TR Property Investment Trust (LSE:TRY) — Interim update

0:00 Good morning, and welcome to the TR PROPERTY INVESTMENT TRUST PLC interim update investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using 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 received during the meeting itself. However, the company can review your questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 And I would now like to hand you over to fund manager Marcus Fairmudge. Good morning to you. Good morning and... Good morning, everyone, and thank you very much for taking the time on this rainy morning, to to listen to, to the TR PROPERTY interim results for the half year, to the end of September twenty twenty four. And it will be the usual format. We'll whistle through some slides. Some of those will be historic, but I think there's a bit more, sort of of the the background that we need to, to rehearse as to why we are are optimistic about the future. And then and then we'll, take some, q and a, as well. So thank you very much. Okay. Right.

1:18 You know, we are just gonna cover a little bit of background on the product range and and the track record and then the the the why now in the usual usual way. So we're still running about 2,100,000,000. The TRUST remains the mothership. Just over one point... Just under 1,100,000,000 of assets. The purpose of putting up the slide with all these funds on it is to help you understand why the trust is able to benefit from this, huge support network, large number of analysts. Just to remind you that for the INVESTMENT TRUST, we do our own bottom up analysis of all the companies, that we invest in. We do buy research from the sell side, but that is to, to to help us see, you know, where... You know, what what the what the market's broader perspective and what the sell side is is telling, our competitors and and and other investors.

2:09 And the other point I always like to make, particularly to people on this call who may not have heard me speak before, is is, you know, how long, so many members of the team have been working with me. Deputy fund manager,, sixteen years, George Gay, who runs the direct property on both, this fund and our other fund that runs owns physical property, nineteen years, and Joe Elliott, my finance director, twenty years. So, you know, it's important that the, you know, the core team is very much, been together for a long time. Okay. Quick snapshot overview. Market cap, we've talked about, trading at a discount, of... I mean, the live discount's about six and a half percent today.

2:54 That is a little bit wider than our long term. The long term average, going back twenty odd years, is around the sort of four to 5% mark. So we're a little bit surprised by that. But, it's... You know, it does move around as you can imagine. We do have the ability to own physical property up to 15%. That dropped to an all time low, in, April this year on the sale of the colonnades. We'll talk about that a bit later as well. And then we've bought some more real estate, in the last month or so. So that's currently 5.5% of assets, and will be expected to rise if we can find the the the the right deals. Potential to gear, we are currently at just under 13%. That's that's up in the last couple of days.

3:40 We're we're we're back closer to 14. That is, heading towards our most optimistic range. I know it says maximum 25% here, but we've... We wouldn't really be pushing it, above the high teens really, but that's still pretty optimistic. I often say to investors, you know, our most pessimistic, was, in q two two thousand and eight. So the quarter before Lehman's went down, when we were 20% cash in this product and the other product that we ran at the time, property growth and income. So our... You know, the way to look at this is our most bearish is, is 20% cash, and probably our most bullish would be 20% geared. So we're we're pretty well heading up there, and I'll explain more why.

4:26 Now for the half year to the end of September, on the left hand side of these these bubbles, these circles, you can see, that we were, you know, pleased with the, with the share price total return, the NAV, and we were a bit ahead of the benchmark. And then we've then gone into an October and November, which has proved to be extremely, extremely tricky, and given back, you know, quite a lot of that return in quite a short order. And the most recent sort of nadir in the market was the November 21, and we've had a a sort of three, 4% rally since then. But, I mean, clearly, there's a there's a lot of, a lot of geopolitical, issues across Europe with, with everything that's going on in France, you know, the the the election, the new year in Germany, new new government making a bit of a holox in The UK.

5:19 And then the central banks really trying to trying to manage their way through that, and we've obviously had some more dovish commentary from, from the Bank of England yesterday, and we'll wait with bated breath for, the ECB, next week. And then performance, again, backward looking, but, worth just reviewing why, it's good to be in TR property rather than going and buying the benchmark via an ETF. We have managed to beat them, a bit. And then most importantly, you know, dividend, which is crucial, to the trust, and the board did announce that the interim, would be the same as the previous, half year... The the... A year ago, the first quarter last year, keeping that and and aiming for that, that steady growth. The sharp eyed amongst you will notice that we were uncovered last year.

