LondonMetric Property Plc (LMP) Earnings Call Transcript & Summary

Good to go. Okay. Good morning, ladies and gentlemen, and welcome to LondonMetric's half year results for the period ending 30th of September 2024. Well-trodden path this. I was just saying, I think this might be my -- somewhere between my 38th and 40th time I've actually stood up to do these results, not always in wearing the LondonMetric colors. I'm going to start with a brief overview, highlights of the period, pass over to Martin to take you through the numbers in more detail. I'll come back and give you a view on the property performance, both on the sectorial performances and our activity in the investment market, how we see the investment market and then finish with an outlook slide of what we think will come to pass over the course of the next 6 to 12 months. And then, we'll open up the floor to Q&A. So our activity over the last 18 months has cemented our position as the U.K.'s leading triple net income REIT, the CTPT and LXi takeovers delivering cost synergies, earnings progression and material dividend growth. We have set exceptional income characteristics with credit, occupancy, duration and growth and that's underscored by the rent review and lease renewal regear settlements that we've achieved in the period on an average of 17.5% above previous passing rents. And today, we now have scale and efficiencies of operation that delivered an EPRA cost ratio at 7.6%, and Martin will go through that in more detail later on in the presentation. Our investment activity over the period, GBP 437 million of selling and buying, continues to reshape the portfolio for long-term outperformance. We remain exposed to the strongest thematics and those that we think will benefit the most from evolving consumer behavior. As you can see there, just over -- I think, it's GBP 234 million of assets that have been sold in the period and GBP 203 million that have been purchased. And I'll talk about that in a little bit more detail as we go through. And our enlarged platform is delivering economies of scale and opportunities. We are seeing external growth opportunities at an asset portfolio corporate levels, which with our balance sheet strength and flexibility gives us the firepower to continue to strengthen our portfolio for the times ahead. So a quick dive into the financial highlights of the period. Our EPRA earnings at GBP 135.4 million is up materially 155%, obviously reflecting the acquisition of both LXi and before that, CTPT. That's largely driven by a material increase in our net contracted rents to GBP 345 million. On a per share basis, we're up 26.5% at 6.64p per share. And this morning, we announced our second quarterly dividend of 2.85p, which gives us a half year dividend of 5.7p, which is in line with our full year target of 12p a share. That's a nearly 19% increase from where we were this time last year. And we are 117% covered and 100% cover on a cash basis. And again, Martin will go through that in a bit more detail. This is, and I want to point this out, this is our 10th year of dividend progression. We are well on our way to becoming a dividend achiever. And after that, we start our path to dividend aristocracy. The portfolio at GBP 6.2 billion, capital value is up 1.1%, is driven by rental growth as well as absorbing 16 basis points of outward yield. And again, I'll touch on how that -- where that happened later on in the presentation. And that helped drive a 2.1% increase in our EPRA NTA to 195.7p a share. Our pro forma LTV is largely flat on where it was this time last year -- this time back in March or the full year at 33%, which again supports the comment I made before about balance sheet, flexibility and firepower. And on that note, I will quickly pass on to Martin.

