LondonMetric Property Plc

Morning, ladies and gentlemen, and welcome to London Metrics full year results for the period ending the 31st of March 2025. Usual arrangement this morning, I'm going to start with an overview of the year gone, go through some of the highlights of the financials. I'll get all the good numbers out of the way. I'll pass over to Martin. And he can take you through the detail and hopefully keep you interested. And then I'll come back and talk about the market and the activity that we've executed before finishing up with our thoughts for the period ahead, both at a sector level but also at a portfolio level. We'll then open up for Q&A both in the room and on the phones. So if we start with an overview of the last 12 months, the companies continue to build a leading portfolio of triple net income assets. The portfolio is up at just under 6.2 billion and continues to demonstrate exceptional income characteristics. Some strong numbers with an earnings per share up 21%. It's allowed us to progress our dividend for the 10th year in succession, which is now up 18%. And we continued to capture the cost synergies that we said we would this time last year as we were closing the LXI takeover. And that has allowed us a sector-leading EPRA cost ratio of 7.8%. Martin will come on to talk about that in a little bit more detail and our ambitions to reduce that even further. Our portfolio continues to be aligned to the strongest thematics, logistics, convenience, groceries, healthcare and entertainment. And again, I'll go on to talk about those four key sectors later on in the presentation. Over the year, we've continued to add new income through rent reviews, lease renewals, asset management initiatives. So 15 million of new income in the year, like-for-like income growth of 4.2% and an increase in our ERV of 3.1%. The portfolio continues to be reversionary and we remain confident that we will capture at least 27 million of further rental uplifts through those three various initiatives over the next couple of years. Our scale is continuing to drive economies of opportunities. We said at the time of the LXI takeover that actually getting bigger was not only going to deliver cost economies, it was also going to deliver opportunities too. And we are unlocking those external opportunities with further M&A activity. I'll come on to talk about that in limited detail later on because I can't actually talk about anything else that isn't already public. And we have, as you can see, over the last 12 months executed on £685 million of investment activity across 104 assets. And that's been equally balanced between sales and acquisitions. And again, I'll come on to talk about that further. And our recently assigned BBB plus credit rating is giving us greater capital market optionality as well. And that, again, is something that Martin will come to talk about later on in the presentation as we talk about our refinancing options in the years ahead. Turning to the financial numbers or the highlights, these are all the good ones. Net rental income at £390 million is up from £175 million 12 months ago. That's driven our earnings up to £268 million. That's an increase of 120%. which has driven our earnings per share up, as I said, 21% to 13.1 pence, and has allowed us to declare this morning a final dividend of 3.3 pence, which brings 12 pence for the year, an increase of 17.6%. We've also announced this morning an intention to pay a Q1 dividend of 3 pence a share, which is an increase of just over 5% on our Q1 last year. I've already referenced the portfolio value, which is up 2.5%. That's helped drive an NTA increase of 3.9% to 199.2%. And our activity, both in terms of M&A and also investment activity, both sales and purchases, has meant that we've retained an extremely conservative LTV at just under 33%, at 32.7%. So what can I tell you about our recommended offer for urban logistics at REIT? This is all in the public domain, so I'm maybe not telling you anything that you haven't already read. It's an offer that values the company at £700 million. It's a mixture of shares and cash, and it represents a 22% premium to their undisturbed share price. We think that this is an excellent transaction for both shareholders and it will consolidate our position as the UK's leading triple net REIT and increases our market capitalisation to circa 4.5 billion. The combined portfolio, 7.3 billion, will continue to be aligned to the structurally supported sectors and it increases our logistics exposure from 46% to 55%, absent sales obviously, but that will be the spot headline number. And it offers us potential for cost in operating synergies through increased economies of scale. And as I've already intimated, we actually think that there is more to shoot for in reducing our cost ratio with a target of 7.5% or lower. We also believe that our more... Active asset management approach will capture embedded reversions, as it has done within our own portfolio, and we expect to be able to use those skill sets across a wider portfolio in the coming periods. The offer has been structured to ensure that we retain our conservative balance sheet, with the LTV at 35% and an all-in cost of debt at 4%. So looking at how the portfolio will evolve, pie chart, which I'll come on to talk about the left-hand one in a little bit more detail later on in the presentation, but that's our current portfolio today. You can see the urban logistics pie chart in the middle, and then this is what the pro forma would look like, 7.3 billion of gross assets, and as I said, logistics at 55%. Urban logistics would be actually at 40%, and that is, as you know, our strongest conviction call. As well as that, the portfolio will increase not only our income but also the asset and geographical granularity of our portfolio, which is also important to us. Average lot size, you can see if you do the sums on the right-hand column, is only £11 million, which actually is quite important. I'll come on to talk about it later. It's quite important in today's investment market, where actually we're seeing more liquidity for smaller lot sizes than we are for bigger lot sizes. And that is all a factor of the debt markets, despite bankers' efforts to give us the tightest possible margins that they were able to. Thank you. I really appreciate it. The swap rate is more elevated than it has been for a while, albeit it is off its peak, which is great news, but it's not as low as I'd like it to be. And so smaller average lot sizes is a distinct positive. I can't say any more. Before I get into trouble, I will hand over to Martin.

