Earnings Call: H2 2013

May 14, 2013

Morning, everybody, and thanks for coming. We will be talking about three things today. A good set of results, the key drivers behind those results, and our key priorities over the next couple of years. As you would expect, I will be paying particular attention to new investment. Let me start with the numbers. Profits are up despite plenty of recycling. NAV is up to 596p, slightly ahead of last year, and the dividend is also ahead. At the property level, we significantly outperformed, beating IPD by more than 3%. Our running order today follows what I would regard today as the usual pattern. Let us turn to those drivers of performance. It has been a very active year for us, with real successes in several areas. Investment and disposals have been very important, repeating the pattern of the last three years. Our development program, mainly but not all in London, has continued to deliver, and so has asset management. We have reduced total costs by grinding down our interest bill. Let me start with investments and disposals. The combination of our share placing and the sale of Ropemaker made 2013 a big year for us, a really big year. I very much appreciate the support that we were given. Taken together, these two transactions help us to fund our current development program and take advantage of a growing investment pipeline. Our recent placing has given us significant investment capacity. We have already spent nearly GBP 300 million, and we are seeing more interesting deals out there. I will come back to future investment later. We were very active last year. We sold nearly GBP 800 million of assets at an average yield of 5.3%, and we bought over half a billion pounds of assets at yields of 6.3%. So we have bought well, and we have sold well. We have continued to recycle capital into higher growth opportunities. Our office portfolio is now balanced between the City and the West End, compared to a 65/35 split three years ago. That is good for performance. Our overall business has a greater exposure to London and the Southeast. The Southeast now accounts for 55% of the total. At Meadowhall, we signed a new joint venture partnership with Norges. Let me move on to development. Development was again a star performer. The program generated a profit of GBP 147 million, mostly from offices, and the construction programs are on budget. Overall, we have pre-let a further 300,000 sq ft, so 65% of the development program is now pre-let. As Tim will tell you, there is more profit to come. For example, 10 Portman Square PC two weeks ago and is now 50% pre-let. We have also made real progress on retail development, with Whiteley opening next week, and you can see this is next-generation retail. Last year was not just about development. Far from it. It was also a strong year for asset management. We had another good year from a letting perspective. Overall, we signed just over 2 million sq ft of lettings and renewals. In the investment portfolio, we signed these an average of 7.6% ahead of the ERV. So we have been able to keep occupancy high despite retail administrations. At the same time, we have also been busy refinancing, and as I said, grinding that interest cost down. Together, these things mean that underlying profit is higher and our dividend cover is improved. A year ago, we said capital values would be variable, and so it's proved. Market conditions have not been easy. Large parts of the market have seen downward valuation pressure, with real divergence in performance between assets and sectors, and polarization continues. There's been some improvement in investment demand helping retail valuations in the second half. Of course, London has continued to perform well. This slide also shows quite clearly how British Land has again outperformed on a relative basis. Overall, I'm pleased with our NAV figure. It's up despite some dilution from the placement, weakness in Europe, and slight widening in U.K. retail yields. These results do say a lot about the relevance of our properties and the hard work we've put in. With that, I'll turn it over to Lucinda. Thank you, Chris, and good morning, everyone. As Chris has said, these are a good set of results despite a tough market. Profits are up at GBP 274 million. That's a 2% increase at the earnings per share level. As previously announced, the dividend for the year is GBP 26.4, an increase of 1.1%. Following the placing, NAV is flat against September and a penny up since March at GBP 596 per share. So our total accounting return for the year is 4.6%. Turning to rental income, we've had an active year. With almost GBP 800 million of sales, including Ropemaker at a premium to book value and a yield of 5% late in the year. The overall impact on rents has been a reduction of GBP 12 million. We've invested into income producing assets in London retail, increasing rents by GBP 10 million, and we've been replenishing our development pipeline. Properties vacated for development, largely Victoria Street, have reduced rents by GBP 2 million. Like for like net rental growth in U.K. retail was 1.8% before the impact of administrations, which left retail flat overall. Offices were up 0.7%, despite various lease extensions, where we've taken a modest adjustment today for longevity of income. Looking now at the income statement. Profits are up 1.9%, as we arrange our debt to benefit from lower interest rates and refinancings. We've held admin expenses flat despite ongoing investment in our retail platform, and our efficient low-cost base remains market leading with a cost ratio of 15%. Turning to the