Earnings Call: H1 2019

Nov 14, 2018

Good morning, everybody, and welcome. Yet again, I see that the front row seats are unused. That's all the way from school right through. Welcome to our new event space here at 3 Finsbury Avenue, which is in the heart of our Broadgate campus. I'm here with Tim, Charlie and of course Simon, who I'm delighted really joined us in May. I'll start by giving you a brief introduction before handing over to Simon for the financials, and then I'll come back to cover strategy and outlook. Over the last six months, against a backdrop that is clearly uncertain and in a tough retail market, we've remained focused on delivering day to day across our business, while at the same time progressing our strategic agenda. So what does this mean? First, we're leasing well. On our campuses, the momentum I spoke about in May has continued. Developments are letting up ahead of schedule on better terms than expected as we continue to benefit from a market where the supply of high quality office space is constrained but demand remains good. So we let 420,000 square feet of space. In retail, we continued to generate demand for our space, letting over 450,000 square feet in the half. Although we were not immune to the obvious challenges in the market, including CVAs, Simon will talk more about this. Operationally, the business is in good shape. Occupancy remains very high. We're outperforming benchmarks on retail footfall and sales, reflecting the hard work of our asset managers. In offices, we continue to roll out STORY as we further enhance our campus offer. At Canada Water, we submitted our planning application and signed our master development agreement. These are two important milestones. And we've continued to be thoughtful about how we allocate capital. We sold more than £850,000,000 £840,000,000 even of dry or off strategy assets in the half that includes £500,000,000 for five Broadgate across the road, a development which generated an 18% annual return. We used the proceeds to extend our share buyback and invest in the future growth of our business, again with a focus on our campuses. Our campus approach is one of three areas of particular attention I set out in May, alongside a smaller, more focused retail portfolio and a larger residential business principally built to rent. We have made good progress in all these areas. I will return to them in a moment, but before I do, let me hand you over to Simon. Thanks, Chris. It's great to be back at British Land. There's been a huge amount of change in the business while I've been away. I've been struck by how this change has been driven by a consistent strategy with a clear focus discipline. This capital discipline has been particularly evident in the tougher markets post referendum. I think it's pretty impressive to sell assets at close to 4%, reinvest in your own properties at over 6% whilst reducing both leverage and cost of debt. We should look at the financials. Overall, our performance has been robust in a challenging retail market. As expected, EPS is down, primarily due to one off surrender premia, which contributed nearly 2p last year. Strong leasing in offices and the benefit of the share buyback have offset the impact of CVAs and sales. These sales are funding our development program. This will deliver significant income in future periods, much already contracted. As previously announced, we've increased the dividend by 3%, giving a half year dividend of 15.5p. NAV is down 2.9% at £9.39 primarily due to valuation decline of 1.9% as reductions in retail were partially offset by more resilient office values. Despite this, we've reduced LTV further to 26.7% using the proceeds from sales we've made. Turning to the income statement sorry, turning to the income statement in more detail and starting with net rents. These have reduced by £30,000,000,000 We benefited from one off surrender premia of £20,000,000 last year. Net sales we've made over the last eighteen months have reduced rents by £10,000,000 five Broadgate was half of this. These sales should be viewed in the context of our work to reposition the portfolio and recycle capital into developments. Chris will come on to how our campuses, which are a significant part of our business, continue to deliver. We've seen strong like for like growth of 5.8% in offices, driving rental uplift of £7,000,000 more than offsetting the £6,000,000 impact of CVAs and admins. In terms of finance, we've continued to make good progress, and we've reduced finance costs by a further £4,000,000 This is due to financing activities over the last eighteen months, with capital activity broadly neutral. Our weighted average interest rate remains low at 2.9%, but we're mindful of the current interest rate environment. And on a spot basis, 92% of our debt is hedged. On average, over the next five years, based on projected debt, we are 63% hedged. Bringing this together, earnings per share were 17.2p, down 10% on last half year. Setting aside the surrender premia, earnings are flat. Strong like for like growth in offices and the 0.6p benefit of the share buyback have offset the impact of net divestment and CVAs and admins. We expect developments to deliver £63,000,000 of future rent, adding over 4p to annualized EPS once fully occupied. And as Chris will cut later, our strong leasing activity means that more than two thirds of this is already let or under offer. Additionally, we expect a further annualized benefit of roughly 0.8p on EPS from the share buyback program. Looking down the income statement, we've covered the significant movements in rent and financing costs. Admin costs have remained broadly flat, and fees and other income have come down slightly due to the sale of our third party property management business. We have increased the dividend by 3% for the current year to 31p. As discussed, we've got good visibility on the income to come from developments and the benefit of the share buyback. And at 98% occupancy, we're virtually full. As usual, the guidance slide is included in the appendices. Before we talk about valuations, I'm going to give you a bit more detail of our exposure to tenants in CVA or administration and what we're doing to manage this. We set out the impacts on this slide. As you can see, the total number of units impacted over