Picton Property Income Limited (PCTN) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Picton Property Income Half Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself; however, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Michael Morris. Good afternoon to you.

Thank you, and good afternoon, everybody. My name is Michael Morris. I'm the Chief Executive of Picton. I've been involved with the group since launch and sit on the main Board alongside Saira.

I'm Saira Johnston. I joined Picton in 2024. And prior to that, I spent the last 20 years-or-so in the real estate sector and private equity and institutional fund management houses.

So today, we are going to give you an overview of our half year results that were published this morning. We'll give our thoughts on the U.K. commercial property market. We'll talk in a bit of detail about what's been happening in the portfolio, the activity and also the outlook looking forward and the pipeline. After that, we'll have the opportunity for Q&A. So the results today, I think, were really good, recognizing the underlying market conditions we're operating in. Our focus on shareholder value through our buyback program has seen positive results. Within the underlying portfolio, we've grown the rental value of our assets over the period. We've seen a positive total return, and we've taken more activity to reposition the portfolio with a view to reducing office exposure and at the same time, growing earnings. And all of these areas we'll talk through in a bit more detail. But firstly, we'll look at the results themselves.

Thank you. So for the 6 months, we delivered positive financial performance with increased profit and increased total return compared to the prior comparative periods. From a profit after tax, we're reporting GBP 15.1 million for the 6 months and a total return of 3.4%. Our earnings per share were lower in the last quarter due to an occupier break at Rushden and we'll talk about that in a bit more detail later. And earnings for the 6-month period were 2p per share. Alongside that, we paid dividends of 1.9p per share, and that's on the back of an increased dividend in May this year of just under 3%. So our cover, we are pleased to see remained comfortable at 106% for the 6 months. From a net asset or balance sheet perspective, we closed at 102p per share, which was an increase of 2% over the 6 months. The next 2 slides talk to the movements and the bridge between the year-end or prior comparative period, firstly, on net asset value and then I'll come to earnings. In terms of the NAV movement, we've seen an increase of 2%, which is really driven by the moderate but continuing valuation increases alongside our accretive share buyback program. I'll just talk through a couple of points of note on this chart. So firstly, we completed our London office disposal and proceeds of that just under GBP 35 million came in during the period. That was our Stanford office building. We've retained the lease for the first floor at the building. And really, that was the first step in recycling proceeds from lower-yielding assets into higher-yielding assets, and we sold that at a valuation 1% higher than the end of March. Overall, there was a small loss in terms of that sale due to the costs associated with it. Otherwise, from a valuation perspective, we saw like-for-like portfolio increase of 0.6%, and we're pleased to see that positive valuation over the last 5 quarters now. They have been moderate but consistently positive valuation movements. We do see differences across the sectors that we invest in with our industrial sector, just under 70% of all our assets are in the industrial sector with that contributing the largest amount to that valuation increase. We've seen offices reduced in value, 1.6%, which is more in line with the market, and we'll come on to talk about that in a little bit more detail later. We are investing in our office assets, and we do believe there's a bit of a time lag between that investment and the impact on capital. And lastly, a point of note on our retail and leisure, largest percentage increase. It is our smallest sector weighting and that was attributable to the lease regear that we did with one of our hotel occupiers at Carlisle. And as part of that regear, we received a GBP 2.4 million cash payment, which was recognized in the period. In terms of our share buybacks, we bought just under 14 million of shares back at an average price of 77p and a discount of 25%. And that share buyback program has been accretive during the period and it contributes 0.7p per share on a NAV per share basis. Moving to EPRA earnings. So EPRA earnings in the 6 months were impacted by a lease event at Rushden, where we had our occupier exercise its break, and I'll come on to talk to a few points on the financials in respect of that. But if we exclude that tenant and that building, Rushden and our disposals both in this period and the prior financial year, we