CLS Holdings (LSE:CLI) — Investor Presentation

0:01 Good morning, and welcome to the CLS Holdings PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right corner of your screen. Just simply type in your questions and press send. Company may not be in a position to answer every question it receives in the meeting itself. However, the company can view all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Fredrick Woodland, CEO. Good morning to you, sir.

0:31 Good morning. Thank you. And welcome to this presentation about CLS Holdings PLC. I'm Fredrik Wittland, Chief Executive. And next to me here is Andrew Kirkman, our CFO. Today, we will present you with an overview of the business, including our performance in 2023 that we published about a month ago and our priorities and on the portfolio.

1:04 But let me start with a brief overview of the company and a bit about the history. So CLS HOLDINGS, we are a property investment company, which has been listed on the London Stock Exchange since 1994. So later on this year, we are celebrating our thirtieth anniversary. We are a commercial landlord, and we specialize in owning and managing office buildings with a range of lease length. And the aim is to achieve a stable cash flow over time. We operate in London and the Southeast Of The UK and in the largest cities in Germany and France. We are a long term investor and we consistently invest in the portfolio to ensure that we have modern properties that meet what the customers are looking for.

1:58 And since 2022, our UK business is a REIT, but we are not a REIT in Germany or in France. If you look on the right hand side, you can see some statistics about the portfolio. As I said, we're in three countries. We own 86 properties. We have seven forty four different tenants. It's very diversified. But as you can see 45% of the portfolio by value is in The UK, 43% is in Germany and 12% is in France. You can also see the top 10 shareholders and it's worth noting that the founding family owns 55.3% of the company through a family trust. So why invest in CLS?

2:49 A couple of points here. We have a diversified approach. You heard we have three countries. We had 86 properties. We have over 700 tenants. We are an office specialist, and we are not primarily a developer. We are a manager of offices and we've managed that for the long term. We have active management with a lot of experience. We have offices in all three countries where we operate. So in Germany and in France we're in Paris and here in The UK we are in London. We don't tend to outsource because we do believe that you get a very different experience as a customer in one of our buildings when you know who to deal with on a daily basis. As I said before, we have been listed thirty years and we do take a very disciplined approach to investments.

3:39 So when we invest in our properties, which I'll talk a bit more about later on, we do ensure that we get an adequate return on the money that we put into it. We have a cash backed dividend and the yield as for now is 9.6% and it's fully cash backed. And Andrew will talk a bit about that later on. And finally, we do have a focus on sustainability and we have a very clear net zero carbon plan by 2030. And this is something that we think is hugely important, but it's also something that our tenants are asking for these days. In addition, there's more and more legislation around environmental targets, but we're well on track to execute on that.

4:29 So talking a bit about what we did in 2023. So as I said, we did publish our full year results in early March. We had a good view on the operational side in all our three countries. The leasing momentum is strong, especially in the second half of the year. And we did sign 89% more leasing transactions by rent than in 2022, so a good increase. And we also saw very healthy rental growth with new leases 6.9% above market rent, which is described here as ERV estimated rental value. Our net rental income was up 4.8% to £113,000,000 and the underlying vacancy was steady at 7.6%.

5:17 On the valuation side, as expected, we saw a full year reduction of 12.5 in local currency, which was driven by yield expansion on the back of increasing interest rates. One of our priorities last year was on the financing side. And I was very pleased to report in March that we had completed all of the twenty twenty three refinancings. And as per March, we had also completed over 70% of the refinancings for 2024. The investment market were more challenging last year. We sold CHF 25,000,000 of property, But we are targeting over CHF $270,000,000 of disposals this year. I'll come back to that later, but it certainly appears that the year has started in a more positive spirit with a bit more activity than what we have seen in the last couple of years.

6:12 And finally, the Board is proposing to keep our full year dividend flat at 7.95p per share, which I guess is reflecting the confidence in the business and in our assets and that there is significant rental upside in the portfolio. Now let's move to the next slide to give more details on our leasing activities.