Morning. Thank you, Andrew. I think when I stood here last year and I made a little mental note to myself, don't do an M&A transaction three weeks before the year end. So my little mental note to myself this year is don't do two M&A transactions around the year end. But our focus this year has been on integration, following last year's very transformational corporate acquisitions. And these results reflect the full benefit of that activity. We've delivered very significant earnings growth and dividend progression. I'm pleased to report that our net rental income is 390.6 million, an increase of 123% over last year. In addition to 207.5 million of additional rent from LXI, We've included just under £6 million of additional rent from CTPT and rent from our other acquisitions of £9.5 million. Our rent collection remains exceptionally strong. We've collected 99.5% of rents during the year. Our gross to net income leakage remains very low at 1.2% and our administrative overhead for the year is £27.1 million. But our EPRA cost ratio continues to be sector-leading at 7.8%, a little better than I forecast this time last year as we have taken significant economies out of LXI and the CTPT business that we acquired. The increase in overheads in the year reflects increased headcount and remuneration costs. Our headcount is now 48, up from 35 prior to the LXI acquisition. That is a combination of employees coming to us from LXI, but also new recruits to ensure that we have the right level of resource and the right skills for managing the enlarged group. Our net finance costs have increased to £97.1 million compared to £37.4 million last year. We acquired an additional £1.2 billion of debt from LXI at an average rate of 5.2%, compared to LNP's cost of debt at that time of 3.3%. So this, together with costs attributed to the income strip liability, are the main contributory factors to the increase in finance costs. So despite this increase in finance costs, the tighter cost control and our focus on rental income growth has driven that per earnings to £268 million, or 13.1 pence per share, an increase of 20.7% over last year, and that supports the increase to the dividend for the year to 12 pence a share, providing very strong 109% dividend cover and full cash cover for the dividend. The trading performance has been strong. with portfolio valuations increasing by £106 million in the year, allowing us to report IFRS profits of £348 million compared to £119 million last year. So whilst the income statement this year demonstrates the significant impact of last year's acquisitions, the balance sheet already reflected that increased scale of the enlarged group, the LXI deal, having happened on 5th March. The value of the portfolio is now £6.2 billion. And whilst much of our focus this year has been on the disposal of non-core assets, the combination of acquisitions, development expenditure and accretive capex has actually exceeded our disposals by £50 million. So that, together with the revaluation uplift of £106 million, has contributed to that increase in the portfolio value. Gross debt, which I'll come on to in a moment, is £2.07 billion and the cash balance is £81 million. The other net liability position at the period at year end is £93 million. Rents in advance of £63 million are the main component of that number. So in summary, our EPRA tangible assets at the year-end were £4.07 billion, or £199.2 pence per share, an increase of 3.9% on last year, comprising surplus earnings and revaluation uplifts, providing a 9.7% total accounting return. So as I said a moment ago, our gross debt balance is now £2.07 billion. The £1.2 billion of debt added to our balance sheet through the LXI acquisition was both shorter dated and more expensive than the existing LNP debt. The £700 million refinancing undertaken at the point of acquisition was on more favourable