actually saw underlying net property income increase of just around 2%. And that again was largely driven by the reversion and leasing activity in our industrial assets. From an office perspective, we had surrender income of GBP 0.8 million during the period. And from a retail and leisure, that did offset some of those increases across the industrial and office assets as some of the over-renting in those asset -- retail assets unwound during the period. We think that's largely come through now, and we'll talk to that in a little bit more detail in the sector slides later on. The pie chart or doughnut at the bottom really just shows that our overweight industrial assets are contributing a larger element and our move to reduce office assets and our industrial overweight is really contributing to that growth. So we're seeing 61% of our underlying net property income from our industrial weighting. Coming on to Rushden. So you may have seen an RNS, which was issued last month. Our occupier Rushden exercised their break. And as a result of this, whilst the break is effective in October, we have written-off the lease incentives in respect of that lease during the period. That is a one-off. And looking forward, we will be recognizing part of the break penalty in the latter half of the year, and that equates to GBP 0.8 million of income in the latter half of the year. So we've had GBP 1 million of one-off costs during the 6-month period, but it looks quite different on a look-forward basis. Moving to a couple of points on capital structure, first debt, and then I'll move on to equity. As a reminder, we have a really strong balance sheet, a strong cash position following the sale of Stanford Building and a strong balance sheet generally with a significant amount of value in our long-term fixed debt structure. That isn't shown in the 102p per share. That attributes another 4p on to that. So our EPRA NDV is 106p per share at the end of September. We've reduced our loan to value over the course of the period as a result of the sale of Stanford Building to 22% and our weighted average interest rate is 3.7%, which is well below the current market financing rate. Our debt maturities are over 6 years, and so we've got really good visibility on our financing costs. We have no refinancing risk in the short to medium term, and that puts us in a really good place to position the business going forward. One other point of note, alongside our fixed term loans, we've also got a revolving credit facility. We refinanced that in May this year and extended its maturity. There's GBP 50 million available under that facility, which we think puts us in a good position for operational flexibility, CapEx and also to take advantage of accretive opportunities going forward. In terms of equity, we've continued with our share buyback program over the 6-month period. We think that, that's a way of creating value for shareholders. I've shown that in terms of the NAV accretion over the period. And we've also seen that coming through on earnings with just under 0.1p per share accretion from an earnings perspective. We've deployed GBP 10.5 million into our buyback program over the 6 months at a weighted average price of 77p, a discount of 25%. And both of those have been accretive for our shareholders. At the end of September, we had just under GBP 12 million outstanding but committed to share buybacks, and that really was the residual amount of the GBP 12.5 million program, which we recommenced in September. Just by way of background and as a reminder, we paused our buyback program in August and the chart at the bottom, which shows the Picton share, price of the EPRA NAREIT shows in August a slight impact on our rating. But since the buyback program has been recommenced, we've been pleased with the rating of our share performance relative to the NAREIT index. As we stand today, we still have GBP 9.5 million of that program still to be deployed. Final slide on capital. This is a bit more about how we see those proceeds from Stanford Building being deployed across our capital sort of priorities. We've talked about this in prior periods where we've had disposals, and this really sets out how we see an allocation of these Stanford Building proceeds across those 4 areas. I've mentioned the share buyback program. So we've committed GBP 12.5 million of the proceeds to that. And alongside that, we'll be looking to reinvest in our existing portfolio. We believe there's a lot of value wrapped up in our portfolio. There's a lot of reversion to unlock and investing into our assets, particularly in the office sector to unlock some of that reversion is key for us. And alongside that, we are also looking at investment opportunities. We set out at the beginning of the year an intention to recycle proceeds from lower-yielding assets into higher-yielding assets. And the remainder of the proceeds we'll be considering pursuing that further. Moving on to the market update.

