LondonMetric Property Plc

Good. Okay. Morning, ladies and gentlemen. Welcome to London Metrics full-year results for the period end of March. Nice to see you all. As usual, I'll give you a run-through over the highlights of the year, together with some of the financial numbers, conscious that I don't want to go through all of them, otherwise Martin's got very little to say. I am then going to just go through the detail of the recommended... acquisition that we announced this morning um i'm going to go through it there's not i can't deviate we have a rule 2.7 that i'm there's our lawyer where's christy she's here somewhere oh god front front row uh so i can't deviate off that too much uh and then hand over to martin who'll take you through a deeper dive into the financial review i'll come back and give you a a you know some some for the colour on the portfolio and its performances over the period, and then finally sharing our thoughts on the outlook for the sector and also for London Metric in the periods ahead. We'll open up then to Q&A, obviously both in the room and I think Rose has got some, hopefully we'll have some on the iPad. So, actually, the first thing to do is to welcome, actually, Alistair Elliott, who is due to replace Patrick Vaughan as our chairman at our AGM in July. So those of you who haven't met Alistair, he'll be around later, and I'm sure he'd love to introduce himself to you all. So that's my first point of order. So just an overview of the markets as we see them today. I think since certainly the beginning of the calendar year, we've seen the macro investment backdrop stabilising. The economy is showing resilience. And we think the outlook is improving. There is no recession. We've still got full employment. We have a very robust consumer, as evidenced by today's inflation print. We've continued as a result, therefore, to continue to shape the portfolio. And that has been influenced by structural trends that we see taking place around consumer behavior. And that has strengthened our conviction around the logistics market, particularly the urban logistics, which continues to demonstrate attractive demand supply dynamics. And come on to talk about that in more detail in a moment. That's allowed us for the year ending at the end of March to deliver like-for-like income growth at 5%, helped by lettings, but particularly by rent reviews. And again, I'll come in to talk about this in a bit more detail. Rent reviews overall are up 16% on previous passing, driven by our urban logistics reviews that are up about 21%. However, we have seen the portfolio yields expand 107 basis points, which has seen the overall capital value fall just under 16%. So the outward yield shift has been compensated to a bit by ERV growth, as you can see there at 8.4%. But still, you know, that showed a I think is a 15.7% drop in valuation. And then rental growth over the next few years. Again, I'll come in to talk about this in a bit more detail later. We think that we will capture over the next two years another £11 million worth of reversion through open market and contracted rent reviews. And Martin will go through how we think that that will play out over the next couple of years and where it falls and what is guaranteed and what is open to negotiations. As you might expect, we've continued our disciplined approach to capital allocation this year with more sales than acquisitions. £273 million that have been disposed of and £120 million worth of new acquisitions over the period. And that has allowed us to keep our LTV stable. I think in a terrific place, 32.8%. And again, Martin will talk about the debt stack. And I think the fact that we've got 93% of our debt is now hedged, which is up from 71% this time last year. So our exposure to rising interest rates has been greatly mitigated. So just a quick run through on some of the numbers. As I said, otherwise Martin won't have much more to add. Net rental income is up 10.4%. Earnings are up 8.1%. EPRA earnings are up at 10.33 pence a share. That's up 2.9% on where they were last year. And that has allowed us to announce our final dividend for the period at 2.6 pence this morning. And that will be a final dividend for the year of 9.5p. And this would represent our eighth year of dividend progression. Went on our way to dividend aristocracy. Just another 17 years to go. And that dividend is 109% covered. So it's progressive and it's covered. It puts us in a rarefied territory amongst some of the REITs. As I said, the valuation... The portfolio suffered a 107 basis point outward yield shift, partly mitigated by the 8.4% growth in ERVs. But as you can see there, that saw the NAV, or NTA, sorry, fall to 199 pence, which is a fall in portfolio valuation of around about, I think it's roughly 580 million pounds. It's interesting that this time last year I stood up to announce that the valuation had increased by £632 million. So what we're effectively doing is giving back a large proportion of those gains that we took last year. So then turning to the announcement that accompanied our results this morning, which is a recommended acquisition, 198.6 million for CTE Property Trust, which works out at 85.5 pence per