Warehouse REIT plc (WHR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the presentation of the annual results to 31st March '21 for Warehouse REIT. My name is Andrew Bird, Managing Director of Tilstone, the REIT's investment adviser. I am joined this morning by Peter Greenslade, Finance Director, who will present financial numbers; and Paul Makin, Investment Director, who will speak to property valuation and asset management information. But first, I'll cover the operational and financial highlights for the year. Next slide, please. Actually next slide again, please. Thank you. So much has happened in just 12 months, perhaps best illustrated by the scale of the company's portfolio, almost doubling in size from GBP 450 million to just short of GBP 800 million. And yet, loan-to-value has moved in the opposite direction, falling from 40% to just less than 25%. At IPO, we committed to growing the scale of the business but only when it will be accretive to shareholder value. The results illustrate how we've remained true to our publicized strategy and listened to our shareholders who favored reducing the gearing levels down from circa 40% against the backdrop of the pandemic. This time last year, both the economic relevance of our urban warehouse portfolio and our strong relationships with our occupiers were put to the test against the backdrop of the first lockdown. I think both passed with flying colors, best illustrated by the rent collection statistics throughout the year being in excess of 98%. And COVID brought about a short period of disruption to the investment market, once again providing the opportunity to raise and deploy capital into accretive pipeline of assets. We raised a total of GBP 199 million of new equity from 2 capital events. We bought assets focused on the e-commerce warehouse market where we could see growing profitability of occupiers. Over the 12 months, we've invested a total of GBP 226.6 million, achieving a blended net initial yield of 6% from assets that continue to improve the portfolio KPIs. It's been a disciplined acquisition strategy not only last year but since IPO, and that's been recognized in the year-end valuation prepared by CBRE. The like-for-like uplift of just under 19% pays testament to the quality of the portfolio and like-for-like rental growth of 2.9% and like-for-like ERV growth of 3.7%. And yet, the ERV still equates to just GBP 5.62 per square foot. So there's still ample opportunity to make further progress, particularly from the ongoing asset management. Once again, the asset management team had been flat out, signing more than 2 leases and/or lease renewals each week and, in the process, continuing to grow the occupancy level from just over 93% to 95.7%, with new lettings achieving rents 9% ahead of the value as ERV and achieving high retention levels on longer leases at renewal. All of this progress has manifested itself in strong financial numbers, with the EPRA NTA rising 23.4% to 135.1p per share, helping to drive the total accounting return to 27.7% in the year. Next slide, please. Slide 4 shows 4 graphs that illustrate the strong performance since IPO in September 2017. Top left, total shareholder return of 64.6% captures the dividend and share price movement in the period up to the 18th of May. Bottom left, total accounting return being the compound annual growth rate of 13.9% exceeds our IPO target of 10% per annum. And the graphs on the right-hand side of the slide illustrate how the scale of the business continues to grow. Slide 5, please. On Slide 5, we look at the summary of the supply and demand imbalance of the U.K. warehousing market. We've experienced unprecedented demand for vacant space. The graph on the top right of the slide shows the annual U.K. warehouse takeup, illustrating a rising trend and highlighting the outperformance experienced in 2020, over 50 million square feet having been let. And this calendar year has continued in a similar vein with 8.8 million square feet let in Q1, 34% above the long-term average. Online sales have ballooned during the lockdown, growing market share by 62% year-on-year to March. Knight Frank research published an analysis to show that for every 1 billion of online spend requires 1.36 million square feet of warehouse space, slightly higher than previously thought. The research continues that there will be demand for an additional 92 million square feet of U.K. warehouse space over the next 3 years. Looking at the graph on the bottom right, it's not surprising to see the availability of space has contracted over the last 12 months across all range -- all size ranges, yet, again, we see limited supply of both new build, especially sub-100,000 square feet and limited new planning permissions. The economic moat about which we have previously spoken remains as relevant today as 3 years ago, especially in the mid- and small box range. You might have thought with rising rents and yield compression, it would be different, but land values have been chased ever higher by big box competing developers. So what about the effort ratio? This is the proportion of the rent as a percentage of the occupiers' annual turnover and provides a strong indication as to the affordability of rents. With the Internet driving sales from these warehouse buildings and supporting increased EBITDA margins, the rent is becoming ever increasingly immaterial. And I'll give you just one example. We recently acquired a warehouse let to TaylorMade, who used it for their U.K. -- for their European HQ. As you'll know, golf has had a resurgence last year. And TaylorMade had a real winning experience on the back of Dustin Johnson's success at Augusta. European sales hit just less than GBP 100 million, which represents -- sorry. So therefore, the rent represents less than 0.5% of turnover. Now this is significant rental growth upside, and there are many more examples. So just to conclude. Occupier demand is high, supply constrained, and the space is very affordable, which gives us great expectations that we'll continue to grow and justifies why global capital is chasing stock and yields are compressing. But for me, with our ERV, as assessed by CBRE, at just GBP 5.60, there is still significant potential, which we'll talk to you about in the asset management. Peter, over to you.

