Londonmetric Property Plc

All good. All right. Morning, ladies and gentlemen, and welcome to London Metrics full-year results. It's quite a long table just for Martin and I, but actually I'm going to open up with congratulating Steve and all the other Arsenal supporters in the room for what has been an incredibly long wait. So well done, Steve. I quite often take the mickey out of you, but today I'm going to congratulate you. That will stop tomorrow. Okay, so quick overview. on the last 12 months. So the company has continued its triple net net income compounding model. We've grown the portfolio up 23% courtesy of obviously external growth as well as internal growth. Continue to invest in the right sectors, mission critical assets. We added 1.5 billion pounds to our portfolio value 1.2 of which came from the acquisition of Urban Logistics and Highcroft. Come on, I'll talk about that in a little bit more detail later on how that's going. Our income continues to flow and grow. Net rental income is up 17% in the year. And again, as you would expect from a budding dividend aristocrat, we have again increased our dividends for the 11th year in a row. It's now up, actually, it's up 3.8% of the year, it's actually up 78% since the creation of London Metric back in 2013, when I probably stood up in a room similar to this and taking questions on whether or not we're going to cut our dividend because we were over-distributing like so many others in our sector. That obviously has been reversed. The portfolio... We added across the portfolio 16.6 million of additional income, 4.2% like-for-like growth. And I'll come on to talk about that. That's effectively a combination of rent reviews, lease renewals, asset management, lease read years, and what have you. And I'll break that down in a bit more detail later. So as a result, our average uplift on rent reviews was 19%. Open market rent reviews delivered 33%. And the standout former was again our open market rent reviews on our urban logistics portfolio, which was up 38%. And then as you can see, we still haven't bought rent to collect over the next two years, 38 million. So all in all, that delivered a total property return of 7.1%, which is effectively a relatively flat cap rate. I mean, we all know we're living in a very volatile world at the moment, so to be able to actually predict cap rates, I think, for values at this moment in time is particularly difficult. I don't think it's easy in any markets to predict what assets will trade at, but it's particularly difficult today when you've seen in the last 12 weeks a 100 basis movement in the five-year swap. I mean, it is very, very difficult. And even the valuations that companies are reporting at this moment, you know, for end of March, you know, what do they look like at the end of May or the end of June? I mean, this is a fast moving world. The great thing is why we focus on income is because it's real. You know, as we say, you know, valuations can be vanity, but income is sanity. So the scale continues to give us some competitive advantages. Martin Ritesh and the finance team have refinanced 2.7 billion of debt in a period. And we've been doing that at opportune times. And we've got a graph to show that later. So maybe taking, you know, the volatility of the five-year swap is amazing, absolutely amazing. And what you need to be is fleet of foot, and we need to be quick. And you'll see the timing of our financings has meant that we try to take advantage of the swap rates when they're closer to 3.5 and when they're closer to 4.5. Our scale is giving us other opportunities to think about as we look to deploy capital, whether or not it's development fundings. We announced a small £40 million trade today with a developer across some food stores. M&A, which you all know about. Say the leasebacks, which is a sector that we continue to operate in. And obviously portfolios. as we see a shake-up in the wider pension fund sector. The most important number on this slide is actually the bottom right. It actually shows that we paid out dividends last year to our shareholders that were nine times higher than our overheads. That's against a sector average of about four times. There are a few companies where actually I think their overheads are higher than their dividends, but we probably leave those for when we're not on the mic. But that is a very, very powerful number, and we hope to improve on it over the year as we leverage our platform further. Turning to some numbers, I'd better do this briefly, otherwise Martin will be limited in what he can say. EPRA earnings are up 14% to £305.3 million, driven really by that increase in our net rental income which is now at a record 455 million. I mean, that is a lot of money to arrive in our bank account every day. So I said to somebody this morning, the great thing about this model is we're collecting rent when we sleep. It's a phenomenally comforting strategy. Our earnings per share is up at 13.45 pence per share, which has allowed us, as I say, to announce A final dividend of 3.3 today to bring our total dividend for the year at 12.45 pence. That's up 3.8% on the previous period. We're also announcing this morning a Q1 dividend for the financial year 27 of 3.15 pence, which is up 3.3% on the Q1 last year. And as you see on the right-hand side, 11 years of dividend progression. Just another 14 to go to get aristocracy. Portfolio value I've just touched on already. EPRA NTA is at 200.6p. That's helped drive a total accounting return of 6.9%. Excluding M&A costs and refinancing costs or whatever, that would obviously mean a bit higher at 7.7 pence. And so there's been a drag there which we don't expect to be recurring. And as I've already indicated, the activity in the debt markets has allowed us to maintain... an average cost of debt for the period of 4%, and that's courtesy of the £2.7 billion of the refinancing that Martin and Ritesh did over the year. So on that note, I'll let Martin do a deeper dive into those numbers, and I'll come back to talk about the portfolio in a bit more detail. Thank you.