6:10 We have had reserves that have equaled, up till the previous year to '22, had equaled about one year's of full payout. So obviously, we've dipped into those reserves, and we've dipped into them, like, in order to be able to maintain that growth. And that's because our outlook, the recovery in in earnings from our companies, post the very dramatic, change in in the cost of money, which resulted in a number of our companies suspending dividends and us avoiding some of those businesses that had suspended dividends. Those are returning, and certainly for, you know, the most have returned to paying dividends, and the the laggards have announced that they will they will be coming back and paying dividends in, 2025.

6:56 So that's, encouraging. And then a slide that many of you seen, many times before, but just to reiterate, you know, for us, the yield comparison, that margin over fixed income, something that disappeared when interest rates moved very dramatically and the cost of money rose very dramatically. But what we're really hanging our hat on again today, is rental growth and making sure we target those markets where there is rental growth. And, you know, you will hear me, unfortunately, say it time and again, but there is a serious bifurcation, in the market between... In pretty well every single sector between the best in class assets, those which tenants want, you know, wanting to upgrade to, and it really doesn't matter which sector you're talking about.

7:45 And then there's the the rest, which is which is, you know, brown buildings that require huge amounts of CapEx, to improve energy efficiency, improve their their ESG ratings, etcetera. And that and that is, you know, when the money needs to be spent, and we'll come back to, you know, why our companies are in a good place, to do that. And then finally, you know, the last couple of years indexation has been very, very helpful. It's been, you know, it's it's been a strong driver of rental growth, less so going forward. But we think that as that... You know, as as inflation subsides or continues to subside, then the central banks will will will feel, able to to reduce short term rates and bring the, you know, bring the shape of the curve down. But please bear in mind that we don't price real estate off the short end of the curve. It's much more what that that that mid shape of the curve looks like. But what's much more encouraging for us, is the way that, you know, many more debt providers have returned to the market.

8:47 And we find that margins, and competition, to lend money, particularly for the best assets, has very much returned. We've also seen... You know, you've seen that, in the public debt markets, in the bond markets, you know, where where where that that the the spreads have have continued to come down. And then just again remind you, this is, this is unlevered real estate returns in The UK. You could see those three clear periods of of negative performance, since the, yeah, the the the the eighties. That that early nineties was all about over construction in the late eighties, the GFC, you're all familiar with. And then more recently, the... Yeah. The the the explosion in the cost of money, but not a reduction in the availability of money. That was very much something we saw that double whammy back in the GFC, both cost of money accelerated or shooting upwards, but but also the lack of availability. Whereas this time around, they're very much a a very much a managed lending environment. Money got expensive, but but it was still very much available. We only had a couple of banks, small banks in The US go bust, but really no, broader systemic, risk.

9:59 And then another way of looking at it, and I think this is quite useful, we look at the the the the price of all Eurobond... Eurobonds, and how they move from those really, really low, you know, post COVID, yields, up at peaking at at at, you know, five and three quarter percent and now that steady path down. And then on the right hand side, how that's been reflected in in in capital returns. And, you know, the the the the great hiking cycle, as we referred to it, was, in many respects, worse than the GFC in terms of valuation for REITs. So we have seen, you know, very dramatic corrections in value. So there's been debt availability and refinancing, but we've actually had valuation corrections, had to happen given where, yields had moved to.

10:50 But now we're very much feeling that yield project... Trajectory, coming down. So, you know, we're very much field that the worst is behind us, and we're starting to see, as you can see in that black line, on the right hand side, you know, stabilization, and that is... That's crucial. And then we look at how it's been reflected in in share prices. Again, very dramatic, to that, low point in in October 22. We then had the sort of false dawn and a rally on the back of expecting, you know, inflation to have been slain at that point. It turned out not to be the case. We we bumbled... Bumped along through, through most of '23, and then, again, sort of, you know, October 23, we saw that that that surge and give up and then and then recovery.