Thank you. So I think we're all kind of broadly familiar with what's going on in the wider U.K. economy. And I think the headline really is against that backdrop, property values have been pretty stable. And you can see there is a positive growth in industrial and retail, but offices have still struggled a bit, recognizing some of the sort of cost demand characteristics. We're seeing rental growth across all sectors. Again, very clear, industrial continues to lead that. Occupational demand, we think, has been pretty good. I mean we've certainly got quite a good pipeline ourselves. But it does reinforce in my view, the view that asset quality is absolutely key in terms of re-leasing in the current market. And we'll talk about the occupational markets in a little bit more detail on the next slide. So in terms of the headline, really measured by MSCI, which is really the only data that is out there, 29 of the 32 subsectors showing positive rental growth, and that reinforces that resilience points that I mentioned earlier. In industrial, occupancy is running at 90%. Rental growth, as you can see from the chart, is positive across all subsectors, albeit a little bit of tail off in the latter half of the period, but nevertheless, still positive. In offices, this is where occupancy is lower overall running at about 75% occupancy. Interestingly, in many sort of historic cycles, that level of occupancy would have impacted rental growth. I suppose to some extent, it maybe is impacting rental growth. But nevertheless, rental growth is positive. And I think that ties back to the story about being able to improve your assets and improve rents, but there is a capital cost to that and we'll see that on the next slide. And then finally, on retail and leisure, you can see that occupancy is reasonably high, maybe -- the sample size here is a little bit skewed towards some, what I call convenience retail. But nevertheless, you're starting to see an improving rental story in the retail and leisure sector despite some of the sort of challenges that are out there. In terms of the investment markets, well, really, the positive capital growth is primarily coming from industrial and retail and leisure sector. You can see that quite evident in the slides. In terms of offices, that has been through a correction and kind of post-COVID work-from-home sort of ESG cost upgrade being factored into valuations going forward. But you can see that rate of decline is reducing. And I think our own sense is that, that has largely worked its course. So now we'll just sort of show how that fits into our own overall portfolio. With the disposals we've made in recent years, we're now running at nearly 70% in industrial warehouse and logistics assets. Our office exposure has reduced and retail and leisure broadly constant over that period. The other thing I think I'd just sort of note is, of our entire portfolio around 60% of that is invested in the Southeast of the U.K., a little bit in London also with the balance spread pretty evenly across the rest of the U.K. Very diverse occupier base, 300 occupiers. That kind of underpins the cash flow that drives the business. And we can talk to occupancy in a bit more detail on the following slide. Sorry, my mistake. There's a slide here on portfolio overview and a lot of activity over the period, nearly 50 transactions. Key is that we've been able to grow the underlying rental value of the portfolio. That came at a time when we went through a sort of valuer change as well. So really interesting to get 2 independent sets of eyes on the underlying portfolio values that are provided by our independent valuer. You can see in the blue boxes the bar chart showing where the transactions overall have all been ahead of either the previous rent or against market ERVs, which I think is encouraging in terms of unlocking that reversion. And speaking of reversion, there are 2 key drivers from our portfolio at the minute. One is the rental upside from vacancy, which is just over GBP 5 million, so meaningful. But equally, resetting rents to market levels, that's just under GBP 5 million. So it's nearly split 50-50 across the 2, and we'll try and provide a bit of a breakdown on that as we look forward.

So just talking about our occupancy in a little bit more detail. We closed at 90% occupancy at the end of September. That was lower than the year-end. So we just thought to give a little bit more color in terms of what that makes up and also a bit more comfort actually that we were seeing lettings across the 6 months in all of those sectors. So in terms of our occupancy or vacancy at the end of September, 81% of that was focused in offices and offices comprise a large component of the space surrendered. So space surrendered was where we received surrender premium income, which gives us some buffer in terms of rental income and also space returned was also concentrated in the office sector. In fact, it's 2 specific buildings, which we'll come and talk about on the next slide. But we think it's important to just recognize that this is all long-standing vacancy, almost 50% of the vacancy at the end of September only arose in the 6 months period. Another point to note, we did sell, as I mentioned, Stanford Building. That wasn't so fully occupied. So that sale has also indirectly impacted our occupancy or vacancy numbers.

And this chart really hopefully provides a bit more color as to that change in occupancy over the period. And I think the key -- if you think about looking at the chart from left to right, as we look at Parkbury and Radlett, which is industrial, Tower Wharf and Bristol, which is offices, Easter Court and Warrington industrial moving all the way through, those are all where we have leased space during the period. So that's where we've found occupiers, relet, as we've said through the previous slides, those have been ahead of ERV. And then at the far right of the chart, this shows where we've had space come back. So Farringdon, we've had an occupier leave, but that's interesting because some of you may recall, we've got planning permission to add another floor to that building, which we got earlier in the year. So actually, having a bit of void on the top floor isn't a bad thing because that will kind of practically help us unlock that. And Saira mentioned previously in Chatham, another big office vacancy coming back. We've actually been paid to take that space back. So that allows us to control the leasing. We decarbonize that asset about 20 -- well, maybe in the last year, actually, we did that. So that now means from an EPC perspective, meeting the needs of occupiers today. The building is in a good shape. We're going to use a little bit of the money that we got given on the surrender to upgrade the reception. But after that, the building is ready to go and be re-leased.

