Great Portland Estates Plc (GPE) Earnings Call Transcript & Summary

Hello, and welcome to the Great Portland Estates Half Year Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] And I will now hand you over to your host, Toby Courtauld, Chief Executive, to begin today's conference. Thank you.

Thank you, Courtney, and welcome, everybody, to our interim results call. Thank you so much for joining us. The plan today is for us to take you through a couple of the highlights from the slides that we have published, both on our website. You can find the full presentation deck. And I'm going to refer in the talk and in, I'm sure, Q&A later to slide numbers. So it might be worth just making sure you have access to that. So I will do a bit of chat about the numbers and the market and operating conditions. Nick's going to help with that as well. And then at the end, we'll open up the floor for any questions. And with us to help answer that, we will have Steven Mew; Robin Matthews; Andy White; Simon Rowley, who's manfully stepping in for Marc Wilder, who is away on -- for family reasons; and we've also been joined by Janine Cole, who's going to help answer any questions you may have on the other release we put morning on our net 0 carbon road map and decarbonization fund. So that's the plan. Let me now kick off, please, with just some summary numbers. And you can see on the front of the press release and also on the presentation Slide 3, the headlines. Property valuation, down 6.6%. Developments for the first time in a while, underperforming, largely due to retail ERV declines. Portfolio ERV across the fees, down 3.9%. And our NAV, now NTA, down 7.8%. But we are paying a flat dividend compared to last year at 4.7p. Some key messages from us this morning, Page 4 in the deck. One, rock-solid financial position. This business is in as strong a financial position as ever. You've seen us do new financing at record-low pricing. Liquidity is high at GBP 465 million. LTV is still one of the lowest in the sector at 17.2%, and we have significant capacity for investments. And I'm sure we'll get into the investment market that Robin can help us with later on. And we -- as well as the investment market, clearly, we have opportunity internally. Our development book provides us with a really interesting pipeline of opportunities. It's an 11-scheme program today, 10 of which are in the pipeline, one still on site, 40% of the portfolio. And a significant opportunity across the investment portfolio for investment in improving stock, our stock and trade assets where we can make them fit for purpose, well designed, flexible, tech enabled. And typically, today, they're in low-rise buildings and off low rents. Very positively, point three, we have been leasing in what have been extraordinary conditions. Half 1, GBP 6.6 million leased, beating ERVs, up 4.6%. We've also got a good amount under offer, GBP 6.8 million, a healthy 13.9% ahead of the September ERVs. That's a very strong number, we think. And it's also followed up by the fact that we have a significant amount of discussions with prospective occupiers. We've described it as being in negotiations, another GBP 30 million in negotiations, the majority of which is in early pre-let discussions for some of our future development pipeline. So there is life in this market, and we are beating ERVs still, which is terrific. Very clear purpose, great values across the group. Never have they been more important than they are today, and you're seeing it in spades around the GPE team. We're really proud of our employee engagement numbers. 96% of GPE people say that this is a great place to work, and it is. So let me now hand over to Nick for some of the numbers, and then I'll come back and talk about the market in a minute. Nick?

