Helical plc (HLCL) Earnings Call Transcript & Summary

Good morning, everyone, and thank you very much for coming to Helical's full year results meeting on a very busy day. I'd just like to make some brief introductory remarks. And by the way, I should -- I'm Richard Cotton, for those of you who don't know me, I'm Chairman of Helical. There's no getting away from it. We are reporting a disappointing set of results, principally due to the write-downs on our valuations. However, pleased to report it's been a busy start to the year. We have announced a JV at 100 New Bridge Street, where we're already on site under construction and also the sale of Charterhouse Square. And these 2 transactions have generated GBP 100 million of liquidity. The also been good progress on letting JJ Mack. We're well aware of market sentiment towards smaller property companies. Although I'm glad to say it's been a little bit brighter in the last few weeks. But I've led a review looking at our options, which have led us to the following conclusions: Firstly, we've got a pipeline of 450,000 square feet of consented, high-quality office space, all scheduled to start in the next 12 months for delivery into an undersupplied market in 2026, plus a major student accommodation scheme, and we believe this should produce attractive returns. Secondly, to maximize the value of our investment properties, we need to complete our asset management plans, focusing on leasing up vacancy. And as you're well aware, the investment market for lot sizes of GBP 100 million plus is currently very illiquid. So it's not a particularly good time to sell. Looking ahead on a 3-year view, the prospective returns from executing our developments and asset management far exceed alternative strategies to return capital to shareholders, such as an orderly breakup. We believe we've got a credible plan for delivering shareholder value, and the Board is unanimous in supporting it. We're currently out for consultation with our major shareholders on a 3-year management incentive plan, which is designed to directly align interests with a focus entirely on shareholder return, both relative and absolute. We've also concluded that we need to reduce our overhead, and we've committed to reducing these -- this by 25% by this time next year. Now we're well aware that many shareholders value dividends. And so it's with considerable regret that we're cutting the final dividend and signaling lower payouts. However, it just doesn't make sense for us to borrow to pay dividends, and we will be guided by cash covered EPS and PID payments when setting the level in future. So we've got a plan, we're not complacent about the challenges in delivering it, and I'm quietly confident that we've turned a corner. However, we're fully aware that we'll be judged on how we execute. And I hope that this time next year, we can report meaningful progress. We also announced this morning our succession plan with Matthew succeeding Gerald as CEO at the AGM. Congratulations, Matthew. We're lucky to have you as Gerald's successor with your 30 years of development experience at Helical, and I look forward to working with you in your new role. I'd also like to pay tribute to Gerald. For 30 years, he's been putting his imprint all over London. The evidence of his development skills and reputation for delivering millions of square feet on time and on budget are all around us, including appropriately this building, which was one of the most profitable schemes that Helical has ever undertaken. So we're delighted that you've agreed to take on a consultancy role on 100 New Bridge Street and Brettenham House and will remain part of the Helical family. And at that point, I'd like to hand over to you to take us through the presentation.

Good morning, everyone. I will run through the agenda for the presentation. I will start off with a brief overview of our results. Tim will then explain the financials in detail. I will follow this by running through our progress and operational achievements over the last year, after which Matthew will talk about the opportunity we see ahead for Helical and our ongoing pipeline. We report losses as we have continued to suffer from the property yield readjustment following interest rates rising from 0.1% in December 2021 in increments to 5.25% at 3rd August 2023, where they remain today. Over the last 12 months, our valuation has moved [ down ] 95 basis points on a true equivalent basis. This is despite fulfilling our operational business plans well on the individual assets, which I will highlight shortly. I believe we have a strong platform and a pipeline from which to grow. Tim, over to you for the numbers.

