Shaftesbury Capital PLC

If you're ready to start, we can crack on. Well, good morning again. Thanks so much for joining us today at our interim results presentation. We're delighted to report strong results for the first half, delivering growth across all key metrics. This is the agenda for this morning. I'll start with an overview. Sital will then take you through the financial review. and I'll then provide an update on portfolio activity and we'll finish with a summary and outlook. So it's been a successful period, delivering strong performance with an increase in rents, values, income and dividend. And despite the well-documented uncertain geopolitical and macroeconomic environment, I'm pleased to say that the West End continues to demonstrate its strength and our portfolio is well positioned to outperform. We continue to see positive trends in footfall and customer sales growth across our prime portfolio and the team, many of whom are here today, is successfully achieving significant leasing spreads with excellent levels of activity, limited vacancy and a strong pipeline of transactions. We continue to invest in our portfolio through capital expenditure and acquisitions and also disposed of non-core asset Lily Square during the period. We have a strong balance sheet with access to substantial liquidity and are well positioned to take advantage of market opportunities. So just turning to the headline results for the first half of the year, total property value increased 3.4% like for like to 5.6 billion pounds. That was supported by 3.8% increase in ERV. EFRA NTA increased 3.9%, 223 pence per share, provided a total property return which was 5%, which is significantly above the MSCI index of 2.6%. The total accounting return was 4.9%. We continue to deliver rental growth and operational efficiencies whilst aiming to enhance customer service. Underlying earnings overall increased by 8% and the board has declared an interim dividend of 2.2 pence per share, which is up 16%. I think the performance demonstrates the exceptional qualities of the portfolio delivering growth in rents, dividends, ERV and valuations. As one of the largest owners of property in London's West End, we play an important role in shaping the areas that we operate in and their long-term future. Visitors continue to be drawn to the West End's exceptional cultural, retail and entertainment offering. Approximately 70% of footfall is driven by domestic UK visitors. Londoners account for around 45%. visitors from elsewhere in the UK are furthered 25% and international visitors into the capital contribute the remaining approximately 30% creating a diverse very resilient customer base that supports consistent trading performance we've noticed that spend, basket sizes and overall trading productivity continue to improve and this is supported by more frequent and longer visits reflecting the strength of engagement across our destinations. Rental growth prospects are underpinned by strong fundamentals. Occupancy remains very high with the supply of new space limited and this is creating continued scarcity value. The West End market has delivered quite predictable growth over the long term with annualised rental growth of approximately 4% per annum Our portfolio has delivered ERV growth of nearly 7% per annum since 2010. West End retail yields have also been remarkably consistent, averaging approximately 4% over many cycles, again demonstrating its attractiveness and also its long-term defensive qualities. So as I say, despite that backdrop, investment yields across our portfolio, which predominantly comprise small lot size freehold properties, remain very resilient. And there continues to be a broad pool of domestic and international investors attracted to the West End real estate market, particularly for those smaller lot sizes, which is a very active component of the marketplace. So with that, I'll just hand over to Zittel to take you through the financial review.