Thank you. Steve, I'm glad you took the heat. Otherwise it would have been me. And he dealt with the timing of the refi, so that was my best point. I thought he probably would. So our focus this year has been on income and portfolio growth through significant further M&A activity and asset recycling. We've delivered a strong set of results, increasing our earnings, growing our dividends and strengthening our balance sheet through significant financing activities and intercepts. I'm pleased to report that our net rental income is £455.3 million, an increase of 16.6% over last year. We've included £60 million of additional rent from the acquisition of Urban Logistics and Highcroft. That reflects nine months of trading. We'll benefit from the full effect of the Urban Logistics and Highcroft acquisitions next year, or in the year we're currently in. We've included 13 million of additional rent from other acquisitions and these increases in rent have more than offset the rent loss through non-core disposals of 23 million pounds. Rent collection remains exceptionally strong. We've collected 99.7% of rents during the year and our gross to net income leakage remains very low at 1.4%. Our administrative overhead for the year is 30.2 million. That does reflect an increase from the scale of the business. The increase in overheads in the year primarily includes headcount and remuneration costs. Our headcount is now 54, up from 48 last year, which includes a small number of former urban logistics employees and new recruits to ensure that we continue to have the right level of resource and the right skills for the enlarged business. So despite these increases, our EPRA cost ratio continues to be sector-leading at 7.7%, a little better even than last year. Our net finance costs have increased to £124 million compared to £97 million last year. We've held higher debt balances in the enlarged group in the year. We acquired an additional £464 million of debt through our corporate acquisitions, and we funded the cash consideration for the urban logistics acquisition of £205 million. So our average drawn debt balance in the year has been £500 million higher than it was last year. Despite the increase in financing costs, our tight cost control on top of our rental income growth has driven our EPRA earnings to £305.3 million, an increase of 13.9%, or £13.45 per share, an increase of 2.4% over last year. This supports the increase to our dividend for the year to £12.45 per share, providing a very strong 108% dividend cover and full cash cover. The trading performance has been strong with the portfolio valuations increasing by 68 million in the year, allowing us to report IFRS profits of 295.7 million. This is after deducting exceptional acquisition costs of 16.3 million, debt and hedging early repayment costs of 16.9 million and a goodwill impairment write-off of 9.6 million pounds. These were incurred in the previous year. We would not expect them to occur going forward. In terms of balance sheet, the value of the portfolio is now £7.6 billion, including £1.23 billion of property assets acquired through the acquisitions of Urban Logistics and Highcroft. Whilst much of our focus continues to be on the disposal of non-core assets, the combination of other acquisitions, development expenditure and accretive capital expenditure has exceeded disposals by almost £160 million. This, together with our valuation uplift of £68 million, has contributed to the increased portfolio value. gross debt is now almost £3 billion, compared with just over £2 billion last year, and the cash balance is £143 million. Other net liabilities for the period end is £113.6 million, that is, the major component of that is rents paid in advance of £63 million. So in summary, our EPRA net tangible assets for the year were £4.7 billion, an increase of 15.4% on last year, or £200.6. comprising surplus earnings and revaluation uplifts, providing a 6.9% total accounting return, or 7.7% if you exclude the exceptional items. This year we've taken proactive measures to strengthen and diversify our financial position. Our objective has been to improve the balance of our debt stack between bond debt and bank borrowings, We've raised new debt facilities of £1.2 billion, supported by our scale and our Fitch credit rating. New debt includes our inaugural £500 million public bond, rated A-, with a weighted average maturity of 5.5 years and a coupon of 4.69%. If we're doing that today, I think that coupon would be more like 6%. and a £150 million US private placement at the tightest credit spread of any REIT globally over the last three years. These new facilities allowed us to repay £1.1 billion of existing debt, £744 million of which was more expensive former Urban Logistics and LXI secured facilities. We have repaid Aviva debt at 6.2%, Canada Life debt at 5.8% and AIG debt at 5.3%, all materially ahead of our cost of debt. The refinancing of £1.5 billion of unsecured revolving credit facilities and term loans in March reduced the average margin by 49 basis points to 105% and average commitment fees by 19 basis points. Further diversifying our lender base, and removing any material refinancing risk until FY30. So the right-hand side of this graph is a little busy, but it does show that our various refinancings through the year marked by the red diamonds have been well-timed when the swap curve was near its lowest point and ahead of spikes in rates in May, August of 2025 and January of 2026. We do not expect our finance costs to increase materially over the next two years as reduced fees attaching to repaid revolving credit facilities will offset the risk of increases to bank rates. Our debt metrics remain robust with debt maturity at 4.4 years or 5.2 years if I include the plus one options. With only £200 million of debt expiring over the next two years, Undrawn debt facilities amount to £500 million, which, taken together with our disposals programme, provide significant headroom and flexibility to meet debt maturities over the next three years. Our loan-to-value stands at 36.7% and our net debt-to-EBITDA stands at 7.5 times, comfortably within our upper target of 8.5 times. We would expect both these numbers to reduce as we continue to divest non-core assets. Our interest cover ratio stands at 3.8 times ahead of our covenant limit at 1.25 times and our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. Our drawn debt is now 99.8% hedged at the year end and we expect floating rate debt to remain substantially hedged until its maturity. Our contracted rent roll at the year end now stands at £432.1 million, which includes £75.1 million of the annualised benefits of the urban logistics and high-cost acquisitions and other net investments in the year, and £16.6 million of additional rent driven by our active asset management. Looking further forward, we expect to add £38.3 million of short-term reversion by 2028, which together with £11 million of additional rent from the letting of vacant assets, will increase the rent roll to in excess of £480 million. This significant earnings growth supports our confidence that we will continue to be able to grow our dividend, and as Andrew said, we have announced our intention to increase our quarterly dividend payment for Q1 2027 to 3.15 pence per share, an increase of 3% on Q1 FY26. Finally, a brief look back, which puts the increase in the rent roll into context and clearly demonstrates that in the last 12 years we've been able to increase earnings per share by 3.13 times, and we're in the 12th year of dividend progression, as I think Andrew might have mentioned, with excellent dividend cover. Our total property return is strong, with a 12-year CAGR of 10%, and our total shareholder return, driven both by share price appreciation and significantly