Thank you, Gerald, and good morning, everyone. Let's start by looking at a summary of the financial results on slide 6 of the presentation. These are not pretty results. Despite the many operational successes, as Gerald briefly mentioned there, we've been badly hit by the impact of expanding valuation yields. As Gerald mentioned, 95 basis points decrease in the equivalent yield is reflected in a valuation loss of 22.4% and led to a loss after tax of almost GBP 190 million. Earnings per share fell to 3.5p. And taken together with the valuation loss, we feel compelled to limit our final dividend to the minimum required to meet the requirements of the REIT regime. With a portfolio value of GBP 662 million and net debt of GBP 262 million, the net asset value of the group at 31st of March stood at just over GBP 400 million, which works out at an EPRA NTA per share of 331. And at the year-end, the group's LTV was 39.5%, with a balance sheet gearing of 65%. At that point, we had cash and undrawn facilities of GBP 115 million. However, since the year-end, we sold 25 Charterhouse Square and 50% of our site at 100 New Bridge Street and the additional cash of GBP 98 million has reduced pro forma net debt to GBP 164 million, and LTV to 28.7%. Those are the results in summary. Let's take a look at the detail. Turning to slide 7, our net rental income of GBP 25.5 million is 24% lower than for the corresponding period last year. Much of this reduction comes from the adjustment to net rents from writing off the accrued rent relating to the rent-free period granted to WeWork under the terms of their leases and recognized in advance under IFRS. Bad debts continued to be negligible with 99% collected of all rent contracted and payable for the year. Recurring administration costs, including in joint ventures, fell by 8% from GBP 10.3 million to GBP 9.4 million. In addition, we accelerated the depreciation of leasehold improvements in anticipation of moving offices later this year, adding a further GBP 0.7 million of costs. On performance-related pay, there were no bonuses and the 2021 PSP award will not vest. Despite this, the accounting requirement to recognize the TSR element of share awards, regardless of actual TSR performance led to a charge of GBP 1.1 million and an overall administration cost of GBP 11.3 million, down 15% on last year. While we're on the subject of that administration expenses, and as Richard referred to earlier, you'll have seen that we intend reducing our recurring administration cost by 25% by the end of the year. Finance costs in the main group were down, reflecting the lower level of average borrowing during the year. While in joint ventures, the completion of the JJ Mack building in September '22 saw finance cost expense during the year rather than capitalized. Overall, there was a 7% reduction in net finance costs from GBP 12 million to GBP 11.1 million. So on an EPRA basis, we generated net earnings of GBP 4.3 million or 3.5p per share compared to 11.5% or 9.4p last year. Moving on to the non-EPA components of the income statement, the 95 basis points outward movement in yields generated a valuation loss of GBP 188.6 million. Our interest rate swaps reduced in value, adding a charge of GBP 5.6 million. So overall, we made a net loss after tax of almost GBP 190 million. On the back of these results, we've reviewed our dividend policy previously to have been based on EPRA earnings and realized capital profits. However, earnings have fallen and there were no realized capital profits. So again, as Richard said, we're adjusting our dividend policy to suit our expected trajectory and will align our dividends to our EPRA earnings per share, rebasing to a lower level, while we wait for our development pipeline to produce income and profits. Turning to slide 8, the EPRA net tangible assets per share of 493 at the end of March last year were increased by the EPRA earnings during the year of 3.5p, but then reduced by the investment losses