Thank you. Thank you, Andrew. I don't propose going into great detail on the results, but aim to pull out the salient numbers and ratios. But if you do have any specific questions, we're only to -- happy to answer them at the end. On Slide 6, we'll see that our IFRS profit before tax increased to GBP 123.1 million, up from GBP 20.7 million in the previous year. The main driver was GBP 105 million gain on revaluation of REIT's assets compared to a GBP 5.1 million gain in previous year. Andrew and Paul will talk more to the drivers of the gain later, but it should be noted that this comes after absorbing GBP 11.4 million of acquisition costs; and GBP 2.6 million of CapEx, much of which was focused on sustainable investments. Our adjusted earnings before interest were GBP 24.8 million, and our earnings were GBP 18.6 million. These results were 16% and 19% ahead of the previous year. Earnings per share and EPRA earnings per share were both 5.3p per year, a reduction of 1.2p from the comparative period, reflecting the increased number of shares in issue following July raise from a cash drag through to January 2021, whilst the funds raised were deployed with associated debt. Despite the lower earnings, we maintained the dividend for the year at our target level of 6.2p. Dividend cover in the year was 85%, but by the final quarter, 1.55p quarterly dividend is fully covered. And we expect it to be so going forward. We intend to maintain our quarterly dividend and progressive dividend policy and pay at least 6.2p in the year to March 2022. The revaluation increase, together with assets acquired in the period, meant that we had a portfolio valued at about GBP 792.8 million at March and an EPRA NTA of 135.1p per share, up from 109.5p a year ago. Andrew has already referred to the 27.7% total accounting return for the year, and since IPO, our total accounting return has averaged 13.9% per year. LTV reduced to 24.6% at the year-end as we deliberately managed the level down from 42 -- 40.2% a year ago. This will grow as we acquire more assets over the coming months, but will not exceed our self-imposed cap of 35%. We'll go to the next slide, please. Gross rental income was up GBP 5.4 million year-on-year to GBP 34.8 million. This reflected the full benefits of acquisitions made in the year to March 2021 and together with like-for-like EPRA rental growth of 0.7%. Property costs only increased GBP 0.4 million despite the portfolio doubling in size. A large part of this is due to lower vacancy costs together with only a marginal increase in bad debt provision despite COVID-19. I'll talk more about debt collection later. The total cost ratio increased to 29.5%, up from 27.1% a year ago. This is a function of the cash drive, and I expect it to reduce going forward. Indeed, it's already started to do so in the last quarter of the year to March 2021. Net finance costs were only a little higher year-on-year at GBP 6.2 million, up GBP 0.3 million on the previous year. This was largely due to the raise last July and from paying down the RCF prior to redrawing it later. The weighted average cost of debt is some 2.1%. The ongoing charge ratio of 1.4%, lower than 1.9% from a year ago, this is as the REIT benefits from its size and scale. Next slide, please. The balance sheet is strong and has net assets of GBP 574 million, substantially up from GBP 263 million a year ago; and driven mainly by the raise in July, the placing in February and the net GBP 105 million revaluation surplus. Net borrowings are GBP 194.8 million, and this represents GBP 182 million of term loan and an RCF of GBP 40 million, offset by cash held pending deployment. Other net liabilities are higher year-on-year, reflecting some GBP 13.5 million of deferred acquisition costs and lands acquired for development during the year. The scale of the business also means that deferred rent is some GBP 2.6 million higher year-on-year. Next slide, please. This slide looks at the NTA bridge from 109.5p to 135.1p. We had a small positive impact from share issues of 0.4p as the raise in July and placing in February affected the premium. The adjusted earnings of 5.3p were offset by dividends paid and a small loss from disposing some 11 noncore assets as part of our regular housekeeping, but the biggest impact, by far, was from the revaluation of NTA, benefited by 24.7p per share from the uplift. Slide 10. Thank you. Before I hand back to Paul, it's just worth seeing at the rent collection in a little more detail. April to June 2020, collection was 99% cash; July to September last year, 98.4% cash; October to December, 98.2% cash; and in the last quarter of the year, 98.6%. The current quarter is already 95.8% collected. And we anticipate similar levels of collection experienced in year to March 2021. And I would just ask you to remember that we also hold rent deposits for our smaller tenants. In summary, we have good rent collection. We have no debt maturities until 2025, an option to extend 2 years beyond that and an accordion for further GBP 55 million of debt. We have a low weighted cost of debt at 2.1% based on current LIBOR. We have interest cover of well over 4x and are operating within our banking covenants. We have a low LTV and self-imposed cap of 35%. And we believe our balance sheet is strong and positions us well for the new financial year and beyond. Paul, over to you.

