LondonMetric Property Plc (LMP) Earnings Call Transcript & Summary

Please go ahead.

Good morning, ladies and gentlemen, and welcome to LondonMetric's annual results presentation for the period ending the 31st of March 2020. Obviously, a slightly different physical setup this time around, but Martin and I will do our best to try and keep on track with the usual agenda. I will talk you through the highlights and the portfolio overview. I'll pass on to Martin, who will take you through the financial performance before handing -- he'll then hand back to me and to take you through the property investment activity. And then my -- I'll share with you my thoughts on the outlook and the period ahead. Then I'll open up to Q&A as best we are able in these unprecedented circumstances. So turning to the first slide, the key full year highlights. What we have obviously -- we've seen over the last few months has been an acceleration of the structural shifts. Many of these shifts were already in the system. And obviously, the lockdown and the onset of COVID-19 has accelerated a number of these trends, which highlights the growing importance to be continually aligned to the winning sectors. As you can see, our distribution portfolio represents 70% of the total assets that we own, and long income in at 24%. And I'll come in to talk about those in a bit more detail later on in the presentation. The main investment activity through the year was the increasing our exposure to the urban logistics portfolio, and that was done predominantly through the GBP 455 million acquisition of the Mucklow assets that have been fully integrated now into the LondonMetric platform. And again, I'll give you some more color on that later on in the presentation. And that acquisition was also assisted by a further GBP 159 million of acquisitions, bringing a total of GBP 614 million for the year. And again, I'll go into more detail later. We also made nearly GBP 180 million of the disposals, particularly reducing our exposure to the big box logistics market with a number of key sales but also noncore assets, and again, more color on that further into the presentation. Our income-led approach is certainly delivering operational outperformance. Our net rental income is up at GBP 116 million. And our like-for-like income growth of 3.8% has been supported by 130 separate asset management initiatives. We're going to break that down, later on in the presentation, between lettings, rent reviews and regears. Over the period, we've looked to strengthen our balance sheet both from a debt perspective and also following the recent GBP 120 million equity raise that we successfully concluded last month. Martin, again, will go into a bit more detail on those later, but that today gives us a pro forma LTV of 30.9%, which gives us significant firepower for quality opportunities as and when we see them in the period ahead. So turning to the next slide, financial highlights. Our net rental income is up, as you can see there. I said -- referenced it earlier, GBP 116 million. Our contracted rent is also up significantly at GBP 123 million, and that's what we will enjoy when we have the full 12 months contribution from the Mucklow assets. That has driven EPRA earnings up to GBP 74.5 million, which in turn has seen us enjoy an EPRA earnings per share up 6% at 9.3p. For the fifth year in a row, we've managed to progress our dividend, albeit less than historically, but -- dividend of 8.3p, following the announcement this morning of a final dividend of 2.3p which will be paid later on in the summer. And the NAV at 172p is after absorbing 2.5p of acquisition costs that were incurred in the acquisition of the Mucklow business. And all in all, that helped us deliver a positive total accounting return for the year of 3%. And on that note, I'll pass over to Martin, who will take you through the financial review.

