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RNS Number : 2242V

M7 Regional E-Warehouse REIT PLC

04 April 2023

M7 Regional E-Warehouse REIT Plc

Company number 13671085

Report and Consolidated Financial Statements

for the period from incorporation on 11 October 2021 to 31 December 2022

Strategic Report

The Board of Directors (the "Board") of M7 Regional E-Warehouse REIT Plc (the "Company") is pleased to present its first audited result for the period from incorporation on 11 October 2021 to 31 December 2022. This is the Company's first report as a public listed company and includes the result of its subsidiaries (the "Group"). The principal activity of the Group is to provide shareholders with a sustainable level of income together with the potential for income and capital growth.

On 21 December 2021, the Company was admitted to trading on the Wholesale Market of International Property Securities Exchange ("IPSX") with 38,161,963 million shares in issue (the "Admission"). The listing raised additional capital of £38,161,963, £37,780,342 of which has been treated as share premium.

M7 Regional E-Warehouse REIT Plc aims to provide shareholders with a sustainable level of income together with the potential for income and capital growth by investing in a diversified portfolio of enhanced warehouse (e-warehouse) properties across the UK. This strategy aims to take advantage of the anticipated continued occupier demand for last mile logistics and warehouse space driven by structural changes to consumer behaviour and an increased focus from businesses on their supply chain, as well as the resultant strong investor demand for assets in the sectors.

James Max, Non-Executive Chairman of M7 Regional E-Warehouse REIT plc:

"The positive set of results we have announced today demonstrate the continued resilience of, and strength of occupier demand there is for, both M7 Regional E-Warehouse REIT's portfolio and the wider asset class. During what has been a challenging year in broader macroeconomic terms we have continued to achieve strong rent collection, maintained high occupancy and reported a valuation that significantly outperformed the wider commercial real estate market.

"Our focus on active asset management has meant that where we have had vacancy, we have been successful in releasing space and capturing reversion to grow rents - as evidenced by the three lease renewals during the period being transacted at an average of 4.5% above passing rent and 1.1% ahead of ERV.

"We have significant headroom on our debt facilities, and, against a backdrop of wider economic challenges, we continue to closely monitor the outlook for the business while taking comfort in the underlying strength of occupier demand and the quality of our portfolio."

Highlights

Financial Highlights

As at 31 December 2022


Net Asset Value ("NAV")	£33.31 million
NAV per share	87.28p
Share price	111.00p
Investment property at fair value (based on external valuation)	£106.05 million
Loan to Gross Asset Value ("GAV") A	66.35%
Loan to value (covenant) A [1]	49.09%

For the period ended 31 December 2022


Adjusted earnings per share A	6.12p
Dividend cover A	74.45%
Dividend per share	8.22p
Dividend yield A	7.41%
Operating profit before fair value changes	£6.20 million
Loss after tax	-£2.06 million
Loss per share	-5.39p
Ongoing charges A	4.69%

A Considered to be an Alternative Performance Measure. Further details can be found at the end of this section and full calculations are set out following the notes to the Consolidated Financial Statements.

• Operating profit of £6.20 million, or 16.25 pence per share ("pps"), with £8.76 million of net rental income, excluding service and direct recharges, for the period ended 31 December 2022.

• The fair value of the Group's portfolio of across 17 properties reduced by 4.20% to £106.05 million since Admission (Admission: £110.70 million), outperforming the broader UK commercial real estate market which rerated, with the CBRE index down by c13% over 2022 as a result of interest rate rises and macroeconomic headwinds.

• The impact of the valuation resulted in a NAV decline of 11.43% or £4.3 million to £33.31 million, equivalent to 87.28 pps (Admission: £37.61 million, net of issue cost of £0.55 million, equivalent to 98.55 pps, net of Admission costs of 1.45 pps) as at 31 December 2022.

• IFRS loss per share amounted to -5.39p in the period, driven primarily by a reduction in market value of the investment properties of £4.90 million.

• At 31 December 2022, the Group had total short-term borrowings of £74.04 million, which comprise a senior loan facility of £54.34 million and a mezzanine loan note balance of £19.70 million, with significant headroom against the facility's ICR and LTV covenants. The loan to value of the total borrowings as compared to the current valuation of the investment properties amounts to 69.82%. The term of the loans is disclosed in note 13 of the Consolidated Financial Statements.

Property Highlights

• A continued strong rent collection 97.39% of rent received in respect of the December 2021, March 2022, June 2022 and September 2022 rent quarters, and as at 31 December 2022.

• Occupancy remained high at 98.17% let at 31 December 2022 (Admission: 98.80%).

• Three lease renewals were agreed during the period at an average of 4.5% above passing rent and 1.1% ahead of ERV, with an annualised gross contract rent of £231,000 p.a.

• The weighted average unexpired lease term ("WAULT") at 31 December 2022 was 4 years and 9 months to break (Admission: 5 years and 5 months) and 5 years and 7 months to expiry (Admission: 6 years and 3 months).

Dividends in line with 8% target dividend yield in reference to the Issue Price

• On 7 February 2023, the Board declared an interim dividend of 2.00pps in respect of the period 1 October 2022 to 31 December 2022 bringing the total dividends for the period of 8.22pps in line with the annual 8 pence, or 8% target dividend yield in reference to the Issue Price, target as stated in the Company's Admission Document.

Debt Refinancing

The Directors note that the Group's senior loan facility of £54.34 million and mezzanine loan note of £19.70 million mature on 17 August 2023 and 31 July 2023, respectively.

M7 Real Estate Limited (the "Asset Manager") is currently exploring options for, and the cost of, refinancing the senior loan and discussions are progressing.

The Group is in the process of extending the term of the loan notes to July 2026.

Outlook

• The Group is continuing to deal with a backdrop of global and recent UK-centred economic headwinds impacting the UK commercial property sector.

• Notably the Bank of England base rate has risen to 4.25%, a level not seen for 14 years since 2008, in response to stubbornly high inflation which was reported as 10.4% in February 2023.

• The rapid rise in interest rates which began in December 2021 led to a revaluation of UK commercial property across all sectors during the period. However, the broad composition and strong income characteristics of the Group's portfolio mitigate this with the Group reporting a modest 4.20% fall in the valuation over the period. The Group will closely monitor the financial performance of its tenants and explore every opportunity to reduce costs and drive income as well as opportunistic disposals of particular assets.

• The Group has declared dividends in line with the Admission Dividend target during the period. In light of anticipated increased cost of debt post refinancing in August 2023, the Group will pay careful attention to the feasibility of maintaining this level of dividend in the short term.

ENQUIRIES


M7 Regional E-Warehouse REIT plc
James Max - Chairman	via FTI Consulting below

M7 Real Estate Ltd (Asset Manager) Richard Croft	+44 (0) 20 3657 5500

Dickson Minto (Lead Adviser)	+44 (0) 131 225 4455

FTI Consulting (Communications Adviser)	+44 (0) 20 3727 1000
Richard Sunderland Eve Kirmatzis	[email protected]

Alter Domus (UK) Limited (Company Secretary)	+44 (0) 207 645 4800

The Company's ISIN is GB00BLN7H037.

Further information on M7 Regional E-Warehouse REIT plc is available at www.rewreit.co.uk[2].

NOTES

M7 Regional E-Warehouse REIT Plc is a property investment company, listed on the IPSX offering shareholders a sustainable level of income together with the potential for income and capital growth by investing in its diversified portfolio of enhanced warehouse (e-warehouse) properties across the United Kingdom.

An e-warehouse is defined, by M7 Real Estate Limited ("M7"), as a warehouse with enhanced planning uses which means there is the flexibility to change the use of the warehouse in the future. They are typically large regular shaped industrial units with retail frontages that could easily be converted to pure industrial use. They are typically located with good accessibility and sufficient car parking that could be used for yard space in the event of conversion. It is these types of characteristics which in M7's opinion underpin the value of the asset.

The Company's Asset Manager, M7 is a leading specialist in the pan-European, regional, multi-tenanted real estate market. M7 has over 225 employees in 14 countries and territories. The team manages almost 590 assets with a value of circa €5.9 billion.

Chairman's Statement

Overview

I am pleased to present the audited report and Consolidated Financial Statements of M7 Regional E-Warehouse REIT Plc (the "Company") together with its subsidiaries (the "Group") for the period from incorporation on 11 October 2021 to 31 December 2022 (the "Period").

During the Period, the rent collection was 97.39% and at the end of the Period occupancy stood at 98.17%.

We cannot ignore the fact that the outlook for the UK economy remains uncertain in the short term and the Russia-Ukraine war has had wide-ranging macroeconomic effects, increasing inflationary pressures and supply chain disruption to many businesses and industries. Throughout these challenging times, our portfolio has demonstrated its resilience. Consequently, the Directors are pleased to make distributions in line with the 8% targeted dividend yield in reference to the Issue Price.

At 31 December 2022, the portfolio comprised 54 tenants. The WAULT was 4 years and 9 months to break and 5 years and 7 months to expiry. The ongoing asset management initiatives generally relate to voids, future lease expiries, breaks, rent reviews and capital expenditure. During the Period, three lease renewals were completed (as detailed in the Portfolio Activity section).

The portfolio valuation has decreased by £4.65 million or 4.20% to £106.05 million as at 31 December 2022 compared to the property value at the date of Admission of £110.70 million. The current valuation reflects a net initial yield of 7.75%. Portfolio valuation and, in turn, NAV have both decreased driven by valuation falls as a result of falling values across the commercial property sector during the Period.

M7 Real Estate Limited ("the Asset Manager"), continues to consider asset management initiatives and transactions initiated on an opportunistic basis to further enhance income and capital growth; further information can be found in the Asset Manager's report below.

Financing

At 31 December 2022, the Group had a senior loan facility of £54.34 million and a mezzanine loan note of £19.70 million, totalling £74.04 million. The senior loan is repayable on 17 August 2023, while the loan note is repayable on 31 July 2023. Refinance discussions on the senior loan are currently underway and the Group is in the process of extending the term of the loan notes to July 2026. There continues to be significant headroom in the senior loan facility debt covenants. As at 31 December 2022, the senior debt loan to value A ratio is 49.09% (cash trap is greater than 65% and default level is greater than 70% and based on lender's valuation) and the interest cover ratio is 316.30% (cash trap/default level is less than 225%). The Group has complied with the senior loan covenants to date.

Valuation

The Group's properties are independently valued on a quarterly basis by Avison Young which has recognised relevant professional qualifications and recent experience on the type and location of the Group's investment properties. The Board has ultimate responsibility for the valuations (this being a key area considered by the Audit Committee and the Board).

Dividends & Earnings

Three interim dividends were declared and paid in respect to the first, second and third quarters of 2022. The first interim dividend of 2.15pps was declared on 27 April 2022, the second of 2.00pps on 26 July 2022 and the third of 2.07pps was declared on 27 October 2022. On 7 February 2023, a fourth interim dividend of 2.00pps was declared in respect to the fourth quarter of 2022 and paid on 3 March 2023 to shareholders on the register at 17 February 2023. The ex-dividend date was 16 February 2023.

Corporate Governance

The Board members have substantial experience in real estate including private equity, legal and transactional sectors. The Board is committed to maintaining high standards of corporate governance and is responsible for promoting high quality governance and reporting to foster investments. More details of the corporate governance arrangements are provided in the relevant section.

Shareholder Engagement

As part of its investor engagement strategy over the coming calendar year, the Board will continue to engage with shareholders and communicate all material news flow including financial results, dividend announcements, Environmental, Social and Governance undertakings, and other key initiatives that will drive long-term value to shareholders.

Future Growth and Outlook

The results outlined demonstrate a resilient portfolio with high occupancy and strong rent collection helping drive an underlying profit and a dividend that remains in line with target. The Group's strategy and ongoing focus remains unchanged, focussing on active asset management to grow income and value, as well as risk mitigation and opportunistic transactions.

Despite the current economic uncertainty and significant increases in both inflation and interest rates, the Group is well positioned to focus on asset management initiatives supported by a strong balance sheet. As discussed above, completing the refinancing of the existing senior loan in advance of the maturity and at a reasonable cost of financing is a priority for the portfolio in the first half of 2023.

The Group will continue to closely monitor the market and economic conditions and respond accordingly to any changes.

I would like to thank our shareholders, my fellow Directors, the Asset Manager and our other advisers and service providers who have provided professional support and services to the Group during the period.

James Max Chairman

03 April 2023

Asset Manager's Report

Initial public offering

On 21 December 2021, the Company through its subsidiary acquired a portfolio of 17 e-warehouses from M7 Real Estate Investment Partners VIII LP (the "Fund") and was admitted to trading on the Wholesale Market of the IPSX (www.ipsx.com) with 38.16 million shares in issue (the "Admission"). Existing investors in the Fund either directly or indirectly acquired an interest in the Company equal in value to their existing holding in the Fund at the time of listing.

Market Outlook

UK Economic Outlook

The outlook for the UK economy appears to be stabilising as we approach the end of the first quarter of 2023. Following a further 0.25% increase in the Bank of England base rate in March, from 4.0% to 4.25%, there is reason to be optimistic that rates may now be close to their peak. However, inflation remains stubbornly high, at 10.4% in February, and in the statement following the latest Monetary Policy Committee ("MPC") meeting, the Bank of England note that uncertainties around the financial and economic outlook have risen.

This increase in the Bank of England base rate was the 11th consecutive hike in as many MPC meetings and took rates to a 14-year high with a cumulative rise of 4.15%. This represents the fastest and largest rise in rates since the late 1980s and is a response to the fastest and largest rise in inflation since the early 1980s. Expectations are that any further rises are likely to be more measured 0.25% increases rather than the 0.50% hikes to which we had become accustomed. Capital Economics forecast that lingering domestic inflation pressures will force the Bank to keep interest rates at or above 4.25% for all of 2023 before falling to circa 3% by the end of 2024.

Whilst the economy has so far avoided a technical recession, economic growth remains subdued. The National Institute of Economic and Social Research are forecasting mild growth of 0.2% in 2023 whilst the Bank of England is still predicting a shallow but protracted recession, with a 1% contraction over five quarters, highlighting that most of the drag from higher interest rates has yet to be felt. The latest statistics from the ONS released on 10 March 2023 are more encouraging, estimating that GDP grew by 0.3% in January after falling by 0.5% in December 2022. However, looking at the broader picture GDP was flat in the three months to January 2023.

The significant increase in energy prices as a consequence of the Ukraine war and the emergence of the global economy from the Covid-19 pandemic is now reversing with petrol prices approximately 25% lower than at their peak and average household bills predicted by both The Resolution Foundation and Cornwall Insight to fall below the government's £2,500 p.a. price cap by the summer.

The principal risks to the UK economy appear to be from the squeeze on disposable income, as a result of the increases in the cost of living, the speed with which inflation will fall and low levels of economic growth. Low-income households are estimated to have seen their disposable income fall by nearly 20% since the onset of Covid according to the National Institute of Economic and Social Research. With respect to inflation, the latest forecasts from the Bank of England have inflation falling from 10.4% to 3.9% by the end of this year, and to 1.4% by the end of 2024, albeit the Bank note that the "risks to inflation are skewed significantly to the upside".

However, the Bank of England's Financial Policy Committee in its most recent assessment judges that "households are more resilient now than in the run-up to the global financial crisis ("GFC") in 2007 and that households are, in aggregate, less indebted compared to the peak that preceded the GFC.

More recently lingering doubts about the financial stability of a number of global banks have resurfaced culminating in the takeover of Silicon Valley Bank (by HSBC in the UK) and Credit Suisse by UBS. It is widely considered that these banking failures are at least, in part, due to the rapid rise in interest rates in both the US and UK.

UK Real Estate Outlook

The challenging economic circumstances in the UK are unsurprisingly impacting the commercial property sector and particularly the investment market at the present time. The occupier market will inevitably also be influenced by any recession although the extent of this will, of course, depend upon the length and depth of any period of economic decline.

Inflation and rising interest rates have brought about an increase in property yields as investors seek an appropriate yield gap between the risk-free rate and commercial property returns. Lower, and less certain expectations about future rental growth also add to pressure on the lowest yields, with the greatest impact seen so far on the industrial and regional distribution big box warehouse sector. The ongoing yield shift has reduced values and returns for property investors particularly those with debt for whom the cost is increasing although not necessarily until expiration of their debt term.

In its latest outlook for the UK Real Estate Market in 2023, CBRE reached five key conclusions.

· First, that real estate prices will stabilise in 2023. They suggest that the spread over gilt yields going forward will be tighter than in the last decade. CBRE argues that as a result of quantitative easing, implemented after the Global Financial Crisis, the spread between commercial real estate yields and those of UK government bonds was abnormally high in a historical context.

· Income returns, rather than capital growth, will drive commercial real estate returns in the year ahead. The financial performance of occupiers and the success of asset management initiatives will be key.

· The performance of other asset classes relative to real estate will affect investor demand particularly as institutions seek to rebalance portfolios as a consequence of the changes in investment performance and outlook in 2022.

· Transaction volumes will fall although the impact of this will be limited on established portfolios.

Finally, CBRE forecast that the debt market would remain resilient as UK real estate is less leveraged than in the Global Financial Crisis. CBRE also noted that higher debt costs, together with lower asset values, would pose challenges for investors that needed to refinance this year and that this would inevitably lead to forced, or at least "lender-led", sales particularly by highly leveraged investors and those owning sub-prime assets particularly. In some of the first analyses of actual transactions in 2023, it has been reported that capital values declined by 0.4% across all UK Commercial property in January and a further 0.5% in February 2023 according to the latest CBRE Monthly Index. On a sector specific basis, CBRE reports that in February the decline was higher for the Industrial sector across the UK, at -0.6% whereas Retail Warehouses posted a fall of only -0.3% along with flat rental growth after positive rental growth of 0.3% in January.

As a further consideration, the Asset Manager does not anticipate any reduction in the value placed by occupiers and investors on assets and portfolios meeting sustainability criteria as global warming is increasingly seen to impact upon our climate. Furthermore, more mandatory disclosure requirements are to be introduced in the UK and high energy prices will incentivise investment by reducing the payback period of energy saving measures.

It is worth noting that the fall in the share price of UK REITs in 2022 was some time ahead of the subsequent fall in values in the conventionally traded property market. Investors will be looking to see if an improvement in listed property prices acts again as an indicator of change in market traded values.

E-Warehouse Market Outlook

Occupational:

Given the current economic backdrop and low levels of consumer confidence, it is widely expected that UK retail sales will decrease over the course of the current year. A recent estimate by Retail Economics suggested that lower income households have seen their discretionary spending fall by 15.8% versus a 1.1% fall for the most affluent households. With inflation remaining close to a 40 year high at 10.4% p.a. in February, the situation is unlikely to change in the short term although there are reasons to hope that inflation may have now peaked even though it is not yet falling. Discretionary items and leisure activities are expected to come under the greatest pressure from the cost-of-living squeeze although food price inflation is impacting food sales as well to the advantage of the discount retailers. Online penetration has plateaued for many retailers providing evidence that consumers still value the physical retail experience. Anecdotally, retail warehouses have continued to perform well for many retailers including those occupying the assets within this portfolio.

