Schroder European Real Estate Investment Trust Plc (SEREL.XC) Earnings Call Transcript & Summary

Good morning. Thank you for joining us for the annual results for the Schroder European Real Estate Investment Trust for the period ending 30 September 2025. I'm Jeff O'Dwyer, I'm the Fund Manager. I'm joined by Rick Murphy, the finance manager. Just a little bit of housekeeping to start with. You should be able to download the annual results, including the annual report and this presentation on your screen. Secondly, we welcome questions. There's an opportunity for you to answer -- ask questions. We'll answer those at the end of the presentation. And then finally, we welcome any feedback, and there's an opportunity to give some feedback on the website. Just dealing with a number of the points that we want to sort of touch on, I will address the key factors currently influencing the share price and also the market perception of the European REIT before I'll hand over to Rick to run through the financial results. My main aim is to outline the main issues affecting the business and to explain how we, as a team, are responding to protect and enhance shareholder value. Turning to the two sort of key points, one being KPN and the other 1 being the French tax. This week, we received verbal notice from KPN in terms of their intention to terminate the lease at the end of December 2026. That's in relation to the Apeldoorn mixed use data center. It's a risk that we previously highlighted and one that is likely to impact the current dividend. I'll present later, our ongoing initiatives to mitigate the risk as we seek to either secure a replacement tenant or look at achieving sort of planning approval to maximize alternate use and value for the asset. In relation to the French tax, the claim continues to go. We continue to dispute that. We don't believe it's payable. However, we've made the prudent decision to ring fence approximately EUR 14.2 million and the bulk of that we've put into a bank guarantee. Obviously, this limits our ability to use that capital to look at new investments and really until that matter is resolved. We're currently in a window of 6 months in terms of working or disputing with the French tax authority. If our claim is dismissed, we will continue to pursue this and that will then move into a court process, and that could take a couple of years to resolve. Moving through to some more positive news and obviously, things that we can control over the year, we're very much focused on the asset management side. Obviously, the backdrop in terms of market backdrop although it's improving, we can't control that. But positively, we've been able to sort of secure 10 new leases and regears covering just over EUR 2 million of annual rent. And we've actually increased the unexpired lease term on that to 11 years. And the bulk of that is really to do with the Berlin, the Hornbach lease that we have there where we've extended that for 12 years. We're in advanced discussions on a number of other leases and I hope to come out with some really positive news over the next 3 months as we sign those, and I'll talk a bit more detail about those in a minute. Post period end, we secured some further leasing success in the Paris asset, and we've moved occupancy to 97%. And through the year, we made a decision. And this is really once we achieve full asset management on an asset, we look at rotating and selling out, and we did that for the Frankfurt retail investment. So we've reduced our retail exposure. We've used those proceeds. We sold that at value. We've used those proceeds to reduce debt and to implement an accretive share buyback program. I'll stop there for now in terms of the key points. I'll hand over to Rick to run through the financial results.