Thanks, Andrew. Good morning. Our financial results for the year, as Andrew said, benefit from the -- our acquisition of Mucklow in June of 2019 and therefore, include 9 months of activity from that portfolio. I'm pleased to report that our net rental income is GBP 115.9 million, an increase of 24% over last year and exceeding GBP 100 million in the year for the first time. And interestingly, this is double the net rental income in 2014, the year after our merger. Our administrative overhead for the year is GBP 15.9 million compared with GBP 13.7 million last year, an increase of 16%. The increase reflects our acquisition of Mucklow in the year, whose annual overhead was GBP 3.5 million. The combined overhead on a time-weighted basis has fallen by more than GBP 400,000, and the cost benefit on an annualized basis will be over GBP 2 million once our cost-saving measures are fully implemented. Our EPRA-cost ratio has reduced by 80 basis points in the year to a lower 14.2%, and our gross-to-net property cost leakage has fallen by 60 basis points to only 1.2%. Our finance costs in the year are GBP 26.1 million, an increase of GBP 5.9 million over last year. This reflects an increase in net debt over the year, which I'll come on to later, but also a higher interest rate in the year as we replaced part of our cheaper revolving credit facility with more expensive, though longer-dated, private placement debt. By the year-end, however, our average cost of debt has reduced to -- by 20 basis points from last year to 2.9%. So in summary, our EPRA profit is GBP 74.5 million, a 22% increase on last year, or 9.3p per share, which supports the increase to our dividend for the year to 8.3p per share, an increase of 1.2%, and provides a very strong 112% dividend cover. This increased level of dividend cover reflects our cautious progression this year given current circumstances but also supports our expectation that the dividend will continue to progress in the future. We have reported an overall loss this year of GBP 5.7 million, which is entirely due to the impairment of goodwill, the fair value adjustments and the acquisition costs of the Mucklow transaction amounting to GBP 57.2 million in total as previously reported at our half year. Adjusting for these costs, our profits rise to GBP 51.5 million. Turning to the balance sheet. The portfolio valuation of GBP 2.35 billion is significantly ahead of last year. The increase in value reflects a very active year, with acquisitions of GBP 577 million in total and development expenditure and CapEx of GBP 53 million, offset by disposals of GBP 128 million and a small value diminution in the year. As at the year-end, we had GBP 86.1 million of cash in our balance sheet and GBP 975 million of debt. The cash balance is a significantly higher level of cash than we would normally hold, recognizing the uncertainty arising from COVID-19 the net liability position at the year-end is GBP 26.3 million, the major component of which, as in previous years, is rents received in advance. And there is a small negative mark-to-market movement in our derivatives. So in summary, our EPRA net assets at the year-end were GBP 1.437 billion or 171.7p per share, a decrease of 1.8% over last year's EPRA NAV of 174.9p per share, arising from the costs incurred on the Mucklow transaction. The GBP 975 million of debt on our balance sheet at the year-end is an increase of GBP 349 million in the year. And we have continued to be busy post year-end in managing our capital structure with, as Andrew said, a GBP 120 million equity raise, swap cancellations and a GBP 50 million debt extension with Santander. The increase in debt is due to the high level of net portfolio acquisitions and expenditure in the year of in excess of GBP 500 million, part financed clearly by debt and the adoption onto our balance sheet of Mucklow's SWIP facility of GBP 60 million. Together with the new GBP 75 million facility recently signed with HSBC, our LTV is at 35.9%, net of deferred proceeds on sales completing this month. Our debt maturity has reduced in the year from 6.4 years this time last year to 4.7 years with the passing of 12 months but also due to the high level of drawing on an RCF which has a shorter term than our very long-dated private placement money. And as mentioned earlier, the average cost of debt is now 2.9%, a decrease of 3.1% from last year. The marginal cost to our debt now stands at 2% at the year-end but has fallen further since to 1.5%, so that when we do draw down the headroom of over GBP 130 million on our RCF, our cost of debt will fall. Our earnings will be enhanced, and our already strong interest cover ratio of 4.3x will be maintained. Immediately after the year-end, we canceled GBP 350 million of interest rate swaps such that our only current hedging is by way of fixed-coupon debt as we seek to take advantage of interest rates which are low, may go lower and will stay low. And our current cost of debt has fallen further to 2.7%. This provides a 2-year payback period on the capital cost of the swap breakage. Following the equity raise just after the year-end, our loan-to-value was 30.9%, net of cash. However, in the longer term as we deploy this headroom, it remains our intention to retain the LTV at around 35%. That net rental in the year of GBP 115.9 million equates on an annualized basis, as Andrew said, to GBP 123.3 million of contracted income. Adjusting this number to account for a busy post-year-end period reduces our contracted rent roll in respect of lost income arising from sales completed in June, offset partly by acquisitions and asset management costs by GBP 1.8 million. I have further adjusted the contracted rent roll by the GBP 5.9 million to be generated from the investment of the proceeds of our equity raise in April over the next 3 months and by GBP 3.2 million for the letting-up of our near-term developments at Bedford and Tyseley over the next 2 years, to generate an annualized rent roll of over GBP 130 million. A rent roll of GBP 130 million, net of interests and overhead which currently stand at GBP 42 million, will generate earnings over time of almost GBP 90 million or 9.9p per share. The significant level of growth in our rent roll supports our confidence that we will continue to be able to grow our earnings substantially and therefore, progress our dividend from the 8.3p per share that it stands today. And finally, a brief look back which puts that increase in the rent roll into context and clearly demonstrates that, since our merger way back in 2013, we have been able to generate earnings growth, dividend progression and total property and shareholder returns well ahead of our peer group. And on that note, I will hand back to Andrew.

