Earnings Call: H1 2018

Nov 16, 2017

morning, everybody, and welcome. Today's results reflect another period of successful activity. In leasing, 1,300,000 square feet. In planning, 1,800,000 square feet. In sales, nearly £1,000,000,000 And in particular even, on our development pipeline, where we're announcing significant leasing progress today. So despite the obvious uncertainties, these results demonstrate four things: the demand for our space is healthy that we're actively managing our capital that we've got a strong financial position and that we're successfully positioning the business for growth. I'll start with the results. Profit was almost £200,000,000 for the half. That's despite selling £1,500,000,000 of assets over the last eighteen months. NAV is 2.6% ahead of March, reflecting a valuation increase of 1.4%. We've leased 5,000,000 square feet more than this time last year. Our pricing remains firm with deals signed 7% ahead of ERV. And at 98% occupancy, the business is effectively full on both sides. We're also delivering from more than just a financial perspective. As you know, sustainability is integral to our strategy, and our leading position is now recognized by a number of international indices, as you can see here. Turning to offices. Our leasing activity covered threefour of 1,000,000 square feet. New lettings accounted for 8% of Central London activity, with an average lease term of more than fifteen years. Overall terms were again ahead of ERV, and incentives remained steady throughout the period. We're also under offer or in advanced negotiations on over 500,000 square feet. Our experience is that demand is polarizing. Increasingly, occupiers are focused on high quality space and a broader experience. That's what our campuses offer. Today, campuses represent nearly 80% of the office portfolio. These parts of London represent an increasing advantage for us. We're aggressively managing the mix of uses and the mix of occupiers as well as curating the spaces outside our buildings. And of course, our campuses benefit from great locations. They're in vibrant neighborhoods with excellent transport links. It's a really attractive combination, which is appealing to a broader and broader mix of occupiers. All this creates a superior experience for employees before, during and after the working day. Let's look at Broadgate. We're transforming the experience. We saw the move of UBS into five Broadgate as a big opportunity to reconfigure 30 acres of Central London. A year later, you can really see the impact of our activity in terms of the mix of uses and the occupiers that we're attracting. Across our three developments, 100 Liverpool Street, 135 Bishopsgate and 1 FA, we're delivering over 1,000,000 square feet. 16% of that will be in retail and restaurants. We're already under offer to a global retail brand who are taking 40,000 square feet. And we're in active negotiations for a cinema as well. That's a big improvement in quality and in mix, building on the success of Broadgate Circle. We've attracted occupiers who wouldn't previously have come to Broadgate, maybe not even thought about coming to Broadgate. That's been an important strategic focus for us. Mimecast are a great example. They complement recent lettings we've made at 2FA, where a fintech cluster is now emerging. I'm also very pleased to announce that we're now under offer on 160,000 square feet at 100 Liverpool Street. That means that the space across these three developments is already 30% let 36% let or under offer. Of course, it helps that Crossrail opens in 2019, so our customers will be just thirty five minutes from Heathrow. They also value proximity to Spitfields, to Shoreditch and to Old Street. Flexible workspace is another important part of our campus proposition. We launched our own brand story in June. We've tapped into growing demand from small and medium sized businesses as well as for short term and project space from larger customers. We're delighted that with the progress we've made so far, nearly 70% of the space is let or under offer on terms in line with expectations. That feels pretty good after just five months. At the moment, threefour of the space is at Broadgate, but we're also fitting out space at Paddington and Regent's Place. So Storey will shortly be available campus wide. Turning to Paddington. It's been another strong performance. 4 Kingdom Street was a speculative, I nearly said spectacular, development. We were both is true. We were 80% let within a week of completion in April. That is exceptional. Store is taking space. So today, we just got one vacant floor. Average rents are 5% ahead of pre referendum levels. We talked about Pergola in May. It attracted over 130,000 people this summer, and the lineup has just been refreshed for Christmas. That gives people another reason to visit. We're also making real progress at The Gateway. It's a 20 storey premium hotel with high quality retail and a restaurant on the Ground Floor. We're well on the way to a pre let, and we just received a resolution to grant planning. So as you can see, our strategic decision to broaden the mix of uses is working well. We're now achieving rents 40% ahead of when we acquired Paddington Central four years ago. Remember, here, too, Crossrail arrives in 2019. At Regent's Place, our leasing has also been outstanding. Today, we're announcing our commitment to redevelop 1 Triton Square as we fully pre let as we're now fully pre let on the office space to Dentsu Aegis, the international media agency. That's over 300,000 square feet for a twenty year term. It's the largest West End pre let for more than two decades. It's great that Facebook have increased their commitment, raising their occupancy to over 180,000 square feet. These commitments are another endorsement of our campus approach as well as the attraction of the location. Our neighbors at Regent's Place include the Francis Crick Institute and the Wellcome Trust. In fact, there are eight universities within a one mile radius. 