6:35 So we had a busy year on the leasing side and our asset management team did a great job in converting enquiries into signed leases. On the left hand side, you can see that we signed 130 leases and they were at 6.9% ahead of market rent, which is up significantly compared to last year, both in the number of leases, in terms of value and in terms of uplift to market rent. Encouragingly, the average lease size was also up, even if the small to medium sized floor plates are most sought after in the current market. Like for like contracted rent and the European portfolio both grow during the year as highlighted in the middle of the slide.

7:24 In terms of vacancy, the underlying vacancy was steady at 7.6%. But when you add the completed developments in the year, the reported vacancy increases to 11%. The difference there was due to the completion of the code in London and Park Avenue in Lyon in the first half of the year and the part completion of Prescott Street for the Atation in London in the second half. And I will give a separate update on all of these projects a bit later on in the presentation. Underlying vacancy was stable across the board and the largest overall increase was in The UK for the developments I just mentioned. But this also represents the greatest opportunity for us to drive rental growth going forward.

8:12 The beginning of twenty twenty four has also started in a similar way to Q4 last year And we have seen a very decent level of leasing activity in the first quarter. On this slide, I will walk you through a bit more on the valuation movements in 2023. A reduction was expected and the portfolio was down 12.5% in local currency for the full year. With 5.5% in the first half, we saw a logic decrease of around 7% in the second half. That is however much better than for the markets we operate in compared to market statistics. So even if it's down, it's still not performance compared to what we see in the wider market.

9:04 The valuation decline was all driven by yield expansion and that was on the back of rising interest rates as we saw across all three countries. And valuation was flat as you heard. In The UK, valuation declined 16.7% yields were up 79 basis points, while rental growth was up 1.1%. It is worth noting that Spring Garden, which has a that's the largest property we have in the portfolio in Vauxhall in London, has a shortening lease with the main tenant NCA, the National Crime Agency. That is valued as an office investment, so with a fairly short lease and not a development opportunity.

9:50 That contributed 2.7% to The UK decline. So if you exclude this property, the rest of The UK was down just over 14%. In Germany, valuations were down 9.1% from yields increasing 36 basis points and due to much stronger ERV growth. So ERV the rental growth was 2.4% in Germany, which offset some of the decline. The reductions were evenly spread across most cities and properties, although we did have a good uplift in our Essen property due to the new thirty year lease with the local government. In France, valuations were down 9.1%, same as in Germany, from yields moving out 82 basis points, while rents were up 1.3%.

10:43 The Paris properties reduced in value by 6.9%, while Lyon was down 12%. The UK was down more as you heard in Germany and France, but it's also reflected of the fact that we do have much more indexation, 100% in France and close to just over 65% in Germany. That also explains why you have less volatility in these portfolios. As always, it's very hard to predict the future. But with market expectations of lower interest rates, I guess the timing is still a bit unknown. But the adjustments we have seen so far, it's starting to feel like we are nearing the bottom of the cycle. But it is a question of timing. Sooner or later, things will start to bounce back. But we are where we are at this stage in the cycle.

11:35 Next on the next slide, I'd like to talk a bit more about our sales program. So while we had a good momentum in the leasing markets, the investment markets were difficult in 2023. And the volume of transactions were down between 4060% in all our markets. And this was from the low numbers that we saw in 2022. So during the year we sold five properties for a total value of £25,000,000 They were all relatively small, which was one part of the market that still had traction. Many were repositioning opportunities and in total the sales closed at about 10% above the latest valuation.

12:21 We are looking to reduce our loan to value. And for 2024, we have a larger sales program, which includes the remarketing of Westminster Tower, where the buyer unfortunately failed to complete. And also our spring used student property, which we have now owned for over ten years. During this period, the performance of the student has steadily improved, but we believe we have done what we can to optimize the property and now is a good time to look for an exit. In total, as you heard, we're looking to sell over CHF $270,000,000 of property and we have already made good progress in the first quarter with two property sales agreed in principle. So next stage would be to move into the contractual phase of that.

13:07 I'll now hand over to Andrew, who will give you a bit more details around the numbers and our occupiers. Thanks, Frederic, and good morning to everyone dialing in. This morning, I'm gonna run through, well, briefly our 2023 financial results. There's more detail in our annual report and our results presentation that we did at the start of March, talk about the successful refinancing activity that we achieved in 2023 and the further progress we made this year with planned 2024 refinancings. And finally, I'll talk about our occupiers and our index linked leases.

