TR Property Investment Trust plc (TRY) Earnings Call Transcript & Summary

Good afternoon, everybody. Nice, it's a little bit cooler than it has been in the last couple of weeks. So right. For those of you who've been here before, heard me speak before, the presentation is very much follows the usual format, but with a couple of sort of key points to pull out of the year's performance. I think the first point to make is, and I'll talk about this quite a lot. It was very much a game of 2 halves. For those of you who follow us closely and had looked at your interim report, you would have been quite pleased with that -- those first 3 circles. And we were particularly glad to see the share price outperforming the NAV in that first half. We then look at the full year results, and you'll see that it was very much a game of 2 halves. We essentially gave up all of what we've made in the first half, unfortunately, and some. However, the good news is, because we are on a roller coaster, it feels like that at the moment. When we look at the results so far from March to a couple of days ago, this is to the 18th -- sorry, to last week, you'll see we've had a good start to the new financial year. So that's encouraging. And then quickly looking at the long-term performance. I've said it's a period of modest relative outperformance. We beat the benchmark by about 130 basis points. So that's less than we have done over the long run. The 10-year record is -- average is about 375, but it's worth just highlighting those figures. And then key to TR Property, as you know, we say that TR stands for Total Return, no longer to [indiscernible] going back in the day or even Thames River. But it's very much a message to investors that this is real estate equities and income is a crucial part of our total return. And we're very pleased -- I'm delighted that the directors felt fit to increase the dividend again this year, albeit modestly. What you will notice in the bottom left-hand corner, of course, is that actually the dividend exceeded the earnings. But as we've said in years gone by, the Board is sensible enough to build revenue reserves for exactly the period that we've been through in the last couple of years, which is the need to draw on those reserves to ensure that we can spread out the earnings over a cycle. The good news is that the earnings are being rebuilt dramatically as more and more of our underlying -- almost all of our underlying companies who did pay dividends pre the adjustment in interest rates and COVID, have all now returned to paying dividends. We still have a couple of companies that will never pay dividends. They like to recycle their capital inside their businesses. They tend to be Swedish property companies in particular. But so the message to shareholders is we're very much back, as you will see in the annual report in the Chairman's statement, back to steadily rebuilding our earnings. But at the same time, should we need to draw down on revenue reserves for 1 more year, we do have those reserves. So that's good news. For those of you who follow the AIC's dividend heroes statistics, we're very pleased that we would be in that group if we've managed to actually increase the dividend just a tiny bit here, but we held it flat. But if we've gone up a little bit then, we'd very much be in that group, and we'd be right in the top quartile of that group given our compound annual growth rate. So all very encouraging. Now this is our benchmark, and I've taken it back to December '21 and the giddy days of the bull market. And really to show you what a roller coaster it's been and then particularly the shaded area, which is obviously the year under review. And literally -- it is literally a game of 2 halves, as you can see, and then the recovery that we've seen more recently. So it's just another way of looking at what I already mentioned. And then just to kind of bring out a few factors from the year, which I think are really important. Very obviously, the interest rate cutting cycle is well underway in the U.K. and Europe. And I think we'll see that continue to progress. Certainly, we're getting positive feedback from the ECB. We expect another cut shortly before the summer. And the market is definitely expecting a couple more cuts in the U.K. as well as we head into the autumn. And crucially for us, the cost of borrowing is not only a function of the shape of the curve, but that spread, the margin that the banks or other lenders require. And that spread is -- that margin is getting tighter. It's getting smaller as more and more lenders enter the market and we get a more competitive environment. No different to you or I going and getting a mortgage and find lots of mortgage providers prepared to fight for our business. So that's really, really encouraging, and it's a very healthy sign. And then in terms of our underlying market fundamentals, things are really, really quite positive for -- certainly for the best end of the market. And it doesn't really matter whether we're talking about West End prime offices or we're talking about retail warehousing or hotels or self-storage, the very best are doing well because there really quite simply is a shortage of this best quality care and rental growth, which is fundamental to why we're all here, where real estate is an income stream, but with an opportunity to have capital growth through the fact that it's clearly related to economic growth. And what we've got across Europe, some pockets of more better economic growth than others. So the