Thanks, Martin. So I'm going to give you a quick run through the property review. So the portfolio today. You can see a pie chart there on the left-hand side of the slide. As I've already mentioned, urban logistics has been our conviction call over the last few years. And we've increased its proportion of the portfolio now to 35%. That's up from 27% this time last year. Our regional distribution portfolio stands at 19.5%, down marginally from 22% a year ago. And then the biggest reduction has been in our exposure to the mega sheds, which I referenced earlier, which is down from 23% a year ago to just under 15% today. And long income at 24% is marginally up from 12 months ago. And turning to the right-hand side of the presentation, looking at some of the performance numbers. As you can see, that we've had a strong total property return across all 3 subsectors of the logistics portfolio, 7% in the mega -- from the mega sheds. Regional portfolio has delivered a total property return of 11%, assisted by one particular asset management initiative. And a strong performance from our preferred urban logistics assets. Our long income delivered -- portfolio delivered total property return, you can see there's a positive 2%. That's despite a negative 3% capital return, as it absorbed 40 basis points of outward yield shift on average, but that does actually disguise a wide variety of valuations, which I'll touch on in a bit more detail later. Our retail parks were the weakest contributor to the -- to our numbers, 9% negative total property return driven essentially by a 15% fall in capital values as the valuation witnessed a 75 basis point outward yield shift, to give a total net initial yield across that portfolio today of 7.5%. And that portfolio, a bit more color, has a weighted average lease term of 9 years and it has 97% occupancy. So looking in the round. The total property return from the portfolio, as you can see there, is positive 5%. The portfolio also enjoys some strong metrics, which we've highlighted there at the bottom of the slide. Our WAULT at 11.2 years is only down marginally from this time last year. Our occupancy at 98.6% is up nearly 1%; and which also managed to extract improvements to our gross-to-net rental ratios, up to 98.8%, again up from 98.2% this time last year. We've also materially increased our exposure of assets within London, the South East and the Midlands. And that -- and those assets now represent over 3/4 of the total portfolio. So going into a little bit more detail across those various sectors. As I've already mentioned, that our largest exposure now is our urban logistics assets at over 35%. We've nearly doubled the number of properties that we own in urban logistics over the last 12 months, 98 assets across 6.5 million square feet. That's up from 3.3 million square feet 12 months ago. We enjoy high occupancy. Occupancy at 98% is up from 95% this time last year. As you can see, this is the sector that is -- continues to enjoy superior rental growth. We settled rent reviews on average 24% above previous passing, which equates to just under 5% rental growth per annum, and that helped obviously generate a total property return of the 8% that I referenced earlier. Our regional and mega distribution portfolio covers 6.1 million square feet, enjoys very long lease lengths of 14 years. And our occupancy now -- across this portfolio is now at 100% following the announcement this morning that we've let our last vacant unit in Stoke. The portfolio enjoys high contractual rental uplifts of just under 90%. And as you can see there, rent reviews were settled at 9% above previous passing, equating to just under 2% per annum rental growth. Total property returns were 7% and 11% across the mega and regional portfolios, respectively. And then our long income portfolio, which accounts now for nearly 1/4 of the assets that we own, enjoys high net initial yields, 5.6% running yield; long unexpired lease term of 13 years and full occupancy. Again, rent reviews across this portfolio were settled at 13% above previous passing, which helped deliver the 2% total property return. I referenced earlier that the valuation suffered a 40 basis point outward yield shift, and this disguised a wide spread of yield movements across this portfolio. For example, triple net retail assets suffered a 100 basis point outward yield shift, whilst our convenience food assets, the other end of the spectrum, enjoyed 50 basis points of yield compression. Turning then to the next slide, on our investment activity. And I think our decisions on our -- on the investment activity is very much best explained by a focus on