13:46 The picture on this slide is one of our offices' upspring used about the Devauxhall, which highlights the increasing quality of our portfolio.

13:57 Turning to the next slide. I've set up some more detail on our positive rental income performance in 2023, which was outweighed by higher finance costs resulting in lower EPRA earnings. I mean, Frederic already touched on, but I think it's really important to focus on the operational side of the business. The occupational market remains healthy, which has helped CLS to drive a 4.8 increase in net rental income. The principal movements, are highlighted in the graph on the left, are as follows. Firstly, over 55% of the portfolio is subject to indexation, which results in £2,800,000 increase in rent. There was a £2,300,000 increase from the full year impact of the last two acquisitions that we made in 2022. Our student and hotel operations had another excellent year with the student accommodation being fully occupied and bookings already well ahead for the next academic year.

14:55 In fact, we are substantially ahead for that, and we will be fully occupied in the next month or so in terms of bookings for for the for this upcoming academic year. It's already up fully up by this year. And then the hotel saw significant increases in average daily room rates. The 9,900,000 increase in other is a mixture of dilapidations offset by some refurbishments and higher net service charge. And finally, a small decline from the disposals that we made in 2023 and 2022. On the right hand side, this £5,400,000 increase in net rental income translates into a 1.3p per share increase in earnings.

15:41 However, this was more than offset by higher finance costs with our interest costs increasing by 92 basis points and slightly higher expenses from inflation increases. Turning over to the next slide. Financing is a key part of CLS's business model, and therefore, I've included two slides in this presentation. The first slide, slide 12, summarizes CLS's financing strategy and the progress we made in 2023. And the main points of our strategy are CLS differs from most of our competitors as we secured nonrecourse lending with currently 43 loans from 24 different lenders.

16:28 In addition, we aim to have at least 100,000,000 in cash and undrawn facilities. At the year end, this was over 200 over 120,000,000. And our LTV target loan to value is between 3545% given that we borrow in The UK as well as in Germany and France where higher loan to values are more common. Whilst net debt was unchanged in 2023, LTV increased to 48.5 as a result of property valuation declines. We are targeting to reduce gearing to below 45% in the short term and below 40% in the medium term. And as Frederic touched on, to achieve this, we've identified over two seventy million pounds of disposals, including spring new student accommodation.

17:17 On the right hand side, I've highlighted the progress made in 2023. As you can imagine, we have over 40 loans with a debt maturity of three and a half years. Our treasury department is always going to be busy. 2023 was no different, and we refinanced all the loans which are expiring in 2023. In addition, we refinanced over 50% of the loans maturing in 2024. The chart in the bottom right shows the debt maturity at the start and end of the year. Slide 13 summarizes the further refinancing progress made in 2024 and our focus for the rest of the year. The chart in the left hand corner shows the position at the start of the year and the current position.

18:06 We have already extended two loans this year so that compared to the start of 2023, over 70% of 2024 refinancings are now complete. For the remainder of the year, we only have six loans in Germany and France for £98,300,000 left to refinance. We also believe that our finance costs have started to peak based upon the current swap curves with only a 10 to 20 basis point increase in our finance costs expected this year. The other focus of 2024 is to tackle the refinancings that we have coming up in 2025. Our strategy has been to extend loans over the last two years as some loans are associated with expected sales, and so we want to avoid break costs on long term fixed rate loans.

18:57 Some loans are for buildings for which we're trying to improve the letting situation first before securing a longer term loan. And finally, we've expected we expected finance costs to reduce, and we don't want to take out long term loans at these higher rates. For 2023, we have 12 loans for 399,000,000 to refinance with the greatest percentage being in The UK as this includes one portfolio loan across 12 properties. We are already progressing with refinancing some of the 2025 loans early and others will be paid down through sales or the usual debt on amortization. My penultimate slide, Slide 14, illustrates our high quality and diversified tenant base across our three markets.