the last eighteen months is 114, of which 62 occurred this half. Our experience to date suggests that we are faring better than the market. Almost half of our CVA stores are unaffected. But we have not been immune. On an annualized basis, the reduction in contracted rent is £14,700,000 This breaks down as £9,500,000 rent at stores that are due to close. Encouragingly, pounds 5,500,000.0 of this is already let or in negotiation. That's evidence of the demand we're able to generate for our space. The remaining £5,200,000 is at stores where rents have reduced under CVA. The majority of these now have annual landlord breaks built in, and we are actively considering alternative leasing at these locations. Taking advantage of our ability to obtain vacant possession, we are now under offer to sell two assets, which account for £700,000 of the reduction up 5% ahead of March valuations. Turning to the valuation performance. Overall, values are down 1.9%. Offices have increased 0.7% driven by our leasing success at developments, which are up 7.5%, including 135, where values are up 26% following some great lettings here. Chris will cover these later. On the standing office portfolio, yields have remained broadly flat with ERV growth of 0.2%, reflecting specific asset lettings and resulting washover effect. Retail values are down 4.5, reflecting outward yield shift of 14 basis points and ERV decline of 1.5%. At Canada Water, values have been stable as costs incurred in the half offset by the good progress we've made on planning. I know there is some concern about valuations, especially in retail, so I wanted to give you more detail than normal. As you can see from the chart, performance has been varied, and so the range of valuation movements this half is broad. On the left are the assets that have increased in the value, and then going across to the right are the assets that have fallen more than 10%. Starting at the left, investment demand remains robust for long term secure income assets. And we continue to see ERV growth supporting values for high quality, well positioned multi less assets with good supplydemand tension. These are generally in the middle of the chart. But CVAs and administrations have had an impact, and we've seen larger valuation falls at assets that have been more affected. In our portfolio, nearly 70% of the rent reduction has been at assets where values have fallen more than 5%. But as I mentioned earlier, we are well progressed in filling this space. Against this backdrop, we continue to be active and outperform operationally. We signed over 450,000 square foot of lettings and renewals in the half, 5% ahead of ERV on a net effective basis. On average, our renewals in the period are in line with previous passing rent. We settled £15,000,000 of rent reviews, with over 40% of these seeing an increase, and our retention rates are strong at 85%. Whilst footfall and sales have declined, our assets have again outperformed the market. So overall, another good operational performance in what is clearly a tough market. Bringing all this together, NAV is down 2.9% at £9.39 This is principally a result of the negative valuation movement, partially offset by the 2p benefit of the shares bought back in the half. We expect to complete the remaining £150,000,000 of the share buyback program by the end of the financial year. Financing activity has reduced now by 3p in the half but is NPV neutral given future savings. As I've mentioned, we've got significant uplift to come from our unique development pipeline. We continue to progress developments on a carefully risk managed basis. Pounds 43,000,000 of ERV on committed developments is already pre let or under offer, and our speculative exposure is now just 3.7. And costs to come are 93% fixed. We've got further opportunities within our portfolio, including 440,000 square foot of development in our near term pipeline, which is fully consented, and a further £5,000,000 in our medium term pipeline. This thoughtful approach is also how we think about our balance sheet. This is particularly important in the current environment. We're maintaining capacity to progress opportunities when the time is right. The team continued to deliver, and I'm pleased to say since March, we've raised £1,100,000,000 of new finance. Most recently, we issued a £231,000,000 private placement at favorable pricing levels. Our LTV and weighted average interest rates are low. We have £1,500,000,000 of undrawn debt facilities and no requirement to refinance until late twenty twenty one. To summarize, yes, we are in uncertain times, but our balance sheet is strong, putting us in a great place to deliver our strategy. And on that note, I'll hand over to Chris. Thank you, Simon. Back in May, we set out three key elements of our strategy: our London campuses, a smaller, more focused retail portfolio and a larger residential business, principally built to rent. Since then, we've made real progress on each of these. Starting with campuses. Today, they represent nearly 40% of the group, that's 80% of the office business. They're a unique competitive advantage, which will be almost impossible to replicate, and they're really delivering for us. At our three campuses, we continue to create space that reflects modern London lifestyles and really resonates with occupiers. The building you're in is an example of that. And while you're here, look around. Many of you will remember Brogiate even a few years ago, so you'll notice the changes we're delivering to transform this part of London. These changes really underpin our continued leasing momentum. Portfolio, we let 420,000 square feet. Developments are now 69% let or under offer, with lettings in our more than 6% ahead of ERV. Strikingly, both Paddington and Regent's Place are now full. Here at Broadgate, we're developing space to appeal to a broader range of occupiers than ever before. I'll touch on a few examples. The most recent is McCann, a global advertising giant who signed only last month. They chose Broadgate to consolidate their London businesses under one roof. They recognize the transformation we're delivering here, so they're taking 150,000 square feet across the road at 135 Bishopsgate, where together we're creating what they call a 20 century warehouse. You can see on the slide what