TR Property Investment Trust (LSE:TRY) — Annual General Meeting

0:00 I'm now going to hand over to Markus, who will give the presentation on behalf of our fund manager. Gentlemen, thank you very much. Good afternoon, ladies and gentlemen. So nice to see so many familiar faces. And at least this year, the air conditioning is working beautifully. It was a few years ago that it was tricky.

0:24 Thank you. Right. We'll whistle through the presentation and then some questions, no doubt. Usual format, no point changing something that's working perfectly well. Look at the results, the drivers, a bit about positioning. Our physical real estate portfolio that the sharp eyed amongst you would have noticed has that has shrunk. It's temporary, but we'll talk about that as well. And then a little bit at our outlook. It's very pleasing to be able to give you the numbers on the left hand side of this chart compared to where we were this time last year after our annus horribilis. And real estate equities really have had a rebound, and there are a number of reasons to continue to be cheerful, but I'll save the good news for later, albeit against a somewhat tricky backdrop, particularly from a geopolitical point of view.

1:26 I've also put up the more recent numbers. And in fact, when you looked at those from the end of March to the end of June, they were pretty well flat. So actually, certainly, the first two, the 4.9% and the 4.2% have been very much in response to the last few weeks. And I think that's to do with a sigh of relief from markets about stability, not only politically in The U. K, but also possibly certainly sort of a calmness in France, which is one of our larger markets. We are very encouraged by the share price response in the last few days. And I'm delighted to say that it's as I've got a number of colleagues who work very hard in ensuring that we get our message out there.

2:20 Compared to previous years, we are really targeting social media and PR because so many of our we have an ever increasing number of private shareholders owning the shares directly through online platforms, and they're much harder to speak to as a group compared to wealth managers, but we are battling on. We're getting our message out there. So that's good. Relative performance, this is really what the Board is measuring me on. Am I beating the benchmark? And that we managed that well last year. So this is just a bit of a smoke blowing chart. So if you'll forgive me on that one. And then moving to, obviously, something that's very important to all of us, shareholders, myself included, and that is the dividend.

3:14 We're very proud of the ability to continue to grow the dividend. When I'm talking to giving presentations about the TRUST and about the sector, I very much make the point that real estate through the ages, the vast majority of your return in bull and bear markets does come from that income component. It's absolutely crucial. The sharp eyed amongst you will have noticed that, in fact, the Board chose to increase the dividend even though the earnings dropped compared to the previous year. And we have Joe Elliott, our Finance Director, wrote about it extensively in the annual report about why this drop was temporary. But partly, it's to do with the previous year, the 17.2p being a bit of an outlier for a number of reasons. But we are confident of building that building the dividend the earnings back into the dividend over the next couple of years.

4:22 And then turning to really what drove markets and our performance. Of course, we are a leveraged asset class. The market very much focuses on judging our sector by the expectations on the interest rate cycle. And clearly, is peaking. And in fact, our near neighbors in terms of central banks, the ECB and the RIX Bank have already started that correction process, which is very encouraging. And there is much talk about whether the BOE are going to cut in August or September. But as long as it's one or the other, then we're pretty happy about that. When we look back at the last couple of years, clearly, we've been hit very hard in 2022 and 'twenty three, but the very dramatic adjustment in the cost of money.

5:21 When we look back further to the global financial crisis, where you saw a very dramatic change in the cost of money, but you also saw, which is almost more important, a complete drying up of liquidity. So it was those twin evils that caused such a big problem for global economies back then. This time around, it was really about cost, not about availability. We had a couple of small U. S. Banks go bust, fairly irrelevant, but no real distress amongst banks or even bond markets in Europe. What happened is that margins just widened substantially, and bond markets did sort of for our companies were relatively unavailable in 'twenty three. That they have very much reopened.

6:11 But as I said, margins do remain elevated, and we're going to be looking for those margins to come down. And what really will bring those margins down will be just stability in the outlook. And that's really what we're very much looking for in the second half of this year and into 2025. So that will be helpful. So obviously, we want base rates to come down. But even if they only come down 25, 50, maybe 75 basis points, it will be that margin on top that our companies, where they're getting their lending from, we want that to squish a bit as well. That will be very helpful for them. Transactional evidence, so this is buying and selling of the underlying physical commercial property, mainly commercial that we're involved with, is improving.

7:01 We are getting more data and deals are being done, and that's very important for pricing. But I still believe that there's quite a lot of independent valuers who are using the red book, which they're required to look at evidence in the market, and that is a bit backward looking. So for some sectors, particularly those where there's been less transactional evidence, we think that they've been looking back and some of those numbers are a bit high. So whilst we've got a lot of companies trading on big discounts to the asset value, in some cases, we're not actually believing that asset value. We think it should be lower. So that's something to bear in mind.

