Land Securities Group Plc (LAND) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the presentation of Landsec's 2024 Half Year Results. More importantly, welcome to 21 Moorfields, and welcome to the City of London on a Friday morning. Owning the right real estate has never been more important. No matter the sector, customers are clearly focused on the best space. And because supply of that space is limited, rents are growing. How well we have positioned Landsec for this shows up in these positive results. Like-for-like net rental income growth rose to 3.4%. Return on equity for the 6 months September rose to 3.9%. And today we are raising our EPS guidance for the full year, which also carries through into future years. Our active portfolio repositioning over the past year -- past few years means we keep significantly outperforming the wider market. And we expect the trends which unpin this to persist, and we're also capitalizing on the substantial accretive growth potential that we've created. We acquired a GBP 120 million stake in Bluewater at an 8.5% yield in the first half and are confident of deploying more capital into major retail in the second half. We're on site with 2 highly sustainable London office developments, which, once completed and let, will deliver a yield on cost of over 7%.

The advancements we've achieved in our residential pipeline give us clear line of sight, then, to putting more than GBP 1 billion into the structural growth sector by 2030. With our strategic focus delivering results, we're strongly positioned to expand the appealing 5.8% income return at NTA that we already have and to achieve the 8% to 10% annual return on equity we're targeting over time. Lying behind this encouraging outlook is our robust operational performance. Across our portfolio we keep leasing space ahead of ERV, and on relettings and lease renewals we are generating positive reversionary potential, with that potential in retail specifically continuing to rise. Occupancy has risen further as well, meaning our London portfolio is essentially full now, while retail occupancy stands above where it was prior to COVID. Looking at our future pipeline, site preparations have begun at Finchley Road, and at Mayfield we signed a new development agreement that substantially raises the residential element of that site. We also recently filed an application for our residential master plan at Lewisham. Taken together, these 3 schemes could deliver more than 6,000 homes across the coming decade, with a possible start on site for the first phases in just over a year's time.

Meanwhile, the prospects for the investment market have gotten better. The steep climb in inflation and interest rates that pushed property yields upward across the previous 2 years has flattened out. And we have observed a steady pickup in investor appetite, with competition showing up selectively for the finest assets in every one of our key sectors. How quickly things recover from this point could be influenced somewhat by long-term rates, yet the broader direction is still upward. Back in May, we stated that we anticipated yields settling and values for the top assets coming back to growth as rents increase, and that is precisely what has occurred during the past 6 months. On the whole, yields across our portfolio held steady. So, combined with ongoing ERV growth, values rose 0.9%. We also had a busy stretch on the investment side, with close to GBP 700 million of transactions, recycling capital in places where our capacity to create additional value is constrained, through GBP 464 million of disposals. And we put GBP 226 million back into several of our key places, mainly in major retail, with more headway in retail anticipated during the second half. Our balance sheet is still solid, featuring low net debt to EBITDA and a 34.9% loan-to-value, and we lengthened our average debt maturity to 10 years.

Keeping our balance sheet strong is still a top priority. That said, with the cycle looking appealing right now and our income profile expanding, there is room to grow in the near term. You can see all of this in the positive set of results for the first half. EPRA earnings landed at the top end of what we expected, and the decline versus last year came from lower surrenders, as anticipated, while our emphasis on like-for-like income growth and cost savings offset the effect of GBP 0.5 billion of net disposals made over the prior 12 months. Since we expect those benefits to continue, we are raising our earnings outlook: we now expect EPS this year to be in line with last year, and for 2026 to be further ahead of that before any further acquisitions. Our dividend is up 2.2%, matching our guidance. And as valuation yields stabilize, our NTA rose 1.4%. Meanwhile, we keep cutting our energy intensity by 2 percentage points. So we remain on track to reduce it by 52% versus our 2019,'20 baseline, and to achieve that by 2030. And 52% of our portfolio now holds an EPC A or B rating.

