would

demonstrate

further

yield

compression

even

in

the

first

two

months

of

this

year.

So,

we

do

feel

that

the

positive

momentum

that

we've

seen

in

Q4

of

2021

has

been

carried

forward

into

2022, and

this

talks

to

the

relative

confidence

we

have

in

further

yield

compression

being

evidenced

in

2022.

So

of

our

current

4.1%

equivalent

yield,

yes,

we

feel

pretty

positive

about

the

prospects

for

further

capital

appreciation

during

the

course

of

this

year.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great.

Further

couple of

questions

around disposals.

So, just

sort

of

thematically,

I

think

the

question

is

around

why no

disposal

during

2021

and

so

prospects

for

disposals

moving

into

2022?

[Frankie Whitehead, Finance Director, Tritax Big Box REIT Plc]

Thank

you. And

so,

yes,

it's

correct.

No

disposal

in

2021. I

think

that's

reflective

of

our

view

of

market

conditions

given

the

level

of

yield

compression

we

experienced,

we

believe

that

holding

on to

those

assets

is

the

right

thing

to

do

and

enhance our

performance

in

respect

of

2021.

Going

forwards,

clearly

asset-recycling

is

a

good

investment

discipline,

and

we

look to

do

that

in

order

to

optimize

the

performance

of

our

portfolio.

We

have

provided

some

guidance

this

morning in

terms

of

both the

near

and

longer

term

disposal

targets

of

£100

million

to £200

million

per

annum.

So

we

see

that

as

a

trimming

of

the

portfolio

and

looking

to

optimize

performance

of the

portfolio.

And

we

look

to

recycle

that

capital

into

more

accretive

opportunities.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Yeah. And

a

question

from

Tom

Musson

at

Liberum

asks

if

the

demand in

the

market is

currently

four

years

of

average

take-up,

why

not

commit

to

3

million to

4

million

square

feet

equivalent

starts

more

than

just

the

next

12

months?

How

much

is

the

business

operationally

able to

commit

to in

any

given

year?

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Yeah.

Thanks

for

that,

Tom.

Well,

look,

I

think

it's

fair to

say

that

during

the

last

six

months

or

so,

we've

gained

increased

visibility

on

taking

interest,

particularly

in

relation

to

our

near-term

pipeline.

And

as

you

quite

rightly

say,

we've

increased

our

guidance

up

from

2

million to

3

million

square

feet

in

2021

to

3

million to

4

million

square

feet

in

2022.

Now,

whilst

we're

giving

longer

term guidance

of 2

million

to

3

million

square

feet, there

is

nothing

to

prevent

us

from

maintaining

a

3

million to

4

million

square

feet

level

into

the

medium

term,

subject

to

the

demand

being

there,

which

is

being

relatively

prudent.

We

don't

have

that

crystal

ball.

And

you're

absolutely

right.

The

backdrop

of

the

market

is

very

positive

and

it

could

well

be

that

we

continue

to

travel

at

that

level.

I

think it's

important

to

recognize,

however,

that

we

continue

to

bring

land

through

the

planning

process

and

3

million

square

feet

consented

last

year,

also

implementing

infrastructure

works

at a

given

rate

and

mindful

of

the

rate

at

which

we

can

bring

through

continued

new

planning –

and

we

want

to

continue

to

be

able

to

replenish

that

planning

consented

bucket

so

we

don't

run

out

of

planning

consented

space. I

mean,

that's

important

to

continue

to

attract

occupier

interest

right

away

across

our

sites

across

the

UK.

And

indeed,

I

think

there

are

some

developers

that

are

probably

a

little bit

concerned

about

the

run

rate

at

which

they're

burning

up

their

planning

consented

sites,

bearing

in

mind

that

there

are

natural

barriers

to

entry

within

the

planning

system

which

are

going

to

control

the

supply

side.

And

I

think

that

that

will

keep

the

supply/demand

imbalance

very,

very

healthy,

but

it

doesn't

mean

that

one's

got

to

manage

that

process.

I

don't

think

we're

worried

about

the

potential

for

up-scaling

even

to

sort of

5

million-plus

square

feet

in

the

context

of

our

manpower

capabilities

within

the

business.

And

the

last

thing

I

think

just

to

mention

is

that

one's

got

to think

about

the context

of

that

totally

in

terms

of

number

of

buildings

and

the

size

of

those

buildings

and

the

type

of

those

buildings.

So,

for

instance,

if

you

get

a

multi-decked

building

let to a

major

online

retailer by way

of example,

and

it

could

be

2

million

square

feet

in

one

building.

So,

that's

a

very

different

proposition

than

creating

10

buildings

of 200,000

square

feet

each,

by

way of

example.

So,

there

needs

a

bit of

understanding

about

that

component

part

as

well. Hopefully,

that sort

of

gives

you a

bit

of

a

feel for

how

we

see

the

future

guidance.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great.

A

couple

of

questions along

a

similar

theme

here

around

inflation

more

generally.

How

is

your

appetite for

inflation? I

think

lease

is

evolving,

especially

for

new

developments.

What

is your

preferred

rent

review

clause

for

new

leases

now?

