Derwent London Plc (DVK.SG) Earnings Call Transcript & Summary

I think we're all here. Good morning, and welcome to Derwent London's 2025 Interim Results Presentation. As well as me, you will hear from Emily, Damian and Nigel this morning. I shall then wrap up before Q&A. However, before I start, I hope you've seen today's announcement that Nigel has made the decision to stand down from the Board with effect from March next year. I'm delighted that he will stay on as a consultant working alongside our talented team. Now Nigel has been integral to the success of Derwent over many years, indeed, 37. He asked me not to mention that number, but it is 37 years. On behalf of the Board and everyone in the business, past and present, I wanted to pass on our many thanks. Thank you very much indeed, Nigel. Now we've delivered another good operational performance since the start of the year with GBP 13.8 million of new rent agreed. Open market lettings were 10.5% above ERV. Our total accounting return in the first half was 3% or 7.3% over the last 12 months. Our 2 on-site projects at 25 Baker Street and Network, both complete this year, and we expect them both to deliver attractive returns. And we've made good progress on our next phase of West End projects. Our Holden House work started earlier this month, one at 50 Baker Street building on the success of 25 Baker Street opposite. I'm delighted that we've agreed a new head lease, unlocking this striking project ahead of the start next year. London has an enduring appeal and the key drivers of the office market are strong. There's a significant shortage of supply with limited speculative development and low existing availability of the right space. Demand remains well above the long-term average and many occupiers are in growth mode. As a result, businesses are thinking proactively to secure the right space. The competition is translating into sustained rental growth. Now the outlook. Following growth of 3% in the first half, we are reiterating our full year ERV guidance of plus 3% to plus 6%. When combined with our earnings yield and development profits, we are confident we can deliver an attractive total return over the medium term. Now consistent outperformance. Now since 2020, our total property return has outperformed the MSCI London Office Index by an average 230 basis points each year and by 120 basis points in the first half this year. Strategic reshaping to stay ahead of the continuing evolving office market supports our long-term outperformance. Over the last 5 years, we've invested nearly GBP 1 billion in the portfolio and have sold or contracted to sell a similar amount of property, which includes GBP 215 million this year to date. Proceeds have been reinvested into our regeneration-led total return business model with 1.5 million square feet of highly profitable, class-leading, well-located space either completed or currently on site. Now turning to our key differentiators, which drive our outperformance. We are a London specialist with the right product in the right location and the right approach. We have a unique design-led vision for each building based around a set of core principles. We like to be disruptive and push boundaries while ensuring we're delivering space which is adaptable to the evolving needs of occupiers. We know, however, that occupiers want more than just great space. They also want a close relationship with their landlord. Our clustering approach allow us to leverage our scale to provide high-quality amenity like our lounges in a cost-effective way on a portfolio-wide basis. We are seeing the benefits of this in leasing and asset management activity. Many of you have been around our portfolio, which is in well-connected locations along the Elizabeth line, and you will be familiar with our larger HQ space and our smaller, more flexible fitted units. Reducing carbon through the development and operational stages of the building's life cycle run through all that we do, including exploring new and innovative building materials and methods. We continue to build on our circular economy strategy. Now confidence in our total return. Now looking at the total return and starting with earnings. Our long WALT gives us good visibility on income. Combined with a focus on capturing reversion and controlling costs, we anticipate our earnings yield on NTA in excess of 3%. Now capital growth. Yields have peaked, and we expect ERV growth to be sustained over the coming years. As a result, valuations are rising. Alongside proactive asset management activity and ensuring we own the right buildings in the right locations, we expect to outperform. Finally, developments. Our next 3 schemes all have planning, and we have an extensive pipeline of major projects and refurbishments, which we're confident will make an ongoing positive contribution to our total return. Thank you. I will now hand over to Emily.