Thanks, Andrew. So the bad news is, you've only got 31 of these to go before you become a dividend aristocrat. Keep going. So good morning. So this period is the first period where we have the full effect of the transformational takeover of LXi. And I'd just like to acknowledge at this point the huge efforts that have gone into the integration of the two businesses so effectively and so quickly. We've delivered very significant earnings growth and dividend progression. I'm pleased to report that our net rental income is GBP 193.1 million, an increase of 154% over last year. In addition to GBP 111.1 million of additional rent from LXi, we've included GBP 6.6 million of additional rent from the CTPT acquisition in August and GBP 4.1 million from other acquisitions. Rent collections remain exceptionally strong. We've collected 99.7% of the rent during the period in line with last year. Our gross to net income leakage remains very low at 1.1%. And although our administrative overhead for the period is GBP 12.9 million, our EPRA cost ratio has reduced in the period to only 7.6%, which is the leading performance in the sector. This reflects the significant economies we've taken out of the LXi and CTPT businesses, which will continue as up to GBP 0.6 million of current year overheads can be expected to be nonrecurring for the enlarged group going forward. Our net finance costs of GBP 45.4 million in the period compared to GBP 16.3 million for the comparative period last year. We acquired an additional GBP 1.2 billion of debt from LXi at an average rate of 5.2% compared to LMP's finance cost at that time of 3.3%. So this, together with the cost attributed to the income strip liability are the main contributory factors to the increase in finance costs. Despite this increase in financing costs, I'll focus on cost control. On top of our rental income growth has driven our EPRA earnings to GBP 135.4 million or 6.64p per share. This supports the increase to our dividend for the period to 5.7p per share, providing very strong 117% dividend cover and importantly, full cash cover. The trading performance has been strong with the portfolio valuation increasing by GBP 41 million in the period, allowing us to report IFRS profits of GBP 163.8 million compared with GBP 81 million last year. The net value of the portfolio has increased since the year-end, whilst much of our focus has been on the disposal of non-core assets, particularly from the CTPT and LXi acquisitions. The combination of acquisitions, development expenditure and accretive capital expenditure has actually exceeded disposals by over GBP 100 million. This, together with our revaluation uplift of GBP 41 million has increased the portfolio value to GBP 6.16 billion. Gross debt is GBP 2.15 billion and the cash balance is GBP 85.5 million. The net liability position at period end is GBP 85 million, with rents paid in advance accounting for GBP 63.4 million of that amount. This number excludes the incomes reliability, which has also been excluded from the portfolio value shown above. In summary, therefore, our EPRA net tangible assets at the year-end were GBP 4 billion or GBP 195.7p per share comprising surplus earnings and revaluation surplus to provide a 4.9% total accounting return. As I said, our gross debt balance is now GBP 2.15 billion, the LXi merger, adding that GBP 1.2 billion of debt to our balance sheet. This additional debt was shorter dated and more expensive than the LMP debt. However, the GBP 700 million refinancing undertaken this acquisition was on more favorable terms being both of longer maturity and cheaper. Consequently, and with the passing of time, our debt maturity now stands at 4.8 years and our average cost of debt is 4% compared with 3.3% this time last year and 3.9% at the year-end. Our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. We retained all of LXi's hedging on acquisition and have acquired GBP 296.5 million of additional, current and forward starting derivatives in the period at an average rate of 3%. Our drawn debt is fully hedged at the period end and until April 2027, and we expect floating rate debt to remain substantially covered until its maturity. Our LTV is broadly the same as at the year-end at 33.8% compared to 33.2% last year, and that will fall to 33% as we complete post-period end sales. Looking forward, we will continue to manage our debt arrangements to ensure that the refinancing risk is mitigated and that we are able to take advantage of our increased scale to diversify our funding sources. To ensure increased liquidity, we are in active discussions on the new RCF facility for 5 years with 2 plus 1 extensions for an amount of GBP 175 million. We have ensured through the merger that the enlarged group, as was previously the case for LMP is not subject to any material refinancings for the remainder of this financial year. But it's important to recognize that debt which matures at the end of next summer, if interest rates remain elevated, will not necessarily be met through refinancings, but may be dealt with through a mixture of available headroom at GBP 661 million, new debt facilities I've just mentioned or further non-core asset sales. Our focus is to ensure that we retain full optionality around these debt maturities. And hence, we are considering a credit rating towards the end of this financial year to allow us to potentially access the public bond markets. Our contracted rent roll following the acquisition of LXi and CTPT was GBP 339.7 million. Since the year-end, we've added a further GBP 7.7 million through a combination of new lettings and rent reviews and regears, which Andrew will come on to later. And although much of our focus has been on non-core disposals, we've actually been a net investor. The loss of income of GBP 12.3 million on the disposal of high-yielding assets has been compensated by new income from lower-yielding but higher growth assets of GBP 10.5 million. Our contracted rent roll now stands at GBP 345.6 million. Looking forward, there is short-term reversion within the portfolio of GBP 26 million, a combination of open markets and contractual rent reviews which will increase the rent roll over the period to March 2026, more than offsetting the loss of income from post period end disposals of GBP 7.4 million. Therefore, by March 2026, the rent roll will have increased, taking the forecast position to over GBP 364 million. This will generate further earnings growth, which supports our confidence that we will continue to be able to grow the dividend. We have already increased our quarterly dividend payments in H1 of this year to 285p per share, which has generated a half year dividend increase of 18.8% and in anticipation of reaching 12p for the full year and then continuing to grow the dividend in the following years. And finally, a brief look back, which puts the increase in the rent roll into context and clearly demonstrates that in the last 10 years, we've been able to increase earnings per share more than threefold. And we are in the 10th year of dividend progression, as Andrew says, with excellent dividend cover. Our total property return and our total shareholder return driven both by shareholder appreciation, share price appreciation, but significantly most recently by dividends equates to compound annual growth rates at 10% and better. And on that note, I'll hand back to Andrew.