most recently by dividends equates to compound growth rate also in excess of 10 percent on that note great okay so as I already mentioned I'm going to dive a bit further into the portfolio and also our thoughts about the market and the periods ahead We continue to operate a true triple net income compounding model, a disciplined approach, as you can see there, to delivering uninterrupted, predictable and growing rental streams. We have a relentless focus on our cash return, the quality, the quantity and its timing. I'm obsessed around how how much leakage comes out of a portfolio. Martin's already touched on our gross to net ratios, which are incredibly high. But for this model to work, you need to limit income leakage from maintenance capex, operations, insurance, taxes. You also have to avoid vacancy. Vacancy is the dementor of the real estate sector. The joy of holding a building gets sucked out of you and it comes vacant because of the loss of income and the costs and the taxes that you incur. that you inherit as the owner. And therefore, when we look to allocate capital, not only do we focus on those qualities and the timings and the quantity of income, but also we want to make sure that the future growth trajectory is positive. And in order to then, that's the income side of it, but then our operations, scaling up of our efficient platform is we have to leverage that. And that is not only about making sure that we operate a very efficient platform at London Metric, but also to minimise the cost of debt that is available to us through different sources, which Martin has already taken you through. Income, see there, gross to net income ratio of 98.6. I mean, there's still room for improvement. I mean, it's a wonderful number, but we could still do a little bit better. And we do want to let up the vacant space that Martin touched on on his previous slides. Turning then to the portfolio, we continue to... Align them to the structurally supported sectors. Those of you who followed this business for the last 12, 13 years will have seen us pivot in and out of old sectors into new sectors. Logistics, as you can see there, still dominates our capital allocation, a portfolio there of 4 billion. And the reason for that is we think it's due to deliver the highest forecast rental growth. I touched on what our open market urban rent reviews were over the period. And as you can see there, we're forecasting rental growth over the next few years of just over 5% per annum. We continue to invest in our entertainment and leisure assets. We acquired 17 new Premier Inn hotels in the period, let off 30-year leases with guaranteed inflation-linked rent reviews between 1% and 4%. And also we've continued as we made a small announcement this morning about further investment into the convenience grocery sector. And that is a market that we continue to look to allocate further capital into given the evolving consumer behavior for convenience groceries. You know, time is a more valuable commodity today for the population than it was maybe 20 or 30 years ago. So as you can see at the bottom there, the numbers, it's a 7.6 billion pound portfolio. a weighted average lease length of just under 17 years and a topped up net initial yield of 5.3, heading to over 6.5 that is due to deliver us an average forecast rental growth over the next couple of years of 4.3% per annum, which is largely, slightly ahead of the like-for-like number that we've, you know, marginally ahead of the like-for-like number, and obviously we will do our utmost to try and beat those forecasts. So the acquisition activity in the period is focused on four key areas, and And this hasn't changed for a number of years now. And we separate this out into the M&A and the listed markets where we've obviously been relatively active over the last few years, four deals in the last three years. Staying in leasebacks, I've already referenced the Whitbread deal, but there are others in the wings too. The shakeup in the pension fund market, which is gonna happen. I mean, it's happening a bit slower than maybe we would like and therefore haven't allocated as much money to those opportunities this year as we might've expected. But that pension fund, that big shift from defined benefit to defined contribution is taking place. I mean, you know, there's a lot of money coming out of this. And I think that pension fund, that sector owns as much commercial real estate as the entire listed sector. So that is an area of focus for us in the current year. And I touched on development fundings already, and it tends to be either in the logistics or the grocery market where we've seen growth. the most success, and that is with, you know, with existing customers who we have already enjoyed strong relationships with. So that will be a focus of attention for us, excuse me, over the next 12 months. Disposal activity, this is probably my favorite slide. You know, without a doubt, interest rates are affecting liquidity in the market. And whilst we have elevated swap rates, that becomes difficult for people who are seeking liquidity and monetization of their assets, particularly for assets above 20 million. You can see on the chart in the bottom left, we made 57 disposals in the year, totaling 318 million. We've actually made another 12 post-period ends, totaling 49 million. That means we're selling one building every four and a half working days. We're in the market. But all of the tension is at the smaller end. Out of the 57 sales, 50 of them were assets of less than $10 million. It just shows you where the demand-supply tension is. And we're dealing with every sector. You can see it there. Food stores, retail parks, discount stores, car parks, offices, garden centres, motor dealerships, children's nurseries, hotels, pubs, you name it. We've sold something in those sectors, I tell you. I mean, it is. It's a machine. But what is really, really interesting is the type of buyer. 