And just to give you a bit more flavor of what we're doing to reinvest in the portfolio. Michael mentioned that we think having quality assets is really important. And we've been looking to upgrade our assets because we believe that is the best way of retaining and attracting occupiers and we're particularly focused on that office vacancy, which we've talked about in the last couple of slides. So over the 6 months, we spent GBP 4 million across our portfolio, and we have a pipeline of just under GBP 7 million of live CapEx projects, which we expect to spend over the remainder of the financial year. The chart at the bottom shows where those projects are and shows the spend expected over the full financial year. The pale, sort of pink color is the amount that's committed over the remainder of the year. So really focused on offices, which are sort pale pink and burgundy being an area of focus. And we've seen that strategy work. We've talked about having quality assets and actually investing in Tower Wharf was something that we did in the last financial year, and we've seen 2 lettings as a result of upgrading that space. We're now left with the final part of that work, which is decarbonizing the air conditioning. So that's something that we're bringing in as a next phase. And alongside that strategy is really the same kind of thesis for all of our office assets. It's trying to align the spend with leasing events to manage that return on cost, and give us protection that when we're spending money on the assets that that's actually linked to improved occupancy and occupier retention.

The next slide just talks to the industrial part of the portfolio. As I say this is where nearly 70% of our assets are. At September, we're running at 98% occupancy. We've seen strong ERV growth. We've seen an increase in contracted rent. And again, you can see on the blue table in gold, the premium rents that we've been achieving on rent review or lease renewal that are resetting those rents. If we turn to the office sector, we've spoken about the occupancy point, but we've again through our refurbishment and upgrading, we've seen an ERV increase across the portfolio as the space has improved. We've divested from our largest office asset, Saira has mentioned that, and we've received over GBP 1 million in surrenders. Again, you can see there generally rent renewals ahead of previous rents, a couple of lettings we've done slightly what I call below market, but those are instances where either they were taking space in its existing condition, for example, very short or next to no incentives and our view in the current climate is a bird in the hand, and we're very pragmatic about getting space leased. In retail and leisure, running high occupancy, which I think is great. We've had leasing success. If you look online to the presentation, you can see a few more examples in the appendices that we've had some good leasing success. Again, we've seen ERVs grow less than the other 2 sectors, but nevertheless, growth there. And for the first time in a while, our ERV is ahead of the contracted rent. Saira mentioned about the premium that we've received on this asset, but it is a meaningful number, recognizing the overall portfolio value here is just over GBP 80 million. So to talk to 3 key example transactions over the period, just give a flavor of what we're doing across all 50-or-so of our assets, Bristol has been mentioned already, but when we spoke to investors in March, we were saying that we've invested capital here, and we were hoping to lease the space. We now have leased that space, which is great. We've got one new external occupier into the building. And then we also had an existing occupier more than double the space requirement in the building, and they've moved, we get another unit back, but we have got a sort of tried and tested and indeed proven refurbishment program here. In our industrial portfolio, we've expanded an occupier in a building in East London. Interestingly, there, a data center occupier. There's been a lot of talk recently about data centers. We're using ultimately more traditional industrial units for data center uses, but the capital is being bought by our occupiers rather than on Picton But interestingly there, we've expanded a unit as their business is growing. They're now in 3 units rather than 1. And the rent we got undertaking that transaction was 40% higher than the tenant that vacated. So really good to be able to get sort of units together to make that happen. We've also surrendered another unit on that estate, light refurbishment going on. But again, we're expecting sort of good rental uplifts relative to what outgoing occupiers are paying. And then I think we've already sort of spoken about this hotel in Carlisle. But I think the key point here is it was a relatively short lease, and we were keen to really sort of reset this. And so what we've done is we've accepted a lower rent sort of looking forward in lieu of an some upfront fee now, we can use that money for reinvestment into other assets into CapEx across the portfolio. But that sort of derisks the cash flow because ultimately, we've embedded value in the occupational lease. And I think that's attractive on a number of accounts. But certainly, for us here as landlord now, we know that there's a very secure cash flow associated with that hotel. And overall, we did this restructure, received the money and the underlying value of the asset really didn't move because of that balance of risk.