share. It's 100% pay per offer. You can see the exchange ratios there. It reflects a 6.3% discount to their NTA as at the end of March and a 33.2% premium to their three-month weighted average share price. the transaction comes with a unanimous board recommendation. We think that there is a compelling... rationale for the portfolio. You know, this is a space that, you know, this corporate acquisitions, we've done this before. I stood up here four years ago, possibly in the same room, to announce the acquisition of the A&J Mucklow PLC. So this is a relatively well trodden route for us. So you would have expected us to have done a fair amount of due diligence on this portfolio. And we think that, you know, 78% of the portfolio is highly complementary with our own. I'll come on to show you a pie chart in a minute. We think it's the opportunity. We've structured it so that we think we're acquiring it in a cost-efficient way. And we think that our intense asset management approach will allow us to capture not only the rental reversions embedded, but we would hope we might do a little bit better as well. And that's certainly been our experience with the Mucklow portfolio. When I look back at some of the assumptions that we made in terms of rent reviews, in terms of leasing, in terms of re-gearing, and in terms of cap rates, it's gone extremely well for us. And obviously, the merger of the two companies does improve scale and liquidity. You can see there the financial benefits will continue to support our progressive dividend. Our rental income will grow to £163 million, and it will be earnings accretive through the economies of scale, cost synergies, but as I say, also hopefully through reversions. The company has a current LTV, which is below ours, so therefore that that the overall group will drop, LTV will drop. And it also comes with 31 million pounds of cash on their balance sheet, which obviously helps some of those metrics. So if you look at the pie chart here of the company and how their assets are split across the sectors and then what that means to us, to the enlarged group, as you can see, there's an awful lot of synergies. I'm colorblind, so I won't use the colors. across the urban and long-income portfolios, which accounts, as I said, for just about 78%. Offices and high street retail make up the remainder, and I think it would be fair to assume that those are assets that will be monetised over the forthcoming period. The portfolio is 34 assets. They are operationally light, attractive net initial yield with a current embedded reversion to 6.5%, high occupancy, not as high as ours, but again, I would consider that to be an opportunity. And then importantly, really, is the chart on the bottom there. The five biggest assets, as you can see, are very well-located distribution assets. in parts of the United Kingdom that we feel happy with. I've talked about being geographically obsessed, certainly since we came out of the GFC, and that's an important point for us in where our assets are located. It's not just about being in the right sectors. We want to be in the right sectors in the right places. So when you look across Colnebrook, which are Heathrow, you've got Banbury, Hemel, you've got Southampton Airport, you've got Bracknell, we feel comfortable in those places, and that is the five areas largest assets that make up the portfolio so on the basis I'm not allowed to say any more than that I'm not going to read the transaction structure and timetable it's there for you all to read it's set out clearly by our lawyers and I will now pass on to Martin who will take you through a deeper dive into the financial review Martin

Morning all. I think next year, Christy, maybe you can say to him he's not allowed to talk about the numbers either. That would be really very helpful. So against a backdrop of volatile capital markets, rising costs and rising interest rates, our trading performance has been strong. We delivered significant earnings growth and dividend progression. So I'm pleased to report our net rental income is £146.8 million. an increase of 10.3% over last year and again supported by exceptionally strong rent collection stats in the year. We've collected 99.8% of rents during the year, up from 99.5% last year. We consider these levels of rent collection continue to reflect the strength of our occupier relationships and our focus on strong credits in the right sectors in strong trading locations. So despite operating in an inflationary environment, our administrative overhead for the year has increased by only 2.5% to £16.5 million compared to £16.1 million last year. As we continue to monitor our operational costs closely, our EPRA cost ratio has reduced by a further 80 basis points in the year to 11.7%, which is still one of the leading performances in the sector. Our net finance costs are £29.9 million this year, an increase of £5.2 million over last year. We've held higher average debt balances in the year and we've seen our average interest rate increase over the year from 2.6% to 3.4% as the central bank interest rate increases have had a negative impact on the cost of our floating rate debt. Despite these increases in financing costs, our