7:46 And then when we come to earnings in our underlying companies, this is sort of the bit that's kind of exciting. So we've got two things in our favor in terms of the rents that our companies are receiving, so the top line growth. A lot of them are capturing indexation. And obviously, we've had that surge in inflation. So we've been punished because interest rates have gone up. But actually, the rents that our tenants have been paying to our companies, those rents have themselves gone up with indexation. So that's very positive. And then for those sectors, particularly in The U. K, where we have less indexation and more market rental levels, we have seen rents improving, particularly in the likes of industrial, logistics, student accommodation, self storage and prime offices. Here in the West End, rents are rising. I know offices are a dirty word, but we'll talk a bit more about that a bit later. Not so in Docklands or even in some parts of the city where there's a loss of supply, but we are actually seeing natural rental growth.

8:49 Now imagine you've got a property company where they've got top line growth, but they've got a very clever finance director. And some time ago, she fixed the debt like our finance director for it. So they've got a nice load of debt that's fixed for a number of years still. So their interest bill is not going up. Essentially, what's dropping out of the bottom line is an increased amount of earnings. And that's what we're seeing lots of. So our companies have invariably been driving up earnings growth. Now not everybody. Some people are a bit like you've got your fixed rate mortgage and it's coming up for renewal, and unfortunately, the interest rate has gone up. We've got a bit of that as well. So those companies are struggling to increase earnings or even start repaying dividends. We've got a few of those as well. But those folks, we think, are improving all the time as well.

9:44 And then that leaves the last sort of positive leg of the stool is M activity. And I'm just going to leave that for the moment because there's a couple of slides to talk to that a bit later.

9:58 Well done. Fat finger, see, I need to get a bigger device. So I thought just to have a quick look at a performance of one or two names. And it's really just a reminder that when we produce a total return of 20 plus percent in the year, it's nothing is ever smooth. And in fact, we had post the previous year, we had a lot of names that got hit very, very hard in the year to March 2023. We had some very dramatic recoveries in the year to 2024. So whilst you had to be pretty we had to be pretty quick on our toes to make sure that stocks that we had sold in the previous year, we realized that they were either oversold or they had reasons to start to be cheerful again, And we had some very, very big, big performance. So this was a German residential business that sorted out a lot of problems it had with its debt. It did some capital raising.

10:55 This is a Swedish residential business that, again, also solves another German residential. These are German residentials. And then these three, they're in a slightly different color. These are businesses that we had lots of shares in that were the beneficiaries of either mergers or take privates. So in the case of Aberdeen, UK commercial, that was taken over by TRITAX Big Box. We'll talk about that a bit more later. Industrial REIT was bought by the mighty Blackstone at a 40% premium to the undisturbed share price, a 17% premium to the underlying asset value. So this was a classic case of what the stock market does. And over the years, those of you who've heard me bang on for many years about the fact that the listed property world can often undervalue the underlying physical real estate.

11:51 We're a tiny part of the equity market, and it just leaves these pockets of value. And that's what we're out there truffle hunting for those deals. We actually owned 12% of industrial REIT. We thought it was a really good business, owning multilet industrial all over the country. And of course, those clever folks at Blackstone clearly think the same. And then CT PROPERTY TRUST, that is that was acquired by London Metric, so good strong performance. And then on the negative side, businesses that had lots of debt, like SBB and IGD and Citicom suffered regional REIT and ECAD both own secondary offices, regional REIT in The UK and ECAD in sort of the suburbs of Paris.

12:41 And we didn't own any of those businesses. In fact, I was asked to give a presentation about a year ago about at a dinner about my favorite what my favorite REIT would look like. So I told everyone what the favorite REIT looked like. And then I said, well and I had obviously a glass and a half of wine. I said, would you like to know what my least favorite REIT is? There's one we don't own. I said, it's regional REIT, and the shares were 77p, and the business has just been recapitalized at 10p. So yes, sorry, shouldn't sort of blow smoke, but it's quite an interesting one to it's important to avoid the ones that go the wrong way. Okay. Our portfolio exposure today, unobtainably, we're pan European. You all know that.

13:27 But relative to the benchmark, are a little bit long, The UK. But geography isn't really the core issue for us. It's more a consequence than an output rather than input. It's all about the underlying asset classes in the various areas. And then I thought I'd just chuck out a few names, some of you want to talk about these and sort of things that we've done in the last six months. I don't want talk about what we did at the beginning of the financial year, so March 20 April 2023, let's focus on things that have happened more recently. Adding beta, you can this is really about our expectations that interest rates are going to start falling. The market is getting much more positive about our environment. So you want to own those businesses that are a little bit racy. They've got a bit more debt, and they're going to respond well because their share prices have been a bit subdued. And Boulder and TRUST PLC are Swedish property companies. And the strapline we always use about because Sweden lots of property companies in Sweden have more leverage than the average market. And we always say the nation that brought you the safest car brings you the scariest property companies. And the point is that it's scary when things are going wrong, but it's brilliant when things are going right.

