THIS ANNOUNCEMENT IS NOT AN OFFER FOR SALE OR SUBSCRIPTION OR SOLICITATION TO PURCHASE SHARES IN ANY JURISDICTION. THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION, TRANSMISSION, DISTRIBUTION OR FORWARDING, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, SOUTH AFRICA OR ANY OTHER STATE OR JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE UK VERSION OF EU REGULATION 596/2014, WHICH FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"). UPON PUBLICATION OF THIS ANNOUNCEMENT, THE INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN FOR THE PURPOSES OF MAR. 

21 April 2023

Urban Logistics REIT plc

("Urban Logistics" or the "Company")

Recommended Proposals for amendments to the management arrangements of the Company

and

Publication of Circular and Notice of General Meeting

The Board of Urban Logistics has, as previously communicated to Shareholders in the interim results for the period ended 30 September 2022, been carrying out a review of the Company's management arrangements.

The review considered, inter alia, the relative merits of internalised versus externalised management structures, the performance of the management team and the efficiency of the Company's operations compared with a broad peer group of other internally and externally managed London listed real estate companies.

The Company has now concluded that review, consulted with a number of Shareholders and today published a circular (the "Circular") to convene a general meeting to be held at 9.00 a.m. on 11 May 2023 (the "General Meeting") to put forward proposals on future management arrangements. The following structural changes to the Company's management arrangements (the "Proposals") are being proposed:

·          Logistics Asset Management LLP (the "Investment Adviser"), who currently provide asset management services to the existing AIFM to the Company, PCP2 Limited ("PCP2"), to be appointed as the investment adviser to the Company and the Company's new AIFM.  The Investment Adviser will, from the date of its appointment, be controlled by Richard Moffitt.

·          G10 Capital Limited ("G10 Capital") to succeed PCP2 as the new AIFM to the Company.

The Independent Directors have concluded that the Proposals provide for both the valuable continuity of the existing management team, principally Richard Moffitt and Christopher Turner, who have driven the Company's strong performance since IPO as well as securing a lower cost base for the Company going forward.

The Proposals do not require shareholder approval under the Listing Rules but the Board has decided that as a matter of good governance they should be put to shareholders at a General Meeting.

Nigel Rich, Chairman of the Company, commented:

"The Independent Directors are pleased to recommend the Proposals to Shareholders. They provide for continuity of the core existing management team and also represent very good value for money for Shareholders. We see continued attractions in our focus area of small and mid-box UK logistics real estate where occupier demand remains strong and rents are rising. We believe that the Proposals will put the Company on a very strong footing to take advantage of the opportunities which lie ahead."

Background

The Ordinary Shares were first traded on AIM in 2016 and moved to the premium segment of the Main Market in 2021 with a market capitalisation today standing at c.£650 million, as well being a constituent of the FTSE 250 and the FTSE EPRA/NAREIT Global Real Estate Index Series. The Company has been led by the same management team throughout this period and has had a focus on small and mid-box logistics assets, typically in in last mile / last touch locations in important logistics hubs.

The Board continually reviews Urban Logistics' investment policy and strategy, its ability to deliver positive returns to Shareholders and the best management solution to meet these ends. The Chairman's statement set out in the financial statements for the six month period ended 30 September 2022 noted that discussions with PCP2 had started about the contractual arrangements with the Company given that either party could give twelve months' notice under the Existing AIFM Agreement from 17 April 2023.

The Board sees continued attractions in small and mid-box UK logistics assets situated in last mile / last touch locations. Occupier demand remains strong and, with an imbalance between supply and demand, rents are rising. The Independent Directors believe that the portfolio of the Company is well-balanced between assets with active asset management potential and secure longer-term income, providing a strong opportunity to capitalise on rising rents.

The Independent Directors reviewed a number of financial ratios across the real estate sector in both externally and internally managed companies. In the six months ended 30 September 2022, the Company incurred management and administrative costs of approximately £5 million, giving an annualised Admin Expense Ratio⁽¹⁾ of 1.15%.  This benchmark compared well to the broader peer group of mid-cap internally and externally managed comparable vehicles and, the Independent Directors believe, demonstrates the efficient nature of the Company's existing management arrangements.

Proposals

PCP2 Limited (the "Existing AIFM") is the existing AIFM to the Company pursuant to the Existing AIFM Agreement. Logistics Asset Management LLP (the "Investment Adviser") currently undertakes the day-to-day asset management and administration of the Company.

The Independent Directors have concluded that it is in the best interests of the Company and Shareholders as a whole to secure the continuity of Richard Moffitt and Christopher Turner who have driven strong performance since the IPO by proposing to make the following changes to the Company's management arrangements:

·    the Investment Adviser will be appointed as the investment adviser to the Company and the Company's new AIFM;

·    G10 Capital Limited will succeed PCP2 Limited as the new AIFM to the Company.

in each case from the Effective Date.