11:38 And then most recently, this correction that we've seen in the last couple of months, been very much more about, I think, geopolitical risk and and and rather than necessarily... There's been a a deferral possibly in the amount of... The the the number of rate cuts that was anticipated. But now I think that that that is... You know, everyone knows what's coming or hopefully what's coming. But this economic slowdown that's that's that's likely, particularly if if we... If Trump brings in tariffs, etcetera, we will, of course, will see the cost of money continue to come down. And then it's all about do do you own the right real estate with the light... Covenant, risk, credit risk, and tenants who need need to continue to operate even if they're making a little less money from their businesses.

12:27 And then again, this chart, I think, is quite useful. Our proprietary forecasting, and and looking at, you know, these key metrics. Very happy to talk about any of these if anybody's, particularly, interested in them. Then on the right hand side, as you can see is where, you know, we were out banging the drum a year ago saying, look, you know, discounts have reached a, you know, historically wide figures of... Out beyond 40%. We're gonna see a very sharp correction as as NAV stabilize. Obviously, while NAVs are falling, market feels very unsecure about, insecure about it, about where prices are gonna get to, so they require this very large discount, to those to those numbers. And then the moment you start to see some stability in those NAVs, then everyone goes, hold on. 40 discounts way too wide. We've seen that, you know, the first leg of that come through with the with the with the discounts, you know, halving closer to 20.

13:26 And then again, you know, looking at, you know, pricing of of real estate, versus global equities, essentially, to remind everyone, you know, we got... Yeah. If you're getting it kicked in the head, metaphorically from from interest rates rising so dramatically, then surely you're gonna benefit as they come down. And this is just looking at how markets have performed three, six, or twelve months after previous peaks in in cycles. And as you would expect, real estate has has done reasonably well. So turning quickly to the portfolio itself. As you know, we are very much a pan European animal. The geographical focus on the right hand side isn't really the way we look at it. We look at it very much on a on a sector basis, but it's quite useful for everyone to see the the level of diversification.

14:11 And then, again, sector positioning, the way we we divide our world up is into these what we call buckets because not all companies sit naturally in each. But, generally, we're trying to put companies together that are likely to experience a similar response to a particular set of top down macro drivers. And then on the right hand side, you know, how we build the portfolio, you... You've got a feel that you've got you've got the right companies with the right opportunities, but but but they're also functioning, in an environment, which is which is beneficial. You may be surprised to see French offices up there, at the top of the page, but that's because Paris CBD is operating very much as a sort of microcosm, not so much of the broader, French economy, but to do with the fact that it's a... It... It's... There's a a real shortage of best in class, refurbished market buildings in those in that particular...

15:03 Those particular markets. And just seen our preferred stock, which has a very, very strong debt book as well, is able to deliver those returns. That's quite an interesting one. And I could talk about any of these in due course on the q and a. And then turning to our most active positions, as you know, we, PROPERTY, specialize in having some big positions in small companies relative to our our benchmark. Here, you can see our top two names are currently actually UK diversified names, Picton and London Metric, and we're actually very... You know, we've moved into some months ago now, a very underweight position in Seagro. Seagro is a great company. It's just that there is now a marked slowdown in the rate of growth, of of industrial and logistics rents.

15:50 They're still growing. They're just not growing at the rate that they were, and they couldn't possibly sustain the rates they've been growing for the last three or four years. But, you know, the... These are... There has been a bit more of a supply response, particularly in the in in the big box state. And then some of the greater London, markets that that Seagro specialized in, Park Royal, etcetera, the Slough Trading Estate, you... You're you're seeing particularly the ultra urban markets, you know, there is some sort of cap almost on what tenants are prepared to pay. So we're seeing some rental slowdown, there. And then looking at how we've, performed, you know, what we're... So sorry. How we've changed positions. Adding beta, what this means is we've been buying into businesses that are going to be very... You know, gonna benefit the most from changes in reductions in the cost of of capital, and that's the most higher leverage names that we had steered away from in... When interest rates were rising very rapidly.