income, income growth, geography, lease lengths and credit. Over the year, we acquired GBP 614 million worth of assets on a net initial yield of 5.6%. Obviously, the Mucklow acquisition dominated those acquisitions, which added GBP 327 million to our urban logistics portfolio and GBP 49 million to our regional distribution portfolio. We also acquired during the period GBP 162 million of long income assets. And our focus continues to be on growing all 3 segments of this part of our portfolio. Our disposals. We've already referenced the sell-down of some of our mega distribution assets. And these -- and our disposal activity was dominated, as you can see there, by the sale of our Dixons Carphone warehouse logistics center in Newark and the Next logistics warehouse in Doncaster. Across the regional distribution portfolio, we sold GBP 28 million worth of assets. We've completed recently on the sale of the Royal Mail facility in Rotherham and hope to complete the sale of the DFS headquarters in Doncaster later this month. We also made progress with the sale of noncore disposals with GBP 21 million worth of office and residential sales. We sold 2 offices out of the Mucklow portfolio in Worcester and Leicester. And we've continued to sell down our remaining residential assets at Moore House. In fact, we now only have 5 flats remaining, with 2 which were under offer, out of the 149 million flats that we started the divestment process with. I thought -- on the next slide, I thought it would be interesting to give you an update on how the integration of the Mucklow portfolio is going. The contribution, as Martin has already referenced, is for the 9 months period. And overall, it's been a strong contribution both operationally, corporately and from a performance perspective. We've maintained a high occupancy. Portfolio enjoys 97% occupancy; high rent collection at 95%, with 57 occupier transactions completed over the period delivering over GBP 1 million of additional rent. Corporately, we've relocated the downsized team to the center at Birmingham. And they've been fully integrated, as I mentioned earlier, into the LondonMetric platform. We're on track, as Martin has already referenced, to deliver annualized administrative cost savings of GBP 2 million. And we are leveraging our occupier relationships across the enlarged portfolio, as evidenced by the high number of occupier initiatives executed during the period. We continue to enjoy strong performance; good rent collections, as I've already referenced; but also 5% capital return from the Mucklow portfolio and a 9% total return, with more to come as we look to collect the 12% reversion that current -- that we believe that currently exists across that portfolio. And that, as we do that, will drive further income growth. So turning then to the -- a snapshot on the portfolio management in the year. I referenced that our like-for-like income growth of 3.8% had been delivered as a result of -- courtesy of 130 asset management deals in the period adding over GBP 5 million of rent per annum to our rent roll. We undertook 63 initiatives across the distribution portfolio and 22 long income transactions. Our rent reviews were settled 12% ahead of previous passing, with our urban logistics assets, the standout performers, delivering 24% uplifts against previous passing rents. Over the period, we completed 436,000 square feet of development, essentially the completion of the 188,000-square-foot development at Bedford in phase 1, 160,000 square feet at Tyseley. And we're currently on site building out a further 425,000 square feet dominated again by the -- a Croda new facility up at Goole, unit 2 at Bedford. We've recently completed the construction of a new Aldi convenience store down in Weymouth. So turning to the next slide, on post-year-end portfolio activity. Our rent collection statistics, as we announced this morning, are high. We collected 93% of the rent, 100% across the distribution portfolio, 87% across the long income portfolio. We've executed asset management initiatives across 4% of that rent roll, where we've looked to extend lease terms, settle rent reviews, remove break clauses in return for some rent-free periods. 