We place risk appetite at the heart of our risk management process. Our risk appetite is dynamic, evolving over time and throughout the course of a property cycle.

Risk management is deeply embedded in our decision-making, as we aim to reduce uncertainty around expected outcomes and bring controllable risks within our risk appetite, in an effort to:

• balance unpredictability with the objective of protecting and creating value, and 
• keep our business stable and resilient.

We adjust our risk appetite in relation to different types of risks as explained below. 

Property risks

We must accept a certain level of property risk to achieve our target returns. 

We strive to diversify our portfolio with an appropriate mix of:

• stabilised, income-producing properties with a low appetite for risk (typically across our public-private partnership and build-to-suit strategies), and 
• development or redevelopment properties with a high appetite for risk (typically across our value-add and opportunistic strategies).

Our goal is to construct a portfolio that will deliver attractive returns with strong rental income and capital growth when market conditions are positive, while remaining resilient during downturns.

We actively enhance returns through development, which requires maintaining an appropriate level of land holdings. To avoid the performance drag associated with holding excess land, we closely monitor both the churn and holding period of our land bank. We also seek to proactively manage other risks inherent in development and construction – particularly contractor covenant risks.

We have a low appetite for income risk from tenants and therefore aim to maintain a diverse tenant base, avoiding over-exposure to individual tenants.

Financial risks

We approach financial risk management with discipline, while maintaining flexibility to respond to opportunities and evolving market dynamics. 

While our general approach is to maintain a moderate appetite for financial risk, we may, when appropriate, adopt a high level of financial risk on a case-by-case basis to achieve our target returns.

We seek long-term growth in asset value despite fluctuations driven by external factors that influence the property cycle, while recognising that the use of leverage can amplify their impact.

Corporate risks

We have a low appetite for risks to our good reputation with customers and other stakeholders. 

Our responsibilities to these stakeholders include, inter alia:  

• protecting the health and safety of the occupants and other users of our properties, as well as of our employees,
• complying with all relevant laws, 
• adhering to relevant codes of conduct and ethics, 
• managing our impact on the environment, and 
• making a positive contribution to the local communities in which we operate.

Effective risk management is fundamental to our ongoing success.

🡢Risk management process 

Our risk management process is designed to identify, evaluate and respond to the significant risks our business faces. This process aims to understand and mitigate – though not eliminate – the risks of failing to achieve our business objectives. 

While we have an integrated and robust approach to managing risk effectively and consistently, there is only reasonable, and not absolute, assurance that our risk management process will achieve its intended objectives.

Risks are considered within each area of the business to ensure that risk management is fully embedded throughout our operations, decision-making processes and culture

‍Risk review process 

The identification and review of principal and emerging risks are integrated into our risk review process. 

Principal risks are those that have the potential to materially affect our business.

Emerging risks are those that are often rapidly evolving, with impacts and probabilities of occurrence that are not yet fully understood. As a result, appropriate mitigation measures may still be in development.

The principal risks we currently face are summarised below.

Some risks that are currently unknown, as well as others that are presently considered immaterial, are not included. However, it should be noted that such emerging risks could become material in the future.

Portfolio strategy & execution risks

Our property portfolio may underperform in absolute or relative terms due to an inappropriate portfolio strategy. This could result, inter alia, from: 

• unexpected macroeconomic factors,
• increased market competition for our target properties or target customers,
• disruptions, for example from changing customer needs, evolving trends, technological developments or innovation,
• incorrect or ineffective capital allocation decisions,
• poor or incorrect assumptions regarding the market or specific properties,
• inaccurate modelling or forecasting, or
• lack of appropriate procedures and inadequate due diligence, leading to lengthy, onerous or costly transactions as well as missed opportunities.

🡢Development & construction strategy risks

Development properties involve, without limitation, the following risks: 

• potential for cost overruns on more complex projects (for example, due to contractor default, poor performance or mismanagement), 

• potential for increased construction costs or overoptimistic appraisals, leading to reduced or uneconomic development yields, or
• potential for additional costs, reputational damage, or health and safety exposure due to building defects or deleterious materials.

Exposure to non-income producing properties or land holdings may reduce overall portfolio returns or limit our ability to pursue certain timely opportunities. 

Financing strategy risks

We could suffer financial loss, experience financial distress, or face an acute liquidity or solvency crisis as a result of failing to secure adequate financing. This may be caused by a number of factors including, without limitation:

• failure to obtain debt or equity financing (for example, due to market disruption), 
• an inappropriate debt structure (including loan-to-value ratio, debt maturity, interest rate or currency exposure); 
• poor forecasting, 
• an event of default under a loan agreement (resulting from a breach of financial or other covenants), or
• counterparty default.

Operational risks

We could experience an operational failure, including but not limited to: 

• major customer default, 
• supply chain disruptions or human capital shortages, 
• structural failure of one of our properties, 
• erroneous lease execution, 
• poor customer insight and retention, or 
• inappropriate or inaccurate valuation reporting. 

Such failures could result in a range of adverse outcomes, including reputational damage and financial loss due to unexpected costs or lost revenue.

🡢Market cycles risks

The real estate market is cyclical in nature, and there is an ongoing risk that we may either misread or fail to respond appropriately to: 

• changes in the real estate market, 
• the cost of capital, or 
• broader macroeconomic and geopolitical conditions. 

This could result in us devising an inappropriate strategy or an inability to execute our strategy, potentially leading to a significant impact on the performance and value of our properties.

Major event & business disruption risks

Unexpected events (including, but not limited to, a global financial crisis, health pandemic, war or civil unrest, geopolitical tensions, acts of terrorism, cyber-attacks, or power and water shortages) may cause severe disruption to our business, such as:

• sustained revenue or value impairment, 
• pressure on covenants or solvency, or 
• challenges to liquidity or business continuity.

🡢Legal, political & regulatory risks

We could fail to anticipate legal, political or other regulatory changes that may lead to significant reputational or financial damage. 

In general: 

• legal and regulatory matters may present medium- to long-term risks with the potential to cause substantial harm to our business, and
• political risks may impact business confidence and operating conditions in both the short and long term.

People & talent risks

Our business performance could be adversely affected if we:

• lack the appropriate organisational structure, culture or skilled personnel necessary to execute our strategy and business plan;
• fail to attract, motivate, retain and develop diverse talent as part of our ambition to nurture and grow our workforce;
• do not establish and maintain an adequate succession plan.

‍Health & safety risks

A health and safety incident involving harm to individuals or loss of life may occur. Such incidents could result from failures in management processes, structural or physical asset failures or negligence by third parties. Consequences may include litigation, fines, significant reputational damage and negative impacts on employee wellbeing.

Climate change risks

There is a risk that we fail to anticipate and respond effectively to both the physical and transitional impacts of climate change on our business.

The increasing severity and unpredictability of weather-related events may cause more frequent or prolonged damage to our buildings, leading to operational disruptions and higher costs.

Additionally, failure to keep pace with evolving social attitudes, customer behaviours and preferences may necessitate changes to the design, construction or energy provision of our properties, potentially resulting in reputational damage as well as reduced attractiveness and value of our portfolio.