16:43 Baldur and Constellium Sweden is always... Those are Swedish... Two Swedish companies. These are businesses that, know, that that Sweden as a whole is that the nation that brought you the the safest car, brings you the scariest property companies in terms of they tend to be... Have the most short term leverage. Participating in offensive raises, this is offensive versus defensive rather than something being kind of rude or horrible, just to be clear. And again, those... You know, we did participate participate in Seagro at £8.20. The stock reached £9.45, £9.50. We're able to sell those. Argonne forward footed... Front footed, again, with Sirius, you know, using the money to buy, to to buy into new new assets. M and A potential, we obviously know about these. I can talk about those if you if you wish.

17:31 In due course, we get on to call. And then selling that weaker income growth where we felt that there's, there've been, you know, structural headwinds, in the case of, Assurant PHP, you know, the valuation office being very tight about increasing, rents available to those. And then the sale of of the colonnades, we'll again will have a slide on a bit later. And then more recently, looking at, at what we've done in in in q three and into q four, again, you'll see those those, Swedish names up there. Reducing industrial, I've already mentioned about Seagro, but now we've, Sargax, which actually is a Swedish, based business but owns assets all across all over, all over Europe. And then, more participation in in in raises. This time, Seabus, which is a supermarket operator in in Scandinavia, British land, buying into more retail warehousing, and Pandocs, is a, Scandinavian hotel group.

18:30 And then buying more beds. Again, this is... Ones will be familiar to you. It'd be something like student... In Unite student accommodation. IRES is is, is flats in, in mainly in Dublin. Koyamo is, is is, Helsinki, and Idifika is, health care in, across Europe, particularly in The Benelux, The Netherlands. And what we're doing here is accepting that there is likely to be a slowdown in economic growth. So, again, it's buying into where we see that there's necessity, and where, you know, ultimately, people will still, you know, will will still, if they've got jobs, they'll continue to, to pay their rent. More more, teenagers will go into, education or stay in further education if the jobs market becomes weaker, etcetera.

19:22 And then small cap, here, we've we've added... We've built a position, in something called Schroeder's, Schroeder SREIT, where we see a a quite an interesting situation. The fund manager there has been promoted, to run the whole Schroeder's, real estate business that we suspect is... To what we expect and are quite sure that they will be replacing him or there'll be a new manager in that in that fund. We'll be looking for that. And then Picton, again, just, you know, we we love this business. We think it's very cheap. It's got fixed price debt. The management team there have done a very good job selling out of a number of their office assets through change of use, and therefore, not selling them at a discount, but, you know, converting to residential in the case of, Angel Islington or or or West London.

20:15 And then, and and then out in Cardiff where they've where they've converted to, student accommodation. And then we bought a couple of buildings, a couple of... One is industrial stage in Vista, and the other is a a little property in in in Northampton. Again, nice, you know, healthy yields, and lots of asset management opportunities there. And then the other leg to our underpin for for real estate looking forward from here is that at the end of the day, you know, this has happened time and again. If you look at the right hand side of the page is that, you know, if if real estate... If if equity investors leave these REITs too cheap, then private equity will say, thank you very much, and come in and and gobble them up. And you will see anything in bold we've been involved in. On the right hand side, you'll see that, we didn't own balanced commercial property trust, which is acquired by Starwood at a at a nine discount.

21:08 That's because BCPT was actually a a a product that was a fund that was managed by Columbia Threadneedle to assist the product to us even though we have no involvement, with it. So, we weren't allowed to buy shares in that. And then you'll see, TRITAX, Euro Box, we can discuss. And ARIMA was our little exposure to the Madrid office market tidy portfolio, and acquired by another, a private Spanish REIT called JSS, at about a 20% premium to the undisturbed, share price. And then on the left hand side, something that we much wish to encourage much more, is the merger of these businesses. And good to see New River, raising capital and acquiring capital and reg for a mixture of cash and shares.

21:58 And we will we will... You know, we we... That we suspect there will be more because, you know, ultimately, the the the the the equity market, you know, really needs bigger bigger, more liquid companies. And I'm afraid 250, $303,154 100,000,000 market cap businesses are are just too too small. And then turning to a sort of more recent sort of issue in the market, and this is to do with the the the... There's... We obviously have a a whole part of our sector which is externally managed, particularly... Well, primarily, almost exclusively actually in The UK. So these are, vehicles that have external management structures, where we've always been complaining for many years that there's been a a misalignment, often because, the management company is charged as a fee based on the asset value, which can be a very, very long way from the share price.

