Workspace Group Plc (WKP) Earnings Call Transcript & Summary

All right. Well, good afternoon, everyone, and welcome to our Capital Markets Day today. Today, we're focused on sustainability. I'm delighted to be presenting from our Exmouth House business center, in Clerkenwell. And hopefully, as you arrived, you got a goody bag containing a selection of sustainable products, majority of them from our customers indeed. By way of background today, Exmouth House is a building we purchased in 2006. And over the years, we have gradually adopted it to our flexible multi-let strategy. And that includes some time back now actually adding an extra floor on the roof of the building. And actually, it got a fantastic roof terrace there as well. And then more recently, we've refurbished the ground floor with the reception area and break up some space for customers. And just [ back ] and it's a typical example of us of a clustering a building, not only have we got the building here across the road, we've got a building called the Ink Rooms. And then just about 100 yards -- a couple of hundred yards south of here, we've got Clerkenwell workshops, another one of our sort of, if you like, flagship business centers, and it's great how these buildings work together, particularly in areas like this, which are really vibrant sort of centers for our customers. In terms of sort of the recent corporate calendar, just a quick reminder for you, in April, we announced our fourth quarter trading update. I guess a key highlight there that I just draw to attention if you haven't seen it is actually great news for us is that our like-for-like occupancy returning to sort of pre-COVID normalized levels of around 90%, a really great achievement in the year for our team. On the 6th of May, as you might have seen last Friday, we announced actually the completion of the McKay portfolio. Again, really pleased with that. Not surprising there, of course, today, when we focus on what we're presenting in terms of data, at the moment, just focuses on the existing Workspace estate. What I will say, though, is our full year results in June, we will, of course, give you an update on our plans around the McKay portfolio acquisition. Just moving on to the agenda for today. After my introduction, we will -- I'll then hand over to Sonal Jain. Sonal joined us last year from JLL as Head of Sustainability. And she'll be kicking off by outlining our overall approach to sustainability. And then covering in more detail the environmental aspects, and particularly our ambitions around net zero carbon. Dave Benson, our CFO, will then crucially, I think, also cover an estimates of how much that's going to cost us in terms of delivering on those plans. Sonal is then going to come back and actually outline how we're driving social sustainability, and that's really engaging with our people, our customers and the local communities that we're in. And lastly, on that, just looking at the overall value that our sustainability ambitions generate. We're then going to finish with a panel session. The panel comprises a selection of our senior management Workspace team, which we'll introduce later. They are responsible for delivering on our plans. And it's going to be moderated discussion by [ Stuart Prosser ], and he's going to give the team the opportunity, hopefully, to share with you some of the experiences around deliverings on our ambitions and also their thoughts around the challenges ahead. And then lastly, an opportunity for you in the audience to ask any questions you may have of either Dave or I or the panel. So just first of all, by way of introduction, what I'm hoping you're going to get out of the presentations today is an appreciation of actually how much sustainability is ingrained in our business model. It really is part of our DNA. Our purpose, to give businesses the freedom to grow. What does that really mean? It's around -- for us, it's around nurturing employment-led regeneration across London, providing inspiring, flexible workspace at buildings that we own. We create vibrant community to driving ambitious sustainability agenda, working both with our own staff, but also with our customers and the communities that we're in. And lastly, by [ way ] introduction, of course, it goes without saying that governance is key in making sure that we deliver on these ambitions. At executive level, the buck stops with me. But at Board level, we have now established a dedicated ESG committee to ensure an overseas delivery about those ambitions. And also importantly, sustainability is now an increasingly significant element in bonus schemes at all levels of the company. We also think it's important to actually benchmark ourselves against others. And those external ESG accreditations are important. And I'm delighted to say that actually, over the last year, we've improved our GRESB rating from 4 star to 5 stars, the highest level. And we've also got a AA rating from MSCI and overall, replacing us very much in the top 2 of our peer group. And I think with this solid governance, we are well positioned to deliver on everything that you're going to hear us talk about today. I'd now like to hand over to Sonal. Thank you.