Thank you, Paul, and good morning, everyone. Occupiers are planning their real estate for the long term. Businesses are increasingly looking further ahead to secure space ahead of anticipated supply constraints and positioning themselves for the future, showing commitment to London. Good quality, sustainable and intelligent design is still driving the majority of occupier demand. Location remains paramount with the Elizabeth line having sharpened the focus on micro location and occupiers prioritizing transport connectivity. For businesses making real estate decisions, it is also about the strategic role the office plays and what it says about their business. Offices are strategic tools for talent attraction and retention. Businesses want and need environments that people want to come to that reflect their values, drive productivity, foster collaboration and well-being and support their brand identity. Looking now at market fundamentals. Take-up in H1 2025 reached 5.2 million square foot with 70% of that being Grade A space. What's particularly encouraging is that around 80% of this activity was expansion-led. We've also seen significant withdrawal of sublet space as tenants take floors back for their own growth. Alongside sustained above-average active demand, these are trends we expect to continue. And in respect of supply, the pipeline remains tight with 11.8 million square foot under construction through to 2029, which is just GBP 7.1 million of that is speculative, equating to only 7 months equivalent average take-up. With 40% already pre-let, the market continues to absorb new space with ongoing pressure on available stock in the medium term. Central London's overall vacancy stands at 7.8%. But when we focus on Grade A, it dropped sharply to just 2%. And in the West End, it's even lower at 1.4%, demonstrating the scarcity of premium options in the right locations. Now looking at our own leasing and asset management activity. We delivered GBP 13.8 million of lettings, renewals and regears so far this year. Open market lettings were on average 10.5% ahead of ERV, and we have a further GBP 3.8 million of rent currently under offer. Our furnished and flexible offer continues to perform well with H1's transactions agreed well ahead of adjusted ERV. We've also seen strong leasing momentum at the Whitechapel building, where the recent letting to BE offices means the office space in the building is now fully let. A great story of active asset management, strong relationships and expansion is reflected in the deal to Adobe at White Collar Factory, where they've taken more space and extended their lease through to 2033. Retention remains high, and our EPRA vacancy is just 3.7%. Rent reviews have also delivered meaningful uplifts with GBP 16.7 million settled in the first half on average 5.4% above previous rents. A standout example was at the Brunel Building, where Sony Pictures rent review resulted in a 13.5% uplift over the previous rent and a 10.4% outperformance on ERV. At Derwent London, we recognize that forward-thinking businesses consider 3 factors with each real estate decision: the quality of the place, the flexibility and design of the space, and the strength of the partnership with their landlord developer and investor. Our focus is to deliver excellence in each of these pillars. As London specialists and industry leaders with a strategically located Central London portfolio, we consistently set the standard for best-in-class office environments, underpinned by a strong brand, a proven track record and a distinctive approach to partnership. The quality of the Derwent London offer can hopefully be brought to life as we now look a little more closely at our exciting pipeline. Our major schemes alongside our refurbishments and future pipeline amount to potential 2.2 million square feet over the coming years, all of which reflect exciting opportunities for regeneration. We're confident that development activity will deliver strong and improving returns as ERVs move in our favor, inflation on construction costs settle and the rates environment hopefully continues to improve. At this stage, we're committing to schemes where we know we can deliver profit on cost with a comfortable range of 15% to 25% and with opportunity to better this. In terms of those on site, we're on site at 25 Baker Street and Network, both due to complete this year as well as Holden House, which we've commenced this month. Across these 3 schemes, there is good potential to outperform the current 15% profit on cost projection, and we expect to deliver a yield on completion in excess of 6.5%. By way of update at 25 Baker Street, whilst we have physically completed the building, we await sign-off from the Building Safety Regulator, which is expected imminently. As you are aware, the offices are now 100% pre-let, and we have now let more than 50% of the retail space to Atis and Notto with good interest in the remaining units. In addition, the sale of the residential apartments is progressing well with contracts exchanged on 23 of the 41 private units for GBP 113.1 million. At Network, which is due to complete at the end of the year, this beautifully designed Piercy & Co scheme is progressing well on site and the quality of the product is outstanding with its beautifully crafted facade of scalloped concrete. Additionally, this building will be our lowest ever embodied carbon intensity delivered, likely to beat the number you see here on screen, well surpassing our 2025 target and already likely to be very close to our 2030 target. Occupier discussions here continue with good momentum. At Holden House, we will be delivering a best-in-class west development behind a retained facade and opposite the Elizabeth line. Demolition has now commenced and the contractor has been appointed under a preconstruction services agreement. This scheme designed by architects, DSDHA, will comprise just over 110,000 square foot of office space with a new prominent entrance on Rathbone Place as well as circa 20,000 square foot of retail on Oxford Street. PC is anticipated H2 2028. The scheme will deliver large rooftop amenities, event space and terraces as well as characterful internal space around a beautifully designed atrium. As with all our developments, Holden House will deliver best-in-class sustainability credentials. Moving now to some comprehensive refurbishments where we're on site. Firstly, Middlesex House. We are repositioning this beautiful 1930s warehouse, enhancing arrival spirits and end-of-trip facilities as well as adding a fantastic rooftop terrace. This will enable us to move rents on substantially with PC anticipated in the first half of next year. With a variety of size of units across the building, we will be offering both Cat A and Cat A+ space. At Stephen Street in the West End and Oliver's Yard at Old Street, we're carrying out significant rolling refurbishments on office floors and are simultaneously providing enhanced amenity and outdoor space at both. In addition, we'll be degassing both buildings and improving environmental credentials. In doing so, these works, we can move rents on significantly. And now on to our near-term pipeline. At Greencoat & Gordon, we will be delivering a comprehensive refurbishment of 2 Victorian warehouses. The scheme will comprise 108,000 square foot over 7 floors and multiple units. The building boasts an abundance of character, and we'll be maximizing its inherent features throughout the scheme, bringing the stunning architectural heritage of the building back to life. And at 50 Baker Street, we've now agreed our regeared with the Portman Estate, as you've heard from Paul, and are due to commence in H2 2026. Just north of 25 Baker Street and on a 1-acre island site, this is an exciting prime West End scheme designed with AHMM. The office building will have a dramatic and prominent entrance and voluminous reception. It will comprise 236,000 square foot, of which 18,000 square foot is ground floor retail. There will be 7 floors above ground, the largest of which will be a unique 34,000 square foot. Large floor plates with 360-degree aspect will allow for light and bright office floors. As you would expect, the scheme also provides for huge communal roof terrace with uninterrupted views and generous amenity throughout. In addition, we will be delivering 17 residential apartments on the site. Finally, looking at the longer term and our next phase of redevelopments. We have further projects totaling a combined circa 1.2 million square foot at Farrington Road, Blue Star House, Old Street Quarter and 230 Blackfriars Road. These projects offer a range of opportunities from a comprehensive office refurbishment to mixed-use urban generation. At Blue Star, we will shortly be submitting a planning application for a change of use to hotel and hope to achieve an uplift in floor area of over 50%. At Old Street Quarter, we continue to work through a detailed study and expect to submit a planning application for this exciting mixed-use urban generation project during the course of 2026. You'll be hearing more on these projects at year-end. Hopefully, that provides a summary of the exciting schemes we have ahead as we continue to invest in and position our portfolio, driving returns and value in the longer term. I shall now hand over to Damian.