19:46 The three key our properties remain strongly multilets with over 744 tenants equating to an average of over eight tenants per building, a couple of changes in our hit parade of our top 15 tenants with Kantar in at number four and Frank Perth at number 13. Both of these changes are the result of us negotiating the surrender in the head lease at New Printing House Square, a property in London from the Secretary of State. This means we are now directly contracting with the tenants as well as receiving increased rental income. And as a consequence of this, our proportion of government tenants has dropped by 4% to 22%. But these plus major corporations represent well over half our tenant base, which is reflected in our rent collection of over 99%.

20:39 The strong rent collection of over 97% is the same as before, during and after the pandemic. My final slide summarizes the resilience of our income with over 55% of rent being index linked. As noted, this indexation was one of the key drivers of the increase in net rental income. The amount of indexation and how it works varies by country. Most UK leases are not index linked, but benefit from upward only rent reviews. However, Spring Gardens, CLS' most valuable property, had 11.1% rent increase midyear 2023 due to the rent being linked to RPIX.

21:25 In Germany, 66% of our leases are CPI linked, which rose by 7.1%. In addition, a further 20% of our German leases have contractual step increases, which rose by 5.7%. And lastly, in France, all leases are index linked. In 2023, we had an in we had an inflation increase of 5.6%. And with that, I'll hand back to Frederic. Thank you, Andrew. What I would like to do now is go into a bit more details about our recently completed projects. But maybe before that, the picture here is on Flexion, which is located in Central Berlin next to the River Spree.

22:14 This is one of the properties that we acquired a few years ago and we have

22:20 now renovated that one and been very successful in letting it. On Slide 17, part of being an active asset manager is to modernize and renovate our buildings when we have the opportunity. And given that we have over 80 properties, there will always be some smaller refurbishments going on in the portfolio. Why do we do this, you might ask? And it's a very clear answer to that because it drives rental growth.

22:56 And on this slide, I'd like to go through a few recent examples of what we have been working on. The first one on the left hand side is Flexion in Berlin, the picture I showed you earlier. We acquired a property in 2019 when it was 70% vacant. We have refurbished about half the building so far, 85% let. And also the new space is achieving roughly 30% higher rent compared to the existing space. So it does really pay off to invest in the properties. The second one in the middle of the page is Fleert House in Hamburg. It is an old warehouse building in the waterfront area. We have carefully renovated the listed facade and the windows to improve noise and energy efficiency in addition to contributing to the cultural heritage of the city of Hamburg.

23:52 The building is now 80% let and we are in final negotiations for the last remaining space with rents circa 20% above the RV, the market rent in the area. The third one on this slide is Apex Tower in New Malden in Greater London, where we have refurbished several floors, including the addition of a business lounge on the Top Floor. There's a picture of that one you can see. We have let circa 60% of the refurbished space and we have strong interest for the remainder. And we will continue with Phase two of this building once that space has been let. If we now move to the next slide, Page 18.

24:41 So during 2023, we did finish our enhanced CapEx program. So with the code, Prescott Street and Park Avenue, Lyon, we completed on these three larger projects that we have been working on for the last couple of years.

24:58 At the code in Vauxhall on the left hand side, we have completed a 9th Floor office development. It was completed in May. It launched in June. We have now let the Ground Floor and the 9th Floor. And very encouragingly, the 9th Floor the rent achieved is starting at GBP 59 per square foot and will be rising to over GBP 70 per square foot over time. Park Avenue in Lyon in the middle of the slide, we refurbished five out of the nine floors. We've also replaced the facade. The market launch was in September. We had existing tenants for five floors in and we have let three floors of the refurbished space at market rent. We have two floors left to let and I'm very confident that, that will go shortly.

25:52 Final one here on the right hand side is The Artesian in Prescott Street. It's located in Baldgate to the east of the city of London. We've completed the renovation of the entire 96,000 square feet office building. The marketing launch was in November. And so far, we had over 30 viewings of the space. And, yeah, marketing is ongoing. And, I mean, this really represents the highest environmental standard these days and what tenants are asking for with, as you can see here, can't be fit out in an open plan environment.