Thank you, Graham. Hello, everyone. So I'm here to tell you about our approach to sustainability and show how we are driving positive environmental and social impact. But to start with, why is sustainability so important to us? The driver for sustainability comes from really who we are as a business and who we serve. Workspace is home to London's brightest businesses. We are long-term custodians of some of the most iconic buildings in London, and we are a responsible employer. Having a progressive sustainability approach really ensures we are effectively delivering on all our responsibilities. Additionally, our footprint is massive. We occupy over 4 million square foot in 14 boroughs across London. Our people reach is significant as well, reaching over 3,000 businesses in London. Now this is a unique opportunity we have to have a lasting positive impact on everyone. Now coming to our sustainability strategy. It is underpinned by 3 pillars: the first is delivering a climate resilient portfolio. And here, our focus is really minimizing our environmental impact, ensuring we are future proofing our business for the long term. The second pillar is supporting our communities. Our focus here is employment-led regeneration of London and in doing so, creating lasting value for the communities in which we operate. And the third pillar, looking after our people. Our focus here very much is about ensuring we are supporting all our people, our employees, our customers and our supply chain partners to achieve their best. And underneath the 3 pillars, there are a whole range of work streams focused on environmental and social issues that we are driving forward. And these issues are very material to our business that we have decided to focus on. Now with that context, let's look at how we are driving impact, starting with environmental impact. A bit of context again. The building and construction industry is very energy intensive, in the way our buildings constantly run 12-plus hours a day. The construction activity is very material intensive, too. And as a result, the environmental impact of our sector is significant, accounting for nearly 40% of global emissions. However, we take that impact very seriously. We have set an industry-leading ambition to be net zero carbon by 2030, 2 years ahead of government's own net zero carbon target -- 20 years ahead, sorry. Now actually, on the same point, half of FTSE250 companies have made a net zero commitment. So what makes us unique? Firstly, our commitment is science backed, very much aligned with a 1.5 degrees warming trajectory. Secondly, our net zero commitment completely includes the emissions from our tenants' or our customers' energy use. We're taking full accountability of whole building emissions. And thirdly, since being one of the first real estate businesses to commit to net zero carbon back in 2019, we made significant progress already. Now the reason we have made significant progress in such a short amount of time, it's because we have a clear delivery plan. For us, to get to net zero carbon by 2030, we have to basically eliminate 2 sources of carbon. The first is operational carbon as the name suggests, it's the carbon we use in operating in our buildings, the gas and electricity we use in our buildings. And the focus here is very much ensuring we are driving the energy use down in our building, and at the same time, we are decarbonizing our heat, which is in layman terms means replacing all our gas-fired boilers with high-efficiency electric heat pumps. So how are we performing? On energy efficiency, we've made a fair bit of progress already. And currently, our energy profile is 25% better than industry benchmark. And by 2030, we plan to further reduce it significantly getting to 70-kilowatt hour per meter square, which will be more than half, 50% better than current benchmark. On heat decarbonization, 30% of our portfolio is already electric, and that's really very unique to us. And for us, by 2030, the future is all electric across our portfolio. Now the key point to note here is in our plan, we plan to get to net zero carbon all the way down to zero for operational carbon without any offsetting. The second source of carbon we need to eliminate is embodied carbon. Now that is the carbon that comes with every material we use in our building construction and refurbishment activity. And our strategy here is to ensure our construction development activities as lean as possible. At the moment, our current projects are already performing really well on embodied carbon. We are 40% to 70% better than typical newbuild office. And by 2030, we are aiming to significantly reduce it to (sic) [ 350kgCO2/m2 ], that would be 70% better than any office building stock, to ensure our reliance on offsetting for embodied carbon is minimal. And the third work stream is renewable procurement, which is basically any electricity that we land up using across the portfolio comes from clean sources of power. And we already power 100% of electricity that we manage with renewable sources. We have installed solar panels across multiple buildings already. And by 2030, 100% of our power is going to continue to be powered by renewable sources. Now this is our net zero delivery plan. And as you might have heard last year, the government announced every large U.K. corporate and PLC has to report a robust net zero transition plan by 2023. Everyone has to do this. We have obviously done it a year earlier. And this plan clearly shows we made significant progress. Hence, we are performing well above industry benchmarks, and we are on track to meet our 2030 targets. So with that, I'd really like to next, evidence some of the impact we have generated and show you a snapshot of our portfolio on environmental performance. Let's start with our emissions trajectory, looking at Scope 1 emissions first, which is the emissions resulting from the gas we use in our building. The net zero target was set in 2019. And hence, that's our baseline here. And just putting aside the impact of COVID and empty buildings in last year, this year, I'm pleased to report that we have reduced our Scope 1 gas emissions by 8%. Now from here on, you see 2 trajectories emerging from us. Our 1.5 degrees [indiscernible] target required us to only reduce our gas emissions by 42%. That's the doted column you see on the right-hand side. However, we have upped our ambition, and we have set ourselves a challenge to go full zero by 2030. And why we are doing it? Firstly, because we have a viable strategy to go full electric with our portfolio. There will be no gas in our buildings by 2030. That's what we are working towards. And second, we do not want to claim net zero on operational carbon by offsetting, constraining our long-term outlook. Our money is really best spent on decarbonizing our portfolio than on annual offsetting. Next, looking at Scope 2 emissions trajectory. Again, very pleased to report that we have reduced our Scope 2 emissions, which is the electricity we use in our buildings by 15%. And this is really the effort of driving energy efficiency down, building by building. And then, obviously, the plan is to continue to drive the electricity emissions down in future years. However, if you overlay the fact that 100% of our electricity comes from renewable sources, our market emissions associated with this Scope 1 is down to zero now and will be zero in the future as well. Next, evidence. Looking at the energy efficiency profile of our portfolio. Now what you see in this graph on the X axis is each of the buildings in our portfolio. And on the Y axis is the energy intensity of our portfolio as represented in kilowatt hour per meter square. A couple of key things to draw out from this slide. All buildings in our portfolio, bearing the 4 on the right-hand side, are already well below the 2020 net zero energy target for offices. The second point is we are obviously working on further reducing this energy profile down to ensure all our buildings in the portfolio operate well below the 2030 net zero target, as shown in the solid purple line. So it's -- we are well better -- we are way better than the green line at the moment, which is our current target -- an industry set current target, and we're going to get to 2030. Now looking at the positioning of the purple -- solid purple line, you can see nearly 40% of our portfolio already is well below a future aspirational target. Hence, where we are really prioritizing our energy efficiency efforts are on the buildings, which are on the right-hand side of the graph. Now to give you a few examples. This building on the far-right corner, Leroy House, obviously, not looking great from an energy perspective. We are currently sustainably refurbishing it, ensuring post works, this comes comfortably on the left-hand side of the graph. The building we are currently in, Exmouth House, obviously, we bought it back in 2006. Over time, did works in the ground floor and the top floor added -- in doing so, improved its performance. And hence, it's performing well below our current 2020 target. However, we are also creating a full net zero asset plan for this building to ensure by 2030, this building performs below the purple line. And then we have our tried-and-tested sustainability refurbishment playbook, which we have delivered on [ Walks ] and Brickfields deals recently. And as you can see, this playbook works. I mean these buildings are comfortably performing on the left-hand side of the chart. So in many ways, I would like to say that this is the most important evidence for investors because this shows that our portfolio is green to begin with and the additional investment needed to get to net zero is going to be modest compared to our peers. Obviously, Dave is going to [ offer ] the investment plan in a bit more detail later on. Now next, looking at how we are driving embodied carbon down. This is Leroy House, the building on the far right-hand corner of the graph. I said we are currently refurbishing it. As part of the works, we are retaining the entire shell. We are adding this 4-story side extension and the floor on the top, overall increasing the net lettable square foot to circa 55,000 square foot, and we are doing it sustainably. We are adding high efficient heat pumps, LED lights, high-efficiency lifts and double glazing across the entire facade. And we are also ensuring this is carried out as leanly as possible when you look at embodied carbon. We worked with the design team to ensure our design choices and our material choices, make this building carbon lean. And at the moment, we are achieving significantly lower embodied carbon on this building. The (sic)[ 230 kgCO2/m2 ] basically is 77% better than any office building, new office building currently being developed. And so how are we getting to this lower number? I mean the plain answer is because we focus on refurbishing and we focus on retaining as much as we can of the existing building structure. I see another point to add here is this is one area we are not claiming to get to net zero without offset, only because it's not doable. Every brick, every cement, steel comes with carbon. However, by making it this lean, what we are ensuring is the money we are spending on offsetting is minimal and our reliance on Virgin materials is minimal as well. And then finally, looking at Energy Performance Certificate, EPCs, very pertinent, given proposed regulation around all commercial buildings need to be EPC B by 2030. What you see here is the EPC split of our portfolio by area. Now one thing to note here in our case, we have an EPC per unit. And so at a building level, we can have -- we have multiple EPCs, which we track unit by unit, and that's what you see here in terms of square footage. So what you see here is roughly 2/3 of our portfolio is green to begin with when you look at EPC specifically. And now contrast this with the typical London office stock, this is -- our picture is twice as better because, this, by circa 35% for rest of the London office stock. So obviously, the scale of challenge is nowhere comparable for us versus others. Second, obviously, we need to upgrade the EPC Ds and Es, the 1/3 of the portfolio that we see here. And through the delivery of our net zero transition plan and by investing, building by building in those upgrades, we obviously ultimately will get to a portfolio which is fully net zero and a portfolio which is fully A&B. So that sums up the environmental impact section of the presentation. And really, the message is we take our environmental impact seriously. We have set an ambitious target and most importantly, we are actioning without delay. Now I'll hand over to Dave to really give you some examples of how we are putting our playbook to work and what is our costed plan or investment plan to deliver on our targets.

