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

The presentation is going to start in just a moment.

Welcome, everyone, to the presentation of Landsec's 2025 half-year results. Across every part of our business, we keep witnessing clear and positive momentum. Delivering sustainable income and EPS growth is our primary focus, and we continue to do that effectively. For a while now, I've been stating that owning the right real estate has never mattered more, and our performance during the past six months demonstrates this once again. After the significant repositioning of our portfolio in recent years, best-in-class office and major retail assets now account for over 90% of our income. Thanks to the high quality of our market-leading platforms in both sectors, we have once again delivered strong like-for-like net rental income growth and positive rental uplifts on relettings and renewals across both office and retail. We see no signs that strong customer demand for high-quality space, which underpins this positive trend, is abating; this will remain the key driver of near-term income and EPS growth, with further asset rotation and residential expected to enhance this over the longer term. Consequently, we are raising both our near-term and medium-term EPS outlook, which means we are well-placed to deliver material shareholder value as we move to higher income, higher income growth, and lower cyclicality over time.

Back in February, we laid out nine key objectives for delivering our strategy, and on every one of them we are either on track or ahead of plan. Over the near term, the bulk of our EPS growth will come from our current platforms — the assets we own today — and that is the foundation for the first five objectives. We keep capturing the rising reversionary potential within our office and retail portfolios, and today we are lifting our guidance for like-for-like income growth this year to roughly 4% to 5%. We have also increased our overhead cost savings target, which now implies more than £10 million of savings against financial year '25 by the next financial year. We remain on track to deliver half of our three-year target of reducing capital employed in pre-development assets by 0.3 billion during year one, and we have sold one-third of our retail and leisure parks, while an increasing number of acquisition opportunities in major retail are coming to market over the next 12 to 18 months. Our four longer-term objectives are designed to ensure that in three to five years' time, our asset mix is such that we remain as confident about this outlook for income growth at that point as we are today.

Once more, every one of these is moving in the right direction — in fact, we've disposed of close to £300 million of offices across 12 months, which is ahead of plan. At our Capital Markets Day in September, we laid out a clear expectation for income growth in retail, and in residential we've been making solid progress on planning. That said, since retail returns still appear the most attractive, we aren't intending to make any meaningful new development commitments during the next 12 to 18 months, which means our committed development exposure will drop to only 200 million by mid-2026, and beyond that point we expect it to stay meaningfully under the present £1 billion level. The sharper focus on sustainable EPS growth as our primary financial objective, which we set out earlier this year, is giving us genuine clarity in where we focus and in how we make decisions, and benefits are showing up right across the business. Portfolio-wide, we've achieved 5.2% growth in like-for-like income, and occupancy now stands at a decade high. It's been a very active half year for shifting our portfolio mix — we sold £644 million of assets that were producing limited or no return — and we anticipate further capital recycling in the second half.

At the same time, our capital position is holding up well, helped by ongoing increases in rental values, and we're dedicated to strengthening it further — we now aim for net debt to EBITDA under 7 times over the coming two years, which is lower than the earlier goal of under 8 times. That all fed into a good set of financial results for the half year. Solid like-for-like income growth plus ongoing overhead savings drove EPS up 3.2%, while our dividend rose 2.2%. NTA per share dipped slightly, by 1.3%, though that was mainly because of the disposal of almost £650 million in low-returning assets that I referred to earlier. Apart from the finance lease income on Queen Anne's Mansions, the effect of those disposals on EPS was roughly neutral, and the hit to NTA was around 1%. Our LTV now stands at 38.9%, and net debt to EBITDA rose, as we anticipated, but we expect it to fall under 7 times within the next two years as our current developments finish and lease up and future development exposure shrinks, and we also expect LTV to come down under 35% over time. In light of this positive performance, we're lifting our full-year EPS growth outlook and now anticipate it landing at the top end of our 2% to 4% guidance range.