14:48 And then participating in offensive raises. It means it's offensive in the context of defensiveoffensive, not offensive as in Trump. No, sorry, didn't say that. I've had to forget, this is recorded live, so I've got to be very careful. I forgot to edit that part out. But we've so the Seagro came out and raised £800,000,000

15:09 overnight sorry, 700,000,000 and it was so successful, they increased the raise to £800,000,000 Argonne is a logistics business in France run by a very smart chap called Monsieur Lelong and his family. He's now in his late 70s, but he's still going very strong, does cold water, wild water swimming. And then Sirius, a business in The U. K. And Germany, run by chaplain Andrew Coombs, a very smart guy. They've all raised money recently, and we've participated in these raises. Then M and A potential, we talked about U. K. Commercial, one that we owned. TRITAX, Eurobox, owns industrial across Europe, and it's currently the subject of a potential bid from Brookfield, something called Brookfield have to make a decision by the end of July under the takeover panel rules, under the put up or shut up. So we may find that they the share price, of course, as you imagine, has already responded to that. And then we've been selling some of our what we think as weaker income growth.

16:09 So these are companies that are really strong businesses fundamentally, but they just haven't got that top line growth. There's nothing really to sort of drive the earnings in the short run. And then finally, the colonnades, the sale of one of our largest physical property, and we're definitely that deserves a slide all by itself in a minute. And so just whistling through, you've seen this one before. So on the left hand side, our sector positioning in absolute terms, and then on the right hand side, how that is reflecting relative to the benchmark. And I would highlight that you it's not that we love all of those sectors and hate all of these ones. It's all about relative pricing. So you take something like student housing, where we are exactly neutral relative to benchmark, that's because we think Unite is a brilliant business, but that all its immediate prospects are in the price, in the share price. It's already captured in the value. Still a great business.

17:09 And then you'll see right down here, self storage. We're actually underweight self storage at the moment. And that's just because they really benefited hugely from COVID and post COVID. They really pushed their rates up and occupancy has gone up, and we've just seen that pull back a little bit. Although this week, we had some slightly better news, so we might be amending that. But very happy to talk about any of those positions in due course. And then turning to the physical property. It's never been this low, 3.7%. And that's a function of the fact that we have sold our largest asset in Bayswater, we'll come through about a moment, and then we had previously sold Bristol. That was now more than two years ago.

17:55 But the fact of the matter is we've just been finding so much value in the equity market, so the ability to buy shares in listed companies at big discounts to asset values. Even when that asset value, we've adjusted it to what we think is the real number, even that gap is still very big. So it's been there's been more in the short term, more value to be harnessed to be captured, harvested in the equity market than the physical. But the good news is that George definitely and Hannah are both very much remaining firmly part of the team. George has been with me for I'd to say fifteen years, but... Nineteen. It's nineteen. The time flies when you're enjoying yourself, you see. And he is definitely out looking now opportunities, and there are some opportunities. But just a quick trip down memory lane.

18:43 Chris Turner, the my mentor and previous fund manager of TR PROPERTY, is actually in the audience. I'm not going to ask him to stand up because he looks exactly the same as he did twenty years ago. So it's only me who's aged. But he very much encouraged me to buy this building or he agreed that we should buy it back in and as you can see, it wasn't very attractive in 1998.

19:06 But really, what this is about is about the fact that we can change this building over a long period of time, and George takes total credit in waitrose to come out of a tiny little store on the side of the building and to open a 44,000 foot store but at 1st Floor Level, which meant that we were then able to let the Ground Floor to all these other tenants as well. So we had like a double whammy. On top of that, there was a load of two forty two flats. Lots of them were sold on sort of seventy or eighty year leases. So lots of folk wanted extensions to their leases, and we were able to sell lots of them. So all the numbers are there. But the important thing here is once we completed the exercise over that long period of time, it was time to exit that asset and we sold it this year. But it's crucial that we like to remind investors about our physical portfolio because it's really helpful for you to know that when I'm quizzing constantly the managers of the companies that we're invested in, that everybody in this room and all

20:07 the other people in the register know that we understand what you need to do and what makes a good property manager and what makes a poor one, etcetera. And it's absolutely crucial. We know how much construction costs have gone up, how long planning takes, how difficult the type of tenants you need to get, etcetera, etcetera. So that's very important. And then turning to our future projects, which I think you might be we're definitely hugely excited about. This is an industrial estate in Wandsworth. For those of you who know Wandsworth, this is Wandsworth Town Railway Station, and then there's a pub here called the Alma, which is very popular with lots of property people. You stumble out of the Alma pub, often watch the rugby, this is that first industrial estate is the one that you see. And we're busy refurbishing and bringing these units up to an EPC rating of A, so that's an energy performance certificate.

21:01 And George and Hannah have just let Phase one to a brand that I'd never heard of, but it's apparently very big in female leisurewear and fashion called Vale. Are we allowed to say the name, George? Well, they're a bit late now, isn't it? So I've just done that. Anyway, there we go. And we're really excited about that and at a fantastic rent. So we're busy refurbishing the rest of

21:25 them. And then we have a little coffee shop here. It was let to Costa, and they decided they wanted to leave. And now we've got ourselves into a nice bidding war between Joe and the Juice and Pret a Monje. So we're going to one of those two, we will run with. We're currently running with Joe and TheJuice. But hopefully, they'll be able to hear this on the recording and sign up soon because it's going fast. Okay. And then ESG, crucial, obviously, it's all about we can't control what the companies that we're investing in are actually doing in terms of helping the environment, but we can certainly do our bit for the ones that we can control. George and Hannah have been extremely busy in making sure that we get solar panels on Gloucester.