Thanks, Sonal. so good afternoon, everyone. Over the next few slides, I want to talk you through how we're actually going to go about delivering on this plan over the next few years to get EPC A and B compliance and also to get to net zero. And I would just reiterate, this isn't new for us. We've been upgrading buildings for years. It is fundamental to our business model. By upgrading buildings, we drive rents, that drives valuations and delivers strong returns. But as part of those upgrades, we also significantly enhance the environmental credentials of our buildings. And we target at least an EPC B and it's pretty -- very good. But as you've seen on many of them, we achieved much better than that. So as Sonal says, we're already in a good place with 1/4 of our portfolio already EPC A or B. So what about the rest of the portfolio? So the first thing we really need to consider is our pipeline of refurbishment and development and projects. We've got an extensive pipeline, about 1.2 million square feet of new and refurbished space to be delivered over the next 5 years. And the total CapEx to deliver that is not insignificant. It's about GBP 300 million. But on that, we target an IRR -- an ungeared IRR over 5 years of 8%. So this is about investing, but it's actually driving returns. So this isn't just about delivering ESG credentials. As shown in the top left-hand segment of the pie chart, the project pipeline will constitute about 1/4 of the enlarged portfolio. So as we deliver that pipeline, obviously, the portfolio enlarges. So together, I mean that pipeline obviously will all be EPC A or B. And together with the quarter that's already A or B, that will take us to over half of the portfolio in that A and B area. On the right, you can see a good example of where we've done this. Vox Studios is one of the examples pulled out on the chart that Sonal showed earlier on the left-hand side of the chart. And here, we invested GBP 8 million. We refurbished the West wing of the building, added a new roof extension on top. So delivering about 27,000 square feet of new and refurbished space. That was completed in 2018. That moved the EPC from a C to a B, and that was really done with LED lighting, double glazing, enhanced insulation and air source heat pumps. So that's how the environmental credentials move. But equally, from a business perspective, that increased average rents from GBP 21 to GBP 43, increased the valuation from GBP 8 million to GBP 20 million and overall achieved an IRR of 12%. So as you can see, the environmental upgrade and the business benefit go hand-in-hand. Next, around 29% of the enlarged portfolio is currently -- will be rated EPC C. Now upgrading these units to EPC B does not actually require a very significant investment. It's not a great deal of work to do it. And typically can be achieved just by, for instance, putting in high-efficiency LED lighting. Now we have a flexible business offering. That is our proposition to our customers. And as part of that, it means that actually we can deliver this over the next few years as customers move -- between those customers, we can go in and we can do these upgrade works, they're quick and easy to do. On the right, you can see an example of where we've done this recently at The Old Dairy in Shoreditch, actually an acquisition last year. Here, we've got a 4,000 square foot unit. And as part of a light upgrade, we put in LED lighting, the cost of that is GBP 12,000, about GBP 3 a square foot. So actually, a very small cost relatively speaking to move from a C to a B. We then have the tail of the D and E units. And here, we do need to do a bit more significant works, about 20% of the overall portfolio. As well as upgrade in lighting, we also need to put in more insulation, both wall and glazing insulation. And also, we will need to replace the gas boilers with air source heat pumps. Again, we've done many of these already. And here, you can see an example, Metal Box Factory. As part of a refurbishment of a 3,000 square foot unit here, we did put in secondary glazing, air conditioning, LED lighting. The works cost more, so GBP 76,000. And that took it from a D to an EPC B. But hopefully, you can see and maybe a little bit more, but from the before on the left and the after picture on the right, this is, as I say, part of a bigger refurbishment of the unit more broadly. And that, again, similar to the Box case study, we will drive rents. So this is about driving rents as much as changing EPC. So that's what we need to do. Those are the activities we need to do to get to fully EPC A and B compliance by 2030. And that will also get us significantly down the road of getting to net zero. But in order to get to fully net zero, we will also have to replace the gas boilers with air source heat pumps for existing A and B units. We've done a lot of this work already. And here, you can see an example where we've done this at Screenworks. So here, we did a whole building replacement of all the gas boilers and radiators with air source heat pumps and air conditioning. Cost about GBP 1.6 million. But again, installing air conditioning increases customer demand and allows you to increase rents at the same time. So again, there's a positive business case for doing this. And then finally, the overall costs. I should just reiterate this excludes the cost of delivering our project pipeline to GBP 300 million. Obviously, it's difficult to disentangle the investment in EPC from the project work in terms of development. So this is just more for the sort of remedial works, if you like. As I said, the cost of movement from C to A and B [indiscernible] fairly minor. So we think that's going to be sort of GBP 5 million to GBP 7 million over the next few years to 2030. For EPC D to A and B that is more significant. So we estimate that cost of being GBP 30 million to GBP 40 million. And then the final push to net zero on top of that for the air source heat pumps, another GBP 15 million to GBP 20 million. So overall, over the next few years, we're looking at somewhere between GBP 50 million and GBP 70 million. which is about GBP 6 million to GBP 8 million a year. I should say, though, that we will, as part of our normal maintenance CapEx, which covers some of this anyway, so that actually the incremental cost of delivering is actually lower than that. So in summary, we're in a good place. About 80% of the portfolio is already either EPC A or B, will be converted by our project pipeline or is in that low-cost C to B bucket. And the incremental cost of dealing with the D to E units and with the net zero transition, we estimate to be about GBP 5 million a year. So hopefully, that gives you a view of the costs and the plan to do it, and I'll now hand back to Sonal to talk more about driving social impact.