2% of the rent is subject to deferment arrangements, where that rent will be repaid to us over the coming 12 months period. And as you see, we anticipate no more than 1% of the total rent being permanently forgiven. Our response to this unprecedented crisis, we believe, has been appropriate and proportionate. We focused on helping those more vulnerable and the fragile operators within our portfolio. We announced this morning a number of new lettings and asset management initiatives across the logistics portfolio: at Stoke, where we've done a new letting to Pets at Home; at Greenford, where we've done a new lease to Echo; and Network Rail in Birmingham. These new lettings add GBP 1.4 million to our rent roll. Plus, since the year-end, we've settled GBP 200,000 worth of additional rent that have been secured through the rent review process, 10% above previous passing. As both Martin and I have already referenced, we successfully raised GBP 120 million worth of new equity last month. We've already announced the deployment of GBP 11 million of this into our long income portfolio. We're also in solicitors' hands on a GBP 60 million long income convenience portfolio and also have an GBP 11 million London urban logistics unit under offer and a further GBP 10 million roadside acquisition in solicitors' hands. Collectively, these asset -- these acquisitions will add about GBP 4.5 million to our rent roll. And equally importantly is the fact that they will deliver weighted average unexpired lease terms of over 18 years. So looking at the market outlook, and then I'll finish with our thoughts on looking forward before opening up to -- before opening to questions and answers. Without doubt, the COVID lockdown is accelerating trends that many of us have already seen and were already in the system. This is leading to a rapid change in how we work, shop and socialize. And it is our opinion that a number of these temporary changes will become permanent. That's particularly visible when you look at the impact that the lockdown has had on online grocery sales. It's interesting. It took 23 years for online grocery sales to reach 7% of total grocery expenditure, but it's taken 12 weeks for that to almost double to 13%. Similarly, across all online -- all retail, online penetration has grown from 7% in 2010 to 19% in February of this year. However, in the last 10 weeks, it has added a further 11%, currently standing at 30%. Trends that we expected to take years are now happening in months and in many often cases, in weeks. The challenging markets are undoubtedly exposing both winning and losing strategies. The winners are enjoying strong tailwinds. The losers are facing tough headwinds. As a result, we expect the polarization performances across the sector to widen. We believe that logistics is a clear winner, and the margin of victory will be greater than probably previously anticipated. And let's not forget that the macro environment is highly supportive of the right real estate. 0 interest rates support well-let, structurally supported property. We believe that quality, well-let assets in winning sectors will become increasingly sought after. Market uncertainty is undoubtedly presenting higher quality opportunities at attractive pricing and we've already started to execute on those, and hopefully, we'll have further announcements to make over the coming weeks. And the fact of the matter is, in the global search for yield, the right real estate in those right sectors will become increasingly sought after. So looking forward, we believe that the disruption is being accelerated and that, when we look back, history will show that the post-pandemic world has been permanently altered. Trajectory and speed of the recovery does remain unclear, but the acceleration of existing polarizations is very, very likely. We continue to align the portfolio to the winning sectors and importantly, the right assets. We're building a portfolio with resilience and looking to take opportunities to upscale our asset quality with opportunities that rarely become available in a normalized market. We remain disciplined with our capital allocation; and our occupier-led approach, hopefully, will ensure that we're investing into the right assets. We continue to improve the diversity and quality of the portfolio's reliable, repetitive and growing income base. After all, we firmly believe that income compounding and a growing dividend is the bedrock for attractive returns over the medium and long term. And we continue to ensure that the surplus income that we generate will be passed into our shareholders' pockets through our progressive dividend. We have strengthened the balance sheet, as Martin has already outlined, with new income-led opportunities. This is allowing us to invest further into our conviction calls of urban logistics and long income as more quality investment opportunities become available. And on that note, I thank you for your time and very happily take some questions. I think we're doing that on a webcast. So if there are any questions, then I'm very happy to deal with them.