22:12 Wandsworth, while we're doing the refurbishment, we have a food bank that we've got a temporary let on. And also, obviously, we'll be doing green energy and solar panels

22:25 at Wandsworth as well. Okay. Just a quick whistle through the market conditions. I talked about companies trading at big discounts to their asset value. And I like to use charts to go back a long period of time. You've seen this one before, we've shown it before, it's really quite interesting that when the market gets to sort of around the 30, 40% discounts, you've seen it before in many previous cycles, you get you often the market decides that the risk is now asymmetric. There's more charts of it going up 10% than going down 5%, and you get the snapback, and that's what we've seen. So this has been part of our 20% performance for the year to March. That's been very helpful as we see these discounts close. And what drives this is that the market starts to feel that the net asset value because when things are going south, the market is going, I don't know where these asset values are going, but yesterday's price is wrong. I don't know where it should end up. I just need a bigger and bigger discount to this number to help me, give me comfort to buy.

23:26 And then they realize this number is still falling, so they need an even bigger discount. And then suddenly this number starts to get stable and then you get a whiplash back. That's exactly what we're experiencing. So we're hoping this will continue. And long term averages, we're looking at kind of 10%, 12%. So we've got a decent bit of decent way to go.

23:45 Okay. And then just looking at the performance, just to give you the numbers, there was our amnoscerebris. You can see that minus 42%. The market had the sort of slight full storm back in sort of October 2022, everyone thought inflation was under control and then it wasn't, and we gave it all back. We bumped along sideways, and now we're starting to climb out of that. And I think we feel reasonably comfortable that whilst there is some service services inflation that other areas of inflation, particularly energy, they'll seem to be reasonably under control. And then just to close out with that mention about M and A as one of our kind of underlying sort of stools of helping performance and what's been going on. You can see anything in bold, we've been involved with. And I have to say, it's one of the great attributes of TR PROPERTY, being a closed ended permanent capital vehicle, I can take we can take large positions, particularly in small companies, work with the Board, work with other shareholders as to what's going wrong, what can we do to support those business, promote them. Any of you who read The Daily Telegraph, I think, Questa a couple of days ago, there was an article about Picton Property. We were quoted in that as why we own so many shares in Picton Property, and it's great to see the share price respond. But looking at what's happened in the last year, you can see a

25:15 number of these. I would call out Ediston, which is a little business that owned retail warehousing. And the board decided the company was too small, had a market cap of about GBP $250,000,000, languishing a bit of a discount to asset value. So they decided to conduct a strategic review. And I'd hoped that they would merge with another listed company. But in fact, the best bid came from a U. S. REIT called Realty Income, vast REIT, many, many billions of assets, and they just gobbled it up for cash, which was a shame it didn't go to another listed company, but we made a healthy gain on that. And then in Industrials, we talked about, Civitas, we weren't invested in. And the other names, I think, are all reasonably familiar to you.

26:02 Okay. So last year, I said more activity likely, we need bigger property companies, we've engaged with many boards, we've talked about recent highlights, Ediston, Phoenix is another one. Conscious of time, I can talk to you about that for anybody who wants to know. And then what actually happened at these situations, now we don't own Aberdeen European Logistics or Aberdeen Property Income, but they've effectively been through very traumatic stories, but they've ended up the boards of those businesses have just decided that they're trading at such large discounts, they're just going to do a managed wind down, which I think is a shame because I think these managed wind downs take a long time. And then you've still got to run the vehicle even though it's got a very small number of tail of assets and often takes a long time to get out of that. So be a bit careful if you're in any of those ones.

26:54 TRITAC and the Brookfield approach, we've talked about. BCPT, that's got a strategic review. And then more recently, Capital and Regional, which is a tiny company that we own a few shares in. It's mostly owned by a big South African group, and they are they've been approached by New River Retails. And it will be good if they get together because that will be a win.

27:16 Particularly as the Chief Executive of Capital and Regional, a chap called Laurence Hutchins, who we like very much, he's just become the Chief Executive Workspace, which is a business we have lots of shares in. So good to see. And because as you know, we know all the players in this game, and we know who are the good Chief Execs and who are the not good ones. Obviously, we only own the good ones. So it's good to see him go to one that we have an even bigger position in. So that's great. Okay. There we go. The final slide. Sigh of relief. I can hear the cups of tea rattling. Interest rate cycle peaked, at least in Europe. Obviously, we're not sure about The U. S. This undersupply of prime space in many of our markets is really important. We just have had very little new development. This is a big this is like a long term hangover from the global financial crisis, where prior to that, banks were the big leader. Remember, RBS, big lender to real estate, all went horribly wrong, had to be bailed out by the state, etcetera. Post that, we just the banks would not have not been big lenders. So we've found developers have found it very hard to find finance.