73 organizations have joined together to create what is becoming known as London's Knowledge Quarter. This proximity to exceptional talent is great for leasing. So again, local connectivity is really important. As you can see, our campus approach is driving demand for our space. We're capturing a bigger share of the market. 8% of all Central London activity in the half, that's a great result for British Land. Turning now to Retail. Here, too, we've made good progress. Clearly, there are headwinds in the market in terms of the economic climate and continued structural change. So retailers are firmly focused on quality. As you can see, our leasing performance has been very strong. There's healthy demand for our space, and we're signing deals on average 12% ahead of ERV, showing that we are on the right side of polarization. This performance is a testament to all the work we've done and are doing to reshape our portfolio for an omnichannel world. Today, retailers' margins are under pressure, so the right network of high quality stores is actually critical. But the role of the store is changing. Historically, most, if not all, shopping was done in the store. Today, retailers break the journey down into three parts: discovery, transaction and fulfillment. Our job is to help with each part of that process. Onefour of online sales are first browsed in store. Just think about that number. So physical discovery is important even for an online purchase. Our role is to attract people to the physical shop by driving footfall. That's why at our regional centers, we're enhancing the customer experience with more F and B and leisure. At the fulfillment stage, retailers are incentivizing consumers to use Click and Collect because last mile delivery costs are expensive. So 30% of shoppers now use Click and Collect at our local centers, up from nineteen percent three years ago. Twothree make an additional purchase while collecting, so retailers benefit from lower fulfillment costs and additional sales. Convenience is a big consideration for shoppers, which really benefits our locals. And here, the use of Click and Collect is significantly higher than the national average. Across the portfolio, we're also significantly ahead on footfall. This helps drive our leasing performance. So what does all this mean for our retail business? We're continuing to reshape it in three ways. We're selling assets that are not in line with our approach. We sold £1,700,000,000 of Retail assets in the last three years. We'll continue to sell assets which don't fit our strategy, around another £05,000,000,000 over the next year. We're buying assets which fit consumer needs and an omnichannel approach, like our £50,000,000 purchase of Ealing, adding to the existing asset. And we're investing in those assets, which can really drive performance. I'll give you a couple of examples. First, Meadowhall. It's a super regional. It provides great opportunity for discovery. We just completed a £60,000,000 refurbishment. In response, over 70 retailers have invested nearly £40,000,000 upgrading their stores. Rents and valuation are up, and we've outperformed IPD on a one, three and a five year basis. And we're attracting some great brands. For example, Jo Brand is an online retailer, but they've opened their first physical store at Medihall just last month. In September, we received a resolution to grant planning for a 330,000 square feet leisure hall. It's an exceptional design, which will increase the lettable area by 20% and transform the leisure offering. It's a significant milestone in Medihall's evolution. What really helped us achieve planning was our track record of supporting the local economy. For example, during the refurbishment, we prioritized local suppliers and workers, boosting the regional economy by over £30,000,000 We're really excited about the next step, and we'll tell you more about that next year. Whiteley, a local center, is another great example. We built it five years ago. Since then, we've had a total return of more than 20% per annum, in part because we added a leisure extension. We've made some great lettings in the half, so ERVs and values were strongly up. As you'd expect, it works well for click and collect with over onethree of customers using it. In an omnichannel world, our combination of regional and local centers is working well for both shoppers and retailers. As you can see, and despite the uncertainties, British land is performing well. We've seen strong demand for our space. And in a moment, I'll talk you through how we're managing our capital and positioning the business for long term growth. First, though, I'll hand over to Lucinda, who will take you through the numbers. Thank you, Chris, and good morning, everyone. I'm pleased to present another good set of results to you today, which reflect the effectiveness of our strategy. At British Land, we create outstanding environments through development and expert asset management with a strong balance sheet to boot. And that's been achieved through another very active half in finance. For me, the highlights have been