Thanks, Toby. Good morning, everyone. I'm going to jump straight into some of the key points, starting with the valuation on Slide 7. You can see there that the valuation decline was the main cause of the NTA per share fall of 7.8%. In the gray box, you can see this was really driven by retail values. They fell 18% given ERV declines of 13% and some yield expansion. You can also see that, on the other hand, our offices proved more resilient with values down 2.4%. Analyzing the portfolio a little further, our long-dated properties held up best, down 3.2%, whilst our committed developments fell 7.5% given retail rental declines on Bond Street and Oxford Street. Our pipeline assets fell by 10%, principally driven by retail exposure and short income duration, although as you know, many of these assets are stacked with latent development potential. And we'll touch on some of the near term in a moment. Lastly, fee income. If we start with an update on rent collection on Slide 8. The chart top left shows that we've now collected 83% of our first half rents. And having assessed each and every outstanding balance, we have made a GBP 5 million expected credit loss provision, of which GBP 4.8 million sits in the first half income statement. And as you can see, 79% of that provision relates to retail, hospitality and leisure occupiers. On the right, you can see that our September quarter's rent collection has continued to improve, with our collection rate now 80% compared to 72% for the June quarter at a similar date, so some good momentum there. In terms of how we're dealing and working with our occupiers, our efforts continue to be proactive and collaborative with our most challenged occupiers and -- as we seek to find the optimal rent reprofiling route. As at today, we have 30% of our rent roll now on monthly payment terms. And pleasingly, we've had a 100% collection rate from these occupiers. And there's a further 6% of the rent roll on deferral plans; that's typically 6 to 12 months. It is fair to say, though, we are taking a robust approach with the small number of our occupiers that fall into the can't pay, won't pay camp. And don't forget, we still have GBP 18.5 million of rent deposits. And as you can see, bottom right, our delinquency rate remains low. On Page 9, you can see that the credit loss provision, combined with lower wholly owned rental income given prior period sales and also securing vacant possession of 50 Finsbury Square ahead of potential refurbishment, resulted in EPRA EPS falling to 8.2p, and cash EPS is now 6.4p. This outturn, when combined with our strong financial position, supports a fully covered interim dividend of 4.7p. And importantly, this is further supported by our significant organic rent roll growth opportunity, which is set out on Page 10. Here, you can see there's 88% of potential uplift coming through a combination of our flex space, leasing up the balance of Hanover Square and Hickman, which are already 51% let or under offer, and also leasing up the remaining space at our on-site Oxford Street scheme, which completes next summer. And we now have clearer line of sight of the GBP 43.6 million of additional rent roll at our 3 near-term schemes with starts as early as January next year. So lots of rent roll growth for us to go for here. Turning to the debt side on Page 11, where the team has been busy further enhancing our maturity profile through issuing GBP 150 million of new USP notes, locking in a low blended coupon of 2.77% for nearly 15 years. And we've also recently repaid the JV debt secured on Mount Royal. As a result, our weighted average debt maturity is now nearly 9 years. Our available liquidity has increased to GBP 465 million. And if that were to be fully utilized, our weighted average interest great would fall to only 2%. Turning to the last slide from me on our financial strength. As you can see on the left, our LTV is low, only 17.2%, and we continue to have very significant headroom over our group debt covenants, including the ability to withstand further value falls of 63%, and earnings before interest could fall to 0. As shown on the right, we have significant investment capacity with illustrative GBP 750 million of acquisitions, leaving LTV well below 40%, assuming constant property values. So in this context, we continue to be very well positioned. Now back to Toby for a few comments on the market.