22:53 And that that is... That, therefore, the management are focused on, on making sure the independent valuers were in valuations and are not a science, managing this... The NAV when in fact they should be focused on the share price. And and we wish to see these management fees convert from, from being based on NAV to being based on market cap. We also think same as we have with TR PROPERTY, there should be a one year notice period so that if boards do need to step in and remove management, they can. And then also to help alignment, and we do already see this in businesses like TRITAX, Big Box, and Supermarket Income REIT, that there is a, you know, a meaningful percentage of of of fees are actually paid in shares or reinvested in shares. And where it works very well is if the shares

23:36 are... If you're trading a big discount and you're paid in shares, you go into the market and buy those shares. And if you're trading at a premium, of course, you issue the paper and that's accretive for everyone else. So really exciting to see a real step change in this area. Three recent announcements that the manager of supermarket income REIT, TRUST, is proposing a market cap based fee, that'll be voted on next month, and that'll come into a force next year. And then PRS REIT, we've seen a lot of, you know, the the the concerns, by investors around the relationship between the the board and and and the and the manager, the extension of the contract, we think unnecessarily, which ended up seeing the the chairman being, being ousted and the notice period reduced to one year.

24:24 And then most recently, in their interim results, the board of warehouse REIT announced a review, to try and, manage their, yeah, their very wide, discount, and, of course, which which ultimately will result hopefully in in... Hopefully, one, two, or all three of these of these new pillars. And then turning to our physical property, as you can see here, we we we have, you know, continued to acquire our preferred subsector even though we talked about, the rate of rental growth slowing, particularly for big box industrial, big box logistics rather, this is much more about, asset management. This is a particular market. You're in that... You're right in the heart of that Oxford.

25:09 This is Bistra, that Oxford Cambridge ARC. And Bistra has got a, you know, thriving, particularly automotive, sector, and we're... We've got, you know, lots to do, on on this estate, and rents can be moved, can well be moved up. And, again, similar to Northampton, a a particular market that we know well, we already own other sheds in this area in our other fund, and we can see rental rental growth prospects. And we're gonna be moving those initial yields, up quite quite quite quite quickly. And then at Wandsworth, you know, we are, you know, really pleased with our with our refurbishment, which we'll come on to in a second. Just a quick look backwards, probably the last time I'll be showing this slide because it's rapidly becoming history because we... Or else we did sell it in the in the half year, but this was our, you know, long term success story. You can see on the left that we, we bought this. So I bought this, the long lease sold in '98, having started work with Chris Turner, the previous fund manager in 1997. So I've done more than twenty five years with with TR PROPS, taking over from Chris in in March 2011.

26:17 And then looking at the sales side, you know, we we we, you know, we had a a lot of success, creating a new store for Waitrose at 1st Floor Level, which then enabled us to put in all these new tenants at at Ground Floor. So, again, reminding investors that, you know, we know what we're doing when it comes to to to the actual real estate. We don't do big development, but we do, you know, relatively small based refurbishment here, CapEx of 8,000,000.

26:39 And and also, you know, we know what we're looking for in in in good managers. There are some good managers out there. There are also some less good. And then here, our ultra urban, logistics as an industrial at Wandsworth. For those of you familiar to the north where it says that you... You could see that's Wandsworth Town, railway station. And then for some of you, the the Alma Pub is quite well known down at where... Just to just to the

27:03 southeast of the site. And here, we've... We we... We've we've done a phase one, and and been delighted, with the success of the letting. We've let those... Both those units, to a high end, female athleisurewear fashion business at a record rent. And then, you know, sorry. Just to finish, you know, our ESG credentials, for us, it's not about, you know, this fund... We're we're not an Article nine fund. What we... Our view is that rather than me ticking boxes, we need to get out and do what we can, where we can, where we have direct control. So it's it's it's everything you would expect from, moving... Degassing our buildings, moving to green electricity, solar panels, helping biodiversity wherever we can, etcetera. Then the right hand side, while we go through this rotation of improvement at Wandsworth, you know, moving the Wandsworth Food Bank around, to keep... Ensuring that they have, use of a of a free building, in these unfortunate times of of need.