44% of our sales went to high net worth individuals and owner-occupiers. Those buyers are not available when you're trying to sell an asset for more than 20 million pounds. They don't exist. They can't afford it. They don't have that sort of money. So fortunately, because we've got small average lot sizes, we're finding great liquidity. We've sold 467 million of non-core assets that we've inherited through our various M&A transactions. We are proving liquidity. And that is... And that actually takes place in an environment where you're seeing less activity from UK institutions or indeed US private equity operators. Asset management activity. I mean, this is, again, a terrific slide, partly because the numbers make it easy for me. As I said before, just under 17 million of rent added in the year, delivering a 4.2% like income growth. $38 billion of reversion to collect over the next two years. Rent reviews, on average, as I said, 19% up. Open market urban at 38% up. 69 lettings and re-gears. We don't actually have the opportunity to do lots of lettings because we don't have any vacancy. So actually, most of that activity would have been re-gears that Mark and his team would have executed. On average, 23% higher than previous passing rents. And we have vacancy of about 1.2 million square feet. You know, we're working hard on that. I mean, we obsess about it. You know, we have weekly meetings. I join them all. And a lot of that has come from the assets we would have acquired from urban logistics. And we're just working through it. You know, we are chopping down a lot of wood here. And then as all good portfolio managers, we always keep an eye on our income and our income granularity. And as you can see, through asset management activity, portfolio management activity, also growing the asset base, we've seen our exposure to our top three customers fall over the period. As I say, travel lodgers would have fallen quite a lot, courtesy of the amount of sales that we've made out of the budget hotel sector. And a lot of that money has been reinvested, as you can see, into, talked about the same lease back deal with Whitbread for Premier Inns, but also activity with Tesco's and Booker. and also Marks and Spencers increasing materially. And that income granularity is something that we think about a lot, and it's something that we will continue to improve. And, you know, even over the last 12 months, it was quite a short period of time, our top three occupiers now are down from 27% of our rent roll to 22%. Now, a number of you in this room would have remembered when Primark was our biggest tenant, okay? I think at one time they accounted for 11% of our rent roll, all right? Today it's 1.4, all right? We know how to actively manage income granularity. And then if I look at the outlook, I've touched on a number of these themes already. Macro events continue to impact investor sentiment. Interest rates are the yardstick by which all investments should be upset. Guilt rates, swap rates, they are influencing the market, pricing and liquidity. Political uncertainty is not helpful. However, I still believe UK consumer remains resilient. Good employment, high savings ratios, wage growth, still outpacing inflation. Even better if you're in the public sector. But it's still above. It's 4.1. It's 4.9 if you're in the public sector. It's not that at our place. But our triple net income model is unbelievably resilient. It's helped us build an all-weather portfolio that is driving reliable, predictable, and growing income. And consumer behavior continues to affect the sectors that we want to allocate money into. For those of you who have known me a long time, I started my career in shopping malls. It doesn't work for me anymore. We'd rather be in sheds and beds. But in those sectors, you want to own the best assets. It allows you to be a price setter, not a price taker. We want to avoid sectors and buildings that incur maintenance capex, OPEX, Letting incentives, they all dilute returns. Everybody can talk about big headline numbers on ERV, you know, this ERV that, you know, oh, I did a letting at 6% above ERV, but why did the valuation only move two then? Oh, well, I gave away 12 months rent free for every five-year term certain. I mean, some sectors, they're addicted to concessions. You know, even in the very hot office market, which apparently there is in about four streets in London. And undoubtedly, market uncertainty creates opportunities for us. You know, we think that there's all this consolidation out there in the listed space, and we're allowed to talk about that. We also think, as I touched on earlier, the structural shift in the pension, institutional pension fund market, and scale will continue to provide access to these deals, but also to cheaper and more diverse pools of debt. So in summary, Our income model is driving earnings and dividend. Our rent is flowing and growing to historic levels. Our disciplined capital allocation has created this all-weather portfolio. We continue to run our winners and we'll sell our losers. And long-term compounding is what creates value. It is the essence of value creation. We will collect, compound, and see our yields compress. And our ownership culture ensures full alignment of interests, It also ensures it stops us doing stupid stuff. We're not growing this for just to grow AUM. There's so many companies out there that have made mistakes in the past by wanting to grow AUM just so that they can increase their management fees. And a full alignment of interest stops you doing that. We're shareholders first. We're employees second. So thank you for that. And now I think we're going to open up. Actually, there's a large part of the audience that actually can't ask questions because they're so offside. I would like to say they've given me them in advance, but they haven't. So any questions in the room before I go to the screen?