Thanks, Dave. So the S in ESG is equally important to us and in many ways, more inherent to our business model than the environmental impact. And the reason is our business model is about creating hubs of economic activity by strategically investing in parts of London, which are very often very deprived to begin with. And in doing so, obviously, we benefit as a business, our customers benefit from access to high-quality working space and the surrounding communities benefit as well through the employment-led regeneration of the area. So what do we mean by social impact? Simply put, our aim is to have a lasting positive impact on people's quality of life. And we are targeting this impact towards all our people, our employees, our customers, our communities and our supply chain partners. And within the social impact strategy, the issues that are most material and close to our business are really focusing on skills and employment, well-being, prosperous neighborhoods and delivering local environmental stewardships. Here are just some of the highlights of our social impact work from last year to give you a flavor of initiatives we are driving at the moment. By far, the most impactful initiative for us last year has been our well-being programmed, focused on our employees and focused on our customers. We have managed to reach and support the well-being of over 750 customers last year through our dedicated program. We also, as a business, believe in fair work and fair pay. We pay all our employees and all our subcontractors, London living wage. And we had a successful partnership with our charity partner, Single Homeless Project, where we raised GBP 100,000 in a year, impacting over 550 homeless Londoners. Here's a video from our charity partner, Single Homeless Project. [Presentation]

Now we know as a business, the main social impact we can have is through employment-led regeneration of London. Now what do we mean by that? Here's a case study. This is Lock Studios, one of our business centers in Bow. The borough, Tower Hamlet is the fifth most deprived borough in London. And through our redevelopment of the site, we have completely transformed a previously low-quality industrial space to a vibrant mixed-use community now. And the resulting social impact that we have seen, now over 500 jobs have moved to this area of Bow, which obviously has a knock-on economic impact in the local area in terms of increased footfall and local spend, where previously local residents avoided the (sic)[ Devons Road ] site. Now they absolutely regularly use and fully utilize the site because of the need-based communities -- amenities we have provided on the site. And we have also incorporated a large public park with plenty of greenery on the site, which really has created a safe and welcoming space for local residents to socialize. And we worked with the council and contributed GBP 3 million to enhance the healthcare and education provision in the borough. Now for the real estate business, this is what delivering social value in action looks like. And for us, it really starts with when we plant that seed of creating new employment opportunities in pockets of London, be it Tower Hamlet, be it Hackney, Haringey, Lewisham, you name it. With that, the final part of the presentation, generating value. Here's our take on how our sustainability approach is generating value for our business. It's absolutely generating value across the business for us. Obviously, looking at financial value add, which is more tangible to assess, Dave's example, demonstrated our sustainability playbook enhances environmental performance and our projects are IRR positive as well. Cost savings is absolutely getting material for us, especially in today's energy prices. If we are on track to reduce our energy use by 30% between now and 2030, we'll be saving over GBP 1 million in energy cost annually. And on financing, we are already accessing green finance on the back of our robust ESG credentials. However, we must not ignore the intangible value add that sustainability brings. The employee engagement, the strength in brand and reputation and most importantly for us, it is the customer connect and the customer satisfaction. And the reason I say this is because we are, again, very unique because our customers genuinely care about sustainability. Here are some -- here are the results of a recent SME sale where we did. And it says, 85% of SME decision-makers describe sustainability as very important. Over 70% of them have set a net zero target themselves. And increasingly, it is influencing their decision-making on the choice of their office space. And this is very much the feedback that has been echoed to us through our multiple conversations with our own customers. They have repeatedly told me that how much they have valued the care we give on energy management, waste management, a well-being program is a big hit. And here's a video which captures some of our customer voices on sustainability. [Presentation]

So what you see here are customers who are connected with us and who are satisfied with us, and that's the value add. Now all said and done, today is not about building a business case for sustainability. Fundamentally, sustainability is not a choice for any business, for us, for any investor. I mean everyone will have to invest. Everyone will have to embrace the change. However, for Workspace, we are absolutely well placed to capitalize on the opportunity this change is bringing for us. And I'll leave you with that over to [ Stuart ] for the panel.

Thank you, Sonal. Good afternoon. So we've heard now about the strategy that Workspace is adopting in relation to sustainability. With different aspects of that from the investment plan through the social impact, which is the way of generating value for the company. And the way specifically, it's supporting the 3 pillars, the -- looking at having a climate resilient portfolio, supporting communities throughout London and supporting the Workspace team and culture as well. We thought it might be interesting to take another look at it from using different lens, and that is the lens of the business. What is it that the business is doing that can bring this to life for you to show that it's an embedded part of what they do and the impact that it's having. And we thought that might be useful to do by -- through a panel discussion with business heads, just to look at that and get it to bring it to life a little bit for you. And particularly, we thought under 3 key headings you can see on the slide there, we thought it'd be useful to look at how this is all helping to future-proof Workspace? How it's going to help to provide value for the future and future growth? How our customers, if you like, are -- how important they see this and how that Workspace is addressing their needs and how all of this is therefore helping to create the fare, flatter London the Workspace is talking about as well. So I was going to -- my name [ Stuart Prosser ], but on the panel, I'm joined by Claire Dracup, who's the Director of People and Culture; Leo Shapland who's Head of Portfolio Management; Bryony Gerega, who's Head of Development Management and Sonal who you know already. So if we kick off with the first area, is future-proofing idea, how is what Workspace is doing in sustainability actually helping to future-proof the business, create longer-term value? Bryony it's come to you first from a development perspective. What's your role in all this?

Sure. Thanks, [ Stuart ]. Well, from my perspective, you've heard we've got a development pipeline of almost 1.2 million square feet that we're going to deliver over the next 5 years. And I see that as our biggest opportunity to really make a shift change in our carbon emissions and at the same time, to reposition some of our older, less efficient buildings. And so a big part of my role right now is making sure that all new projects, whether it's refurbishment or redevelopment that we are surpassing the industry benchmarks on carbon emissions. So on embodied carbon, we're making sure that we are an absolute minimum of 40% improvement on the industry benchmark of 1,000 kilograms. And on energy intensity, we're targeting a 50% improvement from the benchmark of 130 kilowatt hours that's across all projects.

Those are ambitious numbers, how are you going to actually achieve that?

So -- well, okay, so we set those targets almost 2 years ago now. And what we found is that because our business model is inherently sustainable, we're actually getting to those targets relatively comfortably. And so for me, it's really about how we go beyond those targets. But I'd like to just explain what we mean when we say inherently sustainable, so I think we're seeing it quite a lot today. And I think we're inherently sustainable because we prioritize working with our existing buildings. So that's immediately a significant embodied carbon saving. And our product or our specification is very [ stripped back ]. We don't put in raise floors, we don't put in suspended ceilings, we have both services. And that's been a specification for as long as I've been at Workspace, which is 8 years. And then also -- although we call all of our buildings, because our business model is to have lots of small units, they can be naturally ventilated by just opening a window. So we're not putting in big chunks of pieces of kit, and we're not dealing with plant replacement strategies every 15 years. So that means starting carbon footprint is actually much lower than your conventional office building.

So it is straightforward then, to you?