That compares with 49% 6 months ago, and it should increase even more starting next year as our net zero investment plan begins delivering its advantages. Now, moving to our operational review. Although the main purpose of our properties varies throughout our business, what makes each one successful traces back to our 3 competitive advantages: the superior quality of our portfolio; how strong our customer relationships are; and our capacity to unlock complicated opportunities. These same elements are what support our ongoing outperformance and the future optionality we have built into our pipeline. Likewise, these are the elements that underpin our capacity to generate additional income growth and value growth over time, whether that's in office, retail, or our future residential-led places. In Central London, appetite for the correct assets in the correct locations stays robust, since customers continue to focus firmly on the most sustainable space with strong transport links in areas that offer exciting amenity. The supply of such space is constrained. Consequently, we have witnessed new record rents being achieved in our markets during the last few months, which represents double-digit growth over record rents set just a year earlier.

Demand strength also shows up in overall take-up. Over the past 12 months, Grade A take-up ran 14% above the long-term average, despite overall take-up being 6% lower. Demand’s outlook is still positive as well, with space under offer market-wide currently around 40% above the long-term average. Turning to our customers, we keep seeing additional growth in how much they use our offices. Utilization is up 9% year-on-year, though growth will naturally moderate as customers approach full capacity in that space. At the same time, customers are planning more space per person than before the pandemic, as they build more collaboration, meeting or breakout space into their designs. All of that translates into robust demand. Of the 31 leasing deals we signed over the past 12 months, 12 customers took more space, while only 6 took less, and most of those did so by downsizing space they held in locations other than ours. Just 3 customers left, totaling only 20,000 square feet of space. So with our portfolio effectively full, this positive demand keeps driving further rental growth.

So our leasing performance continues to be strong. We signed or have in solicitor's hands GBP 16 million of lettings, which were on average 3% ahead of the ERV, and relettings and renewals came in on average 7% above previous rents. We've also pushed occupancy up further, to 97.9% now, which is significantly ahead of the wider London market. We recently opened 4 new Myo locations, which add to the 2 we already had. Those are in lease-up at the moment and are now 45% letter under offer, with another 20% in active negotiations. Overall, our successful leasing drove 2.2% ERV growth, which is on track against our guidance of low to mid-single-digit growth for the full year. So moving on to retail. We're still seeing strong demand for our space. When brands decide where to invest in physical stores, their main focus is on how they can access the largest amount of potential retail spend. And the chart on the left here shows that the top 1% of all shopping destinations across the U.K. give retailers access to some 30% of all in-store retail spend across the country. And that's effectively the same as the bottom 90% of all locations combined. And 95% of the destinations in that top 1% are major shopping centers such as Bluewater, city centers such as Cardiff and Leeds, or outlets, i.e., the major retail destinations where we have focused our strategy.

And consider this: roughly 90% of all U.K. locations belonging to brands like Apple or Inditex sit within that mere 1% — which really underscores that these spots are where brands want to be. The chart over on the right demonstrates that, for the overwhelming majority of brands, outlets situated in major shopping centers within key city centers rank far and away as the most sought-after. That's where 76% of their stores sit, and naturally, that's exactly where our assets are located. So, buoyed by shoppers staying longer and more people passing through, sales densities at key shopping destinations like ours come in materially above every other retail format — and ultimately, that makes them the primary focus for brands. We keep seeing this reflected in positive demand for our space, as brands stay focused on having fewer, bigger, better stores. The chart on the left reveals that although a number of brands have been cutting their total store count, the typical size of the stores they keep has grown by roughly 20%. And we're reaping the rewards of that through several significant new store openings right across our portfolio — Zara at Trinity, Sephora, Pull&Bear and Bershka at Bluewater, plus a range of major new lettings, among them agreements with Primark to double their space at White Rose and Leeds, and JD Sports to relocate from the high street in Cardiff into a brand-new store in our St.