We are focused on tenant covenant strength following some high-profile administrations in late 2022 and are closely monitoring the financial performance and covenant strength of all our tenants.

We anticipate patchy occupier demand throughout 2023 with continuing strong demand from food retailers across the value spectrum whilst those retailers dealing with rising energy costs, supply chain disruption and higher purchasing costs are more likely to engage in portfolio rationalisation and to seek opportunities to re-gear leases for the short-term benefit of rent-free periods and other incentives. We hope that the rating revaluation later this year will provide much-needed support for the wider retail sector.

Investment:

By the Autumn of 2022, our External Valuer, Avison Young, along with other commentators, was reporting that the UK commercial property market was displaying many of the hallmark signs of a cyclical downturn. Sales volumes had started to slow, some open-ended funds had announced restrictions on redemptions and the gap was widening between purchaser and seller expectations on pricing.

The speed with which inflation rose in 2022, followed closely by interest rates, dramatically changed the financial outlook for the UK and the commercial property sector. The Consumer Prices Index ("CPI") measure of inflation rose by 10.4% in the 12 months to February 2023, marginally up from 10.1% in January although lower than the peak of 11.1% in October 2022. All this points to a difficult environment for the investment market as we approach the second quarter of 2023 whilst cash-rich investors still sit on the side-lines waiting for clear signs that the bottom has been reached in terms of value falls. M7 believes that retail warehouse values have largely stabilised inQ1 and will start to improve as the expected peak in inflation (and interest rates) is passed.

Retail warehouse yields are comparatively higher than other sectors (such as warehouse and industrial) and for this reason this sector will be better protected against rising debt costs, and yield movements will be less significant than for other assets. The Asset Manager believes that this is reflected in the relatively modest fall in the value of this portfolio at the end of Q4 compared to the wider market.

Investment Policy and Objectives

The Company pursues its investment objective by investing in a geographically diversified portfolio of enhanced warehouse (e-warehouse) properties across the UK. An e-warehouse is defined, by M7, as a warehouse with enhanced planning uses which means there is the flexibility to change the use of the warehouse in the future. This may be possible not only because of the planning consent but also because of the configuration and location of the assets.

Investment risk has been spread through investing in a range of geographical areas, e-warehouse properties which have the potential for a number of alternative uses and, where possible, low risk tenants. The properties are held and/or have been acquired directly or via SPVs and the portfolio targets the following overall metrics:

· good quality, high yielding, regional real estate;

· assets with medium to long term sustainable income streams where, through active asset management, the Asset Manager believes that value-add initiatives can be implemented, thereby creating increased cash flows, longer income profiles and increased capital values; or

· assets with the potential for increased use values.

Redevelopment policy: The Company considers investment where there is potential for active asset management and will engage in renovating, extending, customising and/or re-purposing existing e-warehouse properties as necessary to ensure they are fit-for-purpose to seek to achieve the Company's investment objective. The Company does not intend to undertake speculative development (that is development of property which has not been at least partially leased or pre-leased or de-risked in a similar way), save for refurbishment, the extension of existing holdings and/or the re-purposing of assets for alternative uses.

Cash management: Cash held for working capital purposes or received by the Company pending reinvestment or distribution will be held in Sterling only and invested in cash, cash equivalents (including holdings in liquidity funds), near cash instruments and money market instruments.

Derivatives: The Company may engage in full or partial interest rate hedging or otherwise seek to mitigate the risk of interest rate increases as part of the Company's portfolio management.

Investment in other investment funds: The Company will not invest in other investment funds.

Investment restrictions: The Company will invest and manage its assets with the objective of spreading investment risk. In order to achieve a diversified portfolio, the Company will be subject to the following investment restrictions:

· the Company will only invest, directly or indirectly, in e-warehouse properties located in the UK;

· no individual e-warehouse property will represent more than 20% of the Gross Asset value at the time of investment;

· the income receivable from any one tenant or from tenants within the same group will not exceed 15% of the passing rent across all of the properties held by the Company for that financial year at the time of investment; and

· the Company shall not hold more than 30% of the Company's total portfolio by floor area in single let properties.

Borrowing policy: The Company is permitted to incur borrowings and employ other forms of gearing such as the issue or sale of bonds, loan notes, debentures, other forms of security and any such other methods as the Board may determine in accordance with the Company's Articles. Under the Company's Articles, the Company's total gearing as a percentage of the Gross Asset Value is limited to a maximum of 80 per cent at the time of drawdown or the entering into of the gearing.

Changes to the investment policy: No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution. Non-material changes to the investment policy may be approved by the Board. In the event of a breach of the investment policy set out above and the investment and gearing restrictions set out therein, M7 Real Estate Financial Services Ltd (the "AIFM") shall inform the Board without delay, and if the Board considers the breach to be material, notification will be made through a Regulatory Information Service announcement. The Directors currently intend at all times to conduct the affairs of the Company so as to enable it to qualify as a REIT for the purposes of Part 12 of the CTA 2010 (and the regulations made thereunder).

Portfolio Activity During the Period

The following asset management initiatives were undertaken during the year:

· Three lease renewals were agreed during the period at an average 4.5% above passing rent and 1.1% ahead of ERV, with an annualised gross contract rent of £231,000 p.a. The lease renewals are as follows:

o Dreams, Greyfriars Retail Park: Reversionary lease for a term of 5 years from September 2023 at a rent of £80,000 p.a. (ERV: £81,344 p.a.). The new rent agreed is in line with ERV.

o Farm Foods, Greyfriars Retail Park: Reversionary lease for a term of 10 years from March 2026 at a rent of £75,000 p.a. (ERV: £81,240 p.a.). A 10-year term was agreed at the expense of a c.8% discount to ERV.

o Pizza Hut, Tower Retail Park: Lease renewal for a term of 10 years from June 2022 at a rent of £76,000 p.a. (ERV: £66,000 p.a.). In these negotiations we were able to agree a rent in excess of ERV reflecting the attributes and potential demand for the unit.

· Rent collection remained strong at 97.39% for 2022 (as at 17 March 2023). Action is ongoing to collect the outstanding arrears.

· As at 31 December 2022, there were 54 tenants and the WAULT was 4 years and 9 months to breaks and 5 years and 7 months to expiry.

ESG

Overview

· The Asset Manager is committed to adopting and promoting best practice in sustainability. This is achieved through internal policies as well as by promoting the same high standards in our tenants and service providers.

· The Asset Manager's Environmental, Social and Governance (ESG) strategy has been established to consider the full lifecycle of an asset from pre-acquisition to disposal and is applicable to all M7-managed investments, related business operations, and relevant key stakeholders.

· The strategy is based on defined responsibilities, processes and procedures and has been designed specifically for M7. A Plan-Do-Check-Act implementation approach has been applied (in line with ISO 14001: 2015) to the strategy to support M7's continual improvement.

· ESG remains at the forefront of investors' minds even in an uncertain political and economic environment. As the real estate industry seeks to reduce its environmental impact, a performance spread will emerge between assets with strong and weak ESG credentials.

Environmental

· The Asset Manager has been able to implement various Environmental and sustainability initiatives at the properties in this portfolio where we are responsible for managing the common parts.

· There are seven properties within the portfolio where the Asset Manager does not manage common parts as the entirety of these properties is leased. In these locations, the Asset Manager is only able to suggest and discuss initiatives with the respective tenants without being able to compel them to make changes.

Data Gathering Analysis

· "Measurable" has been selected as the Asset Manager's ESG data management system. This will allow key data points such as energy, water and waste data to be collected and analysed. This will help identify areas of inefficiency and waste for which mitigation strategies can be devised and implemented. Implementation of Measurable's data recording systems is now underway.

· Changes to MEES regulations will require commercial properties to have an EPC rated "C" by April 2027 in order to remain compliant and lettable. If the valid EPC is a rating below compliance, the Asset Manager will be required to undertake any works necessary to bring the property up to the compliant rating. The Asset Manager is consistently keeping up to date with these requirements.

Active Intervention

· Energy saving improvements, such as insulation and energy saving equipment, are installed where economically viable to ensure energy use is minimised. For example, LED lights and water saving taps are included in refurbishment specification as standard. LED lighting has now been installed in all common parts where we have authority, and it is possible, to do so.

· The Asset Manager will continue to explore the installation of Electric Vehicle charging points throughout the portfolio. To date, we have installed two chargers at each of South Baileygate Retail Park, Mitre Retail Park and Clyde Retail Park. We are looking to roll-out ultra-rapid chargers in partnership with SSE wherever such are feasible.

· Sourcing energy from certified renewable energy suppliers. As and when existing utility contracts come up for renewal, we are seeking new supplies from utility companies able to offer REGO (Renewable Energy Guarantees of Origin) certification.

· The Asset Manager is actively monitoring the EPC ratings within the portfolio in conjunction with lease expiry dates. As the minimum standards for EPC ratings increase, we need to ensure that we budget appropriately for any improvements that are necessary to achieve at least minimum standards on reletting.

· Refurbishment - as a matter of course our asset management teams will always seek to minimise the carbon footprint of any refurbishment works in the portfolio and will prepare an appropriate analysis at the outset of each project.

Green Leases

· For all new leases and lease renewals, M7's policy is to incorporate green lease clauses wherever possible. Most environmental impacts from the portfolio originate from tenants' operations, hence it is important to manage such risks and increase our interaction with occupiers by improving communication and collaboration.

· There are six principal areas in which M7 seek to agree green lease clauses: Tenant Alterations, Compliance, Collaboration, Information Sharing, Access and Waste Management and Recycling.

· As a minimum, all tenants will be required to share their energy and other utilities data and to commit to not making changes to the property that will negatively impact its energy efficiency. Other green lease clauses, where these can be agreed, help to ensure the occupier's commitment to improve the environmental performance and sustainability of the building with the support of M7 and the Group.

· This is one way in which we can influence sustainability matters at fully let properties without common parts. The extent of what is possible will depend on the asset, the occupier's business and the precise lease terms agreed. As a minimum, all tenants will be required to share their energy and other utilities data and to commit to not making changes to the property that will negatively impact its energy efficiency. Green lease clauses will ensure the commitment to improve the environmental performance and sustainability of the building and support the tenant with ESG certification.

Operating Procedures

· Where considered appropriate by the Asset Manager, environmental audits are undertaken to review the environmental performance of particular assets and engage with tenants to improve their operations from an environmental perspective.

· The Asset Manager's standard policy is to carry out Phase 1 environmental reviews (and further Phase 2, where and if appropriate) on assets during purchase due diligence. This enables the Manager to establish appropriate environmental management plans for all assets under management and minimise the impact on the local environment.

· The Asset Manager assists estate occupiers in reducing the levels of pollution generated through several waste management initiatives including:

o Reducing pollution released from estates and the efficient use of building materials in refurbishments.

o Environmental audits to review the current and potential sources of pollution generated by tenants.

o Recommendations to manage these sources in line with current environmental legislation.

Social and Governance

The Asset Manager seeks to implement its Social responsibilities as set out in its ESG policy by making improvements in the following areas wherever such is possible.

a) Tenant and community satisfaction. Examples of how this is achieved include engaging with tenants on Green lease clauses and providing operational tips for reducing environmental impact.

b) Community engagement. In the future, this could include consideration of social improvements during developments and refurbishments.

c) Active transport. This policy encourages consideration of facilities that encourage greener forms of transport such as cycling.

d) Health, safety and wellbeing of staff and tenants. This continues to be a priority for the Asset Manager.

In respect of the Governance aspect of the policy, the Asset Manager's ESG policy identifies the following areas for compliance.

a) Adherence to regional legislative requirements

b) Compliance with local, environmental, social & health and safety laws

c) Compliance with M7's ESG strategy and objectives.

In order to ensure compliance, M7 is committed to regular training of staff and to introducing registers to document, monitor and review compliance.

Financial Results

Net rental income earned from the portfolio for the period ended 31 December 2022 was £8.76 million excluding service and direct recharges, contributing to an operating profit before fair value changes of £6.20 million.

The portfolio has seen a decrease in fair value of investment properties as at 31 December 2022 to £106.05 million, a fall of £4.65 million compared to the property value at the date of Admission of £110.70 million.

Administrative and property operating expenses, which include the AIFM and Asset Manager's fee and other costs attributable to the running of the Group, were £3.10 million for the Period excluding service and direct recharges. Ongoing charges ratio for the period was 4.69% and represents expenses as a proportion of average net asset value in the Period.

The Group incurred finance costs of £3.41 million during the Period.

The loss before tax for the Period was £2.11 million. During the Period, an amount of £48,739 of tax gain representing the reversal of an over accrual of United Kingdom Corporation Tax recorded prior to Admission and entering into the United Kingdom Real Estate Investment Trust tax regime was recognised. This results in a loss after tax of £2.06 million which equates to a loss per share of -5.39p.

Adjusted EPS for the Period which equates to cash generated from operations (and therefore excludes movements in lease incentives, the amortisation of loan arrangement fees, movements in the provision for impairment of trade receivables and other non-cash items) was 6.12p which, based on dividends declared of 8.22p, reflect a dividend cover of 74.45%.

The Net Asset Value decreased by 11.43% or £4.3 million to £33.31 million (Admission: £37.61 million, net of estimated issue cost of £0.55 million), equivalent to 87.28 pps (Admission: 98.55 pps (net of Admission costs of 1.45pps)), driven by valuation falls as a result of falling values across the commercial property sector during the Period.

NAV Movements


	Period ended 31 December 2022
	Pence per share	£ million
NAV as at beginning of period	-	-

Issuance of shares - net of issue cost	98.89	37.74
Change in fair value of investment properties	(12.84)	(4.90)
Income earned for the period	24.37	9.30
Finance costs for the period	(8.93)	(3.41)
Other expenses for the period	(7.99)	(3.05)
Dividends paid during the period	(6.22)	(2.37)

NAV as at the end of the period	87.28	33.31

Financing

Asset Summary at 31 December 2022


Asset	Area (sq ft)	Contracted Rent (£)	Valuation (£)	Valuation (%)	NIY (%)	WAULT (years)	ERV (£)	Physical Occupancy (%)
Baildon Bridge Retail Park	37,175	382,006	4,275,000	4.03%	8.38%	4.03	365,322	100.00%
Bilston Road	46,445	357,102	4,275,000	4.03%	7.83%	6.90	359,998	100.00%
Carlton Street	39,568	478,582	4,700,000	4.43%	9.55%	5.10	430,000	100.00%
70 Carron Road	45,542	422,000	4,650,000	4.38%	8.51%	6.79	409,878	100.00%
Clyde Retail Park	148,845	1,484,816	19,360,000	18.26%	6.76%	3.39	1,637,460	92.68%
Festival Leisure Park	122,857	1,122,975	12,300,000	11.60%	8.56%	6.99	1,096,496	100.00%
Greyfriars Place Retail Park	40,480	396,884	5,200,000	4.90%	6.48%	7.66	421,070	100.00%
Haydn Road	42,163	422,428	5,285,000	4.98%	7.49%	5.32	362,560	100.00%
Moor Allerton District Centre	34,848	430,002	4,850,000	4.57%	8.30%	2.58	414,360	84.53%
Mount Street Retail Park	55,302	539,628	6,300,000	5.94%	7.58%	3.65	559,253	99.28%
Parkfield Road Retail Park	48,599	412,534	4,820,000	4.55%	8.03%	5.34	412,550	100.00%
Sands Industrial Estate (Poundstretcher)	26,641	171,828	1,970,000	1.86%	8.18%	1.48	173,000	100.00%
Saltney Retail Park	48,200	340,000	4,210,000	3.97%	7.57%	8.61	337,400	100.00%
Sandy Lane Retail Park	51,991	734,394	9,000,000	8.49%	7.65%	3.08	674,741	100.00%
South Baileygate Retail Park	68,106	638,000	6,950,000	6.56%	8.61%	3.64	547,972	100.00%
Tower Retail Park	33,770	383,500	5,200,000	4.90%	6.92%	1.67	383,500	100.00%
Wickes, Scunthorpe	20,792	202,000	2,700,000	2.55%	7.01%	4.90	181,895	100.00%
Total	911,324	8,918,679	106,045,000	100.00%	7.75%	4.73	8,767,455	98.17%

Annual Report and Accounts | 31 December 2022 | 14

Top Five Occupiers


Tenant	Property	Annual Contracted Rental Income (£)	% of Portfolio Total Contracted Rental Income
Matalan Retail Ltd	Multiple	1,279,757	14.35%
Go Outdoors Retail Limited	Multiple	754,648	8.46%
Odeon Cinemas Ltd	Festival Leisure Park	740,000	8.30%
B&M Retail Ltd	Multiple	498,000	5.58%
B&Q Ltd	Sandy Lane Retail Park	463,058	5.19%
Total		3,735,463	41.88%

Lease Expiry Portfolio - To the earlier of break or expiry


Year	Rent pa (£)	Cumulative (%)
Vacant	207,380	2%
Holdover	639,500	7%
2023	652,113	14%
2024	171,828	16%
2025	615,033	23%
2026	1,284,392	38%
2027+	5,555,813	100%

M7 Real Estate Limited

03 April 2023

Annual Report and Accounts | 31 December 2022 | 15

Key Performance Indicators ("KPIs")


KPI AND DEFINITION	RELEVANCE TO STRATEGY	PERFORMANCE
1. Net Initial Yield ('NIY') Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with purchasers' costs estimated by the Group's External Valuer.	The NIY is an indicator of the ability of the Company to meet its target dividend after adjusting for the impacts of leverage and deducting operating costs.	7.75% at 31 December 2022
2. Weighted Average Unexpired Lease Term ('WAULT') to break and expiry The average lease term remaining to expiry across the portfolio, weighted by contracted rent.	The WAULT is a key measure of the quality of the portfolio. Long leases underpin the security of our future income.	4 years and 9 months to break and 5 years and 7 months to expiry at 31 December 2022
3. NAV per share NAV is the value of an entity's assets minus the value of its liabilities.	Provides stakeholders with the most relevant information on the fair value of the assets and liabilities of the Group.	£33.31 million/87.28pps at 31 December 2022
4. Dividend per share Dividends declared in relation to the period are in line with the stated dividend target as set out in the Admission Document at IPO. The Company targets a dividend of 8 pence per Ordinary Share per annum.	The Company seeks to deliver a sustainable income stream from its portfolio, which it distributes as dividends.	8.22pps for the period ended 31 December 2022
5. Adjusted EPS Adjusted EPS from core operational activities, as adjusted for non-cash items. A key measure of a company's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings. See Note 8 to the condensed Consolidated Financial Statements.	This reflects the Company's ability to generate earnings from the portfolio which underpins dividends.	6.12pps for the period ended 31 December 2022
6. Leverage (Loan-to-Value (covenant)) The proportion of the Group's properties values that is funded by borrowings (senior loan).	The Group utilises borrowings to enhance returns over the medium term.	49.09% at 31 December 2022

Principal Risks and Uncertainties

The Group owns a portfolio of enhanced warehouse (e-warehouse) properties across the United Kingdom. Its principal risks are therefore related to the commercial property market in general, but also to the circumstances of the individual properties and the tenants within the properties.