Thank you, Emily, and good morning, everyone. Firstly, the financial highlights. EPRA NTA increased in the first half to 31.87p per share and adding back the dividend paid, our total accounting return was 3%. After the 4.2% TAR in H2 '24, this takes it to 7.3% over the last 12 months. Gross rental income rose to GBP 109.1 million, but net rental income and EPRA earnings were marginally lower than in H1 '24. Our dividend remains well covered, and we're increasing the interim dividend by 2% to 25.5p per share. It has also been a busy period of refinancing. And though borrowing levels are a little higher than at December, we expect them to fall back in H2. The movement in EPRA NTA per share in H1 '25 includes an upward revaluation movement of 46p per share compared to an 84p decline in H1 '24. This is the main change and the other figures are very close to last year. Turning to EPRA earnings for the first half. These were GBP 58.6 million or 52.2p per share. Compared to H1 last year, gross rents were up and admin expenses down due to lower staff costs. However, property expenditure increased to GBP 14.5 million. As we guided in February, net finance costs have also risen, a result of higher average borrowings and refinancing fixed rate debt in a higher interest rate environment. The gross rental income movement compared to H1 '24 takes account of lettings and asset management, which added GBP 6.1 million of income. However, breaks and expiries took rent down by GBP 3.3 million and GBP 1.2 million was lost from disposals. On a like-for-like basis compared to this time last year, gross rent was up 3.1% and net rent 1.9%. More details are in Appendix 8. As noted earlier, property expenditure has increased with irrecoverable service charges rising to GBP 4.1 million in H1. This was due mainly to higher voids, partly on space taken back for refurbishment. Property costs have also increased to GBP 8.6 million. And at our lounges and other customer service facilities, the running costs rose to GBP 1.8 million. The net cost is GBP 1.3 million as we also received GBP 0.5 million of rent and other income from these facilities, and they offer important amenities to help attract and retain our occupiers. Now turning to project expenditure across the portfolio. Developments and refurbishments included in investment property incurred GBP 69.6 million plus capitalized interest and staff costs. A further GBP 1.4 million was invested in the residential apartments for sale at 25 Baker Street. We also incurred GBP 3.1 million at our new solar park in Scotland, taking total expenditure for the first half up to GBP 74 million. Including capitalized interest and staff costs, the total was GBP 84 million. Future estimated CapEx is shown on Slide 33. Expenditure in H2 is forecast to be very close to H1 at GBP 88 million, and there's a detailed breakdown here on the chart. Note that we expect capitalized interest and overhead to be about GBP 6 million in the second half, in other words, GBP 4 million lower than in H1, and that's due to practical completion at 25 Baker Street, which is expected imminently. Estimated future EPC upgrade costs are GBP 86 million. Now moving to refinancing highlights. These include the issue of new GBP 250 million 7-year unsecured bonds at 5.25% in June, followed shortly by the redemption of GBP 175 million of convertible bonds at maturity. We've also arranged and extended several bank facilities. These include signing a fresh 4-year term in July on our main GBP 450 million revolving credit facility plus 2 1-year extension options. Cash and undrawn facilities at the 30th of June increased to GBP 604 million. The weighted average interest rate on our borrowings through the first half was 3.6% on a cash basis. Following refinancing, it ended the half year at 30th of June at 4.1%. After last week's 25 basis point base rate cut, the average interest rate on our borrowings has fallen to about 4%, where we expect it to remain through to the end of the year, maybe a little lower if there is a further base rate cut later on. Looking to 2026, we have GBP 55 million of private placement notes and GBP 175 million of LMS secured bonds due to be repaid by March. These have a combined average rate of 5.6%. And with both fixed and floating rate debt pricing close to 5%, we forecast that our overall rate will fall in 2026 to about 3.9%. Some more debt summary figures on the next slide. Note that the maturity profile on the right is shown after the latest refinancing. So there we plan to invest a further GBP 88 million in our projects in H2, borrowings are forecast to fall later this year as we have circa GBP 180 million of contracted sales to complete. GBP 54 million of this is the Francis House sale with the balance from the residential and retail disposals at 25 Baker Street. To conclude, our balance sheet is in strong shape. And while we expect earnings to decline a little in the short term due to higher interest costs, lower capitalized interest and the take-back of space for regeneration, our total accounting return outlook is the highest for several years. Thank you. And now over to Nigel.

