Regional REIT (LSE:RGL) — HY26 Results

0:00 Good afternoon, and welcome to the REGIONAL REIT LIMITED investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team. Steven, good afternoon, sir. Thank you very much, and good afternoon, everyone, and welcome to the presentation of the half year results of REGIONAL REIT for the period ending 06/30/2026. It is my intention this afternoon to take you through the results for 2026 and then spend a bit more time updating you on what we are witnessing in the marketplace and our continued progress that's been made towards our strategic goals.

0:56 As mentioned earlier, q and a, we'll deal with at the end. And if you can submit your questions, we'll try and get through as many of them as possible. If I may now introduce this afternoon's team from Regional REIT's manager, e s r ESR LIMITED. I'm Steven Ingalls, chief executive officer. And also on the call this afternoon, Simon Marriott, property fund manager, and Adam Dickinson, investor relations manager. Well, after another six months of political and economic change and instability, I think we are almost back to where we have been many times before over the course of the last few years. Turmoil both in The UK and internationally, given the host of events currently ongoing, and that undoubtedly has impacted business confidence and impacted the real estate market both in terms of energy, and and also in terms of interest rate movements.

1:58 Political turmoil in The UK with yet another new prime minister, six in ten years, and Europe wide with disenfranchised voters and the rise of the far right. This background impacts The UK economy either directly in the case of increased energy costs or more subtly, but also, as I said, impacting business confidence. And the vital part of business confidence in growing the economy and creating jobs, which has in turn an impact on the requirement for physical space. So a backdrop of uncertainty and continuing headwinds. However, against this backdrop, we are making steady progress in reducing the company's debt, selling nonperforming underperforming assets, and leasing up space marginally ahead of the expiries and breaks being exercised.

2:50 So despite all of this, I think the company is making good progress and has made good progress over the course of the past six months. Adam, you can take maybe to slide three. Thank you. So a a quick summary of the 2026 half year highlights. So as I mentioned in my opening remarks, whilst things are undoubtedly difficult and the leasing market remains slightly subdued, we have nonetheless undertaken 26 new lettings, delivering 1,900,000 in new rental income and delivering a £700,000 annualized saving in in reductions to avoid costs. We're making good progress on sales with £21,500,000 of sales completed in the period, and these were on vacant or partly vacant assets, and this has allowed us to reduce debt and reduce VOID costs so accretive to income.

3:53 And we further reduced LTV, which now sits at 38.5% through repayment from those sales proceeds. And finally, of course, we've delivered a fully covered 4p dividend in line with our target of 8p for the full year 2026. Slide four, please, Adam. So just looking at the key highlights. Our strategy to reposition the portfolio continues. We remain committed to creating a high quality income focused portfolio with targeted value add opportunities. The portfolio value currently stands at £526,700,000, down as a result of sales and a small 1.3% valuation reduction.

4:45 EPRA occupancy is mainly down. This may look at first as counterintuitive given the leasing activity that I was just commenting on and the sale of vacant units. This is mainly due to the CapEx projects completing and coming back into the EPRA numbers, so it's very much a timing issue. Actual occupancy has improved over 2% over the period. CapEx in the period at £1,400,000 looks low. This is mainly as a result of the significant letting that we have undertaken in the period where we anticipated expanding £5,000,000 of CapEx. However, as part of the deal, the tenant is now undertaking that. And we will obviously commit that CapEx elsewhere in the portfolio to improve the overall quality of the portfolio and consequently the income.

5:41 And you're on track to do £10,000,000 per annum, which is our previously stated estimate. Earnings per share in line with our estimate, allowing us to fully cover the 4p per share dividend for the half year. And LTV, as mentioned in my opening remarks, down. Gross borrowings have decreased to 243,800,000 just due to those sales and the pay down of debt. Slide five, please, Adam. The strategic sales program continues, and the rationale, obviously, for sale to reduce debt in advance of the refinancing in December 27 and December 28 facilities, a little bit more detail on which to follow, and to reduce costs associated with noncore and nonperforming assets. So, you know, attempting to sell the nonperforming, nonincome producing assets, which we were successful in the first six months.