terms, of longer maturity and cheaper. And since that time, our increased scale has helped us to secure an investment-grade credit rating with Fitch of BBB+. Our financial position has been further strengthened and diversified in the year. We have entered into a new £175 million revolving credit facility with SMBC, a new lender to us, on terms ahead of our existing arrangements in terms of maturity and price. We have extended the maturity by one year on £975 million of our revolving credit facilities and consequently and despite the passing of one year our debt maturity now stands at 4.7 years compared with 5.4 years last year. And our average cost of debt as Andrew said is 4% compared to 3.9% last year. Our interest cover ratio is 4.2 times. and our net debt to EBITDA stands at 6.4 times, comfortably within the Fitch upper target of 8.5 times. Our policy continues to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. We retained all of LXI's hedging on acquisition and have required £339 million of current and forward starting derivatives in the year and extended protection on a further £150 million of debt at an average rate of 2.9%. So our drawn debt therefore is fully hedged at the year end and through until April 2027 and we expect floating rate debt to remain substantially covered until its maturity. And our LTV, as Andrew said, is slightly better than last year at 32.7% compared to 33.2%. Looking forward, we'll continue to manage our debt arrangements to ensure that refinancing risk is mitigated and that we are able to take advantage of that increased scale to diversify our funding sources. Since the year end we've entered into two further facilities for £150 million with JP Morgan and £200 million with Lloyds. These facilities mirror the SMBC facilities in terms of price and duration that I mentioned earlier. We have £350 million of former LXI debt which matures this autumn and we have ample resources to cover its repayment. We have prioritised the sale of weaker and non-core assets acquired through our corporate acquisitions and have successfully substituted approximately 600 million of assets held in secure facilities to facilitate that disposal programme. Further to that, our successful credit rating now allows us to plan for possible future debt capital market activity in the form of a public bond issue and further private placement activity as we plan for debt maturities coming at us in finance year 27 and finance year 28. Continuing to look forward, our contracted rent roll at the year end stands at £340.4 million, which will grow with the inclusion of rent on the Highcroft acquisition and reversion within the existing LNP portfolio to £373.5 million. Looking further forward, the urban logistics acquisition is expected to add £63 million of contracted rent and short-term reversion within that portfolio of £14.4 million. The rent roll will increase as a result of that to over £450 million. This will generate significant earnings growth, which supports our confidence that we will continue to be able to grow our dividend. And Andrew mentioned earlier, we've announced our intention to increase our Q1 dividend for FY26 to 3 pence per share, which is an increase of 5.3% on the same period last year. And finally, a look back, which puts the increase in the rent roll into context, clearly demonstrates that in the last 11 years now, we've been able to increase earnings per share more than threefold. And we're in the 10th year of dividend progression with excellent dividend cover. In particular, this year has marked a material step up both in earnings and in dividend. Our total property return is strong with an 11-year CAGR at 9%. And a shareholder return driven both by share price appreciation but most significantly by dividends equates to a compound annual growth rate in excess of 10%. And on that note, I'll hand back to Andrew.