Thanks very much, Nick. So I'm on Slide 14, just a couple of summary points from the graphs we're showing you here. And the conditions plainly remain challenging. We're seeing confidence levels that have been relatively weak, and that has been feeding into lower occupier demand that you can see from the chart on the middle top of that page, the blue bars showing that demand is down circa 45%, 46% from where they were last year. It's also feeding into under offers being lower, now beneath the 10-year average, that dotted line, for the first time in a while. But we are still seeing, as I described earlier, resilient occupier interest for 2 kinds of space: firstly, where flexibility and high service provision is offered; and secondly, where you have very high-quality, Grade A HQ opportunities. And that speaks to the amount of discussion we have ongoing for our pre-lets. The other point to note from this slide is top right. The supply side, we've often talked about this. We think it's tighter than most people have forecast. And if anything, it's going to get tighter still. Total vacancy is rising because tenant release space has been rising. But the high end, the quality end of the spectrum, Grade A supply, we think will fall, because we think the supply pipeline of new-build will fall by circa 30% versus what we thought this time last year over the next 3 years as people run from risk and/or put their cranes away. Turning to the investment market briefly. Some amazing statistics coming out of that world at the moment. You can see that from the chart bottom middle of this slide, where turnover has fallen off a cliff. And to the opposite of that, asset supply has jumped by almost 450% between May this year and November. Interestingly, also capital looking to buy has gone up as well over the last 12 months. It's now at around about GBP 40 billion, just shy of that, not 1 million miles away from the all-time high. And we are still seeing an appetite from investors, even though they can't travel, in London real estate, partly because it's -- because of its relatively high yields. And consequentially, given the monetary backdrop, we are not seeing really any distress. So opportunities are limited, but we are looking. We're looking hard. And as you can see, we have GBP 1.2 billion under review at the moment. And that number has been rising in the past few months. Don't forget, we have no need to buy and we have no need to buy because of the pipeline of opportunity, which I'll touch on in a minute. Over to slide then to Page 15, please. And this is just the outlook that we always publish. We've reinstated our guidance on rents in the context of this uncertainty. And you can see bottom left there the actual outturn for the year, down 0.7% for offices for the half year -- sorry, down 0.7% for the 6 months so far on offices, down 13% on retail, down 3.9% overall. For offices for the year, we're now estimating down 0 to down 5%, so a relatively small move. That's certainly relative to retail, where we think there is a bit more to come potentially on ERV declines. The yields on the right, we think that the prime yield, particularly in offices, will be very robust. And in some cases, we might even see compression because of that demand I was talking about earlier. For the average quality stock, logically, there should be some drift out of yields, but let's see. Just a couple of comments on the -- on our operations on Slide 16. We've touched in our releases, and Nick's just touched on the support we're giving our occupiers. We've worked incredibly hard on this, reaching out to all of them wherever we can. And some of our innovations over the last few years are really helping, particularly our award-winning Sesame app, which they can use to control their buildings contactless, and we can monitor air quality and so on. It's an incredibly valuable addition to our toolbox. It's also clear to us that we need to continue refining our model. And there are 2 key themes that we're referring to here, top right of that Slide 16. One, sustainability. It is now a must-have in our occupier community. And we believe that it is translating already into a rental premium, for example, our buildings versus poor buildings. And thus, it's become not just a moral imperative, as we said in our CMD back in the spring this year, it's now also an economic and a clear strategic imperative. And with our announcements this morning on the net 0 carbon road map, we think we're taking some great leadership in this arena. The second theme I want to touch on is the evolving pattern of work. Clearly, this is something that's been running for a while. COVID has probably accelerated it. We think occupiers, customers are looking for higher service provision across the board. They're looking for flexibility. Interestingly, we think that they are also looking for smaller scale and domestic comfort style buildings as well as HQs, so there's an interesting bifurcation going on there. And when we think about how we're supplying these 2 themes, bottom left of this slide, what you see is a business that is willing to deliver fully fitted, own front door space, on whole floors, on flexible terms, in tech-enabled and sustainable buildings and providing a services menu for occupiers to take as they wish. And we think that is generating decent levels of interest. It helps that 93% of our assets are of less than 10 stories. 82% of it is in less than 10,000 square foot units, so it appeals to this smaller scale idea I'm talking about. Meanwhile, the development pipeline is going to deliver HQ-style buildings with efficient floor plates, very sustainable credentials that will appeal to theme #1. And we're growing our flex offer. It's 255,000 feet today, up 16% since March. Average occupancy has held up very well at 74%, and we're generating a rental premium and an NPV premium, as you can see in that table. And we're looking at about a further 141,000 feet, which if we did all would take it up to about 19% of the book. So lots of really interesting initiatives for us to be pursuing in our operating end of the business as well as in developments on Slide 17. Just one point to make here, 3 near-term projects, starting from 2021. Nick showed us the overall rental increase opportunity there. These 3 schemes in isolation have the potential to deliver circa 160% uplift in their rents, which, as you might imagine, is significant. And we're working hard to begin to look for starts from next year. The one point I want to make on the decarbonization and net 0 carbon road map on Slide 18 is that we've today also launched a fund into which we will pay GBP 95 per tonne for the emissions that this business generates as an internal carbon price, which we will use to improve our buildings wherever we possibly can, and the idea being that it will help us change our behavior and drive investment and, crucially, drive innovation in trying to find ways and new materials for improving our carbon footprint and our operational carbon across the business. So some exciting things to look forward to there and I'm sure we'll touch on that in Q&A. Two more points for me, and then I'll wrap up, Slide 19. We're saying this morning that we are still of the view that we will be net buyers from here. Whilst we are finding limited -- very limited examples of distress, as I said earlier, we've got a good pipeline and deal flow of opportunities. Whilst we may not be about to trade, we are certainly interested in some of them. And as I say, I think we will be net buyers over the next few periods. It's worth, just on Slide 20, reminding ourselves the shape of the portfolio. And you can see that in the pie chart showing the breakdown between our various portfolio components: 32% pipeline, 40% active portfolio management, lots to go for in those 2 components. Long-dated has jumped from 13% -- sorry, from 7% to 20%, and that's because Hanover Square has now finished and is in that component of long-dated income. And as you will know, our game plan is typically once we have created the opportunity and generated a Grade A, top-quality asset at some point over the ensuing years, we're likely to reduce our interest in those assets. To finish, Slide 21. This is a business with lots of opportunity long term but equally one that's very well prepared for further near-term disruption, very strong balance sheet, sector-low LTV, high liquidity, low rents and clearly an experienced senior team who've been through 3 recessions together. We have lots of growth opportunities for us to use that balance sheet strength to exploit 40% in our development book. And don't forget, 92% of our assets are near Crossrail. And if ever Crossrail is needed, especially after an experience like COVID, it's now and it isn't far away. Very focused acquisition strategy and a really strong positioning for some of the themes that we're identifying today as being most important. Clear priorities, clear strategy, deep knowledge, demonstrable capital management discipline and, crucially, a strong and enduring belief in London. We still think that this great city of ours has a very strong future, arguably stronger as a result of COVID. Never has it been more obvious to me that people need to be congregating and getting together. And the work-from-home experiment, important as it's been, does not replace that, in our view. Great culture, great team, unifying values, supporting our occupiers and our communities and as I said earlier, terrific people engagement scores. So yes, near-term economic challenges, but this is a business in great shape and with a confident long-term outlook. So that's all we wanted to bring your attention to from the deck we've published this morning. Why don't we now hand over to questions? And Courtney, if you could marshal that for us, that would be great.