Right. So I'll run through the property portfolio. As I touched on earlier, we have created the U.K.'s leading triple-net REIT. The focus is on investing in the winning sectors, as I said earlier, as macro trends continue to influence consumer behavior and that impacts on our capital allocation decisions. We want to own the strongest assets. We want to own assets that our customers love to be in. They stay longer, they invest more in our buildings, and they eventually will pay us more rent. We want them to be mission-critical. This helps our exceptional income metrics. I've talked about it before, occupancy, longevity limited leakage, and that will also translate into growth. We have, as Martin said, we have GBP 26 million short-term reversion to collect over the next 18 months, and that's a combination of contractual uplifts but also open market reviews. Whilst many of our peers talk about building or developing their rental growth, we will just collect it. And we now have an efficient and scalable platform that is both low cost and internally managed with strong shareholder alignment. So if we -- this is a common slide that we put up for probably the last 23 of these. Our triple-net thematic creates the umbrella under which we allocate capital, and we want to focus on those sectors that are benefiting from the structural tailwind. As you can see there, logistics now is up at 45%. That remains our strongest conviction call, but we continue to look at growing our investments in convenience retail as well as selective entertainment, hospitality opportunities as they present themselves. We have to remember that one of the things, as far as the consumer is concerned, time is increasingly becoming a rare commodity. Our sector investments have all delivered. And logistics have shown ERV growth of 2.6%, relatively flat capitalization rates that helped deliver a total property return at 3.4%. Convenience Retail delivered a 3.4% increase in ERV and with a higher starting yields 3.8% total property return. Our healthcare investments delivered a total property return of 5%, helped courtesy of an annual rent review that fell in the period, which increased the capital value by 2.1%. On entertainment and leisure, delivered a total property return of 4.1%. So you put all those together, I mean, the others effectively are non-core and those will be assets that we will look to exit over the coming periods. But overall, the portfolio delivered a 4% total property return, supported by a net initial yield of 5.3% and the reversionary potential highlighted by the equivalent yield there of 6.4%. It's been an active period for disposals, Will and Valentine have had -- and their team have had a busy time, 55 disposals. I mean, actually, when you put the 55 into the GBP 234 million, you get to an average lots of about 4-point-something million. I mean, there's a lot of work here. Now I think that actually has been a positive for us. I mean, I think the investment market is much more liquid at the smaller end than at the bigger end probably largely down to the fact that debt costs are more elevated today than they have been over the recent past. So we're very, very pleased with our GBP 234 million of sales and we will continue that process. And they have been, as you can see there on both the right and the left, they have been non-core sectors where we are not going to build a market-leading position in, whether or not it's care homes, offices, where my thoughts are well written, training centers, large groceries, formats, leisure assets, car showrooms, some pubs, some smaller hotel assets. So we've -- it's been -- and the market is actually pretty good for us. And actually, Martin asked me earlier what's highlight of these results, actually, I think the progress we've made in selling non-core has been excellent and we will continue that process. We are -- we have another GBP 80-or-so million in the pipeline that we hope to exchange before, before we finish for Christmas. And therefore, the average lot size of the non-core is very, very helpful in today's markets. Acquisitions. We see -- we continue to see opportunities from various vendors, and it is a much less crowded pitch. Whether or not it's defined benefit pension funds coming out of direct real estate whether or not it's occupiers looking to raise money more cheaply out of say and leasebacks as opposed to from bank debt, whether or not institutions looking to fund in better redemptions and looking for speed of sale and a certainty of sale or whether or not it's developers turning to us for development finance, because despite all the banks in this room, they are -- they will shy away from a