Thank you, Peter. And now looking at Slide 11. During the year, we successfully invested over GBP 223 million in 9 transactions, acquiring 16 new assets, all of which we believe to be accretive to both shareholder returns and portfolio quality. Leveraging on our good track record and strong market contacts, we successfully secured a number of these off market and a number at historic-low prices, as we were able to transact very quickly, where vendor needed liquidity. We, therefore, managed to secure the asset at a blended net initial yield of 6%, which we felt was good value. And I'm pleased to say that the view was confirmed by CBRE in the end-of-year valuation, where these new acquisitions increased in value by 15%, being an increase of 11% on cost. And we've also increased [ our lettings ] in 2 locations by buying adjoining lands and buildings, taking our total investments for the year to just over GBP 226 million. Just to pick out a couple of highlights. As we went into lockdown last year, we made a strategic decision to increase our weighting in core longer-income assets which, we believe, would be pandemic proof. And this led to the acquisition of the online fulfillment center in Chesterfield, which you can see in the top left picture, with over 13 years on expire to Amazon, at a price we believe to be good value. In this case, we definitely were proved right as the value has increased in this asset alone by 25% since purchase, showing 22% uplift on costs. We also made a strategic investment decision to focus on the key economic locations along the Oxford-to-Cambridge arc. This prompted the acquisition of Granby Industrial Estate in Milton Keynes, which has already seen good letting transactions; and also, the most recent acquisition in Cambridge with the Cambridge South Industrial Estate, which I'll come on to later. And it's also worth noting quickly that we managed to buy almost half of these assets in corporate transactions, thereby significantly reducing the friction costs associated with purchasing, enhancing investor returns. Next slide, please. On this slide, we see the breakdown of the valuations. There's a lot of detail in here, so I'm just going to pull out a few points, if I may. The value has increased from GBP 450 million to GBP 792 million, which is -- whilst a good part of this is through the acquisitions, we have seen a like-for-like increase of around 19%. However, the average current rent per square foot is only GBP 5.50 per square foot. And with a reversionary yield close to 6% based on the value as ERV, we see good potential for future rental growth, especially as we consistently outperform value as ERV. The good work being done by the asset management team can be seen by further increase in the weighted average unexpired lease term from 5.2 years to 5.8 years. In terms of portfolio weighting, we have around 1/4 of the portfolio in regional distribution warehouses, which are typically our core longer-term e-commerce assets. We have around 15% in last-mile single-let assets in key locations serving major urban [indiscernible], but that leaves almost 60% of the portfolio in multi-let assets. Again, these will include last-mile functions, but it's interesting to note the number of these are valued at 6%, with reversionary yields of 7%, which in our opinion shows good value and potential for further valuation increase. And it's also worth noting quickly that our valuation currently breaks back to GBP 90 per square foot, which is still below the cost of replacement, so you'll be pleased to know the land is effectively still [indiscernible]. Slide 13, please. This slide shows the spread of the valuation uplift across the regions and estate type. You can see that the largest valuation uplift is in regional distribution warehouses, where the like-for-like value increase was over 30%, reflecting the strong increased investor demand for these larger assets with longer