Earnings Call: H2 2018

May 17, 2018

Good morning, everyone, and welcome to Broadgate. This morning, I'll set out how our consistent approach of investing behind themes has driven our performance this year and positions us well to further evolve our business. But first, I'd like to welcome Simon Carter, our new CFO. He's out there in the front row and starts on Monday. No difficult questions for him, by the way. I'm also pleased to introduce John T. McNuff, our Head of Financial Reporting, who will present the financial section today. Let's start, though, with the results. Profits were £380,000,000 down slightly on last year. That's despite asset sales, though, of £1,500,000,000 over two years. NAV is nearly 6% ahead, reflecting a valuation increase of more than 2%, plus the impact of our share buyback. Our leasing activity has covered 2,400,000 square feet. Pricing has remained firm with deals 8% ahead of ERV and at 97% occupancy. We're once again effectively full in offices and retail. At the same time, we're reporting some of our strongest ever financial metrics, and we've again increased the dividend. Jonti will talk more about that. As usual, I'll take our segments in turn, starting with Offices. Here, progress has been exceptional. Our activity has covered more than 1,000,000 square feet, four what we achieved last year. That's a striking number. It reflects our strategic focus on our campuses and on delivering quality space. Our letter teams to Dentsu Aegis at Regent's Place, which was the largest West End pre let in more than twenty years, is a strong endorsement of our approach. Overall, terms were 5.6% of ahead of ERV, and we're under offer or in negotiation on another 500,000 square feet. We've also successfully launched STORI. Again, it was a strategic decision to invest behind a growing theme in the market, but our offer is clearly differentiated. It's performing well, and I'll talk more about that in a minute. Of course, the market remains cautious, but one effect of Brexit is that it has constrained London office development at a time when many feared oversupply. So actually, businesses who want high quality space don't have a lot of options. So we're faced with what might be termed an unconventional London cycle, which continues to reward sensible development and our differentiated offer. Turning to retail. You're all aware of the environment we're operating in, so are we. Retailers face a combination of long term structural challenges, principally Internet related as well as short term pressures like rising costs and fragile consumer confidence. So polarization is playing out, and indeed, it's accelerating. But as our operational performance demonstrates, we're generally on the right side of that trend. So yes, retailer sales are down, but in a tough market, we're 130 basis points ahead of the index, and our footfall is positive. Here, we're more than 300 basis points ahead. Our leasing activity again covered more than 1,000,000 square feet, and we signed these deals on average 10% ahead of ERV. At Meadowhall, where we completed our refurbishment, they were over 13% ahead. Overall, incentives remain stable. And as I said, the portfolio is virtually full. But we've all seen the recent news flow, and activity has slowed in the last couple of months. That said, across our portfolio, the combined impact of administrations and CVAs is around 1% of our total gross income. Let me remind you, in the last four years, we've made £2,300,000,000 of retail asset sales. That includes £1,000,000,000 worth of superstores and £05,000,000,000 of multi assets and multi let assets that don't fit our strategy. But we're also investing in assets that do. So let me give you an example. At Fort Kinnead, we opened a new leisure extension in 2015 with a seven screen audience and a range of restaurants. We've improved the environment and extended the trading hours. In 2016, we opened a purpose built store for Primark. All this represented ERV. And we welcomed new occupiers like Puregien and Wagamama APD on a three five year basis. We've also maintained our disciplined approach to capital allocation. We completed on the sale of the Leadnor Building, an iconic city asset at a 24% premium. And we've made over £400,000,000 of retail disposals. We've continued to invest in our development program and in £200,000,000 worth of acquisitions, primarily mixed use opportunities. Finally, we completed our £300,000,000 share buyback at an average price of 630p. We've cut our interest bill from £200,000,000 five years ago to £128,000,000 today and reduced our weighted average interest rate to an all time low of 2.8%, and that's without materially impacting NAV. At the same time, leverage is now down to 28%. This all reflects our consistent approach to managing our finances, which has been very accretive to our long term performance. I said I would set out how the consistent strategic aims we have taken over several years have driven our performance. Some of these actions are laid out here. First, we've invested in London. Today, it accounts for nearly 60% of our assets, up from around 40% in 2010. And we've shifted our focus away from the traditional city so that the West End now accounts for some 60% of our office exposure. At the same time, Broadgate, our only remaining city asset, continues to thrive. Banks' exposure is now 66% of the whole portfolio, and this building represents around half of that. By contrast, TMT is up to 8%. We recognized the importance of Crossrail early on. In 2013, we acquired Paddington Central and Ealing Broadway, and we recently