I wonder if you could just talk about your tenant retention rates. Obviously, very impressive numbers on your rental uplifts on lease reviews in logistics. I just wonder, is there a risk that things could get unaffordable if you keep putting through these rent increases?

Yeah, I mean, it varies around the UK. I mean, we think London's weaker than many other areas. It's hard to basically paint the whole UK with the same colour. I mean, there are regional differences, and that comes back down to demand and supply. London is tougher because of the massive rental increases that you've seen in London. The rest of the UK, I couldn't give you a correlated pattern. I mean, we've just agreed, you know, for example, we've got a warehouse up in Motherwell, which is somewhere in Scotland. And, you know, we've just retained the tenant, you know, XPO for another five years. You know, I mean, we might have thought that might be a risk. But, you know, they're probably not building too many sheds in Motherwell these days. So it varies around the country. London would be our biggest area of concern. We don't have a lot of money in London anyway, but that would be the one area where people can maybe move out from Zone 2 and just move out a bit further past the M25 and they can halve their rent. But you also remember in logistics, rent's just not a big portion of their overhead. Transport and wages are dominant. It's very different in retail, for example, where your total occupational costs can hit sometimes 20%. So it's not something, we don't really talk about it. You know, I mean, you'd see it through the vacancy if it was a big issue. I mean, the amount of people, you know, we have imminent break clauses coming up. Is so-and-so going to issue a break clause? We think they might, and then they don't. You know, we had a situation down in Raybridge recently with Tesla. We expected them to issue the break clause. They didn't. But there'll be somewhere else in the portfolio where we didn't think they'd issue the break clause, but they did. But you'll see it through the vacancy, and we're not really seeing that just yet. This can be a technical one, Mark, so it's definitely coming to you. It's high level. I think it's high level. Congratulations on the good results. Maybe a question on... See, there's obviously a lot of best practices that you can see in London Metric, and that's obviously contributed to the success of the growth. In In relation to the balance sheet, very strong, really good financing. Just a question on net debt to EBITDA. If you look at the best practice in the US, it's about five, maybe six. Just any thoughts on that? Obviously, the UK market and European market is different, and I appreciate that.