Thanks, Ian, and good morning all. As you've seen, there's been continued progress in the first half towards our medium-term target and further growth in earnings, valuations, and net tangible assets. Our strong balance sheet positions us well for investment, expansion, and growth. So starting with the income statement, top-line growth reflects a successful period of leasing and asset management. Gross rents of £97.3 million are effectively up 4%, adjusting to the establishment of the Covent Garden Partnership in April 2025. In aggregate, commercial lettings and renewals were 5% ahead of ERV and 25% ahead of previous passing rents. Property costs reflect some inflation, and a small increase in the expected credit loss offset by operational efficiencies. Administration costs of £20.8 million include the effect of an increased share option charge and ongoing savings. Continued income growth and operational efficiencies are targeted over future periods. Net finance costs have been reduced to £17.5 million, reflecting lower levels of drawn debt. All of these movements taken together resulted in an 8% increase in underlying earnings to £44 million, or 2.4 pence per share, and we've increased the interim dividend to 2.2 pence. There's been further growth in passing and market rents, with embedded reversion in the portfolio and good visibility on income growth. ERVs were up across the portfolio, resulting in a 3.8% increase since December to over £280 million. Retail and CompGarden were the largest contributors to growth in passing rents during the period. Vacancy remains low, with under 3% of the portfolio being available to let. As illustrated in the chart, there's the opportunity to grow rental income significantly whilst also continuing to grow ERVs. This will be through a combination of contracted income and rent freeze converting to running income, refurbishments being completed, and ERV capture through the normal leasing cycle. So turning now to the balance sheet, the main driver for NTA growth was increased property valuations. The market value of the portfolio is up 3.4% to 5.6 billion pounds. or £4.9 billion on a group share basis. Total property return to the period was 5%, outperforming the MSCI UK Property Index. Net debt is slightly under £800 million, with loan-to-value at 16%. NTA per share has increased by 3.9% since December to 223 pence, and NRV per share is up to 241 pence. Rental values are up across the portfolio, with retail and F&B, which account for some 70%, being the standout contributors. The equivalent yield was stable at 4.6% for the commercial portfolio. Our sales continue to be highly attractive to our customers, and with average rental tones of around £100 per square foot, demonstrate good levels of affordability and leave plenty of room for growth. The balance sheet is in a strong position with low leverage, access to significant liquidity and substantial headroom against covenants. With loans to value of 16% and net debt to EBITDA of under 6.5 times, there is significant flexibility to deploy capital. Most of our drawn debt is at fixed rates. The interest rate protection we have in place will be topped up with further hedging for future years. Other points on debt. Firstly, we have reduced gross debt using cash to repay the exchangeable bonds and the Lily Square proceeds to pay down bank facilities. Secondly, we've extended the maturity profile, most recently on the Comet Garden RCS. And three, debt margins have continued to improve, with our most recent facility being completed at 90 basis points for an initial term of five years. Post repayment of the private placement loan notes maturing later this year, the group will have access to over £800 million of liquidity. We are very well paced to invest in our portfolio and will continue to review financing opportunities, taking advantage of the attractive credit profile of the group. So to summarise, there's been strong financial performance in the first half and we have enhanced flexibility. The total accounting return in H1 was 4.9%, driven by rental growth and disciplined cost and capital management. We will continue to focus on our priority areas, progression in earnings and dividends, deploying capital accretively, and maintaining balance sheet strength and flexibility. And with that, I will now hand back to Ian.

Thanks Tittle. So a little bit about the portfolio, just a recap. I think you know what we own, but it's an impossible to replicate portfolio. It's located in some of the most iconic destinations across the West End. Obviously Covent Garden, Carnaby, Soho and Chinatown. It's 5.6 billion pounds of value. that we have under management today comprises 2.8 million square feet of lettable space that sits across 640 predominantly freehold buildings within that there are approximately 1900 individual units excuse me the portfolio is broadly one third retail one third food and beverage with the balance in the upper floors which offer office and residential accommodation and overall the portfolio offers a very diverse occupier mix, a range of income streams and a range of unit sizes and rental towns. As you'll have seen, occupational demand continues to be strong and it prioritises the best locations, not just in London but elsewhere in the world. Availability on many of our streets is now at near record lows, and that's supporting competitive pricing. Portfolio vacancy was 2.6% at the mid-year, and there's obviously been progress since that date, with this slide showing some of the new brands and renewals that occurred during the period. Overall, 226 leasing transactions completed. That represented £23 million of contracted rent about 5% ahead of December 25 ERV and roughly 18% ahead of previous passing rates. I think the long-term benefits of our active approach to asset management and our leasing strategy are becoming increasingly evident. Careful customer selection and the introduction of high-quality brands have driven higher sales densities, stronger customer performance and continued rental growth. Since the merger we've welcomed over 180 new brands across the portfolio and many of those new entrants are trading at significantly higher levels than the previous occupiers which supports future sustained rental growth. The team take a very active and creative approach. This is informed by a really deep knowledge of the West End and I think that positions the company

to continue to outperform that long-term trend.