[Operator Instructions] And our first question comes in from the line of Robert Duncan calling from Numis.

So just one question from me, please, which is, could you just explain how the valuers are thinking about your use of tenant deposits in the valuation and then importantly, how tenants are responding to requests to top those deposits back up? I think back with your -- in your Q1 statement, you kind of commented off-line that clearly, retail customers were somewhat less happy about having to top that back up. But could you just give like an update on where we are? Because clearly, there's been a substantial use of tenant deposits by Great Portland, much more so than some of the other London office operators, because of your higher exposure to RHL tenants. So yes, any commentary there would be fantastic.

Robbie, why don't we -- Nick, if you take the first part of that, and then perhaps, Steven, you could comment on experience that we're having in the deposit top-up game.

I think the truth is that the way that the valuers think about the covenants is not hugely impacted by the take-up of rent deposits, because by definition, if we have a rent deposit, it's unlikely to be an occupier that would be viewed as a AAA covenant. However, what the valuers are doing is going through, as they always would be, each and every building and each occupier, and thinking does the yield need to change because of the covenants. And if the fact is that we are drawing down on the rent deposit and/or the occupier isn't paying rent where we don't have a rent deposit, some of that will be factored into the yield. But I wouldn't describe it as being a material -- having a material impact on the valuation, but it is being factored in. Steven do you want to take the second part?

Yes, sure. Yes, rent deposits. We've drawn about GBP 6.5 million. As you all know, within the rent deposit deeds, there is a right for an automatic top-up. We haven't insisted on that automatic right of top-up at this moment in time. I mean it would seem a bit -- us drawing the deposit to help with the occupiers' cash flow and then insisting that it's top straight back up, doesn't really help. So what we have done is we said, look, we're effectively going to park that conversation until the new year when, hopefully, occupiers' cash flow will have improved.

But Steven, it's fair to say, isn't it, that the obligation to top up has not been waived and so we'll come back to that, as you say?

Yes, absolutely right. I mean it's not to say we haven't had top-ups. Only yesterday, we had an occupier who offered to top that deposit back up.

The next question comes in from the line of Max Nimmo calling from Kempen.

Just on the retail ERV guidance going down 15% to 25% for the year, has that surprised you at all in terms of how defensive you thought this could have been going into it back in March? And how much of that do you think is a kind of structural shift that we're seeing in wider retail? And how much of it is just down to the sort of [press effect] and the fact that very few people have been in the office since March? And does that -- I know it's quite embedded in your portfolio in terms of growing floor retail, but does that change your attitude to this exposure going forward? So that's my first question. And if I could just ask secondly, you talked a little bit about -- in the presentation about you increasing the flexible opportunities in the portfolio. Flex could go up to 20% of the overall portfolio, which means you'd be taking on more operational risk. Does that mean that fundamentally, you'll take a lower through-the-cycle financial risk? And if so, does that mean that you'll need to recycle more capital in order to keep total returns up? I know that leverage is obviously quite low at the moment, but through the cycle.