valuation. This is up 0.5% for the year. Within this, our U.K. portfolio was 1% ahead for the year, reflecting an improvement in the second half, with the valuation up 0.8% since September. This was driven by developments which continued to deliver significant performance, up more than 12% over the year. Our standing investment portfolio declined modestly by 0.3%, compared to a market decline of 2.7%, reflecting the superior quality of our portfolio and our actions. In U.K. retail, whilst values were down for the year, the pace slowed in the second half, with asset management and fixed uplifts helping to offset outward yield shift. In offices, values were 5% ahead, again better in the second half and benefiting from developments together with lease extensions and new lettings. In Europe, which represents just over 2% of the portfolio, values continued to decline, reflecting the weak economy and a thin investment market. Overall, the quality of our portfolio, the long leases, high occupancy and inbuilt growth on a quarter of assets, as well as our intensive asset management, have all supported performance. This slide shows that portfolio performance at a per share level, which, with the benefit of gearing, has offset the placing dilution. Our actions adding GBP 0.16, more than covering the market yield shift of GBP 0.13, which is equivalent to 7 basis points. This translates to an NAV of GBP 6, and after the placing, this takes NAV to GBP 5.96, the same as at the half year. On the placing itself, first, I would like to echo what Chris has said. We are appreciative of the support we received. This slide shows investment of the proceeds to date, and we have made good progress. I am confident we will deliver on our commitment of achieving earnings accretion on an annualized basis post the Ropemaker sale by March 2014. As we expect to invest more than this, as we take our leverage up towards the middle of our range. As we discussed before, we are focused on total returns, so we may invest further in developments as well as income producing assets. Of course, we will continue our disciplined approach to acquisitions. With long and predictable cash flows, we typically announce our dividend intentions at the beginning of the year. For the coming financial year, pending further investment of the placing, the dividend will be not less than 6.6p per share per quarter. Looking at the debt portfolio. We continue to access low cost, flexible finance, and we have done well here. It continues to be a key competitive advantage for us. We have raised GBP 2.8 billion of debt finance in the last two years, GBP 2.3 billion of it for British Land, and that is half of the debt. This includes GBP 1.2 billion since the start of the financial year across eight different financings, including a GBP 290 million revolving credit facility which closed last week. This chart shows the diversity of our finances, and I have included here the undrawn facilities, which we will draw down as we continue to make accretive investments. An important part of our track record of access to finance is the strength of our debt metrics. Our weighted average interest rate, which as you know is a spot measure, stands at 4.6% today. It was 4.2% before the Ropemaker sale and placing, and it will come down again as we invest in developments and acquisitions and draw down more debt. We are comfortable with our loan-to-value ratio of 40%-50%, which remains unchanged. At 40% today, we have capacity for substantial further investment. Developments will be a valuable source of earnings growth. Our decision in 2010 to commit to the office development program will generate significant rental income of GBP 74 million over the next three years. I show here the phasing, starting with the P&L and then adjusting that to an annualized base, reflecting the impact of this year's recycling. The prospective income includes both the pre-lets and the value as assumptions on spec space. The program is more than 60% pre-let, and we are excited about our prospects for further letting, as you will hear from Tim shortly. As our West End developments reach PC, there will be a temporary increase both in vacancy and property outgoings while we let the space. If we take a look at interest, the phasing of our developments is a key driver of the interest charge. I show here the P&L position, and then again, I have adjusted it to an annualized base. You can see the prospective impacts of completion of the West End developments and CapEx of GBP 280 million in the coming year. The amounts shown here are at today's interest rates, and they include interest capitalization. I have included more detail on both this and the previous development slide in the appendix. Of course, recycling and investment will also both have an impact going forward. In summary, you can see the quality of our portfolio, combined with our management decisions and actions, continues to drive performance today and build in growth for tomorrow. With that, I would like to hand over to Charlie. Thank you, Lucinda, and good morning, everybody. The retail portfolio has delivered another decent set of results against a pretty challenging market, which means we continue to outperform. That is because the breadth of our portfolio allows us to leverage the ways people shop, capturing a wide range of consumer spend. Modern lifestyles demand flexibility and quality. We all shop in different ways on different days, and our portfolio reflects that. Experiential, convenient, and functional destinations. In a rapidly evolving market, we believe that high-quality retail, managed in the right