Before we get to the QAM divestment, note that this sale converts the remaining finance lease on that asset from income received over 2025 and 2026 into a capital receipt paid upfront when the deal completes next month. Even though the cash coming in is essentially unchanged, reported earnings for the year drop by 7 million as a result. Beyond that, we've lifted our financial year '30 EPS potential guidance from roughly 60 pence to 62 pence, which represents a 20% step-up in our earnings growth objective, supported by stronger retail income growth, reduced overhead costs, and lower development. Any benefit from the medium-term residential investment we have planned won't really materialize until after financial year '30. We'll keep looking for ways to build on this, but the figure now points to compound annual growth in earnings per share of 4% to 4.5%, which adds further appeal to the income return we already offer. Turning now to the operational review. Customers are clearly still chasing the best space in both office and retail, and thanks to our high-quality operational platforms, our leasing results continue to lead the market, with our outperformance versus the broader market still expanding. Occupancy has reached a decade high, with our portfolio essentially full, and that is fueling intensifying competition for space.

That, in turn, is pushing rental values up. Rental uplifts are climbing, mainly in retail, and like-for-like income growth is moving higher. With that in mind, we now anticipate like-for-like net rental income growth of roughly 4% to 5% this year, compared with our original guidance of 3% to 4%, and this trend that has taken hold remains a key driver of our near-term EPS growth. Looking more closely at offices, utilization rates keep rising — turnstile tap-ins were up 11% in the three months to October versus the same period a year earlier, even as TfL tube traffic declined slightly over that same stretch. Consistent with what we observe across our own portfolio, most active demand in the wider London market comes from businesses seeking more space. Because high-quality office space in locations with the right transport links and appealing amenities is in short supply, rents keep being pushed higher. That applies not only to brand new developments but to existing high-quality assets as well. The proof is in our 2.3 million square foot estate in Victoria, which is 100% full, and we are now securing rents on existing buildings that match what, just two years ago, were record rents for a new development.

These are also shown in yet another set of operational results that lead the market. Office occupancy now stands at almost 99%, which puts us well ahead of the wider London market figure of 92%. Like-for-like income rose 6.8%, and relettings and renewals delivered uplifts of 6%, while £19 million of lettings were either signed or in solicitors' hands, averaging 9% above ERV. That produced 3.1% ERV growth across the six months, which leaves us firmly on track against guidance of full-year ERV growth broadly in line with last year's 5%. Since the portfolio is now essentially full, turning this market growth into like-for-like income depends more and more on lease events, so it will be more evenly spread going forward than was the case across the past six months. Even so, the reversionary potential we continue to build supports a positive view of like-for-like rental growth from here. This healthy customer demand carries through to the office completions we expect soon. Across the coming nine months, four new projects will finish, among them the repositioning of an existing asset into Myo flex office space and a small forward purchase agreed back in 2021. Altogether, we expect those projects to deliver roughly £58 million of net effective, that is,

Turning to the P&L, rent is recognized once a lease is signed, alongside incremental annualized interest expense of 43 million. Naturally, the FY27 EPS outlook depends on how quickly these schemes lease up, though engagement with prospective customers right now is encouraging—we're seeing interest through active negotiations, requests for proposals, or live engagement amounting to more than 100% of the space across our nearest-term completions. Of course, not all of that will convert into signed leases, but in our FY27 EPS outlook we presently assume roughly 40% of the two main schemes will be let by completion, with all space let approximately 12 months after completion, and we're comfortable that these assumptions mirror those current activity levels. On the retail side, brands keep concentrating on the best locations, since those offer the best access to consumer spend and the highest sales growth. As the chart on the left illustrates, the top 1%—60—of all UK shopping destinations captures about 30% of all in-store retail spend. That's where major brands direct their investment, with, for instance, roughly 90% of all Apple and Inditex stores situated in these locations. It's also where close to 90% of our portfolio is concentrated.