added the Woolwich Estate. So today, pounds 4,600,000,000.0 of our assets stand to benefit from Crossrail. And of course, our campus approach has been absolutely key to a lot of this. It's a real differentiator for us, and it plays to our mixed use skills. Almost 80% of our offices are now in our three London campuses, who we not only own the buildings but the spaces outside too. So we can meet people's needs throughout the working day, and increasingly, we care 7% of the Central London market, which compares with our own us owning about 2% of the stock. And we're attracting a broader mix of occupiers than ever before. How are we doing this? Look at Paddington. Five years ago, we raised equity to buy Paddington Central. It was an estate which, frankly, had lost it in the public realm. That's made a huge difference, as you can see here. I know a number of you have seen it live. We've let Space to Pergola, a pop up dining concert, which has brought nearly 180,000 people to the campus last year and has just reopened for another season. We've nearly doubled the provision of restaurants and cafes, and we've turned the canal from a barrier into a feature. So we've really changed the perception of the campus. The result for Kingdom Street was nearly 90% let before it launched last summer. Today, our top rates are nearly £80 a square foot. Back in 2013, they were below £60 We've achieved a total unlevered return of 12% per year. So it's a great example of how we allocate our capital well. And this year, Paddington was our strongest performing campus with values more than 7% ahead. Crossrail opens next year, bringing further momentum. At Broadgate, we're further ahead in that journey. Take a look around. You'll see pop up cafes, art installations and a lot of blue sky above 100 Liverpool Street, at least for the next couple of years. Such a relief somebody laughed at that. You've no idea. There's been a lot riding on that, let me tell you, not all for me. We're now on-site at 1 Finsbury Avenue and 135 Broadgate Bishopsgate even. So including 100 Liverpool Street, we're delivering more than 1,000,000 square feet of space. More than 30% of that is already pre let. 15% of that space is F and B and retail. So we're really progressing our mixed use vision. This year, we're delighted to have signed Italy a 135. It's a world class Italian marketplace concept and represents a real step change in our Boston. And this will be their first U. K. Store. This signing is clear demonstration of how our expertise in retail is really adding value, and it sparked interest across Broadgate from a range of other occupiers. Story is another example of investing in Athene, and it's delivering, as as larger organizations seeking add on space. We got a genuinely differentiated offer because we own the buildings that have Story. Our contracted lease term is more than two years, and the average size is over 50 people. Equally important to our customers, they can brand their own space, they have their name on the door, and they really like that. So one year in, occupancy is nearly 80%, and we're achieving a premium of nearly 50%. That's an impressive start, but we think it will settle over time at more like 20%. We're attracting a lot more tech companies. Around threefour of storey space is let TMT occupiers. So we're learning a lot about this part of the market and that insight. You may remember that our 2010 program delivered more than £1,000,000,000 of profits. We've had another great year of progress. We've more than doubled our committed pipeline. 55% is pre let or under offer. So our speculative exposure remains low at under 5% of the portfolio, and future costs are substantially covered by residential receipts to come. Looking further forward, we have a very significant opportunity at Canada Water. I'm pleased with our progress here. We signed the master development agreement with Southern Council last week and submitted our planning application for the overall master plan and for three buildings in the first phase. That phase covers 1,800,000 square feet with around six fifty new homes. That's really complementary to our mixed use model. We're continuing to engage with the local community. 10,000 people have visited our exhibitions so far, and their views remain critical to our approach going forward. This is a part our we're pleased that today, our portfolio is nearly twice as efficient as it was in 02/2009. And we've maintained our leading sustainability performance across a range of indices. I'll pause there and hand you over to Donti for an update on on percent following the successful sale of £1,500,000,000 of income producing assets over the last two years. EPS is down by just 1.1% due to the positive impact of the £300,000,000 share buyback, which added 0.4p. There's a further 1p of benefit to come on this next year. As previously announced, we increased the dividend by 3% to just over 30p for the year. NAV is up 5.7% at 967p with valuations up 2.2%. LTV has reduced by 150 basis points to 28.4% as our sales were partially offset by the impact of share buyback. Altogether, we've delivered a total accounting return of 8.9% for the twelve months to March. Let's look income statement in more detail, and I'll start with the rents. Net sales we've made over the last two years have reduced rents by £44,000,000 The impact of lease expiries of properties in our development pipeline is largely offset by one off surrender premium, principally the £15,000,000 received from RBS at 135 Bishopsgate. Income from our completed development was £6,000,000 for the year. Turning