At David's Center, beyond the appetite for new brands, rental growth keeps being propelled by existing tenants who want additional space or more stores within our destination, since there is effectively 0 new supply available to satisfy this rising demand. That underpins the ongoing robustness of our operational results. Retail sales overall rose 2.2%. Footfall dipped a little, and roughly half of that decline stemmed from the timing of Easter, which landed in March this year. Even with somewhat mixed spring weather, what our customers tell us now points to a trading outlook that stays very positive. All of this puts occupancy at 96%, ahead of its pre-pandemic level, while total lettings came in 7% above ERV. Crucially, rental increases on relettings and renewals keep building, after turning positive last year, and we anticipate rent reversions will rise further over time. Since major retail represents 30% of our rental income, this will increasingly affect earnings growth as we go forward. ERVs rose 1.7% across the first 6 months, which is on track against our full year guidance of low to mid-single-digit growth, even though valuer's assessments of ERV keep lagging actual leasing performance by a considerable margin.

That said, for us like-for-like income growth remains the more meaningful yardstick, and it is there that we keep delivering strong growth and where the outlook looks favorable. All of this supports the appealing returns we see from putting more capital into this sector, with a day-one income yield of 7% to 8% and rents rising in the best locations. Values sit at roughly half of replacement cost, so no new supply is going to appear anytime soon. And while every asset in real estate requires some investment over time, maintenance CapEx for the best retail destinations is low. The chart on the right here shows that we spent approximately GBP 80 million of CapEx across our current portfolio during the past 5 years. That works out to about GBP 15 million per annum. Roughly 45% of that spend was accretive, tied directly to leasing deals that produced higher rents and saw tenants upsize their space requirements. Another 1/3 of that spend was defensive, related to repurposing space vacated by a number of major retailers that fell into administration in the wake of the pandemic, such as Debenhams or Arcadia. But we have now reached a point where repurposing former department store space is generating double-digit IRRs and delivering rents well ahead of anything department stores ever paid.

That defensive spending component is now fully behind us. What remains is just over 20% for routine maintenance on items that generate no extra income and that haven't been recovered from customers via service charge. At roughly GBP 4 million annually, that works out to about 20 basis points of current asset values, which we view as fairly minimal. Looking ahead, we plan to put more into accretive CapEx, since we now have several projects — like the examples at the bottom right — that should produce IRRs in the mid-teens. With most of that space already pre-let, that implies a low-risk yield on cost of approximately 10%. And once all maintenance CapEx is factored in, our total CapEx return is still projected at an IRR of around 10%. Turning to new investment in Central London, we're on site with our 2 schemes, 1 in Victoria and 1 in Southbank. Rents for the best space keep rising. And lately, we've seen evidence elsewhere in Victoria of rents well above GBP 100 per square foot — a record we set with our n2 project last year. That's a good sign for Thirty High, and pre-let interest is also beginning to emerge for Timber Square, though as a rule we assume the bulk of our leasing — these are all multi-let assets — will occur after completion.

And although returns on both of those projects are still healthy, supply chains are still being affected to some degree by the consequences of the inflation spike from about a year ago. Completing Timber Square now costs GBP 31 million more, partly because of design changes that will generate extra rent, but also because a subcontractor became insolvent. As a result, the overall yield on cost for that project has fallen by circa 10 basis points over the period. Looking forward, we have a potential future pipeline of more than GBP 2 billion, and virtually all of it has planning consent. That gives us attractive optionality, so we will keep working on optimizing the risk-return projects within that pipeline. We have also made significant progress in growing our residential pipeline, since we have been refocusing our mixed-use activities onto this sector over the past 12 to 18 months. At our Finchley Road site in zone 2 of Central London, we are making some small changes to our existing planning consent and have begun on-site preparations. We therefore now expect to start development of the first phase by 2026. At Mayfield, next to Piccadilly Station in Manchester, we recently agreed a new development strategy with our partners, which effectively gives us control over the opportunity to deliver 1,700 homes following delivery of the first office-led phase.