focus on cost control and our rental income growth has driven our EPRA profit to 101.1 million or 10.33 pence per share. That's the first time our EPRA profit has exceeded 100 million in a year. This supports the increase to our dividend for the year to 9.5 pence per share and provides very strong 109% dividend cover. But notwithstanding this strong trading performance, the effect that rising interest rates have had on property yields has recalibrated, as Andrew said, property valuations. So despite reporting record IFRS profits last year, predicated on a valuation uplift of £632 million, we have effectively given that back due to the fall in the valuation of the portfolio of £587.5 million, causing us to report an IFRS loss for this year of £506 million. That decline in valuation has materially impacted the value of the portfolio, which has fallen by 16.6% in the year. The valuation is now at £3 billion. Our gross debt of £1.03 billion is broadly consistent with last year, although the split between fixed and floating rate debt has changed significantly. I'll come on to talk about that in a moment. The net liability position at the year-end is £22.8 million. The major component of that, as in previous years, is rent received in advance and is calculated after deduction of the non-controlling interest in our retail park joint venture. In summary, therefore, our EPRA net tangible assets at the year-end were £1.96 billion, or £198.9 pence per share, a decrease of 23.8% over last year. The decrease in NTA in the year, together with the dividend paid, resulted in a negative total accounting return of 20.2%. Interestingly, despite the significant uncertainty, we have still delivered a positive accounting return over the last three years of 32.5%. In the light of the volatility in financial markets during the year, we've sought to ensure that our debt provides long-term certainty with flexibility and that our exposure to rising interest rates is mitigated. Consequently, as reported in November, we lengthened the maturity by one year on £400 million of debt and then by a further one year in the post-period end period. Additionally, we entered into a new £275 million RCF facility through to November 2025 with two one-year extension options. And we entered into a £225 million interest rate swap to hedge our floating rate exposure. The new facility and our available headroom eliminates our refinancing risks until 2027. So although our debt repayments are more than adequately covered by available resources, we also retain the optionality to continue to crystallise cash from asset sales of non-core assets. The pricing on the new facility is consistent with our existing RCF facility, which eliminates for us the risk of bank credit spreads widening for any refinancings that might have happened this year. The facility is also subject to ESG criteria, which generates a small margin benefit. So our debt maturity now stands at six years, down from six and a half years, despite the passing of 12 months, and we are 93% hedged against future interest rate rises, compared to only 71% last year, the result of a very clear focus on the sales programme, whilst also maintaining a comfortable LTV which sits at 32.8% compared to 28.8% last year. As I mentioned earlier, we have reduced our exposure to floating rate debt significantly in the year and that now stands at only £70 million. Our current cost of debt is 3.4% compared to 2.6% last year and we have unutilised facilities and cash of £416.5 million. We have excellent cover for our banking covenants and in particular our interest cover ratio is 4.7 times against a covenant level of 1.5 times. And finally, given our low level of exposure to floating rate debt, a 25 basis point increase in interest rates would reduce our EPRA earnings by less than £200,000. So our contracted rent roll is now £145.2 million, a small increase on last year, given the loss of £5.2 million of rent from net disposal. But it's forecast to grow to £156.7 million. Andrew will talk later about the embedded reversion within the portfolio of £10.9 million, a combination of open market and contractual rent reviews, which will deliver this increase to the rent roll over the period to March 2025, and of which £1.1 million has already been delivered in the year. The forecast increase to rent roll of £156.7 million will exceed the forecast increase to our finance costs in that period and will generate earnings growth. This supports our confidence that we will continue to be able to grow our dividend, which has increased by 2.7% this year. and which we expect to increase in FY24, and accordingly we expect the increase to our first quarterly dividend for FY24 of 4.3% to 2.4 pence. And finally, a brief look back, which puts the increase in rent roll into context and clearly demonstrates that in the 10 years since our merger in 2013, we've been able to increase our net rental income and earnings per share, by 2.5 times. Our total property return and our total shareholder return, driven both by share price appreciation but significantly most recently by dividends, equate to compound annual growth rates in excess of 10%. And on that note, I'll hand back to Andrew.