So a little bit about retail. London is definitely a priority market for retailers. It's perceived as a global gateway city. It has strong leasing demand, which manifests itself throughout the West End, but particularly in our locations. Carnaby Street, I'm delighted to say, is attracting some leading international brands. as some to note are addicted KuKai, K-Way and they've chosen the destination for their UK debuts and also Sephora opened this week with queues around the block for their first West End store Covent Garden, Tiffany important customer for us, they've recommitted to the estate while Mathieu Premier launched their first UK store and that's strengthened our offer in beauty and premium fragrance Chinatown welcomed Popmart, which opened its largest London store, and together these leasing successes have supported retail valuation growth of 5.4% across the portfolio. There continues to be a very active demand for our high-quality food and beverage locations. Leasing activity has largely been focused on founder-led restaurants and international operators, that are making their UK debuts, as well as established operators, often within the portfolio, that are expanding selectively. There is a broader shift in consumer preference towards high-quality, experience-led dining, and our portfolio is very well positioned to benefit from this trend. Across Covent Garden and Soho, there have been a number of new openings, including Bavette, Borough, Padela and Vagabond Wines to name a few and we're very pleased with the way they've been received by the consumer. I think it's the vibrancy of our destinations that continue to attract strong customer and consumer demand supporting that very resilient level of leasing activity. Overall 12 new concepts open during the period and their available space, any available space has been re-let very quickly often with multiple bidders and that just leaves about 0.2% of the portfolio currently available for let. 27 new lettings and renewals were signed, 9% ahead of December 2025 ERB again supporting valuation growth which for the F&B component was around 4%. The vibrancy of our locations I think does continue to attract office occupiers. It's that vibrancy of location as well as the quality of service and accommodation that we offer and that continues to generate sustained leasing demand. Carnaby and Covent Garden portfolios offer very high amenity value and for our smaller period properties we continue to offer fully furnished flexible leasing packages which seems to be meeting consumer demand. The residential portfolio is letting very well. During the period 116 leasing transactions were completed at rents of around 2-4% ahead of previous party. The scale of our portfolio allows us to shape not just the individual buildings but also the spaces around our properties. and the pipeline of asset management and refurbishment activities that we're currently undertaking represents around 5% of the RV, which will be delivered over the next 12 months or so. In addition, we're working with local stakeholders to enhance the public realm across various destinations, making them more enjoyable for everyone. Princeton's Covent Garden's Henrietta Street public realm is currently being transformed and we're also undertaking significant improvements to Carnaby Street and Kingley Court to enhance the visitor experience. We also continue to rotate capital where appropriate. This year we completed the disposal of non-core asset Lily Square and invested £31 million in target acquisitions and capital expenditure and indeed we're bidding on a number of properties at the moment. as Sittel mentioned we have substantial liquidity or access to substantial liquidity to take advantage of those market opportunities when they arise so just in conclusion we delivered a strong first half with leasing momentum and operational performance continuing into the second half of the year The operating platform that we have and the experienced team does differentiate Chesterbury Capital and that's translating active asset management and leasing into earnings and value progression. The West End is a highly attractive market with strong customer demand, high footfall, sales growth, limited vacancy and a strong leasing pipeline and we have significant growth potential across the portfolio and continue to deliver on our medium-term rental growth targets. Supported by that strong balance sheet, we're well positioned to pursue selective expansion opportunities and capitalise on those market opportunities as they arise.

So that's the conclusion of the formal presentation.

I think we'd like to go to Q&A. So if you're on the phone, if you could let the operator know If you'd like to ask a question, we'll come to you. If we can start perhaps with the room, you could just say your name if you have a question, and we'll try and answer it.

Thank you. It's Thomas in Berenberg. Thanks for the presentation. Just a question on leasing spreads. Last year you were leasing 10% ahead of ERV. So far in 2026 it's 5% ahead. Is the competitive tension still as strong today as in the recent past that you're seeing? I appreciate you're also pointing to some higher credit loss provisions too. Any colour you can give on where you're seeing those would be helpful as well. Thanks.