The Board has overall responsibility for reviewing the effectiveness of the system of risk management and internal control, which is operated by the AIFM and, where appropriate, the Asset Manager. The Group's ongoing risk management process is designed to identify, evaluate and mitigate the significant risks the Group faces.

The Board undertakes a risk review, at least annually, with the assistance of the Audit Committee, to assess the adequacy and effectiveness of the AIFM's and, where appropriate, the Asset Manager's risk management and internal controls processes.

An analysis of the principal risks and uncertainties is set out in the table below. This does not purport to be exhaustive as some risks are not yet known and some risks are not deemed material but could turn out to be material in the future.

PRINCIPAL RISKS AND THEIR POTENTIAL IMPACT	HOW RISK IS MANAGED	RISK ASSESSMENT
REAL ESTATE RISKS
1. Tenant Default
Failure by tenants to comply with their rental obligations could affect the income that the portfolio generates and the ability of the Group to pay dividends to its shareholders.	The maximum exposure to any one tenant (calculated by reference to contracted rental income) was 14.35% at 31 December 2022. The Asset Manager subscribes to quarterly assessments of the covenant strength of each occupier by Income Analytics.	Probability: Moderate to High Impact: High
2. Property Defects
Due diligence may not identify all the risks and liabilities in respect of an asset (including any environmental, structural or operational defects) that may lead to a material adverse effect on the Group's profitability, the NAV and the Group's share price. Furthermore, there is a reliance on third party property and facility managers to ensure property defects are identified and rectified.	The Group's due diligence and ongoing maintenance relies on the work (such as legal reports on title, property valuations, environmental, building surveys) outsourced to third parties that have appropriate Professional Indemnity cover in place.	Probability: Low Impact: Low to moderate
3. Portfolio concentration
Although the Property Portfolio is diversified by sub-sector and tenant, a significant proportion of the Group's assets are retail warehouses. Consequently, any downturn in the UK economy, or regulatory legislation or policy changes relating to retail warehouses, could have a material adverse effect on the Group's results of operations or financial condition. Investing exclusively in a single sector and single asset class may lead to greater volatility in the value of the Group's investments and the NAV and may materially and adversely affect the performance of the Group and returns to Shareholders. Should returns from the retail warehouse sub-sector of the market underperform relative to other sectors of the property market, the Company's exposure to the retail warehouse sub-sector could decrease shareholder returns relative to a more diversified portfolio.	The portfolio concentration was already set at the time of listing and it is a feature of this particular asset that it is a portfolio of retail (enhanced) warehouse assets. The Asset Manager closely monitors the performance and outlook of this sub-sector of the market and will report to the board on any adverse legislation or structural changes that can be reasonably foreseen.	Probability: Low Impact: Low to moderate
4. Rate of Inflation
Rent review provisions may have contractual limits to the increases that may be made as a result of the rate of inflation. If inflation is in excess of such contractual limits, the Group may not be able to deliver targeted returns to shareholders.	The inflation linked (RPI/CPI) leases in the portfolio have contractual rent review collars, with the lowest floor being 0%, and caps that range from 3% to no cap. The majority of caps are in excess of RPI and CPI forecasts during the next five-year rent review cycle and therefore based on forecasts. The risk of inflation is somewhat mitigated by the leases that have no cap.	Probability: Moderate Impact: Low to moderate
5. Property Market
Any property market recession or future deterioration in the property market could, inter alia, (i) lead to an increase in tenant defaults, (ii) make it harder for the Group to attract new tenants for its property, and (iii) lead to a lack of finance available to the Group. Any of these factors could have a material adverse effect on the ability of the Group to achieve its investment objective. Furthermore, wider market developments, the addition of new properties to the local market and tenants' intentions to relocate could also have adverse effects on the Group.	The Group has investment restrictions in place to invest and manage its assets with the objective of spreading and mitigating risk as far as possible. M7 as Asset Manager adopts a pro-active approach to managing the portfolio and anticipating risk as well as opportunity.	Probability: Moderate to high Impact: Moderate to high
6. Property Valuations
There may be an adverse effect on the Group's profitability, the NAV and the Company's share price as a result of a decrease in property valuation.	The Group uses an independent External Valuer (Avison Young) to value the property on a quarterly basis at fair value in accordance with accepted RICS appraisal and valuation standards.	Probability: Low to moderate Impact: Moderate to High
7. Investments will be illiquid
The Group invests in commercial properties. Such investments are illiquid; they may be difficult for the Group to sell and the price achieved on any realisation may be at a discount to the prevailing valuation of the relevant property.	The Group aims to hold the properties for long-term income.	Probability: Moderate Impact: Moderate
8. Environment
The Group is subject to environmental regulations that could impose liabilities on the Group. In addition to regulatory risk, there is a growing importance being placed on ESG credentials by tenants, which could lead to difficulty in letting vacant space if the portfolio does not adapt. Properties could be impacted by extreme environment events such as flooding. Climate change could accelerate more quickly leading to adverse physical impacts as well as regulatory change. Failure by the Group to meet current or future environmental targets could result in penalties, increased costs, a reduction in asset values and have an adverse effect on the Company's reputation, leading to loss of good quality tenants.	The Asset Manager has prepared an ESG strategy to ensure the portfolio meets legal requirements and the properties remain attractive to potential tenants. Please see the section called 'Environmental, social and governance matters' for further information.	Probability: Moderate Impact: Moderate
9. Development
Redevelopment, expansion and/or the refurbishment of the property portfolio may be necessary in the future to preserve rental income and could be adversely affected by a number of factors. Asset management initiatives may be more expensive than anticipated and take longer to implement.	The Asset Manager would require Board approval prior to executing any redevelopments, expansions, or refurbishments. Prior to seeking Board approval, the appropriate analysis would be undertaken and a thorough tender process would be executed to ensure any works are competitively priced. Additionally, the Asset Manager would ensure that suitable insurance is in place.	Probability: Low Impact: Moderate
BORROWING RISKS
10. Breach of borrowing covenants
The Group has entered into a term loan facility. Material adverse changes in valuations and net income may lead to breaches in the LTV and debt yield covenants. If the Group is unable to operate within its debt covenants, this could lead to default and the loan facility being recalled. This may result in the Group selling properties to repay the loan facility which will cause a reduction in the NAV of the Group.	The Group monitors the use of borrowings on an ongoing basis through periodic cash-flow forecasting and quarterly risk monitoring to monitor financial covenants. Furthermore, there is a hedge in place which gives the Group an element of protection against interest rates. Diversification of both the portfolio and tenants limit the risk to the Group of any one geographic or sector property event and any one tenant default which assist in mitigating any breach in loan covenants. The Asset Manager has performed sensitivity analysis of the loan covenants to take account of the availability of mitigating actions that could be taken to avoid or reduce the impact or probability of the breaching of the borrowing covenants.	Probability: Moderate Impact: High
11. Interest rates
There may be an adverse effect on the Group's performance, profitability and cash flow as a result of continuing rising interest rates.	The AIFM uses an interest rate hedge to mitigate the impact of rising interest rates. While the existing arrangement matures in August 2023, the AIFM is exploring alternative hedging arrangements to replace the current cover.	Probability: High Impact: High
CORPORATE RISKS
12. Use of service providers
The Group has no employees and is reliant upon the performance of third-party service providers. Failure by any service provider to carry out its obligations to the Group in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Group. Should the Group pursue litigation against service providers, there is a risk that the Company may incur costs that are irrecoverable if litigation is unsuccessful.	The performance of service providers in conjunction with their service level agreements is monitored via regular calls and face- to-face meetings and the use of KPIs where relevant. The Board reviews the performance and continuing appointment of key service providers on an annual basis.	Probability: Low to moderate Impact: Moderate to high
13. Dependence on the AIFM and Asset Manager
The Asset Manager is responsible for providing investment advisory services together with asset management, operational advice, budgeting and planning for the Group's property. The future ability of the Group to successfully pursue its investment objective, among other things, depend on the ability of the Asset Manager to retain its existing staff and/or to recruit individuals of similar experience and caliber, and effectively carry out its services.	The Board meets regularly with the AIFM and Asset Manager to ensure it maintains a positive working relationship.	Probability: Moderate Impact: Moderate to high
14. Ability to meet objectives
The Group may not meet its investment objective to deliver an attractive total return to shareholders from investing predominantly in a portfolio of e-warehouse properties in the UK. Poor relative total return performance may lead to an adverse reputational impact that affects the Group's ability to raise new capital and new funds.	The Group will have quarterly and ad hoc Board meetings where performance will be reviewed along with the Asset Manager.	Probability: Low to moderate Impact: High
TAXATION RISK
15. Group REIT status
In 2021, the Group obtained UK REIT status that provides a tax-efficient corporate structure. If the Group fails to remain a REIT for UK tax purposes, its profits and gains will be subject to UK corporation tax. Any change to the tax status or in UK tax legislation could impact on the Group's ability to achieve its investment objectives and provide attractive returns to shareholders.	The Group will monitor REIT compliance, asset and distribution levels through the Asset Manager; the Registrar on shareholdings; and third-party tax advisors to monitor REIT compliance requirements. The Board is provided with assurance regarding compliance requirements.	Probability: Low Impact: High
16. Political / Economic Risk
Political and macroeconomic events present risks to the real estate and financial markets that affect the Group and the businesses of our tenants. For example: (i) the impacts of inflationary pressures arising from the war in Ukraine and any future developments; (ii) any arrangements made (or lack thereof) between the UK and the EU that could impact the ability of the Group to raise capital and/or increases the regulatory compliance burden on the Group; and (iii) any "cost of living" pressures, reducing free transactional cash flow in circulation, potentially affecting the turnover of tenants.	As the Group has no property holdings outside of the UK, the impact of the war in Ukraine is likely to be limited to factors such as higher energy costs and inflationary pressures on other purchased goods and services. At the present time the Group does not need to raise capital but nonetheless continues to monitor the availability and cost of capital. There is regular re-evaluation by the Asset Manager and AIFM of non-recoverable costs through the budget process and the impact of inflation on tenants. All material decisions are made with the approval of the Board.	Probability: Moderate Impact: Moderate
REGULATORY RISKS
17. Health and Safety Risk
Tenants or other users of the asset may experience health and safety incidents that could lead to an adverse effect on the Group's reputation, profitability, the NAV and the Company's share price. Furthermore, there is a reliance on third party property and facility managers to ensure property defects are identified and rectified.	The Group has a robust Health & Safety Management system in place that is externally assessed and audited on an annual basis. The third-party property & facilities management providers who work onsite are continuously trained in health & safety protocols to ensure health & safety risks are always minimized, and any possible incident is escalated, logged and reported immediately.	Probability: Moderate Impact: Low
18. Disclosure Risk
Failure to properly disclose information to investors or regulators in accordance with various disclosure rules and regulations. Examples include AIFMD investor disclosures, annual reporting requirements, marketing/ promotion disclaimers, data protection regulations etc. Examples that are not currently required but may become so include PRIIPS regulations and TCFD disclosures.	Service providers including AIFM, Asset Manager, Company Secretary and Legal Advisers monitor disclosure obligations and liaise with the Board to ensure requirements are met.	Probability: Moderate Impact: Low

EMERGING RISKS

The Board takes account of and considers emerging risks as part of its risk management assessment.

Debt Refinancing

The Directors note that the Group's senior loan facility of £54.34 million and mezzanine loan note of £19.70 million mature on 17 August 2023 and 31 July 2023, respectively. The Asset Manager is currently exploring options for, and the cost of, refinancing the senior loan and discussions are underway. The Group is in the process of extending the term of the loan notes to July 2026.

Going Concern

The Group has considered its cash flows, financial position, liquidity position and borrowing facilities.

The Group's unrestricted cash balance at the period end was £2.89 million.

At 31 December 2022, the Group had a senior loan facility of £54.34 million and a mezzanine loan note of £19.70 million, totalling £74.04 million. The senior loan is repayable on 17 August 2023 while the loan note is repayable on 31 July 2023. Refinance discussions on the senior loan are currently underway. The Group is in the process of extending the term of the loan notes to July 2026. There continues to be significant headroom in the senior loan facility debt covenants. As at 31 December 2022, the senior debt loan to value A ratio is 49.09% (cash trap is greater than 65% and default level is greater than 70% and based on lender's valuation) and the interest cover ratio is 316.30% (cash trap/default level is less than 225%). The Group has complied with the above covenants to date.

A 'severe but plausible downside' scenario has also been projected. While rent collections have been strong, this scenario anticipates rent deferrals and write-offs for tenants with difficulty paying rents from operational cash flows.

In this scenario, the Group still has adequate headroom against the interest cover covenant and positive cash balances. Further detail of the assumptions made in assessing the adaption of Group's going concern basis can be found in Note 2.

The Group benefits from a secure, diversified income stream from leases which are not overly reliant on any one tenant. As a result, the Directors believe that the Group is well placed to manage its financing and other business risks.

In the worst-case scenario, if the refinancing on the senior loan is not successful and the lender requires the loan to be repaid then the Group will need to sell properties in the portfolio to raise the cash.

In addition to the senior loan, the Group has a loan note in the sum of £19.70 million which REIP VIII Propco has borrowed from a Jersey FinCo, Auskerry Finco Limited, which has been raised from third party investors. This loan note is for a term of 5 years expiring on 23 July 2023 with a coupon of 8.5% per annum payable quarterly in arrears. The loan note is not secured, does not incur redemption penalties and does not have any financial covenants or fees. The Group is in the process of extending the term of the loan notes to July 2026.

The Directors are satisfied that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future, being a period of at least 12 months from the date of the approval of these Consolidated Financial Statements. The Board is, therefore, of the opinion that the going concern basis adopted in the preparation of the Consolidated Financial Statements is appropriate.

Viability Statement

Pursuant to Provision 36 of the AIC Code and relevant provisions of the FRC 2018 Guidance on Board Effectiveness and the FRC Guidance on Risk Management and Internal Control and Related Financial and Business Reporting, the Board has considered the nature of the Group's assets and liabilities and associated cash flows and has determined that three years, up to 31 December 2025, is a realistic timescale over which the performance of the Group can be forecast with a degree of accuracy and so is an appropriate period over which to consider the Group's viability.

Considerations in support of the Company's viability over this three-year period include:

1. The Group's debt facilities will mature during 2023. The Group is currently seeking to extend the loans with the current lender or refinance with another lender on similar or better terms.

2. The Group's property portfolio had a WAULT to break of 4 years and 9 months and a WAULT to expiry of 5 years and 7 months at 31 December 2022, representing a secure income stream for the period under consideration.

The three-year review considers the Company's cash flows, dividend cover and REIT compliance over the period. In assessing the Company's viability, the Board has carried out a thorough review of the Company's business model, including future performance, liquidity and banking covenant tests for a three-year period. In particular relating to the impact of the current political and economic uncertainties, the Directors have assessed the extent of any operational disruption; potential curtailment of rental receipts; potential liquidity and working capital shortfalls; increasing interest rate; and diminished demand for Company's asset going forwards, in adopting a going concern preparation basis and in assessing the Company's longer-term viability.

These assessments are subject to sensitivity analysis, which involves flexing a number of key assumptions and judgements included in the financial projections:

§ Tenant default;

§ Dividend payments;

§ Property valuation movements; and.

§ Interest rates

As part of the sensitivity analysis performed, the cash flow was sensitised to see how much a reduction in the net rental income (including tenant defaults) and property value would need to fall by to be in breach of the relevant covenants. Forecast dividend payments were reduced where required to leave a sufficient buffer to cover any shortfalls.

Based on the prudent assumptions within the Company's forecasts regarding tenant default, void rates and property valuation movements, the Directors expect that over the three-year period of their assessment:

· Debt covenants will not be breached:

o as at 31 December 2022:

§ the asset valuations would need to fall by 24.48% before breaching the Loan to Value loan covenant;

§ interest cost would need to increase by 36.80% and rental income would need to decrease by 26.90% before breaching the debt service cover covenants;

o the Group is in compliance with the debt covenants throughout the three-year period apart from in the year ending 31 December 2024 where the Debt ICR is in potential breach due to increased debt service costs. We are confident that this risk can be mitigated.

· REIT tests are complied with; and

· That the Group and Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

Furthermore, the Board, in conjunction with the Audit Committee and supported by the Asset Manager and the AIFM, carried out a robust assessment of the principal risks and uncertainties facing the Group, including those that would threaten its business model, future performance and solvency over the three-year period. The risk review process provided the Board with assurance that the mitigation and management systems are operating as intended. The Board believes the Group is well positioned to manage its principal risks and uncertainties successfully, notwithstanding the current political and economic risks and uncertainties. These risks, and other potential risks which may arise, continue to be closely monitored by the Board.

Confirmation of Viability

The Board confirms that it has reasonable expectation that the Group will be able to continue its operation and meet its liabilities as they fall due over the next three years, considering the Group's current position and the principal risks and uncertainties.

Section 172 Statement

This section of the Report covers the Board's considerations and activities in discharging their duties under s.172(1)(a) to (f) of the Companies Act 2006 (the "Act"), in promoting the success of the Company for the benefit of members as a whole and forms the directors' statement required under section 414CZA of the Act 2006.

This section describes how the Board has regard to the likely consequences of any decision in the long term, the need to foster the Company's business relationships with suppliers, customers and others, the desirability of the Company maintaining a reputation for high standards of business conduct and the need to act fairly as between members of the Company. The Company does not have any employees and therefore s172|1|(b) is not applicable to the Company. The impact of the Company's operations on the community and environment is set out in the Environmental, Social and Governance section on pages 10 to 12.

The Board regularly reviews the Company's principal stakeholders and how they engage with them.