6:47 The sales program continues with a further two sales completed post period end for £4,300,000, and there are a further 11 assets either contracted in the last listed hands or in late sales negotiations, I. E, where we've agreed terms, accounting for a further circa £32,000,000 of potential proceeds. Until then, assuming the sale is complete before the year end, we could well be selling around £58,000,000, in line with our previous guidance of 50,000,000 to 60,000,000 of sales for the full year. Slide six, please, Adam. Thank you. So portfolio repositioning for long term growth.

7:35 You know, if you look at the average rent, average rent continues to grow. Yields, as you'll see in the right hand side, have effectively remained static since June 25, so over the last three periods. That kinda suggests the valuation market certainly has stabilized and that, you know, we may well be now at the bottom of the market, all things being equal. But we we, you know, continue to see average rents creeping up. Offices, the vast majority of our portfolio, almost 90% by value, and, obviously, the lettings there in terms of what we've previously discussed. But, you know, clearly, the one big letting, 1,100,000 of income across two buildings in Nottingham. That's the annualized rent. That's not the income for 2026 given rent free periods.

8:32 So but that was the annualized rent over the ten year life of that letting. And average requirements in the market increasing. So we we are seeing some upscaling of several tenants to our benefit in some cases, but obviously to our detriment in others where we have lost tenants, where they have moved to bigger buildings. And rent collection remains strong, 99.7% in the period to date. That will ultimately become a 100%. Those point 3% is just an issue of timing and when those rents are collected. You'll see the full year figure there at 100%. Okay. Slide seven, please. Just looking at, obviously, the the map of The UK showing our assets distributed across the main regions and major contributions of The UK.

9:24 One or two highlights there, obviously, one and two, Newstead Court is the letting of the first six months, almost a 150,000 square feet on a twenty year lease with a ten year break and producing over a million pounds of annualized rent. But the tenant undertaking, as I mentioned earlier, £5,000,000 of CapEx works that we had originally looked to undertake on their behalf, but a much better result for us not having to expand the capital, but still achieving a million pound trend on a ten year lease term certain. Linford Wood, business part again, your rent's improving there. Previous rents at £18 up now to £22.50. Thorpe Park Leeds, likewise, we're seeing good rental growth now at £24 a square foot on the latest letting there.

10:16 So progress being made across the portfolio and different regions. Next slide, please. So a quick look at the portfolio segmentation. Many of you remember, we've actually locked the assets in in terms of the segmentation eighteen months ago. Clearly, assets do change in terms of where they should be, and and the classic example of that in the value add, you'll see that building above, which is one of the new state court buildings. Clearly, that is no longer value add. We had looked to demolish these buildings to make way for high quality industrial. Clearly, we've no done a letting, and that will move effectively to core, albeit to allow us to compare like for like the assets that are frozen in each box.

11:07 We've made good inroads to the sales program. So sales down to roughly 30,000,000 by value, 5.6% of the portfolio. Value add there at 55,000,000, as I say, distorted slightly by that that one asset, but we'll talk more on value add later in the presentation. CapEx to core and in core. So if you like the buildings on the right, the value added sales building we would look to sell in due course, the CapEx and to core and core those assets we want to retain for further income growth. Next slide, please. Now looking at the trends for regional offices in respect of the supply and demand. In in this slide, the supply side. So supply remains constrained, and and it's probably gonna constrain further as time moves on. When you look at the bottom right slide there or the bottom right box, construction start for regional offices at lowest level in over a decade.

12:12 And and that, you know, is is indicative of the development market as a whole, but office market specifically. The cost of ground up construction these days are have grown substantially as a consequence of which really, you know, unless it's pre let to achieve rents of between 50 and £60, which is what you're required to achieve to justify development. As I say, I think we'll see very little in the way of new starts over the course of the next few years. On the right hand side there, obviously, is the supply. We're seeing delivery of just under 1,500,000 square feet in 2027. All schemes obviously commenced, you know, several years ago. 2028 pulls away dramatically, and then when you look at twenty nine, thirty, thirty one, almost no new supply coming to the market at that point.