number of these development fundings. And so, that has provided us a rich vein of opportunities, and we see that continuing. As Martin touched on earlier, some of these acquisitions have been made at yields are lower than what we've been selling, but the growth trajectory is so much better. And therefore, you can see there roughly a 6% net initial on the way in with a reversion to 6.75%. And we expect further announcements to be made over the next couple of weeks with deals that we have in the listed hands. Asset management, again, our asset management team have also had an incredible period as we -- they have embraced the larger portfolio and our higher intensity approach to sweating our assets and this has yielded some excellent results. I touched on it in my opening slide. You combine the average uplift across the rent reviews, both the contracted and the open market with the regears, the 28% that we've been getting on average uplift at regears, it comes out at just under 18% average uplift. And when you look at some of the brands there across the screen, we're dealing some best-in-class customers here. We have got some fantastic tenants, and we're very, very proud of that. And that's why we don't have a rent recovery problem. We don't actually have a vacancy issue. It'll be part of our portfolio where we wish sometimes the vacancy might be a little bit higher. But we enjoy full occupancy, we enjoy strong like-for-like income growth. And as Martin and I have already touched on, we have that reversion to collect over the next 18 months through a combination of market rent reviews, leasing and contractual uplifts. Like I said, our rent is going to grow. We don't have to build or develop to do that. It's going to grow. I could say whether or not I'm here or not. That's probably right. And as always, and it's very much part of our DNA, we're always looking to improve the quality of our portfolio and the assets that we hold within it whether or not it's by acquiring new buildings or whether or not it's actually spending money to improve the buildings that we already have that will improve the occupier desirability, but also our ESG performances. We want to ensure that our portfolio is always fit for purpose and that we continue to own desirable real estate. Our occupier led approach ensures that we want to be the partner of choice and that over this -- over the period is actually been incredibly helpful. We've worked very, very closely with Marks & Spencers on a number of opportunities, and we continue to work closely with them for their -- as part of their store opening program. We've got Weymouth. We've got somewhere -- I'm not allowed to tell you where it is. And also, we're always looking to improve, I'd say, the EPC and ESG credentials of our buildings, 3 solar projects carried out in the period, I think with 10 in the pipeline, and that will continue to lift our EPC ratings. We're up 85% to 87%, A to B up to 52%, and we will continue to make progress on it. For us, it is part of our DNA. It's what we do. It's not a big ask. So final slide on the outlook. The macro events continue to influence investor sentiment towards the sector with elevated 5-year swap and 10-year gilts up trading very close to 400 basis points. I think, a smidgen under 400 basis points this morning, but only just. However, we will see continued interest rate cuts and decelerating inflation will hopefully bring more stability and confidence. But you have to remember, the U.K. consumer remains resilient with full employment and real wage growth. At a real estate level, we think that structural cracks across the various sectors will continue to widen. We see sectors the strongest fundamentals winning out. We call it -- this is a takeoff from Mike, bed sheds and breads. The disputed sectors are seeing CapEx and OpEx rising quicker than net rents and we will continue to seek opportunities for external growth, a small cap external REIT structures continue to get exposed. We want to cement our position as the U.K.'s leading triple net income REIT, our all-weather portfolio continues to be underpinned by our investment in the structurally supported sectors. Today, we have a scalable platform, which is driving -- operating efficiencies and will give us access to bigger opportunities in the coming periods. And our exceptional income characteristics offers the certainty, longevity and that growth will support our journey for continued dividend growth. So that's all from us from the formal part of this morning. We're very happy and welcome any questions in the room, and then we'll turn to the screen to see if there's anything on the phone. So thank you for your time.