Moving on to outlook. A key area of focus for us looking forward is really how we unlock the reversion in the existing portfolio. There's a significant amount of reversion, as Michael has mentioned, in terms of re-leasing that vacancy and also resetting rents to market levels to ERV. The net initial yield on the portfolio is 5.2% and the reversionary yield is over 7%. So that's nearly 20% increase in terms of that reversion. And so what we think about is how do we bridge the gap between that contracted rent of GBP 45.7 million to just under GBP 56 million of ERV. And that comes down to 2 component parts that we've talked about. But just to highlight here, in terms of that vacancy, you can see that vacancy bar being largely shaded in burgundy, which really reflects the vacancy in our offices, and we've set out our sort of strategy of refurbishing and upgrading that office space to attract occupiers and we're seeing that starting to work. In terms of the reversion and resetting rents to ERVs, that's whether that's on rent reviews or breaks or expiries that element is largely concentrated in the green sector here, which is our industrial weighting. And that's a sector that we know well. We're certainly seeing that reversion come through in all of the leasing activity that we do and the stats that we've presented to you really show evidence of that in the most recent 6 months. And when we think about that reversion, we think about how quickly can we unlock it and how quick can that upside come through in terms of rents and ultimately earnings. And the chart at the bottom shows a rough timing for where we see those lease events falling in. So you can see that in this financial year, FY '26 and the next financial year, we're heavily skewed to those lease events. So these are really big opportunities for us in our portfolio to unlock those. There will sometimes there will be a timing lag where we have space handed back, but that is something that we're actively managing and we think creates a huge opportunity for our portfolio. And we'll come on the next slide to talk to that in a little bit more detail with some live examples.

Yes. So everything that we've said so far has really been about the period to 30th of September. This slide is just trying to look a little bit further forward because we have had some key lease events literally in the last 2 weeks. But if we just deal with sort of leasing progress since September and recognizing that this is in a sort of pre-budget broadly business nervousness place, I think we've done well and are in a good place. And I'm quite encouraged by the activity that we're seeing at the minute. So we've done nearly GBP 1 million worth of lettings. They're 5% ahead of ERV. They're across all parts of the portfolio, office, retail, industrial. We've done lease renewals 47% ahead of the previous passing rent. So it's only a small part of the portfolio, but it just shows some of the uplift that is coming through. And then we've got nearly GBP 0.75 million worth of lettings today under offer. So we've got terms agreed. We've got lawyers instructed. There's always the property transactions, a little way to go between agreeing terms and signing on the dotted line. But again, the fact that in respect of that amount of space that we've got under offer today, the majority of that is in the office sector, I think, is a really interesting statistic and recognizing that we do have quite a lot of vacancy at the minute in the office sector to actually be seeing that pipeline sort of reducing as a result of the refurbishment and upgrading activity we've done, I think, is really, really good. There are, however, 2 key deals that I think are absolutely key. And actually, from an industrial perspective, are the biggest sort of upside potential as we look forward. We put out a stock exchange announcement, I think, last week or the week before on Rushden. Rushden is in Northamptonshire. It's close to the A1, it's close to the M1, it's close to the A14. So a strategically very well-located distribution warehouse unit. An occupier actioned a break clause. That's what they're entitled to. It was a lease that we signed up during COVID, 10 with a break of 5. They've actioned that break clause. Saira mentioned the accounting treatment of that earlier on. But the headline is that the lease restructure with some penalty payments. So the headline is that they paid us GBP 2.5 million. We've got effectively GBP 1.7 million that we could use for upgrading the building itself and the balance is sort of an income penalty payment as well. Like I say, the building came back at the very end of last month. Yesterday, we had an agent launch day for about 30 agents. We do have some occupational interest in it, but we haven't agreed terms with anyone. But the fact literally days after getting the space back to be even in a place where we can say we have some occupational interest, I think, is encouraging and more on that to follow, I'm sure, as we go through the financial year. In Radlett, for those that don't know, Radlett is on the M25 and very close to where the M1 intersects with the M25. It's our largest asset. We've got multiple units on this estate. I mentioned earlier that we just set a record rent at Radlett on one of the smaller units. This is the bigger unit there, a pre-agreed surrender from about 2 years ago. But again, it was structured where we would be getting a capital receipt, including money for dilapidations, but money to offset and defray income costs. This is quite interesting, subtly different to Rushden in that we do think we might be able to extend the unit here. And if we can extend the unit, we can enhance the rental income and if we can enhance the income, we can enhance the value. And so really, this is -- I mean, this unit came back on Sunday. So this is how fresh and live this is, but we are clearly going to seek to attract occupiers with it as is. But if we can twin track that with planning and/or an extension of the unit as another means of unlocking value, then I think that's quite interesting, too. And even on a base case [Technical Difficulty] ERV. Finally, just as a summary, in terms of the property market, we've mentioned it's not firing, I'd necessarily say on all cylinders. But I think the headline is that we are seeing rental growth. For the right assets, we are seeing values rise. Occupancy is broadly stable, but in the right parts of the market, supply is quite tight. And this word resilient demand, I think, is absolutely key. And if we think on a valuation basis, the fact that values are below replacement cost, I mean that was really lost the case back in 2012 as we were coming out of the GFC, but if you think about the cost of construction has only risen. I mean that's undoubtedly going to be a dampening factor on supply and constraining demand, which is why the rental growth story is just absolutely key looking forward. Our own capital structure is really strong. I mean I think we have one of the lowest LTVs of many of the REITs. Our buybacks have been effective. We've still got firepower to use that looking forward. We've got an undrawn debt facility. If we think interest rates are coming down next year, and that's going to look more attractive to use. And we do have monies available from the sale of this building over and above identified investment. And we've got an opportunity that we're looking at the minute. We're due diligencing it. It remains to be seen if we -- it ticks all the boxes and we go through with it, but early stages look good. And that's in retail and leisure, but it would be relative to the sort of 4.6% yield that we sold this building for, it will be sort of highly accretive from a reinvestment perspective, a much higher income profile going forward. So in terms of our existing portfolio, we're seeing rental value growth that ties in with my comments above about the property market. And not only do we think values will continue to nudge forward with the asset upgrading that we'll do, but also we think capital value should move forward also as we improve occupancy and improve income. Saira has mentioned about the sort of reversionary upside coming from 2 strands, primarily coming from industrial and office across the portfolio where we're undoubtedly seeing success with the pipeline that we've got at the minute. And that's a meaningful amount of money relative to the sort of dividend across the portfolio that we pay out, which is in the order of about GBP 20 million a year from memory. So it's a meaningful number. We've got a lot to work for. And we're encouraged by the feedback that we're receiving in the market and very definitely hope that we can report positively as we move forward in the final 6 months of the year. So I might end there and I think it's question time. Is that how it works, Alex?