taking LTV to 27%, issuing a sterling bond and launching a £300,000,000 share buyback. This activity reflects our focus on capital discipline and increases our flexibility, ensuring we can continue to make the right decisions for the business. And now I'd like to take you through the financials for the half year. We've kept profits and EPS in line with last year at £198,000,000 and 19.2p, respectively, despite the impact of 1,500,000,000 of sales over the last eighteen months. That's 12% of the portfolio that we've sold. The dividend is up 3% to 15p. NAV is also up 2.6% at 939p, with valuations up 1.4%. We've been a net divestor, and LTV stands at 27%, underpinning the financial capacity to progress our substantially derisked developments. Altogether, for the six months, this gives a total accounting return of 4.2%. So if we look at the income statement and starting with rents, the net sales we've made have reduced rents by £22,000,000 this half. The impact of lease expiries of properties in our development pipeline is offset by a one off surrender premium from RBS on 135 Bishopsgate, which you'll remember I mentioned at the full year. This surrender allowed us to accelerate our development plans and also gives a useful boost to development returns on the asset. Income from our completed developments as well as like for like growth of 1.8% take rent to GBP $297,000,000 for the half. Turning now to financing costs. We've reduced these by a further £12,000,000 This is as a result of the liability management activities we've undertaken over the last eighteen months as well as our net divestment activity. In September, we cash settled our 1.5% convertible bond. This has been a highly efficient source of financing for us over the last five years, saving us £40,000,000 in financing costs. We also successfully issued a £300,000,000 unsecured bond for twelve years at a coupon of 2.38. That's the lowest achieved by U. K. REITs in this market. It's good to have established the benchmark of this benchmark in our home sterling market. It also further diversifies our sources of funding and extends our average maturity, which now stands at nine years sorry, just under nine years. Today, on a spot basis, our debt is 76 percent fixed. Looking ahead, over the next five years, this reduces to 60% on average. Putting this all together, you can see here that profits are flat, and we've already discussed the key moving parts. But what this slide further demonstrates is how active we've been through the half, both in terms of selling and reinvesting in development. Looking ahead to the second half, as we discussed in May, we expect profits to be lower as we won't benefit from the RBS surrender premium, and we will have a full six months impact of the sales we've made to date. I note this is currently captured in consensus. I've included my usual further detailed guidance slide in the appendix. Looking down the income statement, you'll notice that admin costs have decreased by £2,000,000 due to lower variable pay. And I'm expecting them to be at a similar level or possibly a little lower in the second half. Overall, our EPS is in line with last September. The continued dividend growth reflects the Board's confidence in our strategy and our ability to grow income and therefore, dividends sustainably over the longer term. So looking at the property performance. We've got a high quality portfolio that's practically full with average lease length of eight years. Valuations are up 1.4%, reflecting stable yields and the ERV growth of 1%. Our performance reflects some great leasing activity and investor appetite for long term secure income streams, including the Leadenhall Building. As you know, we completed the sale in May. And although we recognized most of the benefit in our March valuation, the remaining £32,000,000 was taken this half. And we've made further sales of £417,000,000 on average 2% ahead of valuation. The book the valuation fall of 4% at Canada Water reflects costs incurred in the period. Our new valuation appointment policy, which restricts engagement periods to ten years, resulted in a change of value for nearly half of the portfolio. As you would expect, there were a number of moving parts at the individual asset level but no material impact at subsector level and, therefore, overall. On our portfolio as a whole, Retail has underperformed IPD by 40 basis points whilst Offices has outperformed by 70 basis points on a total return basis. Looking at Retail in more detail. Valuations are marginally up at 0.3%. Multilay assets make up almost 80% of the portfolio now. These saw good ERV growth of just over 1%, and values overall were down 0.4%. We leased or renewed almost 580,000 square feet of space in the half at terms 12% ahead of ERV. That's a reflection of the quality of the retail we're delivering to our customers. Investors continue to focus on low risk, long term, smaller lot size assets shown in our Solis assets where valuations were up 2.5%. Turning to offices. Overall valuations were up 2.6%. Here, we saw six basis points inward yield shift and ERV growth of 1.2%. Our West End valuations were up 3.2% overall. At Paddington, values were up 5.6. Our success in leasing 4 Kingdom Street with an average rent of £71 a square foot had a positive impact on ERV growth across the campus. And this is an example of how our campus approach magnifies returns for investors. Over at Regent's Place, values were up 2.6%, primarily as a result of pre letting 1 Triton Square on a twenty year lease. Values in the city were up 