Vanessa Guy from JPMorgan. Probably not the easiest question to answer. So there's been a lot of market investors commenting on the first order impacts from the recent budget. I was wondering if it won't be a first order impact for you guys, but mainly on the side of occupiers. Are you seeing any changes in behavior?

Well, I mean, I've met with a couple of retailers, in the last week or so, pretty grumpy, whether or not you'll have read about letters that have been written by the BRC, Marks & Spencer, Tesco and Kingfisher referenced it yesterday in their results. I think it's tough. Now, they're big companies, they make a lot of money so they can absorb it. I think the smaller, mid-sized retailers, I think that is going to be tough. I think, probably shopping center tenants feel more exposed than maybe logistics so even retail park tenants will feel. But the retail sector feels that it's taken quite a lot of that, brunt of it, and it feels a bit harsh. And as reading the comments last night from the Chancellor well, that was a one-off hit against businesses. I won't come back for more. Yes, we'll see. We don't know. I mean, look, she inherited an overdraft and she's got to sort it out. She decided to do it in one hit, hopefully. But it's pretty hard. There's some big increases. It's actually not the rise in NII, that's the issue. It's the threshold that's causing most of the grief. And that extends to some of the pub groups as well. It actually doesn't impact our hotel operators. We were with one of them the other day. It's less of an issue. They're just not as -- they're not -- there's not as many people involved in that today. It's much more automated, even those robots that do all the hovering for your help.

Edoardo Gili from Green Street. So as you know, the net lease game is all about cost of capital. So how do you think about your own cost of capital when you own such a diversified real estate portfolio in terms of acquiring more logistics assets? And how do you think that or how do you square versus competitors in terms of your own cost of capital? And how much can you grow using it?

I don't worry about our competitors that much. But in terms of -- look, when we were scoping out a potential acquisition today, we're thinking about an ungeared total return that's going to be probably north of 8.5 into the 9s. That's a combination of income and growth. But you'll obviously be conscious of what your cost of debt is going to be as well. I think the certainty of rental growth in the logistics market gives you incredible comfort. I mean, that doesn't mean we want to go -- we're not buying in the forwards, for example. But that's what we're looking for. I think, finding that almost certainty of growth in organic growth in some of the other sectors is more difficult, because actually, you might get it, but you have to pay for it. I mean -- if I look at our convenience retail business, it's a good -- it's improving all the time. But getting rent reviews out of retail warehousing is tougher than some people think it is, but it's coming -- it will come. We don't see that issue as in logistics. And then, there's a part of the portfolio that guarantees us roughly around about 3%. So as long as that's priced properly. And you would pay more for an asset that guarantees your growth to one that you've got to work a bit harder for. I was the Chief Executive of another company that not so long ago in this space -- in the real estate space. And he was explaining how hard they have to fight for rent reviews, like really have to fight hard. And then they might get 1 or 2. It's not enough over a 5-year period, that's just not enough. So I think it's horses for courses, but that's how we think about it. We're looking for the 8.5% -- might be the wrong side of 8.5%, but it depends on how certain it is and we're also about the credit.

Miranda Cockburn from Berenberg. Martin, could you just talk us through the cash EPS to the EPRA EPS? And I mean, it may have been in your report, but I haven't gone through it yet. I don't know if you can just sort of talk us through that 6.6 forward to where the cash will be?

So look, I said, I thought we had full cash cover and that is because...

It's just really....

Yeah. If you take off from the EPRA earnings, which is about GBP 135 million, the rent smoothing impact is about GBP 25 million. So with one or two other cost capitalizations and one or two other adjustments we've made to get to our FFO, our FFO is almost bang on 100% of the cost of the dividend.

And then the second question, just in terms of retail warehousing. I noticed that you bought a retail warehouse part recently. Can you just sort of give us a thought on that going forward, whether we could see you buying more retail warehousing, whether you see these opportunities out there?

Look, I think, that as a concept, I'm more in favor of out-of-town convenience than I am for in-town experience. I'll go back to a comment I made earlier that, time is a commodity. I think, there are good retail warehouse opportunities. I think, there are also some over-rented, overvalued retail warehouse opportunities. So we will be -- it's not a case of one color fits all. It will be on an asset-by-asset basis. I mean, Mark, Valentine and I, in particular, have deep experience in the retail warehouse sector, probably more than most other management teams out there. We understand the occupiers really well. We understand behavioral, consumer behavioral trends as well. But we still think there's some right pricing, right renting to be done. I mean, there are some portfolios that have been traded at elevated yields, but it's because they're over-rented. Over-renting is not something we particularly seek okay, quite the opposite. And it will be selective, Miranda. Of course, we prefer smaller than bigger. I mean, the asset that we bought the other day was only -- I mean, it's three retail units and two drive-thrus. I might argue that -- I mean, Will might have different view, but I'd argue that the drive-thrus offered better reversion than the units. I mean, the drive-thru market is a great fun. I mean, amazing. Amazing what people will pay these days for McDonald's. So that's -- yes, we're wide eyed about it. But again, it's triple net. We're not interested in running big shopping parks and offering toilet facilities.