secured income streams. However, we're also seeing increasing investor demand for multi-let estates, with yields dropping with each new transaction. And as I pointed out previously, a lot of these are valued at 6%, again showing potential for valuation growth. Next slide, please. We introduced this new graph at the half year, which just pictorially shows the evolving portfolio risk-return analysis. And we've updated it for the year-end. As you can see, we've got 31% of the portfolio in core, 57% in value-add and 11% in opportunistic. And as I said, at the start of the year, we made a decision to increase our weighting in core pandemic-proof income, as we did through the Chesterfield acquisition, but also, along with the Iron Mountain regear that we did in Warrington, that increased the percentage in core from 16% at the beginning of the year to 25% that we presented at the half year, now standing at 30%. The portfolio analysis allows us to analyze valuation uplift, and we can target what -- which assets have got -- have increased in value through asset management. We've shown the larger assets which have increased in -- which have changed category in [ hatch ] areas. The regeared Iron Mountain lease in Warrington I've referred to, creating a new 10-year lease, moved it from value-add to core. The 5-year lease extension to John Lewis in Northampton, creating 8 years on expires, again moved that from value-add to core. And the letting to DFS in Nottingham, which I'll talk about later, moved the property from opportunistic to value add. The like-for-like uplift in these assets is 40% compared with the 19% overall which we've talked about. This is a real demonstration of the hard work from the team and marks the true performance of alpha over the beta. And whilst we do see good valuation uplift, we still see plenty of opportunity with -- we currently have 60% of the portfolio in the value-add category, offering good potential to capture embedded reversion. However, there's real excitement in the opportunistic category as we have been working up development opportunities around the spare land or lazy acres, as we call them. And we've also been buying lands in the adjoining estates, creating further development opportunity. While there's still significant work left to do having to successfully take these sites through the planning system, the potential value uplift around these is potentially very large. And these opportunities offer the potential to invest capital once we've derisked through some pre-letting, with the resultant returns on that capital employed being larger than buying standing investments and provides an opportunity to create substantial product -- sustainable product from the ground up. Next slide, please. During the year, we continued with our strategy of improving quality and not just quantity of the assets and the income. As we can see on the table on the top left -- top right, sorry, in the middle of the year, we actually reduced the number of assets back to that in 2018 as we concluded the disposals of 11 of our noncore and smaller, more granular assets where we believe the business plan had been completed. These sales totaled GBP 16.5 million and were close to the valuation. Through the resultant replacement acquisitions, we've continued to grow the average asset size, now standing at about GBP 8 million. And as you can see from the graph on the top left, the majority of our occupiers are in e-commerce, with 52% being directly involved, with many of the remainders providing suppliers and providing services to the e-commerce. And before I turn to leasing activities, just looking at the bottom 2 graphs, we've continued to increase occupancy, and effectively -- the effective vacancy now stands at only 1.8%. And we've also maintained strong retention rates, with effective income retention rates for breaks during the period being over 90% with occupiers recognizing the