Thanks, Martin. Just a brief comment upon the investment strategy, just to remind you of the four key subsectors that we're invested in. The portfolio continues to be aligned to the strongest thematics and owning mission-critical assets within those led to strong occupiers. Logistics remains our strongest conviction core, particularly urban logistics. with incredible rent reviews capturing the reversions, which I'll come on to talk about later. Our entertainment and leisure investments continue to benefit from the shift from material to experience. And convenience retail and grocery builds on the thematic that time is an increasingly more valuable commodity. And our healthcare investments continue to enjoy a strong demographic tailwind. So diving down into the numbers in a bit more detail, You can see there total assets of 6.155 billion, net initial yield of 5.1, capital value appreciation of 2.5, helped deliver a total property return across the portfolio of 8.3. Strong performances across all four key sectors. Logistics 7.1, driven by a 7.6% total property return across the urban logistics investments. and then strong returns both from entertainment and convenience, which enjoy slightly higher starting yields than our logistics investments. And our healthcare delivered a 9.9% return, where we've seen some small yield compression allied to guaranteed rental growth. I've touched on our investment activity. So if we start with disposals first, as I've already referenced, the investment markets continue to be influenced by the five-year swap and the overall cost of debt. There is, however, healthy activity across the winning sectors. And as I mentioned earlier, we are seeing the greatest liquidity for the slightly smaller lot sizes with owner-occupiers, private businesses, family offices. all active across the investment market. In the year, we sold 342 million 72 assets. That works out an average lot size of about 4.75 million. And as the pie chart shows you at the bottom, we have been active in disposing of assets and exiting sectors, whether or not it's assisted living, hotels, car dealerships, offices, training centres, large format food stores, et cetera. I mean, Will and the team have been incredibly active there. in getting out of what we consider to be non-core sectors or non-core assets. In the year, as well as selling £342 million, that included £202 million worth of LXI assets across 54 individual properties. And that is roughly about 7.5% of the total portfolio that we acquired a year earlier. And as you can see there, bang in line with the prevailing book values. Looking at acquisition activity, again, as I've already intimated, we remain a thematic investor, allocating our capital to the structurally supported sectors, with 32 assets acquired for a total of 343 million in the year, 87% of which were invested in the logistics sector. We're continuing to see five pockets of opportunities, as again is highlighted here on the pie chart, whether or not it's pension funds increasingly looking to exit direct ownership of real estate. Sale and lease backs with some of our key operators is a great source of opportunity for us, as indeed are forward fundings from developers who are finding it difficult to get development finance from lending banks. We've also benefited from open-ended funds receiving redemptions and the need to monetise assets quickly. And obviously our activity in the M&A arena has allowed us access to around £1.2 billion worth of properties, which we remain hopeful of securing. You can see then the average acquisition yields of 6% net initial with a reversionary yield of just under 7%, 6.8% to be precise. Asset management, this is probably one of my favorite slides. Our activity reinforces one of the best asset management teams in the industry with 340 initiatives. That's effectively one a day and certainly demonstrates the effectiveness of being in the office five days a week, at least five days a week. Like-for-like income growth, 4.2%. Portfolio occupancy post-period end is up at 99%. We've already referenced the reversion that we expect to capture over the next couple of years of 27 million. And we've continued to improve our properties which we always do. I mean, I always find it quite amusing when people say, worry about, you know, what are you going to do about your EPC ratings? I mean, the best money we allocate is to our own properties, OK? And that's evidenced by not only our investment activity, but also the fact, you know, the CapEx programme that we commit to some of our older assets to improve their letting and rental potential, but also their EPC ratings. A to C are up to 92%, our A to Bs are up to 58%. The 15 million additional income that we secured, 9.4 from rent reviews, that's an average uplift on a five-year period of 17%, with open market reviews being settled on an average uplift of 40%. We've highlighted the performance of the urban portfolio, with an average uplift across that portfolio of 24%, and open market reviews settled on average at 48% above previous passing rents. That is why it is our strongest conviction call. Our asset management has continued to look at leasery gears and lettings, adding amenities, 68 lettings, 5.9 million. On an average uplift on previous passing rents of 25% and a very impressive waltz of 19 years. So last two slides. First of all are the outlook. We have assembled a six year billion pound portfolio that is well let, is all weather and enjoys triple net income characteristics. As I've already touched on, macro events will continue to influence investor sentiment across the real estate sector with gilt and swap rates having a massive impact on investment markets. However, We are optimistic that continued interest rate cuts, decelerating inflation, wage growth will continue to bring more confidence. The UK consumer remains incredibly resilient with full employment and real wage growth. In the real estate sector, we think polarisation will continue and that the sectors with the strongest fundamentals will continue to win out. To take a phrase from Mike, it's all about bed, sheds and breads. Disruptive sectors are seeing CapEx, OpEx and letting incentives continuing to dilute returns. And we remain convinced that there are opportunities for external growth, both at an asset level, a portfolio level, a funding level and obviously future M&A. The market dynamic is continuing to create further opportunities. There will be more consolidation in the listed markets. There's also ongoing structural shifts in how pension funds and institutions hold their direct real estate that will create opportunities for us. And scale provides, as Martin's already touched on, better access to cheaper and more diverse debt. So finally, our focus for 2026 as we look at the current financial year, 12 months ahead. Full occupancy, exceptional income with longevity and certainty of income growth underpins our triple net portfolio. We continue to invest in the winning sectors. We will look to own mission-critical, high-quality assets that fit with our triple net strategy. We enjoy exceptional income and growth and will continue to capture the embedded reversion and the value enhancement opportunities through our active asset management programme. And we will look to improve our efficient and scalable platform with a wider range of opportunities that will continue to propel our earnings and grow our dividend for the foreseeable future. So thank you very much. That's the end of the formal presentation. Thank you for listening. Thank you for attending. So I'm very, very happy to open it up to Q&A. If we start in the room and then maybe we can go to the screens later, assuming there is anybody on the screen. So any questions? Max finished his sandwiches. Yeah.