1.7%, reflecting the Leadenhall Sale Building I just mentioned. Broadgate was up 0.6% with ERV growth of 1.4. This reflects our reshaping there and occupier demand for the quality space we are creating in an increasingly diversified campus. In residential, Clarges is close to practical completion, and we'll formally market the apartments in 2018. We've made some good sales progress here, and we only have £127,000,000 left to sell. Bringing it all together, NAV is up 2.6% at 939p. The impact of the valuation increase and contribution from underlying profit is partially offset by dividend payments in the year. The share buyback program contributed 4p. To remind you, we launched the program because we decided that investing in our own shares represented an attractive use of funds, an example of our commitment to delivering long term value for shareholders. To date, we've invested £156,000,000 in total, and we're on track to complete the program by the end of the financial year, which, at today's share price, would generate an increase in NAV of around 17p in total. I like this slide. Our debt metrics are strong. Our loan to value now stands at 27%. We retained significant headroom to our covenants, and our interest cover stands at a solid 4x. We have undrawn facilities of over £1,500,000,000 and no requirement to refinance until 2021. So you can see we've got real financial capacity and, as importantly, long term flexibility. Development is a key element of our strategy for creating value and growing rents over the longer term. From a risk perspective, we're doing this in a really considered way, and I'd like to take you through it. Our committed pipeline has increased since March with the addition of 1 Triton Square and 1 Finsbury Avenue. It has an ERV of £55,000,000 as you can see on the left hand column in the chart. Of this, almost 60% is pre let or under offer. That equates to a future income stream of £32,000,000 shown in dark blue on the column. So despite more than doubling the ERV of our committed pipeline since March, speculative development exposure remains at just 4% of the portfolio. We have costs to go on this committed pipeline of £446,000,000 85% of this is covered by residential receipts to come on Clarges, twothree of which are already contracted. Looking also at the near term pipeline, that's shown in the right hand column. Again, the dark blue is leasing progress so far. We're already under offer on 168,000 square feet at 135 Bishopsgate. And having recently secured planning for the Gateway Building at Paddington, we're in advanced negotiations on a pre let there. For a moment, let's look at these developments in the context of our LTV of 27%. If you strip out the book value of these committed and near term developments, then the rest of the portfolio carries an LTV of just 22%. Chris will talk more about future developments, including Canada Water. Finally, as usual, let me talk you through our future income profile. This slide takes a five year view of income. As you know, it's illustrative and based on valuers' assumptions, and it excludes the impacts of future sales and purchases. I'd just like to draw out a few key points. You can see the £55,000,000 of ERV on our committed development, which we just talked about. And you can see the £32,000,000 of it that's let or under offer. That's considerably more than the lease expiries on properties in our development pipeline. I've set out in the appendix the year by year phasing of this, but taken in the round, you can see why we're progressing our development opportunities and why we're confident about the future potential of the business. So this is my last results presentation for British Land. Over the last six years, we've significantly reduced LTV from 45% to 27%. And the majority of this has been through actions we've taken rather than market movements. We've also reduced the weighted average interest rate to 3% and practically doubled interest cover. Altogether, that's a 40% reduction in financing costs. The direct contribution of this activity is clear to see with the 50 growth in profits over the same period. We've grown the dividend whilst also improving the payout ratio. I'm proud that I'll be leaving the company and its finances in such good shape. And on that note, I'd like to hand you back to Chris. Thank you. I'm very conscious this will be the last time Lou and I sit on the stand, sit, whatever, on this platform. And so normally, I give her a thank you for the presentation. But to paraphrase her, I like this slide. I like it because it's a great testament to what she has done over the last six years as Finance Director. You will have your favorite line in this, but my own, for what it's worth, is financing costs reduced by 38% because that's one of the ways we've been able to drive profits by as much as we have in what, over the period, has not been without its challenges. But there's more to Lucinda's service to this company than the last six years, and I just wanted to draw your attention to a couple of things. The first is, which I promised her I wouldn't say, but I'm going to say it anyway because I always was. I just didn't want to. She's been in the company twenty five years. And her commitment to the business, her contribution over that period has been remarkable. And to put that in perspective for people, I think it's worth reflecting on how few women in this industry have actually managed to go from, if you will, the bottom to the top over their career. So congratulations on that. And the second thing, which really