way, will continue to deliver decent total returns over the medium to long term. We have been actively evolving and repositioning our portfolio to ensure that we are able to exploit opportunities for growth in the future. Our results validate our view that at a time of increasing polarization, we have got the right offer. Over the next few minutes, I will show you what we have been doing in four key areas. First, attracting a broader range of occupiers, both retail and leisure. Enhancing our overall services to customers, in particular, expanding access to technological advances. Upgrading the physical environment. Continuing to reshape the portfolio. First, let us have a look at the figures. Unleveraged retail total returns of 4% mean we have outperformed the market by 170 basis points. As expected, values were marginally down for the year, with a more modest decline in the second half, and each subsector has outperformed. In addition, our leisure portfolio produced a total return of 8.1%. Despite the market challenges, our operating metrics remain robust, with strong relative outperformance. Rental values were up 0.8% against a continued fall for the market, outperforming by 150 basis points. Footfall has fallen, but continues to outperform by 220 basis points. We have also seen a number of retailer casualties in the past six months, but at the year-end, administrations were less than 1% of total BL rents. We are in active negotiation on over 70% of the units in administration. Our overall occupancy is 97.4%. Despite administrations, like-for-like income growth was stable, with a strong performance from superstores of 2.8%. Leasing activity also remains positive, with 1.1 million square feet of lettings and renewals, 7.6% ahead of rental value for the year. This comprising 287 lettings, including 49 food and beverage and leisure deals. We have signed multiple transactions with key partners such as Next, Arcadia, and TK Maxx. Particularly gratifying were major lettings to Debenhams at Leamington and Fort Kinnaird, and in Camberley, only the third Next Home. We have also attracted new entrants out of town, such as Whole Foods Market at Cheltenham and Office at Glasgow Fort. Some assets have seen lots of activity, such as Drake Circus, where we have signed 8 lettings, including Apple, Bank, and Hotel Chocolat. Across the portfolio, we have about 420,000 sq ft currently under offer. As you know, we continue looking at how we can improve the provision of landlord services to both enhance the consumer experience and help amplify the retailer's voice. Digital is an essential and growing part of our offer. For example, Wi-Fi usage has increased by 400% at Meadowhall in the past year. For many retailers, the relationship between in-store and online is becoming increasingly blurred. Integrating technological advances is essential, and fundamental to this is the ability to access the internet on the go. That is why we really like our new tie-up with British Telecom. This will enable some of the innovations we will be trialing to fulfill their potential, such as Google Indoor Maps, which helps consumers to navigate our assets, or Centre Buzz, a social media tool which aggregates information and keeps consumers updated on current offers. The key point from a landlord perspective is to provide a platform that facilitates and maximizes the benefits of these innovations. There are many other services that our landlords have to provide. For instance, there is no doubt that click and collect is playing an increasingly significant role. That is why we are trialing Collect+ at Meadowhall, where usage has doubled in the past year. During the year, we have also been busy upgrading the physical environment. We have gained 40 planning consents, and we have initiated 5 cinema and restaurant schemes. Over the year on asset management, we spent or committed CapEx of almost GBP 80 million, further enhancing the quality of our assets. We are mid an exciting reskin of Debenhams flagship store at Oxford Street, shown here. This will generate in excess of GBP 700,000 of additional rent when completed. We have also been busy evolving the portfolio with acquisitions, sales, and development commitments of over GBP 600 million. We have sold 23 non-strategic or ex-growth assets, and we have been investing in locally dominant schemes that attract in excess of 5 million visitors per annum with a bias to London and the Southeast. In the last 6 months, we have invested around GBP 260 million in Greater London with purchases of Eden Walk, Ealing and Surrey Quays at an average initial yield of 6.6%. Ealing has strong and growing demographics, a rapidly improving local environment, low base rents, a strong tenant lineup, and a high day 1 yield. Surrey Quays and Harmsworth are a 37-acre acquisition in an area of urban regeneration, again with strong growing catchment and considerable potential. We have got planning consent to add 100,000 sq ft extension to the existing 300,000 sq ft scheme. We would hope to be on site next year. We have also started master planning the 15-acre site at Harmsworth Quays, which medium-term has potential for a major mixed-use redevelopment. We are also now on site with our scheme at Hereford, which is over 50% prelet with completion due in 2014. It is anchored by Waitrose, Next, Debenhams, and a 6-screen Odeon Cinema. In 9 days' time, we are opening a great new retail destination at Whiteley near Southampton with our joint venture partner, USS. It's already more than 90% prelet to some of the best retailers. Two weeks ago, we received planning consent for a 60,000 square foot