13:05 And I think that will constrain the market further as we continue to lose buildings to, alternative uses, and for demolition of noncore, poorer quality grade c, d, and e buildings. So I think we will continue to see supply very much constrained. Okay. Slide 11. Looking at demand then, so that's the supply side. We are gonna see a constrained supply and indeed diminishing overall supply in the regional office markets. So therefore, what about demand? Well, demand is holding up. I talked about a subdued leasing market. It is. It's taking much longer to get deals over the line. However, there still are requirements out there from many, many companies, but decision making and determining timelines for when that initial interest becomes income, I e, the buildings are actually leased and then become income producing becoming increasingly difficult.

14:06 So there are requirements. There is demand, but the time taken for that to flow through into actual lettings is quite considerable. And because of that constrained supply and that continued demand, we are continuing to see rental value growth. So the data there, UK offices saw rental value growth of 4.7 the year to June compared to Citi at 3.6%. Across our portfolio, we're achieving, on average, 3% above ERV. And, of course, ERV has been increased over the course of the last couple of years in line with the market. So rental growth is there, which kind of supports my thesis that supply is restricted and demand continues.

14:55 And we expect to see that rental growth continue and increase and indeed increase ahead of the 2030 date for EPC requirements a and b coming into force, and the take up figures there in the bottom right hand corner. Okay. Slide 12, please. So just looking at a couple of case studies. This is a brutalist architect building, but internally provides very, very good quality accommodation. So the majority of this building is led to Global Banking School. We have one vacant floor, which we have agreed terms with Global Banking School to take. In fact, terms have been agreed for almost fifteen months, but for a a number of reasons due to global banking skills internal requirements and indeed requirement from building warrant to change some of the fabric of the building to meet and satisfy their requirements for a single occupier. This deal is now only now coming to fruition. So we expect to announce the final letting here in next few weeks, taking this building to a 100% let and of investment grade.

16:08 Okay. Next slide, please. We talked earlier about value add and potential change of use assets. We have undertaken 15 feasibility studies and taken many of these assets through first stage planning and for initiatives for change of use, where the change of use values add value to the building compared to current holding cost. And we will we will now see some of these assets coming to market over the course of the next few months demonstrating that the value add element and that increase in value for alternative use does actually pay off and increase values quite substantially. So what's the space in terms of some of these properties coming to market with the benefit of support for PBSA for residential to sell and residential to let on the whole.

17:09 But other UCs include hospitals, industrial, and a host of others. Okay. Next slide, please. So the largest value add potential asset in the portfolio, Central Park, New Lane Leeds. So this has been a long battle with the local authority. This was originally safeguarded as part of the HS two proposals, and, of course, they were canceled a couple of years ago. So HS two no longer happening. Therefore, one would have imagined that this would have been released from safeguarding. However, local authority and local MPs, have managed to retain the safeguarding for, potential mass transit leads mass transit, system.

18:01 We, have been battling with the local authority and Department of Transport to say, well, you know, that wasn't the intention of legislation for HS two. The safeguarding is in connection with HS two only and should not apply in respect of the mass transit. Moving forward, some good news. The Department of Transport have now confirmed that this will not be required for the mass transit system, and indeed, there are arguments on safeguarding hold water, and this will be released from safeguarding imminently. So we are waiting for documentation to be signed, but the safeguarding will be released. As part of that, that has allowed us to agree a new long term reversion release with ASDA on the front portion of the site as they use the industrial unit for their national training center, a very important part of their business with, of course, their headquarters across the road. So that has been agreed.

19:03 A much higher rent and will kick on from the expiry in 2028 for a further period of ten years. So good news there. Again, that that is in the process of being documented, and that releases then the rear element of the site to go through the planning process for residential. And we anticipate that that will be high density residential. And, of course, south side of this of of Leeds and the South Bank has been significant a part of Leeds showing significant improvement and significant development. We anticipate, as I say, achieving a high density scheme on the rear site at which time we will sell to residential developers. Okay.