Thank you, Damian, and good morning. Slide 38. The portfolio saw a valuation uplift of 1.2% in H1, and this follows on from the return to growth we saw in the second half of last year. This was from a mix of rising ERVs, asset management activity, project delivery and a slight yield tightening. Our on-site developments, 25 Baker Street and Network, which are nearing completion, were up 4.3%, and they have delivered 30% capital growth over the last 2.5 years. They represent about 13% of the portfolio's value. Overall, we saw a property total return of -- sorry, 3.1% in H1, which was another good outperformance against the MSCI Index, which delivered 1.9%. Also, the positive rental growth story helped us achieve a small outperformance against the MSCI, All Property Index, and this is encouraging for our market. We continue to invest across the portfolio with GBP 74.1 million in our developments and refurbishments. I'm sure you're all aware of the government's recent announcement that it intends to prohibit upwards only rent reviews. This came as a surprise to the industry, particularly due to the lack of consultation. It's very early days on this in the sector we will consult with the government. We think the market may consider alternatives to the rent review models such as fixed uplifts. Turning now to rental values and yields. Valuation ERVs were up 2% in H1, continuing the trend we've seen since '22. The West End was up 2.4% and the City Borders 0.4%. The stronger West End trend looks set to continue, especially in the space-constrained market. Our average office rent is just under GBP 52 a square foot. This ticked up a little and with a topped-up rent of only GBP 63 a square foot, this supports continued growth. This is now flowing through to positive rent review settlements. Yields have leveled off, supported by the increased investment activity. Our equivalent yield moved in 4 basis points to 5.69%, mainly through asset management activity and specific events rather than a cyclical movement. Now we look at the usual buildup of ERVs. Our annual passing rent is GBP 208.9 million, slightly up from December '24, mainly due to contracted uplifts coming through. Overall, there is GBP 114.3 million of cash reversion in the portfolio. As shown, GBP 37 million of this is contracted uplifts, so already in the accounting rent roll of GBP 207.3 million. The balance of GBP 77.3 million is a 31% reversion in the portfolio and will be subject to appropriate rent-free spreading when let. The developments at 25 Baker Street and Network could have GBP 34.5 million. Over 60% of this is pre-let. There are then smaller projects and vacant space. The reversion for future rent reviews and lease expiries of GBP 20.5 million is up 12% since year-end. It is feeding through to valuations and will flow through to the income statement as these events come through. As you've heard from Emily, Holden House is now on site, so we've shown the impact on the right of this chart. We have deducted the ERV on the existing building and then added the schemes ERV. This will take the portfolio ERV to over GBP 330 million. Now the investment market. This continues to improve with transactions of GBP 3.3 billion in the first half, which is already 70% of last year's total. Small lot sizes continue to be liquid, especially those in the West End; however, some larger lot sizes were traded, which is encouraging. We expect this trend to continue. The strong rental outlook as well as London is enduring appeal and expectations for a reduction in finance costs support a recovery in volumes. On sales, we were busy with a mixture of activity. An owner-occupied acquired Pentonville Road, a U.K. pension fund is acquiring Francis House. At 25 Baker Street, further progress was made with presales of the residential departments. So overall disposals, we expect to receive over GBP 200 million this year. On acquisitions, we made a small purchase adjacent to our 90,000 square foot Morelands property, where we -- and where we extended the head lease from 112 years to 160 years. So some good asset management here and a long-term development play. Finally, a brief sustainability update. The team continued to work with our occupiers to get energy uses down, and this was down 9% in the first half. Firstly, our intelligent building systems, which are using AI software within them to monitor the usage and then adjust it. Also, the benefits of our EPC upgrades over the last 18 months are starting to cut consumption. This was mainly the installation of air source heat pump at Stephen Street and plant upgrades at 17 Gresse Street. On embodied carbon, we firmed up our circular economy strategy last year, and this is being implemented at Holden House redevelopment. There is good opportunity for reuse existing -- including existing fit-outs, the raised floors and structural elements. At our 100-acre solar park, we've completed site prep and the support frames and now on to panel installation. Completion of the project in power generation is anticipated in H1 next year and should produce over 40% of the managed portfolio's electricity. Now back to Paul, and thank you for your kind words earlier. Thank you.