STAKEHOLDER	ISSUES OF IMPORTANCE	ENGAGEMENT	EFFECT OF ENGAGEMENT ON KEY DECISIONS
Shareholders
The Group's investment objective is to deliver an attractive total return to shareholders. Shareholders are directly impacted by the performance of the Company both through equity growth and dividends.	· Strong total shareholder return, operational and financial performance. · Attractive and sustainable level of income, earning and dividends. · Robust corporate governance structure and well-performing service providers. · Strategic direction of the Company. · ESG strategy and performance. · Value for money - low ongoing charges.	· Shareholder engagement is set out in the Strategic Report. · ESG engagement matters are disclosed in the Strategic report. · Periodic updates are provided to the market with trading updates. · The Company is subject to regulatory disclosure requirements applicable to companies with shares admitted to the Wholesale market of IPSX which the Board abides by with the assistance of the Company Secretary.	· Clear and effective communication leading to the Company meeting its objectives to deliver an attractive return to shareholders and boost the reputation of the Company. · The impact on shareholders is central to each aspect of the Board's decision making. · Any matters raised by the shareholders will be discussed by the Board and the outcome will be shared with the shareholders.
Service Providers
As an externally managed REIT, the Company conducts all its business through its service providers, the key ones being the Asset Manager, Property Manager, Company Secretary, AIFM and Depositary, Registrar, tax adviser, Auditor and Valuer.	· Reputation of the Company, including its impact on the community, environment, and maintaining high standards of business conduct. · Fair and transparent service agreements. · Effective relationship between the Board and key service providers.	· Effective and consistent engagement both through formal Board meetings and regularly outside the meetings with the Board. · A formal annual evaluation process allows performance highlights and concerns to be identified and discussed. · Culture set by the Board and communication to all providers.	· As per evaluation performed for in relation to the Period, service providers continue to be competitive and to provide and demonstrate high standards of service. · Clear and effective strategic oversight and culture by the Board has been crucial to enhancing the effectiveness of the Company's key service providers. The Board has worked closely with its service providers to maintain and continually improve processes and to ensure that the Company's values are aligned with them.
Tenants
Tenants with strong business fundamentals and profitable operations are one of the key components to ensuring a consistent income stream and ability to pay dividends to the Company's shareholders.	· Working closely with tenants during the cost of living crisis, offering assistance where required. · Fair lease terms. · Long-term strategy and alignment with tenants' business operations. · Health and safety and property maintenance. · Financial stability of tenants.	· To ensure the Asset Manager and Property Manager generate and foster good relationships with our tenants. · Focus on asset management initiatives to assist our tenants where applicable.	· Following the removal of national lockdown restrictions in response to COVID-19, majority of the outstanding arrears/deferrals have been repaid. · All rent renewals due in the Period have been successfully negotiated and extension to leases have been agreed, as set out in the Strategic Report.
Lenders
Lenders play an important role in the Group's business. The Asset Manager maintains close relationships with our lenders, based on openness, transparency and mutual understanding.	· The impact on rent collections and occupation as a consequence of the current economic environment and latest political events which resulted in the rising of interest rates and living costs as well as the effect these had on the lender covenants. · Good working and transparent relationship. · Compliance with loan covenants.	· Engagement with lenders with detailed reporting and modelling.	· Board strategic and detailed oversight has contributed to the positive relationship with the lenders.
Government, Local Authorities and Communities
· The Company is committed to engaging with central and local government and to supporting the wider community as a responsible corporate citizen.	· Considering impact on local community and ensuring good relations with surrounding occupiers and the wider city. · Noise and traffic. · Health and Safety. · Environmental performance. · Employment opportunities.	· Regular engagement with the government, City Council, community business groups and charities.	· Early insight into city plans and local business improvement & information schemes. · Decision making takes into account social and community considerations. · Examples of how we engage and support our local community can be found in the Strategic report.

The Strategic Report was approved by the Board and signed on its behalf by:

James Max

Chairman

03 April 2023

Corporate Governance

The Board undertakes an annual review of its compliance with the principles and recommendations of the 2019 AIC Code of Corporate Governance (the "AIC Code"). The AIC Code is available on the AIC website (www.theaic.co.uk). The Financial Reporting Council has confirmed that member companies who report against the AIC Code will be meeting their obligations in relation to the 2018 UK Corporate Governance Code (the "UK Code"). This endorsement means that companies adopting the AIC code may make a statement that, by reporting against the AIC Code they are meeting their obligations under the UK Code and, as such, do not need to report further on issues contained in the UK Code which are irrelevant to them.

The Board recognises the importance of sound corporate governance and is committed to maintaining high standards of corporate governance. The Board has considered the principles and recommendations of the AIC Code), which addresses the principles and provisions set out in the UK Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company as an investment company.

The Board meets at least on a quarterly basis and has established the Audit Committee which also meets at least three times per year. Given the size of the Board, the Board has not established Nomination and Remuneration committees.

Board of Directors

The Board of Directors, led by the Chairman, is collectively responsible for the long-term sustainable success of the Company, generating value for shareholders and contributing to wider society. It establishes the purpose, values and strategic objectives of the Company and satisfies itself that these and the Company's culture are aligned. The Board ensures that the necessary resources are in place for the Company to meet its objectives and measure performance against them, fulfilling its obligations to shareholders within a framework of high standards of corporate governance and effective internal controls.

Board composition was unchanged during the Period and comprises of non-executive members:


JAMES MAX Chairman and Independent Non-Executive Director Date of Appointment: 11 October 2021 Skills and Experience: 30 years' experience in real estate, broadcast and advisory. Member of the Royal Institution of Chartered Surveyors and holder of an Honours degree in Land Management. Originally, he trained as a chartered surveyor starting his career at DTZ (now Cushman & Wakefield) before becoming a director of their investment team in 1996. He joined Morgan Stanley's investment banking team and was head of UK and a Principal at Doughty Hanson's Real Estate Fund. He is a contributor to TalkTV (a British television channel owned and operated by News UK), the Spectator Life and writes monthly columns for FT Weekend. Other current appointments: James is a director of Wildwood Investment Management Ltd, Frinton Lawn Tennis Club Hospitality Limited, Frinton-On-Sea Lawn Tennis Trust, Limited, Humphrey French Limited and was recently elected as vice president of the Royal Albert Hall in London.
CANDACE INGALS VALIUNAS Independent Non-Executive Director Date of Appointment: 11 October 2021 Skills and Experience: An accomplished real estate professional with over 35 years' legal and transactional experience in both the commercial and social sectors. Holder of a Doctor of Law (JD) degree from the University of Virginia School of Law and Bachelor of Arts degree from Dartmouth College. She has served as director of, and adviser to, international boards in the listed, private, and social sectors. She retired from Cambridge Place Investment Management in 2015 having held the position of Head of European Real Estate for seven years. Prior to Cambridge Place, Candace held senior positions with Tishman Speyer, JER Partners and Hatfield Philips. Other current appointments: Candace has been a non-executive director of Silva Homes, a charitable housing association, for over six years and currently chairs the board's People Committee and is its Senior Independent Director.
IAN WOMACK Non-Independent Non-Executive Director Date of Appointment: 11 October 2021 Skills and Experience: Over 40 years' experience in the real estate sector and retired as Chief Executive of Real Estate at Aviva Investors in June 2015. Spent majority of his career at Aviva Investors in various roles within the Real Estate division before being appointed to lead the business in 1998. He is an active and engaged participant in the broader Real Estate community and was Chairman of the highly respected Investment Property Forum from 2006 to 2007. Other appointments: Ian is a director of Grosvenor Liverpool Limited, a non-executive director of Mailbox REIT plc and was a Senior Adviser to IPSX. He is a director for Bennbridge Group, and for his own consulting company Womack Partners Limited. He is also trustee of the charity The Story of Christmas and an independent adviser of M7 Box+ II LP, a company managed by the Asset Manager. Ian Womack is a non-independent non-executive director of M7 Regional E-Warehouse REIT plc due to his role as non-executive director of Mailbox REIT plc which is also managed by the Asset Manager.

Structure of the Board

The Board consists entirely of Non-Executive Directors, with no individual having unrestricted powers of decision. The Directors have a wide range of relevant business and financial expertise and brief biographies, including details of their significant commitments are provided above. The Directors consider that they commit sufficient time to the Company's affairs. Each Director was appointed for an initial three-year term, subject to re-election annually at each Annual General Meeting ("AGM"). The Board has not stipulated a maximum term of any directorship. The Board's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of service of any of the Company's Directors, including the Chairman, has been imposed.

The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company. The Chair promotes a culture of openness and constructive debate to ensure the effective contribution of all Directors, and facilitates a supportive, co-operative and open environment between the AIFM, Asset Manager and the Directors. The Chairman has no significant commitments other than those disclosed in his biography above.

Given the size of the Board and the Group, the Company has deemed that it was not necessary to appoint a Senior Independent Director, departing from provision 14 of the AIC Code. This provision is not deemed relevant to the Company as it is an externally managed real estate investment company, with an entirely non-executive board of directors. The non-executive directors will, as necessary, serve as intermediary between shareholders and other Directors.

Election/Re-election of Directors

Under the Company's Articles of Association and in line with corporate governance best practice and provision 23 of the AIC Code, Directors are required to retire and seek re-election by the Shareholders at each annual general meeting of the Company. A Director that is so re-appointed will be treated as continuing in office without a break.

All Directors will stand for re-election at the forthcoming AGM. The Board considers that, during the period ended 31 December 2022, each Director has performed effectively and demonstrated commitment to the role. It therefore believes that it is in the best interests of shareholders that each Director is re-elected at the AGM.

Independence of Directors

During the Period, the Board consisted of three Non-Executive Directors. Two directors are independent, and one director is non-independent. In line with provision 10 of the AIC Code at least half of the Board, excluding the chair, are independent non-executive directors. A majority of the Board members are considered by the Board to be independent of the Asset Manager and of the AIFM. The Chair was independent on appointment and his independence continues to be reviewed annually in compliance with Provisions 11 and 12 of the AIC code.

Board Diversity

Before any appointment is made, the Board would evaluate the current and recommended future balance of skills, knowledge, experience, independence, diversity and cognitive and personal strengths on the Board. The appointment of any new Director would be made on the candidate's merits, measuring his or her skills and experience against the criteria identified by the Board as being desirable to complement the Board's composition and qualifications. There have been no appointments to the Board during the year being this the first year of the Board's mandate, therefore Provision 25 of the AIC Code was not applicable to the Company.

The Board maintains a training log and skills matrix which maps the key skills required of the Directors and is used to inform the necessary skills of future Director appointments as well as allowing the identification of any gaps in the Board's skills.

Board Evaluation

The Board undertakes a formal and rigorous annual evaluation of its own performance and of its committees and individual Directors in line with provision 26 of the AIC Code. The annual evaluation of the Board's effectiveness always considers the performance of the Chair, and whether they have performed their role effectively. The Directors have concluded that the Chair has fulfilled their role and performed well, supporting the effective functioning of the Board, as evidenced in the Board evaluation that took place following the end of the first financial year.

Board Responsibilities

The Board is responsible for the overall leadership of the Company, setting its values and standards, including approving the Group's strategic aims and objectives as well as oversight of the operations, including the control and supervision of the AIFM and Asset Manager. A copy of the schedule of matters reserved for the Board's decision is available on the Company's website.

The Board conducts an annual review of effectiveness of the Company's system of internal control managed by the Asset Manager. The review covers all controls, including financial, operating and compliance controls, risk management and review of outsourced service providers by way of monitoring performance and remuneration. The outcome of the review is documented in the Audit Committee's report part of this Annual Report.

Directors are regularly provided with any relevant information from the Asset Manager and have access to the Company Secretary and independent advisors, as required.

Key Board activities during the Period

The Board regularly reviews the required time commitment to fulfil their duties. The Directors continued to devote sufficient time to the Company's business through participation in both formal Board meetings and informal operational meetings.

The Company Secretary and the Asset Manager regularly provide the Board with financial information, briefing notes and papers in relation to changes in the Company's economic and financial environment, statutory and regulatory changes and corporate governance best practice. Representatives from the AIFM and the Asset Manager attend each Board meeting and continuously communicate with the Board between formal meetings.

A report from the Asset Manager is reviewed at each meeting, which includes relevant matters to highlight since the previous meeting and details of business activity, ESG and other matters.

The Board also holds periodic meetings with the AIFM and the Asset Manager for general updates on the day-to-day operations and business updates. During the Period ended 31 December 2022, the number of Board meetings attended by each Director were as follows:


Director	Attendance[3]
James Max	4/4
Candace Valiunas	4/4
Ian Womack	4/4

Conflicts of Interest

The Articles of Association permit the Board to consider and, if it sees fit, to authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the Group's interests. The Company Secretary keeps a register of disclosed interests which is regularly updated and reviewed by the Board at every Board meeting.

Board Committees

Audit Committee

Candace Valiunas and James Max are the members of the Company's Audit Committee (the "Audit Committee"), chaired by Candace Valiunas. Ian Womack usually attends the Committee's meetings as an observer along with representatives of the Asset Manager and of the AIFM. The Audit Committee report is included in this Report. The Board considers that the members of the Committee have the requisite skills and experience to fulfil the responsibilities of the Committee.

The Committee supports the Board in fulfilling its oversight responsibilities of the effectiveness of the Company's risk management and internal control systems led by the Asset Manager and the AIFM. The Committee also reviews the half-yearly and annual reports, approve the audit plan and receive information from the AIFM and the Asset Manager providing final recommendations for approval to the Board. It is also the responsibility of the Audit Committee to review the scope, results, cost effectiveness, independence and objectivity of the external auditor.

Other Board committees

Given the size of the Board, which comprised of two independent Non-Executive Directors and one non-independent Non-Executive Director, it was not deemed necessary to convene separate nomination or remuneration committees. Therefore, the Company has departed from provisions 22, 28, 37, 38, 40, 41 and 42 of the AIC Code.

As the Board is comprised only of Non-Executive Directors, there are no performance-related elements of the remuneration. The remuneration of Non-Executive Directors is determined in accordance with the Articles of Association in line with provision 39 of the AIC Code and therefore there is limited scope for the exercise of discretion or judgement.

Nomination and remuneration matters are dealt with by the Board of Directors as a whole. This is consistent with the market practice and in accordance with the AIC Code, which states that such committees are not required if, in view of the size and make-up of the Board, it is unnecessarily burdensome to establish separate committees. The Board will continue to monitor its requirements and if necessary, constitute separate committees to complete these functions.

Directors' Remuneration

The Company is not required to implement a Remuneration Policy or to prepare a Director's remuneration report in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Board is responsible for determining the remuneration of each Director and each Director abstains from voting on their own individual remuneration. There is limited scope for the exercise of discretion or judgement in respect to Directors' remuneration.

Following the recommendation of the AIC Code, the Non-Executive Directors' remuneration reflects the time commitment and responsibilities of the role. The Non-Executive Directors of the Company are entitled to such rates of annual fees as the Board at its discretion shall from time to time determine, subject to the aggregate annual fees not exceeding £250,000. No component of any Director's remuneration is subject to performance factors and reimbursement of reasonable expenses and fees are provided in accordance with the Articles of Association.

In accordance with Letters of Appointment approved prior to listing, Directors' fees from 11 October 2021 to 31 December 2022 were at a level of £30,000 per annum for the Chairman, £24,000 per annum for the chair of the Audit Committee and £24,000 per annum for the third Director. These fees took effect from the date of Admission. The remuneration paid to the Directors during the period ended 31 December 2022 is set out in the table below:


Director	Fixed remuneration
James Max	£31,154
Candace Valiunas	£24,923
Ian Womack	£24,923
Total	£81,000

No pension schemes or other similar arrangements have been established and no Director is entitled to any pension or similar benefits, although the Company's Articles of Association permit the Company to provide such pensions or similar benefits for Directors or employees of the Company.

Taking into consideration inflation rates and raising of overall living costs, and further to a benchmarking exercise by the Asset Manager, the Board and the Asset Manager agreed to increase the Directors' fees to ensure they remain in line with the market, as follows:


Director	2023 Fixed annual remuneration
James Max	£40,000
Candace Valiunas	£35,000
Ian Womack	£30,000
Total	£105,000

These changes are effective as of 1 January 2023. Prior to approving the fees, the Board held discussions with the Asset Manager and carried out a review of the proposed increased fees along with other costs of the Company to avoid any negative impact on the Company or the Group

The Board will continue to consider any views expressed by shareholders on the fees being paid to Directors.

Company Secretary

Alter Domus (UK) Limited (the "Company Secretary") was appointed on 11 October 2021 as the Company Secretary under the administration agreement between the Company and Alter Domus Fund Services (UK) Limited (the "Administrator"). The Company Secretary is responsible for ensuring timely delivery of information and reports to the Board, for advising the Board on corporate governance matters and for ensuring that the Company meets its statutory obligations.

Statement of Compliance

During the period ended 31 December 2022, the Company has complied with the AIC Code, except where the Board has concluded that adherence or compliance with any principle or provision would not have been appropriate to the Company's circumstances, in which case the reasons are fully explained in this Report.

The AIFM, the Asset Manager and the Depositary

The Board has appointed the AIFM to provide day-to-day discretionary portfolio and risk management of the Company's investments subject to the AIFM agreement, the Company's Articles of Association, and the prospectus, and also subject to the overall supervision of the Directors.

The Board has also appointed the Asset Manager to provide day-to-day asset management and advisory services to the Group. More information about the Asset Manager and its strategy can be read at the Group's website (https://www.rewreit.co.uk/).

The AIFM and the Asset Manager provide relevant support to the Board pursuant to the AIFM Agreement and the Asset Management Agreement. In particular, but without limitation, the AIFM provides to the Board the property business plan and any variation thereto. Responsibilities delegated to the AIFM and to the Asset Manager are provided in the Delegated Authorities Register which is maintained by the Company Secretary.

The AIFM acts in accordance with the Company's code of ethics and with its own policies and procedures, that cover areas required under AIFMD such as risk management and valuation of the Company's assets. Conflicts management is handled under the AIFM's conflicts policy and recorded on the AIFM's conflicts register. Regulated complaints are dealt with under the AIFM's complaints management policy. These policies are overseen by the members of the AIFM relevant committees and reported annually to the Board.

The AIFM and the Asset Manager are entitled to receive an aggregate quarterly management fee of 0.5% calculated quarterly in arrears as a percentage of the NAV on the relevant quarter day. There is no performance fee.

Alter Domus Depositary Services (UK) Limited (the "Depositary") has been appointed to provide services in accordance with the AIFMD Rules, including cash monitoring activities, custody and safe keeping of assets and oversight duties.

Key Service Providers

The Company has a number of key service providers, each of which provides a vital service to the Company and ultimately to the Company's shareholders. The Company's key service providers are the Administrator and the Company Secretary, Auditor, Depositary, the AIFM, the Asset Manager, the Valuer, Communications Consultant and the Registrar. All service providers are required to act in accordance with the Company's code of ethics. The Company conducted a review of the terms of all key service provider engagements along with their fee levels to ensure an appropriate level of support was being provided to the Company. The Directors provided specific feedback to key service providers with the aim of ensuring the Company receives the appropriate service. The Company seeks to ensure a two-way engagement between the Board and key service providers on service delivery expectations and feedback on important issues experienced by service providers during the Period. The outcome of the evaluation of the key service providers for the Period was that all met or exceeded performance expectations. All key service providers' contracts were considered necessary and adequate in scope for the Company's requirements, appropriate and to be delivering value for money. The Board decided it would be for the benefit of the Company to retain existing engagements.

Internal control review

The Board is ultimately responsible for the Company's system of internal control and for reviewing the effectiveness of such in light of the risks identified.

In agreement with good corporate governance practice mentioned in the AIC Code and in the Financial Reporting Council publication, "Guidance on Risk Management, Internal Control and Related Financial and Business Reporting", the Board has undertaken an assessment of the effectiveness of its risk assessment and internal control processes.

In order to capture new and emerging risks and implications, the AIFM is responsible for the risk management function. Any such risks are reported to the Board. An initial analysis of key risks has been prepared by the AIFM and reviewed by the Board before listing and continue to be monitored regularly by the AIFM and on a bi-annual basis by the Board. The Board reports that review in the annual report in line with Provision 34 of the AIC code aiming to minimise the chance of a material adverse outcome arising from causes which could reasonably have been foreseen.