of 153p and dividends paid of 11.75p leaving an EPRA NTA per share at 31st of March of 331p, down 32.9%. The individual contributions to the valuation losses are detailed on this page. Looking at our LTV and gearing on Slide 9, we again see a history of these ratios over the last 12 years. Since the year-end, the sales referred to earlier, have reduced on a pro forma basis, net debt to the lowest level of this 12-year period and the LTV to a current 28.7%. Now with a substantial new development pipeline commencing, there will be some upward pressure on these metrics, but we will look to contain over the medium term, our group LTV to a broad range of 25% to 40%, depending on the timings of expenditure and future sales. Turning to Slide 10, we reduced our total debt facilities during the year as it became clear we would not use all of the available revolving credit facility. Reflecting this reduction, the average cost of debt is down to 2.9% from 3.4% last year, all of which remains hedged to the end of the facilities with an average maturity now down to 2.1 years. We've had early positive discussions on extending the RCF, which currently is due for repayment in July '26, and we're looking to extend this by a total of 5 years, which would include 2 1-year extensions. As you will have seen from the announcement earlier this week, we signed a facility to build out 100 New Bridge Street. This 4-year facility will fund almost all of the remaining development costs. Turning to Slide 11, all of our current borrowing is protected by a combination of interest rate swaps and fixed rates, and this covers our main investment debt until the expiry of the 2 facilities. And looking at our loan covenants on Page 12, we have a substantial cushion before we reach our covenant levels and can withstand a further 27% fall in property values and the further 32% fall in rental income before we start to reach our banking covenants. Slide 12 also shows the impact of the committed expenditure on the group's LTV for the year to 31st of March '25, which reflects the site acquisition of 10 King William Street, our first Places for London site. This forecast pro forma LTV is just over 37%. And of course, it's before any further recycling of equity through potential future sales of existing assets or valuation movements. Slide 13 notes the committed and planned capital expenditure at 100 New Bridge Street and under the joint venture with Places for London. This slide is worth spending some time looking at. We've indicated on the schedule where we expect to use our own funds and where bank finance is expected to finance the development expenditure. For example, at 100 New Bridge Street, we expect to need a further GBP 3 million of equity with the balance of the construction cost being provided by the bank facility we signed at the end of last week. At King William Street, the site purchase will require GBP 33 million of our equity with a further GBP 10 million required before bank finance funds the rest. And at Southwark, as Matthew will mention later, we're seeking an alternative use for the site, which would obviate the need for any further funding from Helical. With each of the Places for London scheme spread over the 3 years from '24 to '26, we have time to ensure that suitable financing is in place. And finally, a summary of our financial position on Slide 14. We have an investment portfolio with a true equivalent yield of 6.6% at a time when 5-year swaps and 10-year gilts are around 4%. The debt on our portfolio is fixed at an average cost of 2.9%. And we have a balance sheet that's in good shape with a pro forma LTV of 28.7%. We have a deep pipeline of development opportunities, which we are looking to supplement with additional equity-light schemes. And looking forward, we're looking to reduce overheads and maintain financial discipline, recycling equity and using third-party financing to fund our development pipeline. And with that, I'll hand back to Gerald.