It's straightforward to get to the current markets, I'd say. But the premise of net zero carbon is, of course, to continue to drive down emissions through innovation in design and maximizing efficiencies. So something that we're looking at, for example, on embodied carbon is to really focus on lean structural solutions. That's where the big savings are going to be. And so for example, on Leroy House, that's where we're using low-carbon concrete and recycled steel. And on newer projects, we're looking at mass timber solutions and recycled aggregate. And that's what's allowing us to drive down our emissions beyond the targets, and that's how we're future-proofing the business and protecting ourselves from shifts in legislation, scarcity of energy and increased costs of offsetting.

So if that's looking at the GBP 1.2 million in the portfolio, but my reckoning and Leo, there's GBP 3 million other square feet that need to be worried about? How are you approaching that?

Well, I think we've made this point that by -- just by virtue of our business model, we get a pretty good head start on the E and the S side as it pertains to embodied carbon and the social aspect that we bring to the community. But where that really puts our focus, therefore, is it's no point in Bryony building a fantastic ultra sustainable building, and we leave the lights on the windows open and the cooling going. So we're really focused on operational energy and that kind of energy use intensity if you will. And so that puts a real focus on us to drive down -- to drive energy efficiency and therefore, drive down energy usage and improve performance, not just from a sustainability perspective, but again, back to that link with the financial outcome that Sonal was talking to, that improves our P&L and our operating expenditure as well. The good news for us is that because we own and directly manage our buildings, we get that real hands-on approach. We can apply that hands-on approach. We can take a direct live feedback from our buildings, back from the individual units or common areas on where the energy inefficiencies are, whether the optimal usage can be whether we need to tinker with the central plant, the individual units or whether we need to do that targeted CapEx that Dave was talking about in order to improve things. I think an example that adds a bit of color to that is that one of our largest centers down in Chiswick, [indiscernible] we put in some tech-led smart metering equipment that basically in its first year, drove energy usage down by 20% below. So I think that's quite a powerful indication of how we can take the feedback on where performance isn't optimal and drive an improvement at pace.

I think, Stuart, the key point that Leo is making there is, obviously, within energy intensity, a big part of reducing that is through how we operate our buildings and making sure we've got that granular clarity on energy consumption. But from my point of view, and if we're really going to future-proof our buildings to get towards and beyond those 2050 targets, then the starting point really has to be the fabric of the building. And so we're also looking at how do we improve the thermal performance of facade systems and how do we optimize glazing ratio so that we're reducing, or balancing solar gains and heat losses and actually bringing down reliance on heating and cooling systems so that we're reducing the demand for energy in the first case.

If I could flip back to you, Leo. So the buildings you've got in the portfolio are presumably going to be at different stages in their lives of being that all on one level. What's your timetable to get them all up to the same the same level?

Yes. Well, I thought that graph, the bar graph that we -- that Sonal talked through, it's really powerful indication of where we are. So we've got -- excludingly Warehouse, which is under refurbishment, we've got 3 assets which are above the kind of current best practice, the industry benchmark, which I think, given the size of our portfolio is a very limited and very manageable target. But I think more impactful is that the 40% that are under the 2030 target or the [ 13%, the 20% ] that are below the 2050 Paris-led most ambitious targets. I think that's a really positive thing. And not just come across as complacent or to take anything for granted, but I think we do have that head start on meeting those targets. I think that's to paraphrase Sonal, we're starting greener and through targeted CapEx and the behavioral changes that we have as we're operating our business, we're ending greener as well. So I think we're in a really positive place versus where we need to be for 2030 and for 2050. But in the meantime, as we make that transition, I think we're exposed to less cost risk, less chances of brown discounting or asset stranding that you might see amongst some of our competitive set.

Okay. Thank you for that. So let's now tighten the focus, as we said we would do on to customers on the SMEs. I think Sonal, you said that something like 85% of them feel sustainability is seriously important to them. What's works best doing to capitalize on that interest?

So basically, we -- I mean I feel we are very fortunate to have this customer base that cares. However, it's important to note what in sustainability they care about? They are not certification driven. They have never asked me about [ BM ] certificates or EPCs. What they have, however, asked me is how the energy is being managed on my site, what is the waste management policy, what sort of bike racks and showers you have. They've asked for more greenery on site. And they have asked for more sustainable food in the cafe. They are very, very performance driven, and we are capitalizing through our performance-led focus and our model by really giving them the features they've asked for.

So not just those individual things like bike racks are very important, more about the buildings themselves, though. So how are you addressing that?

Absolutely. I mean the building features, which are very popular with our customers, obviously, natural light and workspace has always been important. You look at all our buildings, narrow flow plates, central atrium, plenty of daylight in every display. So that's taken care of. Interestingly, what is becoming a key unique selling point for us is the fact that our buildings are naturally ventilated. You can open the windows, let the fresh air come in. Obviously, from our perspective, it saves carbon. It saves energy. But from their perspective, they never feel stuffy. They're productive because there's plenty of fresh air in the building. So these kind of -- these are the things that are very popular. I will add, though, customers' expectations are evolving fast. And where we come in is really responding with agility. And I'll give you a classic example. In the last 2 years, we have had multiple requests from our customers to install electric vehicle chargings points across our portfolio. This is not a surprise. This is just going to go up with our electric car ownership increasing. And we have responded swiftly with agility. Now we have over 18 charging stations across our portfolio. And this is really -- we're meeting the customer demand now, but we are agile enough to meet it, as their demands change.

So pivoting quickly is important?

Absolutely.

So to be able to do that, though, to deliver that, we need people, Workspace people. What is it about the Workspace platform, if you like, Claire, that really helps that -- that makes that work?

Okay. So I mean, we've heard a couple of times about the increasing importance of sustainability with our customers and 20% from the research we've done believe that sustainability is a focus of their decision making and where they're going to take their office. But our USP is really our operating platform, and that's our center managers, facilities managers and third-party partners at ground level there, they are real champions driving the change. So the policies and procedures and systems that we've put in place, we rely on our people to implement that. So all of our employees have undergone sustainability training in the last year. And everybody in the business has a KPI around sustainability, whether that be waste management, energy reduction, well-being, charity is fully integrated into our business.

And you've been at Workspace quite a long time, I might say. Is this new, something that is...?

No, it's not new at all. I mean I started at Workspace as Center Manager, a leather market in [indiscernible]. And nearly 30 years ago, we introduced our waste management and recycling program. And of course, it's become much more sophisticated and elaborate and rolled out through the whole portfolio over those years, but it's nothing new at all. And what really makes the difference is our engagement with our customers and with waste management, particularly. The success of that is driven from our center staff and our waste contractors who -- they run recycling awareness days at our centers and talking to customers, what do they need? What do they want to make it successful for them? That's what drives it and makes it successful. So I believe that engagement really drives enhanced customer satisfaction and success of these.

What does it actually look like that engagement? What's that?