leisure scheme. We think Whiteley is a great example of next generation retail space. As you've heard, we're firmly focused on the future. Realistically, it will remain tough until economic growth really picks up. But we'll continue to be disproportionate beneficiaries because the actions we're taking today will ensure our assets remain in demand tomorrow. With that, I'd like to hand over to Tim. Thank you, Charlie. Good morning, everybody. The key points I want to cover this morning are, first of all, the office business has had another successful year with total returns of 9.6%. Secondly, the portfolio is in good shape. For the first time, we now own more offices in the West End than we do in the City, and that's been really good for performance. Thirdly, the development program is continuing to be our star performer. We now expect total profits to be GBP 420 million, and we've got a clear plan to replenish our development program. As I say, we've had a good year continuing our run of success, outperforming at a sector and a sub-sector level, and also on a capital and total return basis. We've had two good halves which combined together show a capital return for the year of 5.8%. On capital return, we've outperformed significantly in the West End by 370 basis points and in the City by 90. You can see from the chart in terms of the drivers of performance, developments contributed two-thirds, and asset management, one-third of the uplift and yields have remained broadly stable. As I say, the portfolio is in good shape. We've successfully grown the office weighting despite the sale of Ropemaker, which was a sale of nearly half a billion pounds. As Lucinda said, we're pleased with the price, and together with our acquisitions, it also means for the first time, we've got more West End offices than we have City. This strategic shift has been good for performance. Over the last three years, our acquisitions in the West End since purchase have shown us a total return of 18% per annum. They're also going to allow us the opportunity to commit GBP 800 million to the West End, so that sort of figure moves the dial. This record gives us real confidence we can make successful acquisitions, even in competitive markets. One of the great strengths of our office business is the split between investment and development. The investment portfolio is a good blend of income, with much of the medium to short-term income ripe for asset management or near-term development. The long-term income is at the core of the portfolio, and we can replenish this through our development pre-lets. Now, a good example of this is the completion of Portman Square and Brock Street, which will complete in June. There, those pre-lets will increase the weighted average lease length of the office portfolio by 1.1 years, so it'll go to 8.9 years. The level of leasing activity remains high in the investment portfolio and has contributed to the uplift of 2.3%. We have completed 780,000 sq ft of leasing activity, split between 650,000 sq ft of lease re-gears and 124,000 sq ft of lettings. In particular, we have seen an uptick in interest in 199 Bishopsgate, and there we have recently put 40,000 sq ft under offer or agreed deals. Interestingly, they are all non-financial services related occupiers. There are pockets of demand in the City that we are tapping into, notably the insurance sector, but also there is good demand from smaller occupiers who want requirements of around 20,000 sq ft. Staying with the City, we continue to revitalize Broadgate. We see this as an estate that has evolved from a financial campus to one that today is attracting a wider use of occupiers. We believe that with one, Crossrail, two, the outlook for more restricted supply, three, the success of areas such as Shoreditch in attracting a wider range of occupiers, that we can make the estate more vibrant. We can attract a wider range of occupiers and ultimately also have a wider range of uses. By the end of 2014, we will also have finished 5 Broadgate and Broadgate Circle, and there will be major steps in revitalizing the estate. I have talked before at these presentations about 100 Liverpool Street, and as you can see, the concept design is progressing well, and our plan is not only to provide a building that will also meet the need of these smaller occupiers, non-financial-orientated occupiers, but also will provide two floors of retail that will, in effect, link Liverpool Street station with Broadgate Circle. Turning to development, one of the things that I am really proud of is the way that we have grown our profitability. The total profit expected has grown from just over GBP 250 million in 2011 to over GBP 420 million today. So despite having taken GBP 297 million so far, we still have GBP 126 million of profit to come, and we have got ambitions to grow that some more. During the year, we have agreed 200,000 sq ft of office pre-lets, so our developments are now 61% pre-let. We have done well at attracting pre-lets that add to our profit. A good example is the pre-lets at Portman Square. Post-year, we have let another 9,000 sq ft, but you can see in total now we are about 50% pre-let on Portman Square at average rents of GBP 90 a square foot. That is a staggering 23% higher than the March 2012 valuation. At Leadenhall, documentation with Amlin is close to being signed, and together with Aon will then be 50% pre-let. That will put us in a strong position to let the top premium floors of this iconic building. Clearly, development in London is one of our competitive advantages, and we believe we are still at a point in the cycle where