Since 31st of March 2023, significant progress has been made letting the JJ Mack building. We've let 4 office floors to J Sainsbury plc who have also acquired 2 contiguous retail units at ground floor for their flagship small store concept. These lettings for a 15-year straight term represent around 79,000 square feet. We've also let the ninth floor to Corio Generation, an offshore wind developer and the eighth floor to Three Crowns LLP, an international arbitration law firm, further increasing the diversity of the tenant mix. Both lettings were for rents significantly in excess of GBP 100 a square foot. We are in the process of signing the fourth floor and the 10th floor is also under offer and should sign shortly. When this is done, we will be 90% let with just the fifth floor, which has a great terrace, remaining. The average rent across all the floors is GBP 95 a square foot, which is a record for a low-rise building in the city and recognizes the quality of the asset, which has also achieved the highest commercial BREEAM score of 96.4%, somewhat over than 85% threshold for outstanding. Turning to The Bower, [ Pickardo ], our tenant on the 17th floor has expanded on to the 16th at a rent of GBP 85 a foot. And we moved Incubeta from the 16th floor to the 14th, replacing Snowflake whose expansion we could not accommodate at that time. We took swift and appropriate action to deal with the WeWork situation so that we had control of the future. WeWork departed from all floors in December apart from the third, which is occupied by Stripe as part of a global arrangement. They leave in the next month when we get the floor back. We are refurbishing the 4th, 5th and 6th floors, and we'll finish them in July and August on a high-quality, fully fitted basis. We have a management agreement with InfinitSpace who are providing attractive flexible offices on the first and second floor. I would stress this is a high-quality piece of real estate. The valuation has been hit by the demise of WeWork. We are confident it will let well and recover strongly from a valuation perspective. We are encouraged by the current level of demand. Indeed, Farfetch have agreed to assign their leases with 3 years remaining on the 3 floors in The Tower to a growing tech company, which we hope will continue to expand and convert to a longer-term occupier. The building is well maintained and many remark upon it looking like new. The setting has been much improved by the [indiscernible] of Old Street roundabout and a new entrance to Old Street station in front of our building. We are beginning to get good traction at The Loom with new lettings. And if all the under offers complete, we will have moved the vacancy down from 35% at year-end to 26% with encouraging further interest in the [ wings ]. This slide shows how passing rents rise from GBP 23.6 million to GBP 39.3 million as we let the space in the current completed investment portfolio. So this ignores all the buildings that are under development. This schedule shows how movements in both rents and yields impacts the value of our investment portfolio. A 5% increase in rent and a 50 basis points improvement in yield, add GBP 71.6 million to the value. Over the last 12 months, we have continued to recycle equity and we completed the sale of 25 Charterhouse Square to Ares Management for GBP 43.5 million, with the proceeds utilized to pay down debt. We also sold the last residential unit at Barts Square and completed on the sale of the retail element. Since 2014, the joint venture between Baupost and ourselves has built 235 apartments, 3 office buildings and 10 retail units in 15 different buildings. We have also worked with the city of London to transform the public realm around the scheme. Through the waterfall outperformance, our share of profit increased from our 33% equity participation to 44%. Helical's total profit was GBP 41 million, and that was with a 26% IRR. Since last March, we've obtained planning consent for the comprehensive refurbishment of the existing 1990s building, whereby the great majority will be reclad and 2 new floors will be added to the top, which increases the floor area from around 165,000 square feet to nearly 195,000 square feet. I'm delighted to say that last Friday, we completed our joint venture arrangements, which are on a preferred equity basis with a vehicle led by Orion Capital Managers. Momentarily after entering the joint venture, we completed GBP 155 million of development finance with a partnership of 2 lenders, including NatWest who are providing GBP 50 million. We also signed a building contract with Mace. So work is well underway, and we are due to complete in March 2026. This will be a best-in-class office scheme, and we are aiming to achieve BREEAM outstanding and EPCA [ a neighbor's 5 star ]. We will seek to better the rents we have achieved at the JJ Mack building, where, as I said, we are averaging over GBP 95 a square foot. In November, we referred to a new project in the West End in which we were involved. We have worked in partnership with the owner of the long lease of Brettenham House, which occupies the northern approach to Waterloo Bridge and has commanding views up and down the Thames. The building which was originally completed in 1931, has now been stripped out, and we are shortly to commence a full refurbishment to create a highly sustainable best-in-class building, which is due to complete again in March 2026. Helical are managing the redevelopment and letting process, contributing towards the construction costs alongside the owner to ensure full alignment. For this, we will receive a profit share based upon the outperformance of the project and the development management fee. I will now hand over to Matthew for further detail on the development pipeline.