U.K. looking a bit soft, Germany looking much better. But even regardless of which economy is doing the best, the fundamental underlying point is that we've had very little really net construction or particularly speculative construction. So as a result, there is a shortage of that best space. And that's quite simply 101 economics driving up rents. However, it's the sort of last consequence of the fact that interest rates moved so dramatically in 2021 and 2022. And that's we have lots of very smart finance directors in our underlying companies. And many of them were smart enough to take out quite long-term debt when interest rates were very low. No different to you or I taking out a 5-year fixed mortgage in 2020 or 2021, you suddenly find yourself with that dreaded letter from the bank, from the mortgage provider saying, you've got a remortgage and we're no longer lending to you at 1.5% because rates have gone higher. And that's what is happening. So we -- and of course, as you would expect, we model all of that. So all of the future forecast earnings for all of our companies are reflecting. So for some of them, unfortunately, the growth in earnings is going to be held back in the next couple of years, not because their top line growth, which is absolutely, in many cases, doing really well, the bottom line is a bit subdued because they've got this increased cost of debt. And then lastly, M&A activity. It's been a very busy year, and I'll talk a bit more about that as we go through, particularly in the U.K., but increasingly in Continental Europe as well. But we see fewer obvious candidates looking forward. So the M&A that we have seen has generally been tidying up of a lot of very small companies. They've either been amalgamated or they've been taken private. But in a way, and we've been beneficiaries of that for many, many years, but we're now at the point where there are fewer of these very small companies. And then in terms of how we measure the companies we invest in, we're using many more metrics than just discount to the net asset value, but it's the one that's very popular and very easy to explain. And I think it's quite encouraging to show investors that whilst we've had this roller coaster year and then really quite an encouraging first few months of our new financial year, we're still trading at quite a wide discount to asset value relative to history, and this goes back a very long time. And it was -- we turned really quite optimistic about our listed companies when discounts were very wide, even though at the time, market fundamentals weren't as strong as they are now. So we're now in a situation where we've had -- obviously, everyone started to realize that things are a bit better and they're prepared to buy shares in the underlying companies at a smaller discount to the asset value. But I would say we're almost more optimistic now because whilst these have got a bit more expensive than they were, where the fundamental backdrop is much stronger. So actually -- and relative to history, we're still a very long way from any of the periods where the sector was very expensive. And many people ask me, why, Marcus, things are improving so much and you've got -- you're pretty geared in the trust. What's holding investors back? And quite simply, I'm afraid it's just there's more shiny things on the other side of the playground. NVIDIA, the Mag 7, S&P 500 all-time high, et cetera, et cetera. There are a lot of investors who are still very focused on growth. And let's be blunt about it. When you look at where the real estate equity sits in your whole equity portfolio, we are at the value end of the trade. That's -- there's no getting away from it. We're not -- our companies are not trading on 30, 40, 50, 60x PE, et cetera. So we are. But that's not a bad thing. It's just, but right now -- and as we saw in the first couple of months of the year when we saw the S&P sell off, a lot of the Mag 7 sell-off. And I certainly was getting a lot more incoming calls from institutional investors wanting to talk about Europe, European equities, real estate, M&A. So that's all encouraging. And I think that will come again. Okay. A couple of names to call out. I always like to put some companies or some sort of flesh on the bones of what we've been up to. And I think given that you saw those numbers on the front slide, minus 2, minus 3, small negative figures, it might have looked like a sort of quiet year when you look at it as a snapshot, but it just never is. And in our world of 100-plus property companies, it's not really a surprise, but if we picked only these top 7, we'd be really getting out of the champagne. But at the same time, it's equally important to have avoided the ones on the bottom left. We do have a very large holding in Argan, which is the French logistics business on the left-hand side, and it's really, as you'll see, SEGRO, which you'll be familiar with. And essentially, what happened during the year with some of these logistics industrial names as they had been very well bid and share prices have risen very dramatically in the previous couple of years. They were essentially priced to perfection. And we were -- we held on to our Argan, but we did sell a lot of shares in SEGRO when they were trading at somewhere between GBP 10 and GBP 13, and they're now down to GBP 6.60. So that company is probably fair value now, but it's just a good example of -- the market fundamentals didn't deteriorate dramatically over that period. It's just that the share price rating, the market