Andrew Saunders, Shore Capital. You've mentioned your exposure to industrial getting back to 50% by the year-end. I wonder if you could just share with us your thoughts about where that might ultimately get back to what we can expect in terms of further capital recycling and perhaps as an add-on, have we seen any sort of change in investor appetite post the budget for deals?

The movement from 45% to 50%, it's like almost guaranteed as Monday follows Sunday, right? It's just going to happen, right? The non-core gets sold, it gets reinvested into sectors that are going to treat us better. So it just happens. I mean, we don't sit there -- around that time we don't sit there, we must buy more shares. It's going to happen. It's just the way it is. I mean, I think there's a -- I think, I had a slide with me or something. Year-to-date, what we got, we've done 203 of acquisitions and 193 of that happened to be in logistics. Well, some of that, that's just because that's where we thought that we're going to get treated better. And if I look at the ones that are under offer, I guess what, there's GBP 90 more million come in. So -- and I don't know where it is, it will just keep going. We don't have targets internal, not sitting there going, we've got to go and buy another 50 million share. Otherwise, I'm not going to hit my 50%. It's going to happen. And like I said, it shows Monday follows Sunday. I mean, the investment market post budget, V?

I think, it's not particularly active. It's slowed down a bit and transaction volumes are certainly down in Q4 compared to earlier on in the year. But there is still money out there. But the advantage we have is that is our relationships. We are doing a significant funding at the moment or green one because we have a relationship with the developer, and we have a relationship with the tenant, which has allowed us to get a very attractive yield, which on a funding and what I'm really pleased about with the funding market, at the moment is that, you get a really respectable discount to what it's worth up and built again. I mean, we didn't -- we haven't seen that for a while, but we're seeing it now. And the market really for us is about meeting -- it's not necessarily -- we're not in a competitive situation in some of these circumstances. It's just about meeting the developer or the vendor's aspirations with our pricing aspirations. We do that, we do a deal.

You've been very patient. I think, you're too close to the desk to see you.

Bjorn Zietsman from Panmure Liberum. I guess, my question revolves more around your -- your shares enjoy a premium rating. Considering the discounts that competitors or peers are trading at, does it not make more sense to focus on M&A rather than the direct market?

What am I allowed to say here? Look, -- we look at all opportunities to allocate capital. And I mean, whether or not it's an asset or portfolio to Valentine's point, development funding or corporate, I mean, I don't think anybody could say that we're going to shy away from M&A, all right? We've done three in the last 5 years, is it? -- yes, 4.5 years or whatever, we're wide eye. I mean, it does take two to tango most of the time, to be clear.

Just a follow-up question. In the sort of long lease space, are there any areas or sectors you're more concerned about becoming more over-rented as time goes on?

Well, look, we -- the one area of long lease space that we've avoided is big food stores, because sale leasebacks in big food stores started a long time ago. I mean, I've been involved in joint ventures on sale-leasebacks with Tesco, Sainsbury and Asda during my career, and that goes back a while. The compounding impact of that has taken certain rents to levels that are way above where the open market is. You've got some portfolios out there with average rents of GBP 30-odd and you've got open markets that are probably less than GBP 20, maybe management would arguing with me on that. And these are not only over-rented, but also I'd say that because of consumer behavior, a lot of these are also overspaced for the original purpose. I mean, I do struggle to believe there aren't too many locations in the United Kingdom where you need 115,000 square feet food store. Now people say, we're going to use part of it now for omni, but that's what you -- that's an expensive omnichannel solution. We think that, that's over-rented and that's because the consumer shopping patterns have made the open market rents reset and hence, why our exposure is -- we don't have any big food anymore. We've just sold that beauty in Halesowen. And our exposure in convenience grocery is very much M&S, Aldi, Lidl, Waitrose, Home Bargains, B&M. So we think about that, yes. So we will not be doing big food at those rents.

James Carswell from Peel Hunt. Andrew, you touched about on the market being more liquid at the small end. Just in terms of the larger lot sizes, are you seeing any opportunities given the size of the LondonMetric, the capital that you have available, I mean, to do some bigger deals, maybe an even better pricing?