So we -- I mean, a big focus for me currently is around a program that we're calling customer first, and this is really about putting ourselves, our -- all our employees in the shoes of our customers so that we understand what they need and what they care about. And that is about driving engagement. So again, something that we've done just this year is all employees have been on some training called customer first. And we're looking at the customer journey every step of the way and how we can improve engagement. And a great example of that is why [ or who ] are a customer of ours, our China Works in [indiscernible] and there are the U.K.'s first refillable, nonplastic deodorant and bathroom producer. They're part of the green economy. I've got really clear sustainability credentials around supply chain, transparency and energy procurement. Through working with them, they've grown and moved 4 times within 2.5 years, starting in 200 square feet to now just over 2,500 square feet. And that's really through our center staff and our lettings and sales teams listening to them and talking to them and then being brought into our sustainability strategy. So I think sort of listing engagement really drives long-term retention and relationships.

And I would completely echo this. I come from a world of real estate where the relationship between tenant and landlord is nonexistent. Many people employee base, don't even know who's the landlord of their office. That's really not the case with us. Every employee, 30,000 people know they work in a Workspace building. They know who their center staff is, who their support team is. And there is this constant communication and engagement, which is absolutely unique to us.

You also mentioned in your presentation, I think, about well-being and is that part of the engagement that Claire talking about, too, is that...

I mean, very, very topical at the moment, well-being, especially given the issue has raised into prominence post pandemic. And we are absolutely on it. I mean, bearing in mind our customer teams, our customers have maximum 10 people in their business certainly no HR teams to focus on employee well-being. So they are really reliant on us to extend our duty of care to their employees, and we are doing it. I mean, from a well-being perspective, physically in our buildings, we design our buildings with well-being in mind, natural light, natural ventilation, plenty of greenery, prominent staircases, which encourage active travel, all of that is there. But what we do also on day-to-day level is really support them with well-being. And now we -- last year, we rolled out this extensive program of well-being initiatives for our customers yoga clubs, pilates, running, nutrition sessions and are extremely, extremely popular oversubscribed puppy therapy session, a must go.

Puppy therapy?

Yes, absolutely, must go for everyone. So really, I mean, the feedback has been terrific, and we have got happy customers as a result.

Excellent. Thank you. So let's look at the final -- the third area, [indiscernible] back out, look at London more broadly. We've talked about -- or we presented about the fare, flatter London. Leo, what does that really mean?

I think just to put some context around that, the benefits of office occupation and office employment have typically in London been based in the center of London, Zone 1 and the broader West End, City of London and more recently last generation in the document. And for us, what it essentially means is just spreading out that benefit beyond that typical traditional historic location that more concentric ring around London and bringing essentially kind of 2 benefits. The first is sort of for our customer and end users. So that is bringing high-quality, affordable character for sustainability-driven space out to areas where there isn't that space. There isn't that ability if you are a local SME and you want something that is convenient. You want to tap into that local employment base or a cluster of other like-minded people. We're bringing that to our customers. And then the second is really for the broader community that our customers, their employee base, their visitors, essentially bringing not just those kind of direct tax benefits to the local borrower, but also going out into the community and spending in the local amenities and spending on services, et cetera, locally and bringing that employment-based revenue into the local area. And the more that sort of grows and [ mushrooms ], then the more they're likely to bring in other communities and other businesses into our centers and sort of roll out that benefit beyond just the center itself.

It does sound quite altruistic all of that, doesn't it? But you're saying there's a real -- there's a commercial benefit?

I would -- I'd start by saying that it's not -- it's no new news, if you will. It's sort of, again, back to that, what do we mean by inherent. It's embedded in our business model by selecting the kind of assets we do and the kind of areas that we do, there's inherently a sort of a value-add asset play in a value-added location, right? So we've always done that and always pursued that, and that brings with it arguably altruistic benefits, but it really is a mutually beneficial proposition. We do it for business reasons. And by pursuing that MO, we think that we are -- we're taking a shot at outsized rental and capital growth. We think we've got more potential to outperform through that. We're often operating in areas and locations where there is very limited or even no competition whatsoever. We are making the market. We are the market. So we can grow and expand and really control that market, and that's a very positive thing that a lot of our competitors set can't talk to. And then thirdly, I'd like to think that our benefits are so visible and so quantifiable that we really do get a beneficial planning reception when we go for something a little bit more ambitious or we do need to refurbish or do a redevelopment.

I think when Leo was talking there about flatter London being mutually beneficial, I think Lock Studios is a really good example. And I think it's because we get to develop our local knowledge of these areas that we're able to design the right products. And that means that we're actually filling a gap that the local councils have already identified as missing in their local plan. And so when we come to the table to invest and we work collaboratively with the local councils to create more jobs, that means that there is a very positive and straightforward conversation that we're able to have with the planners. And I think in today's planning world, that's paramount.

Right. If you think about an example of that, I think Sonal you talked about Lock Studios. Is that a good example of...

Yes. Absolutely. So Lock Studios, I think Sonal, obviously, touched on it in her presentation. But what we started with at Lock Studios was a completely walled off site, low-quality industrial buildings, the surrounding area was very much poor quality housing. There was very little retail or immunity offer in the area. Although young professionals, they were still living in Haringey at this point. No one was venturing to go. But we saw an opportunity. We saw a great site right next to the DLR station. It's got great links into the city and Canary Wharf. And we understood what was missing from the local office market. So we approach the council, and we secured a mixed-use planning consents. And together with our development partners, we've now completely transformed this little pocket of Bow.

So what does it actually look like? What the people see now?

So -- okay. So now there's 600 new homes that development partners have delivered and there are now public gardens all the way through the site to the DLR station. We've created a new public square with 6 new retail units. And obviously, there's the Workspace Business Center on the Square that we've called Lock Studios. So that was the final phase. We delivered that last year. We're almost fully let now. And there are 70 small businesses operating there. And they're all progressive companies. There's music production, there is a science lab, there's 3D printer. There's a couple of tech, fintech firms. And I think the really great thing about it, so Sonal was there a couple of weeks ago, she was doing a survey and 60% of the businesses at Lock Studios are local businesses. So that means that the owner lives in the area. And for some of them, it's the first office space that they've taken in Bow but for others, they've actually moved their business from more central areas in London to be at Lock Studios because it's closer to home. And almost half of the local -- or sorry, half of the people working in the building also live locally. And I think that really shows how we're flattening the working that...

And staying with that local theme then, Claire, fare or flatter, what does that look like for communities?