Thank you very much for the sandwiches. Max Nemo at Deutsche Numistik. I've got a couple of questions, if I can. You talked, obviously, about the urban logistics strategy, but can you maybe talk a little bit about regional and the megabox strategy and where that sits in your thinking as part of this kind of enlarged portfolio? Second question, if I can, is on swap rates. You mentioned just in the past that you... that they're not quite where you'd want them to be. And I think in the past you've kind of said around 3.5% was where you'd like things to be. But, you know, do you... I guess the question is do values need to... Sorry. Does the property market need to kind of adjust its assumptions on where that should be and do values need to adjust further on that front? And then final question, if I may...

Stop, stop, because I'm going to forget all the questions. You're kidding me. I'm a real estate guy, yeah? What was the first one?

Yeah.

I don't even remember myself now.

Regional box. Okay.

Look, we like them. We think that regional and mega have a place in our portfolio. They don't enjoy the same organic rental growth dynamics that you get in urban, generally because a lot of the lease structures are indexed as opposed to open market, and so therefore it's difficult to capture the real pizzazz that we're seeing in the urban logistics space. But we're very, very happy to own them. I mean, in the period... We announced a £74 million funding of a 400,000 square foot box in Avonmouth that's let to Marks and Spencer's, which actually has the best rent review you can ever have, which is the higher of open market or indexation sort of thing. So we quite like those. But that's fine. But it's just the fact we like to get greater exposure to organic rental growth as opposed to the contractual. I mean, I think contractual rents in the portfolio today are around about mid-70%. Obviously, with the urban transaction, that will fall. And that would be one of the attractions. So it's not that we don't like them. It's just that we want to get greater access to the market dynamics. So the second question was swap rates, wasn't it?

Yeah, just do property values need to correct more?

Look, I think that property values have to reflect interest rates because I think interest rates are the yardstick by which all investments should be assessed. Now, I think that if you're invested in a great sector, if you've got a great asset where you've got organic income growth, then I think that the yields look pretty well set. I mean, we've talked about buying off an initial yield of 6 with a reversion to 6.8 and maybe with further growth we get to 7. You compare that against our current, what would be our marginal cost of debt today. If you take the swap rate, say at 3.80, you add... a margin of 130 in, you're at 5.1, you add in a few undeserved fees. Did you get that, guys? 130. 130, you know, you're in at 5.2. I actually can't believe I didn't go lower, but anyway, I'll keep the audience. You know, you're in at just over 5, and you're buying an asset at 6, so I think that's fine. I think my views on some of the ex-growth legacy sectors are pretty well known, where there is no growth, and actually, you know, your values are just going to melt away. So I think that there's nothing wrong. And by the way, I've lived in a period where we've had probably yields way below the cost of debt, but then we've had unbelievable confidence in growth that will break through that. I think for the wider sector is what I talk about. I think that for the wider sector, I think you will see more liquidity when swap rates get to 3.5% and preferably below. And when you say my preference is for 3.5%, my preference is for 2.5%.

What's the third question? No, no, you've answered it.

Oh, have I? Oh, great. Clever.

Rob? Great. It's Rob James, BNP Paribas. Just following on from Max's question, Martin, obviously you've got a credit rating now, BBB+, any kind of colour you can give in terms of plans to utilise that going forward?

Look, Rob, we are... His requirement of my team is optionality. And so when you look at that debt maturity in the autumn, we were always concerned. Sitting here last year, if rates had fallen by now, we would have probably refinanced it. Today, we probably wouldn't refinance it. The new facilities we've put in since the year end have given us the ability. We've got the money to do that, but we're also preparing the paperwork for a public bond issue and for a private placement because I think we need to be in a position that if rates do come in and it's good to go, we want to be able to go. We don't want to say, look, give us two weeks while we sort the paperwork out. So it's in play. Public bond pricing is not quite where Andrew was talking about, but it's not so far off now. Private placement is still more expensive.