19:50 Another change of view. So one to new state core, obviously, featuring a lot in this presentation given the the skill of letting. But, clearly, we're not gonna be demolishing this for industrial anymore. It's now a core hold offering potentially twenty year income. So, you know, that's it just kind of is indicative of what's happening in the marketplace just now. I talked about constrained supply earlier. The constrained supply is forcing tenants to perhaps be a little bit more imaginative. For example, you know, in this case, the tenant in Glenair, a US defense and electronics company, required to upscale. There was nothing in the region suitable for them, and therefore in in terms of ready made space, and therefore, they had to be a little bit more imaginative and say, well, fine.

20:43 We'll take what is fundamentally two good buildings in this business park and then undertake the works to create the space that we require for our staff. So we've seen this on a few occasions over the course of the last six to twelve months where constrained markets are forcing tenants to to look elsewhere, not necessarily in terms of geographic locations because they want to retain their existing staff, but more specifically on the types of buildings they're prepared to occupy and upgrade. So I think this will become a feature of the market moving forward. Thanks, Adam. So ESG remains very, very important in the minds of occupiers and and, of course, us as responsible responsible landlords.

21:31 So, you know, we still are very much focused on ESG to deliver sustainable and cost sustainability and cost savings. EPCs, the energy performance certificates, legislation is still not through, but everybody expects that by 2030, the legislation will be that all buildings required to be EPC a or b. And, actually, to a degree, it doesn't really matter about the legislation because companies themselves are taking upon themselves as part of their own ESG requirements. The vast majority of requirements barring several outliers are all for EPC a and b. So vital that we provide that quality of space.

22:19 We are, as you'll see, making good inroads. Just over 61% of our portfolio now conforms. Of the rest, you know, 26% is EPCC with an identified route to upgrading and improving those buildings to EPC a or b, and the vast majority of the d and e's and below's will be sold as part of the sales program moving forward. I think worth of note, I mean, we've mentioned this many times before, but the market hasn't responded as quickly as it should have done to creating EPC a and b. So it's currently only 19% of UK commercial buildings that includes industrial. So UK commercial buildings meets the requirement.

23:05 In the office markets, they vary city to city, region to region. But if I take Leeds and Manchester as an example, you know, those those markets are roughly 25% conforming. Now if we look at that in the context of occupation, last occupied numbers, are from December 24. We're awaiting the December 25 numbers to be confirmed, but roughly 81.6 of the regional office market was occupied at that point in time. 81.6% occupation with only 25% of buildings conforming. You can understand why we're infused and indeed believe that we'll see rental growth for those better quality buildings. So more of the market chasing fewer buildings or small part of the market that's conforming.

23:54 So we expect to see substantial rental growth over over the office market where it's offering greater accommodation and EPC a and b. Elsewhere on ESG, we're continuing the rollout of our four d smart technology. This is effectively the smart technology for identifying energy usage and where we can find cost savings. We've installed this system across 45 sites so far, and that's producing a £190,000 of savings to regional REIT over and above those savings that the tenants themselves are receiving. So those 190,000 of savings are direct savings to the REITs, not to the occupiers.

24:43 Solar continues to be installed. Installation completed there at 17 sites, 14 of which are energy producing and roughly 880,000 kilowatt hours being produced from those 14 sites, and we'll continue that rollout over the course of the coming years. Okay. Just looking at the income overview. So this is the earnings h one, twenty twenty five versus h one twenty twenty six. So, you know, the effects will be running through the bridge. Looking at the earnings, looking at rental property income, obviously, down 5,700,000 in terms of sales. You know, most of that income from sales as well well as the expiries and lease breaks, looking at costs, admin costs, financial income, and finance expenses coming to the 6,800,000 of April earnings June 26.

25:47 Next slide, Adam, please. And then evaluation, obviously, December 25, there's the disposals of 20,800,000 of net of cost disposals, 21.5 gross. Acquisitions, obviously, none in the period. The gain and loss of properties, 2,100,000. CapEx, 1.4, and the valuation change there, that 1.3% reflecting 7,100,000 due to income differentials and end of the current valuation of $5.02 6,700,000. And then just look at the balance sheet overview. So, again, summarizing effectively the two slides that we've just we've just run through looking at that.