Yes. Look, I mean, Valentine touched on it a little bit. If you look at that note, that bullet on Slide 16, that says under of GBP 116 million, 80% of that money is probably going on a deal -- on one deal. And we're not arrogant to think that we're the only show in town, but the field is a -- when you go past GBP 50 million, the field is a bit less crowded. There's less people trying to knock you off the board. So we'll do that. But at the end of the day, the market is -- there's some money out there. It's -- but again, as Valentine said, the bigger end, probably what -- over GBP 40 or GBP 50 million gets a bit -- the air gets a bit thin. And that's, it's a fact.

And then, maybe just on the LTV, given valuations seems to be kind of back on the right, I mean, is now arguably time to be looking to increase the LTV slightly? Or are you pretty happy where it is?

I'd be very happy if it was another couple of points higher as well. I feel pretty happy about it. I mean, this time last year, was it some last year or maybe, we were down at below -- just below 30 -- weren't we were at 33 today if we were -- it's fine. But it's not going to be a target, because if you set targets, investment team will go out to spend the money by the end of the week. I've learned that lesson. And all the disposals get pushed off the desk. That was a complement in there somewhere.

Sam from [indiscernible]. Just a quick one. On the EPRA cost ratio, it's obviously come down quite significantly. Is that -- are there any one-offs there that we should be careful of? Or is that a good number going forward to look at?

I think it's a pretty good number. Going forward, I think, we said after the acquisition of LXi that we thought it would be somewhere between 7% and 8%, which it is. Now I think there are -- I don't want to say to you, it will get better because then they hold me to it. But there are some costs in there that are non-recurring. So you can clear out a lot of costs quite early, but then there are ones in sort of year 1 after the acquisition, you still got some legacy costs that by next year would have gone.

I mean, just to add on that, I mean, I go back to the question earlier. One of the attractions when you look at M&A is what economies of scale that come with that. Okay. So we've got another one.

Eleanor Frew from Barclays. So when you discussed your refinancing the full year, you mentioned equity as one of the tools in your kit, but I don't think you did today. So just wondering if that's still on your mind or if you're more attracted to the bond market?

I think we -- on the debt side, we need to have full optionality. And that is the main reason we're going for the credit rating. Whether that's a U.S. private placement, which we've done before or public bond market, which we've never done. Would we raise that -- we've never said we wouldn't raise equity. It will be horses for courses again, if it's off a scale that would require it and the numbers work for us, then fine. Someone made the point earlier, we trade as a -- the share price is trading very well and so why couldn't we use equity if we needed to.

Okay. Right. Okay. So I've got a question. Fortunately, this is not for me. Actually, it's not written here. I'm just going to ask and I'm just picking one up. When you talk, you touched on obtaining investment-grade credit rating with LMP now being a triple net player in the public debt markets, a tool that allows you to prolong debt maturities even further or debt maturity is not a big concern of yours?

Debt maturity is always a concern, but I think it is a balance. We have such an active asset manager that we need to have that combination of long maturity, but also shorter dated revolving credit facilities, which gives us very much more flexibility for when you guys come in and so you know the asset, I told you guys are going to hold forever when I want to sell it tomorrow. So we need that flexibility. I think the length of our leases gives us the opportunity to take some of our debt a little bit longer. I think, the bond market can do that. It's more binary, I think, than the private placement market. I've always quite like the private placement market, because you can mix and match and you can have a bit of 7-year, and a bit of 9-year, and a bit of 12-year. But that part of the debt stack is always where we see length rather than flexibility.

But you also mentioned your exceptionally low operating costs. So how do these cost synergies compared to what your expectations were?

On the cost ratio, I think, I just answered it in the way. I think, we always thought we could get it down to somewhere between 7% and 8%, and that's what we've done. We've taken a huge amount of cost out to CTPT, where actually we imported 0 cost. We've taken the management fee out of LXi. We've brought in a very small number of people. We've cleared out some of the external arrangements they have for the management of their finances, and that's saving a lot of money. And so, I think, we'll be in a similar range going forward.

Great. I've got no other questions or [ is that a way it do not ] works probably. So well, it takes -- thank you for your time. Thanks for your questions. Thanks for your interest. And hopefully, your next set of results is equally as good.