26:39 On this slide, I'd like to talk a bit about our sustainability work that we're doing, and we are making good progress on our net zero carbon pathway. Pleased that things are progressing. We spent over CHF 15,000,000 by year end twenty twenty three out of the total program cost of CHF 65,000,000 until year 2030. This has also been recognized with EPRA Gold Best Practice as well as GRESPI four out of five green stars. We have also published a separate sustainability report, which is available on our website for those that want to dig a bit further into this area. In 2023, we completed 73 projects and that included EV installation charging points and also the completion of our photovoltaic program in The UK.

27:31 This also resulted in a 20% reduction in our D rated buildings in The UK, and we are fully compliant with UK EPC legislation and on track to meet our long term targets. Now let's move on more to the outlook section, which starts on the next slide. So as an overall direction, the leasing markets are performing well, while the investment markets have challenging time in the last couple of years. And that has resulted in very low transaction volumes for commercial property. If we start in The UK, we're seeing good leasing demand. And as you heard earlier, especially the second half of the year and including the first quarter this year was strong with small to medium sized floorplays particularly in demand.

28:23 There's also been much more clarity from larger corporates in The UK about future space requirements with most companies now calling for employees to return to the office. The trend is also very clear for fully fitted offices, so called Cat B renovations or outfits. In Germany, lettings to government in Mittelstand, the mid sized companies are performing well, while the larger German companies whose main markets are overseas, they're still grappling with some uncertainty, which is mainly driven by general growth concerns. But as I said, small, medium and government tenants are still very much active in the market.

29:08 There's new EU legislation around coming into effect. And both tenants and banks are certainly ramping up their requirements. And this is much more of an important topic for everyone. Rental growth is evident across the board. And we are seeing growth rates in Germany, there are twice The UK and France for the right quality buildings. And this is very much driven by the fact that there is a lack of high quality space in the right locations in the German market. And in France, same story here, we're seeing good demand for small to medium sized floor plates and that also plays well to our French properties. Office supply in Paris will increase in 2024.

29:53 So that would probably put a bit of a dampening impact on rental growth for the fresh portfolio. But we are also seeing more conversions of office buildings to residential. And that's driven by perhaps a little bit more of a local planning system than we see in some of our other countries. Finally, in Lyon, in France, we do expect market rates to remain at a fairly low level. And that is driven by the fact that the city operates a very restrictive planning policy for new developments, which has been developed by the Green Party that is in charge of the city itself. So yes, to summarize it, leasing markets continue to do well, which is great for our rental income, while the investment markets are more challenging, which is very much driven by the fact that we have seen a shift in yields, which was driven by increasing interest rates.

30:55 In terms of opportunities for us to continue to grow the company, so our main operational focus is on letting the refurbishment and developments that I talked about earlier on that are now completed and to drive rental income in our existing properties. On this slide, you could see a walk on the left hand side starting at our current contracted rent that is just over GBP 112,000,000. We have vacancy in the portfolio. Letting that space would add 13,700,000 of rental income. The majority here is the Code, Prescott Street and Park Avenue. So those are the three big ones I talked about earlier on. In addition to that, we have ongoing refurbishments that we're working on.

31:44 It's the second part of Notation, which was completed earlier this year. It's the phase two of Apex Tower in New Malden that I also mentioned. And we also have a property in Berlin called Bismarckstrasse that we are renovating at the moment. Once that it's completed and we have let that, there will be another 11,600,000 of rental income. So in the existing portfolio, we're looking at an opportunity over the next couple of years to drive rental growth from the 112,000,000 to 138,000,000. It will be a lot of work, but this is what we have our main focus on the teams in country at the moment. Further along, we have some development opportunities. We have a couple in Germany.

32:32 And after 2025, we also have two large opportunities here in London. One is Spring Gardens in Boxhall, which is currently led to the National Crime a half acre site. It has a lot of opportunity and the valuation or the value of that one is more likely to be as a mixed use development of some sort. And we also have new Printing House Square in Midtown. It's located on Grace in Rome between Kings Cross and Hoburn. And there's opportunities as well there to look at various development opportunities for it. So there's quite a lot of exciting things in the existing portfolio. In addition to these opportunities, and as you heard from Andrew, we also have over half the portfolio being on indexation, which despite inflation being lower now, will still continue to drive growth of rental income.