I think it is different. Last year, I think we had net debt to EBITDA at 6.8%. and it's gone up to 7.5, as our LTV has also gone up. But the truth is, I'd prefer it to have a 6 in front of it. And I think as we continue the disposal program, I'd hope that some of that will reduce that level of gearing. I don't have a problem with it. The LTV's not going to 40, the neck-deck-tree guitar's not going into the 8s. If it had a 6 in front of it, I'd be more comfortable.

Okay, great. And maybe just a bigger picture question on You obviously have grown a lot and of some size now. How much more difficult does it get to do some of these acquisitions and effectively move the dial? Yeah, I mean, look, I mean, there's two questions there. I mean, how difficult? I mean, some M&A acquisitions can be, you know, relatively straightforward and some of them can be cumbersome and that will depend a lot on management and the advisers. But in terms of moving the dial, I think we take the same approach as we do to our property portfolio. It's all about compounding. I remember Valentine would have stood up here a few years back and said, we might need somebody to say, are you doing small deals? But if you knock out singles, instead of waiting for the four or the six, by the time the four or six arise, you might have 10 on the scoreboard. A lot of these companies we've acquired, you would have said, oh, but why did you bother? Why did you bother? When you add them all up, you get to a big number. And so we don't really think about it moving the dial. Oh, I can't be bothered to do that or whatever. I mean, sometimes the smaller deals are harder than the bigger deals. But we don't think about it. It's really, you know, is there value in there that we'll be able to extract for our shareholders from an earnings and a value basis? Of course, moving the earnings dial is more difficult. The value in every little house. You know, arguably, I look back, I mean, even things like Highcroft, which was like an £80 million deal. I mean, it's been good. You know, we've been surprised on it. So we'll keep doing that. But the opportunities aren't just in the listed sector. I mean, the listed sector needed shaking out. Largely, there's a few others. you know, that we're dealing with. But there's other opportunities. You know, I said in the pension fund market, I mean, that is a market that is going to pop. And you just want to be ready.