now to financing costs, which we've reduced by a further £23,000,000 This is the result of thoughtful financing and debt management that we've undertaken over the last two years as well as our net divestment. We successfully issued a £300,000,000 unsecured sterling bond for twelve years at a coupon of 2.375%. That's the lowest for a U. K. Real estate company in this market. Earlier this month, we extended our largest revolving credit rating of 90 basis points. We're pleased with the support of the 12 banks in the syndicate. On a spot basis, the interest rate on our debt is 80% hedged. This reduces to 60% on average over a five year look forward based on projected debt. Bringing this all together, you can see the significant impact that our capital activity has had on this year's profits. As I've mentioned, we've largely offset this through NPV positive financing and debt management as well as one off surrender premium received. Looking to next year, the usual guidance side is included within the appendices, but it's important to highlight that we're not expecting any further significant one off surrenders, which £25,000,000 is included in this year's profits. We'll obviously keep you updated on future capital activity as and when it happens. Looking down the income statement. We've covered the significant movements in rent and financing costs. Admin costs are down £3,000,000 to £83,000,000 as a result of lower variable pay. We expect next year's admin costs to be broadly in line with this. And looking at the dividends for the coming year, we're proposing a further increase of 3% to 31p. Turning now to valuation performance. Valuations are up 2.2% for the year, with growth of 1.4% in the first half slowing to 0.9% in the second. Overall, yields were stable, and we've delivered ERV growth of 1.8%. This performance reflects our strong leasing, development and sales activity. Our developments were up 9.6%, which is £112,000,000 This includes the profit release at Clarges Residential, where we've made sales of £344,000,000 of which we've received proceeds of £231,000,000 to date. The remaining units will be formally launched in the summer. Looking at offices in a bit more detail. Overall, valuations were up 4.5%. Our West End asset valuations were up 5.8 overall. At Paddington, values were up 7.3%, the rest of the campus. Over at Regent's Place, values were up 4.2% as a result of achieving planning and pre letting to Densio Asias, as Chris mentioned earlier. City asset valuations were up 2.8, in part reflecting the Leadenhall Building Sale, which completed last May. And finally, Broadgate was up 1.8%, driven by successful pre lets along with ERV growth of 1.5% on the standing investments. In Retail, valuations were up 0.3%, all of which came through in the first half with values flat overall in the second. Regionals performed better than locals with values marginally up by 0.2% for the year. Across Retail, ERV growth has offset marginal outward yield shift. We've seen good ERV growth of 1,200,000 square foot of lettings, at 10% ahead of ERV. This was driven by point 8%. Bringing the results together, NAV is up 5.7% at 967p. This is driven by the valuation increase of 2.2% together with the positive impact of the share buyback, which added 15p. Finally, looking at debt. We are again reporting some of our strongest ever metrics. Loan to value stands at 28%, followed 2.8%. And our interest cover stands at 4x, with undrawn debt facilities of £1,200,000,000 and no requirement to refinance until early twenty twenty one. The strength of the company's balance sheet and underlying business is reflected in our senior unsecured credit rating, which was upgraded to A by Fitch earlier this year. And that external validation of the strength of our finances seems a good note on which to hand back to Chris. Thank you, Jonti. Earlier, I explained how identifying attractive market themes and then investing heavily has changed our business and delivered value. Going forward, you should expect us to continue to evolve our business. Building on our strengths, we will focus on opportunities which complement and enhance our model to build a more mixed use business. We will remain focused on high quality places, which reflect a broad range of needs and which are properly embedded within local communities. So they reflect modern, diverse lifestyles and are places where people want to work and to spend time. I set out here the future shape of the business. We're moving towards an just to be clear, this slide illustrates the direction of travel. It's indicative and not representing scale or exact size. The three areas are: a London office business, focused principally on campuses a further refined retail business and a growing residential business, principally build to rent. Our customer focus through our operational expertise is part of that customer story. I'll take you through these elements in more detail. First, the London office business focused on our campuses, providing high quality, well located and sustainable office space as we delivered at 4 Kingdom Street and we're developing at 100 Liverpool Street. We'll also offer the right mix of core and storey space to cater for an even broader range of occupiers. We'll build out storey. We've identified another 120,000 square feet across our campuses that we will progress during this year. And over time, it could become 10% of our office business, both on our campuses and potentially in some stand alone buildings. Secondly, on retail. Let me be clear. Physical retail has an important role to play in our business. But