Yes, that's correct. [Operator Instructions] I would like to remind you that recording of this presentation along with the copy of slides and the published Q&A can be accessed via investor dashboard. Michael and Saira, as you can see we have received several questions from investors, and if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end.

Thank you. Okay. So we've had a number of questions. I'll summarize them and then we can work out if you can answer them. But the first question actually is asking about business rates. And maybe this ties in to government intervention and thinking about budgets and other things. But there have been suggestions around trying to reduce business rates in the retail, leisure, hospitality sectors at the expense of other sectors and particularly in respect of larger units. And we've seen certainly the supermarkets come out quite recently because they clearly are larger units. There's plenty of large units across the U.K. saying, well, this is inflationary and cost inflationary. So what does it mean for Picton? I mean we have a whole range of occupiers across the portfolio. Clearly, the larger units we have would be caught by that sort of larger rates increase. I think at the minute though, the detail of what's proposed is scarce or not even scarce, not available. So we don't quite know how those things will pay out. I mean I think our own view is that the occupiers take into account business rates, but it's not a key driver in decision-making. It probably helps more in leisure hospitality sectors, which is why this is planned. But I don't think it will have a material impact on our portfolio. And from memory, I think it's where rateable values are over GBP 0.5 million per annum, which might affect maybe 1/4 of our portfolio, but the remaining 75% is the other side of the line. So I -- my own view is I don't think it will be material. But as ever, with sort of government proposals, you need to see the detail and it's not there.

Shall I maybe cover the one? There's a question on reversionary income and how much do you expect to unlock in the next 12 to 18 months? I think on Slide 28, we set out that reversion and the income profile. And just to give a bit more context to that and the case studies that Michael talked through, the 2 most recent industrial units that we've had back alone account for about 20% of that reversion income in the industrial sector. So that's about GBP 1 million of that reversion and that's in the absence of doing anything else across the portfolio. So hopefully, that gives you a bit of a flavor about timing. So we're certainly expecting that to be sort of front-ended in this financial year and next financial year, recognizing that ultimately, there is some uncertainty about timings and relettings, but that's a broad flavor of it.