28:20 And then, of course, we had Brexit, and then we had COVID, and then we had massive building cost inflation, and it's just become very expensive. And basically, developers have been looking for pre lets. They've been looking to take the risk out of the development. I'll build you the building, but you've got to sign up to the lease now. So that's why we and but so as we're not building anything, but companies are still growing. And as a consequence, we're getting rental growth. So that's the important thing. Independent value is still behind live market pricing. We've talked about that. We've still got a little bit. We are going to see some numbers still trickle down. But the valuation declines are slowing. That's the important point. The market isn't waiting for the valuation declines to stop. They're taking the valuation declines that are quarter on quarter. The fact that, that momentum is slowing, that's enough of a buy signal.

29:11 That's what we're seeing. And then all of this is discounted in share prices, as we've talked about. And then concluding this opportunity capital raises are going opportunistic capital raises are going to be on continue. They're on the rise. That's good. We want to support those companies. We give them the capital. They can go and find the deals that were two years ago were priced differently when interest rates were much lower. These assets are now cheaper. They can get out and buy those assets, and that's good. And then the final one, more M and A activity likely, that's something that we are very much active in hopefully because I want to try and get bigger, more relevant companies that could be run more efficiently, but also make sure that it doesn't all get nicked by those evil private equity people who will leave us a listed property company space.

30:03 Okay. That was a bit of a whistle stop tour. I can't actually think how long I've gone for. I'm not too long. Thank you very much. We'll take questions from the floor first and then any from the web. Right. Sorry, two gentlemen. The microphone is just behind you. Is that great. Thank you so much. Thank you. And your overseas investments, the income from them declined by about 40%. You said the reason for this is in Germany and Sweden especially, and people suspended the dividends so they could pay down debt. Can you first just just confirm that the income of these companies were maintained?

30:49 And secondly, you expect the dividends to be reinstated but at a lower level. Can you see can you just confirm how much of a lower level it will be? Great. A series of great questions. Thank you. The first is, yes, in Germany, we're absolutely the income is rock solid. We invested in these companies for many years because Germany, particularly residential, is a regulated rent. So the people who are lucky enough to be in the apartments are paying a submarket rent. As a result, you end up with 99% occupancy. And it doesn't matter if we're talking about TAG or Vanovia or LEG. Mean you can't have 100% because people are always moving in and out of the flats. But essentially, 99% or 98% is there or thereabouts. So these the income is rock solid.

31:36 The problem, you correctly identified, is that their interest bill went up. They couldn't have enough to pay the new cost of debt and their new interest bill and pay us a dividend. So they suspended, and they've gone through, in the case of Venovia, huge amount of sales. They've sold about GBP 3,500,000,000 of assets. They are reintroducing dividends, in the case of Vanovia, at about half the pre interest rates old zero interest rate environment, okay? A number still haven't started again, and we are not expecting that to happen in this financial year. So we're expecting that to happen in the year to March 26, not the year to March 25.

32:25 That means that we that will still have an impact. If we were to own those names, then we would still not receive any income from them. So we are as you saw, TAG was the top performer. The share price went up nearly 100% in the twelve months. So we've got to be quite careful about looking respecting the fact that we are a total return animal. We want to make recover our income, but not at the expense of the total return. So in summary, we will see the income return

32:57 from our German residential names, but it will be some of it this year, year to March 25, and some of it, we think the rest of it, the year after. However, if interest rates do start to come down, that is a huge tailwind because the cost of as they come to do their refinancing, that cost will continue to decline. Sweden is a little different in as much as that more of our exposure there is commercial property rather than residential. And there you are there's less security of the income. You're Getting the money is cut the rents are being paid by corporates, some of whom are getting bigger, some of them are getting smaller, some of them are going bust. But there, obviously, RIX Bank have started that reduction in the cost of debt, and we're quite optimistic that, that will continue. We suspect that with the exception of SBB, which we're not going to invest in, it's a very confused company. It's got a lot of different parts and a lot of unusual debt structures within it. So it's not one for us. But for ordinary businesses, regular businesses such as Castellum and Efosa, we will see those dividends come back. But again, probably in the they will start paying in the middle of twenty twenty five. So it will be for our following financial year.

34:16 So I think that's an important point to note. But fundamentally, we are as long as we see these companies start we've

34:24 got a combination of interest rates coming down a bit and these companies' top line is very solid, then we can see that they will reintroduce dividends, those that haven't. So we're confident about that. If I'm standing here in a year's time and these companies haven't reintroduced dividends, then it will mean one of three things. Interest rates have gone haven't come down anymore. Maybe we've had a burst of inflation, in which case they will be getting the top line growth, or they've been unable to refinance with the banks. But we as I said, even in the last twelve months, even when things have been there's been things have been more unknown about where the peak of the interest rate cycle is, we've still found the banks open for business. It's just those margins were a bit wider. So we remain we have to take a view on this, and our optimism is that those margins continue to come down as well. But yes, it is definitely,

35:25 particularly Germany, which is a big part of our universe, we do need those companies in 2025 for our year to March 26 to reintroduce those dividends. But a great question. Thank you very much. Gentleman down here, please. Hello. Sorry, I'm just checking it's working. I've been a shareholder for ten, fifteen years. And when I first bought, the marketing spiel was buy our trust and you get a discount because it holds other investment trust and REITs, and they're a discount so you get double discount. When you put the slide up...