Thanks, Jeff, and good morning, everybody. So turning to the financial highlights for the year ended 30th of September 2025. And beginning, first of all, with the financial position of the company. We can see here that as of the end of September, the company held around EUR 28 million of cash on its balance sheet. And we feel that as we move towards 2026, this gives the company a strong foundation and flexibility, whether that be the French tax item that Jeff just spoken about or other matters as we move into next year. From a gearing and debt perspective, the company has a modest LTV net of cash of around 25%, 29% gross of cash currently with 5 loans. The next refinancing is not until next summer. And then after that, not until the back end of 2027. From an earnings and dividend cover perspective, dividend cover of 94% for this financial year versus 103% for the prior financial year. And that reduction in part was due to a sale of an asset in Frankfurt back in the spring, back in April. But noting more widely that the earnings of the company continues to be underpinned by not only the inflation-linked income of the property portfolio and very strong rent collection rates, but also very high occupancy at 94% at the year-end and obviously ticked up since then with that leasing success, as Jeff just mentioned, post year-end. From an IFRS profit perspective, pleasing to be able to say that's increased, so EUR 2.2 million for this financial year versus EUR 0.6 million for the prior financial year. And that in part fed into the performance. So again, pleasing to be able to say that NAV total return of 2%, up from 0.5% for the prior financial year. Just a reminder that back in January 2025, the company initiated its first buyback program of its shares. During the financial year, we've invested EUR 1.8 million to acquire 2.3 million shares at an average price of EUR 0.66 that the company has acquired those shares back in at. And just as a comparison, the year-end NAV per share was EUR 1.04. And then just finally here, just a reminder again around the contingent French tax liability disclosure, EUR 12.2 million tax, EUR 2 million penalties and with post period end, EUR 12.2 million now being moved on to a French bank guarantee. Moving on to the next slide. Here, we can see the NAV bridge. So we opened up at EUR 164.1 million or EUR 122.7 per share. And we closed up at EUR 156.7 million or EUR 119.2 per share. And just starting off from that top block, we can see unrealized valuation losses of EUR 2.3 million in the financial year. So assets such as Venray, Rumilly, Houten, Utrecht on the industrial side have done well with positive increases. That's been offset in part by the mixed-use office assets in Apeldoorn, Netherlands as well as some of the office assets in Saint-Cloud, Paris and Hamburg. With regard to transaction costs, small amounts invested with regards to disposal of Frankfurt of EUR 0.2 million, EUR 0.8 million was invested with regard to CapEx across the portfolio in the financial year. A small amount has come through for Paris BB of EUR 0.2 million. This was a historic sale back a few years ago, and there remains a maximum of EUR 0.4 million of post-tax profit to potentially come through in 2026. EPRA earnings of EUR 6.7 million, noncash capital items of EUR 1.2 million. That's largely capital taxes, deferred taxes, taxes paid on the Frankfurt sale as well as movements in interest rate caps as the Euribor rates has trended down over the financial year. Just with regards to the share buyback, here, we can see that EUR 1.9 million invested. And in that percentage column, we can see how that's really contributed to performance. So 0.4% of that 2% NAV total return coming through that line. And then just finally, dividends paid of EUR 7.9 million, all at EUR 1.48 per share in the financial year. Moving to the next slide, we can see EPRA earnings pre-exceptional items. These were EUR 8.2 million for last year and EUR 7.3 million this year. And just moving through some of those larger movements, we can see that rental income has fallen post the disposal of the Frankfurt assets back in April. And property operating expenses have ticked up a little bit in part due to service charges and in part due to noncapital repairs and maintenance invested during the financial year. Good to see that the fund costs in the rounds have fallen, but these have been offset by a fall in bank interest start of the year, Euribor rate was 3.3% and finished at around about 2%. So all in all, we can see that 94% dividend cover for financial year 2025. And we just built it out at the bottom of the footnote what some of the exceptions are with regard to historic service charge and tax items as well as professional advice in France with regard to the ongoing discussions with the French tax authority. And then just moving to the dividends. We often share this slide with regard to the last few financial years. We can see that dividend cover was 89% for year ended 2023. That was post the sale of Paris BB as some of those proceeds were then reinvested. And we can then see that fully covered dividend of 103% last year and then the 94% dividend cover for this year, as I say, mainly driven by the disposal of that Frankfurt asset back in the spring. And with that, I'll pass back to Jeff to go through the property portfolio.