we want to maintain our levels of risk. We shall replenish through committing at the appropriate time to our near-term development program and together with Liverpool Street, that could offer us development potential of over half a billion pounds. We are also looking at a number of acquisitions which will give us development opportunities, and I am really confident that we will land at least one of them. The largest of our near-term developments is Clarges. We've made good progress by agreeing to relocate the Kennel Club and working up and submitting a revised planning application. We've made changes to the layout and also the external look of the scheme. Significantly, the application looks to increase the residential to 94,000 sq ft and reduce the offices to around 47,000 sq ft. We're excited about our changes and believe that there'll be strong demand for the scheme. I'm also confident we'll achieve more than our original investment case, which was based on residential sales of around GBP 3,000 a square foot, and lettings on the offices at GBP 80 a square foot. We're good at in-house expertise in London residential, and we'll continue to be selective on what we develop, and we will look to sell as we go along. You can see that 54% of our committed residential development program has been pre-sold. There's been strong growth in London residential values, but we believe that good money can still be made on residential developments on the right schemes. To summarize, we've had another successful year. The portfolio is in good shape and better balanced for performance. The development program is continuing to contribute to our profit, and we feel confident about the future. With that, over to Chris. Thanks, Tim. Before I turn the session over to questions, I want to comment on where British Land stands today, but also how we will take the business forward. Clearly, we're operating in an economy which is growing slowly, and as I said, we don't expect that to change anytime soon. As I said earlier, we've been working very hard to reposition our business for growth. I'm pleased with our progress. Development has been exceptional. We've committed GBP 750 million to the program, generating ungeared IRR of close to 30%. Our investment activity has made a real difference. In the three years since September 2009, we bought GBP 1.3 billion of assets, generating an IRR of around 9%. Over the last six months, we've made another GBP 400 million of acquisitions, including Ealing Broadway and Surrey Quays. We're building a new development pipeline, as you heard from Tim. We've also altered the composition of our portfolio. Less offices in the city, more in the West End, and more assets in London and the South East. Profits have grown for the last three years despite development and recycling. That's what we've been doing. All of that is well and good. In this environment, we must continue to create growth for ourselves across our business. We're going to do that through asset management, through development via acquisitions, and by ensuring that we're in the right parts of the market. Let me look forward. Our equity placing has given us more investment capacity. I want to talk about where and why we will use that firepower. I said at the time of the placing that we were seeing interesting deals for a bunch of reasons. Actually since then, we're seeing more. To be clear, I will be disappointed if we do not make new investments over the course of this financial year of at least GBP 500 million. At present, we are focusing our investment efforts mainly in London and the South East, where we expect faster economic growth to continue. Within that envelope, we are looking at projects which play to our strengths and our view of the market. In offices, we will invest predominantly outside the city, continuing the movement west, but also looking at up-and-coming areas. We are very focused on the importance of transport links, with Crossrail a potential game changer. We have got real competitive advantages in mixed-use schemes, in big estates. You should also see our focus on London residential against that background. It is critical to mixed-use schemes. It is also a business we have been at for a long time. It builds on our existing skills, and it creates incremental profitability. We would expect our maximum exposure here to be around GBP 500 million. By that, I mean committed but unsold apartments. Of course, the future is much more than just using our new capacity. Development has served us well over the last three years, and here we see new opportunities for good returns. We are replenishing our pipeline, as I said. You will also have seen in this context the news on Shoreditch. We are delighted that we have been selected as a preferred development partner for the Shoreditch estate. We intend keeping our development exposure at roughly today's levels, but with our committed pipeline not exceeding around 15% of gross assets. I also want to make some comments about our retail business. We firmly believe physical will remain at the heart of an integrated retail offer. As you heard from Charlie, it is even more important today that we have the right approach as well as the right assets. We will continue to focus on locally dominant assets. We will look to increase our exposure to London and the Southeast, where ideally, we will be looking for affluent, up-and-coming areas with significant catchments and good infrastructure. Ealing, Eden Walk, and Surrey Quays are all good examples of this. They also have development potential. We will also invest more in our best assets to ensure