Yeah, I feel strong. You know, every period of six months is different. The last period of six months, a lot depends on the nature of the real estate that's actually coming during that period. So we tend to look at it over the sort of medium term. In fact, so you've got our leasing director sitting behind you. So he's here and he's doing all the deals and he's quite happy at the moment. So what we're seeing does support the forward look on those 5% to 7% rental growth targets that we've got out there.

And on ECLs, there was a small tick-up over the period, which was really a function of one or two unexpected failures. One office tenant in Carnaby, you know, we've taken the opportunity there to take the property back, we'll refurbish it and aim to re-let that at higher rents. And the second element is we've taken a slightly more conservative approach on our other customers just sort of kind of macro level but as I said relatively small numbers nothing materials signal

cool thank you and maybe just second one I think on page 33 in the appendix the at Carnaby and Soho like for like annualised gross income fell 1.1% the ERVs there still moving up almost 4% just wonder if you can help explain that yeah I mean Carnaby Street is doing really well actually I'm particularly pleased with the section to the southern end of the estate where we've got a whole bunch of new brands in there Sephora I mentioned have opened up

opposite Addictive. So they're trading very well. And at the upper end of the street, Will and the team put in Kukai and various other brands. So we're well on the way to transforming the street. That should be enhanced with the streetscape improvements that you'll see rolled out at Kingley and along the street this coming year. So it's well on its way. So I do expect good rental growth over the coming year. This year, you had a couple of failures, mainly on the office side that we didn't really expect. So, you know, that's had an impact on those numbers, but I think the trend is very, very positive for car industry. Thank you. Morning, it's James Castle from Pilhams. And you talked a little bit about the acquisition and kind of the growth opportunities you're seeing. Could you give a little bit more clarity as to what you're seeing? Are they kind of more, you know, kind of standard, kind of both on their acquisitions? Are you seeing anything more meaningful, other particular parts of the estate that you'd particularly like to grow? It's a very tight market in the West End and very actively traded. We've got a new valuer this year and they've done a great job. But the comparable information that they produce shows that certainly for lot sizes below 20 million and up to 50 million, it's really competitive. So where we are bidding, we are seeing multiple competitors. so I think our competitive advantage is often we can see where the rental growth will come so you're generally competing at yields that are tighter than the valuation yields so it's all about what my colleagues can actually do with these places over time so you know priority of capital is always our existing properties so Chris has got a number of refurbishments on at the moment which I think will go very well and they're mainly offices actually a couple of pubs and some retail but they'll lease very well The next focus is buying adjacencies, sort of expanding the portfolio. So we've bought properties around the southern end of Carnaby Street, for instance, bought a couple of things in Golden Square, which we're quite interested in, and we're bidding on something in Covent Garden at the moment. But, you know, we don't seek to buy everything. We generally want to find things that we feel we can make a difference to and that are going to be accretive within a reasonably short period. But you know, very, very competitive. I think when you get to the bigger lot sizes, they don't really come available that often. You know, but when they do, we're well positioned to participate.

Thanks. Thanks for the presentation. Ashna B.R. Soichanumis. On slide 10, you showed that you have 28% income reversion. I was just wondering if you could talk a bit more about the timeframe you expect to capture this. and secondly, are there certain parts of the estate where you think you can drive rent harder?

Yeah, I think, well, I'll deal with the first one and maybe people can talk to you through the bridge slide which sort of explains it, but I think what's really noticeable is where we've had the opportunity to read tenant, they are trading at significantly higher levels than previous tenants, you know, often well over 100%. So that gives us confidence that the rental growth will be sustained at above trend. So that's really very important, particularly noticeable around Seven Dials, where we've put, I think, 30 or 40 new brands in, Chris, over the last 12 to 18 months. They're doing well. And then Carnaby Street, it really is night and day on some of these trading densities. So that should be captured when they come up to reverse, which is probably outside of the the period where we'll capture the $25 million or $28 million, whatever it is. So this is about longer-term growth as well, and that's really comforting. Do you want to go to the bridge?