their UK chief executive says. For them, what's key is Broadgate's connectivity to the most exciting areas of London. My second example is Mimecast. You'll remember we let almost 80,000 square feet to them in April. They've since exercised their option for another 34,000 square feet. That makes them the largest tech letting in the city this year. At the same time, we're continuing to attract financial occupiers. At the moment, banks only account for 3% of total rents following the sale of five Broadgate, but we signed Japanese bank SMBC at 100 Liverpool Street. And in this half, TPI Cap, an existing customer at Broadgate, have also taken place at 135 Bishopsgate. So alongside Eataly and McCann, that building is now virtually full. That's a real endorsement of the changes we're delivering and a real vindication of decisions we took two years ago to continue delivering new and refurbished space. The refurbishment of 135 Bishopsgate and lettings to Eataly, McCann and TPI Cap will together have a big impact, fundamentally changing the Eastern Side Of Broadgate and the way it embraces Shoreditch. As I said in May, STORI, our flexible workspace brand, is an important and growing part of our campus offer. Having launched almost eighteen months ago, it's now operational across 130,000 square feet and the space is nearly 90% let or under offer. We've identified a further 180,000 square feet, both on our campuses but also in stand alone buildings where the rental dynamics are favorable. That's why we're acquiring a building in Haggerston, just north of Shoreditch, helping us capture a greater share of this growing market. And we're continuing to generate a premium of more than 40%, although medium term, we expect that, that will normalize at a lower level. Over time, we think Storey should make up something like 10% of our office portfolio, allowing us again to attract a broader mix of occupier. Turning now to Retail. Simon told you how we've been impacted. We all know that the market is challenging. We're dealing with rapid structural change that's been compounded by short term headwinds. At the same time, we continue to generate demand for our space. As Simon and I have both commented, we've let more than 450,000 square feet in the half and signed deals on average 5% ahead of ERV. Footfall and sales are down, both for us and for the market, but as you'd expect, we're maintaining our operational focus, we're managing our assets intensively and we've continued to outperform the benchmarks. Our second area of focus is delivering a smaller, more focused retail portfolio. I'll start with what we've done. Since April 2014, we've sold £2,400,000,000 of assets. That includes nearly £1,000,000,000 of superstores, more than £600,000,000 of department stores, $560,000,000 of multi let assets and £200,000,000 of leisure and solace assets. Our activity has covered more than £630,000,000 in the last twelve months. We've sold £215,000,000 and we've also got nearly £420,000,000 exchanged or under offer. That's in line with the direction of travel we set out in May. Overall, we sold at a premium to book, but we've also been prepared to accept a discount where it makes sense. So we are continuing to make progress, reflecting the quality of our assets as well as the hard work of the whole team. So how do we think about retail in the longer term? To be clear, we still believe physical retail has an important role to play, both in the market and in our portfolio, but it will be a smaller part of the overall business. We are focused on owning space that will be successful long term, where we can generate good supply demand tension. At the same time, we will continue to sell assets that don't fit our strategy. You should expect our historic run rate to continue, recognizing that there are other significant sellers out there. To do this, we have a clear set of criteria for the assets we'll retain that guide our approach and we set them out here. I'll illustrate them with a few examples, starting with Ealing and Woolwich. Obviously, are located in London. With real potential for placemaking, they benefit from Crossrail. Or Bath and Tunbridge Wells, both affluent towns in the South Of England with connected assets well connected assets with attractive local demographics. All are about the right size, they're affordable for retailers, and in every case, we can increase the mix of uses, so that's an important part of our approach. As I told you in May, we see build to rent as a complementary part of our business. It's a growing market that's highly fragmented, so it represents a real opportunity as we progress our mixed use vision. We told you that bolt on acquisitions would play a role. Whilst I can't give you too much detail today, we are in exclusive discussions with an operator and hope to announce something soon. That will give us more scale and add to our existing operational expertise. Importantly, we've got significant opportunities already in our portfolio, like Bromley by Bow, Aldgate and Woolwich, But of course, the most obvious example is Canada Water. I'd remind you that this is a unique and exciting opportunity in the heart of London. At 53 acres, it's about the same size as the rest of our campuses put together. And here, we're creating a new town centre for London in partnership with Southwark Council. We've continued to make good progress. In May, we signed a master development agreement with the council. We submitted our planning application for the overall master plan, including 3,000 new homes. And we've submitted a detailed application for three buildings in the first phase, delivering nearly 600,000 square feet of mixed use space. As I've said before, we hope to obtain planning permission by the end of our financial year. That would enable us to start on-site during 2019, But these processes are inherently complicated, so there's always a degree of risk in terms of timing. It's a great example, though, of our overall strategic direction to become a specialist in mixed use spaces and something that we'll deliver over the next five to ten years. I've told you how we're progressing the strategy we set out in May. I thought it would be useful to give a bit more detail. This slide sets out the indicative shape of the business in, say, the next five years. Of course, there