that they are configured right, and by that I mean physically, but also in terms of digital and in terms of leisure provision. You should expect to see us continue recycling. Here, I mean making sure that each asset is and will remain locally dominant, and if they do not, we will move them on. Finally, we will not be shy of new investment outside the Southeast, but only if it makes good sense. All this is consistent in terms of our overall approach. We remain committed to both London offices and to U.K. retail. These businesses work well both individually, but they are also very complementary for us. Although we report the business separately, we run them in very close tandem. Substantial retail cash flows have helped us invest in development. Just look at the number of mixed schemes we now have. We also gain real advantage from scale, and leverage is part of that story. You have heard from Lucinda that we are comfortable within our 40%-50% range, and we expect to move back towards the midpoint of that range in the coming period. Before I turn to our outlook, I want to make a couple of observations about our European business. It's a subscale business for us, and valuations continue to slip. Over the medium term, our firm intention is to exit. To be clear, that process will take some time. Let me turn now to my outlook. As I said, we expect the U.K. economy to grow only slowly. On the other hand, there are signs that the investment market is improving a bit, and part of that is the increased amount of Bank funding that's actually out there. In offices, we're cautiously optimistic about rents across London, and in the near term, we expect the West End still to grow faster, driven in particular as supply shortages continue to bite. In retail, the picture is tougher for reasons that have been well discussed. Across the market generally, we expect rents to drift lower, driven by poor performance in weaker locations. We expect our assets to outperform the broader market and to benefit disproportionately from any market uptick. I am slightly more optimistic in that regard than I was 12 months ago. In summary then, it's been an active and a successful year. The business is in good shape, as these results reflect. We're very clear about the direction that we're taking. We're well-placed for new investment. We have a large and growing London business, a development program which will add to our profits, and a retail portfolio which is focused on the places that both retailers and consumers want to be. With that, I'll turn it over to questions. I'll ask my colleagues to join me up the front. Just as usual, the following kind of housekeeping, which is if you could kind of give your name and serial rank when you talk. We've got people on the phones, and it makes their life a bit easier if they know who is asking the questions. With that, why don't you kick off? Morning. This is Harm Meijer, J.P. Morgan. Just a couple of questions, if I may. Chris, you are giving actually a quite punchy outlook. I guess, you are disappointed if you're not buying for GBP 500 million. Does that mean you are currently very close, that you are so confident? On the disposals, is it also something very close? Look, as Tim said, we are seeing a number of interesting things. I think if we look at the balance of probabilities, as I said, we will be very disappointed. I found, in all conscience, that making too much specificity can be just It does not help us. I know it helps you guys, but look, we are in negotiation in different things, different stages. But if I look at the things across the piece that we are seeing, I feel that the statement that we made together is true. We are seeing a lot out there. Oh, sorry. On disposals. Oh, sorry. On disposals, I mean, disposals, that is very much a statement of intent. There is stuff that we will continue to move forward, but there is nothing overnight going to happen. There are a couple of things that could well happen in the course of the next coming months. Okay. Then let us just say that you gear up and you are at your target. Would you keep in mind, again, an equity raising? If so, would you structure it in a similar way as what you have done recently? I've got to say, right now what we're really focused on is investing the money that we've raised from our shareholders wisely. We've also got the capacity to recycle. That's where we're focused right now, and we're focused on investment and recycling. Okay. Can I not push you further on this? You can try, but All right. Lettings versus ERV within retail, is it possible just to give a little bit of color and breakdown between sectors? That's my last question. Let me turn. Charlie, do you want to start? Yeah. The lettings, as I said, have been about 7.5% above ERV. There is a wide range of ERV performance. It is about even across the two, isn't it? Three-quarters of lettings have been at or above ERV over the period. The split between retail parks and shopping centers, retail parks have been a bit stronger. Thank you very much. Just behind you. You are welcome. See who has passed. We got self-help here going on as well. Yeah. Yeah. Yeah. Thanks. Good morning, everyone. It is Nick Webb from Exane BNP Paribas. I have just got a question about the dividend progression. When we looked at the slides you flashed up on the developments, a lot of rent expected to come from developments over the next three years, fairly limited addition to your interest charges. I would have thought that would have made you very confident about the medium-term growth outlook for earnings. I just wonder why the, I guess, the relatively