Thanks, Rick. Just touching on -- many of you have seen this slide before. I won't go through in detail each asset, but just to sort of show the diversification that we have, we've got about 35% allocation to the industrial sector, 35% to offices, around 15% to retail, circa 9% in alternatives and the rest in cash. You may recall that the strategy has always been to focus on growth cities. So from a macro point of view, picking those cities that will grow faster from there from a GDP or population or an employment perspective relative to their domestic economies. And then from a micro point of view, using our teams on the ground to identify submarkets that will benefit from transport infrastructure changes where there's competing demands for users and fundamentally just buying buildings leased off affordable rents. And you'll see that later, particularly on the office side, where we have focused on office buildings that are in really strong locations and affordability is key. So they're accessible locations, particularly given the Stuttgart asset and the Hamburg asset that are leased off affordable rents. Just to sort of do a bit more of a deep dive into the Apeldoorn asset and KPN. So KPN have verbally given their indication that they will terminate at the end of 2026. It was always a risk that we had flagged. The positives around this particular asset is that it sits on 3.5 hectares of land. It's a mixed-use data center and office building. You can see in the photo there that it is quite a large investment. it's quite unique. It's not going to suit every particular occupier. It is over-rented. So the current rent that KPM paid today is about EUR 3.2 million. Market rents vary in terms of from EUR 1.8 million to early EUR 2 million. I mean our view is slightly stronger than that EUR 1.8 million. As I said, the lease expires at the end of next year. So we've got just over 12 months to seek either an alternative tenant or look at other angles. Just from a valuation perspective, and I think this is a really important point that the valuers are valuing this prudently, and they're saying, okay, we're going to take the remaining income, so circa a year and 3 months. So the latest valuation is at the end of September. So you've got 3 months of this year plus next year. So that's roughly EUR 4 million in income and then the residual land value. So that's why they're getting to a value of around EUR 11.8 million. We think that's a prudent way to value this, particularly given the news that KPM have come out with. It's been a good performer, obviously, being a very strong income generator for the trust. It's an asset that's unlevered, and that's helpful, particularly given the opportunity that if we do sell this asset that we can actually lever that up and redeploy. So what are we doing now as a management team? We're doing and managing 2 streams here. One is to seek an alternative user. And in that regard, we are having some discussions with some tenants. And there's actually an inspection happening in January. That's the -- probably the preferred strategy is trying to find an alternative occupier to step in and take the space. One of the things that we are working around that is power is quite key, particularly for a data center. So we're trying to sort of get access and be a party to the power agreement there. At the moment, it sits with KPN. But that's key for us in terms of being able to seek another data center operator and do a lease there. So that's what we're working on, on that side. And then the other side is really working with the municipality. They're very keen to see this site rezoned and move to accommodate residential planning. They've given us a letter of comfort and support to do that. So that's helpful in terms of if we were to go down the route of selling to a developer. So we're trying to advance at the moment and work up a scheme from a residential point of view that a developer could price. We're starting to get some interest from developers, which is positive. And obviously, if we were to go down that route, it creates an opportunity for us to then use those proceeds, gear those proceeds up given the fund gearing is at 25% and then redeploy that capital and then move earnings that way. So they're the 2 angles that we're working on. I appreciate that it's going to take time to do that. And hence, why we have flagged that the dividend is likely to be impacted. And it really -- as to the magnitude of that impact, it depends on, one, the rent that a new tenant may pay or secondly, if we were to sell the asset, the value that we would sell that for and then how quickly we can redeploy that capital. Just dealing with a little bit on the market side of things. And obviously, we're starting to see a little bit more demand and a little bit more positivity on the investment volume side of things and in particular, around the lot sizes that we have focused on, and that's the sub EUR 30 million lot size. You've seen here that most of the activity really centers on that. So circa 60% of volumes are in that sub EUR 30 million bracket. And I think there is a bit more positive that we'll see for Q4 numbers when they come through where we are now seeing vendors meeting the market, reducing their expectations around pricing. And therefore, we're seeing volumes improve. Obviously, the backdrop in terms of lending environment has improved as well, where rates have come down and margins have come down, that's helping to sort of facilitate a little bit stronger sentiment on the investor side. And then the backdrop in terms of economically, there is sort of positivity in terms of growth for '26, '27, particularly in Germany and the Netherlands that is also creating more attraction on the investment side. How does that flow through to value in terms of how the portfolio is valued? And I've broken down the values here across the different sectors. You can see here that the industrial sector is valued at a net initial yield of 6.3%. Obviously, we can get debt against the portfolio. You think about the swap rate at the moment, the 5-year swap, the Euribor is around 2.3%. And if you're adding in a margin that can sort of be anywhere from 1% to 2%, your debt is still highly accretive when you're coming in off of these sort of yields. Our office exposure is valued at a net initial yield of around 6%. And again, the allocations that we have there is in Hamburg, Stuttgart and Paris. Retail is the Berlin asset where we've just regeared that lease. So we feel really comfortable around that asset value being valued off a 5.5% net initial yield. The data center that I talked about being KPN and then obviously, the car showroom in Cannes. If you strip out the data center, the yield premium that you see here, that 4% above the average 10-year risk-free rate falls to 3%. So it's still an attractive level of cover above that risk -- the average risk-free rate of 3%. So therefore, giving us comfort that from a valuation sense, we feel comfortable in terms of our ability to achieve those values should we need to offer those to the market. Just on expiries and some of the positive things that we're doing here, I touched on these are things that we can control and how we are advancing discussions, particularly with a number of the leases that are expiring over 2026. There's roughly just under 20% of leases that we're in advanced discussions on regearing, and that's centered on Stellantis, on the State of Badenwürttemberg in Stuttgart, on Hachette in Nantes and then on Nestle, which is Cereal Partners in the Rumilly asset. So hopeful in the next 3 months, we have to come out with an RNS around this. I won't give any detail on where rents are, just