The Investment Advisory Agreement

The Investment Adviser was formed as a partnership between Richard Moffitt, Christopher Turner and the Pacific Group. After a successful seven years growing the Company, in connection with the Proposals the Pacific Group has agreed terms to transfer their interests in the Investment Adviser to Richard Moffitt, Christopher Turner and certain individuals who have up until now been seconded by the Pacific Group to the Investment Adviser but will, conditional upon the Proposals becoming effective, become members of the Investment Adviser.

The Investment Adviser's appointment is to be extended for a further three years from 12 May 2024 and may be terminated on one year's notice from 12 May 2026 onwards. It is also proposed that G10 Capital succeed PCP2 as the AIFM to the Company with effect from the Effective Date.

Pursuant to the terms of the Investment Advisory Agreement, the Investment Adviser will be paid an annual advisory fee (payable quarterly in arrears) for the period to 12 May 2024 equal to the current fees payable to PCP2 under the Existing AIFM Agreement less amounts due to PCP2 and G10 Capital.  With effect from 13 May 2024, the annual advisory fee (exclusive of VAT) will be adjusted as follows:

* In the period from the Effective Date to and including 12 May 2024, the G10 Capital fee will be paid from the fees calculated pursuant to the percentages set out above.

** AIFM fee payable to G10 Capital will be additional to the fees calculated pursuant to the percentages set out above.

On a pro forma basis, applying the fee rates set out above to the EPRA NTA as at 30 September 2022, the reduction in fee levels from May 2024 will reduce the annual cost to the Company of its external management arrangements (including the fees payable to G10 Capital) by approximately £414k per annum.

No changes to the commercial terms of the LTIP will be made as a result of the Proposals. Following crystallisation of the current LTIP in September 2023, the Company will not establish a new long-term incentive plan to replace the LTIP.

Reorganisation of the Investment Adviser

The Investment Adviser and PCP2 are currently members of the Pacific Group. The Investment Adviser currently undertakes the day-to-day asset management and administration of the Company. The Investment Adviser also holds the interests of the Pacific Group, Richard Moffitt and Christopher Turner in the LTIP.

Richard Moffitt and Christopher Turner will continue at the Investment Adviser in their central management roles, supported by Justin Upton, Mike Perkins and Jamie Waldegrave.

Pursuant to the terms of the Retirement Deed, as at the Effective Date: (i) the principals of the Pacific Group who are members of the Investment Adviser will retire; (ii) Justin Upton (who is currently employed by the Investment Adviser) and Jamie Waldegrave (who is currently seconded to the Investment Adviser from the Pacific Group and will transfer to the Investment Adviser from the Effective Date) will become members of the Investment Adviser as will Jonathan Gray. Richard Moffitt, Christopher Turner and Mike Perkins are already members of the Investment Adviser. These changes will result in the Investment Adviser being controlled by Richard Moffitt from the Effective Date.

Board changes

Mark Johnson has decided to step down from the Board following the General Meeting. Jonathan Gray is retiring from the Board and taking up the position of non-executive Chair of the Investment Adviser following the General Meeting. The Board would like to thank Mark and Jonathan for their  outstanding contributions to the successful development of the Company over the seven years since IPO. Heather Hancock will replace Jonathan Gray as the Senior Independent Director of the Company from the Effective Date; and, as announced by the Company on 15 March 2023, Lynda Heywood will take up an Independent Non-Executive Directorship from 1 May 2023.

The commercial negotiations in connection with the Proposals were overseen by Nigel Rich, Bruce Anderson and Heather Hancock who are Independent Directors for these purposes.

Related Party transactions

The appointment of Logistics Asset Management LLP as investment adviser to the Company, together with certain fees previously incurred from M1 Agency in the previous 12 months totalling £1.7 million, constitute related party transactions to which the modified requirements for smaller related party transactions in the Listing Rules apply. The Investment Adviser and M1 Agency are related parties of the Company by virtue of them each being an 'associate' (as defined in the Listing Rules) of Richard Moffitt, a director of the Company. Under the smaller related party transaction rules, there is no requirement for Shareholders to vote on the Proposals or the M1 Agency fees. However, as a matter of good corporate governance, the Company is giving Independent Shareholders the opportunity to approve Logistics Asset Management LLP's appointment as investment adviser at the General Meeting as an Ordinary Resolution.

The Board, having been so advised by Singer (acting in its capacity as the Company's sponsor), considers the appointment of Logistics Asset Management LLP as investment adviser to the Company to be fair and reasonable as far as the Shareholders are concerned. In providing advice to the Directors, Singer has taken into account the Directors' commercial assessments of the appointment of Logistics Asset Management LLP as investment adviser to the Company. None of Richard Moffitt (the principal of the Investment Adviser), Jonathan Gray (who is stepping down from the Board to become non-executive Chair of the Investment Adviser) or Mark Johnson (the CEO of the Pacific group) has taken part in the Board's consideration of the Proposals nor has Richard Moffitt taken part in the Board's consideration of the historic payment of the fees to M1 Agency.