And

similarly,

are we

likely to

see

more or

less

open

market

review

clauses

given

open

market

rent review

gains

are

higher

than

inflation

currently?

And

the second

part of

this

question,

on

the

inflation-linked

reviews,

most

of these are

capped

and

collared

with

your

average

range

of

1.5% to

3.4%. Do

you

suspect

they're

being

stretched,

given

kind of

rates

of

inflation?

And

are

tenants

willing

to

agree

higher

inflation-linked

caps?

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

I think that is

quite

a

few

components

in

there.

You

might

have

to sort

of

remind...

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Remind to repeat those.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

...you might

remind

us

a

bit

as

we

go

through.

Shall

I

start,

Frankie,

and then

we

can sort

of

[indiscernible]



(00:54:31)?

So,

I

sort

of

touched

on

– I

mean,

look,

I

think

the

first

thing

to say is

that

I

think

we're

very

well

positioned

to

mitigate

most

of

the

downside

risks

and

capture

the

upside.

But

as

I

said

earlier,

50%

of

our

leases

are

inflation-linked

that

act

as

a

cap.

Open

market

reviews

are

uncapped

typically.

I

mean,

it's

very,

very

rare

to

see

an

uncapped

inflation-linked

rent

review.

So,

the

uncapped

component's

typically

through

open

market, and

certainly

in

the

current

market,

we

are

seeing

stronger

growth

in

terms

of

open

market

rents,

I

think,

than

we've

seen

ever

before.

They're

kind

of

catching –

I

mean,

obviously, inflation

is

particularly

high

at

the

moment,

but

I

think

in

the

medium

term,

we

should

see

probably

stronger

growth

from

market

rents.

There

is

potential

to

capture

a

higher

proportion

of

market

rents

through

our

development

platform.

Occupiers,

certainly

the

largest-scale

corporates,

they

do

like

the

relative

certainty

of

knowing

that

their

rents

are

moving

in

tandem

with

underlying

inflation.

However,

of

course,

this

is

a

landlord's

market

in

many

respects.

We

do

have

strength

in

depth

of

interest

on

most

of

our

sites,

and

that

enables

us

to

negotiate

from

a

position

of

strength

in

relation

to

the

type

of

rent

review

that

we

would

like

to

see.

And

clearly,

if

an

occupier

is

going to

be

resistant

to

the

potential

for

open

market

rent

reviews,

then

they

may

well

lose

that

opportunity

and

find

themselves

struggling

to

meet

that

requirement,

having

to

move

to

a

location

which

is

less

favorable

for

them

and

not

securing

that

building

when

they

need

it.

So,

typically

we're

seeing

sensible

conversations

being

had.

We

are

now

seeing

more

conversations

along

the

lines

of

the

best

of both

worlds,

the

higher

of

open

market

or

inflation

as

well. So

I

think

we're

seeing

sort of

a

trend

in

that

direction,

which

is

positive

news

for

us.

Frankie,

do

you

want

to sort of

pick

up

generally

on

the

interest

rate

point?

Is

there

anything

more

to

say

on

that

or

have

we

covered

it

off?

Was

there

anything

else

in

that

question?

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

I

think

that's covered it already.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Okay.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Yeah,

that's

good.

Just

looking

at the next

question

coming

from

[indiscernible]

(00:57:20) at Ninety One.

He asks,

what

are

the

likely

effects

of

substantial

cost

pressures

on

your

tenants'

ability

to

absorb substantial

rental

increases?

He

also

asks, are

labor

issues

limiting

tenants'

ability

to

roll out

new

warehouse

locations?

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Okay.

That's

a

great

question.

The

first

thing

to

say

is

that

property

costs

– from

the

analysis

that we've

undertaken,

property

costs,

say,

for

an

average

retailer,

typically

sits at

around

or

less

than

1%

of

total

operational

costs.

So,

if

your

rent

goes

up

by

10%,

sort

of

10 bps

on

your

total

operational

costs,

I

mean,

it's

a

relatively

small

amount

of

money.

It's

much,

much

more –

I mean,

what

occupiers

are

telling

us

is it's

much,

much

more

important

for

them.

I

mean,

clearly, they

don't

want to

pay

more

than

they

need

to,

but

they

have

to

be

in

the

right

place

at

the

right

time

to

fulfill

the

requirements

of

their

customers.

And

that's

much

more

important

when

we're

facing

structural

change

and

ever

more

complex

supply

chains,

customers

demanding

product

more

quickly,

more

reliably.

So,

I

think

that's

the

primary

focus

for

them.

We're

not

seeing

much

in

the

way

of

[ph]



cost/price (00:58:42)

resistance

to

escalation

in

rent.

Clearly,

there

is

a

consideration

in

terms

of

affordability

ultimately

and

ever

was

it

the

case.

But

it's

more

about

the

space

race

for

getting

the

right

buildings

and

the

right

locations

right

now.

In

terms

of

– I

think

the

last

point

you

mentioned –

was

it

labor,

labor

costs?

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Labor

benefits.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Yeah.

That's

a

very,

very

good

point.