given where we are, the confidentiality and how key the period is in our negotiations. But what I can say is there will be some positive rental increases that we will be able to drive forward. We're going to invest in some of these assets as well. So that's helping us to move the rents on as well and try and improve the quality of the portfolio, and that's something I've talked about in the past. And again, that will enhance the liquidity of the assets and value going forward. Just a little bit on office markets. We are continuing to see a real sort of polarization in terms of the performance of office markets in the cities that we have exposure. If you think about Paris, we're seeing really strong rental growth in the city center and vacancy rates really tight. Secondary markets Paris are different, and that's a common theme across most European cities. So vacancy rates are starting to increase for secondary locations. Now we are in the southern bend of Paris here. Positively, we are seeing some really strong tenancy demand. The vacancy rate for the asset that we have is about 11%. So we're actually outperforming the submarket there. The other positive is, and I touched on before about buying assets that are leased off affordable rents, the rent in Paris for us is around EUR 200 a meter. Now it's not the primest asset, but it is affordable and it's accessible. And the reason we bought that asset is also because of the transport infrastructure changes that are coming through, there will be a new train station at the end of 2030. So we expect to see rents and demand grow on the back of that. Now we're seeing prime rents in Central Paris grow extensively. And you can see here that over the year, those prime buildings have increased rents of around 20%. So some phenomenal rental growth for the city center. Similarly, in Hamburg, I mean, we're located one stop from the city center. We're in the city submarket. Prime rents there are around EUR 22 a meter, where to put that into perspective, we're leased off around EUR 14, so a real discount to where prime is. It's a B-grade building. It's a fully leased building. We've had some strong success in delivering rental growth there. And equally, in Stuttgart, we're now seeing sort of prime rents. We're located in the city center, prime rents there of around EUR 37. We're leased off rents of around EUR 15.50. Again, it's a C- grade building. We've got the State of Badenwürttemberg in there. We're in advanced discussions about securing a new long-term lease with them and moving the rents on accordingly. So just gives you a bit of a flavor of the submarkets that we've been working on and some of the success that we've had on the office side. Obviously, Rick touched on in terms of the strength and as a diversifier, European leases are very different to the U.K. Obviously, we do get the annual indexation coming through. Germany is slightly different where you'd have to wait for a hurdle. Typically, it's once the compounding of inflation. And once you get to that 10%, you can then implement the full indexation. But it is a real benefit for growth and particularly for the French and the Dutch leases where they are annually indexed. We're trying to move some of the German leases to annual indexation as well, and that's something they're working with. As an example, the State of Badenwürttemberg, we're moving that lease to annual indexation. And looking forward, if you think about sort of where sort of forecast, we're using Oxford Economics here, but their forecast roughly for '26 and '27 for indexation to move around 2% for each of the markets. Just on the debt, I mean, I feel really positive about where we are and why we actually made a disciplined decision probably 18 months, 2 years ago to be prudent and run a balance sheet that was -- had very, very low LTV. It's putting us in a really strong position to deal with some of the headwinds that I've touched on. The next debt or expiry that we have to deal with is in Berlin, and that's the middle of next year. At the moment, that lease -- that asset is geared to 30%. So I feel really comfortable about that position and finding -- and refinancing that. We've already had some offers come in from lenders to refinance and deal with that risk. Obviously, the cost of debt across the portfolio blended is about 3.8%, and we've got a duration of around 2.3 years. And if we extend the Berlin asset, obviously, you'll see that increase. So just sort of dealing with the priorities as a management team now going forward, heavily focused on delivering and securing those sort of 4 leases that I touched on, that represents about 20% of the income. And as I said, over the next 3 months, we hope to sign those and we'll come out with an RNS and being able to sort of show how we're driving rents on as a management team. KPN equally spent a lot of time with our Dutch team around how we're going to derisk that. And I talked to you through the 2 sort of strands that we're working on and trying to drive that. It could go either way. It could go, i.e., we have success and we find an alternative tenant and we replace that income or if we don't go down that route and we continue to get planning approval, we'll go down the route of a sale and then redeploying capital. The French tax will continue to monitor and challenge. And as we get some news from the French tax authorities, we'll advise the market. Last week, you may have picked up that we announced the appointment of Phil Redding to the Board. Phil will work alongside the current Chairman, sir Julian Berney, until the Annual General Meeting in March. Phil brings significant and relevant experience to the role, having recently served as the CEO of Tritax Eurobox Plc. Phil also has an extensive career at SEGRO and a very strong industrial background as well. So I'm looking forward to working with Phil. We're going to give him some time to understand the portfolio to go and see the key shareholders, and then we can sort of look at reshaping the strategy for this vehicle. Equally, really I would like to thank Julian for his time and obviously, his significant contribution over the last 10 years since the IPO. And Julian will obviously stay on through to the AGM in March of next year. And this is something on the investor side, this is something we continually to sort of work through and try and broaden the investor base. It's become very much more of a retail focus and some of the wealth managers that we're working with, we've had some sort of positive and some new entrants into the register. And that's certainly a focus that we have in here with the marketing teams around trying to sort of broaden and really bring on and target the retail investor to going forward. I won't go through this in detail, but I do fundamentally believe that where the shares are priced today, I mean, looking at share price this morning, we're at sort of EUR 0.63, EUR 0.64. That's giving an investor a dividend yield of around 8.2%. It's a discount to NAV of around 35%. I do think that, that discount and that yield profile reflects the risks that we have around what may happen to the dividend. And then it certainly doesn't reflect the positivity that we have in terms of our management expertise, the assets that we have on the ground, the cities that we have exposure to and the growth that we believe that we can deliver, not only in terms of shoring up income, but also value in terms of some of these regears and repositioning of the assets and really driving shareholder returns going forward. So I'll stop there. I think that's quite timely in terms of just being under 30 minutes, and happy to answer any questions if any next come through, Rick.