Thank you very much indeed, Nigel. Now to the summary on Page 45. As you have heard, we are well positioned for growth with a great portfolio and a strong balance sheet against a more favorable property market backdrop. Rents are growing as demand continues to outpace supply and yields are past their peak. We are committed to our next phase of West End developments and refurbishments with next phase commencing in early 2026. We will continue to recycle capital to ensure we stay ahead of market trends. We expect ERV growth of plus 3% to plus 6% in 2025 with further growth to follow. We have delivered consistent outperformance at both the property and corporate level. And with a strongest total return outlook for several years, we expect to deliver sustained long-term value. Thank you. We'll now take questions from the room and from those who have joined us remotely. We'll start with the room. There are microphones for those that want to ask some questions.

Adam Shapton from Green Street. One specific one and then one more general one, please. Just on the lounge costs, is there seasonality to those costs? So as we look at the higher level in H1 versus the previous H1, should we expect the same increase -- a similar increase in H2 versus H2?

I think we're now reaching a fairly steady state, where it's been building up in volume. And I think we can say that the cost should stay roughly where they are now.

Okay. Understood. And a more general one on capital allocation and the sort of capital market signals as they pertain to Derwent. So there's a few ways to think about share price discounts. So one is that your shares are at more than at least a 25% discount to your reported values on an unlevered basis. Implied EPRA yield is above 6%. And that's -- I'm not talking about sort of daily share price moves, right? This has broadly been the case for about 3 years now. So thinking about that versus the 15% to 25% profit on cost you're underwriting for projects. I don't know what that would equate to a yield on cost underwrite, but can you talk about the deliberations that you and the Board have about the appropriate pace and nature of net external growth in light, in particular of those capital market signals on the equity side. And obviously, we know where your marginal cost of debt is, too.