stands and will stand the company in great shape over and above the financials, is has been her focus on sustainability, which is really, as you know, built into the way the company thinks about it. And that's in no small part down to Lucinda's focus and attention. So thank you very much for all the hard work. We look forward to working with you over the next period, but also wish you all well for the future. I would say that it's a brave man or woman who asks a really tough finance question at the end, but okay, apart from the fact, Charlie will probably clamber across and thump to you. It would be fine. Look, I think above all, for the purposes of this discussion, the main thing is to be very aware that Lucinda leaves this business in very good shape. Before I turn to the outlook, though, I'm going to talk about how we've positioned the business for long term growth. First, I'll spend a few minutes on Canada Water. It's the newest campus in our portfolio, a unique opportunity in Central London, one stop this side of the wharf in Zone 2. We've made real progress over the last six months. In September, we agreed heads of terms with the London Borough Of Southwark, which combines our interests and simplifies the lease structure. We've now got a master plan for the whole site. It covers 46 acres, shown here in red. We'll develop the scheme in phases so we benefit from existing income. The first phase, shown here in blue, covers around 1,800,000 square feet. Commercial space will account for just over half of that retail and leisure, about 15% and there will be around six fifty homes with a substantial affordable component. As you'd expect, we are already generating considerable interest. We'll submit an application for the overall master plan in the spring, along with detailed applications on several buildings in that first phase. In the meantime, we're building awareness of the area through the print works. Our award winning event space has attracted over 180,000 visitors since its launch and is an important part of our plans to create a vibrant new neighborhood. Canada Water is a large scale, ground up and mixed use opportunity. That is very unusual. But Canada Water is by no means our only opportunity. As Usinder said, we've doubled our committed development pipeline in the last six months. It now stands at 1,500,000 square feet. And yet, as she said, speculative exposure remains low at 4%. And we've already pre let or under offer over 20% of our near term pipeline. Our medium term pipeline now covers 3,200,000 square feet, and that excludes Canada Water. So we're successfully positioning the business for growth. Let me tell you what is to come. Across the business, we're focusing more and more on mixed use. I think Broadway and Eden Walk are great examples of this approach. Our London campuses represent a winning strategy. All are situated in vibrant parts of London. We have opportunities at each to further diversify the occupancy by sector and by use. Another real benefit of a campus is that our investment in one area improves the wider asset. So for example, our recent letting success of 4 Kingdom Street has washed over the whole campus, pushing the valuation of Paddington up nearly 6% in the half. However, you can expect us to apply our usual capital discipline. Overall, I expect us to be a net seller this year, and we'll continue to be very focused on leasing. We'll invest in the opportunities that deliver the best long term value. As you've seen, we've got a variety of options. These include development, some acquisitions and, of course, returning capital to our shareholders. We have flexibility in all these decisions because, quite deliberately, we've raised our dividend cover to its highest level in eight years. So to wrap up, yes, there is uncertainty. That's the environment we're operating in. But I'm delighted with our performance and equally delighted with our progress. Going forward, we have three distinct advantages. First, our strategy. We've deliberately shaped our portfolio to attract more and more occupiers. Second, our financial strength and flexibility. Our income is robust. We have a resilient balance sheet and sensible leverage. Third, opportunity. We've created a considerable pipeline. It positions us for growth. It's diverse and well funded, and it will create substantial, long term, secure income for our shareholders. That's a crucial advantage in today's markets. And with that thought, I'll turn it over to questions. Emma, could you name, rank, serial number just to remind everybody? That would be helpful. Down the front. Hammer Khosse from Green Street. Good results in what is a very difficult environment. So thank you for the presentation. Maybe starting with Tim first, if I could just ask a question on the supply outlook. We've heard one of your peers somewhat concerned about the supply outlook, and then we've heard another of your peers much less concerned actually saying that there will be a potential undersupply in the West End. What's your view? And specifically, in the context of the city, please. Yes. I mean, first of all, I'm in the middle of that. I think that the supply pipeline is relatively balanced. What we've seen over the last two years is the supply pipeline adjust, and that means it has flattened out. And the peak that we were concerned about and you were concerned about in 2018, 2019 has moved further out. And then also, what you've seen in the take up figures is this extraordinary demand for pre lets, and you've seen today that we've got more than our fair