Yes. Thanks, Jeff, and thanks, everyone, for your questions that you submitted so far. We'll do our best to get through these in the remaining time. So thank you for those. Jeff, you opened up around some of those 2 big items currently facing the company, we've got a question here around Apeldoorn and just maybe a bit more on the timings. So you talked through some of the options, the optionality moving to 2026, but maybe a bit more around the timings and maybe decision-making for next year.

Yes, happy to. I mean the 2 strands -- we should get the slide up, the 2 strands, I mean the first strand is if we can secure a replacement tenant in an ideal world. Obviously, we've got 12 months, gives us time for the new tenant to step in. Obviously, KPN will leave at the end of '26. And best case is that we would have a replacement tenant to start early '27. I think that's probably a low probability, but that's certainly what we're working towards. At the same time, we're working with the municipality about seeking rezoning and getting further support from them for alternate use, and that will strengthen the underlying value and marketability and liquidity of this asset. So if we were to go down that route, I think if we were to look at a sale, I'd like to try and keep the income at the moment from KPN. I think that's helpful for us in terms of particularly the desire and what we know that investors want. So any sale would probably happen towards the latter part of next year. And then obviously, using those proceeds and regearing or gearing up those proceeds to look at investments. And I think for now, we probably focus on the Netherlands in terms of industrial, where we're seeing some opportunities and potentially in Germany, just given the growth story that we think will come from there, particularly given some of the stimulus package that's starting to flow through the economy. So that's in terms of timing, I think redeploying capital would be likely in '27. But certainly, the preferred strategy would be to try and find a new tenant to replace KPN. And it is a difficult one to sort of give any clear view as to what may happen to the dividend, but it's sort of very much dependent on one, finding a new tenant and what rent they would pay. And then secondly, if we were to go down the sale route, what price we would achieve and then regearing that. But I am quite confident that we'll be able to achieve an exit value north of what it's valued at today.