No internal audit function currently exists within the Company. Existing governance, risk management and internal controls are considered adequate for the size and complexity of the business and the Board will continue to monitor and consider whether circumstances have changed such that it considers that the introduction of an internal audit function would be appropriate.

The Board has carried out a review of the effectiveness of the systems of internal control as they have operated over the period and up to the date of approval of the Report.

Shareholder Engagement

The Board has engaged with key stakeholders and a detailed report was provided in the Strategic Report.

This Report presents a fair, balanced and understandable review of the Company's performance. Copies are released through the Regulatory News Service and made available from the Company Secretary or by downloading from the Company's website.

Arrangements for the 2023 AGM will be released in early April and will give shareholders the opportunity to join physically as permitted by the Company's Articles or to vote by proxy. The results of the AGM will be published on the Company's website.

Text Box: Governance Report of the Audit Committee

I am pleased to present the Audit Committee Report for the period ended 31 December 2022.

Committee Membership

The Audit Committee comprises Candace Valiunas (Chair) and James Max, all of whom are independent Non-Executive Directors.

Meetings

The Audit Committee met two times during the period under review, and the meetings were attended by each member as follows:


Director	Attendance[4]
Candace Valiunas	2/2
James Max	2/2

Role of the Committee

The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external audit, risk management and internal controls, including:

1. monitoring the integrity of the financial statements of the Group, including its annual and half-yearly reports and reviewing significant financial reporting issues and the judgements which they contain;

2. reviewing the adequacy and effectiveness of the Group's risk management systems and reviewing and approving the statements to be included in the annual financial report concerning internal controls and risk management;

3. making recommendations to the Board in relation to the appointment/re-appointment or removal of the Auditor and approving its remuneration and terms of engagement;

4. reviewing and monitoring the Auditor's independence, objectivity, and effectiveness; and

5. approving any non-audit services to be provided by the Auditor and monitoring the level of fees payable in this respect.

Performance Evaluation

This has been reported in the Corporate Governance Statement.

Activities

The Audit Committee meets at least three times a year to consider the audit plan, the annual financial report and half-year report and to review and monitor the effectiveness of the Company's risk management and internal control systems as well as any other matters as specified under its terms of reference. During the period and up to the date of this report, the Audit Committee reviewed: the financial results for publication; the performance and effectiveness of the Auditor and considered its re-appointment, objectivity, independence and remuneration; the non-audit services provided by the Auditor and the associated fees incurred; the internal controls and risk management systems of the Group and its third-party service providers; and the Committee's terms of reference (which are available from the Company's website).

Significant issues considered by the Committee

Valuation

The Audit Committee determined that a key area of consideration in relation to the audited Consolidated Financial Statements of the Group was the valuation of the investment properties, as it is fundamental to the Group's consolidated statement of financial position and audited results.

Having reviewed and thoroughly challenged the period end valuation of the investment properties, the Committee is satisfied that the conclusion represents an accurate depiction of value of the assets in the current economy.

Risk management Internal controls

The Audit Committee carefully considers the internal control systems by monitoring the services and controls of its third-party service providers.

The Audit Committee reviewed and updated the risk register. It received reports on risk management, internal controls and compliance from the AIFM and the Asset Manager and while no significant internal control risks were identified, matters of concern pertaining to movements in interest rates and the impact of a breach in borrowing covenants were given specific consideration. The Principal Risks have been included in this Report.

Going concern and long-term viability of the Group

The Audit Committee considered the Group's financial requirements for the next 12 months and concluded that it has sufficient resources to meet its commitments. Consequently, the Consolidated Financial Statements have been prepared on a going concern basis.

The Audit Committee also considered the longer-term viability statement within the Report for the period ended 31 December 2022, covering a three-year period, and the underlying factors and assumptions which contributed to the Audit Committee deciding that this was an appropriate length of time to consider the Group's long-term viability. The Group's viability statement is provided in this Report.

Independence and objectivity of the Auditor

It is the Audit Committee's responsibility to monitor the performance, objectivity and independence of the Auditor and this is evaluated by the Audit Committee each year. In evaluating Auditor's performance, the Audit Committee examines five main criteria - robustness of the audit process, independence and objectivity, quality of delivery, quality of people and service, and value-added advice. Having carried out a review, the Audit Committee is satisfied with the Auditor's performance.

External Audit Process

The Audit Committee meets at least twice a year with the Auditor, once at the planning stage before the audit and again after the audit at the reporting stage. The Auditor provides a planning report in advance of the annual audit, and a report on the annual audit. The Committee has an opportunity to question and challenge the Auditor in respect of both of these reports.

In addition, at least once a year, the Audit Committee has an opportunity to discuss any aspect of the Auditor's work with the Auditor in the absence of the AIFM and Asset Manager and other service providers by means of a closed session. Following the conclusion of the audit, the Audit Committee will review the audit process and consider its effectiveness.

Re-appointment of the Auditor

Following a review of its independence and objectivity, the Audit Committee has agreed to recommend the re-appointment of Haysmacintyre LLP as the Company's Auditor to the Board for proposal to shareholders at the forthcoming AGM. Haysmacintyre LLP has expressed its willingness to continue as the Company's Auditor.

Audit Fees and Non-Audit Services

The Audit Committee has sole responsibility for agreeing the audit fee in consultation with the Asset Manager and taking into account the scope of the audit. The Audit Committee has a policy on the engagement of the Auditor to provide non-audit services. All non-audit services are reviewed by the Audit Committee which makes recommendations for the provision of each non-audit service and ensures that the statutory auditor is not engaged to perform work that is prohibited under EU law as adopted by the UK. The Auditor is permitted to provide non-audit related services where the work involved is closely related to the work performed in the audit. These include:

1. reviews of interim financial information;

2. reporting on internal financial controls when required by law or regulation;

3. reporting required by law or regulation to be provided by the Auditor; and

4. prospectus/capital markets reporting.

The policy was reviewed, and its application monitored by the Audit Committee during the period. The Audit Committee agreed that the policy remained appropriate for the Company.

The total proposed fees for audit and audit related services amounted to £70,000 for the period ended 31 December 2022. Non-audit services relating to agreed upon procedures on the IPSX Wholesale listing amounted to £55,000.

Candace Valiunas

Audit Committee Chair

Directors' Report

The Directors present their report and the Consolidated Financial Statements of the Group for the period from incorporation on 11 October 2021 to 31 December 2022.

Principal activity

The Company is a Real Estate Investment Trust. The Company is a holding company of one direct subsidiary and two indirect subsidiaries. The principal activity of the Group is to provide shareholders with a sustainable level of income together with the potential for income and capital growth.

Directors, Corporate Governance, Management and Internal Controls

The Corporate Governance statement provided in this Report forms part of the Directors' Report and sets out details in respect to Directors in office during the Period, corporate governance and management arrangements and internal control reviews.

Results and dividends

The results for the period ended 31 December 2022 are shown in the consolidated statement of comprehensive income. The details on dividends paid in respect to the period in review can be found in note 9 of the Consolidated Financial Statements.

Qualifying indemnity insurance

The Directors have the benefit of the indemnity provisions contained in the Company's Articles of Association. Directors' and officers' liability insurance is granted and maintained for the benefit of the Company and its officers. The Group entered into qualifying third-party indemnity arrangements for the benefit of its Directors in a form and scope which comply with the requirements of the Companies Act 2006 and which were in force throughout the year and remain in force.

Continuing Appointment of the AIFM and the Asset Manager

The Board has reviewed the appropriateness of the continuing appointment of the AIFM and the Asset Manager, ensuring the terms and conditions of the relevant agreements align with the objective of the Company. It is satisfied that the terms of the AIFM and the Asset Manager remain fair and competitive, and in the best interests of shareholders. In the opinion of the Directors, the continuing appointment of the AIFM and the Asset Manager is in the interests of shareholders as a whole as the AIFM and the Asset Manager have been successfully managing the Company's assets, thereby allowing the Company to continue paying dividends in accordance with the targeted investment objective.

Social, Community and Employee Responsibility

The Company is an externally managed real estate investment trust and has no direct employees. The management of the assets has been delegated to the Asset Manager who provide the employees that support the Company. The Asset Manager is an equal opportunities employer who respects and seeks to empower each individual and the diverse cultures, perspective, skills and experiences within its workforce.

The Company is not required to produce a statement on slavery and human trafficking pursuant to the Modern Slavery Act 2015 as it does not satisfy all the relevant triggers under that act that required such a statement. The Company does, however, closely monitor the policies of its suppliers to ensure that proper provision is in place.

The Asset Manager embraces its responsibility in respect of ethical, social and environmental matters. The Asset Manager has policies and practices including a code of ethics, and a commitment to best practice environmental and sustainability policies. In accordance with the Modern Slavery Act 2015, the Asset Manager has made a statement concerning modern slavery and human trafficking.

Further information can be found on the Asset Manager's website at www.m7re.eu/company/governance/corporate-social-responsibility/.

Packaged Retail and Insurance-based Investment Products ("PRIIPs")

As the Company is listed on IPSX Wholesale and is not available to retail investors, the PRIIPS regulation does not apply to the Company. The Company is therefore not required to publish a Key Information Document ("KID") on the Company's website.

Environmental, Social and Governance Policy ("ESG")

The Asset Manager is committed to creating long-term value for investors and adheres to a policy of sustainable and responsible investment. The Asset Manager's policy can be found within the Corporate Responsibility area on their website www.m7re.eu/company/governance. Please also refer to the 'Environment & Sustainability' section.

Internal control assessment process

Robust risk assessments and reviews of internal controls are undertaken regularly in the context of the Group's overall investment objective.

In arriving at its judgement of what risks the Group faces, the Board, through the Audit Committee, has considered the Group's operations in light of the following factors:

· the nature and extent of risks which it regards as acceptable for the Group to bear within its overall business objective;

· the threat of such risks becoming reality;

· the Group's ability to reduce the incidence and impact of risk on its performance;

· the cost to the Group and benefits related to the review of risk and associated controls of the Group; and

· the extent to which third parties operate the relevant controls.

A risk register has been produced against which the risks identified and the controls in place to mitigate those risks can be monitored. The risks are assessed on the basis of the likelihood of their occurrence, the impact on the business if they were to occur and the effectiveness of the controls in place to mitigate against them. This risk matrix is reviewed twice a year by the Audit Committee and reported to the Board.

The principal risks that have been identified by the Board are set out in this Report at Principal Risks and Uncertainties section.

The Board reviews financial information produced by the Asset Manager on a quarterly basis.

Most functions of the day-to-day management of the Group are outsourced, and the Directors therefore obtain assurances and information from key third-party suppliers regarding the internal systems and controls operated in their respective organisations.

Financial Risk Management objective policies

The Group financial risk management objectives and policies are discussed in notes 2 and 17 of the Consolidated Financial Statements.

Share Capital

At 31 December 2022, and as at the date of this report, there are 38,161,963 Ordinary Shares in issue, none of which are held in treasury.

Business Relationships

The Group aims to foster close and collaborative relationships with both suppliers and customers. How we engage with the relevant stakeholders is covered in the Section 172 Statement.

Post balance sheet events

On 7 February 2023, the Board declared an interim dividend of 2.00pps in respect of the period 1 October 2022 to 31 December 2022. This was paid on 3 March 2023 to shareholders on the register at 17 February 2023. The ex-dividend date was 16 February 2023.

Substantial shareholdings


Shareholder	Number of Shares	%

M7 Real Estate Investment Partners VIII LP	30,833,131	80.79
M7 Aggregator Fund General Partner Limited	5,724,294	14.99

Disclosure of information to auditors

Each of the persons who are Directors at the time of approval of this Directors' Report has confirmed that:

§ so far as that Director is aware, there is no relevant audit information that has not been brought to the attention of the audited Group; and

§ all necessary steps have been taken in order to be aware of any relevant audit information and to establish that the auditors are aware of that information.

Auditors

The auditors, Haysmacintyre LLP, were appointed as auditor for the Period and will be proposed for re-appointment in accordance with the Act.

This report was approved by the Board and signed on its behalf by:

James Max

Chairman

03 April 2023

Directors' Responsibilities Statement

The Directors are responsible for preparing the Report and the Group and the Company financial statements for each financial year which give a true and fair view, in accordance with IFRS (as defined in the Glossary section of this Report), in conformity with the requirements of the Companies Act 2006, of the state of affairs of the Group and of the profit or loss for that period. The Directors have elected to prepare the Company financial statements in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework and applicable law.

In preparing these consolidated and Company financial statements the Directors are required to:

§ select suitable accounting policies and then apply them consistently;

§ make judgments and accounting estimates that are reasonable and prudent;

§ for the Group financial statements, state whether they have been prepared in accordance with Companies Act 2006 and in accordance with IFRS;

§ for the Company financial statements, state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Company financial statements;

§ assess the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

§ use the going concern basis of accounting unless they either intend to liquidate the Group or the Company, or to cease operations or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

This Directors' Responsibility Statement was approved by the Board and signed on its behalf by:

James Max

Chairman

03 April 2023

Website publication

The directors are responsible for ensuring the Group and the Company's financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Independent Auditor's Report

Opinion

We have audited the financial statements of M7 Regional E Warehouse REIT Plc (the 'Company') and its subsidiaries (the 'Group') for the year ended 31 December 2022 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the notes to the Consolidated financial statements, the Company Statement of Financial Position, the Company Statement of Changes in Equity and the notes to the Company financial statement including a summary of significant Consolidated and Company accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRS') for the Group and Financial Reporting Standard 101 for the Company as issued by the International Accounting Standard Board ("IASB") and interpretations issued by the International Financial Reporting Interpretation Committee ("IFRIC").

In our opinion, the financial statements:

• give a true and fair view of the state of the Group's and of the Company's affairs as at 31 December 2022 and of the Group's loss as well as the Company's profit for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards ('IFRS') for the Group and Financial Reporting Standard 101 for the Company; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

An overview of the scope of our audit

As the Group comprises of a parent holding company and a property company subsidiary amongst two other holding companies which largely eliminate out on consolidation the scope of our work focussed on the Company and the property company subsidiary.

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group's system of internal control and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, included assessing whether there was evidence of bias by the Directors that may have represented a material misstatement.

Our key audit matters as highlighted below were specific to the Group, considering the compliance of the Company with the REIT listing guidelines and the valuation of investment properties respectively.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.


Key Audit Matter	How our scope addressed this matter
Compliance with REIT Listing guidelines There is a risk that that the Group has not complied with the below requirements, or that it has not documented that it has done so: · The requirements to qualify as a REIT under UK tax law · The listing requirements of the IPSX Wholesale exchange As this is the first reporting period for the Group as a listed REIT, there is a greater risk of criteria not being met or sufficiently documented. Refer to note 2.4 in relation to the applicable accounting policies, including areas of significant management judgement. Refer to note 7 in relation to tax implications of being a REIT.	We understood key REIT listing requirements and obtained the Group models to ensure that these were being complied with. Upon our review of management's going concern forecasts we ensured REIT guidelines were also forecast to be complied with going forward and reviewed a sensitivity analysis impacting the REIT Interest rate cover ratio. We have performed a full disclosure review of the annual report which will include any non-compliance with these guidelines. Key observation Based on the procedures performed we were satisfied that the Company was complying with the REIT listing guidelines.
Valuation of Investment Property The investment properties are material to the financial statements and carries a correspondingly high risk of material misstatement. Further, a high level of estimation and judgement is required by the directors and the independent valuer (the "Valuer") in order to arrive at an appropriate valuation. Any input inaccuracies or unreasonable bases used in valuation judgements (such as yields, the Expected Rental Value and other property or tenant specific criteria) could result in material misstatements in the accounts. Given the KPI's and covenant targets in place there is also a risk that the Directors may unduly influence judgements and estimates in respect of the property valuations in order to achieve a specific desired outcome Refer to note 2.4 and 2.7d in relation to the accounting policies including areas of significant management judgement. Refer to note 9 in relation to the detailed note for the investment property.	We read the external valuation report, prepared by the Valuer appointed by the Directors and checked the approaches used were consistent with the requirements of relevant accounting standards We assessed the Valuer's competence and capabilities and read their terms of engagement with the Group, determining that no factors affected their independence and objectivity including any limitations placed upon their work. We recalculated the valuations and we checked the data provided to the Valuer for consistency with the tenancy schedules, ownership information and leases we obtained during the audit on a sample basis. This ensured valuations we reviewed were complete and accurate. We held meetings with the Valuer and gained an understanding of the valuation methods and assumptions used. We challenged the assumptions utilised by the Valuer within the valuation to our independently derived expectations of relevant yield and indices for similar classes of assets around the year end. We checked that the property valuations have been properly included in the financial statements. Key observation Based on the procedures performed we were satisfied that the valuation was materially correct.

Our application of materiality

The scope and focus of our audit were influenced by our assessment and interpretation of materiality. We define materiality as the magnitude of misstatement that could reasonably be expected to influence the readers of the financial statements as well as their economic decisions. We used materiality to determine the scope of our audit and nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.

Group materiality

For the Group audit we had a materiality of £2,200,000. Gross assets were chosen as the benchmark to reflect the key performance indicator of the Group and an area which stakeholders are principally interested in. On the basis of our risk assessment and review of the Group's control environment, performance materiality was set at 75% of the materiality figure, being £1,650,000.

The reporting threshold to the audit committee was set as 5% of materiality being £110,000. If, in our opinion differences below this level warranted reporting on qualitative grounds, these would also be reported.

Specific materiality

We also determined that for the Group, a misstatement of less than materiality for the financial statements as a whole, specific materiality, could influence the economic decision of users.

For the Group we consider specific materiality to apply to all financial statement areas outside of the investment property valuation cycle. We have determined that a level of 7.5% of adjusted earnings at 31 December 2022 would be appropriate. For the Group audit we had a specific materiality of £170,000.

With reference to specific materiality our judgements in relation to performance materiality and our reporting threshold to the audit committee are the same as the Group, with levels of 75% and 5% of materiality being £127,000 and £8,000 respectively.

Company

For the Company audit we had a final materiality of £764,000. Gross assets were chosen as the benchmark to reflect the key performance indicator of the Company and areas which stakeholders are principally interested in.

With reference to the Company we did not feel there was a requirement for specific materiality. Our judgements in relation to performance materiality and our reporting threshold to the audit committee are the same as the Group, with levels of 75% and 5% of materiality being £573,000 and £38,000 respectively.

Component materiality

To avoid any aggregation risk in relation to materiality, component materiality for the subsidiary property company was applied at 90% of Group materiality, being £1,980,000. In relation to performance materiality and our reporting threshold to the audit committee these are the same as the Group, with levels of 75% and 5% of materiality being £1,480,000 and £100,000 respectively

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors' assessment of the entity's ability to continue to adopt the going concern basis of accounting included:

· Discussion with management the Group and Company's ability to remain a going concern despite a period of refinancing being entered into post year end.

· Reviewing and understanding management's assessment and forecasts to 31 March 2024 which are the central element of management's going concern assessment.