decided that the rate of growth in rents was going to slow, and it was quite right that rates have slowed. Meanwhile, on the right-hand side, it's quite interesting that it's been particularly retail properties. So shopping centers, which would be Klépierre, which is mainly in France and Eurocommercial, which is France and Sweden and Northern Italy. And then Supermarket Income REIT, which is supermarkets in the U.K., all did very well. And this is all about the fact that the underlying consumer is in -- particularly in Continental Europe is in rude health. Their mortgage costs haven't gone up particularly. There's very high levels of job growth. There's good wage inflation, all of which has led to good spending powers in the shops. And then up in the top right-hand side, Warehouse REIT, I'll talk about a bit later. But PRS REIT, these -- both these stocks were the subject of M&A activity. PRS REIT, the Board have decided to conduct a strategic review, which has ultimately resulted in and they are going to liquidate the company. And for those of you who do own the shares, the most recent announcement is they do have a decent offer, but it hasn't -- rather strangely, they've identified the company who wishes to buy them, but they haven't actually got their finance in place, which is a bit like somebody bidding for your house and then saying actually, I haven't got a mortgage yet. So it's sort of not really that real. But anyway, the market -- the stock was very, very cheap. We did buy some, but I have been trimming our position because I think it's actually going to take quite a long time, probably 5 or 6 months to sell this company. And I think there's going to be better opportunities elsewhere. Okay. And then this one, which is a bit detailed, just a little bit about where we got it right and wrong. So what we are showing here is on the right-hand side, which was either where we were long of the stock in the dark, the thick line, where we're long on the stock and it did well. And then there are other names in the shaded lines on the right-hand side, where we had less of the stock than the benchmark and it did badly. So that's a benefit to us. And then the reverse on the other side. And you can see, for those of you who want to run through any of these names, we can talk about them in due course. But I always think it's quite interesting just to put the ones that were -- did particularly well. Picton is a small company. We'll definitely talk about that one a bit later on. And then Árima is a little Spanish business, which got taken private by another Spanish REIT. And that was a nice pop for us because it was about a 30% premium to the undisturbed share price. Okay. And then just a couple of slides on what we did and why. Firstly, I didn't want to take this back to the whole of the last financial year because that does feel like an awful long time ago now. But just things that we got up to and why. So industrials, I told you that stocks -- a lot of them had sold off. Share prices have been a bit strong, and we saw that them derate, but the fundamentals are still very sound. So we bought lots of those, as you can see. M&A activism, so Urban logistics REIT and Warehouse REIT. We've got a couple of slides on that a bit later. And then Assura, I'm sure some of you are following the merger of -- or potential merger or takeover by PHP of Assura, but of course, KKR have put a big cash bid out there. So that's a bit unknown. When you -- when 2 listed companies are one taking over another one, often that bid will be either all in shares or a mixture of shares and cash, which is what PHP of bid for Assura. And then, of course, your alternative offer is a full cash bid from KKR. So of course, as no one is going to decide what they're going to do until they get closer to the due date because they'll need to see what happens to the share price of PHP because that's the value of their bid. We are very outspoken about this. We absolutely want to make sure that the Assura assets remain in the public domain. We think the management team at PHP is better than management team at Assura. And if you look at the difference in total shareholder return over the last 6 years, it's actually a massive 40% difference. And so we had lots of shares in PHP and not so many in Assura, but we did then buy some as this deal started to go forward. And if they do get together, there's an awful lot of cost savings. Cost of capital will reduce. It will be a good thing. So we've been quite public about this, and there's been a bit of coverage in the press. U.K. diversified, Picton, you've heard me talk about for those of you who were here last year and the year before that and the year before that, that we are firm fans of this business. And finally, they've got a new Chairman, Francis Salway, who used to run land securities. He was Chief Exec back between 2005, 2011. He's taken over as Chairman. He absolutely gets it, and they've undergone a quite firm buyback policy, which has been very beneficial. The share price has moved from 60p to 80p, and we think it's -- the NAV is at GBP 1. And they've done a number of great transactions converting offices to student accommodation to residential. And then they're in the middle now of selling their largest office asset, which is a building in Covent Garden, it's actually opposite the Garrick, anyone who's a member of the Garrick. It's called the Stanford buildings. It's very nice. So -- and then LondonMetric, we've been adding to our position there because they've been the