It's a good question. Obviously, we're focused on both business, and we're taking a long-term view investing into the portfolio. Obviously, the Board considers various options as to what best use of capital. I don't particularly want to shrink the business. And obviously, buybacks could do that. And whether or not they are a long-term benefit is open to question, but we obviously would consider all options. But at the moment, we have an exciting pipeline going forward. We're consistently beating ERV. Our new lettings are at 10.5%. We think market has settled from a sort of investment yield point view. We think we're past the peak. So hopefully, we can see further growth going forward. Damian, do you want to add to that?

I think it's -- we've had a period of quite substantial pricing adjustment in the sector. That seems to be coming to an end now. We've got rents growing as strongly as they have for some time. We've got pretty stable yields. There is a shortage of good quality products out there. And our job is to supply that, and we believe that can provide attractive returns for our shareholders at the same time. So this is the time to have faith, I think, and look forward. These are great products that we're creating. And good product, the rents are growing much more quickly than they are for less good product. So if you can improve the overall quality of the portfolio, you can get better returns going forward as well.

And just to be clear, attractive return to shareholders at the share price rather than on the basis of NTA. That's the key I think for investors, right? That's what you're underwriting.

We're underwriting off the metrics that we use, which is profit on cost and yield on cost and everything else. But you buy the shares at the share price ultimately.

Who's next, please? You got a microphone there. Yes, please.

Team, it's Zachary Gauge from UBS. I mean kind of linked a little bit to the share price reaction this morning, kind of trying to think about why the reaction has been fairly negative. Obviously, NTA has come in lower than consensus. And then sort of looking at your capital growth numbers sort of versus peers, I think, you're 1.6% for the West End, Shaftesbury was 3.4% for their office portfolio. GP, different reporting period, obviously, but I think it was 2.8% for the 6 months to 31st of March. So that's quite a bit stronger than the numbers you're reporting. Could you give any sort of insights as to why you think perhaps your portfolio is not getting the same level of capital growth, which obviously feeds into NTA and at sort of a 3% total accounting return for the first 6 months of the year, that's obviously a little bit below your target return level. And then also feeding sort of on from that, I think we discussed that the market really wants to see, I think, some larger core office disposals. It sort of -- it sounds like the market for that is picking up and there's more potential buyers out there. But is there any reason why we shouldn't be seeing that coming through in the second half of the year to sort of again prove that or get some evidence of that debate over where the shares are versus the underlying asset values?

Nigel, do you want to start or you want me to start?

Yes. I mean the portfolio is a mixture of core income and opportunities. We didn't put the slide in this time, but the higher value properties have outperformed and they've outperformed probably consistently for the last 3 or 4 valuations. We didn't put it in, but the same message was here. So there is a bit of a drag from the rest of the portfolio, and you need to take a little bit of a longer-term view on those, on the likes of the Holdens and the things that are coming through. So over the short term, you're right. But I think over a longer period, as we've shown with the MSCI Index, we've been outperforming every year for the last X number of years. So over a longer period, I think it under -- that's the real picture than the sort of micro last 6 months valuation.

We're gearing up for the next phase and you've got some schemes starting, obviously, when buildings become near the end of their vacant possession time, values will decline a little bit. And when you gear up to improve your space, you're going to get some good returns going forward. Anything else, Zach?

Yes. And just on the sort of the larger office disposals and appetite for your sort of core holdings?

Well, we've seen an increase in turnover this year, which is you were saying it's 70% of what it was last year. And if you drill down into that, it's quite encouraging. You've had bigger lot sizes being sold, Hanover Square, Manchester Square. You've also had owner-occupiers with State Street buying in a big chunk, 300. You've also had value-add opportunities. So the spectrum of buyers is there, which is more -- which is typical of a more standard market. We just need more activity, and we need a bit more probably debt moving in the right direction, and I think it will unlock that. If you go look at what's happening in Europe, they do get big transactions over there, but the cost of debt is a lot lower. So I think we need a little bit more on the debt side, but the rental growth side is coming through. So it's happening.

Yes, please.

It's Thomas at Berenberg. Just a couple of questions. One on market supply. Just wonder if you can give us a sense of the depth of activity in the refurb market. You yourselves have got a decent amount of refurb work going on at the moment. So I just wonder if you can give any color on whether you're seeing more competing new supply coming from that refurb part of the market, especially with more tenants choosing to stay put and perhaps what it means for longer-term ERV growth?