26:34 Now the $3.00 5,800,000,000 in the far right hand corner. Okay. So moving on to debt. So we have debt expiries in December 28 and December sorry. December 27 and December 28. If I can deal firstly with the Scottish Widows and Aviva debt in December 27, We are obviously very much focused on that, and the majority of sales that have been undertaken in the first half and indeed will be undertaken in the second half are focused on that specific facility. That will mean selling some income, but that income is where we've identified further risks down the line. For example, we will be selling and indeed are under offer to sell a large building where we know the tenant will vacate in fifteen months' time.

27:31 The leasing market in that specific location is thin, and therefore, we're derisking by selling now. And we're selling to and people say, why are you selling and who's buying? Well, we're selling to an occupant an operator who holds various assets in the same location. So the element of local knowledge and marriage value for them. So that that will be refi ed alongside the Scottish widows facility in December 28. So we're in discussions both with our incumbent debt providers, and Scottish widows are there to refinance both facilities and also with other lenders out with the Scottish Widows. We want some competitive tension, but I think the the answer will will be if we can refinance with Scottish Widows, it'd be sensible to do so because they'll give us the benefit of the current pricing to the expiry of those facilities. So current pricing to December 27 in respect of that facility and the current pricing to December 28 on that element.

28:40 With the sales, we expect to refinancing at roughly a 100,000,000 of debt, and that refinancing will, on current pricing, be 3% above current levels, so just over six percent all in cost. Whilst we're also looking at the RBS Bank of Scotland Santander facility, that was a facility we entered into a year or so ago, and it's a three year facility with the option of two further one year extensions. We've already made the application for the one year extension from December 28, and that's currently at credit with the banks. We anticipate receiving that very shortly. So the widows facility, if we refinance for them, is likely to be for seven years with an external party, maybe five years, but that that would then allow us some breathing space in terms of the expiries out until the first one, June 29.

29:40 And the sales program, you know, effectively will continue, but only on noncore assets. So we will have dealt with the bank facilities. We'll have reduced LTV to somewhere around 35% by the year end on current sales. And indeed, we will have no banking facilities to deal with until Santander, June 29. Okay. A reminder of our strategic priorities. So driving income. How do we do that? Well, we increase occupancy and rental growth across the portfolio, Strengthening the core portfolio and continue to improve EPC ratings, vital in obtaining the tenants and the quality tenants that have requirements in the marketplace.

30:30 They will, as I mentioned earlier, only commit to grade a space and EPC ratings of a and b moving forward. We're committed to reducing debt through targeted disposals. That continues, and we're well on our way to achieving our target by the year end and committed to fully covered dividend. We are fully covered for the half year and will be at the full year. And pursue opportunities to add value ahead of disposals. So that's the value add element of the portfolio and, again, making good progress, with those assets. Next item, please. So to sum up, really so we've now taken you through the h one results for the company.

31:22 We're very hopeful that the insight and immediate outlook and longer term out in relation to the supply and demand dynamics also appeal to you, but we do believe that the supply and demand dynamics over the short term offer the regional office UK market a very opportune time to show rental growth and by showing rental growth, show value improvement. With interest rates stabilizing, we don't expect to see huge growth in terms of value by yield compression. However, we can drive value by improving the quality and quantity of the rent.

32:09 But yet again, we seem to be in a period of instability, but we can deal with what's in front of us, which is our portfolio and The UK markets. So that brings us to the end of the formal part of the presentation. I'm now very happy to take any questions. That's great. Thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, 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 by dashboard. And, Adam, if I could just hand back to you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Thank you, Lily. Thank you, Steven.

32:54 Let me start with the first question that was submitted earlier today. Can you give an update on the lead development, please, and what is the legal position, and has that been settled? Yeah. I think I probably touched on this in terms of the presentation. Clearly, it is an important asset, and I can understand why the question has come in. So I I think I mentioned we have been in discussions with Department of Transport who have responsibility for this site. So although it's Leeds City Council in terms of area, and Leeds City Council would normally be the planning authority in the case where the site is effectively blighted, safeguarded. It's actually department transport that has the authority. So we, we have now had confirmation that they will release the site.