cautious approach with the dividend in the short term. Yeah. First of all, it's something, as you would imagine, that the board gives a lot of thought to. Our feeling as a board, was very much that we've been clear about the investment progression. As we see investments coming on stream, then we would obviously look at where we should put the dividend. In today's market, it's a good dividend, it's a good payout, and we want it to reflect that in today's statement. It's that balancing act, which will always be the case for a company like BL. As I said, we think we have a good dividend. We're very conscious of the people like that dividend, but we also wanted to balance the two things. Okay. Thank you. Good morning. Hemant Kotak from Green Street. You sold Ropemaker, which I think was deemed to be a mature asset. Does 201 Bishopsgate and Broadgate Tower fall into this category? Separately, thinking about retail, which, if any, of your retail assets fall into the mature and limited upside category? Presumably, there are a few. Yeah. Let's take retail first. I mean, it is exactly as I said. It is part of the discipline of business, of looking through the portfolio all the time and judging whether those assets can pass our criteria, which is around, as I said, locally dominant. Charlie, I do not know if you want to add anything to that. No. The only thing I would add is that the ones that we tend to look at selling are the ones where we have done a lot of asset management. So, where we have had a lot of leasing activity over the year, and we think we have taken it as far as we can. Often where we have made it a lot more institutional, where we think people will pay premium prices. Those are the sorts of assets that we would be looking to sell. Tim, do you want to comment on? Yeah. Okay, Hemant. In terms of Broadgate Tower, you will be aware that we have been doing quite a lot of lettings on that. We have done about 60,000, 70,000 square feet of lettings, and we have still got about 7% of the tower to go. So we have got some work before it becomes a mature asset. And actually, it is multi-let. It is a fantastic building, so I think that that will be something that we would like to work in the medium term. In terms of 201, we have got slightly longer on the lease than we have on Ropemaker. And I think the thing with any of these big buildings on Broadgate is that we still like the attraction of maintaining the integrity of the estate. So I do not think that either Broadgate Tower or 201 are quite in the same camp as Ropemaker. Ropemaker was a development that we developed very well. We've made money on it. We sold it to a bunch of international investors at a great price. Thank you. Just one more question, please. Standalone retail assets generated total returns of 8.1%. That's double what the retail portfolio average was, I think. Do you expect that outperformance to continue in leisure assets? Is this an area that you'd be wanting to increase investment in? A lot of that's income driven. So it's the Virgin Active, it's the pubs. We think those values are fairly stable. So we think those returns are quite solid. We probably would only look to increase that sort of if we found opportunistic acquisitions there. I think what you will see, as Charlie said, is in all of our locally dominant assets, we'll be looking very carefully at leisure provision. So you saw the comments about cinemas. A lot of those sorts of investments in leisure will be actually linked to existing assets. That is great. Then just one follow-on question, sorry. Land Securities is obviously pursuing standalone leisure in a slightly different way. Would you consider that as well? Possibly, but I think at the moment we are more focused about leisure that is adjacent to assets and that is accretive to assets than just on a standalone basis. Thank you. Yeah, go ahead. Just down the front. Good morning. It's Remco Simon. I just wanted to ask a question. You mentioned that 25% of the leases have RPI links or fixed uplift, yet overall like-for-like income growth is still flat. Do you expect that to change going forward? Do you expect to see more of a benefit of those fixed uplift in the future, or is it likely to be offset by continued weakness elsewhere? Well, what you've really seen in the current period is the impact of the retail administrations and the toll they took on the like-for-like, because, as you saw, the like-for-like for retail would've been 1.8% before the administrations. The offices were up 0.7%, and that is numbers do reflect the benefit of those fixed and minimum uplifts. What will be a key driver for the coming year is as we make progress on letting the administrations. Okay. Chris, maybe a question. You mentioned that you won't shy away from investments outside of the Southeast. You still want to stick to the two core businesses, or won't you shy away from any new sectors, either? Look, I think we were as clear as we could be when we were doing the acquisitions, that we saw good opportunities in the core sectors. Within that envelope, London and Southeast would be our prime focus, and I'm very comfortable with what we said then. I think that's a good way to think of our business over time. We've got a couple of questions at the back. One maybe. Oliver. Our next question will come from Ryan Palesak of Tempel & Co. Please go ahead. Morning, Ryan. Hi. Good morning. Question first on food stores. There was a negative revaluation in the second half. Could you talk a little bit about the drivers of that and how you see that for future reporting periods? Charlie, do you want to? That was