we recognize that the retail market is changing and the types of assets which retailers need to succeed is also changing. We're focusing on providing quality space, places for which there is more demand and supply. And we're already making significant progress. I explained earlier how proactive we've been over several years. Halfway in, we're on track. On balance, we're likely to sell more Solas or local retail. So over time, although we see a role for both regional and local assets, our retail business will comprise a smaller number of, on average, larger schemes. Thirdly, as we build an increasingly mixed use business, only more residential assets, principally, as I said, build to rent, will play increasing role. It's a complementary and structurally growing part of the market, which is highly fragmented, so we see a real opportunity here. As you know, we already have a number of residential options in our portfolio at Canada Water, where Phase one includes plans for six fifty homes and at Ealing, Eden Walk and Woolwich. We've already got a strong track record in residential, for example, at the Hempel and Aldgate and most recently at Clarges, albeit that is a unique scheme. There are a number of ways we can build scale in this market, starting with opportunities in our portfolio, site acquisitions or bolt on acquisitions of portfolios or operating companies. Providing people's homes does come with a real responsibility. We're aware of that. So we'll focus on providing those residents with high quality customer service. And that brings me to my next point. Customer focus will become even more important to us. Increasingly, we think about real estate as a service, not just as physical space. So yes, we will continue to deliver great buildings, but we can do more than that. Our insights into our customers and the people and communities who use our spaces mean we can provide places which reflect their evolving needs, whether that's through story, a residential business, a more focused retail operational expertise, are real advantages for British Land and will be fundamental in our business. In all of this, we'll remain committed to deploying capital in a disciplined and thoughtful way. As I've said already, we'll continue selling retail assets and continue to extract value from office assets, which are mature and fully let, while at the same time progressing our strategic agenda and investing in our business. We've got significant optionality embedded within our model. And on top of that, our current financial position is as strong as it's been for many years. Our leverage is low and with committed development costs and of course, as always, we're mindful of the importance of shareholder returns. Looking forward, as I said earlier, we think that this office cycle is proving somewhat unconventional. Despite uncertainty, businesses are continuing to commit to London. And the supply of high quality new office space is relatively constrained. So we expect demand for the space we manage and develop to remain good. Occupiers face headwinds and polarization is playing out of retailers. Today, I've set out a clear plan for the future development of our business. As you'd expect, we are mindful of the current market conditions. But our unique strengths, including the scale, balance and quality of our portfolio, the opportunities we've created and our strong balance sheet, all mean we look to the future with confidence. And with that, I'll turn it over to questions. As usual, if you can kind of give your name and organization at the outset, it gives an advantage to the people on the phones. We'll probably take some questions from the phones at the end. Good morning. Now can we get this to work? Can you hear me? Yes. I can. Thank you very much, Chris. Very good presentation. I have two questions for you. The first one is a technical one, is how appraisers are assessing the value of office building in which you have a story, I. E, massive premium to ERVs, what is the numerator, what is the denominator? And the other one will be talking about smart use of capital. Can we have a sense of what will be over the next three years the kind of big blocks you're anticipating in term of investment? I think you've got £900,000,000 still near term, as you call it, plus £3,000,000,000 longer term. So how that optionality can play out within those GBP900 million? So disposals and on the other side, dividend, obviously. Okay. I'll try and get through all of that. I'm going to start off with the valuation point, which nobody in the room will be surprised to know that I'm going to hand over to Tim because that's what we pay him to do. Well, we don't actually pay him to do it. The guys at the back of the room get to do the valuation. What the valuers are doing is they're applying a slightly higher yield on the storey income because that income, they believe, is of a short term nature. And where the premium is particularly high, they do some top slicing. I think in with respect to Storey, as Chris has said, it's been strategically a fantastic success because we're attracting new occupiers, new SME occupiers to the campuses. And a great example, if I get my geographies, two and three FA, where we've got a fintech cluster, But also, it's meeting the needs of our existing occupiers who want core space, but they also like the idea of some flex. Moving on to the kind of big blocks, to use your words, I would say the following. First of all, if we look at the committed program, which is principally, as you know, offices, then in terms of cash flow, that's principally, as I