Max, great questions. Quite complex question, the second one there. We could write books about that topic. But maybe what we should do there is Steven and Simon, Simon is our head of office leasing, if between you, you could think about that. And Nick, you might want to just comment on recycling capital as well. In relation to the first question, retail ERV guidance and our attitude to those assets. Yes, I think we probably were a little bit surprised on the ERV outturn from our valuers in one sense because it's a big number. On the other hand, this -- the retail community has been shut down for -- in Central London for much of the spring and early summer. It was just beginning to recover ahead of the second lockdown. And you could see that in footfall figures. The New West End Company published a very good sequence of data that you can dive into to see that. And the guidance that we've given for the year overall has really been informed by the first half outturn. And it felt to us that we needed to show a little bit more decline for the second half. Because when we were thinking through this, it was clear that there was going to be more pain to be felt in the retail community before it recovered, hence why we've increased slightly over H1 and hence because there's so little certainty about the outlook, why we have a fairly wide banding. And it's that -- it's the extent of that number, that is why our guidance for the group overall is down 5% to 10%, when the offices actually are performing pretty well. And as you heard me say at the beginning, the inquiry levels in offices feel pretty good just at the minute. In relation to our attitude, I mean we've always been very clear. We own specific assets for specific reasons. We tend not to take structural views on office versus retail versus PRS, residential, whatever. We're much more granular, and we look at individual assets, and we look at the opportunities within them. And if you look at our retail assets today, without exception, they all have very clear business plans that have opportunity for value creation. And often, that opportunity is diversification away from retail. So if you look at -- and deep into our pipeline, you have things like Mount Royal, 100% retail today. Future, it will be much less retail because we think we can get some office space into a new-build scheme there. It's got complexity, but we think that's the opportunity, and so on and so on and so on. So our attitude is driven by the business plan, and we don't currently see any reason to change the business plans that we've been working to because we think they still all work. So I hope that answers your question, Max, around retail. Let's go to the operational risk part of the question in flex, and perhaps we should start with Steven, please.

Yes, greater flex. I mean one of the reasons, obviously, we're growing the flex model is because we're seeing demand for it. And the majority of that growth that Toby talked about on Slide 16 is through our sort of own front door model. So that's a fitted space and managed space increasingly being managed, which is typically on your 5-year leases, 3-year breaks. And the reasons for doing that are simply the economics are supportive of going down that route. And the only other thing I would also add was the 19% that we're talking about isn't necessarily a target. It's something that we're always looking at appraising, but we'll always do what's right for the building and positioning in the market.

Thanks, Steven. Simon, do you want to just talk about the market as we're seeing it and perhaps touch on -- give a bit of color about the leasing interest, because that talks to Max' question around financial risk?

Yes. Certainly. From a fitted space perspective, as a proportion of all deals in the market, that has doubled during lockdown. So as Toby mentioned earlier in the presentation, COVID has accelerated pre-existing trends. And we've been playing in this area for the last 3 years. So we're quite well placed for it. The crucial thing is that we're sticking to the same principles that we have always stuck to. So we're doing the same number of deals because these are whole floors. The lease lengths, as Steven mentioned, are the same. And we manage all of our buildings in-house already. So from an operational perspective, not a lot needs to change for us to tap into exactly where the market is going. And I think from a wider market perspective on general leasing, we're seeing encouraging interest, particularly in our developments where the flight to quality, which is an often-used phrase, is very real. And I think occupiers who are looking to move at the moment are looking for best-in-class space that respond to sustainability, wellness, technology requirements and reflect or enhance their brand. And whilst there is undoubtedly tough conditions out there, I think the assets that we've got are certainly the kind of assets I would want to be marketing in this environment.

Thanks, Simon. Nick, capital rotation consequences.

Yes. Max, I think your question had 2 legs. One, does higher flex equal higher operational risk, therefore, lower LTV and more recycling? I think on the first, lower LTV, I think going from 10% to 20% of the office portfolio I don't think materially changes our risk profile, particularly when you think about the lease duration we're actually getting on the flex space that we are delivering. If we were to go from 10% to 100%, I think that clearly would influence some of the operational risk that we're taking. However, I think as you probably already understand, the biggest operational risk we take today is development. So again, that is going to be one of the largest considerations that we take when setting our LTV measures. But it answers the question really our 10 to 14 guidance remains today. In terms of recycling, one of the things that we highlighted in the deck was that we now have nearly 20% of the portfolio in long dated. Our discipline of reunderwriting assets every quarter persists. And I think there is a good chance that over the course -- over the next 6 to 24 months, some of those assets in the long-dated bucket will find their way into the investment market, particularly if we see the level of equity demand that we are seeing today for that kind of kit. So hopefully, that answers both legs of those questions.

The next question comes from the line of Rob Jones calling from Exane.