consolidator. They've been acquiring other companies. So that's been good. And then German residential, you'll see on the left-hand side, the arrows both up and down. That's because we've been sort of rolling in and out of these names. We call them the bund proxies because they are -- these stocks very much behave inverse to the German Bund. And then data centers, which, of course, undoubtedly many of you have read lots about data centers, and we've -- there's a stock in Spain called Merlin. The share price has been a tremendous performer. We think probably got a little bit ahead of itself. Meanwhile, Tritax Big Box have announced a really good scheme data center they're building outside Slough. So they've kind of got this deal right under the nose of SEGRO, which has really caused a lot of angst inside the headquarters of SEGRO, no doubt. And then higher beta, that just means that these are very volatile names, and we've been taking some profit in that particular quarter. And then more recently, a little bit more of the same. Management change is interesting. So this is a business called Social Housing REIT that's changed its manager. This owns buildings, which are mainly long-term accommodation for people with physical or mental disability. They're often -- the operators are linked to the local authority. And we really think this provision is an area that's very under -- a lack of provision in this area. And we think that this new manager who were actually part of the folks who used to manage Supermarket Income REIT are going to do a better job, and that's already the case. Hammerson, they've got a new Chief Exec coming in. They've already done a very good deal buying into Brent Cross. Lots of detail I could bang on about, as you know, for hours. But really, it's really up there to take any questions that you might have on those. And then in terms of our position changes, where we are relative to the benchmark. And then on the left-hand side, our absolute position changes. So the little bit in blue is where we've either -- we ended up at the end of the year being more or less in a particular sector. And you can see that our industrial exposure has actually gone down, even though we have been buying back in now, we sold a lot much higher up. Nordic residential, we've taken chips off the table, Spanish diversified, which was the Árima privatization, we've taken stock out of that. And then to pull it all together, where are we in our exposure? Not really much of a change for those of you here last year, particularly. But remember, we don't -- this is an output rather than input. We are generally building our portfolio bottom up on sectors that we want exposure to companies that we can -- we think are the right price in those particular sectors. And ultimately, the geography exposure is more of an output than input. Okay. Last 2 minutes on our physical property portfolio, 5.5% of assets. This is virtually an all-time low and not because George Gay, who's run the physical real estate with me for -- coming up for 20 years. He's been with me. It's also his 45th birthday today. I promised I wouldn't mention that, but who's -- it wouldn't. But George has done a fantastic job. And I would definitely -- if anybody wants more detail about what we're up to at Wandsworth and also Vista, he will be around after this presentation to take questions. But in summary, we're doing a refurbishment of this industrial estate. I actually bought this industrial estate in 1997, a very long time ago, where the rents were GBP 8 a foot. George is now beginning a rolling refurbishment program. We've done Phase 1, and he is achieving rents comfortably in excess of GBP 50 a foot. So it's really been tremendous. And really, it's all about -- this is -- that is Wandsworth Town Railway Station for those who are familiar with the rivers a little bit to the north. It's a very famous pub called the Alma pub here, which is very famous for property people, folks drinking in there. And really, there's been a real lots of this type of real estate because ultimately, it's single story. And if you get permission to build flats on it or offices or pretty well anything else, it's been more valuable. So London has lost a huge amount of industrial space, and we are the beneficiaries of that because there are fewer and fewer places for people to go. Okay. Last couple of bits on M&A. So last year, I said shrink or merge, standing still is no longer an option. And so since then, we've seen all of these businesses either complete either merger, privatization or they're in the process. We've talked about all of these. The big one actually is this one, which you won't necessarily have heard of Cofinimmo, which is a big Belgian company, and it has agreed to merge or be taken, acquired by another Belgium health care business called Aedifica. And again, we're very pleased to see them get together because their cost of capital come down, they become more liquid. And to be honest, the Aedifica team, which we're invested with have done a really good job. Then I also mentioned under strategic review and -- or even winding up, PRS REIT has announced that. Life Science REIT has announced that they're sort of in the process that they're under a strategic review. They're not sure what they're going to do, but something will happen there. And then the Aberdeen European Logistics Income, which is a very small business, they've been busy selling off their assets there. They're pretty small as well. But we're getting to the end. And then I