constrained supply. Next slide, please. Despite the lockdown, we continued to be very busy. And we've actually concluded, as Andrew said, 117 lease transactions, being more than 2 a week. On new lettings, the rents we achieved during the year were consistent with our average outperformance since IPO at circa 9% above value as ERV. And lease renewals continued to see over 10% uplift on new lettings. We continued to be busy and have already concluded 25 transactions since the year-end, continuing this trend of outperformance. Again, despite lockdown complications, we've continued to commit capital expenditure to the vacant units and general improvements to the estates. And we've committed GBP 2 million, which has been -- which has aided the leasing outperformance. This expenditure also forms a focus for sustainable improvements to the buildings, resulting in upgrades to EPC and also improvements to wider estates with projects such as EV charging points. Next slide, please. On Slide 17, we can see the spread of occupiers. And new occupiers we've welcomed to the portfolio include DHL, Swissport, Wincanton, Kuehne+Nagel, Clarins and TaylorMade. And we very much look forward to working with them going forward. And even though we've increased the size of the portfolio, the number of occupiers has only marginally increased. And we look to improve the quality of the income, yet as we have maintained the diversity of income, with the top 10 occupiers accounting for circa 30% of the income and the top 100 occupiers being responsible for 3/4 of the income. Next slide, please. I would like to just now talk to a couple of case studies, the first of these being Nottingham that I referred to. This is a modern 217,000-square-foot warehouse well located next to the M1 motorway. We purchased the asset just over 18 months ago as part of the Echelon portfolio. And we realized that the most challenge for the vendor was that -- this asset in the portfolio. We managed to agree to a deferred consideration of GBP 4.5 million of the capital required for 4 years, and we were granted a rental guarantee by way of a lease for 3 years whilst we refurbish and let the building. And in the event that we do an earlier letting, the remainder of that rental guarantee comes back to Warehouse REIT. Since acquisition, we've secured planning for both the refurbishments and also an extension option. And during lockdown, we agreed a short-term occupancy with DFS without having to stop the rental guarantee. And we were very pleased that just before the end of the year, we signed a new 5-year lease with DFS at GBP 1 million per annum, ahead of the guaranteed rent. We're currently taking a surrender of the lease, and the returned premium will pay for a majority of the refurbishment works that are required. And as part of the refurbishment works, we're looking to implement some of our increasing list of repeatable and sustainable improvements, including electrical vehicle charging points and energy-efficient lightings. On this basis, the asset has seen a 46% like-for-like increase in value this year, and now shows as a 12% return on cost. And finally, Slide 19, please. This is our latest acquisition I referred to. And we've been very pleased to be able to secure a cornerstone to our targeted Oxford-Cambridge arc investment strategy, acquiring 68,000 square foot multi-let estate. The Cambridge industrial market has been starved of new warehouse stock, with the main development focus being on science parks. The estate will benefit from the close proximity of these parks and also the city center, feeding off the related occupier demand. With the estate being just completed, it benefits from good sustainability characteristics such as strong EPC ratings and an on-site renewable energy source. And we've also acquired Phase 2 site next door, with planning permission ready to go. And we already started seeking pre-lets. Andrew, over to you.