Yes. And there's a follow-up question which sort of ties into that, which relates to the vacant space and offices and what's the time frame. I mean I think the reality is the really interesting years are going to be -- well, this financial year clearly goes to March '26. How much of that reversion will we have leased and be income producing by March '26, I think that's a big ask. But actually, in March '27 and March '28, that's when I think a lot of those projects will be not only finished because I think they'll be finished before that, but our own expectation is that we will see leasing success thereafter. And maybe to just sort of tie into another point, we completed a refurbishment in Colchester at the start of this calendar year. And when I mentioned that we've got GBP 0.7 million under offer, a significant proportion of that is in Colchester offices. And if you extrapolate that, it's probably taken us 9 -- probably by the time we've done legal, 9 to 12 months to find good quality occupiers to take that space at the right sort of rent. So if you sort of extrapolate that onto some of our other vacancies at the minute, but Saira has mentioned about Tower Wharf, well, that's only a small unit there, but we're upgrading the M&E. That should complete in this financial year. Chatham that literally only came back a month or 2 ago, we've already upgraded the M&E, but we're going to upgrade the space. So all of these things to my mind, point that it's really FY '27, hopefully, a lot of it in FY '27, but it's not in FY '28. But I would think it's around that period. But knowing quite when the leasings land relative to the calendar year-end is a big ask. But rest assured that we -- the team is on this and definitely sees the upside. And the example I just gave of Colchester, I think, is really -- or should be reassuring to investors because you can see what we've done and assuming what we've agreed transact, there's very clear evidence of doing something and the positive impact and indeed the future impact on earnings. There's a question about -- would we look at strategic partnerships or other forms of corporate activity to unlock value? I mean I think at the end of the day, as a business, we're always looking at how we can unlock value. And the real estate sector, the REIT sector as a whole, generally today trades at discounts to NAV. We have been very clear that we wanted to use surplus proceeds to take advantage of that discount through the buyback process, but we are very alive to the activity, the M&A activity in the sector have been quite a number of REITs smaller than us, even bigger than us that have either consolidated in the year. And I think we're open-minded but shareholder value is absolutely key. And like I say, I think our share buyback program is very definitely a step in that direction. And there are ways of considering joint ventures, strategic partnerships that for the right partner is something that we could definitely consider. There's another question about industrial exposure. Do we have too much industrial exposure in the portfolio? Is it too much of a risk? Well, I think from my perspective, we like that sector and continue to do so, not only because of the sort of strong rental characteristics that you can clearly see coming through in our numbers. But as a sector and as an asset class, generally, there's less depreciation than in other sectors. There's definitely less capital expenditure. We've just given some good examples on the preceding slides of the recovery in dilapidations from outgoing industrial occupiers compared with offices, for example, at the minute, that's a key factor in overall in pretty much every company's office performance at the minute. So we like the sector, and that might change in a point in future, but I don't think at the minute that there's any reason to change that positive view. But I think the thing about Picton is we can invest across other asset classes. So it doesn't mean that if we have a contrary view, we can't pivot, adjust, adapt. And I think I mentioned when we were looking at new opportunities, actually, what we have been looking at -- and we look across all sectors in so far as opportunity is concerned, but the things that we've been running on most recently have been effectively repriced retail and leisure assets. And we think in any portfolio, it's good to have a balanced mix. I totally get you don't want all your eggs in one basket. And I think our structure allows that to do. So we're very positive on industrials. We wouldn't own so much if we didn't, but that doesn't mean to say there aren't opportunities elsewhere. And I think it's incumbent on us to look at opportunities across a diverse range of assets for that very reason.

That's great. Michael, Saira, thank you very much for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But Michael, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I please ask you for a few closing comments?

Yes. Well, thank you, IMC for hosting. Thank you to everyone for listening. We've got these slides available on our website. If you want to sort of follow in a bit more detail of what we're up to, there's quite a bit of information that we post on LinkedIn in respect of smaller transactions, but that's a good way of staying connected. I mean Picton is 20 years -- I said 20 years young this year. We launched at a point before REITs were invented. We've been through the GFC, various other challenges. But I think the business is in good shape today, and there's a lot of opportunity going forward. We hope you can see the opportunity that we can see. And yes, thank you very much for your time.

Fantastic. Michael, Saira, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Picton Property Income, we would like to thank you for attending today's presentation, and good afternoon to you all.