thought I'd leave you just with a couple of slides on how we've played some of this M&A. So Urban Logistics REIT, we -- the stock floated in 2018, 2017, we weren't particular fans of the business at all. But in April 2023, Blackstone acquired a business called Industrial REIT. And Industrial REIT was a company we admired hugely. We own 12% of the company, and they paid a 40 -- more than 40% premium to the undisturbed share price, a 17% premium to the NAV to get hold of this management platform, which was being built by the team at Industrial REIT. And then that's formed the bedrock of a private property company owned by Blackstone called Indurent. Honestly, I am not very good at picking names, but luckily they're good at doing their job. And now they've obviously subsumed other businesses. They've got Hansteen in there. They've got St. Modwen, and they've now acquired -- seeking to acquire the industrial REIT in there. So at the time, we thought on the back of this, that there will be a bit of excitement about privatization of these smaller industrial REITs. So we bought some shares, as you can see. Then we realized having a GBP 1.35 back in that, that was probably not going to happen, but this business wasn't strong enough for those folks to buy or anyone else. Cost of finance was still very expensive. So we sold our shares. We took our profit, and we bided our time. And as you can see, it all went on and the management team were making a real mess of it. It went down and down and down. Got down to here, and I thought this is really is getting really quite cheap now. So we bought a load of shares. And then sort of about -- around here, the Chairman of this company decided, it's an externally managed business, and he decided to agree with the management company that they should internalize the management contract. And then shareholders would have to pay the break fee for this management contract. But then they would rehire all the staff and pay them more money than they should. Anyway, fortunately, some other like-minded shareholders also thought this is a terrible idea. And 3 of us got together and put a requisition at EGM for the removal of the Chairman. And we would have won that. But in between, the Chairman realized he was going to -- he made a terrible mistake and he was going to lose his job. And he's had lots -- he's had an amazing career, and he's very much a sort of city douane. And he decided, well, he needed another way out and along came a business, LondonMetric, who said, well, we'll take the business over and we'll pay in shares, which equated to GBP 1.55. So that actually was a nice success story. On the other side of it, we have a Warehouse REIT. So back -- and the same story, the background in 2023 and the same thing, we bought some shares. We sold them. By the way, sold some of them less than we bought them for, but it was the right thing to do because the share price continues to go down. And then we find ourselves in this scenario where suddenly it looked like this company was in play and it turns out that Blackstone have -- bid for it and the Board agreed to sell it to Blackstone. And then Tritax Big Box came in, and they made -- some of you know the story, and it's been proper sort of M&A excitement. Things that my 15- and 14-year-old children love to hear me talk about, come back and tell them I think how exciting my job is. But in all seriousness, it was -- it's been great for the market because we have actually got a good exit for us. But actually, the story is not over. We've actually sold our shares, but there's still a small window where a counterbid could come back in, but we've decided to come out again, because we've got something better to do with the shares -- with the money. Okay. [indiscernible] all together, a lot of this we've talked about, undersupply of new space, opportunistic capital raises are coming. Equity market experienced heightened volatility, tariffs and geopolitical risk. I mean this is very much a problem for markets because they're just very hard to price the future. For real estate, quite interestingly, particularly if we do see a shift in manufacturing from Asia to more to closer to home, so nearshoring, onshoring, storage of parts. Of course, we've got a very bullish scenario in Germany with the sort of fiscal restraint coming off, and that's very optimistic for -- about companies there. But in all of this, at the end of the day, we are underpinned by the underlying physical assets. Our companies are not overgeared. Our average gearing is about 33%, which is very low relative to private property companies. So everything -- there's a lot of stability and resilience in our underlying asset class. The shares -- none of our shares are going to double overnight anything like that, but we're just -- we've got good businesses where we continue to see earnings grow and certainly the price of debt is coming down as that margin is being squeezed. So anyway, I've banged on far too long as always. I don't actually know how long Chairman I've been weighing on to, okay, that's good. It was tricky when the Chairman goes too long. But anyway, so ladies and gentlemen, thank you very much. I think we'll now go to Q&A. What we're going to start with Peter Brown has some questions from online. So maybe we'll start there, then come back to the room. We'll do a little bit in the room, and then we'll probably close out, and then I'll still be around for anybody who's got other questions. So you'll definitely get your questions answered. Peter?