are a lot of moving parts, but it gives you a sense of the direction of travel as well as the progress we've already made. We think it provides the right balance of exposures, enabling us to continue investing in our mixed use places. These reflect modern lifestyles and drive enduring demand for our space, underpinning a sustainable and growing dividend. So let me wrap up with a couple of key takeaways. First, we acknowledge the uncertainty out there and we expect that to continue, probably including today. But as Simon has set out, we've taken actions which lock in future growth, and financially, the business is in a strong position with limited speculative exposure. Second, we've got a clear and consistent strategy. We've made good progress on that. Looking ahead, you should expect more of the same. We expect Retail to remain tough and we'll continue to work towards a smaller, more focused portfolio. In offices, the unconventional cycle we talked about in May has continued, with the supply of high quality space relatively constrained and demand remaining good. So we'll continue to benefit from the fact we're developing. And as I talked about, we've got some really promising opportunities in build to rent. As we all know, the next six months are difficult to predict. There will be good and bad days, no doubt. But we are confident in the quality of our portfolio. We have a clear, consistent strategy, which is focused on the long term, and we've created attractive options across our business, which we can progress when the time is right. With that, I'll hand it over to questions. We'll no doubt have some questions, or we may have some questions from the phones. If you could, when you want a question, shove your hand up. If you could announce who you are, that would be great, particularly for those people on the calls. I think we've got some microphones. We start just back there. There's a microphone just coming. And then to Mike down further forward. Gemma, just okay, other side, whatever. Chris. Hugo Mitcham from Schroders. I was just wanting to know in terms of the CVA and admin number, what that sort of run rate might be at an annualized rate? And the second part of the question is how does that sort of compare historically to the sort of CVA and admin in numbers? What's the sort of change over the course of the last sort of three or four years there? Sure. I think this is one of those questions that comes to Simon's opportunity to be the new Finance Director. He gets an early question. In direction? Yes, that is coming in your direction. Hugo, in terms of the annualized CVA impact, the £14,700,000 is an annualized number. That's over the last eighteen months. That's how much of our rent roll we've lost either via the CVAs or administrations. And as I mentioned, that breaks down to roughly £9,500,000 where stores have closed or are closing. And of those, we've already released or in negotiations on £5,500,000 of that. And then when you the remaining of the balance is the £5,200,000 which is where we've taken a haircut under CVAs. And in terms of how that looks on a historical basis, I think you can see actually on that eighteen month time chart, the beginning of that eighteen months would have been more typical, and then we saw an uptick in the number of CVAs and administrations in the first two quarters of this year, calendar quarters, which is typically when you see them. And I think as a business, none of the names that have ultimately gone into CVA or administration have been a surprise to us, but I think the whole market has been slightly surprised by the speed with which that happened in the first quarter of the year. Maybe next. Bart Giesens from Morgan Stanley. I've got a quick question on your pie chart you provide on your potential future shape of And your I appreciate this is a very indicative guidance that you're giving. But when you say going down to 30%, 35% in Retail, is that based on more investment in other asset classes and disinvestment in Retail? Or are you also assuming some relative performance in capital values? Because it could well be that the business gets there by actually not changing very much. Yes. Bart, you've actually won me some money because I reckon that would be one of the first two questions. Look, we tried to do first of all, it is indicative, but it's basically based on, if you like, kind of current ish valuations rather than anything else. So you should see it as a direction of travel where there will be more investment in other parts of the business and less investment and probably net, as I said, net disinvestment in retail. So it's that combination. Of course, there may be other factors at work, which you alluded to, but that was kind of done on that basis. Michael Burt, Exane BNP Paribas. Just two questions, please. The first is on the pending disposals in the retail portfolio. Think you said about GBP $420,000,000 under offer. Can you give us a sense of what's in that GBP $420,000,000, who the buyers are and how it looks versus four Charlie will probably take that one in the second one. And the second one, Chris, is just on essentially dividend growth and the sustainability of that sort of 3% plan on dividend growth as you go through this structural realignment. I can see you've got the 5p of earnings upside from the pipeline, but given that you're selling at the same time to support that, can you sustain dividend growth at this current rate? Sure. So Charlie, do you want to take the first part first? And I'll try and remember the second part. It's a and just before I answer the question there, one of the many things I like about working with Simon again is I know he's good at risk management. So I asked him before we came in here what odds he'd give me about whether Retail would get the most number of questions, and he wouldn't give me odds. So I think he'd probably You can't start playing the game by telling people which questions they're supposed to ask, Charlie. But anyway, keep going. On the £420,000,000 of assets we've under offer, we've actually exchanged contracts already on £160,000,000 of those, including the Debloom store at Clapham, which we exchanged on yesterday. And it's a range of assets, multi let assets and solace assets. Demand for the as Simon said in his speech, demand for solaces