Yes. Thank you, Paul. Next slide, please. Paul referred to development and the embedded value that we see in the portfolio. We have a number of estates where the REIT is sitting on unused land. What Paul rightly said, we call lazy acres amongst the crew. The total is now approaching 150 acres. There are some more remote opportunities, but whilst others now have planning, and that opportunity is becoming more near term. We've provided a list on this slide of some of the assets that we have. The most interest -- most recent, as Paul mentioned, is Cambridge, which comes with 3.4 acres with planning permission. And we have an ambition to start on site near term once we have at least our pre-let. To give you an idea of scale, this particular scheme would have total development costs of circa GBP 6 million. The other recent acquisition is 5 acres of land at Middlewich, Cheshire, immediately adjacent to our multi-let estate, again with planning permission for employment use. During the acquisition due diligence, we agreed terms with an operator who would take the site for a term of 15 years on broken lease. So again development is creating extending the WAULT. Knowsley and Liverpool, again planning permission secured for 4 acres of land. And [ this list ] is instructed on half the site for a new 30-year term, and the other half is under offer for a 15-year term, so great progress being made. Perhaps it's Radway 16, Crewe in Cheshire that has the potential to make the largest impact. Since shortly after IPO, we bought a multi-let estate of 250,000 square feet on 25 acres. Working in collaboration with the adjoining landowner, who controls 16 acres, we have secured, in March of this year, a planning permission for just over 800,000 square feet across 6 warehouse buildings ranging in size from 22,000 to 240,000 square feet. The project will now progress to satisfy the pre-commencement conditions whilst we market the space, with a view to securing pre-lets. We have also successfully secured a further 60 acres of adjoining greenfield land, which has been allocated in local planning for employment use. Work has started on the preparation of planning application, which might provide a further 1 million square feet, creating overall a distribution park of regional significance. And we'll keep you posted as matters progress. With these opportunities, the base case assumption is to secure planning; agree pre-lets; and build to hold on a running yield 200 bps over and above the price, for which we might reasonably acquire similar stock. And in all of these development opportunities, as Paul has mentioned, sustainability becomes a key focus. Sustainability is now an integral part of the business, all decisions reinforced by the recently created plc Board Sustainability Committee chaired by Aimée Pitman. We are targeting the EPRA Sustainability Best Practice Gold Award. And we will continue to focus on the 4 building blocks set out on Slide 25 in the appendix. In the interest of time, we're happy to come back to sustainability in the Q&A. Slide 21, please. We set out the built-in income reversion of 22% within the current portfolio, shown on top right on the slide. Near term, the company will benefit to the tune of GBP 4.5 million of annual rent as the short-term rent incentives expire over the next 3 to 12 months. Thereafter, the portfolio reversion of GBP 3.2 million per annum, as assessed by CBRE, whose forecast we continue to outperform, will flow over the next, say, 5 years, depending on the rent review and lease renewal dates. Primarily, this is letting of the vacant space, GBP 2.1 million. Whilst we will let the current voids, we accept that new voids will come on to the register as we work through the lease renewals. We budget to have an element of vacancy, as this is the creative asset management opportunity which enhances value. I won't talk about WAULT, as Paul has already covered it, but I will just take you to the last bullet point on this slide, please. The annual valuation prepared by CBRE reports a portfolio EPRA NRV, net reinstatement value, which equates to 147.8p per share, which is the value of replacement portfolio assessed by ignoring the usual deduction of 6.8% for purchases costs. The assets have also been valued on an individual basis, but if offered for sale as a whole, the value goes on to report that the market would pay a premium which they have assessed as between 5% to 10%, which I think is an interesting point for consideration. Next slide, please. So to wrap up, as we are keen to leave some time for Q&A, the challenges of COVID have accelerated change, leading to greater competition for Warehouse space, particularly from the e-commerce world. The portfolio uplift has witnessed good progress, but still leaves significant upside. We see no reason to think that our investment strategy needs to change. And we continue to back our own judgment, with management holding 6.6% of the REIT. And no one has sold any shares since the IPO. We continue to focus, as Peter said, a covered dividend for the current year of at least 6.2p. And finally, where -- I placed on record an enormous thanks to both the Board of the Warehouse REIT, who had yet another busy year; and to all the Tilstone team, who without exception have had a huge contribution to this year's outcome. With that, ladies and gentlemen, we'd like to open up for a Q&A session, any questions.