Okay, understood. And then, Andrew, if you put on a kind of small Buffett hat momentarily, one of your comments that you made earlier today was talking about time is an increasingly valuable commodity, and obviously that plays in nicely to some of the subsectors that you want to grow, like convenience, for example. If I think about the value of time, I think about it in two ways. One, I could think that it would increase broadly in line with wage growth, because effectively you value a time when you're not having to work at roughly similar kind of value per hour, but also the availability of time, right? And if we go back 50, 100 years, availability of time previously was very very low because people didn't have you know things like washing machines whatever it might be roll forward to today the the driver of increased availability of time is things like you know ai or productivity benefit benefiting measures whatever it might be so when you say time is increasingly valuable commodity i don't disagree with the value point but i wonder if there's a debate around the availability of it and then how that links into your strategy going forwards

Well, I referenced it with our investments in groceries and a view that 20 years ago, to your point, you might have spent an hour and a half or something going around your 130,000 square foot. Well, yours wouldn't have been a Nasdaq superstore, but mine was. And that would take you an hour and a half, and that's time you're not going to get back. The chances of my children spending more than 30 minutes doing a grocery shop is pretty low. And therefore, there is an increasing view that convenience therefore trumps experience in a grocery shop. So that's why we're not big format food stores, why we're convenience food stores. But that also goes to why we actually would rather invest in out-of-town retail parks than we would in... in the wider shopping centre market. You don't want me to get onto offices and the fact that people are demanding more optionality about where they want to work and whether or not they need to actually arrive in their office. Fortunately, we're five, you know, what's our strapline? Five together, two wherever. But that will have an impact on offices as well, probably. But the offices doesn't fit the triple net strategy anyway, so we don't have to get into that and I don't want to offend any more people than I already have.

Thank you very much. Sam Knott from Coalytics. Thanks for the presentation. First one, maybe a simple one. You talk about reducing your EPRA cost ratio. Is the plan there to reduce absolute costs or sort of purely naturally by scaling up the size of the company, the rent roll?

Well, hopefully both. So let's deal with the first bit. We will benefit from a full year of the savings that we've already printed or we've already executed from, for example, the LXI integration. You don't make savings. They don't all come through immediately. So we'll be able to see the annualized impact of that in the current financial year. And obviously, as the rent roll gets bigger, then obviously we're able to push that through. Every cost ratio is an important metric for our business strategy. I know some people don't think it's that important, but we do. You know, that's why we only have actually 47.4 people, not 48, in our business. So that's because somebody works two days a week, so I've downgraded it.

Thanks. And then on the point around, you've been very clear on the growth embedded in the portfolio over the next couple of years. When we're looking at more long-term growth rates, do you see, and maybe between your sectors it's different, where do you see those long-term growth rates? Are they inflation plus a bit, or do you think they're more in line?

Well, look, we have a portfolio that is exposed to both inflation and to the wider market. We think that I think the organic rental growth in the wider real estate market is actually hard to identify. I think it is around bed, sheds and breads, to quote Mike. And that we think will give us better than inflation. But we're very happy to have an inflation floor too. As I indicated in my answer to Max, we would be quite happy to have a little bit more of the market exposure in certain subsectors. But I don't think organic rental growth is universal across the wider real estate market.

Thank you.

We're probably limited on questions because so many of the team are actually offside with so many advisors involved in the M&A transactions. That's probably why we're not allowed anymore, is it? Matthew, you must have a question.

Matt Norris from Gravis. Just looking to the future and drawing on from this question about rental growth and cost of debt. So as you look to the future, as you look to 2027, 2028 and the repricing of debt, what gives you confidence that you can grow rents faster than your cost of debt increases and that we continue to see future dividend growth?