33:29 So on this last slide, just leave you with a few key takeaways. So strong leasing momentum. And last year, we increased net rental income by close to 5%, while the new leases were nearly 7% above market rent. The full year dividend is proposed to be maintained at 7.95p per share, which reflects the board's confidence in our business and assets. And for 2024, we will target more disposals to reduce LTV or loan to value. And we will also increase our flexibility. And over 70% of the financings for 2024 had already been completed when we presented in March.

34:16 We will continue to invest in the portfolio, holding going forward at a more normal level of around £30,000,000 a year. And the operational focus is on reducing the vacancy in the portfolio, and we do expect rental growth to continue to grow. There's a lot of upside in the existing portfolio, both from using vacancy indexation and from letting the recent developments that are now ready to go. And we believe that the outlook for high quality offices is bright as more and more companies favor the return to the office. Companies are again looking for their occupancy needs more strategically. And as the pandemic legacy fades away, we're seeing more and more realistic flexible working policies emerging.

35:04 That is the end of today's presentation. Thank you all for listening in and we will now open up for questions. Perfect. Frederic, Andrew, thank you very much for your presentation. What I'll do is I'll just bring your camera up to full screen now. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the top right hand corner of your screen. Just while the company take a few moments to read those questions that have been submitted, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Frederic, Andrew, as you can see, we have received a number of questions throughout today's presentation. And Andrew, at this point, if I could just hand over to you just to share the Q and A, that'd be great. And then I'll pick up from you at the end. Thanks, Alessandro. So we've had a few pre submitted questions. So if I run through those first, and I'll pick up the ones from the live Q and A.

35:54 We'll do these depending on who they're most relevant to. So the first question is, is the Board comfortable with the level of company borrowings? If so, please explain the reason reasons. If not, please explain what will be done to reduce gearing. I suppose it's pretty much naturally me. So a a few observations on that one. I mean, the first one is the board is comfortable with the level of company borrowings. Why? That's because of the way we are financed as we explained earlier. So in particular, CLS has no group covenants, and we use ring fenced property specific secured lending. So that gives us a very resilient financing structure.

36:39 However, LTV at 48.5 is above our target range of 35 to 45%. And this high level of LTV does appear to be using investor appetite for CLS shares. So therefore, as highlighted, we are targeting circa $270,000,000 of sales to reduce that LTV. I suppose here, taking a few questions together, there's been a number of questions about the share price and the recent decline in the share price and the discount to net assets. Frederic, do you want to Yeah. No. No. Absolutely. So I mean, to first say that CLS is a long term business, and we have experienced many property cycles during our existence.

37:32 The management focus, which you heard earlier in the presentation, is really on improving the company operations and particularly reducing vacancy. We do not overly concentrate or comment on the share price, albeit a significant part of the management remuneration is linked to share price performance. So we are obviously as interested as anyone else that the share price recover. The belief though is that by delivering a strong operational performance that should reduce the discount to net assets. As per the previous question that Andrew answered, we're also going to reduce LTV through sales, which we believe will also reduce the discount to net assets.

38:19 The process from the or proceeds from these sales will primarily be used to reduce net debt and keep investing in their portfolio. Over and above that, we will consider share buybacks and or acquisitions, although that is probably some time before that will be something we are considering. Next one. There's a lot of media speculation about work from home and the decline of the office sector. What is your view? Frederick Publication. Yeah. No. Happy to comment on that since it's a topic close to my heart. We did comment on this in our recent annual report as the picture has continued in some ways still continues to evolve.

39:07 Overall, it has become clear that some sort of hybrid working is now the accepted norm. However, this does vary a lot, between country. So occupancy levels, for example, is higher in Germany and in France and slightly lower in London, which is probably part due to the longer commuting times that you see in larger cities like London. It's also clear that occupancy levels is getting back to the pre COVID levels that we're seeing, although it has taken some time to get there. And I guess finally, a lot of companies and organizations are starting to recognize and promote the office as a vital part of employee engagement, welfare and interaction, which drives a lot of positive things when people are together.