Yeah, of course. The three main elements are contracted, refurbishment, and the under-rented element, if you like. On the contracted, that's a combination of what we've signed up and what's currently in rent-free. Those periods tend to be quite short. So the majority, and there are some step-rents in there as well as the third element. so the vast majority of that will come into running income over the next 12 months or so and that's just a cycle that's just a function cycle of activity on refurbishments there's 13-14 million within that again most of these are smaller schemes in fact they're all smaller schemes some of them are pre-let and on the others we have a high conviction about the ability to let those and as Ian mentioned when we re-tenant we typically see a big pick up in productivity and hopefully rents. And then the third element, the under-rented element, that's really a function of the leasing cycle. So it's kind of velocity and pace of transactions. And remember, we're trying to do it at the same time as increasing ERV. So that metric around consistently beating ERV on our transactions and passing rents is very important contributor to kind of growing income line. I think you had a question, Zach?

Yeah, thanks. It's Zachary Gage from EVS. Just to pick up on the questions on the office sector, you mentioned a couple of failures during the period. I guess that explains the fairly soft light to light growth you saw in the sector. Are those sort of isolated one-off events or is there any particular macro or wider factor that drove them?

Actually, Matt Martin, who runs Carnaby, I think he's quite pleased to get his face back. because I think you've got quite an exciting refurbishment that you told me you're going to get much higher rent from, right? Yeah, so I think it's nice. That one did surprises, actually. We've had a few on the food and beverage side as well, but we kind of expected those. And, you know, where that space comes available, there's multiple bids. We've got a space on where... I won't name the tenant, but in Soho, where you've got five or six bids on it, haven't you? That's significantly higher rents and passing. So that should all feed through. So no discernible trends, I think.

Okay, great. And then a second question. You've got the 163 million PPN maturing. If I'm not mistaken, that's towards the end of this year, so limited impact on 26. You said you'll refi through existing facilities. Could you just give an indication on what the marginal cost you think will be on that?

Yeah, so we put in place a new facility quite recently. Remember, this is within the Covent Garden business. And that's a five-year facility with two one-year extensions, so it's a good term on it as well. That's the lowest margin that we've secured on a bank facility for some time, actually, and lower than we had planned for within the business. So that's at 90 basis points. so there will be a tick up in the weighted average cost of debt inevitably but our judgement has been that actually using the bank market for 5-7 years is a pretty good place relative to the longer term market but we still feel rates are slightly dislocated so the marginal cost on that will be Sonia before any hedging plus 90 basis points Is anybody on the phone?

Is anybody on? Maybe just go to the phone for a second. There's one question, I think. Sorry, did you finish that? Sorry. And then maybe back to the room. Any final questions?

To ask a question over the phone, please signal by pressing star 1. We have a question from Aaron Guy from Citi. Please go ahead.

Good morning, everybody. Just a question on the sort of broader kind of market. Can you just do a bit more colour on what you're seeing in the other estates across the West End, so Oxford Street, Regent Street? Is there more competition coming from the other sort of parts of the West End? And if the demand is just so strong across the West End, where rental growth seems to be pretty strong everywhere, is there anything more you can do to accelerate the cash conversion of estates rent, so I'm sort of thinking of things like trying to encourage higher tenant churn or shorter leases or more capex.

