Real estate for reliable income Annual Report and Accounts 2020 Strategic report Financial performance Overview Our purpose 01 IFRS net assets How our purpose works 02 Performance highlights 10 £1, 4 31. 8 m Chair’s statement 11 2019: £1,216.8m At a glance 12 Our strategy Total accounting return1 Our strategic priorities 14 Chief Executive’s review 15 3.0% Focus on Mucklow acquisition 18 2019: 10.7% Our markets 20 Read more on our progress at Bedford Link page 33 Our business model 22 EPRA EPS1 Performance review Governance Key performance indicators 24 9. 3 p Introduction from the Chair 77 Property review 26 2019: 8.8p Board leadership and Company purpose Financial review 38 Board of Directors 80 Responsible Business Dividend per share Management team 82 Responsible Business review 45 Our activities 84 Risk 8.3p Our purpose and culture 86 Risk management 60 2019: 8.2p Our stakeholders 87 Viability Statement 63 Division of responsibilities Principal risks 64 Leadership framework 93 Leadership roles and responsibilities 94 Composition, succession and evaluation Nomination Committee report 97 Audit, risk and internal control Audit Committee report 104 Remuneration Remuneration Committee report 112 Directors’ Remuneration Policy 119 Annual Report on Remuneration 130 Report of the Directors Report of the Directors 140 Directors’ Responsibility Statement 144 Chief Executive’s review page 15 Financial statements Independent Auditor’s report 146 Group financial statements 154 A responsible business Notes forming part of the Group financial statements 158 Environmental Company financial statements 177 Notes forming part of the Company financial statements 179 Supplementary information 183 Social 1 Alternative performance measures Glossary 189 are financial measures which are not specified under IFRS but are used as Notice of Annual General Meeting 191 they highlight the performance of Governance the Group’s property rental business. Financial calendar 196 They are described in further detail in Shareholder information 196 the Performance highlights section on page 10 and in the Financial review on page 38. Definitions can be found Responsible Business review page 45 in the Glossary on page 189 LondonMetric Property Plc Annual Report and Accounts 2020 Strategic report Governance Financial statements 01 Overview Our purpose To own and manage desirable real estate We explain over the following pages how that meets occupiers’ demands, delivers we retain our core focus, reliable, repetitive and growing income-led but continue to adapt to market conditions. returns and outperforms over the long term. Own Own desirable real estate that meets occupiers’ needs Collaborate Manage Maximise our expertise Manage & enhance and relationships to responsibly to improve build on our position as our assets and help partner of choice occupiers thrive Generate Generate reliable, repetitive and growing income-led total returns See our business model to find out about how this creates value page 22 LondonMetric Property Plc Annual Report and Accounts 2020 02 Overview Own desirable real estate What this means Aligning the portfolio to the right side to our business of longer term macro and structural trends shaping real estate. Owning quality assets, with high occupier appeal, in good locations, that deliver reliable and growing income. Growing exposure to urban logistics, where there are strong demand/supply dynamics and high intrinsic values. Adding to our long income portfolio which offers attractive long-let and index linked income. Delivering enhancements, synergies and income growth from our Mucklow acquisition in the year, which significantly added to our urban logistics and long income exposure. Highlights 35% £614 m Urban logistics exposure, Total acquisitions, including up from 27% the Mucklow portfolio 24% 55% Long income exposure, Percentage of income up from 22% subject to contractual uplifts See Property review page 26 LondonMetric Property Plc Annual Report and Accounts 2020 Strategic report Governance Financial statements 03 OWN MANAGE GENERATE COLLABORATE Amazon in Warrington Our 357,000 sq ft regional distribution warehouse let to Amazon for a further 12 years. Costco in Coventry Our 129,000 sq ft long income asset, acquired through the Mucklow acquisition and let to Costco for a further 17 years. LondonMetric Property Plc Annual Report and Accounts 2020 04 Our occupier activity 130 lettings, regears and rent reviews in the year with existing and new occupiers. These deals generated £5.2 million of additional income. OWN MANAGE GENERATE Lettings at Bedford Link We let three distribution warehouses totalling COLLABORATE 188,000 sq ft, completing lettings on phase one of the development and achieving a WAULT of 16 years. Responsible Bedford Link As we progress the next phase of development at Bedford we are looking to enhance further our ‘Responsible Building’ credentials. See Bedford