33:45 Took a lot of negotiation and fighting. We sat alongside ASDA. ASDA threatened to relocate from Leeds City Center because their car park was also part of this exercise, which has also been released. So I'm pleased to say we we will hopefully document that in the coming weeks. We will be submitting first stage planning inquiries over the course of the next couple of weeks. We're already we're already to go with that, and there that will start the the the process in terms of planning. I also mentioned the ASDA situation. So ASDA are keen to continue to occupy the front area of this, and we'll take a a ten year reversion release at an increased rent. And, again, we'll hopefully announce that in the coming weeks, all tied together, obviously, as part of the exercise.

34:38 Yep. Thank you, Steven. A question on the cash position of the company. So approximately 39,000,000 of unrestricted cash reported at 06/30/2026. Of that, how much represents service charge monies, tenant deposits, rent received in advance, or other working capital amounts that cannot realistically be used for permanent debt repayment? What what amount does management regard as genuinely surplus deploy deployable cash after allowing for operational liquidity and committed CapEx? Yeah. Good question. Long question. Let let me try and deal with it in component parts. So in terms of service charge, money's in the tenant deposit zero, That clearly is not our money. That is the tenant's money's.

35:23 So none of that is in the 39,000,000. Rent received in advance, yes, as a small proportion. Clearly, we accept our our you collect our rents quarterly in advance. But I guess the easiest way to deal with this is in cash terms. So we retain a cash buffer of 10,000,000. An element of unrestricted cash, 1,800,000 currently, and that's restricted by the banking facilities, but will be released as and when we meet the requirements of each individual facility. There's there's you know, that that sum varies substantially. It was almost zero at December 25. In June 25, I think we're at 3 or 4,000,000. So that that number varies substantially, but that will be released.

36:10 And then the remainder really is committed and proposed CapEx projects and normal operating activities costs. So, you know, all all of the money has a purpose and is identified. So true surplus, I. E, where we don't have a purpose for it, very little, and, obviously, the cap buffer the cash buffer of 10,000,000, we we retain as an insurance policy effectively for any unknown matters that that crop up. Thank you, Steven. And then a couple of questions on occupancy. Firstly, core occupants core portfolio occupancy fell from 86% down in December 25 to 82% at June 26, while overall occupancy is 74.3%.

37:00 What caused the decline in core occupancy? What occupancy level does management expect for both the core and total portfolio at December 26 and '27? And then another one is more when you think you'll achieve occupancy at 80% plus level. Okay. So the the main reason for that fall in core occupancy is we have sold some income. Now we we clearly want to target the nonperforming assets and the the assets where that that we have substantial hold costs, I. The vacant assets. And we've done a good job in in the first six months of doing that. I've mentioned earlier 700,000 of saving, which comes from those sales. However, we have sold some income, so that that is really the the main part, along with some lease expiries not renewing and some breaks being exercised in normal course of events.

37:55 You know, we we gained 1,900,000 of rent, but lost 1,800,000 of rent from those lease expiries and and breaks being exercised. So that that's the main reason for the the fall in that core element. In terms of, in terms of occupancy levels by the year end and by the end of twenty seven '26 rather, we are looking at 84% occupancy by the end of twenty six, an outcome from driving rents in terms of increased occupancy of our of our buildings and selling vacants. So So that's really where we're targeting. So 80% figure plus is is gonna come into force, you know, probably beginning of twenty seven.

38:45 So we are keen sorry. Beginning of of of twenty eight, we're we're keen to progress with the leasing up activity. We have over 200,000 square feet of space that hasn't been refurbished where there is strong interest, but converting that interest, like I mentioned earlier, So converting that interest to actual lettings and income has taken some or had does take some time. And we're not the only company witnessing that. It's it seems to be across all markets, not just offices. Thank you. And then a couple of questions on the debt position. Bear in mind, the 240,000,000 we currently have in debt, the 103,000,000 of Scottish widows in a Bathiva facility matures in December 27 and currently has an LTV of 47%.