You know, with the buffer... That contracted rent slide that I put up, you know, I think it's quite interesting because that includes everything that I think is within our control. You know, and I used to say it doesn't include any double sun salts. There's no addition to that that comes out as an opportunity that we may not know about today, but it's opportunistic and we take advantage of it. I remember a time when we'd be celebrating taking that number over 100. We're now pretty close to 500. But there will be things that happen that aren't in that slide that will grow it further.

One more, if I may.

Just You mentioned the importance of occupancy and keeping portfolios full, and you've certainly got a lot of long-lit assets in your portfolio. On the logistics side, in the urban logistics side, it's shorter. How do you think about that, and especially in the context of, you know, the dividend aspect? Yeah, that's a good question. You know, it's interesting, a couple of years ago I would have been standing up and we were just announcing or completing the takeover of LXI and LXI was predominantly a long income REIT and their number one focus was long leases. We applaud that, but actually it's not the only consideration. You have to think about the desirability of the underlying real estate. I'm just as happy to have a five-year lease or sometimes actually a three-year lease on a wonderful building where you've got the opportunity of resetting the rent to what we consider to be the new market levels. We have a number of buildings in our portfolio where we've got indexation on the leases and we wish we didn't. We wish we had the opportunity to be able to market those. And so if something happened at expiry or before that, then that would be for us an opportunity. I think you have to think about the underlying. It's what I say, you run your winners and you sell your losers. I mean, it's unfair because I've never been to Motherwell, but it's not somewhere we want to allocate money. I'm just not sure I'm going to get a lot of demand tension in the event that my tenant was to leave. So I want to be in places where if the tenant leaves, I still feel like I'm a price setter, not a price taker.

Nice. Tony Cooper from Deutsche Bank. I'm just interested to hear why you view convenience as attractive. I mean, it looks like lower forecasts, rental growth there, and also much lower indexed links and fixed reviews. So what is it about that market?

Well, if you think about consumer behavior, you know, I mean, I've been in the grocery sector for about 30 years, real estate grocery sector for 30 years. You know, in the old days, you used to buy your groceries out of four shops. You know, it was Tesco, Sainsbury's, Asda, Morrison. And today, as times become a more valuable commodity for the population, you know, they want to be quick. You want convenience. And, you know, as M&S say, if you can't do your grocery shop in 35 minutes, then you're inefficient. We think that this is a sector where rents are low. You know, the average rent in our grocery assets is going to be around about maybe even just slightly less than £20, maybe slightly around about £20. In the big boxers market, it's up at £30. So we think it looks cheap. We're buying these assets certainly under the funding arrangements at north of six. So if you're getting CPI of, say, three, then you feel pretty good that you're on track. Maybe you only get two and a half because of the way inflation moderates. But you're still getting an ungeared eight and a half. And you're doing it on long leases, brand new buildings, fit for purpose, but also with wonderful credits. I mean, you know, Marks & Spencers is a terrific business. Incredibly well run. And therefore, it feels like a sector with a win, where we're coming in at six. And we sold the grocery store recently in Weymouth for 5.2. We think there's an arbitrage there.

Thanks. Matt Norris from Gravis. On slide 14, where you have the acquisition activity, you've got four buckets there. Can you sort of flesh it out in terms of the returns we should expect across the four different buckets, please?