· Ensuring that loan and debt covenants are met during the going concern assessment period.

· Assessing and challenging the inputs in and judgements made in preparation of management's assessments and forecasts

· Performing stress test including sensitivity analysis to model the effect of varying different versions of post year end refinancing scenarios and considering the Group's and Company's ability to adopt the going concern basis with these different assumptions being applied

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act

2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 42, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group's and the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements for the company and trade regulations and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, the REIT Tax regime, legislation relating to the rental of properties and sales tax.

We evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to posting inappropriate journal entries to revenue and management bias in accounting estimates particularly around the valuation of investment property. Audit procedures performed by the engagement team included:

§ Inspecting correspondence with regulators and tax authorities;

§ Discussions with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud.

§ Evaluating management's controls designed to prevent and detect irregularities.

§ Identifying and testing accounting journal entries, in particular those journal entries which involve income as well as those which exhibited the characteristics we had identified as possible indicators of irregularities; and

§ Challenging assumptions and judgements made by management in their critical accounting estimates

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Jake Pearlman (Senior Statutory Auditor)

For and on behalf of Haysmacintyre LLP

Statutory Auditors

10 Queen Street Place

London

EC4R 1AG

Date:

Consolidated Statement of Comprehensive Income

For the period from 11 October 2021 to 31 December 2022


		Period from 11 October 2021 to 31 December 2022
	Notes	£'000
Income
Rental and other income	3	9,298
Property operating expense	4	(1,293)
Net rental and other income		8,005

Other operating expenses	4	(1,806)
Operating profit before fair value changes		6,199

Change in fair value of investment properties	10	(4,895)
Operating profit		1,304

Finance expense - net	6	(3,411)
Loss before tax		(2,107)

Taxation gain	7	49
Loss and total comprehensive loss attributable to shareholders		(2,058)

Loss per share (basic and diluted)	8	(5.39p)
Adjusted EPS (basic and diluted)	8	6.12p

All items in the above statement are derived from continuing operations.

The accompanying notes form part of these Consolidated Financial Statements.

Consolidated Statement of Financial Position


As at 31 December 2022		31 December 2022
	Notes	£'000
Assets
Non-current Assets
Investment properties	10	106,045
		106,045
Current Assets
Receivables and prepayments	11	2,658
Cash and cash equivalents		2,890
		5,548

Total Assets		111,593

Current Liabilities
Payables and accrued expenses	12	(4,408)
Interest bearing loans and borrowings	13	(73,877)
Total Liabilities		(78,285)

Net Assets		33,308

Equity
Share capital	16	382
Share issue costs	16	(422)
Share premium	16	37,780
Deficit		(4,432)
Total equity		33,308

Net Asset Value per share (basic and diluted)	8	87.28p

The accompanying notes form part of these Consolidated Financial Statements.

The consolidated financial statements were approved by the Board and signed on its behalf by:

James Max

Chairman

03 April 2023

Company number: 13671085

Consolidated Statement of Changes in Equity

For the period from 11 October 2021 to 31 December 2022


		Share	Share	Share issue		Total equity
		capital	Premium	costs	Deficit
	Notes	£'000	£'000	£'000	£'000	£'000
For the period ended 31 December 2022
Balance as at 11 October 2021		-	-	-	-	-

Shares issued	16	382	-	-	-	382
Share issue costs	16	-	-	(422)	-	(422)
Share premium	16	-	37,780	-	-	37,780
Total comprehensive loss		-	-	-	(2,058)	(2,058)
Dividends paid	9	-	-	-	(2,374)	(2,374)

Balance as at 31 December 2022		382	37,780	(422)	(4,432)	33,308

The accompanying notes form part of these Consolidated Financial Statements.

Consolidated Statement of Cash Flows

For the period from 11 October 2021 to 31 December 2022


		Period from 11 October 2021 to 31 December 2022
	Notes	£ '000
Cash flows from operating activities
Loss before tax		(2,107)

Adjustment for:
Finance expenses - net	6	3,411
Change in fair value of investment properties	10	4,895
Lease incentives (net of amortisation)	10	(240)
Operating results before working capital changes		5,959

Corporation tax paid		(576)

Change in working capital
Decrease in receivables and prepayments		687
Increase in payables and accrued expenses		527
Net cash flow generated from operating activities		6,597

Cash flows from investing activities
Acquisition of net assets in subsidiaries	2.2	(38,162)
Net cash used in investing activities		(38,162)

Cash flows from financing activities
Proceeds from issuance of share capital	16	38,162
Finance costs paid	13	(3,710)
Dividends paid	9	(2,374)
Share issue costs paid	16	(422)
Net cash flow generated from financing activities		31,656

Net increase in cash and cash equivalents		91

Cash acquired through subsidiaries	2.2	2,799

Cash and cash equivalents at end of period		2,890

The accompanying notes form part of these Consolidated Financial Statements

Notes to the Consolidated Financial Statements

for the period from 11 October 2021 to 31 December 2022

1. Corporate Information

The Company is a public limited company which was incorporated on 11 October 2021 and is domiciled in the UK and registered in England and Wales. The registered office of the Company is 10th Floor, 30 St Mary Axe, London, United Kingdom, EC3A 8BF. The principal activity of the Group is to provide its shareholders with a sustainable level of income together with the potential for income and capital growth by investing in the property portfolio.

On 21 December 2021, the Company and its shares was admitted to trading on the Wholesale Market of International Property Securities Exchange ("IPSX") with 38,161,963 shares in issue. The Company had 50,000 redeemable preference shares which were redeemed on 12th September 2022. The listing raised additional capital of £38,161,960, £37,780,343 of which has been treated as share premium. The admission document can be found at https://www.rewreit.co.uk.

2. Accounting policies

2.1

Basis of preparation

These consolidated financial statements (the "financial statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Board ("IASB") and interpretations issued by the International Financial Reporting Interpretation Committee ("IFRIC") and applicable law.

These financial statements have been prepared under the historical cost convention, except for investment properties and derivatives which have been measured at fair value. These financial statements are presented in Sterling, which is the Group's presentational and functional currency, and all values are rounded to the nearest thousand pounds (£'000), except where otherwise shown.

2.2

Consolidation

(i) Basis of consolidation

The financial information includes all activities of the Company and its subsidiaries (together, the "Group") for the period from 11 October 2021 to 31 December 2022.

Subsidiaries are entities controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity and cease to be consolidated from the date on which control is transferred out of the Company. The subsidiaries may have differing accounting principles to the Company and, where necessary, the accounts of these underlying entities will be adjusted or reclassified on consolidation to be consistent with the accounting principles of the Company.

The cost of investment in the subsidiaries is eliminated against the Company's share of equity in these subsidiaries. All intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation.

(ii) Business combinations

The Group may elect to apply the optional concentration test in IFRS 3 to assess whether an acquisition must be accounted for as a business combination. When substantially all the fair value of the gross assets acquired is concentrated in a single asset (or a group of similar assets), the transaction is accounted for as an asset acquisition. The consideration paid is allocated to the identifiable assets and liabilities acquired on the basis of their relative fair values at the acquisition date. Where an acquisition does not satisfy the concentration test and the acquired set of activities meets the definition of a business, the Group applies the acquisition method of accounting.

(iii) Acquisition of net assets in subsidiaries

For acquisition of a subsidiary not meeting the definition of a business, the Group allocates the cost between the individual identifiable assets and liabilities in the Group based on their relative fair values as at the date of acquisition. Such transactions or events do not give rise to goodwill.

On 21 December 2021, the Company acquired 100% of the share capital of the following entities for initial consideration of £38.16 million.

M7 Real Estate Investment Partners VIII Master HoldCo Limited

M7 Real Estate Investment Partners VIII HoldCo Limited

M7 Real Estate Investment Partners VIII PropCo Limited

The Group recognised the assets and liabilities at the date of acquisition as follows:


	£'000
Assets
Investment properties	110,700
Receivables and prepayments	2,536
Cash and cash equivalents	2,799
Total Assets	116,035

Liabilities
Interest bearing loans and borrowings	(73,623)
Payables and accrued expenses	(4,250)
Total Liabilities	(77,873)

Net Assets	38,162

The acquisition was financed by issuance of shares.

Due to the lack of acquired strategic and management processes, the acquisition was assessed to be an 'asset acquisition' and accordingly treated as such.

2.3

New standards, amendments and interpretations

The Company has applied the following new standards and amendments in these financial statements:

• Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) (effective 1 January 2022)

• Annual Improvements to IFRS Standards 2018-2020 (effective 1 January 2022)

• Property, Plant and Equipment: Proceeds before intended use (Amendments to IAS 16) (effective 1 January 2022)

• Reference to the Conceptual Framework (Amendments to IFRS 3) (effective 1 January 2022)

The new standards and amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

Forthcoming requirements

The following are new standards, interpretations and amendments, which are not yet effective, and have not been early adopted in these financial statements, that will or may have an effect on the Group's future financial statements:

• Amendments to IAS 1 which clarifies the criteria used to determine whether liabilities are classified as current or non-current (effective 1 January 2024). These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendment is not expected to have an impact on the presentation or classification of the liabilities in the Group based on rights that are in existence at the end of the reporting period.

Certain new accounting standards and interpretations have been published that are not mandatory for annual periods beginning after 1 October 2022 and early application is permitted; however, the Group has not early adopted the new or amended standards in preparing these financial statements:

• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) (effective 1 January 2023)

• IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts (effective 1 January 2023)

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) (effective 1 January 2023)

• Definition of Accounting Estimates (Amendments to IAS 8) (effective 1 January 2023)

• Initial Application of IFRS 17 and IFRS 9 - Comparative Information (Amendments to IFRS 17) (effective 1 January 2023)

• Classification of liabilities as current or non-current (Amendments to IAS 1) (effective 1 January 2024)

• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) (effective 1 January 2024)

• Non-current Liabilities with Covenants (Amendments to IAS 1) (effective 1 January 2024)

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) (Optional)

These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

2.4

Significant accounting judgements and estimates

The preparation of financial statements in accordance with IFRS requires the Directors to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

Acquisition of net assets in Subsidiaries

Please refer to note 2.2 (iii).

Estimates

The estimates and associated assumptions that have a significant effect on the amounts recognised in the financial statement outlined below.

Valuation of investment properties

The fair value of investment properties is determined, by external property valuation experts, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Properties have been valued on an individual basis. The valuation experts use recognised valuation techniques, applying the principles of both IAS 40 and IFRS13.

The valuations have been prepared in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation. Factors include current market conditions, annual rentals, the contractual terms of the leases and their lengths and location. The significant methods and assumptions used by valuers in estimating the fair value of investment properties are set out in note 10.

Provision for expected credit losses ("ECL") of trade receivables

In determining the provision on a tenant-by-tenant basis, the Group considers both recent payment history and future expectations of the tenant's ability to pay or possible default in order to recognise an expected credit loss allowance. The Group also considers the risk factors associated by sector in which the tenant operates and the nature of the debt. Based on sector and rent receivable type a provision is provided in addition to full provision for maximum risk tenants or known issues.

Judgment

Principal versus agent considerations - services to tenants

The Group arranges for certain services to be provided to tenants. These arrangements are included in the contract the Group enters into as a lessor. The Group has determined that it controls the services before they are transferred to tenants, because it has the ability to direct the use of these services and obtain the benefits from them. The Group has determined that it is primarily responsible for fulfilling these services as it directly deals with tenants' complaints and is primarily responsible for the quality or sustainability of the services. In addition, the Group has discretion in establishing the price that it charges to the tenants for the specified services.

Therefore, the Group has concluded that it is the principal in these contracts. In addition, the Group has concluded that it transfers control of these services over time, as services are rendered by the third-party service providers, because this is when tenants receive and, at the same time, consume the benefits from these services.

REIT status

The Group is a Real Estate Investment Trust ("REIT") and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group's property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is management's intention that the Group will continue as a REIT for the foreseeable future.

Share issue costs

The Directors have performed an assessment of the expenditure incurred as part of the listing of the Company to determine which is directly attributable to the issue of new shares, and that which is related to the listing. In accordance with IAS 32, the Company has recognised those costs determined to be directly attributable to the issue of new shares as a deduction to equity. Listing costs have been expensed.

2.5

Segmental information

Each property held by the Group is reported to the chief operating decision maker. In the case of the Group, the chief operating decision maker is considered to be the Board of Directors. The review process for segmental information includes the monitoring of key performance indicators applicable across all properties. These key performance indicators include Net Asset Value, Earnings per Share and valuation of properties. All asset cost and rental allocations are reported by property too. The internal financial reports received by the Directors cover the Group and all its properties and do not differ from amounts reported in the financial statements. The Directors have considered that each property has similar economic characteristics and have therefore aggregated the portfolio into one reportable segment under the provisions of IFRS 8.

2.6

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and the accompanying notes. The financial statements also include the Group's objectives, policies and processes for managing its capital; its financial risk management objective; and its exposures to market price risk, real estate risk, credit risk and liquidity risk.

The Asset Manager on behalf of the Directors has projected the Group's cash flows for the period up to 31 March 2024 and beyond, challenging and sensitising inputs and assumptions to ensure that the cash forecast reflects a realistic outcome given the uncertainties associated with the current economic environment. The scenarios applied were designed to be severe but plausible, and to take account of the availability of mitigating actions that could be taken to avoid or reduce the impact or probability of the underlying risks.

The Directors have also considered the continuing impact of the global pandemic, which resulted in unprecedented risks and significant levels of volatility over the past two years. These risks have reduced significantly over the course of 2022.

The Group's senior debt of £54.34 million matures in August 2023. Refinancing discussions are currently underway. The Group has reported full compliance with its loan covenants to date.

Based on cash flow projections, the Directors expect the Group to continue to remain compliant. The headroom of the loan to value covenant is significant and any reduction in property values that would cause a breach would be significantly more than any reduction currently envisaged. The Directors do not forecast a breach of loan covenants over the next 18 months.

In addition to the senior loan, the Group has a loan note in the sum of £19.7 million which REIP VIII Propco has borrowed from a Jersey FinCo, Auskerry Finco Limited, which has been raised from third party investors. This loan note is for a term of 5 years expiring on 23 July 2023 with a coupon of 8.5% per annum payable quarterly in arrears. The loan note is not secured and does not incur redemption penalties, does not have any financial covenants or fees. The Group is in the process of extending the term of the loan notes to July 2026.

Considering the Group's forecasts and projections, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors have continued to adopt the going concern basis of accounting in preparing the financial statements.

2.7

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below.

a) Foreign currency translation

(i) Functional and presentational currency

Items included in the financial statements are measured using the currency of the primary economic environment in which it and its subsidiaries operate. As all share capital issues and all dividend payments will be made in Pound Sterling this is considered to be the functional currency of the Group and presentational currency of the Group.

(ii) Transactions and balances

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated statement of comprehensive income within finance expenses. All foreign exchange gains and losses are presented net in the consolidated statement of comprehensive income.

b) Revenue recognition

Revenue includes rental income, service charge income, insurance refunds from properties, fees receivable from early termination of leases, and fees receivable for compensation of dilapidation of property.

Rental income from operating leases is recognised on a straight-line basis over the lease term. When the Group provides incentives to its tenants, the cost of incentives is capitalised and recognised over the lease term, on a straight-line basis, as a reduction of rental income.

Service charge income is recognised in the accounting period in which the services and the associated expenses are rendered. Service costs billed to tenants are presented gross in the consolidated statement of comprehensive income, unless the Group is acting as principal whereby it controls a promised service before the Group transfers the service to a tenant.

Amounts received from tenants to terminate leases or to compensate for dilapidations are recognised in the consolidated statement of comprehensive income when the right to receive them arises.

c) Financing income and expenses

Interest income and expense are recognised within 'net finance costs' the consolidated statement of comprehensive income using the effective interest rate method.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability, and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses.

d) Investment property

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the entities in the Group, is classified as an investment property.

Investment properties are valued using the following methods:

i) measured initially at its cost, including related transaction costs and, where appropriate, borrowing costs; and

ii) revalued quarterly by a third-party valuer with appropriate qualifications and carried at fair value.

The fair value of investment property reflects, amongst other things, rental income from current leases and other assumptions market participations would make when pricing the property under current market conditions.

Subsequent expenditure is capitalised to the asset's carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

If a valuation obtained for a property held under a lease is net of all payments expected to be made, any related lease liability recognised separately in the consolidated statement of financial position is added back to arrive at the carrying value of the investment property for accounting purposes.

Amortised lease incentives are not recognised in the consolidated statement of financial position; instead they are recognised in the fair value of the investment property.

Changes in fair values are recognised in the consolidated statement of comprehensive income.

Investment properties are derecognised when they have been disposed. When the Group disposes of a property at fair value in an arm's length transaction, the profit or loss is calculated by comparing net proceeds to the carrying value. This is recognised in the consolidated statement of comprehensive income on completion of the sale.

e) Assets held for sale

Investment properties are classified as held for sale if it is highly probable that they will be recovered primarily through sale within 12 months of the consolidated statement of financial position date, rather than held for long-term rental yields, and the Group has actively marketed the properties for sale.

Investment properties held for sale are measured at fair value.

f) Financial instruments

(i) Recognition

The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument.

(ii) Classification

In accordance with IFRS 9, the Group classifies its financial assets and financial liabilities at initial recognition into the categories of financial assets and financial liabilities discussed below. In applying that classification, a financial asset or financial liability is considered to be held for trading if:

(a) It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term; or

(b) On initial recognition, it is part of a portfolio of identified financial instruments that are managed together and for which, there is evidence of a recent actual pattern of short-term profit-taking; or

(c) It is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

(iii) Initial measurement

Financial assets and financial liabilities at fair value through profit or loss ("FVPL") are recorded in the consolidated statement of financial position at fair value. All transaction costs for such instruments are recognised directly in profit or loss.

Financial assets and liabilities (other than those classified as at FVPL) are measured initially at their fair value plus any directly attributable incremental costs of acquisition or issue.

(iv) Subsequent measurement

After initial measurement, the Group measures financial instruments which are classified as at FVPL at fair value. Subsequent changes in the fair value of those financial instruments are recorded in net gain or loss on financial assets and liabilities at FVPL within profit and loss. Interest and dividends earned or paid on these instruments are recorded separately in profit and loss.

Financial assets and liabilities (other than those classified as at FVPL) are subsequently measured at amortised cost using the effective interest method.

(v) Derecognition

A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is derecognised where the rights to receive cash flows from the asset have expired, or the Group has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement and the Group has:

(a) Transferred substantially all the risks and rewards of the asset; or

(b) Neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its right to receive cash flows from an asset (or has entered into a pass-through arrangement) and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group's continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. The Group derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.

(vi) Financial assets

The Group classifies its financial assets as subsequently measured at amortised cost or measured at fair value through profit or loss on the basis of both:

· The Group's business model for managing the financial assets; and

· The contractual cash flow characteristics of the financial asset.

(a) Financial assets measured at amortised cost

A debt instrument is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Included in this category are trade and other receivables which are initially recognised at fair value and measured subsequently at amortised cost using the effective interest rate method.