36:06 This is the first question. Sorry. When you put the slide up, it broke it down by sector and whatever, but it didn't say how much we actually hold by other investment trust and REITs. It it it drilled down. So we know it's in commercial and so, but How much is that commercial in the sense of we own it directly as opposed to we own it via investment trust? So my question... First question is, do we own... Is the portfolio 10%, 15%, 20%, 25% of other investment trust REITs as opposed to direct investment? Yes. So it's 90 basically 96% invested in REITs, which are themselves real estate investment trusts. It's a bit confusing when you as in they are all not all of them are actually REITs themselves, but they are all essentially closed ended vehicles which you can treat in your mind as investment.

37:00 Can I restrict it to those that the AITC actually list when they list all the what's happening? Yes, but of course, we are nearly

37:07 63% Europe, where those companies, sometimes they're REITs, they could be called SIICs in The Netherlands, S I I C, different codes in each. But some of them are C Corp, that is ordinary companies that don't have the tax transparent status. So that would be the companies in Sweden. But at the end of the day, those are they are themselves trading at a discount to the asset value. So your question is still valid. So the number you need to remember is 96% is companies that are listed companies trading at a discount or a premium, then we have our rounding 4% in physical property that we own directly, which is trading at As asset far as collectively, are our 96% invested in REITs, what's the discount for those collectively?

37:58 And the answer to that is somewhere right now, it's about it's somewhere in the 20% to 25%. Now some of those are trading at premiums. We've some industrial businesses that are trading at but we've got some companies that are still trading at very large discounts. So you are and then as far as where is the TRUST trading, we're today on a discount of about 5%, 4.8, 5%. So you are getting a double discount,

38:24 but that the trust is the discount has narrowed quite sharply, which has driven that 9% total return that we've had literally in the month of July. So we have that double discount has narrowed a bit. But that's what we're always trying to do. We don't think that the trust should trade at a discount at all, but it does and it has, and that's just the way the market. And that discount, to give you a range, we've traded between about I think our peak premium is about 3% and discount, we've got all the way out to nearly 20% in the very dark days of the global financial crisis or the spike down during COVID. But we've come all the way back, and that obviously is helping the total return in the share price. Okay. My second question is to do with Regional Right, which you said you didn't don't have prepared. I held it about five, six years ago, and I saw where it was going, and I sold... I made a profit, but not a great profit.

39:24 Are you able in this trust to be able to short? Because you said in your presentation that you didn't like it, and you thought it was crap. So I would have thought if you were allowed to short, you would have said, oh, I'll short this. So if you are allowed to short, why didn't you? And if you aren't allowed to short, should you be speaking to the board to allow you to do so? That's a great question. The answer is currently, we're not able to short.

39:51 And but we, from a relative perspective, I took the benefit because the benchmark had a holding in it and I didn't have any, so there's some relative performance. In terms of should the trust be able to short, this is something which is reviewed by the board at the strategy meeting every year. And the chairman will be smiling wryly because this was a topic that came up in February at the strategy meeting.

40:19 And essentially, there's a number of problems with it. The first, quite simply, is we are a big fish in a small pond. And when you get a small company like Regional REIT, for us to make a difference, we would... To make a material gain for us, And of course, easy in hindsight to say, 77p was the wrong price and current share price is 12, and that was obvious. But even when it was 77, it was trading at a 25% discount to its supposedly asset value. So you've to be quite careful about it. But the real worry on the short book is the risk of squeeze. And if you have a big short position, you cannot close that should you need to if there's other an event happens. So the recapitalization of regional REIT did lead to a pop in the share price, we would have suffered that negativity.

41:13 The second thing is it's amazing how if

41:16 you're a chief executive of a company and someone's shorting your stock, I think you want to meet them and find out why. What is it that you think I'm doing so badly wrong? You're confident that my shares are going to go down. But it's amazing. Anybody whenever we have and we do have other products that do short, management teams just don't want to meet you. And I think that for us, we very much pride ourselves on supporting businesses that we think are good at what they do. And we want to maintain engagement with Allco. It doesn't mean we always own their shares, but it's a different discipline,

41:53 and it's something which we the Board keep a close eye on. And there may come a time where it is appropriate to do so. We may do it at the single stock level or potentially through the index. If we thought the world was going to Helen Hancart, a very effective way to sell your whole index through an ETF or whatever. But I'm thinking outside the box. I haven't discussed this with the Board at all. It's their decision, not mine. So it's something that is it is under review. But I've just given you a couple of reasons of why we've been thinking about it and why it's actually quite difficult in practice. Thank you very much, and well done for selling your shares in regional REIT at a profit. You'll be in a very you'll be in a distinct minority. Sir?

42:39 Can you sorry, can you thank you. Yes. Okay. Davies, private shareholder.

42:45 You mentioned that German residential properties and billions of pounds worth of it have been sold. So there's always somebody cashed up ready to buy sort of unwanted or surplus property. Did they was it property companies that bought these up?