share. Now the pre lets are also managing the supply pipeline. In terms of the city, again, I think that, that is a similar characteristic. The supply peak feels as though it's a bit closer than the West End. It would probably be in 2020. But you've all seen me talk about supply peak, and what happens is that peak seems to move further out. So generally, I think that the market is in pretty good shape. There's a nice level of demand. And that for our product, we're not finding it exceptionally competitive. We're getting good interest in it. I think just to pick up on that, I mean, I do think this point that we made a lot is playing out, and that's around polarization. I mean I think you do see evidence that ordinary stock isn't necessarily that going that well. We have a big advantage of stuff where we are, the campus approach or if it's not campus, then it's exceptional for other reasons. That feels like it really has linkage with our customers. And a big part of that, of course, is talent attraction and talent retention. Thank you. Yes. Agreed and very clear. Maybe a question for Charlie on Retail, please. So Meadowhall looks like it's performing very well. The pictures that we saw, it looks very good and the refurbishment looks excellent. The fact that it's performing well now is great. How do you think about managing the risk of potential overextending that some of the other big centers have faced in the past given the 330,000 extension that you're planning? Those of you who know me, I'm excitable most days, but Medihall, I get very excited about. And if you've got a chance because the refurb finishes this month, go and have a look at it because it is exceptional. I think a couple of things. The performance has been driven by great leasing activity. We've put in the press release the volume of lettings done, but 30 new brands over eighteen months. The lettings are at 11% ahead of ERV. That's what's given the valuers confidence to increase the ERVs overall by 1.5% capital values up 1.5%. The yield on meta hall is never super aggressive. So it's on a top top initial yield of 4.25% an equivalent yield of 4.4%. So I feel confident from the starting point. On the going forward, where we see and one of the reasons we were so confident about putting the planning application in for Medical is where we see opportunities in two areas. First off is the range of rents at Meadowhall are very broad from GBP 200 Zone A to GBP 400 Zone A. So the rent isn't all concertinaed up at that sort of high end. But second off is that the food and beverage element and the leisure element at Meadowhall isn't high enough at the moment. There's only 7.5% of the income from food and beverage. So the leisure hall extension is only 90,000 foot of F and B, 60,000 foot of retail some leisure. So that's going to be highly complementary to what's already going on there. We're not really adding to sort of existing offers. We're broadening the reach. So we're sort of super excited about it. Thank you. That makes a lot of sense. And then just maybe just one last broad question on retail overall. So in the presentation, you talked about this idea of selling £500,000,000 of retail assets. Obviously, you can't tell us which those are, but can you give us some of the characteristics of those assets? And will you be looking to potentially be active in the market in acquisitions? I think there's a recent press article that talks about a certain acquisition. I think on the sales, we've said in the past, we've still got quite a lot of Solis assets, And we haven't just sold those because there's a lot of latent value in some of those assets where we can get planning. So we'll continue to sell some Solas. And actually, there's really good demand for superstores, bizarrely, at the moment. We've got one under offer at sub-four percent yield. We will sell some of the multilet assets where we don't think they fit our sort of long term strategy. We look at every asset in the portfolio on the purpose it fulfills. And if we think we've done enough to it or we can't quite get it to where we want, then we'll sell those. On the acquisitions side, from what you heard from Chris, we're more confident about this sort of regional local split and the purpose of each asset. So we look at it and say, what's the purpose of the asset? What shop emissions is it trying to fill? That's why we don't talk about shopping centers or shopping parks. And particularly in the local sort of bucket, we think there's a lot of potential. So will we do one or two acquisitions? Yes, we may well do, where we think there's potential in that specific locality. Michael Burdick, Exane BNP Paribas. Just a further question on disposals. You talked about the GBP 500,000,000. Is there also appetite to crystallize more surpluses from, let's call them, super prime assets in the office portfolio? The way I would put it overall, and we made it clear we'd be expect to be a net seller this year, is we'll do right across the business what we have consistently done, which is we will look to see whether the asset is effectively more valuable to our shareholders by holding it or by selling it. It's a disciplined process. We go through it regularly, and we'll continue to do that. And some assets will pop out of that in accordance with demand and how we look at the asset versus how everybody else looks at the asset. So that's the process. It's not changing in style or content, but and we'll keep on doing that. And just the second one, maybe I can push you a little bit further on capital allocation. You've talked