First question, what proportion of the trust portfolio do you intend to allocate to development projects versus income-producing assets?

That's a good question and quite tricky to answer in as much as, there is no fixed number. What I would say is that there are quite a lot of businesses that we like that have a development program ongoing now. And essentially, where the land is in at the right price and particularly where they've got pre-lets, the yield on cost is generally much higher than if they went and tried to buy the built asset in the market and compete, because there's a lot of technical aspects around building, buildings and you get a return essentially, that's discounted in your underlying land value. So we do like those sort of businesses. And obvious ones to call out, Tritax Big Box, it's got a good development program. Argan, we've talked about. CTP, I saw up there was our major Eastern European exposure. They're a big developer of big box logistics, and they're a real beneficiary of the onshoring and nearshoring. So the answer is higher than in previous years, but generally for pre-let, not for speculative.

Okay. And a question I'll address to you. You may want to pass that to the Chairman. As an income is a key reason shareholders choose to own TR Property, has there been any discussion at the Board level about changing the dividend to a quarterly in line with several other investment trusts?

I think that's an interesting idea. We have discussed it in the past, but I don't see any reason why we shouldn't think about it again. So thank you.

Excellent. And one final one then from the online listeners. How comfortable is the Board with the Trust's current level of gearing? And do you anticipate adjusting it in the near term?

The Board are good enough to provide me with some guardrails in terms of the maximum cash, maximum gearing. And that is -- technically, it's 25% maximum gearing, but we tend to operate with a soft limit of 20%. We're currently at about -- live about 17%. So we are -- and by the way, to remind you, back in the dark days of 2008, so Q2 2008, the quarter before Lehman's went down, the then fund manager of the trust, ably assisted by me, he's in the room. We actually had both TR Property and the fund -- the other fund that I ran at the time, both had 20% cash. So if you want to think about -- if you only see me in the street and you want to know how I'm feeling, just shout Marcus, what's the number. If I say it's 20% cash or 20% gearing, then you'll know or somewhere in between, then you know, my grade of optimism, the fact that we are currently 17% geared basically tells you how optimistic I am about life. But there's not much further to go.

I'll pass you to the floor now.