[Operator Instructions] We will now take our first question from Chris Fremantle from Morgan Stanley.

I just have one detailed question and one more general question. The detailed question was just on the swap breakage cost. Can you just let us know what the NAV impact of that is? And then more interestingly, on the strategy and the outlook, you said you're positioning to winning sectors. You said you're going for income growth. Can you just give us a little bit more of a sell on your long income subsector? I appreciate you say it's a mixture of subsectors. I'm just trying to understand which parts of that other bits to be excited about and which parts of those -- of that long income sector you are less excited about and trying to understand -- I think the distribution side of the business, which you talk a lot about, is very clear, but the -- what's inside the long income sector, I think, is less clear, so perhaps you could just elaborate a little bit more on that, please.

Okay, Chris, I'll let Martin do the first question because that's a technical one.

I just remember it. So Chris, the NAV impact was GBP 4.9 million on the swap rate. And then, we think, yes, I'll say, roughly 0.5p. And we think we'll [ make ] back 0.28p in each of the next 2 years to more than cover that.

On the long income piece, Chris. As I said, there is a wide spread of performances across that portfolio. Look, I mean, people want to paint retail with -- all with the same color. And the truth of the matter is we think that there are some very, very strong parts of the retail market that have actually had a very good -- I mean I'd say this is a good COVID period. Convenience food has been very strong. And as you can see from our acquisitions over the last 12 months, we've been looking to add convenience food to that long income bucket with enthusiasm. You've also seen strong performances from some of the discounters. The -- it's interesting, the B&M, Home Bargains, The Range, et cetera. The fact of the matter is, interestingly, B&M, for those of you who shop there regularly, has a market capitalization today that's twice the size of Marks & Spencer's, to give you a flavor for how well they're performing. And no doubt, that will be reinforced with their results tomorrow. So again, the discount market long income is something that interests us, but there are also other areas of retail that have had a good few months. DIY and trade has been strong. Obviously, pets has been strong. Electrical has been good. The worst-performing parts of the retail space, which we've consciously avoided for a number of years now, has been fashion, department stores, where we think that there were negative trends ahead of the lockdown. So looking forward, long income will be focused around that what we consider to be those winning sectors. We announced last week the acquisitions of some roadside assets let to Kwik Fit. We've bought some drive-through assets let to Euro Garages. And we've bought a number of co-op convenience stores over the last couple of months, and we'll look to add to that. What we won't be doing is looking to add to some of the more general retail -- general merchandise retail exposures which we already have plenty of. Some of -- the biggest weakness actually in that portfolio was the -- was an outward yield shift, as I said, across the triple net retail. The brunt of that came from the -- our DFS portfolio, where there is some material over-renting. And that is something that we are addressing with DFS, as we speak, whereby we will look to reduce the rents across that portfolio in return for longer leases. And like I said, we're in discussions on that as we speak. So that's what drives the decision-making. As I said, it's very much an occupier-led approach. Is that okay?

Yes, that's fine. Just one quick follow-up on that. If I look at the blend of your long income portfolio, do you expect growth in rental value there or sustained long income, if you like? I mean should we expect you to grow the rental value there? Or is it -- is flat the best case?

I think, if it -- we're -- our focus in long income is very much around the certainty of rental growth. As you can see on that slide, it paints -- slide...

Has it gone up? The first slide of the property review.

13. 57% of the rent enjoys contractual rental uplifts. And in this market I feel better about that than taking open-market rent review risk. Obviously, that's completely different when we come to talk about urban logistics, where I'd happily flip that round.

[Operator Instructions] We will now take our next question from Matthew Saperia from Peel Hunt.

Two questions from me, if I may. Obviously, you had basically 99% occupancy. You've announced a couple of -- 4 lettings this morning. Is there actually any space to let in the portfolio now? And does that impact any decisions around bringing forward any speculative development or indeed committing some of the recently raised equity to opportunities to develop? And my second question: I noted, Andrew, that you mentioned that the strong performance in regional was down to one asset management initiative. I was just wondering if you could provide any details around that.

Okay. So on the vacancy side, we have a number of vacancies across -- I mean they're all -- effectively vacancies are in the Mucklow portfolio. There's no vacancies within the LMP distribution portfolio at the moment. And they tend to be dominated in some of the -- on multi-let industrial estates, where it's a lot more fluid. Occupancies are shorter as well. But there's no standout vacancy. The second part of your first question, I referenced or intimated that we were on site at Bedford. We are doing, we are carrying out the groundworks that would give us the opportunity to start construction of unit 2, which is 165,000 square feet, which would be on a speculative basis. And to be honest with you, we're also giving -- given the take-up of space across the market over the last few months, we are giving further deep thought to speculatively building out unit 1, which is around about 320,000 square feet. And that's effectively as a result of recent transactions elsewhere in the market, whether or not it's Marks & Spencer's at Milton Keynes, Amazon at Bedford, 3PLs at Milton Keynes. We're just taking a lot of space out of the sector. And so that would give us the confidence to, I say -- as I said, to push ahead with some speculatively build later on in the year. Your second question was around the performance on the regional portfolio. It was going to be strong, anyway. It was just slightly [ turbid while one ] particular asset management where we did a re-gear with one occupier down on the south coast, which allowed us to enjoy 300 basis points of yield compression. Fortunately, it will -- we bought it for 9%. It's been revalued at 6%. We're probably not going to see that again, certainly not -- great, if we're going to revalue it by another 300 basis points next time around, but I suspect that was a one-off. Is that all right, Matt?

Perfect. Thank you, Andrew.

There are no further questions over the phone.