is very strong from U. K. Domestics and long income funds. Demand for home bases is from encouragingly, it's been from a wide range, including developers for resi development. And then the multilet assets, demand is either from private equity or overseas private investors who see the opportunity to get a good cash on cash return. And I should say the GBP $420,000,000 we've got under offer, they're pretty much in line with on an aggregate basis to the September valuations and only about 3% below the March valuations, which sort of in aggregate reflects the numbers that we're reporting today. So in terms of dividend and dividend growth, and Simon may want to chip in, first of all, to state the obvious, dividend and dividend growth is something which the Board thinks very seriously about. So that's the first thing I'd say. Second of all, you've seen us now over a reasonable period kind of flex dividend cover. And I think that has been very much related to the development program. So what you saw and some of you sat in other rooms over the last few years and asked us why weren't we growing the dividend faster, one of the reasons for that was to improve our cover so that at times like this where we have got money that we can seek, we've got good visibility on, we've prepared the inevitability of the dividend pardon me, the development cycle to kind of absorb that by way of cover. When we look further out, of course, there are a lot more moving parts, and we're not in the business of predicting future dividend. That would be I'd get my backside kicked by all sorts of people if I did that. But what I think you should bear in mind is that we think we are investing in businesses which have a good return, and that should be very supportive of the dividend. And that's it's really those two things that I would point you to, Mike. Hang on. On a random basis, and then gentlemen, then you can share wait a minute. It's maybe here at the front first. No, actually, since you got the mic, let's go. Carl to Stifel. Two questions. Did I hear you right, Simon, when you on Page 14, retail operational performance, did you say that 40% of leases at review had seen an uplift? That's right, 40%. Okay. Right. And secondly, what's the gearing in HUT at the moment? I want to say it's around 40%. That's what I had in my mind. So 40%? Yes, 40%. It's pretty similar to where we've been in a long period of time in about 40%. Okay. Thanks. Just down the front here. Cameron Kosek from Green Street. Chris, I just wanted to pick up on a couple of points that you made about retail, I think it was you anyway. This point about short term headwinds in retail, how how short term do do we think they actually will be? Because if we look at the consumer, we look at the what may may or may not happen with Brexit, wider economic environment, this this could, last into the medium term potentially. So just maybe views on that. Question or is that Yeah. The question is Just trying to figure out which it was. The question is just views on that, please. Sure. And then the the point about the focus on space that will be successful in the long term. I think what we often hear is that there is, there is the prime space that will be successful, that will, do well relative to the average. Is this just a retail question? Just This is a retail Yes. I think most of us buy into that. But the question really is, at the current pricing, you're effectively choosing to invest in these assets. So do you see it as success on a returns basis as well? Sure. Yes, I'd describe it as first of all, I try to be clear. We think, I said, that retail will continue to be tough. I think the way that I think about it is that those structural changes were the things that people saw coming. And I think some of the short term headwinds were the things that surprised people, okay? And if you look at input costs partly because of the devaluation, if you look at minimum wage and all that stuff, I think those were the short term impacts. And there are others, right, to name three. I think they're short term in the sense they kind of surprise people. Are they going to go away? I agree with you. And that's why we talk about this business being tough for a period of time. So that's the first one. In terms of space, Charlie, I mean, maybe you want to pick up on that? Well, yes. And I just I think what we're seeing play out are all the themes around polarization that we've talked about for a long time, and we're beginning to see how retailers are rationalizing their portfolios. I think the encouraging part from our perspective is if we look at our leasing stats, 450,000 of deals that we've done over the last six months. But as important for me is since the half year on sort of deals exchanged or under offer, it's north of 5,000,000 square foot of space. So we're still seeing that retail demand and we're still seeing it right across the portfolio. So even in places like Denton a retail park we have there, we've done letting at £45 per square foot. So for us, it's about finding the right asset, creating the right environment, explaining to our customers why they'll trade well at these places. And if we get all that right, then we're still managing to achieve good deals. But it's not I mean, let's not kill ourselves, it is tough. I think there's just one other descriptor of that that's worth giving you in the context of the question around kind of new space. So and I think it's relevant here as a mixed use asset. But if you look at the letting we did to Italy at 135 bish, that is refurbished space. When we looked at that space, Tim, two, three years ago, it all caught knowing we were going to get it back, we were like, are we going to knock this thing down? Are we going to start again? And actually, as we started to look into the space, the combination for Eataly of footfall and what we could create by refurbishment made the space really interesting to them as opposed to flattening the whole thing. And bear in mind, that does have an effect on the cost that you can offer them and still make a return. So I don't think the answer is always new. I think it's a combination of things. And the thing I touched on is this point about the right size. In other words, if you've got some rental tension for one reason or another, then you've got a decent