Yes. That's great. Thank you, Jeff. We got another question about what the Apeldoorn site might be worth if it had residential use approximately at the moment.

Yes, it's -- I mean it's one of those things that we need to work up that planning. But certainly, the initial master plan allows for some very high density on this site. I mean surrounding this site is a mixed-use residential. And that's one of the things of the attraction and what we look at in terms of -- I touched on it when we looked at the portfolio, but one of those angles that we look at is, what are the alternate uses when we do an acquisition. And this was one of the attractions here where you got 3.5 hectares and you've got that ability to possibly look at a rezoning. Now there is the capacity to put on over 100,000 square meters of residential space. It's pretty bold sort of development pipeline and would take a long time, but that is the opportunity. And there's certainly a number of developers out there who are keen to sort of acquire this and manage out that, that amount of space. So I don't want to give any specific numbers in terms of where we think the value is, but I do -- if you sort of think the way the valuers are valuing on a residual basis, they're saying, okay, you've got EUR 4 million of income. It's currently valued at EUR 11.8 million. It's going to be high single-digit millions in terms of residual land value. I think we'll do better than that.

Yes. Great. Thank you, Jeff. We've got another question on -- just on the French tax, just with regard to timing. So maybe I'll take that one. So around approximate timescales, I think Jeff was just sort of setting out that as things currently stand, we're in a 6-month window. We continue to work constructively with the French tax authorities. We take advice from professional service firms on the ground. Depending on how that 6 month goes, if it does go to more of a court process, the advice we've received for the company is that might take up to 2 years. And just to recap more widely, we got the French tax authority notification through last -- back end of last summer. So we've now been working constructively on the company with the French tax authorities now for 15 months. So not a quick process, 15 months in. We're now in a 6-month window, depending on the outcome of that, we then move into the next stage, which could be up to as much as 2 years. Jeff, just with regard to the share buyback. So we saw on the presentation that is accretive and good for performance we're coming out of a close period. Is that something that the investment manager or the company would continue to rereview as we move into next year?

Look, I think the buyback was definitely a good use of capital. We did a small amount, and we deliberately obviously sold out of the Frankfurt asset at carrying value to then buy the shares at a 35% discount. So mathematically, it made sense. Where it's, I guess, difficult to justify is when you're running a small vehicle, you're getting smaller. And I think that's given one of the challenges that this trust have is that it's been penalized for being small in terms of investors saying, okay, we want you to be larger. So you're sort of, I guess, undoing some of your own, I guess, strengths by doing that, but notwithstanding what was the best use of capital. I think for now, we won't extend the share buyback or the Board won't extend the share buyback, but it's certainly something that continually gets looked at and discussed in terms of every Board call. So yes, the buyback has been paused.

Great. Thank you, Jeff. Just a question on the refinancing. You touched upon next summer and obviously then the sort of back end of 2027. Just a question around -- I think you touched upon what the current swap rates are, but maybe just sort of recapping for attendees around what the current rate is and what that might move to with regard to that debt to be refinanced?