And

I

think the old adage of

location,

location,

location has

sort

of

changed

a

little

bit. So,

I

would say

sort

of

location,

power,

and

labor.

And

with

power

becoming

an

increasingly

important

component

part

of

occupier

thinking,

particularly

with

increased

levels

of

automation,

but

labor

is

very

important

as

well.

And

what

you

don't

want

to

do

that

as

an

occupier

is

sort of cut

your

own

throat

in

competition

with

a

competitor

next

door

because

there

just

isn't

the

right

labor

pool.

So,

most

occupiers

do

lots

of

work

on

this.

Now,

this

is

something

we

saw

really

when

we

set

up

our

business

back

in

2013,

and

we've

recognized

what

I

would

describe

as

the

sort of

devolution

of

the

distribution

network

in

the

UK

emanating

away

from

the

sort of central

focus

of

the

Golden

Triangle.

And

ever that

has

continued.

So,

you

see

lots

of

major

occupiers

now

moving

out

into

locations

where

the

motorway

network

is

less

congested,

where

they

can

more

readily

capture

labor,

appropriately

skilled

labor –

and

by

the

way,

lots

of

these

buildings

now

are

providing

labor

for

highly

skilled

workforces

at appropriate

pricing

points

where

they

can

retain

that

labor

and

invest

into

that

labor

with

training

and

obviously

retain

that

labor

in

the

longer

term. So,

it's

a

really,

really

important

point.

And

that's one

of

the reasons

why

we're

seeing

the

emergence

of

new

parks and

new

locations,

but

we

need

it

because

there's

so

much

demand

in

the

market.

We

need

the

emergence of

new

locations

in

the

UK.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great. Thanks,

Colin.

Next

question

is

from

Mike

Prew at

Jefferies.

He's

asking:

are

you

holding

back

marketing

developments

to

capture

the

rising

rents

through

the

construction

phase,

or

is

there

still

a

pre-letting

requirement

before

breaking

ground?

[Frankie Whitehead, Finance Director, Tritax Big Box REIT Plc]

Thank

you,

Mike.

So,

with

regard

to the

development

strategy,

it

really

is

about

a

balance

between

pre-let

and

speculative

activity.

So,

I

think a

good

demonstration

of

that

is

in

the

year-to-date

activity,

we've

commenced

1.8

million

square

feet,

of

which

around

56%

has

been

pre-let,

demonstrating

that

balance. So,

typically

on

the

larger-format

buildings,

we

will

look to secure

pre-let,

de-risking

that

aspect

of

the

strategy.

On

the

smaller,

speculative

assets,

we're

willing

to

obviously

break

ground

there,

commence

construction,

hold

back

the

rents,

potentially

creating

a

range,

looking

to

capture

the

live

level of

rental

growth

and

the

live

market

perspective

in

terms

of

securing

those

rents.

So,

answer is

it's

a

combination

of

both.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great.

Thanks,

Frankie. Next,

I

think this

is

probably going

to

be

our

last

question

given

time.

A

question

from

[indiscernible]

(01:02:04) at

Bank

of

America.

You

mentioned

the

CBRE

prime

yield

is

3.5%

as

at

year-end

and your

reported

net

initial

yield

was

3.56%.

So,

should

we

interpret

this

as

not

lagging

the

CBRE

data,

or

am I

looking

at

the

data

incorrectly?

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

The

short

answer

is

it's

an

incorrect

interpretation.

So,

the

way

to

think

about

this

is

that

the

CBRE

yield

is

from

a

rec

rented

building.

And

in

that

circumstance,

your

initial

equivalent and

reversion

yields

are

all the

same

so,

i.e.,

3.5%.

The

3.56%

you

refer to

as

an

initial

yield

is

not

taking

into

account

the

intrinsic

benefit

of

the

reversion,

which

is

inherent

within

our

business.

And

that's

why

we

point

to

the

4.1%

equivalent

yield

which

is

the

number

that

one

should

view

as

comparable

with

the

3.5%

figure

that

I

mentioned

from

CBRE.

So,

that's

the

point of

comparison.

It's

4.1%

versus

3.5%.

And

when

one looks

at

the

quality

of

our

assets,

the

length

of

our

lease,

etcetera,

we

do

believe

that

there's

further

room

for

value

growth

in

our

portfolio

during

the

course

of

this

year.

But

one

has to

be

cognizant of

the

backdrop

of

macroeconomic

instability

and

the

effect

that

that

could have

on

markets.

So,

whilst

the investment

market's currently

very

strong,

we

still

obviously

have

the

remaining

part

of

2022

to

play

out.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Great.

I

think that's

it for the

questions,

Colin.

[Colin Richard Godfrey, Chief Executive Officer, Tritax Big Box REIT Plc]

Splendid.

Well,

thank

you

very

much,

everybody,

for

supporting

the

business

during

the

course

of

last

year

and for

taking

the

time

to

join

us

today

and

provide

us with

your

questions.

We

really

appreciate

the

continued

interest,

and

we

wish

you a

splendid

rest

of

the

day.

Thanks

very much.

Bye-bye.

[Ian Brown, Head-Investor Relations, Tritax Big Box REIT Plc]

Thank you.