So a core theme of our social strategies, skills and education and employment. So a few years ago, we started a program with the GLA that we called InspiresMe. And this was about creating really work experience placements for young people from deprived areas of London. And we get -- we started giving work experience at Workspace with our center staff and our head office. And what we're starting to do now is to sort of broaden the reach of this and get our customers involved. We started last year at Westbourne Studios in West London with some of our customers going out to schools and delivering career talks to 15 and 16 year olds. And then the next steps for us are facilitating and introducing the schools to customers and get work experience, placements and CV workshops setup. And we're actually, again, looking at those sort of key areas of Deptford, Cannington, Haringey, just to start the ball rolling and then depending on the success and the popularity, we will hope to roll that out. So there should be a lot more to come in the next 12 months or so.

Okay. Great. Thank you very much. So we've covered a lot of ground now. We've taken a look at what sustainability means, how embedded it is through the lens of the businesses and seen that come to life. It's stuck us early, obviously, investor audience here. So perhaps, Sonal, you could just give us some final thoughts thinking about this particular audience. Why is this so important?

Yes. So I think from investors' perspective, really, you can be rest assured that a business that is proactively managing its sustainability risk and opportunity is a strong business with a very strong management quality behind it. I'll leave it at that.

Short and [ pantile ] like that. Thank you very much. That's great. Thank you. I'll hand over to Graham now for the final Q&A.

Okay. Well, thank you, Panel, and thank you, Stuart, as well. So in conclusion, I guess what I hope you've taken from the presentation today is that we've got clear and most importantly, costed plans how we're going to reduce both embodied and operational carbon. And as we mentioned in the panel discussion, future-proofing our buildings for the generations to come. We're actively investing in local communities across London. And as we've highlighted, creating vibrant hubs of economic activity. But I think most importantly, and hopefully, you have picked that up through the discussion today, we have a passion for what we're doing. We've got a robust governance model to deliver on these plans. And I think all in all, I believe that Workspace has got a compelling long-term and sustainable investment story.

So on that note, I'd like to open up for any questions from the audience, please, and that can be for Dave or I or indeed the panel. So any questions from our audience?

Your numbers in terms of total costs, GBP 60 -- sorry, [ GBP 50 million to GBP 67 million. ] Are these external consultants estimates or directors estimates or internal estimates? And what's the risk, just a follow-on from that, exposed to construction cost inflation, LED light bulbs, et cetera. What's the inflation there? And is there a risk that the U.K. legislation changes to a higher grade of measuring green from EPC to [indiscernible] Brio or sorry, [indiscernible] or [ neighbors ].

Okay. I guess first put to you, Dave, around the costing. And then secondly, maybe Sonal or Bryony, you can pick up on inflationary aspects.

Yes, absolutely. I mean, I guess costing, I mean, it's a joint effort. I mean, we obviously have a lot of experience in the team in terms of Sonal, the building team and certainly, a lot of it is informed by the work that we've already done. We obviously work -- this is not is not new. So we have a very informed view based on already delivering these schemes. Equally, as we cost new schemes in that pipeline and depending on the stage in the pipeline it is, we'll have as we look out through the process, we get a more and more accurate picture of exactly the cost. But a lot of it is, as I say, is based on the work that we've done already. And if anyone's got anything to add to that, feel free to chip in. But I guess in terms of cost inflation. I mean, the pipeline is costed, if you like, at today's prices. However, having said that, when we look at a scheme and before we press the button on a scheme, we will look at the returns on it. And as I say, we are very strict in our returns. We're looking at 8% ungeared IRR on the scheme. And that -- as we cost it, what we will do is when we're letting the scheme, we will let the significant packages of cost at that point in time and fix those costs. So actually, as we, if you, like, embark on the scheme, we have a very clear picture of what the cost is going to be. So we're not locked into that and we can make the evaluation. And I guess the other point is because of our -- we've got a flexible lease model, we have relatively short-term leases and we have a lot of active positive churn within the portfolio, customers upsizing, et cetera. And what that means is that we can capture market rates. So as inflationary presses bear, that gives us the opportunity to capture that in terms of the revenue as well.

Sonal, Bryony, any other comments?

I'd just like -- I mean, the inflation is -- obviously, we're living and breathing it now. But in many ways, these estimates are bound to go down, the estimate of heat pump, which are so expensive at the moment, we hope that's not the case in 5 years to come. Government has said clear indication, buildings are going all electric, which means the cost of technology is going to go down. So you have to kind of think of 8 years as a time span on when this investment will be made.

If you look at the cost of facts, they've come down incredibly over time.

Okay, any other Dave? Leo?

Yes. I would also say that I think in the market context, as Sonal said, we're living and breathing inflation. And if there are inflationary pressures or an increase in the hurdle of what we have to achieve. And I think the most likely scenario is moving from an EPC to something that's more operationally used, energy in use rather than a theoretical modeling of energy. I think I would just say that that's a market risk that all of our competitive set face. And I would sort of set that context about our relative head start and favorable position in that -- you overlay Dave's point is we don't have to make that change because we do have a little bit of headroom there. But I think we will, and I think we'll do it faster and better than a lot of our competitors because of that.

Any other questions. Denese?

Are you seeing a sort of significant uplift in the rents achievable on buildings and similar areas that have got perhaps higher EPC ratings. And is that gap getting wider now that your customers are more focused on their own sustainability?

I wouldn't say I've got any specific evidence of that. I mean, as I think Sonal mentioned at the moment, I think it's more about some of the more fundamental aspects of sustainability as opposed to the EPC rating. I'm sure that will come in time. I don't know any other observations on that?

Yes. I think it's often quite hard to strip out what's the specific ESG spend? If we look at a space like this that might have had suspended ceilings or carpeted tiles in an ultimate unit that actually moving this -- I think there was a great visual up there of one of our sites in Metal Box -- in one of our units in Metal Box that we had obviously improve the energy efficiency of significantly, but also significantly improve the aesthetics of the unit as well. So I think they sort of tend to go hand in hand. We'll have a unit role fortunately or unfortunately, we don't get that many units rolling. We have tenant -- customer retention of sort of 80%. But as and when they do, then we are improving the aesthetics as well as the energy efficiency and I think this is not just unique to our customer base, but the office market as a whole post pandemic is people want quality. They'll pay more for quality and they're less likely to take anything suboptimal.

I think the other point I would make, and Metal Box is a good example -- is actually, it is one of our major refurbishments of 5, 6 years ago. But the reality is, as I keep mentioning is, there will be units within some of these buildings, which we haven't been able to upgrade because actually a customer didn't sit [indiscernible] and didn't want us to upgrade their space. So when we're talking about actually upgrading, it's not actually whole buildings. It's actually granular, unit by unit. So Metal Box, a majority of the units there are actually of an A/B standard. So for us, when you're talking about actually the attractiveness, it's actually more around individual units as opposed to the buildings being an A/B building or a C/D. Think about our EPC rate, in particular, that is granular. 4,000 units, each one is graded individually.