mentioned in my remarks, paid for by the cash coming in from the disposals. Looking forward, one of the things we really like is the optionality. And I mean that seriously because that gives us the choice rather than having to make that now. How you should think about this is rent will build over time as the development comes to fruition. These are big buildings, so it tends to be slightly delayed. So that's part one. Part two, in terms of the kind of medium opportunities we have, then we will look at each of those, and they're all set out in the book, as over time to just look at what the returns are. And we'll balance that with other potential uses of capital, including and I hope I was clear about that, including the possibility of share buybacks. But obviously, we're also reminded of the importance of building for the future in terms of our business. So those decisions will come up over the next few years. How will we finance them? You should expect us, as I said in my comments, to be principally out of sales of either mature city offices, buildings or alternatively, obviously, out of disposal of retail assets that we don't fit the future for our view of the future. So that's kind of where the cash flows. Don't know, guys, if you want to add anything to that. That's very nice of Hold on, boss. Just to make sure I understand correctly the valuation, what sort of premium we end up, sorry, on this store evaluation? Is it the same type of valuation than a classic office building? Or do we have a premium? And what sort of premium are we talking about? Because you gave sense at lower rents, higher yield, but net net, does it mean a premium? The moment, net net, on a 48% premium, at a valuation level, started off well. We don't expect to maintain that 48% premium. We are targeting more towards a 20% premium. But at a 20% premium, we still expect it to be accretive to the business and accretive to valuation. Please, quick in terms of response. The first one follows on in respect to the story, the 10% long term aspiration or the 10% potential. Just interested to know how you've derived that number. Is that your view of the latent market demand? Or is it the extent of your risk appetite there? And then the second question, which covers a few is with respect to the build to rent aspiration for the business. Do you have any thoughts around what the achievable gross to net might be there? And also when you talk about bolt ons, can you give a feel for scale and the In terms of the strategic view that it could be 10% of the office business, That is because of our view of where demand is coming from. And I've talked already about that. It's two areas. Structurally, demand is growing from SMEs, and it's an ability for us to attract a wider range of occupiers into our campuses, which helps us with demand and enlivenment and rental growth. The other thing that we are hearing from nearly all our occupiers is that they are really attracted to this core and flex approach. So we think that we will be providing our existing occupiers in the future a degree of flex. And to put this into perspective, as Chris has said, we've got about 115,000 square feet in storey. We are already committed to 230,000 square feet. And at the moment, the office portfolio is about 7,000,000 square feet. So you could see it growing to 700,000 square feet, I think, relatively easily. In terms of the BTR questions, I'll take the ones on bolt on and how to manage and then Charlie don't know what they might be. But where we would see the opportunity is to gain either incremental assets, a platform that has some assets or some incremental expertise. If you look at what we did in STORI, there we really took existing talent from within our business and added a couple of people who were we hired out of other operations. That's worked very well for us. So that's our kind of starting point. But certainly, if something came up that was incremental in terms of either people where we know we don't have every skill set that we're going to require or gets us a bit of scale straight away to add to what we can build from our own resource. That would seem to us to be a neat way of doing it. It's not really feasible to give you a sense of size until they show up, if you I mean, I'm not dodging the question. It's just really hard. In terms of so that's really how I would say it. In terms of managing that, I could see a situation where we hired somebody who had some talent who would be reasonably senior in the organization, but I wouldn't see us needing to expand the the most senior levels of the company. What I would say is, as an organization, we feel incredibly proud of the people that we many of whom you don't see. I mean, just as an example, there was Jonti doing a hard day job, and we just say to him, why don't you come and present the results? So we've got people like that in the organization who do lots of things. I do think we did give him more than a couple of days' notice, but we should maybe pretend not. But that so we have a lot of talent in this business, and we can reuse that talent in different places. But that doesn't mean that we would look not look outside if we thought it appropriate. Charlie, gross to net? And just building on what Chris said. So a lot of the themes that we see in build to rent are similar into the way we run retail places. So the skill sets are transferable. Obviously, you need experts as well, which we can build up that platform. They're actually with the development team with Roger and Nigel, we're sort of working out plans for that, for the schemes that we've