43:04 I'm sure you know the answer to the question, which is why it's such an astute question. But the answer, quite simply, is that in the case of Innovia, where they sold these packages of several billion, they actually did a very complex structured arrangement with a private equity group, which essentially means they can buy back the assets in years to come, but leaving the private equity group with a sock in great profit. So in fact, it was I would say it wasn't really a true open market transaction. It was the market is absolutely not open for £1,000,000,000 worth of German residential property, let to tenants who you can't do anything with these buildings. These tenants are never going to leave because they're paying submarket rent. So they're very much sort of income instruments.

43:53 So that no, you're right. The market is not broadly open for this, but Vinovia needed to shift this probably. So basically, a very sort of clever, almost with some vendor financing involved. So but in smaller packages, absolutely. And then buyers there are high net worth individuals, private family offices, there's small pension funds. There's lots of people who this let's take German residential where it was prime Berlin was valued at a yield of 2.5%. You can now buy the same assets as a yield of 5% because money has gone from costing 1% to costing 6%. So there's a 5%, 4%. There's absolutely people thinking, right, I really like this as a long term inflation proof asset in a city that's booming. It's undersupplied. There's 20 people queuing up for every single flat that becomes vacant in Berlin. So we think fundamentally, it's a really interesting market. But yes, you're right, big lumps can't there isn't really a market for it. Small packages, 30,000,000, 40,000,000, 50,000,000, there are buyers. Thank you.

45:05 Yes. So the other question, London Metric Properties, you've got nearly four times the value from over one year increase in that, from GBP 17,000,000 to GBP 67,000,000. So is that the result of the takeover that they Yes. Had shares in the other Two takeovers for paper. One was CTPT, which was the first one, the second was LXI. So they did paper transactions in both. They were trading Andrew Jones, very good, probably the best Chief Executive in The U. K. Market, and his shares were trading close to asset value. So he was able to use his paper to acquire his highly valued paper to acquire companies at big discounts to their paper, making us as owners of CTPT and LXI a healthy profit on the way through. In addition, the share price return was 25% as well. So the combination of all of

46:03 that means that we have quadrupled our exposure or nearly tripled our exposure to the company. Thank you. You also mentioned the Citi. I read recently that there's been another sort of tower block approved for building in the city, but it doesn't quite make sense to my mind when you say there's so much vacant office space in the city itself. The market is very bifurcated. So what I mean is that if you've got the best in class, so you're very close to a major transport hub like Liverpool Street, which is where this latest tower deck is going, that you will they will almost certainly find, some of it will already be pre let. Meanwhile, you've got some old offices above shops and down by the mineries or the Tower Of London or something like that. Communication is poor.

46:54 It's just a completely different asset. And that's what's suffering. So the prime stuff is doing okay. Certainly build that tower. Okay, thank you. And you mentioned, your last frame, it was mentioned at the bottom of, balanced commercial property. Yes. I thought you had a holding up, but I don't see it. No, we don't own balanced commercial property trust because it's managed it's another fund that's managed by it's an externally managed vehicle, managed by Columbia Threadneedle, which obviously our parent, and we're not allowed to own it. Okay. Yes. Thank you very much. Christian? Questions there and then I think we'll take every hand that's raised now and then everybody else, I'm around.

47:44 So I won't go until I finished. So we'll just deal with a couple more and that's all right. Sorry. Sorry, just hold on a second. Can you wait for the mic? I'm so sorry. Good afternoon. Paul Dawson, I hold fire and TRY INVESTMENT. Ferry Street Industrial Estate, I live in Wandsworth, so I passed it regularly. Do you ever see because the area is changing so much around Ferry Street with more residential development, legal and general building next door, that that estate will be taken out by someone who wants to offer you a large sum of money for residential conversion? Or is the planning search that it's always going to remain industrial? Great question. We actually went through a process several years ago of getting plan permission for a mixed use scheme. That was the most the planners would allow us. And George did a very good job, and it was a mixed scheme. So we maintained industrial on the Ground Floor, some office space, and then residential, which sort of zigguratted across away from the main road.

48:42 And as we stand today, that, that permission that we have is has less value than what we're doing to the estate today. So we bank that permission, and we've got essentially, we've got a local authority who know that this could go eventually to being a multi use site. And when these units come back from their current use in maybe twenty years' time, twenty five years' time, I'm highly confident that, that site will probably go to residential.

49:15 David Lindahl, Private Investor. That point you made that you're not an investor in balanced commercial property trust because it's run by Columbia Threadneedle, but you were an investor in CT PROPERTY TRUST, which I believe is also Columbia Threadneedle? Yes, correct. I'm glad you've asked that. So we are free to own funds that are managed by Columbia Threadneedle elsewhere in the group. That's no problem at all, except when they've gone into a period where there's information they're conducting a strategic review. So elsewhere in the business, there are people who have information about what the Board of BCPT might or might not want to do or recommend to shareholders in that trust. And we are deemed to be a one in, all in policy.