(b) Financial assets at FVPL

A financial asset is measured at fair value through profit or loss if:

(i) Its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding; or

(ii) It is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell; or

(iii) At initial recognition, it is irrevocably designated as measured at FVPL when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

Derivative financial assets and liabilities are classified as financial assets at fair value through profit or loss. Derivative financial assets and liabilities comprise interest rate swaps. They are measured at fair value through profit or loss.

(vii) Financial liabilities

A financial liability remains largely the same under IFRS 9 compared to IAS 39. Two measurement categories continue to exist: FVPL and amortised cost.

(a) Financial liabilities measured at amortised cost

This category includes all financial liabilities, other than those measured at fair value through profit or loss. The Group includes in this category trade and other payables and loans and borrowings which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. Trade and other payables are derecognised when the obligation under the liability is discharged or cancelled or expires.

(b) Financial liabilities at FVPL

A financial liability is measured at FVPL if it meets the definition of held for trading. Except for derivatives as previously disclosed, there are no other financial liabilities measured at fair value through profit or loss.

Debt instruments, other than those classified as FVPL, are measured at amortised cost using the effective interest rate method less any allowance for impairment. Gains and losses are recognised in profit or loss when the debt instruments are derecognised or impaired, as well as through the amortisation process. Financial liabilities, other than those classified as FVPL, are measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, as well as through the amortisation process.

g) Fair value measurement

The Group measures financial instruments (such as derivatives) and non-financial assets such as investment properties at fair value at each reporting date.

A number of the Group's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair value is defined in IFRS 13 Fair Value Measurement as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values have been determined for measurement and/or disclosure purposes based on methods described below. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to fair value measurement as a whole.

The fair value hierarchy:

Level 1: fair values derived from quoted prices in active markets for identical assets/liabilities.

Level 2: fair values derived from observable inputs other than quoted prices.

Level 3: fair values derived from valuation techniques that include inputs that are not based on observable data.

For assets and liabilities that are recognised in this financial information at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

(i) Investment properties

The valuation of investment properties is performed by a third-party valuer who is deemed to have the relevant professional qualifications and with recent experience in the location and category of the investment property being valued.

(ii) Loans and borrowings

The techniques used in the valuation of loans and borrowings is a comparison of debt stock to the marginal cost of debt (from main funding markets) in addition to discounting using the zero-coupon discount curve of the relevant currency.

(iii) Derivatives

The Group uses widely recognised valuation models for determining fair values of over-the-counter interest rate caps and forward foreign exchange contracts. The models incorporate various inputs including counterparty and own credit risk, foreign exchange spot and forward rates and interest rate curves.

The fair values of derivative financial instruments are calculated using a discounted cash flow analysis performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

h) Impairment

An assessment will be performed at each statement of financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. If there is objective evidence (such as significant financial difficulty of the obligor, breach of contract, or it becomes probable that the debtor will enter bankruptcy), the asset is tested for impairment.

Under IFRS 9, the Group shall measure the loss allowance on receivables at an amount equal to the lifetime expected credit losses. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate (that is, the effective interest rate computed at initial recognition).

The amount of the loss is recognised in the consolidated statement of comprehensive income. If in subsequent periods the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the consolidated statement of comprehensive income.

i) Expenses

Expenses include property costs, legal, accounting, auditing and other fees. They are recognised in the consolidated statement of comprehensive income in the period in which they are incurred (on an accruals basis).

j) Leases

(i) Group is the lessor

Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term.

Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the consolidated statement of financial position in accordance with their nature.

At the commencement date, the Group assesses whether the lessee is reasonably certain to exercise an option to extend the lease or to purchase the underlying asset, or not to exercise an option to terminate the lease. The Group considers all relevant facts and circumstances that create an economic incentive for the lessee to exercise, or not to exercise, the option, including any expected changes in facts and circumstances from the commencement date until the exercise date of the option.

The Group makes payments to agents for services in connection with negotiating lease contracts with the Group's lessees. These letting fees are capitalised and are amortised over the lease term.

k) Prepayments

Prepayments are carried at cost less any accumulated impairment losses.

l) Taxation

The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of comprehensive Income, except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case, the tax is also recognised in other comprehensive income or equity. The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the consolidated statement of financial position.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the date of the consolidated statement of financial position and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

The Company obtained REIT status on 21 December 2021, following which any gains or losses arising from property business are exempt from UK corporation tax.

Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains and losses arising on the revaluation of the investment property.

m) Provisions

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as a finance expense.

n) Deferred Income

Revenue received in advance is recognised as deferred income and is released to the consolidated statement of comprehensive income when the revenue is due to the Group.

o) Dividend payable to shareholders

Equity dividends are recognised when they become legally payable.

p) Share issue costs

The costs of issuing or reacquiring equity instruments (other than in a business combination) are accounted for as a deduction from equity.

q) Share capital

Share capital is the nominal amount of the Company's ordinary shares in issue.

r) Redeemable preference shares

The Group's redeemable preference shares are classified as financial liabilities, because they bear non-discretionary dividends and are redeemable in cash by the holders. Non-discretionary dividends thereon are recognised as interest expense in profit or loss as accrued. Non-redeemable preference shares are classified as equity, because they bear discretionary dividends, do not contain any obligations to deliver cash or other financial assets and do not require settlement in a variable number of the Group's equity instruments. Discretionary dividends thereon are recognised as equity distributions on approval by the Company's shareholders.

The Group's redeemable preference shares were redeemed in full on 12 September 2022.

3. Rental and other income


	Period from 11 October 2021 to 31 December 2022 £'000

Gross rental income	8,929
Spreading of lease incentives	(166)
Total	8,763
Service charges and direct recharges (note 4)	407
Insurance recharges (see note 4)	128
Total rental and other income	9,298

All rental, service charges and direct recharges and other income are derived from the United Kingdom.

4. Expenses


	Period 11 October 2021 to 31 December 2022 £'000

Property operating expenses	758
Service charges and direct recharges (see note 3)	407
Insurance recharges (see note 3)	128
Property operating expenses	1,293

Asset management fee	628
Fund costs	419
Professional fees	345
Fund administration	188
Directors' remuneration (note 5)	88
AIFM fee	64
Auditor renumeration	70
Other costs	4
Other operating expenses	1,806

Total operating expenses	3,099
Total operating expenses (excluding service charges, direct recharges and insurance recharges)	2,564

5. Directors' remuneration


			Period from 11 October 2021 to 31 December 2022
	'	£'000

Directors' fees			81
Tax and social security			7
Total directors' remuneration			88

The Group had no employees during the period.


6. Finance expenses - net
					Period from 11 October 2021 to 31 December 2022
		'	£'000

Interest payable on secured bank loan (note 13)					2,288
Interest payable on mezzanine debt (note 13)					1,720
Change in fair value of financial instruments (note 11)					(807)
Amortisation of loan arrangement fees (note 13)					254
Interest received from financial instrument					(66)
Other finance costs					22
Total					3,411

7. Taxation
					Period from 11 October 2021 to 31 December 2022
					£'000
Tax charge comprises:
Analysis of tax charge in the period
Loss before tax					(2,107)

Theoretical tax credit at UK corporation tax standard rate of 19.00%					(400)
Expenses not deductible					930
Effects of tax-exempt items under REIT regime					(579)
Taxation gain					(49)

The resulting Taxation gain in the period represents the reversal of an over accrual of United Kingdom Corporation Tax recorded prior to Admission and entering into the United Kingdom Real Estate Investment Trust tax regime, at which point any gains or losses arising from property business are exempt from UK Corporation tax.


Factors that may affect future tax charges Due to the Group's status as a REIT and the intention to continue meeting the conditions required to retain approval as a REIT in the foreseeable future, the Group has not provided deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.


8. Loss per share (EPS) and Net Asset Value (NAV) per share
					Period from 11 October 2021 to 31 December 2022
Loss per share:
Total comprehensive loss (£'000)					(2,058)
Weighted average number of shares (number)					38,161,963
Loss per share (basic and diluted)					(5.39p)

Adjusted EPS:
Total comprehensive loss (£'000)					(2,058)
Adjustment:
Change in fair value of investment properties (£'000)					4,895
Change in fair value of financial instruments (£'000)					(807)
Amortisation of loan arrangement fee (£'000)					254
Provision for impairment/write-off of trade receivables (£'000)					339
Rental income recognised in respect of rent-free periods and tenant improvements (£'000)					(240)
Taxation gain (£'000)					(49)
Adjusted EPS (basic and diluted) (£'000)*					2,334
Adjusted EPS (basic and diluted) (pence)					6.12p

* Adjusted EPS is a measure used by the Board to assess the level of the Group's dividend payments. This metric adjusts earnings for non-cash items in arriving at an Adjusted EPS as supported by cash flows.

Loss per share is calculated by dividing profit/(loss) for the period attributable to ordinary equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period.

					31 December 2022
NAV per share
Net assets (£'000)					33,308
Ordinary shares (number)					38,161,963
NAV per share (pence)					87.28p

9. Dividends paid
	Quarter Ended	Rate			Period from 11 October 2021 to 31 December 2022
				£'000
Dividends in respect of period ended 31 December 2022
1st dividend	31-Mar-22	2.15p			821
2nd dividend	30-Jun-22	2.00p			763
3rd dividend	30-Sep-22	2.07p			790
Total dividends paid to 31 December 2022					2,374

4th dividend*	31-Dec-22	2.00p			763

Total dividends payable in respect of the period					3,137
Total dividends payable in respect of the period per share					8.22p

*Dividends declared after the period end are not included in these financial statements as a liability.

10. Investment properties
	31 December 2022
					£'000
At the beginning of the period					-
Acquisition of properties through subsidiaries (note 2.2)					110,700
Change in value of investment properties					(4,655)
Total					106,045

Change in fair value of investment properties
Change in fair value before adjustments for lease incentives					(4,895)
Adjustment to spreading of tenant incentives					240
					(4,655)

Valuation of investment properties
Valuation of investment properties is performed by Avison Young, an accredited external valuer with recognised and relevant professional qualifications and recent experience of the location and category of the investment property being valued. The valuation of the Group's investment properties at fair value is determined by the External Valuer on the basis of market value in accordance with the internationally accepted RICS Valuation - Professional Standards (incorporating the International Valuation Standards).


Sensitivity analysis to significant changes in unobservable inputs within Level 3 of the fair value hierarchy
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the entity's portfolios of investment properties are:

1) Estimated Rental Value ('ERV')
2) Equivalent yield

Increases/(decreases) in the ERV (per sq. ft per annum) in isolation would result in a higher/(lower) fair value measurement. Increases/(decreases) in the yield in isolation would result in a lower/(higher) fair value measurement.

The significant unobservable inputs used in the fair value measurement, categorised within Level 3 of the fair value hierarchy of the portfolio of investment property and investments are:

Class	Fair value £'000	Valuation technique			Significant unobservable inputs

Period from 11 October 2021 to 31 December 2022
Investment Properties*	106,045	Income capitalisation			ERV Equivalent yield
* Valuation per Avison Young

The estimated fair value would increase if the equivalent yield decreased to the lower end of the range, see sensitivity analysis below. Yield increments of 0.25% and ERV increments of 5% used in the analysis with a range in ERV between -10% and 10% and Capitalisation Rate range between -0.50% and 0.50%.

		2022
		£'000			£'000
Sensitivity Analysis		+10%			-10%
Change in ERV		7,306			(7,217)
Sensitivity Analysis		0.50%			-0.50%
Change in equivalent yield		(6,732)			7,703

11. Receivables and prepayments
	31 December 2022
					£'000

Rent debtor					1,424
Less: Provision for impairment of trade receivables					(528)
Fair value of financial instruments					956
Tenant deposit (note 12)					85
Other receivables					721
					2,658
Other receivables include an amount of £0.6 million which represent cash held by the property manager relating to service charge monies and rent collected from tenants.

Fair value of financial instruments
The Group does not apply hedge accounting in accordance with IFRS 9. Nevertheless, interest rate caps are part of economic hedge relationships. Interest rate caps are used to fix the interest payments of variable debt instruments (see Note 13). The notional amount of the interest rate cap is £46.67 million with a cap rate of 1.2% with a term ending 17 August 2023. The Group will review the hedging relationship with the refinancing of the senior loan.


The valuation of the derivative instrument is performed on a quarterly basis by an external specialist. Significant inputs into models are market observable and are included within Level 2 of the fair value hierarchy.

The fair value gain on financial instruments amounts to £807,194.

The aged debtor analysis of receivables which are past due but not impaired is as follows:

	31 December 2022
					£'000
Less than three months due					522
Between three and six months due					111
Between six and twelve months due					263
					896

12. Payables and accrued expenses
	31 December 2022
					£'000

Deferred income					2,090
Interest payable (note 13)					827
Accruals					398
VAT					416
Trade creditors					333
Corporation tax*					259
Tenant deposit liability (note 11)					85
					4,408

* Relates to outstanding Corporation tax payable relating to period prior to entering into the United Kingdom Real Estate Investment Trust tax regime.

13. Interest bearing loans and borrowings
	31 December 2022
					£'000

Facility drawn at the beginning of the period					-

Secured bank loans and loan notes utilised through acquisition of subsidiaries (note 2.2)					74,042
Less: unamortised finance cost incurred through acquisition of subsidiaries (note 2.2)					(419)
Plus: amortised loan issue costs					254
At end of period					73,877

Repayable in less than one year					73,877
Repayable between 1 and 2 years					-
Repayable between 2 and 5 years					-
Repayable in over 5 years					-
Total					73,877

At 31 December 2022, the Group had senior loan facility of £54,342,830 and a mezzanine loan note balance of £19,699,563 totalling £74,042,393. The loans are measured at level 2 in the fair value measurement hierarchy (described in Note 2.7g Fair value measurement).

Secured bank loan The Group entered into a loan facility agreement with Aviva Investors Alternative Income Solutions Investment S.A. and Aviva Investors Multi-Asset Alternative Income S.A and is secured against the Group's property portfolio. Interest is payable quarterly at the current SONIA rate plus a margin of 2.80%. During the period, a total of £2,288,298 of interest was incurred, £547,199 of which was outstanding at 31 December 2022.

The senior loan is repayable on 17 August 2023, refinancing discussions are currently underway.

In order to hedge against the risk of interest rate fluctuations the Group has entered into an interest rate cap agreement (Note 11).

The fair value of the loan at 31 December 2022 was £54,416,845.

Mezzanine loan note Mezzanine loan note relates to an external loan from Auskerry Finco Limited with a facility limit of £50,000,000 for which £19,699,563 was utilised and 8.5% interest is payable quarterly in arrears. During the period, a total of £1,720,339 of interest was incurred, £279,842 of which was outstanding at 31 December 2022. The loan has a maturity date of 31 July 2023. Discussions are underway to extend the term of the loan. The fair value of the loan at 31 December 2022 was £20,357,108.

	31 December 2022
					£'000
Reconciliation to cash flows from financing activities
At the beginning of the period					-
Secured bank loans (net of unamortised finance cost)					73,623
Interest paid					(3,710)
Total changes from financing cash flows					69,913

Other changes
Movement in interest payable presented under other creditors					(299)
Interest expense					4,009
Amortisation of loan issue costs					254
Total other charges					3,964
At the end of the period					73,877

14. Commitments
The Group has entered into commercial property leases on its investment property portfolio. Future minimum rentals receivable under non-cancellable operating leases as at 31 December 2022 are as follows:

	31 December 2022
					£'000
Less than one year					8,488
One to two years					7,365
Two to three years					6,916
Three to four years					6,195
Four to five years					5,084
Five to ten years					8,413
Total					42,461

During the period ended 31 December 2022 there were no material contingent rents recognised as income.

15. Investments in subsidiaries
The Company has three wholly owned subsidiaries as disclosed below:

Name and company number	Country of registration and incorporation	Date of incorporation			Principal activity
M7 Real Estate Investment Partners VIII Master Holdco Limited	Jersey	25 June 2018			Holding Company
(Company number 126719)
M7 Real Estate Investment Partners VIII Holdco Limited	Jersey	25 June 2018			Holding Company
(Company number 126720)

M7 Real Estate Investment Partners VIII Propco Limited	Jersey	25 June 2018			Real Estate Company
(Company number 126721)
* Ordinary shares of £1.00 each.

M7 Regional E-Warehouse REIT plc as at 31 December 2022 owns 100% controlling stake of M7 Real Estate Investment Partners VIII Master Holdco Limited. M7 Real Estate Investment Partners VIII Master Holdco Limited holds 100% controlling stake of M7 Real Estate Investment Partners VIII Holdco Limited.

M7 Real Estate Investment Partners VIII Holdco Limited holds 100% controlling stake of M7 Real Estate Investment Partner VIII Propco Limited.

16. Issued share capital and share premium
The Company was incorporated on 11 October 2021 when one ordinary share of 1p nominal value was issued for 1p. On 25 November 2021, 50,000 redeemable preference shares of £1 each were issued, fully paid up pursuant to an undertaking to pay, at £1 per share. These were subsequently redeemed on 12 September 2022. The Company achieved admission to trading on the Wholesale Market of IPSX (the "Admission") on 21 December 2021.

On the date of the Company's Admission, the Company allotted and issued a further 38,161,963 ordinary shares of £0.01 nominal value each at £1 per share, which have been fully paid. Share capital of £381,620 and share premium of £37,780,343 was recognised in the consolidated statement of financial position. Transaction costs arising on share issue were £422,412 and shown as a deduction from equity.

At 31 December 2022, there were 38,161,963 ordinary shares in issue, none of which are held in treasury.

17. Financial risk management and policies
The Group is exposed to a number of risks arising from various financial instruments it holds. The main risks to which the Group is exposed are: credit risk, liquidity risk; and market risk (which includes interest rate risk). The risk management policies employed by the Group to manage these risks are discussed below:

17.1 Credit risk
Credit risk is the risk that a counterparty will default on its contractual obligation resulting in a financial loss to the Group.

Credit risk is managed on a Group basis. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparties, and to geographical and industry segments. Such risks are subject to a quarterly or more frequent review. The Group has policies in place to ensure that rental contracts are entered into only with lessees with an appropriate credit history, but the Group does not monitor the credit quality of receivables on an ongoing basis.

The Group assesses all counterparties for credit risk before contracting with them. It does not include any collateral nor any other credit risk enhancer, which reduces the Group's exposure.

Credit risk on cash and cash equivalents is mitigated by holding cash and cash equivalents with reputable financial institutions. Cash at bank are held with The Royal Bank of Scotland International and Barclays Bank Plc which have a Fitch rating of A and A+ respectively.


The table below shows the Group's exposure to credit risk:
					31 December 2022
					£'000
Cash and cash equivalents					2,890
Debtors: amounts falling due within one year					1,608
Total					4,498

Please refer to note 11, which outlines the level of expected credit losses.