Good morning, everyone. Thank you, Gerald. Given the announced management change, I would like to start by setting a bit of personal context. I joined Helical a year after Gerald, and we've worked together for almost 30 years. Together, we have delivered well over 10 million square foot of space and over 6 million square feet of space in Central London. Whilst we are focused primarily on offices, we have delivered residential, retail, student and industrial space. We have done everything from simple building repositioning such as C-space and 25 Charterhouse to hugely complex mixed-use multiphase schemes like our 3-acre Bart Square scheme in the heart of the city of London around us. I would describe Helical as being a Central London development specialist with a very broad skill set, as well as a very hands-on proactive asset manager, where we take pride in keeping all of our buildings presenting as new. We are particularly adept at working in partnership, and I believe we're now up to our 46th different partner with Orion Capital Managers being the latest, and we've worked with many on a repeat basis. Our approach to each partner is flexible and tailored to their specific circumstances, and they are supported by our effective and efficient property and finance functions. Perhaps our most significant partner currently is Places for London, the property arm of TFL. This joint venture is a wonderful opportunity for us and the cornerstone of our development pipeline with other sites beyond the initial 3 being actively discussed. We worked with Places for London and Kaleidoscope, our over station development at Farringdon East, and this project was very successful for both parties. Now we have 3 really exciting schemes to work on at Bank, Paddington and Southwark, and I'll now provide you with a quick update on the work that we have been doing ahead of the drawdowns on each. So at 10 King William Street, which sits above the new Bank tube station entrance, we are making a number of changes to the existing scheme having introduced a new [ architect ] to project. We are reducing the quantum of retail space and the size of the loading bay. We are creating a shared space on [ Ap-] church Lane, providing a much better linkage to Ap-church yard. We're introducing a wellness lounge at mezzanine level, a much-improved end-of-trip facilities and a better cycle arrival experience. We have an enabling works contractor starting in June, under license. We selected a main contractor, and we are now starting conversations regarding development and finance. Encouragingly, we are also having a few presentations to potential occupiers. And completion is due at the end of 2026 when the supply of new office space in the city core is predicted to be very constrained. At Paddington, we have inherited a valuable but somewhat dated planning commission, and we have been working over recent months with the incumbent architect to ensure delivery of a best-in-class product on arguably the best site in Paddington above the station, adjoining the canal and links both Paddington Central and Basin schemes. We have just obtained planning permission to introduce terracing to each individual office floor, and we are making a whole series of further changes to improve the arrival experience, the end of trip facilities, as well as ensuring it is a striking piece of architecture. We acquire our share of the site in January 2026 and aim to deliver the building in 2029. At Southwark, we inherited a planning permission for a 17-story office scheme, which was to be built over an existing road, which was to be stopped up. The scheme is complex from an engineering standpoint, costly and in a submarket that we were less keen on and hence, priced it accordingly. We carried out a thorough review with our partners, and we are now bringing forward a purpose-built student accommodation scheme with 430 student units and an on-site affordable housing building whilst maintaining the existing road and avoiding costly service diversions. So our plan is to submit planning in the coming months so that we're able to start on site when we draw down the site in July next year. Our current intention is to forward-sell both buildings such that the purchase funds the construction costs. Where we can, we will always try and make our equity work as efficiently as possible. This is a good example of how we can use our broad skill set to maximize the value of an opportunity. We've been very successful over the years in making our equity work hard by structuring what we term equity-light transactions and a few examples are shown here. Out of this selection of deals, we delivered over GBP 100 million of profit using no more than GBP 10 million of equity in total. We were able to do these deals due to our market connections and our successful track record. These deals are easier to do during periods of market dislocation, and I feel we're in one of those periods now. Brettenham House is a very good example of an equity-light deal, where we can inject capital into a transaction to align interest with the owner and development management fees and participate in a meaningful profit share arrangement, which in this case is based upon rental performance with the yield being fixed. We are actively looking at other equity-light transactions, and we hope to do more both in the future and where possible within the existing pipeline such as at Southwark. This slide summarizes our current development pipeline, where you'll see that we have 3 office schemes that have either started or are very close to starting with completion program for 2026, a period where supply is forecast to be particularly constrained. Paddington [ will rise ] later in 2029, and with Southwark, we hope to deliver in time for the academic year in 2027. So we believe of the current base assumptions that this pipeline can produce GBP 100 million of profit and if one to assume rental growth of 2.5% per annum, this could rise to near GBP 165 million. So we have plenty to go for. To summarize, we have experienced a significant readjustment of values for reasons that have been mentioned, but we have taken quick and decisive action at taking back the WeWork floors at the Bower and this space is now being fitted out and is to be relet on a Cat A plus basis. We are gaining momentum at The Loom, and we have recycled equity through selling 25 Charterhouse Square. We will continue to recycle assets as we let up vacancy and complete individual asset management plans. In bringing in a joint venture partner, 100 New Bridge Street, we have released equity to help fund the exciting pipeline we have established with Places for London and with further opportunities being actively discussed with them. We have a fantastic team with a deep and broad skill set, and we are well placed to help owners of London real estate, maximize the value of their assets, be it for offices or alternative use. We will maintain a disciplined use of our equity to enhance returns. Where we can, we will look to limit our capex on schemes such as at Southwark so that we can make our equity work harder. Above all, we're going to remain agile to take advantage of the opportunities that we feel are going to emerge. Thank you. And we welcome any questions.