Thanks, Martin. So as you can see from the pie chart, the £3 billion portfolio continued to be dominated by our investments within the logistics space, accounting for 73% of the overall asset base. And the portfolio continues to be characterised, as you can see there, with high occupancy, just over 99%, long-weighted average and expired lease terms, with 63% of the rent subject to contractual uplifts. Turning then to the chart on the right, looking at the performance metrics over the last 12 months, you can see the distribution portfolio actually fell in value by 18% as cap rates expanded by 127 basis points, which was offset by 11.2% growth in ERV to give an overall total property return of minus 14.7%. Our long-income portfolio actually fared a little bit better, courtesy of higher starting yields, with 57 basis points of outward yield shift. And as you can see there, our £70 million worth of retail parks delivered a flat performance despite outward yield shift of 47 basis points. So diving deeper into the distribution portfolio, this is made up of three subsectors, which we characterise, urban, regional and mega. £2.2 billion worth of investments. But the largest is our £1.3 billion of investments in urban warehousing, which remains our strongest conviction call. And that's simply through the demand and supply dynamics that we're seeing in the market. And I'll come on to talk about that in a bit more detail later on. As you can see from the data, strong operational performances, excellent ERV growth, and some terrific rent review settlements across the urban portfolio in the year. Similarly, our regional warehousing delivered strong metrics with rent review settled at 17% above previous passing and three-year ERV growth of 26%. A weaker performance across our mega investments over the period. Only one rent review, which was up 8% on a five-yearly equivalent basis. The total property return of 24 basis points, courtesy of greater outward yield shift across the mega portfolio. But overall, the portfolio is still characterised, as you can see there, by some strong occupational metrics, lease lengths, but also geographical weightings of about 80% across London, the south-east and Birmingham, which remains our favoured geographical areas. An equivalent yield there up at 5.3%. Looking across our long-income and retail park assets... nearly £800 million worth of value, 100% occupancy, lease length at 13 years, as I touched on earlier, higher starting net initial yield at close to 5.5%, with now nearly 70% of that rent subject to contractual uplifts. allowed us, despite 57 basis points of outward yield shift, to deliver an overall total property return of only minus 3.5%. It's been a very, very strong performance as rental growth, as well as the high occupancy and high starting yields, allowed us to mitigate outward yield shift over the period. Looking at the investment market, I touched on it earlier. We've been a bigger seller than we have a buyer. I mean, there's very few periods I've actually said that, but it means that we've been able to test our valuations in the open market. And as we announced, the £273 million of the sales were done actually at a small premium to the underlying valuation rate. So it gives us great comfort that even in periods of what have been by and large illiquidity, we've been able to monetize a number of the investments that we consider to be non-core. We consider that interest rates remain the most important yardstick in assessing asset pricing. We are seeing a polarization of sectorial performances, and we expect that to continue. There's been an increase, as we all know, in interest rates, and that must impact on real estate pricing. We have seen equity buyers return for some logistics assets. I think the transparency in that sector is probably further ahead than it is in a number of other sectors. But we've seen very little activity coming from leveraged buyers. Nearly all of the activity, sales activity that we've seen over the last probably five or six months since the turn of the year has nearly every single transaction has been an equity buyer. And the fact of the matter is it's harder to get leverage to work. I've said it before that until we start to see five-year swaps drop down to three and possibly below 300 basis points, it will be difficult for proper liquidity to come back into the system. And what we do expect as the markets settle down and we do expect that five-year swap to drop down is we would expect investors to pivot into sectors with the strongest thematics. And the polarization of demand has rarely been wider. And as I said, whilst we've seen liquidity in the logistics market and some of our long-income assets, there's very little activity going on in some of the more troubled sectors. Shopping centres, regional offices are spaces where there's been very little print, which does beg the question of the validity of some of the theoretical desktop valuations that people have been printing. My view is that if the property market is not going to give you price transparency in some of these troubled sectors, I'm pretty sure the debt market is going to assist over the coming periods. And you will see that the true value of some of these troubled assets will come through as refinancings come to the fore. Looking at the occupational market, as I've already touched on, we think that demand continues to remain strong across all sectors, mega, regional and urban. We're still benefiting from structural tailwinds, whether or not it is an ongoing pivot to online shopping, which obviously has come off its peak but is still well above trend over the last couple of years, localisation, onshoring, and the demand of occupiers that we're dealing with continues to widen rapidly. We're seeing an increasing granularity of new occupiers, whether or not it's not just 3PL, retailers, manufacturers, healthcare, but also a number of new industries that are evolving, particularly around the urban space. I was looking at some of the deals that we've done over the last... eight months or so across our urban warehouse. You know, we're doing warehouse deals with, you know, accident repair centers, with trade retailers, people like, you know, Screwfix, Hounds. We've got McDonald's. We've got coffee roasting houses. We've got yoga studios. We've got Deliveroo. You know, it's just a very, very broad church of occupiers, particularly in the urban warehouse market. You know, it just really isn't about the online demand. And the supply remains incredibly constrained as development starts, drop, and cities convert and lose existing warehouse space. I used this stat before. The major cities across the UK are seeing a lot of urban space taken out of the system. Over the last 20 years, London has lost 24% of its warehouse space. Birmingham has lost 19%. Manchester has lost 20%. There's a lot of space coming out of the system. And that at a time when we're