Yes. So the Berlin loan, as I said, was -- is 30% LTV. We did enter into that loan 7 years ago. So when swap rates were close to 0. So the all-in cost of that debt, I think, is about 1.3%. So that will increase. But obviously, the cost of that is relatively small given that it's not a huge loan. And obviously, we've got sort of the indexation coming through in terms of existing leases that will help sort of cover that. In saying that, we entered into some loans, particularly, say, the Dutch loan 18 months ago, where the swap rate on that was slightly higher. So we're in -- sorry, we're out of the money on that. So if we were to refinance that, we'd see the cost of debt fall. So I guess you can't get everything right, and that's why you have some in terms of diversification across your expiry of loans, as you can see on this slide. And obviously, depending on where swap rates are, we make a decision as to whether we go variable or take fixed. But certainly, yes, the Berlin loan will see a small increase in quantum of interest expense.

Great. Thank you, Jeff. A bit more of a sort of holistic question. So we're aware, obviously, that the company has been trading at a discount like many others for a while, quite I think sort of saying 35%. With regard to sort of future strategies, a question here around sort of strategic review type questions and maybe what the investment manager of the company is thinking as we move into 2026, not least with that discount and when assets like Frankfurt were sold for book value as an example. So maybe just some thoughts around that future strategy, as we move ahead to next year?

Yes. I mean the Board is highly aware and obviously disappointed in terms of where the share price is and constantly looking at how do we sort of change or pivot this vehicle and obviously us as a management team are equally concerned and working with the Board around that. Obviously, touched on Phil Redding joining the Board and taking the Chair role from the AGM next year. And I think it's only fair to give Phil time to sort of understand the company, meet with key shareholders and help formulate a decision and work with myself and the team to reshape this. Now at the moment, there are certain investors out there that obviously love the dividend and love the attraction of what we've been able to deliver and the diversification that we do have. And the Board has always said that they're here to work in the interest of all shareholders. And obviously, us as a management team are exactly the same. So I think we just allow Phil and the Board to take the temperature after this with the investors and then reconvene and relook at this. But it definitely is a pressure and a question there that the Board is highly conscious of. And as you rightly said, there is a number of other vehicles that have elected to go down the wind down route. But I would say that the discussions we've had with key investors to date have been highly positive in terms of how this trust has worked and some of the difficulties that we've managed, the teams that we have on the ground in terms of our asset management capability and the returns that we've delivered. So that's all been positive. But I guess the bigger question is, well, can we get this vehicle to a point where we can raise equity to grow it? Obviously, we need a pretty big shift in terms of market to close that 35% discount. And at the moment, we're being penalized because obviously, institutional investors are not looking at smaller vehicles and sort of punishing smaller vehicles at the moment.

Great. And just a quick follow-up question on the French tax around that 6-month window and if that was successful, would that then mean that the company could move forward in that sense. So I think the answer to that one is that, that would be a very best case scenario. As mentioned, we've been working now constructively for 15 months with the French tax authorities. We are in that window. If that is positive or successful, that would then mean that it would fall away. At the moment, we wait and see, as I say, with the French advice we receive how that moves into 2026. So that would be very much a best case scenario.

And just on that, I mean, we've got EUR 14 million that is ring-fenced. We could lever that, allows us to go and buy an asset between EUR 25 million and EUR 30 million of a 6% yield that gives us income of between EUR 1.5 million to EUR 1.6 million. So that is definitely one way that we can help reposition this vehicle to dovetail into the earlier question around strategy. But we have highlighted that, obviously, we're having this cash ring-fenced, it does sort of limit our ability to utilize and grow earnings in terms of new acquisitions and diversify the portfolio.

Yes. Thank you, Jeff. Thank you, everyone, again for the questions, and I think that's all with them.

Okay. Well, I think we'll wrap up there. It's about 40 minutes. So I appreciate everyone joining and also for your questions. I'm always available if there's any other questions that come up post this presentation. But thank you for your time. Have a great Christmas, and we'll speak later. Thank you.