Okay. Thank you very much. Just to add to the Chairman's -- the question about quarterly dividends, it's definitely something which I have been asked about in the past, and it's something that I'm sure we will look at. The only issue or the major issue with quarterly dividends is that we receive our income invariably, most companies provide it to us on an interim and final basis. There's a bit of quarterly. We have a bit of quarterly, and we actually have one company that pays monthly. But the vast majority pay us on an interim and an annual. So that would then just become a function of cash flow management, but it is definitely something that we should definitely be looking at, but that's just a bit of color there. Right. Any questions in the room? Oh, good, none. Thank you very much. Now I should have said no professionals are allowed to ask questions only amateur investors. I introduce Mr. Michael Moore, long-standing fund manager for many, many years. Michael?

Marcus, yes, while you're on gearing, I think only about 3 other trusts have gone down the contracts for different through the CFD. But you've been very good at it. How much money do you have to work out whether you're saving a little bit of money doing it that way? And what -- and do you think it actually prohibited you in the easy -- in the times when interest rates were very low from going out and getting a 2% debenture or something like that?

That's a good -- so as always, Michael, there's actually 4 questions in his 1 question, that's because he's very, very good at it. So we'll go to the back end of it first. We always -- the trust has always had a mixture of short-term rolling RCF, so a short-term facility. In addition, the CFDs are again similar to a short-term facility, plus we've had some longer-term finance, which is a mixture of private placement on different time frames. So essentially, we've always have -- our CFD exposure hasn't restricted us. We could have -- if I've been really smart when interest rates were 0, we would have taken -- Jo Elliott, our Finance Director and I would have taken even more longer-term debt. But of course, we weren't to know that rates were going to suddenly move upwards so dramatically. But the fact is Jo did put this very cheap debt that we have in place. So great credit to her. The CFDs are essentially -- we started using them because the French stocks had this really annoying, essentially is like an elevated stamp duty, which you pay when you buy shares in French companies. So therefore, particularly in large ones, that doesn't apply to the small ones. So if you can then use CFDs instead of buying the ordinary equities, you can avoid the FTT, just transfer tax. So that's one of the great benefits for it. But otherwise, we literally treat it purely as a cheap form of flexible leverage. Of course, it does come with a cost and some of our CFD providers require us to place margin. So it's sort of -- it's not a free lunch in as much as you have this borrowing, you're receiving the equities and the performance of the equities and you have to place your margin. But you could -- if the share price falls, you're going to get called for the margins. You've got to have the cash there as well, and that has a cost to it or you're receiving on your overnight money smaller than longer dated. So you are -- there is a price to it. So, Michael is absolutely right. But in the round, we think that the stamp duty saving alone is a big benefit. So that's why we'll continue to use those. I hope that answers the question. Right. Then on the left gentlemen.

Thank you, Stephen Brown. I'm definitely very much an amateur investor. But I have been around quite a long time well before indeed the trust ventured into Europe and that is our secondary share class, which we call Sigma or...

Sigma, yes.

That's it. Anyway...

I take responsibility, sir, for that, but anyway.

My question is related to the direct property holdings. My sense over the years is that this has been declining as a proportion of the trust. Can you comment on how you see the future and whether the intention is to gradually make it smaller or potentially expand? And if I can have a secondary, you mentioned very near the end, and I admire your optimism and enthusiasm. But near the end of your talk, you mentioned 2008. When is the next 2008 going to happen?