got. And then the other side is, as you rightly point out, is the operations side. The sort of market sort of norm is 25% gross to net. You need scale to do that. And that means you sort of need at least sort of 1,500 to 2,000 units to get to those sorts of efficiencies. But in all the development pipeline we've got, we've already got that sort of potential baked into the assets. Morning. Sander Behn, Barclays. Two questions on retail, actually. First one on the valuation. Perhaps a bit surprising to see the retail valuation up, given that one of your peers just recently saw write downs in three of its assets and other retail what was going on currently in the market. Can you give a bit more feeling on why that valuation was up? And perhaps more bluntly, if you were to put the whole retail portfolio up for sale today, would you achieve book value? And the second one would actually be then on Sainsbury's, knowing it's one of your largest tenants and a recent merger announcement with Asta. Have you had conversations with them? And do you are you aware of any store closures? Or are are they quite comfortable where they are at this moment? I'll get Charlie to answer some of the questions. Look, I would say at the outset, we take a lot of pleasure in some of the decisions we've made over the last year. So that's the overall environment. Charlie, if you just want to talk about valuations, I think that might be useful. I mean, first off, we're confident on the valuations, independently valued. As a sort of side note, this year, we did a valuer rotation, so nearly half the portfolio has been valued by a new valuer. I think the main thing on the valuations is we've created 1,000,000 square foot of lettings and all the physical works, the assets that Chris has talked about. The 400,000,000 plus in sales have been marginally ahead of book, which is valuation. Meadowhall valuation, Meadowhall has had a fantastic year. But also, we've done a huge volume of lettings over the year, 30 lettings, nearly 30 new retailers to the center. Is Meadowhall is only two forty units. Bluewater is £330 Westfield is £450 So that supplydemand tension we've got is strong. You've got over 50% of the rent at Meadowhall is on Zone As of less than £300 So you've got a very widespread of rents at Meadowhall. And from a performance basis, nearly 50% of the retailers at Meadowhall have their Meadowhall stores as one of their top two performers in The U. K. So it's a very strong performance and the operating metrics are very good. And I suppose the last part on Meadowhall for me is we've got the planning consent for the extension, effectively a very pretty metal box, and we can upsize and downsize units very effectively, which is why we've been able to accommodate so many new retail facies. Okay. What they'll do, we've actually only got three sixty odd million of stand alone stores left in the portfolio after all disposals. We've actually had a very good run rate on selling stand alone investments. And we've just sold another couple in the last three months, about GBP 70,000,000 gross asset value, which we yield to sort of 5.2 to 5.5. There's a lot of investor demand for us at the moment. Michael Burt from Exane BNP Paribas. I just had one on Retail. It doesn't appear that units administration are a significant factor for you at the year end. I was just thinking more specifically, though, looking forwards about your exposure to debonins. The equity market seems to be quite worried about debenhams at the moment, and I just wonder how you see it. Yes. I mean I gave you the the number I gave was the current number rather than the year end number. So we've done what we can in terms of disclosure at this stage. Debenhams specifically, remember that quite a big chunk of that exposure, which we disclosed as the head office, that Tim, it wouldn't be a disaster, would it, if you got that office back? God bless them, they're paying rent in the mid-50s, and Facebook have just taken one of their floors paying a rent of £70 a square foot. That helps to offset. And then a couple, if I may, on Canada Water. You've put planning in now. Maybe you could just let us know what you see as the milestones for that now sort of between now and the end of the next financial year. And could you explain the master development agreement to us? These things are complicated, it would just be nice to understand your relationship. It doesn't look like a lot has changed, but an update there would be useful. Look, just to put it in perspective for you, we in terms of the planning document, Roger's sitting over, well, half of the team have dotted around, we delivered 10,000 pages in that planning application. So giving you a precis of that is going to be a stretch in the few minutes available. The basic but what I can tell you is very detailed work. We feel very good about it. The way that these things work with local authorities is you kind of only you only submit it when they want you to submit it because obviously, it's a lot of work for them. So you can take from that in conjunction with the signing of the NDA that that will it's very consensual, if you see what I mean. Your point about the elections is right, same team in place, same it's been consistently labor, same leader in place, same chief executive in place. In terms of the broad brush of the MDA, if you cast your mind back to how we assembled the site, were several bits of ownership. And some of those were freehold, some of those were leasehold. As you can imagine, to make that work, it had to be equitable to both sides. We basically took all aspects