Well, I think the trend has been that vacancy across the West End has fallen significantly from where it was a couple of years ago, but there are still pockets of vacancy and Oxford Street's probably got the higher level of vacancy, probably above 10%. We don't really compete with those places generally. Our units the retail and hospitality are relatively small Oxford Street tends to be to the larger box type but obviously the reduction in vacancy there assists general sentiment in the market and the areas around us have also seen that tightening of availability whether it's Regent Street or otherwise but the reality for us is that we're often competing with other parts of the world so a brand that wants to come into London for their first store, such as Addicted, for instance. You know, they might also look at Le Marais in Paris. They might look at somewhere in Milan. So we're always looking at the relativity of pricing for the West End, which is actually very affordable compared to a lot of other major cities, particularly if you compare it with the US. You know, so they do see high productivity in the UK, particularly in our stores, because you're trading long hours. very very high footfall 150 million footfalls so that's really what attracts it and then for the restauranteurs that's largely domestically driven as well as international operators wanting to come they like the fact that it trades almost every day of the year multiple churns on covers and you can see from the update that we've got demand across the whole range which is very pleasing they also see the benefit I think of just working with a landlord that takes a forward view on running these estates and they're confident that they're going to be surrounded by like-minded people so I think for us I wouldn't say we operate sort of in isolation because there is competition everywhere but we have a pretty unique portfolio in the context of the London marketplace as far as retail leases you know There's been no discernible trend, I would say, in reduction of leases. You know, particularly F&B generally want longer leases. So, you know, standard retail lease will be between five and ten years. We do have a turnover component in all of our leases which does cut in. It generally gets baked into the next review or the next rent review. And the same for the food and beverage. So we're not seeing any discernible change. The office leases have got shorter. and you know it's not our market but you know for larger office spaces the incentives seem to be reasonably full and then for residential it's standard sort of one well you know discuss how long is the lease today but you know they tend to be one to two years long so no discernible chance but I think the thing that we're interested in though and I said this to you before Aaron is how is where there's opportunity to monetise You know, our place is a little bit beyond the real estate. You know, what we call it non-lease income, which is a very dry term. We must get a better term for that. But it's what can we do to reach the consumer and also perhaps use the spaces in between the buildings to generate revenue. We did quite a lot around the portfolio that that non-lease income line is growing. Yeah, understood.

There's definitely opportunity there. Just, can you just talk a little bit about Chinatown? Obviously, you mentioned the strong demand from international brands, et cetera, pushing reps up. Chinatown historically has performed very well. And do you think that performance can continue over the next decade and Chinatown can continue to evolve given its specialism?

Well, I think the team's doing great. I mean, Matt runs it. He's here. You can chat with him if you're in the room. But the reality is that the process has been to widen the choice for the consumer so it's a pan-Asian offer now and that is very well received so we're seeing strong demand from the food and beverage industry so whenever we get anything back it's high demand I think it would be interesting to see whether we can maybe over time bring some retail in you know retail is you know very strong demand at the moment so I think there's good growth over time but you know it's probably going to revert to that mean market performance perhaps before Carnaby Street for instance which you know it's got a long way to go and Covent Garden which you know continues to deliver frankly so that's the way we look at it it's 14% of our valuation base at the moment but it's very consistent it delivers every course of the footfalls fantastic you know so it's a joy to own at the moment

And just one final one, if I can, just on the investment market. Investment demand in the West End grew 23 into 24, then 24 into 25. Are you seeing in the first half, again, I think you mentioned the investment demand strengthening again into 26. And can you just talk a little bit about the two different kind of markets? You know, your average lot size of 8 million seems to be very sort of strong, particularly in the global uncertain market. But also, are you seeing any sort of increased bigger buyers of, say, 1 billion portfolios snipping around the West End?

Well, you know, I mean... It's very active below 50 million, very, very active below 20 million. And that's been reaffirmed actually by our new valuers in the list of evidential transactions that they put forward with the valuation. There's a whole list of stuff that has been sold at valuation or above. And we see when we're bidding on sort of 10, 15, 20 million pound lot sizes, there's four or five people in the room. We're not really in that bigger market. I'm sure it tends to be dominated by the office market. We don't have large individual office buildings. But the values are saying to us that for 100 million plus, it's quite hard work. So I have no reason to disbelieve them. But our market's been incredibly active really now for, well, the last three years, hasn't it really? Lots going on. You know, those bigger lot sizes don't come available very often, but where they have done on Bond Street, for instance, they've sold quite well. And the super prime locations around Barkley Square and things like that, you know, there's transactions in the market today, right, but I'm not really qualified to answer that. That's not really our world. Understood. Thank you very much.

Any more questions? There are currently no questions and with this I'd like to hand it back over to Ian for any additional or closing remarks.

Slightly jumped the gun there, sorry. Okay. Anybody, any further questions from the room? Okay, great. Well, look, thanks very much for joining us. Appreciate it. Hope you find time over the summer to come and shop in the West End. Maybe try one or two of our restaurants. Will can give you a list of his favourites it's quite long but we'd love to see you come and see us in the office and again thanks for your attention appreciate it if you've got any questions afterwards you know where we are thank you very much