The strength of our assets and platform is producing exceptional footfall, and that is translating into sales growth that is significantly better than the broader market. In fact, while total UK shopping centre retailer sales have risen only 3% over the last few years, sales across our portfolio have climbed almost 20%, and that performance gap keeps getting wider. That's the reason brands are eager to have a presence in our locations, and since our portfolio is now close to fully let, it's also the reason rents keep rising. You can see this plainly in how we're operating. Rental uplifts are still trending upward, as the chart on the left shows, while occupancy has gained 50 basis points year-on-year, reaching almost 97%. As a result, like-for-like income growth stays appealing at 5%, and we anticipate that continuing. We signed, or were in solicitors' hands on, £33 million of leases, on average 10% above ERV, which generated 2.2% growth in ERVs across the six months — comfortably in line with our expectation of growth similar to last year's 4% for the full year. As we laid out at our capital markets event in Liverpool in September, the outlook for future income growth from retail is decidedly positive. Drawing on the distinctive data and insights that our market-leading UK platform delivers, we keep investing in creating experience-led places.

That rise in footfall and sales then draws in top brands, and at the same time it improves our social eating, dining, and leisure offering, which produces a setting and experience that in turn brings in more footfall, more sales, and so on. Selective investment in highly accretive smaller capex projects, together with growing turnover income and commercialization income, gives our growth outlook a further lift, and that is what underpins our target of 4.5% to 7% compound annual growth in net rental income from our existing retail platform over the next five years. Turning now to capital allocation. We still prioritize our capital allocation decisions around this clear framework. It examines how our investment decisions contribute to income and EPS growth in the short term, and how they shift our portfolio mix so that it can keep delivering sustainable income and EPS growth over the longer term, underpinned at all times by our commitment to maintain a strong capital base. We continually monitor for any changes in risk and return prospects, but as things stand, for the next 12 to 18 months, our priority is further investment into major retail destinations, given the high income returns and attractive income growth on offer, funded by further rotation out of lower-return assets, including London office assets, as we have done over the past six months, and we do not plan to commit any meaningful capital to new development over that period, creating further investment capacity.

With the clarity this framework gives us, we've been through a very busy stretch of capital recycling. Queen Anne's Mansions was the biggest disposal — an asset that produced zero total return even with its strong short-term income profile, since the valuation falls in step with each rent receipt all the way to lease expiry. Beyond the effect of converting the residual finance lease income into an upfront capital receipt, as I mentioned earlier, there's essentially no effect on earnings, and it de-risks the site's value by passing planning risk for a change of use over to the buyer. We also sold two pre-development assets that produced a negative income return, plus four retail parks. Together, those parks made up roughly one-third of our retail and leisure park portfolio, and while they delivered a reasonable income return, income growth has been constrained. Taken together, this means we've disposed of almost £650 million of assets that produced limited or no return in only six months. It cost us 1% on NTA when sales are compared with March book values, but it will strengthen our future income and EPS growth prospects — a clear example of our decisions being guided by a focus on EPS growth.

We anticipate staying active on capital recycling through the second half. London investor interest has recovered from its trough, and since we are already ahead of plan on office disposals, that gives us a chance to recycle more capital to fund accretive investment in retail, where more opportunities are reaching the market, though not every one of those will suit us. On disposal values we will be somewhat pragmatic, because our main focus ought to be less on NTA as such and more on making sure that the NTA delivers growing cash flow, growing earnings, and growing dividends for our shareholders. In that respect, the positive yield spread of roughly 200 basis points between office and retail, together with the better income growth prospects for the latter, is meaningful, and that is underscored by the excellent track record of the £1 billion of retail acquisitions we've made over the past few years, where in every case performance is tracking well ahead of our initial underwrite. We expect to see further opportunities of this kind to add to our market-leading platform, and that remains our key focus in the near term. Whilst we do have a number of development projects that we could start in the near future, we currently see more attractive risk-adjusted returns elsewhere, so we're not planning to commit any meaningful capital to this.