of that, figured it out, valued it and then had a bit of a haggle at the end, as you can imagine, which was a pleasant conversation between me and the Chief Executive, which came to a satisfactory conclusion for both of us. So that's how it worked. Is that a reasonable summary, John? They don't want it can't slow us down for our aspirations. So we're in control of our own destiny, but very much working in partnership with Southern. And they really want to invest with us, which is great for us to have sort of the largest stakeholder as part of the plans. Bart Giesen from Morgan Stanley. First question on build to rent. It's something that gets a huge amount of attention from the press, a huge amount of capital chasing it. The barriers to entry are significant or in one, three, five years' time, will this become a meaningful part of your business in the investment portfolio? Should we expect it to be 10% plus in three years' time, five years' time? I think those are the numbers to think in terms of. So if you use 10% to 15% over 5%, I tend towards the five years. And just to be clear, we see this as strategically important. We see it as very additive and complementary, as I tried to make clear in my comments. Having said that, we will drive the same financial discipline through acquisitions of sites, build out of rental versus other forms of homeownership at places like Canada Water. So we'll continue to be disciplined about it. Mean those are the sorts of numbers we use. But to be honest with you, one of the things we like about our model is that we can flex these things a reasonable amount if we get the opportunities at a different price. From our perspective, we have a bunch of advantages in this space about history, about how we can run mixed use. That's why we think we can be meaningful in this space. And our approach to customers, again, is very complementary to this thing, creating communities. Those are things you've been hearing from us. That you think are potential CVA candidates? And what type of and obviously, I don't want you to give any names, but can you No, try anyway. No, but do you have kind of what do you think what percentage of your portfolio is at risk of a CVA in the next twelve months? And what kind of discount? First off, I don't think any of the businesses that have gone into CVA particular surprise to anybody. And to date, the impact for us is actually 0.6% of the rent roll is the rent that we've lost. So if you look at a lot of the CVAs at the moment, our assets are in the sort of the category A assets because typically, a retailer comes and has sort of three or four different categories they put them into. Yes, we do have a watch list. I wouldn't, as you quite rightly say, name the retailers. And it's commercially sensitive, so I wouldn't actually give you a percentage of what sort of managing that space when it comes back to us. We start from a very strong position of 98% occupancy. So if you look at, say, BHS last year, we've now filled or sold all of that space. And in aggregate, we're at a higher rent passing than the previous rent passing for BHS. So as you'd expect for us, every asset has an asset plan, target list of retailers, etcetera. So we sort of deal with them as and when they come up. Mike Bessel from Bank of America. One very quick one on build to rent, which is given sort of the shift in the portfolio towards London, can I make the assumption that your build to rent will be exclusively London focused rather than a national play? The second question from me is on the ongoing shift towards being a more operational service business. Can I see this as sort of a further trend to be leaving NAV aside slightly? Or how are you seeing that asset value versus cash flow trade off going forward? A couple of great questions. I would say on the important measure, but we also know that for many of our investors, both are important in terms of sense of value. We all know that, that trade off between income and capital in both directions can be quite complicated. I think the idea of just running it in terms of FFO is kind of weird in this business, to be honest with you. So we look at it in a total return context. I do think that at the end of the day, this business around being able to offer a better service is likely to manifest itself in growing rents above all else. And we can see that with story, if you like. People are effectively paying that premium that Tim talked to them. So that's kind of how we look at it. In terms of BTR and where we would go, I think we start with a natural view that as we've already pointed out, the existing sites that we have solidly in this part of the world, I don't think over time, we would absolutely take the view it had to be in London. And there are clearly some signs that the economics are different in different parts of the country. But that I'd see more towards when we've grown a business before we start doing that absolutely immediately. Charlie, don't know if you want to add anything or Tim to those comments. I think just on the and you all probably noticed with the macro 23% in The U. K. Market is in institutional grade at PRS. That grows to 10% with very few people doing it, which is why we see a lot of opportunity. Yes. And the only other thing, Mike, is that we've obviously got a big advantage because we own Broadgate Estates. And Broadgate Estates is well versed at dealing with buildings. Both offices recently decided to do is to focus that business purely on British Land's portfolio. No, looks like not. Very good. Thanks very much for your time. Good to see you.