chance. If you've got too many units, it doesn't really matter how smart they are, you're just going to struggle to make money at them. That's how I would look at it. Sure. And one more question, if I may, please. So you've been very thoughtful in terms of your capital allocation. Are you going to continue to be thoughtful in respect of keep selling and returning capital while you trade at the discount? We're going to continue to be thoughtful. Paul Maybard, please. Got a couple of general ones and a couple on Retail. You mentioned the lettings ahead of ERV, and I think it's been letting in line or just ahead of previous passing, but the number of previous passing is quite a bit smaller than versus ERV. Understand the portfolio is reversionary. We've had ERV growth over the last five years. You've let ahead of ERV, and yet you're only just letting ahead of previous passing. Just wondering why whether you can reconcile those numbers. On the prime point on retail, you've outperformed on footfall and outperformed on retailer sales, and yet you can that you've underperformed IPD quite materially. Just again, if you give some color on that. You mentioned on average selling ahead of book value. But in the first six months, I noticed you've noted you've booked a loss on disposals. Appreciate it's quite small, but again, just get some color on there. And then finally, you mentioned some good demand for retail assets, multilayered with good lease events. I mean transaction volumes have fallen through the floor pretty much in that market. Just wonder where you're seeing the demand and the transactions that others aren't. Thank you. We might not remember all of those, and I haven't got a pen here, so I'll rely on them to I've written them down. Do you want to have a crack to start with? I may have to look back to see which one's right. Take all those on passing rent and ERV, all right. You start on that. Sure. Sure. So the on the question you raised around renewals being in line with passing rent, that was more of a generic comment as opposed to giving actual spread just in response to, I think, you've seen a lot of retailers out there saying that renewal rents are going down 25 to 30%. That's just not been our experience across the portfolio. And it's also in terms of which space we're leasing up because some of the space we'll be leasing up will be the space that's coming back to us under those CVAs and admins. And if you think the space that's likely to come back, retailers returning because typically they don't return space to us. But when they do, it's because it's over rented typically in those areas. And so we're leasing up that space that's over rented. And so ERV would have been lower on those because that's where the bulk of our leasing activity has been because the portfolio is virtually full. I think the other trend as well that we're seeing is that if you look at lease term on lettings, the average lease term now is six point seven years. It was eight point two years. But actually, our tenant incentives have marginally reduced, and we're getting more of the leases outside the Landlord and Tenant Act. And actually, I prefer that because I'm paying less money to the retailers, and I've got more optionality as we come to lease expiries, which help us ultimately drive rental growth in the long term. And then the other question was on underperformance versus IPD. Yes. I think, first off, we're very happy with our valuations. We've in fact, actually nearly 80% of the retail portfolio has had a different value over the last two years. And we've got the transaction evidence to make us comfortable that our valuations are right. We're a little surprised by some of the performance from the wider market, but that's probably not for me to comment on. There has been investor investor demand for small, solace assets, which make up a big component of the IPD. I think what you see from us and the other sort of major operators in the market is we see the reality of what's going on probably quicker than a lot of other people. So I would There's another mix issue, isn't there, which although it's a small number, the department stores were big. They performed badly for us. They're a bigger part of the portfolio. So there are a few portfolios things as opposed to when you look at each piece that we're represented, and the rest, I think, is pretty minor. And then the I think the third question was on the small loss on disposal. So that's in the group results. Obviously, some of the properties we've sold, like Private Broadgate, have been in JVs. But actually, there was a slight sort of strange that the accounting required as some of the costs we incurred on the sale of five Broadgate were actually going through the group. And also, we made a small investment in the IPSX exchange, which we think is going to be great for property going forward. But for prudent reasons, we've just written that off rather than holding it on the balance sheet. And then just the final one was on the demand in the market that you're seeing with transaction volumes that are obviously not very high at the moment and supporting valuations for multilen assets. And I think it's understandable that sort of the general investors look at what's going on in the occupational market and are sort of thinking where does this settle out. I think if you look at something like the new joint venture partner we've got on Fort Connead, M and G, that was three and a bit below valuation. So that's end of the market. There's very little on the market. You've seen some of our competitors sell one or two assets in that space as well. I think the as I said a minute ago, the demand for the sort more general U. K. Multilept retail market, that is more challenging. U. K. Funds aren't in the market at the moment. But we are seeing some overseas investors beginning to look at that, particularly if they can get yields of 6.5%, they can borrow money at all up 3%, cash on cash returns are quite good, so long as they believe the underlying occupational story. Sorry, just a follow-up on that. You mentioned obviously a higher yield being the driver. Obviously, lot of your assets are at much lower yields than that. I just wonder whether you are fully confident that they would be realizable in the current market or