In London, we definitely see room for rents to keep rising, though as I said before, the portfolio we already hold is gaining from that trend too. When you weigh the different risk levels, there's minimal benefit in offloading top-tier existing offices to finance building new ones, yet we do spot a chance to apply our expertise alongside third-party capital to move projects ahead. On residential development, things are somewhat more mixed, in part since it would help tilt our portfolio toward the mix of stronger income growth and reduced cyclicality that we're targeting, and also because we're observing a change in public sector policy that might boost returns. Take, for instance, the recently announced cut to affordable housing requirements and the community infrastructure levy in London, which for our London projects might add 50 to 75 basis points to our present net yields on cost of roughly 5%. Our near-term priority now is to secure that upside, and the returns outlook may appear different in 12 to 18 months' time. Up to that point, capex spending will be kept under tight control and remain quite limited. Past the near term, we intend to shift toward structurally reduced development exposure eventually in any case, since keeping substantial capital committed to development for extended periods hurts our risk profile and EPS growth, especially in a climate of higher capital costs.

Part of that shows up in our goal of freeing up half of the roughly 700 million capital employed in pre-development assets, and we're making very good progress there, but we also intend to keep our own exposure to committed development nearer to about half of the roughly £1 billion it has been in the past. What this means is that a greater proportion of income-generating assets will sit on our balance sheet going forward, which supports our objective of growing EPS in a sustainable way and means our cash-based leverage measures will also improve. With that, I'll now hand you over to Vanessa. Thank you, Mark, and good morning. We have had a positive start to the year, with strong operational performance. Our occupancy is at a record high, we're leasing well ahead of passing rents, and our like-for-like income growth of 5.2% is well ahead of our full-year guidance. Reflecting this and the continued positive outlook from here, we have raised both our near-term EPS guidance and our medium-term EPS potential. For the half year, our strong like-for-like income growth and further reduction in overhead costs meant EPRA EPS was up 3.2%, supporting a 2.2% increase in the interim dividend.

When it comes to how we valued the portfolio, it was basically flat, and NTA per share slipped a little to 863 pence. The main factor there was our capital recycling — we disposed of close to 650 million of assets that were producing little or no return, and that hit NTA by 1%. Our capital position is still solid, with LTV at 38.9% pro forma for the sales made since the end of September. Net debt to EBITDA rose a bit, which is consistent with the guidance we gave in May, but we're aiming to bring it down below 7 times over the next two years as the developments we currently have on site finish, lease up, and we shift toward a structurally lower level of development exposure going forward. Moving on to income and EPRA earnings. All told, net rental income rose by 15 million, helped by 12 million of like-for-like income growth. We achieved that even though the same half last year had the benefit of a 4 million increase in recoveries of bad debts previously provided for, mostly tied to a handful of assets where we brought the management in-house. Surrender receipts were modest too, at only 3 million, so nearly all of our rental income in the half was regular recurring income, since one-off receipts added little.

Since we concentrated on running things more efficiently, gross-to-net margin rose 130 basis points, reaching 87.7%, while overhead costs fell by 2 million, and we expect further reductions ahead. Finance costs rose as anticipated, mainly because average borrowings went up after our acquisitions in the second half of last year, along with a modest increase in our weighted average cost of debt. Taken together, EPRA earnings climbed 6 million, or 3.2%. This slide illustrates the movements showing how that feeds through into earnings per share growth. Strong customer demand and our robust operating platforms keep benefiting our high-quality office and retail assets, and together those assets account for 90% of our income. Overall, like-for-like income growth produced a 1.6 pence, or 6.4%, rise in earnings per share for the half year. Additional overhead savings, which contributed 0.3 pence, offset the like-for-like finance cost increase. Other items moving year on year, including lower surrender receipts and the bad debt recovery, cut EPS by 0.9 pence. Both items now deliver only a minimal benefit to EPS, and a meaningful impact in the future looks unlikely. Investment activity's net effect was positive as well, with overall EPS up 3.2%.