This site already has outline planning consent. Also, the first residential development could begin as early as 2026. And finally, following substantial local consultation a few weeks ago, we submitted our master plan for delivering 2,800 homes in Lewisham, Southeast London. Across those 3 projects, we now have clear visibility on a pipeline of over 6,000 homes in vibrant, well-connected locations, all of which can be delivered in smaller discrete phases. That means CapEx commitments will be managed and phased, yet overall it gives us the potential to invest over GBP 1 billion by 2030 and GBP 3 billion over the next decade into this structurally supported growth sector at attractive low double-digit ungeared IRRs. Which brings me to capital allocation and our views on risks and returns. As I mentioned in May, the marked increase in cost of capital has clearly impacted the prospective returns of the investment opportunities available to us. Major retail still offers the best risk-adjusted returns in our markets as income returns remain high and rents are demonstrably growing. We capitalized on this with the acquisition of a further GBP 120 million stake in Bluewater in the first half and are confident of deploying more capital in the second half.

Looking ahead at prime London office properties, the picture is more appealing now than it was 2 or 3 years back, since rents for the top-quality space keep rising and yields appear attractive by historical standards, even if they sit below those of major retail. When it comes to new office construction, higher rents for prime space must offset rising build costs and exit yields. And although development returns continue to deliver a premium over standing assets, there is, naturally, greater risk attached, which demands capital consideration. The new government is clearly backing efforts to unlock urban residential developments. And while development returns are not unlike those for offices, the risk profile here is arguably more appealing. Now, the first start of any of our residential schemes will come in early 2026. So, with retail returns currently so attractive, that will be our primary focus for investment in the near term. I'll now pass things to Vanessa, who will take you through our financial results.

Thanks, Mark, and good morning. Strong customer demand keeps flowing toward our high-quality portfolio, and that shows up in the positive financial results we posted for the first half. So let me walk you through the headlines. Gross rental income came down by GBP 21 million to GBP 302 million, yet the only causes were our non-core asset sales and a reduction in surrender premiums, since like-for-like income actually climbed GBP 7 million. I'll go into that in more detail shortly. EPRA earnings per share landed at the top end of expectations at 25p, thanks to stronger-than-expected growth in like-for-like net rental income along with further cost efficiencies. Because momentum is still positive, we are raising our EPS outlook for the full year. And our interim dividend is up 2.2%, in line with our guidance. With ERVs continuing to grow and yields stabilizing, our portfolio valuation edged up slightly, and NTA per share rose 1.4%, meaning we delivered a return on equity of 3.9% over the first half. On top of that, our balance sheet remains strong, with LTV of 34.9% and net debt to EBITDA of 7.4x. So turning to EPRA earnings in more detail. All told, we have been a net seller of GBP 0.5 billion of assets over the past year, which cut net rental income by GBP 20 million.

Following several years in which surrender premiums ran high as customers adjusted their space needs downward, we anticipate a decline in surrenders during this year. In the first half, fees fell GBP 13 million, landing at GBP 4 million. Strong leasing activity, which delivered GBP 7 million of growth in like-for-like income, partly counterbalanced the effects of disposals and reduced surrenders. Bad debt recovery improved substantially this year, since we have collected on debts that had previously been provided for across assets formerly managed externally — those are now handled in-house. On earnings guidance, we anticipate that this extra debt recovery will offset our revised expectation that full-year surrenders will come in below what we guided to earlier. Administrative expenses dropped 10% thanks to our ongoing drive to boost efficiency. For the full year, we expect admin expenses to sit comfortably under last year's level and to come down further in 2026, though I'll return to that point later. On an overall basis, our EPRA cost ratio went from 23% to 20.8%. While seasonality means this will rise very slightly in the second half, we expect it to stay in the low 20s. Finance costs were up GBP 3 million.