40:03 So that does rely on having the right quality space and hence we are continuing to invest in the portfolio to be successful when we let our properties. And then the final one on the presubmitted questions, or I suppose it covers a couple of these. Can you comment on your approach to dividends? Yeah. And I suppose, touch on a bit in our why invest in CLS. I mean, you know, our approach is to have cash back to progressive dividends. CLS's dividends are linked to underlying operating profits with our policy to have dividends covered 1.2 to 1.6 times EPRA, also, know, which is the same as underlying earnings.

40:54 And our twenty twenty three dividend was covered 1.3 times by EPRA earnings. So comfortably in that range and ahead of most of our REIT peers. That covers, I suppose, the pre submitted questions. It also probably covers some of the questions that have been asked in the live Q and A, but I will try and pick out others that are picking up some slightly different things. Starting with there's a question here, maybe for you, Frederic. Could you comment on recent reports of commercial real estate problems in Germany? Yes, absolutely. I mean, there's no doubt that the German economy is going through some challenging times at the moment with fairly low growth rates. They did a remarkable job in terms of getting themselves of the reliance on Russian gas. But yes, there's still some concerns, especially from larger companies around the growth and the export of the German economy.

41:58 If you go to the property sector, I think it's fair to say that it's quite a mixed picture. You have properties which are located near communications that have been renovated, where the owner have invested in sustainability measures, etcetera, that are still doing well. The major price shifts have been for the very prime properties. And I think pricing probably had gone a bit excessive for that with yields around 3%. So I think you've had a bigger shift when the interest rates started to creep up than if you started with yield of, say, plus five percent in your portfolio.

42:47 There's no doubt though that there's a lot of uncertainty of what will happen in Germany. But as I said, it's very driven by the macroeconomic picture in terms of where the growth rates will go and how much space occupiers will need. There's also some concerns around the financing markets and what will happen with German banks. There's a different approach there. I think the German banks that might be experiencing problems are mainly the one that expanded into The US and other foreign markets. We tend to use mainly the Sporkassen or the Lundisbanken, which are very local and regional banks. We certainly haven't seen any shift in their behavior in terms of granting loans or extensions to us. But I'm sure there will be some other parts of the economy that will or the financing market that might have a bit more problematic when they come to refinancings.

43:47 We should also remember that Germany is still 80,000,000 people. It is a very diverse economy. Instead of being reliant on one large city, you have at least 10 big cities with their own office markets. So it is quite a diversified portfolio. And vacancy rates are very different. You have some parts of the country like Berlin, Munich, Hamburg with very low vacancy rates, while places like Frankfurt or Dusseldorf have higher rates. So it's not just one market. But I think it's one to keep an eye on. I'm very confident that long term Germany will do well and the property market will bounce back the lowest rates in the near future that could come quite quickly.

44:34 Thank you, Frederic. Question from Martin g is around, again, LTV. Just taking the two points I think out of it. One is, you know, we have an average LTV quote, but some of it be higher. Do we have any LTVs above 90%? Absolutely not. And the second one is, do we have any loans that are in breach of covenant or likely to be in breach of covenant? And, again, the answer is no. We have the ability, if ever we were to get a problem, to pay down debt through what are called equity cash cures. So, no, we absolutely do not have any loans that are in breach of covenants. Covenants. Another one was probably one for you, Frederick, from Andrea. What are the primary drivers reducing vacancy other than completing builds and refurbishments?

45:31 As I said, the the key drivers for our teams on the ground is to reduce vacancy. We have, as you've seen in the past, achieved very healthy rents compared to to market rent. And I think clearly in an environment where you're you're you're keen to do that, where we might see a little bit less rental growth in there to to get these properties let. But we do look at that on a case by case basis. The key thing is that you have the properties in the right locations and that they meet what people are looking for at this point in time. If you have that, it's more a question of time and I'm very confident that we will reduce our vacancy in the next couple of years.