seeing a broadening church of demand is is why we're getting you know ongoing ongoing rental growth and our vacancy you know our vacancy is 0.9 of a percent i mean it's low um so that all you put those two together and not not surprisingly that tension leads to to rental growth and um our rental growth over over the Over the period, a like-for-like income growth was 5%. Our rent-reviewed settlements across the portfolio at 16%, urban led the way at 21%. And if you look at forward projections, the UK rental growth for warehousing for 23% is expected to be 5%. But as you can see there on the right-hand side, some of the major cities will outperform that. The best assets in the strongest cities are expected to exceed those projections. And therefore... We expect to be able to stand here in six months and 12 months' time. With, as Martin said, or I've said it already, the £11 million of rental reversion, we see that as capturable without too many dramas. So looking therefore at our own activity over the period that's delivered £8 million worth of rental uplift across lettings, re-gears and rent reviews. You can see it there, £3.8 million from lettings, average lease term of 10 years. Our re-gears added £1.3 million to our rent roll and those re-gears often were accompanied by extended lease terms, if you can see there, by an average five years. And as I've already said, 2.7 million of rental uplift from reviews, averaging 16% with urban leading the way, and 11 million to be captured over the next two years. And as you can see, if you look to the far right hand of that bar chart, you can see that Open market reviews will be 4.9 million. 6 million of that 11 will be coming from contractual uplifts with very little risk attached to that. Of the open market, of that 4.9, post-period end, we've already agreed 1.1 million of that uplift. So we feel very, very comfortable that that will be delivered through to our income line. Our activity over the period, our asset management activity, you know, it... It's part of our DNA, as most of you in the room know, and we've continued to de-risk our developments by adding, you know, new or higher quality income over the period. 900,000 square feet of developments completed are underway, which secure about 8.6 million of new rental income. We're always looking to improve the quality of the estate, either through acquisitions or disposals, but more importantly, you know, through asset management and improving the buildings that we already own. I mean, the capital that we allocate At a preference, I would much rather spend it on our existing buildings. We get a much better bump. On average, we're seeing a 10% return on our CapEx when we invest it in our existing portfolio. The issue for us is we would just like more of this. But it's delivering on two metrics. It's delivering ERV growth, but it's also delivering EPC improvements. You can see there on the right-hand side that 90% of our portfolio is now EPC rated A to C. That is up from 74% two years ago and 5% this time last year. We're on a positive trajectory. We expect that to continue. What I would also, though, say is we are very, very good stewards, though, of poor buildings. There may be the odd year that that EPC number drops. And the reason it will drop is because we bought a building that requires some treatment. We have experience, we have the energy, the desire, and we have the capital to bring old buildings, inefficient buildings, back into economic use. We've been doing it across many sectors for very many years. We enjoy it, and we think it is incredibly rewarding. both personally but also financially. So there will be times when that number drops a bit, but we are excellent stewards of these buildings. The easiest way to improve that 90% is to sell the 10% that don't qualify and give it to somebody else. But all we're doing is kicking that problem down the street to somebody else. I don't think we're improving the planet. So then looking at the outlook, finally before we open up to Q&A, as we all know, We have a challenging macro environment. However, we expect that to settle. As I touched on already, we think the consumer is incredibly resilient. We have great savings ratios. We have full employment. It's almost impossible to have a deep recession with full employment. Inflation rates are falling. maybe not as quickly as some would like, but they are falling, and that will lead to an inflection point for interest rates. This will bring confidence back and ultimately improve liquidity. And I come back to talk about the five-year swap rate, which I think for real estate is much more important than the Sonia. In our preferred sectors, the demand and supply fundamentals remain incredibly strong, and that is really changing the macro trend of evolving consumer behaviour. That's creating a tailwind with a broadening array of occupiers that demand representation within our space. Constrained supply continues to create conditions for ongoing rental growth for the best assets in the strongest geographies. However, just to touch on it, there are troubled sectors that are going to be increasingly exposed. And in this environment, it's going to be very, very difficult to paper over some of those structural cracks. If the property market won't deliver the price transparency, then the debt market surely will, and we actually think that that market uncertainty will lead to more opportunities for us, whether or not it is motivated vendors, whether or not it is debt refinancing, whether or not it is higher borrowing forcing more vendors into the open market. or whether or not it's corporate consolidations to try and capture attractive synergies, efficiencies, and improve liquidities, similar to the lines of the announcement that we've made this morning with regard to CT. We think there will be more of that available. So there will be motivated sellers, there will be debt refinancing, throw up more opportunities, and there may well be more M&A within the sector. So finally, before I finish up and open up to Q&A, I would just say it is Patrick's last results presentation, which is a very sad day for me personally. I've worked with Patrick... for more years than I can remember in various different organisations. He has been a wonderful colleague, an incredible chief exec and the old days chairman, but also a terrific mentor and friend to me. So I will miss him enormously. but he will remain, obviously, he will remain close to us as a major shareholder. So I'm going to have to be a lot nicer. And the dividend will be going up, yeah, the dividend will be going up. But thank you, you know, Sir Patrick, you know, it's been an amazing journey. I wouldn't be here without you. So thank you very much. So on that note, before it gets too emotional, let's open up the lines to some Q&A. Either lines or in the room, I don't mind. I don't think we've got a preference here. Anybody want to kick off? Max.