17.2 Liquidity risk

Liquidity risk arises from the Group's management of working capital, the finance charges and principal repayments on its borrowings. It is the risk the Group will encounter difficulty in meeting its financial obligations as they fall due. The majority of the Group's assets are investment properties and as such cannot be readily realised. The Group's objective is to ensure it has sufficient available funds for its operations and to fund its capital expenditure. This is achieved by quarterly review/ monitoring of forecast and actual cash flows by the Asset Manager and Board of Directors.

The below table summarises the maturity profile of the Group's financial liabilities based on undiscounted payments.

2022

On Demand

£'000

< 3

Months

£'000

3 - 12

Months

£'000

1 - 5

Years

£'000

> 5 Years

£'000

Total

£'000

Interest bearing loans and borrowings

74,042

Interest payable

2,482

Payables and accrued expenses

615

1,801

2,489

Total

615

1,801

76,524

79,013

17.3 Interest rate risk

Interest rate risk is the risk that the fair value for future cash flows arising from financial instruments will fluctuate because of changes in market interest rates.

The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates. The Group's exposure is limited to the cash and cash equivalents and secured bank loans in which floating interest rates apply. Other interest-bearing borrowings have fixed interest rates hence the Group is not exposed to interest rate risk in respect of this.

Interest income from cash deposits may fluctuate in amount, in particular due to changes in the interest rates.

As at 31 December 2022, the Directors consider that a 1% to 2% movement in market interest rates is reasonably possible, based on historical and current market conditions.

A movement of 100 basis points in the interest rate for the cash at bank, with other variables held consistent, would result in an insignificant movement in the net asset value of the Group.

A movement of 100-200 basis points in SONIA for the secured bank loans, with other variables held consistent including the current cap, would result in an insignificant movement in the net asset value of the Group.

The following table demonstrates the sensitivity to a reasonable change in interest rates on loans and borrowings, while holding all other factors constant. In practice, this is unlikely to occur, and changes in some of the factors may be correlated. The analysis is prepared assuming the amount of liability outstanding at the consolidated statement of financial position date was outstanding for the whole year. With all other variables held constant, the Group's profit before tax is affected through the impact on floating rate borrowings, as follows:

Increase/ decrease

in basis points

Effect on profit before tax

2022

£'000

Interest basis:

SONIA

-100 basis points

2,656

SONIA

-200 basis points

3,202

SONIA

+100 basis points

(2,656)

SONIA

+200 basis points

(3,202)


17.4 Price risk
The Group is exposed to price risk other than in respect of financial instruments, such as property price risk including property rentals risks.

17.5 Capital risk management
The Group's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

To enhance returns over the medium term, the Group utilises borrowings on a limited recourse basis for each investment or all or part of the total portfolio. The monitoring of the Group's level of borrowing is performed primarily using a Loan to Value and Loan to GAV ratio. Metric calculation for this alternative performance measure is shown on Appendix I. Alongside the Group's borrowing policy, the Directors intend, at all times, to conduct the affairs of the Group so as to enable the Group to qualify as a REIT for the purposes of Part 12 of the Corporation Tax Act 2010 (and the regulations made thereunder). The REIT status compliance requirements include 90% distribution test, interest cover ratio, 75% assets test and the substantial shareholder rule, all of which the Group remained compliant in the current period.

Breaches in meeting the financial covenants would permit the lender to immediately call loans and borrowings. During the period, the Group did not breach any of its loan covenants, nor did it default on any other of its obligations under its loan agreements.

17.6 Real estate risk
Property investments are illiquid assets and can be difficult to sell, especially if local market conditions are poor. Illiquidity may also result from the absence of an established market for investments, as well as legal or contractual restrictions on resale of such investments.

There can be no certainty regarding the future performance of any of the properties acquired for the Group. The value of any property can go down as well as up.

Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend on the amount of income generated and expenses incurred from such investments.

There are additional risks in vacant, part vacant, redevelopment and refurbishment situations, although these are not prospective investments for the Group.

These aspects, and their effect on the Group from a going concern perspective are discussed in more detail in the Going Concern policy note. The Principal Risks and Uncertainties section outlines the risks and how they are managed.

17.7 Fair value of financial instruments
There is no material difference between the carrying amount and fair value of the Group's financial instruments.

18. Transactions with related parties
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

Directors
Directors of the Group are related parties. Directors' remuneration is disclosed in note 5.


Asset Manager
M7 Real Estate Ltd was appointed as Asset Manager on 20 December 2021. The asset management and investment advisory fee is calculated at a rate equivalent of 7.00% per annum of the actual rent collected, payable quarterly in arrears and apportioned 90% as the asset management fee and 10% as the investment advisory fee. During the Period, the Group incurred asset management fees of £628,422, of which £153,630 was outstanding at 31 December 2022.

Alternative Investment Fund Manager
M7 Real Estate Financial Services Ltd was appointed as Alternative Investment Fund Manager on 20 December 2021. The Asset Management and Investment Advisory fee is calculated at a rate equivalent of 7% per annum of the actual rent collected, payable quarterly in arrears and apportioned 90% as the Asset Management fee and 10% as the Investment Advisory fee. During the Period, the Group incurred Investment Advisory fees of £63,811, of which £17,070 was outstanding as at 31 December 2022.

19. Events after reporting date
On 7 February 2023, the Board declared an interim dividend of 2.00pps in respect of the period 1 October 2022 to 31 December 2022. This was paid on 3 March 2023 to shareholders on the register at 17 February 2023. The ex-dividend date was 16 February 2023.

Company Statement of Financial Position

As at 31 December 2022


	Notes	Period from 11 October 2021 to 31 December 2022
		£'000
Assets
Non-current Assets
Investments in subsidiary company	2	38,162

Current Assets
Receivables	3	129
Cash and cash equivalents		19
		148

Total Assets		38,310

Current Liabilities
Payables and accrued expenses	4	(180)

Net Assets		38,130

Equity
Share capital	6	382
Share issue costs	6	(422)
Share premium	6	37,780
Retained earnings		390
Total equity		38,130


As permitted by s. 408 Companies Act 2006, the Company's profit and loss account has not been presented in these financial statements.

The Company's profit for the period was £2,764,196.

The financial statements were approved by the Board and signed on its behalf by:



James Max
Chairman 03 April 2023

Company number: 13671085

The accompanying notes form an integral part of these Financial Statements.

Company Statement of Changes in Equity

For the period from 11 October 2021 to 31 December 2022


	Share capital	Share Premium	Share issue costs	Retained earnings	Total equity

	£'000	£'000	£'000	£'000	£'000
For the period ended 31 December 2022
Balance as at 11 October 2021	-	-	-	-	-

Shares issued	382	-	-	-	382
Share issue costs	-	-	(422)	-	(422)
Share premium	-	37,780	-	-	37,780
Total comprehensive income	-	-	-	2,764	2,764
Dividends paid	-	-	-	(2,374)	(2,374)

Balance as at 31 December 2022	382	37,780	(422)	390	38,130

The accompanying notes form part an integral part of these Financial Statements.

Notes to the Financial Statements


1. Accounting policies
	Basis of preparation
	These financial statements are prepared and approved by the Directors in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. As permitted by FRS 101, the Company has taken advantage of the following disclosures exemptions which are permissible under FRS 101 as the equivalent disclosures are contained within the Group's Consolidated Financial statements. - a cash flow statement and related notes. - disclosures in respect of capital management. - the effects of new but not yet effective IFRSs. - the disclosures of the remuneration of key management personnel. - disclosure of related party transactions with other wholly owned members of the Company. - the disclosure of financial instruments and other fair value measurements. The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000), except when otherwise indicated. They have been prepared on the historical cost basis. The principal accounting policies adopted in the preparation of the Company's financial statements are consistent with the Group which are described in note 2.7 of the Consolidated Financial Statements but makes amendments where necessary in order to comply with the Companies Act 2006 and taking advantage of the FRS 101 exemptions mentioned above. New standards effective for the current accounting period do not have a material impact on the financial statements of the Company.

	Going concern
	The financial statements have been prepared on a going concern basis.

	For an assessment of going concern refer to the accounting policy 2.6 of the consolidated financial statements.

	Investments in subsidiary company
	Investments in subsidiary company which are all 100% owned by the Company are included in the statement of financial position at cost less provision for impairment.

	Impairment of non-financial assets
	The carrying amounts of the Company's investment in subsidiary are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss.

	Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.


2. Investments in Subsidiary Company

		31 December 2022
		£'000

M7 Real Estate Investment Partners VIII Master HoldCo Limited		38,162

A list of subsidiary undertakings at 31 December 2022 is included on note 15 of the consolidated financial statements.

As at 31 December 2022, a total of £3,739,209 of dividend was received from the subsidiary.

The Directors have considered the recoverability of the investment in subsidiary company by preparing discounted cash flows for the period up to 31 March 2027 considering the following key areas: · The quantum and timing of cashflows; · The timing and amount of selling the properties to realise any capital gain; and · The discount rate applied. Based on the analysis performed, there are no indication of impairment on the investment in subsidiary company.

3. Receivables
		31 December 2022
		£'000

VAT receivable		129

4. Payables and accrued expenses
		31 December 2022
		£'000

Accruals		180

5. Dividends paid and payable
Details of dividends paid and those payable in respect of the period are set out in note 9 of the consolidated financial statements.

6. Issued share capital and share premium
	31 December 2022
	£'000	Number of Ordinary Shares
Ordinary Shares of £0.01 each issued and fully paid
At the beginning and end of the period	382	38,161,963

The Company was incorporated on 11 October 2021 when one ordinary share of 1p nominal value was issued for 1p. On 25 November 2021, 50,000 redeemable preference shares of £1 each were issued, fully paid up pursuant to an undertaking to pay, at £1 per share. These were subsequently redeemed on 12 September 2022. The Company achieved admission to trading on the Wholesale Market of IPSX (the "Admission") on 21 December 2021.

On the date of the Company's Admission, the Company allotted and issued a further 38,161,963 ordinary shares of £0.01 nominal value each at £1 per share, which have been fully paid. Share capital of £381,620 and share premium of £37,780,343 was recognised in the consolidated statement of financial position. Transaction costs arising on share issue were £422,412 and shown as a deduction from equity.

At 31 December 2022, there were 38,161,963 ordinary shares in issue, none of which are held in treasury.

7. Contingent liabilities, capital commitments and related party transactions
As at 31 December 2022 the Company had £nil contingent liabilities or capital commitments.

Related party transactions are the same for the Company as for the Group. For details refer to note 18 of the consolidated financial statements.

8. Events after reporting date
Events after the reporting date are the same as those disclosed in note 19 of the consolidated financial statements.

Appendix 1. Alternative Performance Measure Calculations (unaudited)

APMs are numerical measures of the Group's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Group's applicable financial framework is IFRS. The Directors assess the Group's performance against a range of criteria which are reviewed as particularly relevant for a closed-end REIT.

Adjusted EPS

Adjusted EPS is a measure used by the Board to assess the level of the Group's dividend payments. This metric adjusts earnings for non-cash items in arriving at an Adjusted EPS as supported by cash flows. Please refer to note 8 for the Adjusted EPS calculation.

Loan to GAV

Loan to GAV measures the value of loans and borrowings utilised (excluding amounts held as restricted cash and before adjustments for issue costs) expressed as a percentage of the Group's property portfolio (as provided by the valuer) and the fair value of other assets.


		31 December 2022
Borrowings (£'000) - note 13	a	74,042
Total asset (£'000)	b	111,593
Loan to GAV	(a/b)	66.35%

Loan to Value (covenant)

Loan to value (covenant) measures the value of loans and borrowings utilised (£54.34 million senior loan facility with Aviva Investors Alternative Income Solutions Investment S.A. and Aviva Investors Multi-Asset Alternative Income S.A) expressed as a percentage of the Group's investment properties (as valued by the lender).


		31 December 2022
Senior loan (£'000) - note 13	a	54,343
Lender property valuation (£'000)	b	110,700
Loan to Value	(a/b)	49.09%

Dividend Cover

The ratio of Group's Adjusted EPS divided by the Group's dividends payable for the relevant period.


		31 December 2022
Adjusted EPS - note 8	a	6.12p
Dividend per share - note 9	b	8.22p
Dividend cover	a/b	74.45%

Dividend Yield

The percentage ratio of the Company's declared dividends for the financial period (or historic declared dividends if dividends are yet to be declared for a year) per share divided by the Company's share price at the period end.


		31 December 2022
Dividend payable	a	8.22p
Share price	b	111p
Dividend yield	a/b	7.41%

Ongoing Charges

The ongoing charges ratio is the total for all operating costs expected to be regularly incurred expressed as a percentage of the NAVs of the Group for the financial period.


		31 December 2022
Other operating expenses for the period (£'000)	a	1,806
Less: non-recurring/ one-off cost (£'000) *	b	(245)
Ongoing charges (£'000)	c=a-b	1,561
Average net assets (£'000)	d	33,308
Ongoing charges ratio	(c/d)	4.69%

* Non-recurring costs of £0.3 million relating to listing and recharged cost from the limited partnership and FinCo have been excluded from the ongoing charges.

Glossary


Alternative Investment Fund Manager or AIFM	M7 Real Estate Financial Services Ltd.
AIFMD Rules	the provisions of: (i) the Delegation Regulation; (ii) the Investment Funds sourcebook (FUND) contained in the FCA Rules, as altered, amended, added to or cancelled from time to time; and (iii) the Regulations.
Company	M7 Regional E-Warehouse REIT plc.
Contracted rent	The annualised rent adjusting for the inclusion of rent subject to rent-free periods.
Delegation Regulation	the Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing the AIFMD.
Earnings Per Share ('EPS')	Profit for the period attributable to equity shareholders divided by the weighted average number of Ordinary Shares in issue during the period.
Equivalent Yield	The internal rate of return of the cash flow from the property, assuming a rise to Estimated Rental Value at the next review or lease expiry. No future growth is allowed for.
Estimated Rental Value ('ERV')	The external valuer's opinion as to the open market rent which, on the date of the valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.
External Valuer	An independent external valuer of a property. The Group's external valuer is Avison Young (UK) Limited.
Fair value	The estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion.
Fair value movement	An accounting adjustment to change the book value of an asset or liability to its fair value.
FCA	the Financial Conduct Authority of 25 The North Colonnade, Canary Wharf, London E14 5HS, or any equivalent successor as the entity responsible for the supervision of financial services in the UK.
FCA Rules	the FCA Handbook of Rules, Principles and Guidance, as amended or replaced from time or time.
Gross Asset Value ('GAV')	The aggregate value of the total assets of the Group as determined in accordance with IFRS.
IASB	International Accounting Standards Board.
IFRS	International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. On 31 December 2020 EU-adopted IFRS was brought into UK law and became UK-adopted international accounting standards, with future changes to IFRS being subject to endorsement by the UK Endorsement Board.
Asset Manager	M7 Real Estate Limited.
IPO	The admission to trading on the International Property Securities Exchange of the share capital of the Company on 21 December 2021.
IPSX	International Property Securities Exchange.
Lease incentives	Incentives offered to occupiers to enter into a lease. Typically, this will be an initial rent-free period, or a cash contribution to fit out. Under accounting rules, the value of the lease incentive is amortised through the Consolidated Statement of Comprehensive Income on a straight-line basis until the lease expiry.
Net Asset Value ('NAV')	Net Asset Value is the equity attributable to shareholders calculated under IFRS.
Net Asset Value per share	Equity shareholders' funds divided by the number of Ordinary Shares in issue.
Net equivalent yield	Calculated by the Group's External Valuers, net equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears.
Net Initial Yield ('NIY')	The initial net rental income from a property at the date of purchase, expressed as a percentage of the gross purchase price including the costs of purchase.
Net rental income	Rental income receivable in the period after payment of ground rents and net property outgoings.
Ordinary Shares	The main type of equity capital issued by conventional Investment Companies. Shareholders are entitled to their share of both incomes, in the form of dividends paid by the Company, and any capital growth.
Passing rent	The gross rent less in-place lease incentives.
pps	Pence per share.
Regulations	the Alternative Investment Fund Managers Regulations 2013 SI2013/1773.
REIT	A Real Estate Investment Trust. A company which complies with Part 12 of the Corporation Tax Act 2010. Subject to the continuing relevant UK REIT criteria being met, the profits from the property business of a REIT, arising from both income and capital gains, are exempt from corporation tax.
Reversion	Increase in rent estimated by the Company's External Valuers, where the passing rent is below the ERV.
Share price	The value of a share at a point in time as quoted on a stock exchange. The Company's Ordinary Shares are quoted on the Wholesale Market on IPSX.
Weighted Average Unexpired Lease Term ('WAULT')	The average lease term remaining for first break, or expiry, across the portfolio weighted by contracted rental income (including rent-frees).

[1] Loan to value (covenant) measures the value of loans and borrowings utilised (£54.34 million senior loan facility with Aviva Investors Alternative Income Solutions Investment S.A. and Aviva Investors Multi-Asset Alternative Income S.A) expressed as a percentage of the Group's investment properties (as provided by the lender).

[2] Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website or any other website, is incorporated into, or forms part of, this announcement nor, unless previously published on a Regulatory Information Service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

[3] Number of scheduled meetings attended/maximum number of meetings that the Director could have attended.

[4] Number of scheduled meetings attended/maximum number of meetings that the Director could have attended.

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Warehouse REIT PLC — Annual Report 2022

5339_10-k_2023-04-04_4d1b2be2-924b-450e-bd83-e56ccde53824.html

Highlights

Chairman's Statement

Asset Manager's Report

Overview

Green Leases

Operating Procedures

Social and Governance

Key Performance Indicators ("KPIs")

Principal Risks and Uncertainties

Going Concern

Viability Statement

Confirmation of Viability

Section 172 Statement

Board of Directors

Structure of the Board

Election/Re-election of Directors

Independence of Directors

Board Diversity

Board Evaluation

Board Responsibilities

Key Board activities during the Period

Conflicts of Interest

Board Committees

Audit Committee

Other Board committees

Directors' Remuneration

Company Secretary

Statement of Compliance

The AIFM, the Asset Manager and the Depositary

Key Service Providers

Internal control review

Shareholder Engagement

Committee Membership

Meetings

Role of the Committee

Performance Evaluation

Activities

Significant issues considered by the Committee

Valuation

Risk management Internal controls

Going concern and long-term viability of the Group

Independence and objectivity of the Auditor

External Audit Process

Re-appointment of the Auditor

Audit Fees and Non-Audit Services

Principal activity

Directors, Corporate Governance, Management and Internal Controls

Results and dividends

Qualifying indemnity insurance

Continuing Appointment of the AIFM and the Asset Manager

Social, Community and Employee Responsibility

Packaged Retail and Insurance-based Investment Products ("PRIIPs")

Environmental, Social and Governance Policy ("ESG")

Internal control assessment process

Financial Risk Management objective policies

Share Capital

Business Relationships

Post balance sheet events

Substantial shareholdings

Disclosure of information to auditors

Auditors

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Company Statement of Financial Position

Company Statement of Changes in Equity

Notes to the Financial Statements

Appendix 1. Alternative Performance Measure Calculations (unaudited)

Company Information

Glossary

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Warehouse REIT PLC Annual Report 2022