What this adds up to is that EPRA earnings reached the upper end of what was expected, at GBP 186 million. On like-for-like income, we pushed growth higher, to 3.4%. We achieved positive uplifts on both relettings and renewals, and occupancy rose by 80 basis points across the year. That pattern held in both of the main segments of our portfolio: like-for-like income in London climbed 5.5%, helped by positive growth in offices and a robust showing from Piccadilly Lights, while like-for-like income in Retail rose 3.1%. In May, we indicated that like-for-like income growth for this year would come in around last year's 2.8%. Yet with the strength of our performance so far, our expectation now is for something nearer 4%. The reported ERVs don't capture the complete upside potential, but it's evident that we've shifted into positive reversions, particularly in Retail. That supports the income growth we can achieve going forward, above all as rental values keep rising. Moving to the valuation of our portfolio: following 2 years of yield expansion, valuation yields levelled off during the first half, and rental values gained a further 2.1%, powered by successful leasing, which means our overall portfolio value rose 0.9%.

In Central London, our portfolio gained 0.8%, yields held essentially flat, and ERVs rose 2.2%, which puts us on track against guidance of low to mid-single-digit growth for the full year. ERV growth came in higher than in the city this time, at 5.3%, reflecting a number of asset management gains. Our West End assets are still virtually full, and market rents have recently continued to hit new records, which bodes well for upside in our portfolio. And the valuation of our major retail assets rose 2.8%, reflecting a 17 basis point reduction in yields and a 1.7% increase in ERVs — again, on track versus guidance of low to mid-single-digit growth for the full year. Given the high income yield and the fact that major retail assets of our quality need little maintenance CapEx, total returns remain very attractive at 6.8% over the first 6 months. Our mixed-use assets fell 3.7% in value, driven by further yield softening in MediaCity, as regional offices remain behind London when it comes to improving investor sentiment. And we also saw some softening in existing use values in Lewisham, Finchley Road and Glasgow. As Mark explained earlier, the attraction of Lewisham and Finchley Road lies in significant residential potential, whilst in Glasgow, we are already seeing strong interest from leading retailers in our plans to reposition the existing center.

As these plans move forward, we anticipate that valuations for these assets will turn a corner over roughly the next 12 months. And after the hotel sale, our subscale assets make up just 8% of the overall portfolio, and values rose 2%. Going forward, we have begun to see investment demand pick up for assets that offer rental growth, since yields look attractive in real terms. And our outlook for ERV growth is unchanged, and that supports our outlook for property values. That leads me to our total return on equity, which rose to 3.9% for the first 6 months. Our income return for the half year came in at 2.9%, while ERV growth delivered a capital return of 1.7%. This was broadly similar to earlier periods. But over the last 2 years, adverse yield movements have offset all of this. With yields stabilizing during the first half, this chart shows that we are now well placed to deliver our target return on equity of 8% to 10% per annum, building on our growing income return, which is 5.8% on an annualized basis. At the same time, our capital base remains strong. Our loan to value, net debt to EBITDA and interest cover are all effectively the same as in March.

Since that point, the money coming in from disposals has been largely cancelled out by acquisitions and CapEx — in part because the hotel portfolio sale carried a deferred payment of GBP 50 million, on which we earned a 6% coupon. If you adjust for that, our LTV comes out 50 basis points lower. We've also bolstered our financial position by issuing a GBP 350 million 10-year bond with a 4.6% coupon. In addition, we refinanced the GBP 2.25 billion of revolving credit facilities at a low average margin of 65 basis points. Because of this, no debt needs refinancing before 2027, and our average debt maturity runs long at 10 years. So, considering where we sit in the cycle, we'd be comfortable seeing LTV edge up slightly toward the high 30s near term when the right acquisition opportunities arise. That said, we plan to stay inside our 25% to 40% target range, and any rise from here would be only temporary, since we will bring LTV back to current levels over time. Even though activity across the wider investment market has been subdued, the year has been an active one for us so far, with close to GBP 700 million of transactions. During the first 6 months we sold 5% of our portfolio, broadly in line with book value, and that included the sale of our hotel portfolio.