Max Nimmo, Deutsche Numis. I've got a couple of questions, if I can. Just on the TFL JV, just how big potentially could that opportunity be, going forward, talk about potential sites post the 3 that you have there? And how does that work in terms of -- is it sort of a first right of refusal situation? And if you could just explain that part? That's the first question. And the second question was just on the dividend side of things. I think you mentioned it -- going forward, is it going to be set as a percentage versus EPRA EPS? Or was it PID plus some cash -- or is it kind of a mixture of both on that one?

Yes, let me answer that first. It will be based on earnings going forward. And as Richard said, we're focusing particularly on cash earnings. The PID element will be a calculation that's done under the REIT regime, and that will be a minimum payment in accordance with that. To the extent that earnings are beyond -- EPRA earnings are beyond that PID element, then we look to pay that out. We're not specifying a fixed percentage of EPRA earnings at this stage. We're just giving really more general guidance.

And in relation to the Places for London, I mean we are looking at another scheme in Farringdon, which we're about to do a [ pre-app ] on. We're also helping them with their potential occupational requirement, which may end up being in one of the projects or it may end up being in 1 or 2 of the other options. So we're very much sort of in the camp helping them deliver on their projects. And I feel there's a good number that could come through in due course. So we're very positive about it.

But you do get the option to turn them down if you don't want to do them, is that...

Absolutely. Yes.

It's James Carswell from Peel Hunt. So just following on from the question on kind of new opportunities [indiscernible], I mean, the equity light kind of projects you're looking at, I'm wondering how much capacity do you have to do those projects? And how many projects do you think you could be doing at any one kind of moment in time?

I think we can always expand the team. So I think -- but when you look back in sort of 2013, we were running about 7 or 8 projects at that point in time. And we've now got more capacity now than we did have back then. So I think we're well placed to do more.

Miranda Cockburn, Berenberg. A couple of questions. Just firstly, on the reduction in admin costs, 25%, can you give an indication of the components of where that's going to come from? And secondly, in order to buy the remaining TFL sites, how much more do you need to sell? And can we see sales sort of this year? Or is it more likely to be into next year?

Yes. I think in terms of the administration costs, we are, as I alluded to earlier, looking to move offices. It will be an office space that's half the size we're currently in, in a location that's cheap and there'll be substantial cost reductions from there. The rest will be across the board, including the payroll of the company.

And just in terms of the TFL, how much more do you need to sell just to keep your loan to value at the right kind of level?

Look, in terms of the commitments, as we showed on that schedule on my presentation for -- certainly to March next year, absent any movement to valuation yields and further sales, we anticipate LTV not going beyond 37%. Clearly going into the next financial year, we will be looking to recycle equity out of additional schemes or finding alternative ways of funding the pipeline.

And then just one other question, just the ERV on 100 New Bridge Street now has that -- I think it was GBP 17.8 million before, has that changed at all? Is that up over the year?

As I mentioned, the average rents at JJ Mack are GBP 95 a foot. And I see no reason why we can't [ read ] those across to 100 New Bridge Street. So that's ahead of where we're currently appraising it. And I think we can push it on from there, particularly as it looks like a shortage of best-in-class space in the city over the next couple of years.

Matt Saperia from Peel Hunt. A follow-on from Miranda's question around ERVs, I think the average increase in the year was 1.1%. Can you talk about the spread across the different buildings if there indeed was one?