46:16 We will also starting to use more website marketing. So traditionally you appoint an agent or two. You normally have a big national agent or international and you would have a more local agent to to market your property. But we have started to use much more Internet based. So so for those of you that are UK based, you've seen it on the residential side that is also started to come on the commercial side. We've had some pretty good success from using those type of platforms. So we're doing that as well. So we're looking at alternative ways of reaching to potential customers. I think probably one for me from Nicholas L. Will the loss of income from the planned $250,000,000 disposals have an impact on dividend cover?

47:12 I suppose the point I'd make here is, so we're looking to sell around about 12% of the portfolio. But as we talked about with those loan extensions, we have been extending loans to avoid break costs. So the properties that we are looking to sell tend to have the higher rate floating rate loans. There are also properties where we have done everything we can with them, so they tend to have lower yields. So, actually, therefore, that difference between the higher rate cost of debt and the lower yields means that the impact on earnings should not be so significant. So brokers are attempting to forecast that our income could drop by three or 4%. Yes. On a pro form a basis, that would impact dividend cover. But given that we're at 1.3 times, you know, we can have quite a significant drop in income and therefore still keep the dividend at the same level if we were so to choose.

48:09 So yeah. It shouldn't have much of an impact on dividend cover at all. I think probably there's a couple more. Daniel Lee asks, any comments on the remarketing of the tower? I think that's probably Westminster Tower for sure. Yes. That is I assume it's Westminster Tower. I mean, clearly, going into any commercially sensitive details, we have started remarketing. We did that straight away after the previous buyer failed to complete. And as you probably know, there is still strong interest for residential conversions in the London market. So we are back in the market and we are working on a few promising transactions.

49:03 And, yes, I would hope to be able to announce something, yeah, in the not too distant future of what the next step would be for that one. But our intent go ahead and sell that property. And as I said, there is strong interest for residential conversions. Mean, this is a property located opposite the house of parliament. It has a unique location. So, yeah, during this this this year, we would expect that to to close out. And maybe a final one. There's one here from Ben G. He says, how are changing sustainability regulations impacting your long term investment in property upgrades? Fred, do you want to cover that one? Yeah. I mean, as you say, things are changing rapidly.

49:48 It's not changing in the same way in The UK, Germany or France. We have this legislation in each country. But I think the overall theme is very, very clear that the property industry and properties needs to play their part in achieving these sustainability targets. In The UK, it's perhaps most known from the EPC rating on energy usage. In the other we have similar measures. There's no doubt that any responsible landlord need to invest in their properties. And that is something you do over time. You try to combine it with renovations. So so if if you need to replace a boiler in two years time through the normal maintenance cycle, you would replace that with an electric boiler at that time, you wouldn't do today.

50:36 So we have mapped out every single property that we own and we have a very clear plan how we're to convert them into where they need to be by 2030. But as I said, it is a long term program. We're spending CHF65 million over this period. We've spent CHF15 million already. So that will continue. It is hugely important. Tenants are asking for it. The banks are asking for it. So it's not just being a good citizen. This is also crucial from a business perspective. And that is the prime driver why we're doing this. Thanks for that. I mean, looking down the remaining questions, I think we've covered them either around the share price, the dividend or financing and gearing. So, Alessandra, unless there's anything else, I think that probably concludes the questions for today. Perfect.

51:31 Frederick, Andrew, thank you very much for answering those questions from investors. And, of course, the company can review all the questions submitted today and publish the responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which is important to you both, Fredrik, could I just ask you for a few closing comments? Yes, certainly. I mean, let me just start by thanking everyone. It's the first time we've done this type of webcast. Hopefully, you did enjoy it and give your feedback. We appreciate that. And in terms of of the future where we are, we have a very diversified company that is performing from an operational perspective. The property markets are going through a bit of a tougher time. But our belief is that by continuing to deliver with low vacancies, taking leverage down a bit, CLS and the office sector has a very bright future ahead of us as well. So with that, thank you all for attending and please do give feedback after the presentation ends.

52:30 Perfect. Frederic, Andrew, thank you once again for updating us today. Could I please ask investors not to close this session should now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. This will then take a few moments to complete, which I'm sure will be greatly valued by the company. On behalf of the management team of CLS HOLDINGS PLC, we'd like to thank you for attending today's presentation, and good morning to you all. Thank you. Thank you.