Thanks so much for the presentation, Maxime McNemis. I'm not going to ask any tough questions around the transaction this morning. I presume you can't answer much on that. But one of the things you mentioned was about five-year swaps, and we're closer to 4.5% than we are to 3% today. So, yes, inflation might come off a little bit, but without that severe economic recession – You know, it could be a long time before we get to that kind of level. I'm just kind of interested to see what you think that means for the transactional market. Yes, we'll have some refis that kick deals and opportunities out there. But ultimately, other than that, it's mostly likely just to be equity buyers for considerable time. Is that fair?

Look, that's a rational assumption, Max, although I would say there was a three-day period at the beginning of February where actually when the markets thought that inflation had been tamed, we saw the five-year swap drop back down to about 300 basis points. Like I said, it was... It was for a very short period of time. The green on the screen didn't last very long. I think our shares were up 80% in the day. So it can happen, and it can happen quickly. It went up pretty quickly. I mean, this time last year, we were probably looking at five-year swaps around about 120-ish. I can actually plot the five-year swap for you over the last 12 months, I can assure you. It's quite an important metric for me. So it could be. Markets have become, I mean, I talked about it before, the liquidity in the logistics market and also in long income, a lot of pension fund activity, a lot of the transactions that we've been doing. Or, you know, we announced a few weeks ago a portfolio of multi-led industrials that we sold to Blackstone. There was a deep pool of buyers for that. I mean, we had four or five bidders on that market, all of them equity value. And what we'll do, those buyers virtually were not pension fund, but they were equity buyers today with the expectation that they'd put the debt on further down the line. We've seen a bit more interest around special purchasers, owner-occupiers. A bit of repurposes. So, look, there is liquidity. There's a lot more liquidity today than there was, you know, there was back in November, October, November, December of last year. But this is for good assets. This is in good sectors. I mean, I can't really talk about what it's like to own, you know, offices outside the West End or shopping malls and stuff like that. But, you know, fortunately, we don't.

That's great. Thank you. And maybe just one other kind of follow-up, I guess. You know, you mentioned that urban is still your biggest conviction call. But given the repricing that you've seen in the likes of mega and the regional space as well, I mean, has that changed at all? At the margin, has your sentiment changed given where we're... You know, if you were drawing a slate today, a clean slate today, has that changed?