The M&A is harder to work out because we don't know how greedy some shareholders are going to be, do we, Matt? I just want to make it clear I'm not on LinkedIn. Some people try to negotiate on LinkedIn. I am not going to play. What was the question? I've had four coffees blown from you. So let's take sale and lease back. So on average there, depending on quality, lease length, credit, you're probably in and around about a five and a half. And again, you know, actually in reference to my earlier question, you're probably looking to add about close to three on it. So you're somewhere between eight and nine, probably near eight, eight and a half. But rock stock credit, 30-year leases, you know, the sort of assets that if I had grandchildren, you know, even they couldn't mess it up. But I've got another pack that Will's looking at at the moment in the discount retail space where the credit isn't as good. The lease lengths will be good. But the geographies and the quality of the buildings, you know, we would need a 10 on that. We'd need a 7 starting, wouldn't we? And that would probably then 3 on top. So that's going to give you a 10. I'm not even sure we're going to play on it. But we'll see. I won't name who it is. Pension funds is difficult because we just haven't seen enough coming out of it. I mean, the assets that we bought there, the UPS, the hotels at Manchester Airport, the bookers, they're wonderful and unbelievably long leases. I mean, I think that the UPS lease is 55 years. It was longer than that. I think the Clayton Hotel is actually 200-year lease, isn't it, or something, 199 years. So you set the lower return on that. Development fundings is very interesting because there you are, brand-new buildings, good customers, otherwise you wouldn't do it, long leases, 15, 20, 25, and there you're looking for a margin of between 50% 50 and 75 basis points between the development yield that you get, the funding yield, and the completed investment yield. I mean, they are wonderful. Truly, truly wonderful. You know, grocery assets, doing one at the moment for Marks & Spencers. We're in at 6.2. We think it's worth 5.5. We might get lucky and get 5.25. But that's your underride. We'd just like to do more of them. So what's the limiting factor? Opportunity. Thank you. Sorry, Tom.

Thanks. Good morning, Thomas from Berenberg. You've made good progress reducing your debt cost margin in the year. What is the average credit margin you're paying on your debt in total, if you know it? And now with more scale, what's the debt cost savings for that credit margin to fall further as you move through refinancing more pieces of debt. I appreciate the total cost we'll move around.

So the one and a half billion refinancing we did in March, we took the margin down from 155 to 105. And I think that was terrific. And a number of the very generous bankers are in the room who did that for us. I think if you then look at the balance of the debt stack, if you average it across, we're probably about one and a quarter in terms of credit spreads. As we stand today, I don't think we're in the market for more debt particularly, but without doubt, and the banks would say this, credit spreads at the moment, they're not historic, but they are very tight. And I sat in rooms with bankers and said, not here actually, but I'll say this, They say, you've got to do this because the credit spread is unbelievably tight. And I say, yeah, but the underlying cost of money isn't. So you've got to look at the all-in cost of the debt, not just the credit spread.

Thank you. I've got a question here on the screen from Paul at Thames River, talking about one of our debt savings. I think our annual debt savings is about 10 million pounds per annum. and we incurred arrangement breakage fees on existing facilities in the period of... Okay, five.

A very interesting one. When we did the LXI transaction, we took on some Canada life debt that was incredibly long. It went down to 2039. And it was expensive. It was 575 all in. And we thought about breaking it at the time. The break cost would have been 20 million. The movement in the yield curve between then and whenever we did it in September meant that the break cost actually fell below a million. And so you just do it. We've been watching the yield curve, waiting for an opportunity. And then you say, that's great. And then between agreeing, deciding to do it and doing it, we were worried that the yield curve would move out again. So we put a hedge in that meant that when we actually did the transaction... We did it for less than a million. It would have cost us five million if we hadn't put that hedge in. So the yield curve is incredibly volatile. You just have to wait. Opportunities will present themselves, and you just have to be ready to go when the opportunity does present itself.

I've got another good question here on the screen, actually, from Elliot, which is what is causing the difference between the light flag income growth at 4.2% versus the EPS growth at 2.4. It's a very good question to which I'd normally just go, oh, it's all in the timing. I think probably, and we'll come back maybe with a breakdown of this, but I think it's predominantly because your like-for-like is more of a contracted figure and obviously your earnings is a cash flow figure. It's the timing. And obviously some of the timing of the M&A when it came in, when it didn't, might affect those numbers as well. But we'll do a big detail, a big dive into it. But it's going to be, you know, like-for-like might be higher because you settle the rent with you halfway through the year, but you only got half the cash. That was quite difficult, that one. Yeah, I think I'm right. I got a pass. I might not get an A star, but I got a pass. Are there any other questions? I've only got, I think, unless Paul, I didn't answer his question correctly, he'll no doubt reach out if I didn't. No more in the room? Well, thank you so much. I mean, we actually weren't predicted, given so many people who are offside at the moment. We weren't predicting quite such a strong turnout, but that's great. Thank you so much for your support and your time. Thank you.