If the Resolution is not passed the Proposals will not go ahead and the Company's existing management arrangements would remain in place. In these circumstances, the Board will undertake a further period of consultation with Shareholders.

Shareholder Circular and General Meeting

Further to the above proposals, the Company announces that it has published a Circular which will be posted to Shareholders today.

The Circular includes a Notice convening a General Meeting to be held at the offices of Gowling WLG (UK) LLP at 4 More London Riverside, London SE1 2AU on 11 May 2023 at 9.00 a.m. The purpose of the General Meeting is to consider and, if thought fit, to pass an ordinary resolution in relation to the proposals.

The Circular is available on the Company's website at https://www.urbanlogisticsreit.com/investors/.

Unless otherwise defined, capitalised terms used in this announcement shall have the same meaning as set out in the Circular.

(1)    Ratio of annualised administrative expenses based on 1H FY23 interim results (excluding any charge related to the LTIP) to the EPRA NTA as at 30 September 2022

- Ends -

This announcement contains inside information for the purposes of Article 7 of MAR. Upon publication of this announcement, the inside information is now considered to be in the public domain for the purposes of MAR. The person responsible for arranging the release of this announcement on behalf of the Company is PCP2 Limited.

About Urban Logistics REIT

Urban Logistics REIT plc (LON: SHED) is a FTSE 250 property investment company. The Company is the only London-listed REIT to focus on specialist last mile / last touch logistics assets, with a tenant base which delivers essential goods within the UK. The Company's strategy is to invest in mid-sized logistics properties with the objective of generating attractive dividends and capital returns through active asset management.

Urban Logistics' investment advisory team, led by Richard Moffitt, has significant experience in sourcing investments within the logistics market within the broader real estate market. The team's ability to source vital and strategically located mid-sized single let properties, with high-quality tenants, off-market at favourable terms, aims to create considerable value for shareholders. Tenants include Amazon, XPO, DHL, Hermes, DPD, Boots, Unipart (for NHS), Royal Mail and J Sainsbury Plc.

Buying well and pursuing additional value enhancing asset management initiatives has driven the Company's growth, enabling Urban Logistics to grow from a £10m market cap company at IPO in April 2016 to a FTSE 250 constituent.

IMPORTANT NOTICE

This document is not a prospectus and does not constitute or form part of any offer or invitation to purchase, acquire, subscribe for, sell, dispose of or issue, or offer to sell, dispose of, issue, purchase, acquire or subscribe for, any security.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events and the Company's future financial condition and performance. These statements, which sometimes use words such as "aim", "anticipate'', "believe", "may", "will", "should", "intend", "plan", "assume'', "estimate", "expect' (or the negative thereof) and words of similar meaning, reflect the current beliefs and expectations of the directors of the Company and or its management team and involve known and unknown risks, uncertainties and assumptions, many of which are outside the Company's control and difficult to predict, that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.

The information contained in this announcement speaks only as of the date of this announcement and is subject to change without notice and the Company does not assume any responsibility or obligation to, and does not intend to, update or revise publicly or review any of the information contained to this announcement, whether as a result of new information, future events or otherwise, except to the extent required by the FCA, the London Stock Exchange or by applicable law. These forward-looking statements reflect the Company's judgment at the date of this announcement and are not intended to give any assurance as to future results.

This announcement has been issued by, and is the sole responsibility of, the Company. No undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of the Company or any member of the Company's group, the Pacific Group, Singer Capital Markets Advisory LLP ("Singer"), Panmure Gordon (UK) Limited ("Panmure Gordon") or Kinmont Limited ("Kinmont") or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this announcement and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions or misstatements, negligence or otherwise in this announcement.

Singer, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as sponsor and joint broker for the Company and for no one else in relation to the arrangements referred to in this announcement. Singer will not regard any other person (whether or not a recipient of this announcement) as its client in relation to the arrangements referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in relation to the contents of this announcement or any transaction or arrangement referred to in this announcement.

Panmure Gordon, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as joint broker for the Company and for no one else in relation to the arrangements referred to in this announcement. Panmure Gordon will not regard any other person (whether or not a recipient of this announcement) as its client in relation to the arrangements referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in relation to the contents of this announcement or any transaction or arrangement referred to in this announcement.

Kinmont, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser for the Company and for no one else in relation to the arrangements referred to in this announcement. Kinmont will not regard any other person (whether or not a recipient of this announcement) as its client in relation to the arrangements referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in relation to the contents of this announcement or any transaction or arrangement referred to in this announcement.