I have 2 or 3 questions in total. The first one was on Page 6 of your release this morning, you talk about the future of offices going forward. And one of the comments in there, I'll paraphrase, but it's basically saying the impact that COVID has had on individuals and workforces over the last year will have some lasting impact on how people use offices going forward. I wonder if that also, in your view, translates into a lower absolute aggregate quantum of demand for space and whether you've attempted to quantify that with a bit of caveat that obviously, you're clearly not leasing average space across the market, and you've obviously already talked about your kind of Grade A, HQ and flex product offering to try and take advantage of how people will shift their demand for space going forward. Secondly, maybe a couple for Janine, if she's on the line. Firstly, Toby, you mentioned that you're seeing a rental premium in some circumstances for sustainable space. I've heard other people talk about this recently. And I'm just wondering whether you can either quantify this today or maybe give a view on what sort of premium you could expect for a kind of high-rated BREEAM sustainable space that offers great quality, kind of health and well-being for a workforce going forwards. And then finally, just one on the carbon price per tonne. I think the transition fund announcement and idea is fantastic; GBP 95, also very ambitious. That's really good to see. I'm just wondering, A, why you chose GBP 95 specifically. And secondly, as you become a more sustainable business from a carbon emissions perspective, I guess the contribution to that fund will decrease. So how do you continue to fund kind of ongoing CapEx improvements from an environmental perspective? Is it just going to be from that fund or when you run out of proceeds associated with the value of that fund, you just take it from the ongoing business effectively?

Yes. Rob, great questions, and I'll hand over to Janine in a sec to address the second 2 of those 3. On the first one, I mean, just -- let's just think about your own organization for a second. I think you are a brilliant example in a business which is moving to a best-in-class building and space that works for your operations of today. And that space will, by necessity, be slightly different to that than it was a generation ago. And you -- as you know, you've leased space in our building, our new developments in Oxford Street, on Newman Street. And you've done that because you believe that there is real value in having your people in the best possible environment they can be in because that's where they're at most creative. You need to be very near to great transport, which you are. You're opposite Crossrail. And the marginal cost of that is massively outweighed by the marginal benefit that your firm will generate from having those great credentials, be it health and well-being, et cetera, et cetera. And I think going forward, to your question about aggregate demand, going forward, I think the aggregate demand for that quality of space goes up. And I think the opposite is true for space that doesn't hit some of the criteria that we're talking about and some of the cultural benefits that organizations gain from being in great space. And I think that's a theme that's been running now for a while. It's not new. It's probably accelerated by COVID. It's probably changed at the margin by COVID in relation to the design of that space and some of the comforts that people now expect in that space. But the basic thesis holds. And I think, therefore, demand for great quality goes up and demand for really poor quality is probably lower. So from our perspective, that throws out 2 really interesting opportunities. Firstly, it improves the prospective value of great pipeline schemes that Andy and his team are building. Secondly, it provides us potentially with opportunities to buy those really poor assets that Robin and his team can go and access. So it plays to the strengths of a business like us that is very active in rotating and improving poor quality and turning it into great quality. Across the market, aggregate demand has fallen during COVID. But I think once we have a solution for COVID -- and this week, it's clearly generated some great news. I mean there's a long way to go, but it's positive nonetheless. As we get solutions to COVID, I expect to see demand come back quite quickly. Just my view, no real evidence for that, other than perhaps the depth of discussions were already happening with businesses who are looking well through COVID and planning for their future. Rob, let me hand over now to Janine to talk about this rental premium point.

So in terms of the rental premium, I don't think -- I think it's quite difficult to actually put a price on the actual part of the premium that you can attach to sustainability and well-being. And I think we probably talked about this when we spoke when you put out your report earlier on in the year. And I think that it is quite difficult to actually isolate what applies to sustainability. But I do think it is a specific part of producing a prime office. And I think that also -- what we found as well is that we tend to let the space quicker as well by having higher sustainability credentials of our buildings. You also asked some questions around the internal carbon price and how we set it. So as you would expect, we looked at where the market was and put the price through development appraisals. I think what we found was that it was important for the price to be high enough to actually have a behavioral impact on behavioral change and to really push our teams to consider -- embody carbon within the design of our buildings. And in terms of how do we continue to keep the funds going into out decarbonization front, I don't think we're going to need to worry about that for a while. We know that there's plenty of opportunity to go out between now and 2030. And also, if you look at sort of the types of assets that we typically buy, I think that as we purchase new assets, the decarbonization funds will give us an opportunity to bring those assets in and retrofit them and ultimately drive value. So I don't know whether that asks -- answers all your questions.

Andy, do you want to just comment on -- and we've certainly seen some evidence from some of the agencies around the pricing and what your experience in development so far has been?