Logistics case study page 33 LondonMetric Property Plc Annual Report and Accounts 2020 Strategic report Governance Financial statements 05 Overview Manage and enhance responsibly What this means Increasing the desirability of our assets to our business to ensure they remain fit for purpose. Providing real estate solutions to our occupiers to help their businesses thrive. Improving the length and strength of our income and growing our rent. Undertaking asset management and short cycle developments in a responsible and sustainable way having regard for the environment and local communities. Highlights +£5.2m 11.6 yrs Additional income from Average lease lengths our lettings and rent review on lettings signed 670,000 sq ft BREEAM Very Good certified developments completed or in construction during the year See Responsible Business review page 45 LondonMetric Property Plc Annual Report and Accounts 2020 06 Overview Expertise and relationships What this means Leveraging our highly talented, to our business motivated and aligned team to make the right decisions and deliver long term outperformance. Adopting a ‘partner of choice’ approach, collaborating with all stakeholders. Strengthening and deepening our occupier relationships to ensure high occupancy and customer satisfaction. Highlights 98.6% 33 Occupancy rate Employees following the integration of 7 employees from the Mucklow acquisition +5.1% Total Property Return, 560 bps outperformance against IPD All Property See Responsible Business review page 45 LondonMetric Property Plc Annual Report and Accounts 2020 Strategic report Governance Financial statements 07 Our team is highly talented, motivated and aligned We have a highly experienced team and OWN added further depth through the Mucklow acquisition. Our latest employee survey continues to show high levels of satisfaction. MANAGE GENERATE COLLABORATE Investing and working with our occupiers During the year, LondonMetric exchanged on the purchase and funding of a development for £24.0m at a yield of 5.2%. The 232,000 sq ft warehouse is pre-let to Croda, a FTSE 100 chemical company, on a 20 year lease with RPI linked uplifts. It will be a BREEAM Very Good certified building that Croda will use as its global distribution hub, employing 200 people. In parallel, LondonMetric agreed to extend the lease on another Croda warehouse that it owned and where the lease had expired. This helped to facilitate Croda’s short term occupational needs until the new building completes. LondonMetric subsequently sold that warehouse for £5.9m with two years remaining on the lease, delivering an ungeared return of 11% per annum. LondonMetric Property Plc Annual Report and Accounts 2020 08 Some of our key customers OWN MANAGE GENERATE COLLABORATE Our occupier base We continue to focus strongly on the credit strength, quality and sector diversity of our occupiers. Income from Top 10 Occupiers 36% decreasing from 51% in 2019 and further diversifying our income base LondonMetric Property Plc Annual Report and Accounts 2020 Strategic report Governance Financial statements 09 Overview Generate income growth What this means Owning desirable assets that to our business deliver reliable, repetitive and growing income. Focusing our activity on further strengthening our portfolio income metrics and delivering rental growth organically and through contractual uplifts. Continuing to deliver on our progressive and covered dividend policy. Generating highly attractive income led total returns in a low interest rate environment. Highlights £123m +3.0% Contracted rental income Total accounting return p.a., up from £90m 11.2 yrs +3.8% Portfolio WAULT Like for like income growth +5.6% 5 years Growth in earnings per share Of dividend progression See Our markets page 20 See Property review page 26 LondonMetric Property Plc Annual Report and Accounts 2020 10 Overview Performance highlights Net rental income1 EPRA EPS1 IFRS reported profit (before exceptional acquisition costs) £115.9m 81.8 90.6 93.8 115.9 9.3p 8.2 8.5 8.8 9.3 £51.5m 63.0 186.0 119.7 51.5 23.6% 5.6% 57.0% 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 IFRS net assets EPRA net asset value per share1 Dividend per share £1,431.8m 1,006.9 1,149.5 1,216.8 1,431.8 171.7p 149.8 165.2 174.9 171.7 8.3p 7. 5 7.9 8.2 8.3 17.7% 1.8% 1.2% 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2018 2020 1 Alternative performance measures Total property return WAULT The Group financial statements are prepared in accordance with IFRS where 7. 4 13.7 9.0 5.1 12.8 12.4 12.5 11.2 the Group’s interests in joint ventures and 5.1% 11.2 years any non-controlling interests are shown as a single line item on the consolidated 1.3 years income statement and balance sheet and all subsidiaries are consolidated at 100%. 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 on a line by line basis. The key financial performance indicators are also presented on this basis.