primarily the Sainsbury's JV. It was a very marginal outward yield shift of 10 basis points. That is more or less a rounding error. We see the value is pretty much stable. We think the portfolio is still a good quality portfolio. We have got the benefit of having joint ventures with two of the strongest operators, so we feel very good about the specific assets, and we still think there is rental value potential. From here, should I surmise that there is little or no yield expansion potential? I should never say never, but we are pretty confident where things are at the moment. Okay, thank you. I am wondering, could I just move on to your letting pipeline and other retail. Could you give us some indication of what you are seeing there? Is momentum increasing? What kind of occupancy rates are you looking for towards the rest of the year? Is there anything you can specify, parks versus centers, in terms of letting momentum? Yeah, the volume of space under offer has actually increased over the last 6 months. Deals did take a little bit longer in the first half than they are now. The activity, obviously, square footage-wise, it is more out of town because the units tend to be bigger than on the shopping centers. We are seeing healthy activity across both portfolios, and also healthy activity in the food and beverage side. As Chris said, the leisure side, five cinema deals in a year, we are really pleased with. Thanks. If I could just ask one last question. You mentioned, Chris, at the end, you see retail rents going lower across the board, kind of broadly for retail. How much lower and over what time period? Can you give us your central war room scenario? I read somewhere that somebody said that their crystal ball was a bit faulty, and I am beginning to feel a bit like that. Look, I think it is difficult to call. I think it is very asset specific at this point. You have seen the occupancy levels in secondary at, what, 87%? It seems to us that that must drive rents lower, just kind of basic supply and demand. Spotting exactly how fast that is going to happen, exactly how far, as I say, I think it will be very asset specific, and therefore, the generalizations are only of certain use. What we were trying to signal clearly is we think we will outperform against the broader retail as we have done. Great. Thank you very much. Appreciate it. Okay. Good morning. Marc Mozzi from Société Générale. I hope I won't call again your crystal ball, but considering the relative imbalance on the macro side from the capital value downside potential from higher interest rates and the potential upside from economic recovery, which is clearly unfavorable on the downside, where do you see your loan-to-value ratio ideally in 3-5 years' time, let's say, in a normalized world? One thing that the board does is we look very regularly at that loan-to-value range. In today's market, we're very comfortable about that. I don't see that changing anytime soon. But of course, you would expect over a 3-5 year period, then we'd continue to look at it regularly. I think one thing we would be very careful about, in particular, is if we saw at some stage, and I'm not predicting this, but if we did see a big increase in valuations, and as you know, the yield gap's quite big compared with low interest rates and so forth, then we would be very careful to make sure we weren't just borrowing more and more against higher valuations. So that would be the classic situation where we would look again at that. As I say, at these sorts of valuations, at this sort of place, with the characteristics of our business we have today, we're very comfortable in the range that we've been talking about. If I understand you well, you want to keep your level of debt, absolute level of debt, stable within time? Well, now, bear in mind, let's just be very careful. So if you've got the equity raise, we would expect to be able to borrow against that in addition. But if you look at absolutely steady state, what I'm saying is that just in terms of valuation, so knowing valuation's going a lot higher, and we're not going to get involved in a kind of, they've gone up by 2%, do you move it down by 1%? That's just not how it is. But if we saw a big increase in valuations, would we want to review that range? Of course, we would. I mean, that's just part of normal business. On the downside or on the upside? If, sorry, I'm No, I'm just trying to follow you because No, no. It's a big question for British Land, how you run your LTV ratio. Now, currently, you're at the lower range of- We've signaled very clearly that we will be- That you will increase it. moving toward the middle of that. But is it something which remain, meaning 45% is what you have in mind or- No, no. Okay, so it is a range, and we give a range for a very good reason, okay? Which it is very hard to land any of these things exactly, nor would it be appropriate to try and do so, point one. We are very comfortable with that range in today's market. Okay? Second of all, if you saw a big increase in valuation in the real estate, then you would have to think, is the market moving towards the top of the cycle? And therefore, you would not be wanting to borrow about. So you might, in that range, think about whether you needed to take the range down a bit. Thank you. Is that clear? That is very clear now. Thank you. But just to be clear, I am very comfortable with the range where it is. Have I been clear enough? I think you have been pretty clear. Yes is the answer. Thanks. Any more questions? Anything, Oliver? On that basis, I think we are done. Thank you very much indeed. Thank you.