Yes. I think it's hard to say how much more will a customer pay for a more environmentally sustainable unit or building. As I think Leo said, they look at the space, they come into the space, and it is probably part of the decision-making, but as much as the operational benefits. So what is your waste management policy. So I think it's the whole package, and it's very difficult to differentiate. And I guess the other point is you said compared to other buildings in the area, as we've heard, in a lot of cases, there's very limited competition. So there aren't actually that many reference points of directly comparable building to benchmark against.

I mean I would just add that our aim is to stay away from brown discount at this point. And as the market matures, the premium is going to come, hopefully.

Okay?

Maybe I missed it on the slides, but what proportion of your electricity is going to come from on-site renewables in the plan? I just know there's obviously a lot going be electricity driven. So you'll be quite a big draw on the grid. So I was just wondering, how you might cope with that? Also, when it comes to your supply chain, will you pay more for products made in the U.K. or EU than something made in China because you're concerned about perhaps human rights or the sort of carbon cost of shipping something from that?

Shall I give the answer?

Yes. I'll leave you to that one.

So basically, our roof space is limited. We have to add greenery on that roof, add the condensers for heat pump on the roof and add solar panels. So it is always a struggle to get everything on. So we do have 13 solar panels on our roof and it generates an amount which is tiny, but we are doing it because we do want some on site to shave off that peak at building level. It is not going to be a game changer for us or anyone. We don't have large industrial sheds with large room space. So PV is not the game plan for us. It is really about high-quality green power that we want to continue to procure going forward. On supply chain, I mean, obviously, Bryony -- to bring you in. But my perspective is we are procuring locally because it's directly a glass that will come from China will come with more carbon and we'll have to pay more money to offset that carbon. So might as well spend that money with our supply chain with...

Yes, I think we've been looking at initially where the big savings are and the big energy impact of the structure. So for example, we're looking at using more recycled aggregates, which is obviously very close to site. But we're -- now we've sort of figured out what we're doing with the key elements. We're also looking at a more granular level. So we're developing a sustainable material schedule that will include typical products that we put into all our buildings, so floors, tiles, appliances and make sure that they are coming locally or that they are sustainable. And I think as the market becomes more progressed and those products start to get a carbon tag, that's going to be much more efficient for us to be able to monitor how sustainable all the products that we're using are.

Okay. The one in the middle. You can pass the microphone through. Thank you.

Two questions. So regarding the refurbishment or the redevelopment you are doing right now, do you see any evidence you might need to delay the progress a little bit under the current situation? The second question is, can you comment a little bit on the sustainability of the McKay portfolio you just acquired?

I'll take the first one. So we're actually quite lucky that a lot of our development pipeline is at early stages. We're about to let a contract on Leroy House and that's a project that we tendered back in November, and we've actually by working with our contractor and our suppliers, we've been able to keep the price as per as it was tendered in November. But on the remainder of the pipeline, like I said, we're quite early design stages on those.

Yes. And I think I mean we're keen and are progressing with the pipeline as we have been over the last couple of years, in fact and obviously, there have been -- certainly over the last year or so, there has been challenges around getting -- it's not so much just around cost, it's about actually getting the materials. But I mean, I think -- and whilst there probably has been some impact, it hasn't been a significant impact and doesn't really overall impact on the delivery of our pipeline, but it certainly has been more challenging.

I think on the refurbishment projects, I was focusing on the develops, but on the refurbishment projects in the next 12 months, we've already built in significant inflation contingencies. And we are looking at selective value engineering on some projects, but we're making sure we're not compromising on energy efficiency because ultimately, I think it's better to spend the money now and get the energy-efficient building rather than to be exposed to offsetting into the future.

I mean certainly a challenge I mean I think undoubtedly, like anyone who's doing a project of the home, I mean supply chains are stretched, there are inevitably delays. I mean we see delays day-to-day even things like maintaining lifts and basic material supply. So I think we're aware of the challenges, and we're working as best we can to mitigate them. But I think there are going to be challenges ahead on that side. On your point around McKay, I think I'd rather defer that today because I think what we'll probably give you in more detail and be able to explain probably more easily as we explain how we're going to be approaching different elements of that portfolio, which is something we'll be presenting in June.

Okay. Okay. Any other questions? Okay. Well, 1 more question sorry. We need microphone to record it for external.

So I think you said GBP 350 million over the next 5 years to the development CapEx. That brings the portfolio to 50%, right, of the required rating. So in total, how much do you need to spend over the next, what is it, 8 years to get to 2030 target?

Dave.

Yes, I'll take that one. So just to be really clear, the GBP 300 million, that is to build out our pipeline. So that's adding new space, okay? So that's not about just putting in double glazing or heat pumps. That's actually about adding new space, driving -- increasing the footprint, driving rents, okay? To -- but at the same time, obviously, that new space and refurbish base will be EPC A and B, it will be then net zero. So we're achieving that across that. So once we've done that, across the enlarged portfolio, half the enlarged portfolio at that stage will be EPC A and B. So then you had a spend of between GBP 50 million and GBP 70 million to bring the rest of the portfolio all the way up to both EPC A and B and to net zero.

And that's GBP 70 million.

Yes. So that's the $50 million to $70 million broadly incrementally, that's about GBP 5 million of CapEx a year.

So relatively small incremental on our overall CapEx, which obviously, as Dave says, that major of that CapEx is that refurbishment and redevelopment program that we have planned.

Sorry. And just on the GBP 5 million you just mentioned or you said GBP 6 million to GBP 8 million per year. How much was already going to be like -- because this would be a total envelope of your CapEx per year? Or is this only the sustainability CapEx and then you also have maintenance, recurring CapEx, additional to this?

Yes. So I mean, yes, typically, obviously, it varies from year to year. But let's say, typically -- historically, we've maybe spent about GBP 5 million a year on maintenance CapEx and that would cover things like replacing boilers for instance, okay? So an element of that, we would be spending anyway. And it's -- again, it will vary. But if you say maybe half of that or maybe a couple of million pounds a year, we would be spending on ESG activities anyway, which is how I see. So if we're saying the cost of bringing the portfolio all the way up to net zero is about GBP 6 million to GBP 8 million a year. But if you take off a couple of million pounds that we'd be spending anyway as maintenance CapEx, when boilers come end of life, et cetera, that's how you get to about GBP 5 million of incremental CapEx.

Okay, if there's no further questions. First, I'd like to thank the panel and then Dave for presentations today. But much importantly, thank you for attending today's session, both here and also, obviously, we're recording this for people attending virtually. So thank you very much for your time and for those who are here today, please join us now for some sustainable refreshments over in the corner. So thank you very much. Thank you.