Yeah, I mean, rental growth or income growth is a factor of two things. It's obviously organic rental growth. There's inflation, obviously, heavily linked. But the big bit for us is actually going to be asset management, how we can add value, we can create new opportunities. I mean, actually, when you look at our activity, where's my slide gone? If I go to slide 20, you know, you look at the rent reviews that delivered 9 million of rental growth, which is what you would all maybe could have predicted that. Actually, extending leases, adding amenities, carrying out lease-free gears has actually added 25% uplifts. And that's the bit that's very difficult to identify here today is what that looks like. What I do know is we have an incredible team, and they just do it year in, year out. And I have deep confidence that of the 15 million, six actually came from initiatives that we didn't even know about maybe a year or two ago. It's great when you're in a winning sector. You get some incredible tailwinds. If you own great buildings, your tenants want to stay with you. Tenants want to stay with you, guess what happens? They invest more money in your buildings. They invest more money in your buildings, they want to stay longer. They want to stay longer, they over time will come around to the idea of paying you more rent. That is what's great. There's nothing so wonderful as being in a winning sector and owning the great buildings with wonderful occupiers.

Thanks very much.

Oh, sorry.

Good morning. Eduardo Gigli from Green Street. So a conceptual question around sort of your net lease positioning. So you're mentioning you want to reduce your contractual rent exposure and reduce walls potentially as well. Isn't that antithetic with being a net lease REIT today? And then also, how do you think about your cost of capital between being a net lease REIT and being an industrial-exposed company as well? Because obviously you're trading at a stronger cost of capital than a lot of other industrial REITs in the market today. So I'm just curious to know how you square that.

Let's go with the first one first. Look, I mean, reducing your vault allows you to capture the reversions a little bit quicker. There's actually not a lot I can do about that. I mean, actually, that's a first-world problem in some ways. It just means we know we're going to get rich. We've just got to be a bit more patient. Again, like I said, it's a first-world dilemma. And so, you know, in an ideal world, reducing our percentage of exposure to inflation for more open market is fine, but it has to be open market in the right sectors with the right buildings, and that's what we're doing with our M&A. And again, the ideal scenario is that you have rent review clauses that is the higher of an inflation or an open market. Unfortunately, they are very, very rare, but it doesn't stop us trying to find more of them. I mean, in terms of your second question around, look, we are a triple net. It's a triple net thematic. We want to be aligned to the winning sectors. And that might be a logistics transaction, but it equally might be a sale and lease back with a grocery occupier as well. And it might be if we could find some some more theme parks, we might do that too. But, you know, we can only play what's on the pitch. But, you know, it's not about, oh, I've got to get my logistics now from 55 to 65 because I've already gone to 50. You know, it'll happen. But equally, I'm very happy if we were able to execute a same lease back on a grocery portfolio, you know, in the next few weeks. That would be wonderful too, as long as the pricing's right too. But the net lease bid is important because costs can have an incredible impact on your returns. again, to put my Munger hat or Buffett hat on, compounding is just an incredible calculation. Those who earn it understand it. Those who don't will pay it. And that's why our epic cost ratio, despite some people thinking it's not that important, maybe if I had an epic cost ratio in the 20s, I'd probably think it wasn't that important. But that's why it is important. It has an incredible dilutive impact on your returns.

Thank you.

I actually can't find any questions on the screen. I probably messed this up a bit. Are there any? Do you want to ask it? Sorry.

Yeah, there's one that's coming from Charles Vaughan at Waverton about income concentration from the top occupiers and whether this will be reduced through the course of FY26.

Well, it's definitionally going to be reduced simply because actually, as I said, some of the M&A transactions that we're going through at the moment will improve the income granularity. So it will come down on that. If you look at our top customer, Ramsey's, that portfolio is actually in a relatively solid state at the moment because it's got some debt financing on it that prevents us doing anything with it until October this year.

350 million that matures in autumn, the hospital has secured against it. So it would be too expensive to break that debt today. But it will give us optionality in the autumn if we wanted to change the tenant mix.

And then the travel lodge, I think, which is our third highest customer. I mean, that exposure is now down. We'll be down at circa 5% going forward. And we've got a little bit of trimming to do, but not a huge amount. We've done a huge amount of heavy lifting on that portfolio and feel very, very comfortable with where we are. I mean, I think 18 months ago, I think that we would have had effectively 146 travel lodges. I think we're down to about 64, 65 today, and with a few more in the departure lounge. Okay, no more questions on the line, no more questions in the room. So thank you ever so much for your time and your interest. Have a great day.