We put GBP 140 million of that into major retail destinations, at an average income yield of 8%. We anticipate double-digit IRRs from this, and we're confident about deploying additional capital into Retail at accretive returns during the second half. Since the half year, we've also gained full control of MediaCity, with a net consideration of GBP 84 million. That entails surrendering the wrapper leases. Adjusting for the value of that, though, the transaction came in broadly in line with book value. And in the short term, the acquisition is earnings neutral. But importantly, it gives us the ability to carry out our plans for the estate, including the future residential potential on the second phase. So to sum up, we've had a positive start to the year and now expect like-for-like income growth for this year to come in closer to 4%. And more of this like-for-like income growth will now translate into earnings growth, thanks to our successful delivery of sustainable operating efficiencies, which has been our consistent focus over the past few years. You'll recall that we've previously talked about how our investments into data and technology would improve our efficiency, so I'm pleased to say that we' now see the benefits of this coming through.

After the 10% cut to overhead costs during the first half, we remain on course to produce additional savings in the following financial year, as the chart at the top right illustrates. Alongside additional efficiency gains, that means a greater portion of our like-for-like income growth will pass through into earnings. And even with GBP 0.5 billion of net disposals across the past year, the mix of stronger like-for-like growth and reduced costs leads us to expect full-year EPS to match last year's 50.1p. That comfortably underpins our goal of raising the dividend by a low single-digit percentage, and we anticipate this improvement carrying on in future years, with EPS for 2026 expected to be ahead of 2025. This upgraded guidance comes before any possible gain from acquisitions down the road. So on the whole, we are well positioned to achieve an attractive return on equity over time. With that, I'll now hand back to Mark.

Thank you, Vanessa. So let me finish by sharing how we see the current environment and what to expect from us over the coming year, and then we'll go to Q&A. Our decisive repositioning of the portfolio over the last few years means Landsec is well positioned, and owning the right REIT has never mattered more. While geopolitical risks have risen, the general election held here during the summer brought a degree of political stability that the U.K. has lacked for the majority of the past decade. Of course, we are alert to the risk that higher taxes might weigh on business sentiment, though at this stage we see no evidence of that affecting occupational demand. Our reversionary potential keeps building, since customer demand for the best space stays strong. And we continue to anticipate ERV growth of a low to mid-single-digit percentage throughout our portfolio. At the same time, investment market activity has begun to improve now that yields have stabilized. Valuations for the best assets are back to modest growth, helped by good credit availability. We are conscious that shifts in long-term interest rates might affect how quickly momentum builds further from here, but we are confident the overall direction of travel is upwards.

We've also built up considerable optionality, particularly on the residential side. On top of that, our balance sheet is still strong, which gives us the capacity to invest at an appealing moment in the cycle. What that means is we've established clear potential for growth, both when it comes to continued like-for-like income growth and when it comes to new investment. So our strategic focus is delivering, and we expect to keep seeing the benefits of that over the next few years. To sum up, we're continuing to build on the positive momentum as we execute our strategy. We now expect like-for-like income growth to come in higher than we first envisaged, and because we've succeeded in improving our operational efficiencies, more of that like-for-like growth flows through to EPS growth. Having sold 5% of our portfolio in the first half of the year, we intend to reimburse further capital in growing our major retail platform in the second half. Major retail now makes up 30% of group rental income, with reversion building. We'll keep advancing the growing residential opportunity in our pipeline, while we look to further optimize our overall return on capital employed and to focus our activities. We expect our attractive 5.8% income return at NTA to grow further as like-for-like growth and efficiencies drive EPS growth.

And with rental growth continuing and yields leveling off, we're in a strong position to generate appealing returns on equity.

With that, I'll open things up for Q&A. As is our habit, I'll begin by taking questions from the auditorium here, then move to those on the conference line, and finally to the webcast. We have handheld mics that will be roving around. So if you have a question, please raise your hand and wait for a microphone. I'll begin with Paul May, down here in the front row.