Right, sir. First of all, when I referred to amateur, I meant merely not paid, not that you are, in any way, less capable than anyone else standing up here wearing a suit and a tie or anyone else. No, not at all. So please, that's very important point to make. The next point is, I think the evolution of the trust over a long -- as I said, I joined Chris Turner in 1997, our Finance Director in 1996. The trust back then was a very different shape. It had about 1/3 of its assets in both physical real estate and unlisted companies. And the general view of the Board over time was that we wanted to move the trust to be focused much more on listed equities. And as such, the benchmark that was chosen was an all-equity benchmark, but always with a view that if we could make money out of physical property that we can control, then that will be very much a part of the business. So we don't have any unlisted private business exposure, but we do obviously have the physical property. Now the guidelines are up to 15% in the annual report. And we are currently at this all-time low merely for 2 reasons. The first is that we think that in terms of our -- where we're going to make the most money, we actually think the equity market looks a lot cheaper in many parts of it than going and buying open market at market value physical real estate today, with the exception of the deals that George has found recently, which I'll come back to in a moment. It's also just a function of the fact that we completed the development or George and the team completed the development of The Colonnades in Bayswater, which is our largest asset, which we sold for GBP 33 million just over 12 months ago. And that made a big difference in -- obviously, that was 3.5% of our 4% of assets at the time. So the 5 point -- it's a function of a snapshot in time. So to answer your question, would I expect it to go any lower than where we are today? Absolutely not. We are at a low point. Am I expecting it to go much higher or considerably higher, potentially double at some point in the future? Yes. But the caveat has always got to be what is the best allocation and where is the best place to put your money to work. And right now, we still think that's in the equity market. We could have a situation where if real estate equities move up 10%, 15% in the coming months, which they could -- 12 months, that could quite easily do, then there will be that arbitrage would be reversed. And we're always out looking for deals. I would also say it's a very healthy indicator, much to George's disappointment, it's a very healthy indicator. He spends a lot of time looking at deals. And sometimes we bid on them, sometimes we get into -- we come and look at them during the bidding process. And he just says to me, this is too expensive. And then someone goes and pays that price. And we're like, well, that's the live market price. We need to rush out and buy more shares in X, Y and Z because actually, Warehouse REIT is not a well-run business. It's not great real estate. But at 109p, it just looked too cheap. And if we can buy at 109, sell it at 115 a month later, that makes good business. And that's because there's now a bidding war for those assets between Blackstone and Tritax Big Box. So it's -- I think it's very much -- please don't take it -- it's an excellent question. I'm glad you asked it because, it's very much just a snapshot in time, absolutely not a -- we do not -- and the Board, I'm quite sure, don't want to see us not own real estate. And another reason quite simply is that it's really great to be able to stand up here with George and the team and say, we make money out of this stuff. And I then say to chief executives of listed property companies, you cannot pull the wool over my eyes. I'm [indiscernible] by training, but I have these fairly robust meetings where they're like, yes, we're going to get -- we're going to let this in 6 months, and we're going to -- it's going to cost -- it's only going to cost us GBP 250 a foot. I'm like, no, no, that's a year and GBP 300 a foot or whatever the number may be. So yes, and I think we find a lot of our investors really like the fact that we do have that physical exposure. So thank you for asking the question. [ 2000 ] I thought -- did you see I tried really hard to get out of that. Gosh, very difficult one. Obviously, if I had the answer, I'll be talking to you for my enormous yacht or my [ back phone ]. I think it's -- I can't be a hostage to fortune, and this is recorded in perpetuity. I think we just have to make sure that we've learned the lessons of debt availability and corporate structuring. You've got that -- and it's -- there will -- there's great article in the weekend FT about Fred Goodwin and the demise of RBS. And of course, you read it and you're like, my God, it was so obvious, wasn't it so obvious, the whole thing. And that's what we keep a very close eye on. And when there's -- particularly when some of the certain -- the bond markets, when the ratings agencies start pushing up the valuation of 1 or 2 of these listed companies that we don't think is really valid and they're having their arm twisted or whatever. That's the sort of -- we're looking for those canaries in the coal mine. But right now, the risk is clearly all geopolitical. And I'm afraid we really want people to stop throwing rockets at each other and doing all the awful things that's going on. But I am astonished at the S&P being at an all-time high, I really am. But in our world, there's absolutely no bubble anywhere in this. So that's encouraging.