[Operator Instructions] We will take our first question from James Carswell from Peel Hunt.

Good set of results. Just a quick question on the investment market. Obviously, yields have compressed quite significantly. I'm just wondering, in terms of acquisition opportunities, what you're seeing? How competitive is the market? And effectively, how are you continuing to source what seems to be very good acquisitions at good prices?

James, thanks for your question. We absolutely agree. It's a very competitive market. And we do have another GBP 60 million, GBP 70 million of capital to deploy. We have a number of opportunities under offer with solicitors, so we're comfortable about the near term and to have some exciting transactions that we'd look forward to reporting. The market is not screen-based. And it is about relationships, and it is about track record. So there will be opportunities. What our discipline is about is stepping back from what we see as overpriced opportunities, but we do focus on quality and what we term to be scarce resources. And whilst we need to be careful about starting yields, it is about the equivalent yield where we can create value through active asset management.

[Operator Instructions]

There's a question from Julian [indiscernible], Andrew.

Can you read it out? I can't see it.

It says, what proportion of value add has the potential to move to core in the current financial year? And how do you expect acquisitions in the current financial year to be split between core, value-add, opportunistic? And his third question, I think you just answered James. It's same as James.

So first part of the question -- sorry, the second part of the question is how do we expect the acquisitions to be split against the current balance of core, which just to remind everyone is 30%; value add, 60%; and opportunistic, 10%. I've just simplified those numbers. Acquisitions will follow a similar weighting. And we think that, that provides a structured portfolio. The core is very much focused on what we deem as pandemic-proof income, which we've been very focused on building. We also think that, to look to that outperformance that Paul referenced, an element of opportunistic acquisition will help drive returns. What we're constantly doing is trying to ensure that any opportunistic does not have a drag on earnings such that we cannot support our progressive dividend policy. Paul, do you...

Yes -- no. Thank you. It's a good question. And these are sort of questions that this analysis can bring out, and it really helps focus the strategy. I think it's probably worth -- the easy thing is look at is to say, at the moment, we are 30% core with 60% of the portfolio with the value add. We can see -- but if you look on the other side, we've actually got about 25% of the portfolio in the regional distribution, 15% last mile and 60% in the multi-let. There's a strong correlation between the value-add and the multi-let because there's always things to do. We create our own opportunities by investing capital. We're creating new rental tone, which helps drive value. So by inference, it's quite hard for a multi-let estate to enter into the value-add because we're already -- always -- enter into core because we're always finding more opportunity. For the last mile, where we've got about 15%, this is where we build our relationships with our occupiers both on asset and the portfolio level. And this does create opportunities to regear and move across. So that 15% is probably the target. I don't have an exact number for you, but as a rule of thumb, that might be an opportunistic, but then you might at the same time keep working on some of the core assets. As those leases start, we continue to work with our occupiers.

And it's perhaps also worth mentioning that we continue with what we term our housekeeping, which is challenging ourselves as to what we consider to be in the bottom 5% of the portfolio. In this period, we're making sales of just over GBP 16 million at approximately 6% from our weakest assets. So we will continue to make limited disposals when we think it's appropriate. Peter, I'm afraid I can't see the questions.

Yes. I'll read out the next one. The next one is from [indiscernible]. Is development pipeline and exposure to land adjacent, is this estate small but growing? How much value-add can we expect from this activity?

So I think it's good to think about a 3- to 5-year horizon. Some of these will come forward in earlier term. Some will take longer. At the moment, we are not providing specific advice on numbers. It's easier once legal commitments are signed, but I think certainly on larger-scale projects, and we've mentioned the Radway scheme, development values are coming out at around GBP 115 per square foot. Costs are circa -- and this is generic I'm talking about, so just generic numbers. Costs might be, all in, including land, GBP 90 per square foot. So it gives you an idea of the profit margin. And as I mentioned, that the -- you've got details there of the floor area that's been granted planning permission and the mix between our land that we control and the neighbor whom we're working with. So I think probably leave these numbers more generic at this moment in time.

There's another question here from a shareholder, [ Kim Dale ]. Will there be more share placings to fund purchases to increase the portfolio this year? And can you see the dividend increasing year-on-year?