not, basically. Yes. On, Chris. Well, what I was going to say was almost to finalize the piece around disposals. I think one thing we, as a Board, have been pretty focused on as a company actually is to be realistic. In other words, you can see the variation that Simon alluded to. Valuers, and I'm not just saying this because one is in the room, have a tough at least one is in the room have a tough job right now, and it's a point in time valuation, right? So at any one moment, that may be more or less relevant. And on top of that, there's a margin for error. You've seen us sell assets at big premiums to valuation. And you will see us, when necessary, sell assets at a discount to valuation. We're comfortable with that, and I think that is why we've had more success than so, point one. And for me, that sort of is the most important thing about this discussion. Sorry, the other point you asked about, which I've now forgotten, it was the last bit of the question. Maybe we maybe I'll get away with I think this thing has answered. Good. Okay. And Chris, I think my only add to that is part of our job is to find the right moment to sell assets. So when we sold Debnam's in Oxford Street, we got a 2.5% yield on that. That was the right time. So we sort of we make sure that we're targeting the right money at the right time. So that's where we're very considered in what and when we'll sell. Where we go to Venkatesh? Maximo of Kempen. Just a quick one on the story. You talked about 42% premium to ERV, but you expect that to normalize given every man and his dog is doing flex office now. Where do you see that kind of normalizing to? And secondly, I think, Simon, you mentioned about kind of different approaches to leasing structures and some of the struggling assets. Is that just, as you've kind of been alluding to, sort of shorter leases? Or what kind of creative kind of things are you doing there? And obviously, what you think the impact will be on valuations from that? Well, since on the story question, since Tim has been sitting patiently there watching Charlie get peppered, I think it's only appropriate to give him a chance to answer that, although I have my own views. First of all, really pleased with the progress that we've been making with Storey. And you heard from Chris 87% occupancy and also the 42% premium. And we're pleased with that level of premium, and we think that it will settle down and it will be lower than that. But it's hard for us to be prescriptive about exactly where it will be, but that is against a backdrop that we are positive about what we've done in terms of launching story, and we're positive in the way that we can build it out because we've got 130,000 square feet that is committed and another 180,000 square feet sorry, 130,000 square feet that's launched and another 180,000 square feet that's committed. And it's a part of the campus strategy. It keeps on helping us attract a wider range of occupiers that enlivens the campuses, and it also gives existing customers an ability to have core and flex. So very happy with the progress so far. And without wishing to. Every man and his dog can't do that, right? They can't do that because they don't have the campuses. They can't do that because they haven't been doing it for eighteen months. We have learned a lot in the last eighteen months. We continue to learn it. That's a very different story, and we all feel very good about that. So I think it's distinct from other people trying, at this stage, to do it. And we're not losing £2,000,000,000 a year either, like, anyway, moving on. REPRESENTATIVE:] Jonathan Kalnator from Goldman Sachs. There's one more question. Classic two party thing Leasing that I structure. I don't know, Charlie, if you want to talk about some of the Yes. We just talked about lease lengths. That's one thing. We are doing more basin turnover rents. One of the things that we're beginning to make progress on is definition of turnover because the old fashioned just the in store sales doesn't pick up a lot. So I think in the pack, you will have seen new stats that we put in about click and collect, the amount of returns. All those themes that we've talked about over the last few years, we're really beginning to see accelerate. So we're trying to build that into our sort of turnover definitions. And over a medium term period, I'm happy to have more turnover rents because I think if I can create the right places, generate the footfall outperformance, we should benefit as the market recovers. For the question. Jonathan Kialnato, Goldman Sachs. A question for you, Simon. You've just issued recently a USPP. So can you comment perhaps on the financing conditions out there? And obviously, I appreciate you don't have major refinancing before 2021. Do you need extra financing, for instance, for the pipeline and how you're thinking about that? Sure, sure. So I would say for corporates such as ourselves with strong balance sheets, good credit rating with single A, There's plentiful finance, and the recent private placement is an example of that. It was very opportunistic. We were doing our annual update to our U. S. Private placement investors, and it was clear from the two or three of them that they would love to lend us a bit more money. The timing was perfect. So we were very pleased to close that deal. But equally, we were out on the road seeing our unsecured investors as well, and it's obvious that there's strong demand out there. So I think overall, good supply of finance for real estate. I think if you're looking at secured and you're looking at retail, it's tougher if you're not a strong sponsor. So someone like a British Land or Blackstone, who's a strong sponsor, in a much better position than some of the weakest sponsors out there, I think. And so how do you think margins are evolving? Obviously, you're talking about strong demand. Does that mean that margin are stable depending on, obviously, the source of finance? Are they compressing? Are they expanding? What do you see? So for us, for our unsecured, our margins are basically very stable. So The U. S. Private placement broke back to about LIBOR plus 124 basis points, and we envisage being something similar on a bond issue. I think that's where we're kind of trading today our bonds that are out there. What was this, the maturity of this? So