Paul at Barclays here. I have a couple of questions. You've brought up your strong balance sheet several times — particularly, I think, in a European context. But compared with some U.S. peers, you still look overlevered on a net debt to EBITDA basis. And on top of that, since the marginal cost of debt is relatively higher, wouldn't a lower net debt to EBITDA metric be more appropriate going forward? I'm just curious what your thinking is there. I think tied to that, you said before that equity is an option for funding expansion, provided it's EPS accretive. I assume that will be the case. I just wondered whether that's still how you're thinking about it. Then my second question: how do you manage the plan — or how do you manage the impact on FY '27, FY '28 earnings? I appreciate that's a few years out, from the GBP 21 million of rental income lost on Queen Anne's Mansions and the refinancing of roughly GBP 500 million of debt at higher marginal financing rates?

Thanks, Paul. First, I’ll have Vanessa talk about how we view leverage capacity—something, of course, that I believe we’ve handled very effectively as a business through a period of very substantial value correction. After that, I’ll maybe address equity, and together we’ll try to respond to your question about FY ’28 as well.

Yes. So, Paul, I think I've brought this up a few times previously, but in any case, when we examine our leverage position, our focus is on the loan-to-value ratio, and also—I'd say, to some extent, more importantly—the net debt to EBITDA ratio along with interest cover. Our aim is to keep net debt to EBITDA under 8x. Right now we're at roughly 7.4x. So with any investments we undertake going forward, it matters that those investments line up with our priority of driving income growth. And so—and for that reason, we view it through that lens, which means we will keep our position, our net debt to EBITDA position, below 8x. And beyond that, we also manage our LTV, as we've said, within our target range. So we'd look to be primarily inside the range and the remit we have today, which is just under 35% LTV. And I think, as a result, the way we handle that is also through our capacity to recycle capital effectively, as we've shown over recent years. We have good liquidity in parts of our portfolio, and we're active in recycling so we can invest in good quality assets that generate higher income.

I think it's worth taking a moment to consider how this business has performed over time—specifically, how we've successfully handled all 3 of those leverage-related metrics, kept a high credit rating, and taken advantage of inexpensive debt. As Vanessa noted during the presentation, we issued a GBP 350 million bond in the period at a 4.6 coupon, which is quite attractive, and refinanced the GBP 2.25 billion RCF, extending debt maturity to a 65 basis point margin—I believe that demonstrates the market still clearly recognizes the credit quality of Landsec's business. That said, a bulletproof balance sheet is something that underpins our entire strategy, and it's not something we would ever want to put at risk. You raised a question about equity issuance. Obviously, there's been some activity in the sector since our last reporting. What's been interesting about it, I suppose, is that it shows the market's willingness to support equity issuance that delivers EPS growth, even if that comes at the cost of a bit of NTA dilution. I think our view remains—as I believe I said 6 months ago—that for the right assets, and to me it would have to be the right asset, it would need to be genuinely scarce real estate, the kind of thing that I think a REIT should own for the long term, that can support long-term earnings growth.

When it comes to the right kind of assets, that is definitely something we'd look at, though any such deal would need to be earnings accretive and would need to represent a generally scarce opportunity. As for your final question, I have to say I'm always impressed when analysts venture past 2024 — 2028 is genuinely a rare question. That said, on the underlying point, we have one specific asset facing a very substantial negative reversion in 2028, when the lease to the Ministry of Justice at Queen Anne's Mansions comes up for expiry. We're currently working through plans for alternative uses at that scheme, and I think we're making some good early progress on it. In the interim, I believe the remainder of the portfolio, with reversion growing, will be pretty meaningful by that point in time. On the subject of refinancing debt, naturally it remains to be seen where rates stand at that stage. Still, I think what Vanessa and our treasury team have demonstrated quite effectively over the past couple of years is the ability to move into the market swiftly when rates are attractive. I'd expect us to keep doing that and to keep beating the sector average when it comes to the cost of debt we can secure.

Thanks, Paul. Jonathan, I see you right behind — you have questions there.

Jonathan Kownator from Goldman Sachs here. I've just got one brief question about your like-for-like rent growth. Clearly, that figure is climbing toward the 4% level. One factor behind it, of course, is the rise in occupancy. Can you keep pushing occupancy higher? It's already pretty elevated, obviously, but what's the headwind in this regard? And what does that imply for like-for-like rent growth down the road?