39:35 What level of debt and LTV does management expect immediately before refinancing? What refinancing interest rate or range is currently being expected or assumed? Yeah. Again, I think I probably covered this in in the presentation. So level of debt, we expect it to be a 100,000,000 between the two Scottish residence facilities. So that's combining the December 27 expiry and the December 28 expiry. 45% is the figure that Widows requires to get to. When we've been speaking to other banks, ranges between 40 and 45. 45 seems a a relatively comfortable figure for most of the banks. And and, therefore, clearly, we need to get the current LTV of 47.3 down plus the sales.

40:23 So a 100,000,000, 45% LTV, and the cost will be almost certainly 3% above where we are currently, so early early six percents. You know, we have seen a lot of movement over the course of the last couple of weeks just in terms of the the five year rate, which debt is priced. So, I guess, it'll depend where rates sit, when it comes to finalizing the the loan documentation. We are anticipating that will be in place by the end of q one next year, and the rationale for that is clearly the the audit will be undertaken at that point as part of the full year results exercise, and we don't want a material uncertainty clause in the in our accounts given that that debt will then be within twelve months or expired within twelve months. So I think we are that that's, you know, the long and short of it. I think it's highly likely that we will refinance with Scottish Widows.

41:26 Thank you, Steven. And similar question on the debt. What LTV are we actually targeting? Yeah. I mean, we we've indicated levels of debt previously as supposed to be mid 3030%, I e, you know, 35%. We'll be at 35¢ by the year end, assuming the sales that we have contracted and anticipate will complete happen. So that 35% level, the board seemed relatively comfortable with. Various there's various thoughts in terms of should we be targeting 30, should we targeting lower. Certainly, it it will naturally come down if we improve the quality and value of the portfolio. And and indeed, as we continue to sell nonperforming assets, you'd expect that 35 to drift down.

42:16 But at the moment, the the board seem comfortable, and the company seems comfortable at 35% LTV. Thanks, Steven. And then more of a general question on the management structure. I realize that you have to paint the picture as rosy, but the markets don't seem to recognize that as long as the long term investors have suffered high management charges, falling dividend and stagnant, if not falling, share price. What is the board doing to encourage the market? Now is the turnaround? And how is the turnaround to avoid long term shareholders from existing? Yeah. I I I mean, the the the management fees have have reduced substantially as well. Management fees obviously were originally just based on NAV and rental.

43:05 So as as the NAV came down and rents came down, management fees also have been reduced substantially. The board did renegotiate the management contract a year or so ago, which obviously announced to the market, which then split the investment management fee between NAV and share price. So very much aligning the interests of of the manager alongside the interest of the shareholders. You know, the that alignment is is, you know, probably right and proper, but reduces fee income even further for managers. So are are they high costs? Well, high in proportion to what? Clearly, it's a complicated portfolio to run. So I I I would argue that the management fees are are not particularly high when you look at internalized costs and and certainly salary levels of our company far substantially below those of internalized PLCs.

44:04 So, you know, we continue to to fight hard. I mean, I also have a large shareholder as most people know. So, you know, my my interests are aligned both as a manager and as a shareholder, and we continue to drive forward our program. We haven't been in complete control of our own destiny given falling values and pressure from banks. I think that will be far released come 2027 when, you know, we have refied, we have reduced debt to a far more comfortable level, and we begin to see some meaningful inroads into the net income position, I. E, getting rid of some of those void costs. So the manage management continue to work hard day by day.

44:50 Is the market tough? Of course, it is. It has been really since COVID, but I actually am seeing, you know, light at the end of this tunnel. Sales program going well, reducing overall indebtedness, giving us control of our own destiny back, and, you know, we we will see that growth come through in terms of supply demand. So as long as demand holds, doesn't have to improve, as long as it holds and supply continues to contract, then you'll see our our portfolio continue to increase occupancy. Thanks, Steven. And on a similar vein, in terms of supply and demand in the market of office stock, how long is it likely to take for the excess office stock supply to be absorbed?

45:36 Yeah. Excess office supply is mostly of buildings that are no longer fit for purpose and need, you know, a lot of construction, a lot of refurb costs. And refurb and new build is difficult given the construction market. I talked about the developed market earlier. With values effectively flatlining and costs increasing, then it makes development and indeed refurbishment increasingly difficult to justify. You know, bit of a double edged sword. Our evaluations have been hit very, very hard over the course of the last few years post COVID as the occupier market, you know, shrunk and and now is increasing again as as companies who downsized substantially post COVID are now increasing the amount of space that they require to bring people back into the office.