we did a range of maturities from seven to ten years, and I think the average maturity was eight and a bit. I'm looking at Sarah, and she's nodding, so I've got that right. Was there sorry, was there another part of the question? I Yes, there was another part of the question towards funding development, whether it's how do you envisaging that? Yes. So as Chris flagged, in terms of when we sold five Broadgate, we didn't reinvest all the proceeds into our buyback, so we kept some capacity. We've also got, as you've heard from Charlie, retail sales coming through. So we've got four twenty million pounds either exchanged or under offer that will come through. And just to remind you, Leclage's proceeds. So that more than covers our development program and also gives us capacity for a bit more. And as you heard from Chris and Charlie, longer term, we will be selling more retail assets and effectively recycling into our campuses where we think the best returns are. Thank you. Good morning. It's David Brockton from Liberum. Two retail questions, I'm afraid. Firstly, your peer, Lansex, yesterday within the bad debt amount, there was a provision in anticipation of future administrations or CVAs. Did you make a similar provision? If not, why not? And then the second question related to that, I guess, is that CVAs have altered the balance of power between landlord and tenant. And there are a couple of large retailers out there on record seeking to reduce rents meaningfully despite being in long lease lengths. I just wondered if you see any have seen any signs of changes in landlords coming to you outside of the contracted lease lengths seeking to make changes and what response you're taking? Sure. Should I take the question on the CVAs and provisioning first? So I think our experience was pretty similar to land securities. I think they had a £4,000,000 provision and a £1,000,000 of rental income. Our six breaks down to £3,000,000 of rental impact and £3,000,000 of tenant write off effectively, tenant incentive write offs. I think we're pretty similar. And we've also got other balances on the balance sheet that have been there for a while because we've been aware of this situation. So we feel we're in the appropriate place. I think on the other part, it's probably fair to say that every retailer would like to pay us less rent. But I think if we take New Look as an example, When pre CVA stroke admin, we were getting about £6,400,000 of rent. Once we've gone through all of that process, the rent reduction is less than 10% of that original rent roll. When it went into CVA, actually the reduction was less. But as we got to each of the break clauses and we said, right, okay, we're going to operate the break, so we went back to the original rent. So it's become quite a negotiation, and we're quite robust on any retailer that comes to us sort of wanting rent reductions for no reasons. We're just not going to do it. Ben Richard from Credit Suisse. Just two questions for me, please. Blossom Street looks like it's going start next year. Could you give us some indications of your profit estimates for that scheme and where you are on planning? And secondly, on Canada Water, I expect that to be potentially revalued to market at March. Could you give us some indication of how the valuers will look at that, please? Tim, do you want to take the So I'll start up on Blossom Street. I mean as you know, we've got planning for it. We've been working up detail of the scheme. It's a site which we've got an option. We're putting ourselves into a position to draw down the site in the early part of next year. We will then be able to do some of the enabling works, and we will be then in a position in the spring to make a decision as to whether or not to commit to it. And that's against the backdrop of two things: one, we're really, really thrilled with the and I'm glad I've got this opportunity to say this, really, really thrilled with the 70% of pre let and under offer that we've got in the development program. So we're reducing risk in the developments. So it feels at some stage that we want to replenish that development pipeline. And then the second context is, I mean, Blossom Street is wonderful. It's a fantastic scheme. It's a mixture of modern, refurbished warehouse, redevelopment behind the facade. It's everything that people want in a happening part of town. And then the final question, I think, was the profitability. It's likely to be a profitable scheme, and we'll have to assess it in May when we know what the rents will be. But the reason is that we've got an option where we've agreed the price three or four years ago, and I think that, that option is in the money. So I'm expecting it to be a profitable scheme. And a profitable scheme for us, as we've talked to you before, in terms of ungeared internal rates of return for developments on a per annum basis, it's kind of like well into the double digit figures. And I think on Canada Water, I mean, look, we'll assess it in due course. I'm not going to get drawn on valuation changes around a future uncertain planning situation. That just seems a bridge too far. We'll see. Look, we remain very optimistic about it. We remain optimistic about the long term returns. We've had an awful lot of interest from people wanting to, in various ways, partner with us. So I think for all those reasons, we feel good about it. We've a good relationship with Southwark. And generally, the planning environment in London is getting is probably getting tougher, so relationship is really important. But I don't think there's much mileage in predicting what the valuers will think in the future. Perhaps so. What would you pay for a large 53 acre site in London approaching You're going to tell him no chance for a while. While. I mean, look, clearly, if you were to look at other valuations, you would conclude that it's cheap, but it is a lot of land. And therefore, I think the valuers will come to the decision they come to in March. And that will be dependent exactly when as I said in my remarks, we're confident about planning in as much as we can be, but you just don't know. So it looks like we've got nothing on the phones, unless anybody's got any last unless anybody wants to ask me again about Canada Water valuations. We'll call it a day. Thanks very much