No, look, I think... What appeals to us, obviously, in urban is our ability to capture open market rent reviews. In mega, that's more difficult, partly because the structure of leases are more linked to inflation increases. I mean, we don't rule it out. I mean, I still think mega is a wonderful asset class. And I think regional is fantastic. And just that I prefer urban. It doesn't mean that I wouldn't buy them. But it's all about – for me, it's about – real estate can be a wonderful asset class for reliable, repetitive and growing income. It can be a very low-energy compounding machine. And we want to just improve that compounding the best we can by squeezing out a little bit more rental growth. where it's available and at the moment that's easier to capture in urban like I said but still I mean I still think the fundamentals around the mega the mega shed market the regional market incredibly strong um Some of those other sectors don't benefit from the same granularity of demand that you're getting in the urban space. I am truly surprised every time Mark and his team come to me with a letting. I have no idea what sector it's coming from. I mean, no idea. I mean, I'll try and tell you I'm pretty smart on this, but I'm really not. That's great. Thank you. Thanks, Max. Thanks. I will just read out some other questions I've actually got here on the screen. So this is from Hemant. Morning, team. You have a strong capital allocation track record, which is appreciated. You mentioned you'd like more of your own portfolio, and given that you can help us understand how you consider buying your own shares at a discount as opposed to versus the CTPT deal that we announced this morning, The transaction for CTP, the structure of it has been carefully considered. It is a paper transaction. We're not using money that we could have cashed, that we could have used to buy in our own shares. It's purposely been structured this way. Hemant's touched on a point that's been widely discussed at our board, particularly with our outgoing chairman. And so I think the paper offer of the structure sets it apart from how you would – if you wanted to buy in your own shares. So that's – it's a slightly – I think it's a slightly different question. I think it's an apple and a pear. But happy, Hemant, to take that off you – to take that offline if you want. Second question from Gavin at Stockwatch. How open is the property market and how open is it to consolidation in our opinion? Are people's heads buried? Have we looked at many of these ahead of announcing the deal that we did this morning? Look, I think it's a sector, you know, there's market cap, lack of liquidity, shares trading by appointment only. You know, I think it's an interesting part of the market. I really do. And it's pretty uncovered. I mean, Miranda does a good job on it. But it's not really written about. And as a result, there's not a huge amount of liquidity in that space. I mean, we think we've been opportunistic in identifying the company. We think they've assembled a very high quality portfolio that sits very neatly with ours. They've got a good debt structure that is attractive to us. And we think we're doing it in an efficient way. That doesn't appeal, that doesn't apply to every one of those companies. But beauty is in the eye of the beholder. I'm just going to keep reading until somebody puts their hand up, okay? Okay. So a question here from Mike at Jefferies. Is the investment market making a sufficiently significant distinction between urban, regional and mega logistics pricing? I think the interesting thing about those three subsectors today is it comes back in some ways to Max's question or point around five-year swaps. It's a lot easier to find a pension fund who wants to write a check for £20 million equity than it is to write a check for £100 million equity. in a mega investment or a very large region investment. So I think that I would see there's more liquidity in that smaller lot size. Huge amount of liquidity, by the way, in the multi-let space. Huge amount of liquidity in the multi-let space.

And you'll see – a lot of which we are doing ourselves, seeking out special purchases, off-market transactions. And there's no doubt about it, in my view, the market is hardening for the good quality product. We announced a sale today that actually we had under offer back in January when Andrew referred to there being basically a no-bid market. We had it under offer to a USP-type purchaser who just dragged their heels on and on and on to a point that we just said – we looked at each other and we said, look, the ERV has gone off on this asset and the yields have come in. Let's give them the opportunity to buy it, but they've got to pay a keener price. They refused to. We then found another purchaser, which we've announced a deal today, which was 25 basis points keener. So it's good evidence of market hardening. There's another transaction that I've heard about in North London – At the market, it's a well-known Internet retailer, beginning with A, 13 years left on the lease. And in January, that would have been priced at 4.5%. It's under offer at 3.5%. So there's some real return. It's not just the USPs now. It is the pension funds, particularly the local authority pension funds, as we've evidenced today with the DHL sale.

I think that's just also, just to go back to Mike's question, and I touched on a little bit of this, it's not just lot size. A lot of this demand will want open market exposure. I think that's, and that's more rarefied in the mega logistics space. Okay. I'd say vast majority of mega leases, 75% as a number, excuse me, would have some form of inflation linkage in there rather than over market. In regional, that number would drop to probably no more than 50%, and then in urban it would be much lower again. And a lot of the money, certainly the opportunistic money that Valentine touches on, rather than the pension fund money, will want exposure to the market rather than to inflation. And therefore then you're left with, if you're looking for pension fund money, they will tap out at a certain lot size. that's how I would probably characterise it. But by the way, real estate is an art, not a science. Just in case you fall into that. Right, I haven't got any more on the screen. No more in the room? Great. All right. Well, thank you very, very much for your interest and your time this morning. And if you've got any questions you don't want to announce in public, then we'll be hanging around for a bit, and we're happy to take them there. So thank you ever so much.