50:07 In the case of CTPT, we bought all our position because the trust was, we know, is well It had great assets. It had a really good debt structure. And yet the market just completely mispriced it. So we just bought lots of shares, and we were very happy with what was going on. We knew the manager. He sits not in our building, but in a different building. We're very happy with that. And then along came London Metric and bid for it with paper. And so we accepted that offer because it was a very big premium to the share price. So yes, when that there were a couple of days when I obviously I was then privy to information I couldn't buy any more shares, but I'd already bought them.

50:52 So that was the reason. Okay. Obviously, balanced commercial property are going through that strategic review. And there's obviously, they could well be a target for London Metric. London Metric obviously acquired CT PROPERTY, another Columbia Threadneedle. You're large holder in London Metric. Would you endorse a London Metric takeover of balanced commercial property given its portfolio? I think everything is a function of price. And obviously, I'd be on the London Metric side of the fence rather than being kind of in the case of CTPT, we were sort of on both. London Metric has benefited from entering the FTSE one hundred.

51:42 And therefore, we would the fact that it would become even bigger would be a good thing. I think there's economies of scale to be had. At the same time, we don't want all of these companies to disappear. I haven't really spent, as you can tell by my sort of rather pub chatty type response, it's not very detailed, I haven't spent a lot of time on it because I don't own in these situations, the real beneficiary tends to be the acquired rather than the acquire all. So I think in the round, if London Metric was to buy anything out there and to use its paper and to buy on a discount to asset that be beneficial, I'd probably be I don't think I'm in a position to give an answer on that particular situation.

52:36 And also, I don't own the shares. So I don't own the shares, so I wouldn't haven't spent a lot of time. Sorry, I've got to stop question from the floor now because we've got a number of people online who don't have the opportunity to speak to Marcus afterwards. So if I may, I'd like to take those. And then for those of you that have questions who are here, by all means, follow-up with Marcus afterwards. Should I go for three? Because there are topics that haven't been covered. Yes, Lovely. So from Andrew, with the recent disposal of the largest direct property assets, what criteria does the team use to identify and select listed property securities for investment at this point? Property securities? Yes. The answer is we've been adding to a number of holdings where we feel that they are undervalued and offering us opportunities which are going to give far greater than keeping the cash in the bank, as it were. So that's the first point. Perfect. John is asking about the dividend.

53:32 So with the yield up 4.9% and the recent trend of dividend increases, what's the outlook for future dividend growth, especially in the light of your earnings projections? Well, we don't the dividend isn't up to me. It's obviously a Board decision. What I can tell all shareholders is that we the Board have been very astute over a great many number of years to have a payout ratio that's averaged sort of 96%, 97%. So we've constantly each year been adding to our revenue reserves. And our revenue reserves currently equal about 60% of one full year's payout. So if we pay out roughly GBP 50,000,000 in dividend a year, we have revenue reserves of about £32,000,000 at the moment.

54:22 And therefore, should our earnings increase but still be on a per share basis be below the current dividend the next financial year. And as the Board have used reserves in the last financial year, chances are they might be inclined to use a bit more of those. So but as gentlemen who been listening to the presentation, we are confident of earnings certainly based on because we're now in July, and we have collected about half our income for the year. So we have a good idea about where our earnings are going for the full year to the end of March twenty twenty five. I can't give you those numbers. But as you can tell from the presentation, we're reasonably optimistic.

55:10 And then lastly, about the discount. So you mentioned earlier it was around 4.5%. It has been as wide as 9% recently. So how does the management view this in the context of the wider market? And what measures are being taken to potentially narrow the discount?

55:26 So in terms of narrowing the discount, as I said, we are part of my job set by the Board is to get out and bang the drum for the trust, get out and market to both large investors, institutional investors, but also small investors via the webinar, articles we write, podcasts, Moneymakers is one we did recently. So we're always trying to get the message out there. I think it is interesting when you look at comparing TR PROPERTY INVESTMENT TRUST with the wider investment trust market, our discount at 4% is pretty good. And I think what's that that's, by the way, got nothing to do with your manager. That's all to do with the fact that people are starting to think, you know what, interest rates are coming down.

56:11 And markets have been telling me about how the market fundamentals out there are okay. There isn't too much oversupply. There's quite a lot of demand coming, not much newbuild, rents are rising, etcetera, etcetera, etcetera. You know what, I'll have a few TR props, and I'm going to get a 4.5 dividend on the way. Why not? So I think we've got a situation of more buyers than sellers, and that's helped the discount narrow. I'll leave it there in the interest of time. Thank you. Chairman? Ladies and gentlemen, I'm going to bring the meeting to a close. There'll be an opportunity for all of you to speak to Markus or any of the Board that you would like to afterwards. So can I just confirm that the formal business of the AGM is now concluded, and I do declare the meeting closed?

56:54 Thank you very much for your continued support of the company, and thank you very much for joining us both in person and online today. For those of you attending in person, do please join us for a cup of tea now. Thank you. Perfect. That concludes today's meeting. On behalf of the board of TR PROPERTY INVESTMENT TRUST PLC, we'd like to thank you for attending today's Annual General Meeting and good afternoon to you all.