46:28 So I think, you know, look looking looking ahead, you know, we the surplus stock is out there, I. That 20% of unoccupied space, is is mostly of grade c, d, e buildings. So not fit for purpose. Many of the buildings occupied will fall into the same category as tendencies come to an end or or tenants are able to exercise break options. They will look to upgrade space. And the answer to that is that there there's very little grade a accommodation conforming to EPC a and b available, which will drive rents. But it also will mean that, hopefully, our renewal rates will remain stronger as tenants won't have options to relocate. So I'm hoping of a a double edged approach for us, one, in terms of leasing up the space that we've refurbished, and secondly, in in respect of retaining tenants in in their existing accommodation. So I think renewal rates will increase as well as new lettings.

47:29 Thanks, Tim. And more of a general question in terms of the strategy. Value adds come at the bottom of the strategic list, selling assets at the top roughly. Is this an opportunity? And I suppose, when when do we see that the selling going to stop? The the the sales for refi ing will will stop at the end of this year. So so they're they're on forward. There'll be, you know, good rational rational reasoning why we're selling. We'll be selling because we don't see a future in a specific asset. We don't think it will perform in terms of rental growth because it may be wrong type of asset, wrong location, and or risks to us in terms of refurb costs going forward. So we'll we'll be back to selling for strategic reasons post the year end.

48:21 Well and selling will stop? No. Because as as assets become let or or vacant, we may well sell for, you know, the reason that we get an offer that's substantially ahead of of current holding value, it makes sense to do that. And and that's what we've always done. We we've always turned the portfolio where there's a profit to take or to minimize forthcoming risks, and that will continue. But in terms of sales for refi, that that part will complete at the end of this year. Thank you. And I think the last question, which is is invited by a couple of people. In terms of the refi's bank facilities go up across the board, what impact will that have on the dividend?

49:10 Well, the the intention is to hold the dividend at at similar levels in the next year or so. And the reason for that is it's showing a small increase link in terms of brokers forecasts, consensus forecast for for for '27. So the the eight, like, 8.2 p or so. And the reason for that is we we recognize the increased costs. So to put it in context, if you are to refi that a 100,000,000 at a three percent higher rate, then it's 3,000,000 per annum additional interest cost. Now we need to offset that cost by increasing the sales of vacant properties and therefore reducing our void costs. And, obviously, we've done 700,000 in the first six months of this year and also by letting up space of currently vacant accommodation.

49:59 And for those that have listened to me many times before, for every one pound of rent, it's £1.80 to £2 to the bottom line given those very high vacancy void costs of service charge insurance and, of course, the interest charges. So we we we have a plan. We'll offset those costs. We'll try and hold the dividend as best we can, but I I and and, you know, we can do that within the existing parameters of of where we are. So, you know, will will it have an impact on on dividend? No. We we're hoping not. We we should still be able to make our eight p plus dividend. Thanks, Steven. I think that's all the questions today. I'll hand back to Lily now. That's great. Thank you for answering those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the investor meet company platform. Just before redirecting investors to provide you with their feedback, which now is particularly important to the company, Steven, could I please just ask you for a few closing comments?

51:04 Yeah. I think we've covered quite a lot over over this afternoon. This is really just a a six month update as all half year results are. You we'll we'll provide more detail with the full year as to, you know, where where we sit. We anticipate making all of our strategic targets, which will allow us to continue to pay that dividend. And then, hopefully, as markets begin to improve and as we drive income forward, we can then look to to increase that dividend year on year post next year, so '28 onwards. So, you know, thank you all for attending. I think we have made very good inroads. We're getting towards the end of that strategic repositioning of the portfolio, and and therefore, you know, I'm I'm pleased that that we're at this stage.

51:56 We'll get there hopefully by the year end and then drive the company forward into '27, '28, and beyond. Thank you very much for paying attention today. That's great. Thank you for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This may take a few moments to complete, and I'm sure be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.