I'll get into the specifics shortly, but first, the EPS outlook from this point stays favorable. Improving efficiency gives an extra lift to the income growth we keep delivering. In February we laid out a goal of bringing overhead costs below 65 million by financial year '27, yet we've since raised our targeted savings, and we now anticipate overhead costs for next year landing in the low 60 millions. That comes from the payoff on our data and technology investments, which I've mentioned before, plus a culture change across the organization aimed at sustaining efficiency and keeping a structurally lower cost base as we move forward. Overhead costs next year should now come in more than 20 million below the financial year '23 level, and that holds even with a 9 million increase from wage costs and inflation — altogether, that represents a cost reduction of over 25%. Now on to portfolio valuation. Strong leasing activity generated 2.5% growth in ERVs across the last six months, including 3.1% growth in office and 2.2% in retail, with both tracking well against our full-year guidance. Partly offsetting the favorable ERV effect were the ongoing reduction in the QAM valuation as that asset approaches the end of its leases — the NPV of future income keeps declining — along with higher business rates at Piccadilly Lights.

Taken together, those two items cut our total portfolio valuation by 0.5%, though since we've agreed to divest QAM and the business rates review was the first one since 2021, neither should persist as factors going forward. That leaves our overall portfolio valuation essentially flat. Our key priority is making sure we convert that value into rising cash flow, rising earnings, and rising dividends for shareholders. With that in mind, we stated in February that we would take a pragmatic approach to value when it comes to capital recycling, and the past six months have demonstrated exactly that. We disposed of 650 million of assets that were producing little or no return, at a cost to NTA of 1% when proceeds are measured against book value. In the end, those disposals substantially boost our future income growth, and yet this is the primary reason our NTA fell 1.3%. This remains supported by our solid capital structure, which is set to get even stronger shortly. Our average debt maturity is still long at 8.9 years, and we don't need to refinance any debt before 2027 at the earliest. Back in May I noted that we anticipated our net debt to EBITDA would be above 8 times this year, since our two on-site office developments in London are approaching full investment, yet they generate no income until they complete in six to nine months' time.

When you add in our pre-development assets, that gives us roughly 1 billion of capital sitting in assets that aren't generating income right now — we're carrying all of the debt on them but none of the EBITDA. As those projects finish and lease up, and as we shift toward a lower level of development exposure going forward, our net debt to EBITDA ratio will come down on its own. Our target is now a net debt to EBITDA below 7 times, reduced from the earlier goal of below 8 times, and we expect to get there over the next two years. We also anticipate our LTV dropping below 35%, compared with 38.9% at present. So our financial risk profile will be even lower going forward, which gives further support to the appeal of our growing income and EPS. The outlook for both is positive. After the strong first half of the year, we've lifted our guidance for like-for-like income growth for the full year to circa 4% to 5%, up from the initial guidance of 3% to 4%. Together with additional cost savings, that means we now expect EPS growth at the top end of the 2% to 4% guidance range we gave in May.

Before accounting for the QAM sale—which converts this asset's remaining finance lease income into a cash capital receipt upon disposal—the total cash we get is essentially unchanged. However, since that cash now arrives when the sale closes next month instead of coming in as lease income across the remainder of 2025 and 2026, EPRA earnings for this year drop by 7 million. Looking to next year, we anticipate like-for-like growth and cost savings will persist, though the precise EPS outturn also hinges on how quickly we lease up our office developments. As Mark said earlier, potential customers are engaging well with us; we assume our two main projects will be 40% let on average when completed, and fully leased over the 12 months after that. On that basis, we currently expect EPS growth for financial year '27 to be broadly similar to financial year '26, again before the QAM impact, which cuts earnings for financial year '27 by another 15 million. Because the effect on EPS from the QAM sale beyond financial year '27 is minimal, this means we remain on track for the medium-term EPS growth potential we've outlined.