about the £500,000,000 of disposals. You've talked about the committed pipeline being the CapEx is 85% covered by residential disposal proceeds. I mean the implication is that's still sort of a fall in net debt. I mean the buyback is half complete. The shares haven't moved on since the buyback started. Is it fair to assume that you could refresh that buyback looking into the next financial year? The way I would put it first of all, we're only halfway through, right? And bear in mind that we did not undertake the share buyback with a specific we're going to change the share price, right? What this was principally about was seeing the opportunity to invest in a portfolio that we knew very well at a price that was compelling compared with other uses of our capital. You should expect us, as I tried to make clear in the remarks, to continue to look at those alternatives. We have to take a long term view as well as a short term view. We feel in a very good position, as I alluded to, with respect to the position we find ourselves in very deliberately. We've got great cover on the side. We've also got low gearing. So we feel we're in a position to finance that, which isn't already financed, but we'll be looking between those two, and we'll do it in a consistent way. Robbie? On the Dentsu Aegis letting, could you talk about the potential handback of the other space? Will that adjust the terms? So specifically sort of the incentives that have been given away if you do end up taking or just broader, could you just talk about that? And the second question then is for Charlie. Obviously, pretty strong beat versus the RV on a net effective basis, so well done. But were there any large lettings within that that skewed it? In other words, that sort of really lifted it up. So if they were removed, would that number sort of come down to a lower Well, that's slightly in the when did you stop beating your wife conversation. They might have skewed them the other way. You never know. So Robbie, I'm, first of all, absolutely thrilled with the Dentsu Aegis pre let. Yes, and a great, great evidence of the interest in our campus strategy. In terms of the handback, as you know, Aegis are in 10 Triton Street. It's about 118,000 square feet building. And after we've completed one Triton Square, they can hand back that building, but they pay British land compensation for the surrender. So the option is neutral to the development economics of 1 Triton Square. And we're not in a position to talk about the rent or the terms at the moment because we render an NDA. But you've heard it's a long lease, and it's a good rent, and it's a profitable development, and we're really thrilled with it. Charlie? Thanks for letting me go second. I always need a bit of time to think. There were 70 odd long term lettings. There weren't any in the really massively skewed figures. Of those 72, only eight of them were below ERV. So it was quite broad church of deals. 70% of them were in the regional portfolio, 30% of them in the local portfolio. And again, the outperformance was roughly the same in both. So it was sort of pretty consistent. Anybody else on the so nothing on the I think we're done. Oh, wait a minute. Wait a minute. One hesitation. You're nearly out of here. Everyone. Maximo at Kempen. Just a quick one on the valuation side on retail. Could you give a little bit more color around as I understand it, this latest round of valuations was since large the 10% stake in, say, Bluewater sold, but there are some larger stakes that have been potentially brought to market at larger discounts. How do you look at that going forward in with the backdrop that you're seeing that there's a tougher retail environment? Where do you look at that kind of that mix of yield expansion versus the ERV growth? And perhaps it's for Charles. Yes, sure. I think, first off, you have to look at every deal on its own merits and what the starting point is. So I'm told that the starting yield on the Bluewater stakes were sort of a 4% yield. But also, they're passive interests, so they're subject to long term asset management fees. So an investor is going to look at the combination of all of that in how they price it. There's actually very little really good quality retail available at the moment. So and when you do see it coming, there is quite good interest for it. And I think the other thing in the investment market at the moment, which has surprised me a bit, to be honest, is there's a lot of demand for the sub-fifty million pounds lot sizes that Lou mentioned. And particularly sort of long leases where people aren't looking at the underlying fundamentals. So you've got a slightly odd dynamic there on ERV and operating performance. The large lot sizes are sort of showing the long term trends, and the lower lot sizes are being driven short term in value by sort of people investing for a different reason. The only thing I'd add is, I mean, it so happens they're valued by the same firm. So in terms of can you expect consistency and all that stuff, yes, you can. But I would just emphasize this point that Charlie makes about the passive nature of the stake. And so when you people are taking a haircut effectively on that yield. So and the passivity does there are quite a lot of people who will not look at those sorts of slivers of those. So that I think that one of the things the valuers will continue to have in their mind when they try and balance all the information they're getting. Thanks. Right. We certainly won't keep you any longer. Thanks very much for coming, everybody.