Okay. So I've got a couple come through here, no particular order. I've had a question about whether or not we bid on the Perivale industrial estate, which we didn't, but by the way, I think it's a terrific purchase for SEGRO. I think that the tight cap rate implies a material level of reversion and expectation that reversion will be captured, and we would share that confidence as well. Our recent letting down the road at Greenford at GBP 12.50 suggests that moving those rents forward is something that is very achievable. 3.5% on a GBP 200 million portfolio for our model was probably a bit tight, but I have to say I think it's a terrific acquisition. I had a question about -- a little bit like Chris' question about some of the long income assets, a bit of the over-renting, leading to the divergence of performances versus the long-let convenience indexed assets held within that portfolio. I think I partly answered that question. We're engaged. We don't embrace over-renting at all, but what it does do, it always gives you the opportunity to be able to trade rent for term. And I think -- in a market that particularly enjoys long let income, I think that's a trade that we will always look to do. In previous presentations, you've heard Mark talk about we're happy to give up rent for extra term. And in fact, you've already seen it over the last 3 months. We -- 4% of our rent roll in March was traded out for 4 years extension to our -- to lease lengths. And that's something that we will always do. I'm reminded of a quote of -- that the first rule of compounding is not to interrupt it unnecessarily. And I think that supports our view that we want to be long and strong. [ Miranda ] has asked me about on Slide 9, our expected income progression. "There's nothing on your slide, Martin, for market reversion. What is the reversion in the current portfolio?" And whether or not -- and our recent acquisitions, we highlight that they tend to be biased towards long income rather than urban logistics. Is that because it's tough to find opportunities in the urban logistics portfolio? If I take the second part of the question: The competition for well-let urban logistics assets and opportunities is pretty strong, pretty strong, but look, we are knocking a few over but we're not alone. We have some strong competition, and there's a reason for that. And it goes back to my -- the answer I gave to the earlier question on Perivale, well-let assets showing superior rental growth. Reversion is -- are going to be increasingly sought after, particularly where rental growth in across the real estate sector is going to be increasingly rare. So in terms of the reversions, I mean I referenced it. The Mucklow portfolio, we think that there's 12% reversion. And across the distribution portfolio in its entirety, we see around about 10% reversion, but that changes all the time. I mean it really does. It's interesting. You look at the letting we did in Stoke that we announced this morning. The first building we built was let to Michelin a couple of years ago at GBP 5.60. The letting we did today was at GBP 6. That is an 8% improvement over a couple of years. That's quite a lot. Now there are different -- there are vagaries on the backdrop of the lease term and the rent concessions and whatever, but by and large, rents continue to accelerate across this logistics piece. We think it's accelerating faster in urban than it is in mega, but it's -- but they're still accelerating. And like I said, our outlook for the whole sector is strong. Sorry. I'm just trying to read some of these other questions out. So I have got a question here on what kind of like-for-like rental growth do we expect over the coming years. And have we changed our expectations due to the pandemic? Our standard answer on this for a number of years has been we aim for 3%. If we get 3%, that's fine. If it's less than that, we feel a bit grumpy. And obviously, if it's more than that, we feel a bit more cheerful. I think 3.8% that we delivered today is good. We're pleased with that. I suspect it might be a little harder to achieve that going forward and not because I see it necessarily a dumbing-down of growth for the logistics market. It's a lot of it is due -- probably due to the outlook for inflation. The outlook for inflation, we have 50 -- just over 53% of our portfolio subject to inflation-indexed rent reviews, and obviously that will come under pressure given where CPI and RPI are today. And then a final question I've got here is, considering the strong retailers already had an Internet presence pre-COVID, will those likely to fail over the next year or 2, are they going to be the ones that don't have an Internet capability? And is it possible that future logistics demand is being overstated? I mean I'll reference you back to the change in shopping patterns that have occurred over the last 12 weeks. So go back to Slide 19. I talked about the growth in online penetration. We may well lose some retailers, which may lead to surplus logistics accommodation coming back on to the market, but I think that there is a depth and breadth to the demands that will see that swiftly taken up. Some of you will remember that we had a warehouse many years -- a number of years ago in Wakefield 520,000 square feet let to Poundworld. And Poundworld went bust, and we were left -- we were handed back the keys. And a number of landlords of their retail business and shops were handed back keys also. 12 months later, that warehouse was relet on a longer lease and a higher rent to a better credit. And the fact of the matter is I think that there is a depth and breadth to this demand, and I think that the change in shopping patterns will reinforce that. So we may well see some surplus warehouse space coming on to the market, second-hand space coming on to the market from some legacy retailers who may well fall over, but I feel pretty confident that, that will be -- there is, say, sufficient depth to absorb that. I think that finishes our questions. So ladies and gentlemen, thank you very much for your time and your interest this morning. I hope that we've dealt with most of your queries. And I look forward to speaking with you all individually and hopefully, in a different setting to the one we've currently got this morning. So on that basis, many thanks. Stay safe, and best wishes. Thank you.