Let me unpack that a bit further. In February, we laid out how EPS could rise to roughly 60 pence, an increase of about 20%, by financial year '30, and that was even after absorbing the QAM headwind along with the higher finance cost. That outlook now goes up to 62 pence, and the drivers are stronger income growth in retail, additional overhead cost reduction, and shifting to a lower level of development exposure. Let me walk through the components in a little more depth. If we begin from last year's 50.3 pence, the QAM sale that I just described contributed an impact of slightly below 3 pence. The largest piece of future growth by far comes from capturing the rising reversion within our existing portfolio. As our strong operational performance shows, we have a solid record on this front, delivering 5.2% like-for-like income growth across the entire portfolio in the first half, on top of the 5% like-for-like growth we reported last year. Our office portfolio carries 12% reversion, and our figures assume we achieve like-for-like rental growth of 3% to 4% per annum, a more normalized level than what we saw over the last six months, since our office portfolio is now effectively full.

During our Capital Markets Day in September, we laid out the way we aim to achieve income growth throughout our retail portfolio of between 4.5% and 7% over the coming few years, with rental uplifts now reaching as much as 14%, turnover income on the rise, and the advantages of accretive capex becoming visible. That guidance rests on the midpoint of that range. The additional benefit from the further overhead savings I described earlier comes to roughly 1.5 pence, and our record of delivering on that front is solid as well. Our latest acquisitions and disposals, including Liverpool ONE and the divestment of our retail parks, produce a net gain of approximately 1 pence. As Mark said, we are running ahead of schedule on our goal of halving capital employed in low- and non-yielding pre-development assets, and that will contribute about 1.5 pence per share through interest cost savings. Leasing up our near-term office completions will contribute roughly 2 pence. The potential gain from future asset rotation essentially captures our intention to recycle additional capital away from lower-return assets and put a further 1 billion into major retail destinations. Because our planned recycling of capital from offices into residential is broadly EPS neutral across this timeframe, the bulk of the EPS growth benefit will come after financial year '30.

When you factor in the anticipated increase in finance costs, that works out to a little more than 4% growth per year. Over time, producing sustainable income along with EPS growth will translate into an appealing return on equity. Given our solid capital foundation and the attractive income return we already have, we're in a good position to generate meaningful shareholder value. That said, I'll pass it back to Mark. Many thanks, Vanessa. Now I'll close with a summary of what to expect from us in the near term, along with where we see the differentiation and the opportunity for Landsec, and after that we'll open it up for Q&A. The refreshed strategy we laid out in February gives genuine clarity on our key objectives and our main target of delivering sustainable income and EPS growth for shareholders. As a result, every one of our priorities and decisions stems from that, which creates genuine clarity of focus throughout the business. On our best-in-class office platform, our focus is on capitalizing on the ongoing strong customer demand for space — both for our near-term completions and across our existing estate. Much like our market-leading retail platform, where we have solid plans to deliver 4.5% to 7% growth in income across the next few years.

With investment activity on the rise, we'll be aiming to shift more capital out of offices and into retail so we can capture those better risk-adjusted returns. In residential, our focus is on cementing the positive effects of stronger public policy support, since this remains a very appealing opportunity over the longer term, backed by solid growth fundamentals. We've now established clear differentiation in how we're positioned. We hold two portfolios that are unquestionably best-in-class and irreplaceable, run by two market-leading platforms of real scale and stature. Making sustainable income and EPS growth our principal performance measure gives absolute clarity right across the business. Thanks to our clear capital allocation framework, we're clear-eyed and rational when it comes to investment decisions in pursuit of our primary financial objective — as shown by our decision to significantly cut our future development exposure, which underpins our move to an even stronger capital base with a net debt to EBITDA of below 7 times. At the same time, the outlook for income growth stays firmly favorable. Strong customer demand for the best office and retail space keeps driving ERV growth, and our overall occupancy stands at a decade high of 98%. Rents across both our office and retail portfolios are highly reversionary, which underpins future income growth, and at the earnings level that growth is supported by additional overhead savings.