Well, the -- there was the biggest drop is probably at The Loom because we were keen to activate some dynamic pricing to get some -- to get the momentum behind the letting. And then as that building lets up, then you can start to raise the pricing back to where we were, which was sort of near GBP 55 a foot. The Bower was relatively flat. So that's why we saw only 1.1%, but obviously, the JJ Mack rents have steamed ahead. And when you look at where they are relative to where they're appraised at in 2019, it's a huge jump. And obviously, that's what we're expecting to see, hopefully, over the next 3 or 4 years.

Just on the JJ Mack, just out of interest, how far ahead is the leasing versus your underwrite on that? And I guess, linked to that, on Brettenham House, if your performance fee is based on the rent signed there, presumably you're kind of incentivized not to pre-let and actually just kind of take your time and build the rental [ term ] through that. Is that the right way to think about it?

I think on Brettenham -- I think we actually took a group of agents around yesterday because the -- before the scaffold goes up, what has been stripped out so you get the views -- and the views, it's right on the elbow of the river. So you get the most amazing views, particularly as there aren't any buildings around it because you got Somerset House to the east and Savoy Gardens on to the west. So I mean, we'll take it as it comes. But obviously, we do see rents rising, and there's a judgment, isn't there, between do you [ worry about ] something or do you let it go? But I think we want to be, and we were talking with the agents about the top floors at Brettenham, and they're going to get astounding rents because of that -- the roof terraces and the view over the river. And J.J. Mack, I think we -- was at GBP 75. It's around GBP 75 a foot when we bought it. So we're hitting 95. So that's a good increase.

Tim Leckie from Panmure Liberum. Just 2 hopefully quick ones. The JV at 100 New Bridge Street with Orion, if you could make any comments on do you see that side of the funding market opening up? Were there other parties? Do you see a buildup of demand from people looking for operational development exposure that you can take advantage of? And then secondly, just going forward, Gerald and Matthew, I know we've spoken before about the prioritization of cash rent income versus lease length versus getting a tenant in place. Is there going to be any change in sort of strategy towards the development pipeline in terms of pre-letting to derisk, which I understand will always be a function in part or holding more towards that supply crunch? That looks like it's going to be 27 to maximize the income from the portfolio.

As I said a moment ago, I think we've just got to judge each case on its merits. And if we get strong rental offers early on in the process, then we'll look to take them. So I think we'll see how that goes.

I think it's interesting. There's clearly an economic rent for what these buildings can be delivered for. And it's seemingly that the tenant rep agents have now woken up to that. So that most RFPs that are going out on buildings that will be delivered in '26-'27 are at GBP 95 to GBP 100 plus rent-wise even in the city. So it's -- we're getting to that point where unless the tenants are willing to pay now, they won't be able to pre-let it. And they'll just have to bide their time and see whether they get lucky or not because there's definitely going to be a shortage. And given the number of tenants, the active demand of 12 million square foot that is currently around and they're looking increasingly further and further ahead, so those -- the ones that do actually pay the price will secure those opportunities and those ones that sit and wait may find that it's a -- space won't be available or it's a lot more expensive. That's how we feel it's going to run.

And on the JV capital side, more to come there?

I'm sure there will be more capital. Some people [ got to spoil ] what we've just discussed. And I mean, a good -- if you look at what Cliff chance are paying, when was that deal done, what, 18 months ago? That's GBP 73 a foot, and what is Citadel paying? I'm not quite sure, but it's certainly around mid-90s, overall, higher. So that shows what's happened in 18 months. That's one question. We've got one on the screen from Simon. And I think the answer -- well, it's difficult to judge, but in our view…Sorry, the question is, how do you judge the potential for further asset write-downs? Is this the bottom? Well, who knows? The answer that I'll jot it down, was that it looked like interest rates are heading down. Simon French who, I think, is an excellent judge on these things -- I was reading this morning, he think there's going to be 2 25 basis points drop this year. Rents are going up. We just discussed that, and we believe investor increase should invest interest should increase on the back of that. So we do feel that it's got to be close to the bottom. Let's say the rental position has always been positive. It has just been an interest rate led adjustment in the value of real estate. And throughout it, rents have been going up. Thank you very much, everyone.