That gives us the confidence to lift our guidance for FY26 earnings per share and to raise the outlook for our financial year '30 EPS potential, with dividends anticipated to increase in line with EPS growth, and with a strategy that is seeing us shift toward higher income, higher income growth, and reduced cyclicality over time, we are well placed to deliver significant value for shareholders. Ladies and gentlemen, many thanks for attending this morning and for listening to our presentation. As usual, I will now open the floor for Q&A. We'll begin here in the room first, please, if you have a question, raise your hand and wait for a microphone, and then we also have people attending via webcast and conference call, and we'll go to both of those in turn as well. A couple of questions here at the front first, and then we'll go to a question at the back in the middle. Good morning, and thank you for taking my question. It's Marius Pasti here from Bernstein. If I may turn to your longer-term plans in residential. I think you've quantified now kind of policy changes that will actually support your development yields within your kind of London schemes, for example.

Would that uplift be sufficient for you to commit to those projects, or are you seeking additional upside potential from other areas, perhaps cost savings, for instance? We've indicated that we believe — and we need to be clear at this moment — what we currently have are policy announcements from government and GLA together aimed at reducing affordable housing and community infrastructure levy charges. We need to see how those measures actually play through in the detail to individual projects, but the indication we've provided is that if those land at a project level, that would represent a 50 to 75 basis points improvement, and that would take us to somewhere in the high 5s as a yield on cost, which for a sector that has structural growth and annual capturing of rental growth feels like a pretty attractive starting point. It's really a decision for us to look at probably towards the end of 2026, when we have more clarity at a project level, and we also have an understanding of what the other opportunities to deploy capital look like and what the relative risks and returns look like. It is unquestionably positive in terms of the direction of travel for policy support, but it'll ultimately be a decision for later in 2026 when we can look at things with a greater degree of certainty.

That's very clear, thanks. Turning to retail, I believe you mentioned once more that you expect additional potential investment opportunities to reach the market, and that's where the focus sits today, putting capital to work in that area. It also seems fairly crowded given what we're seeing in the market — are you confident about being able to deploy that capital, and at the return levels you were targeting before? In short, we are. More capital is arriving and beginning to look at the market, but a couple of things need to be kept in mind, I think. This is a highly operational market. Relationships with brands, operational expertise, and data on consumer behavior are each essential to running a shopping centre successfully. One reason we have purposely targeted that sector is that we hold a demonstrable capital advantage. Looking at where we stand today, our major retail portfolio has 40% more reach in terms of footfall than the next largest UK retail platform, and we intend to build and grow on that. The larger the lot sizes become, I think, the harder it gets for some of the other investors who might be entering the space to capitalize that and to underwrite an exit.

I’d say that’s positive, because having additional investors examine the sector helps confirm what we’re seeing inside it. At this point, I don’t believe it’s sufficient for us to become overly worried about how we deploy capital, but it does mean that one factor behind our view of a 12- to 18-month window—and one factor behind why we’ve sped up office sales so we can rotate into that window—is that we don’t want to act across too lengthy a period and then discover the cap rate is 6.5% instead of 8% once we begin deploying capital. Jonathan. Thank you. Jonathan Kownator, Goldman Sachs. Three questions, if I may. First question is on retail ERV. When are we going to see these grow? You’re obviously letting 10% ahead, how do you think this is going to evolve? First question. Second question, share buybacks were on your allocation charts. How are you thinking about this? Would you need more disposals to do share buybacks, or are you considering those at this stage? Third question, you’re obviously willing to redeploy in residential. We’ve talked about the economics, we’ve talked about the timeframe. Given the long timeframe for development as well, would student housing be something that you would consider instead of doing residential development?