28:07 And then to conclude, bringing it all together, you know, the cycle has peaked. We know that there is this severe undersupply of of prime space in so many of our markets. Independent value is still behind live market pricing, but catching up very quickly. Valuation decline slowing and in some cases actually improving. You'll have seen, I think, a little REIT that we don't own shares in called Custodian. A little REIT that's actually published a positive valuation movement in in the half year, so that's that's encouraging. But the point is that where these valuation declines are still declining, but they're slowing or even where they're completely stabilized, All of this is fully discounted in the share price, and that's what's so interesting for us. And we're seeing earnings coming through because our businesses... The key with the listed space is that it's... Know, it has a collective loan to value in the low thirties.

29:02 Obviously, there are some, particularly in Sweden, they're a bit higher, but we also have a lot of, you know, a lot in their in their twenties. And this is... Offers a real opportunity for these businesses to come in and snap up assets. We've seen these these front footed offensive capital raises, as opposed to the sort of defensive ones that we saw in the GFC. It's all very, really, really quite, quite encouraging. And then, you know, more m and a activity is, I'm afraid, likely, because, you know, these companies are still trading trading too cheaply. So I'm just gonna spin through, to this. I do actually have to go past the disclaimer slide, believe it or not. Compliance requires that. And then otherwise, yep, I think happy to to move to move to q and a.

29:50 Lovely, Marcus. Thank you for that. Very insightful and another great update on TRUST. We do have some questions. I will try and answer or ask as many as possible. We'll answer as many as we can. So please submit them when ready. The first question is presubmitted, and it's one we get asked a lot. Most property companies are currently on substantial discounts to NAV, plus TR PROPERTY is also on a discount, making a double discount. What is the look through discount at the moment? And how does this impact on forward dividends? So it's a it's a great question. So as you can see from this chart, the average discount across our group, as I said, is about in the mid-20s, plus the TRUST has got a discount of today six and a half, 7%.

30:41 So you can you can all do that math yourself. The question I think is much more nuanced about, you know, how... You know, do we own a lot of the most discounted companies or do we actually have... Do we actually own... Because we tend to have a quality bias. So we tend to own more of the companies that have have the tighter the tighter discount because they've just got better earnings opportunities. The market sees that and they trade at tighter discount. So now we don't run the calculation day in, day out because it's, you know, it's moving around so much. So we tend to look at it range bound or on a broader basis. But if you if the if the benchmark is trading, you know, we tend to trade our see through is probably roughly a 5% tighter than than than than the average as it were because we're not owning some of those superly discounted names.

31:38 Having said that, the counter is, you know, businesses such as Picton, you know, small cap,

31:44 relatively unloved, trading at a wider discount would be a classic case, where actually the reverse is correct. So in the round, we are generally a little bit tighter than the

32:03 than the market, but compensated by the fact that you are able to buy the trust at a discount. In terms of how does that affect earnings, not at all. That's not that is literally looking at the balance sheet. As far as earnings are concerned, we are very much focused on businesses that are going to continue to deliver earnings growth, partly because they either they've got natural top line growth because they're in sectors that have rental growth or they're still attracting historically high levels of indexation that's coming through even as slows. Or they've had, you know, a lot of debt, which is which ultimately they're refinancing and they're able to refinance it much cheaper than they were expecting a year ago. And that's going to have a tailwind for their earnings expectations, which are either that the expectations that they were looking forward looking a year ago has improved.

33:09 Now it all depends on the timing of that debt. So all the time, we are looking for those businesses that have that earnings growth. Now, of course, there are companies that we think on occasion are incredibly cheap. The market has forgotten about them. They're unloved. And they're trading at large discounts. They may not have earnings growth. And there are occasions where we'll pick up those value trades, knowing that we're not necessarily going to benefit that much from short term earnings growth. But we are a total return animal, and we should respect that.

33:45 And by, obviously, earnings, you obviously the follow through is the dividend payments of these companies? Absolutely. Yes. Sorry. And then for, you know, for what we're, of course, looking for are those that those earnings are then pushed through to dividends rather than what we've seen particularly eighteen months ago, as businesses still needing to retain those earnings to rebuild their balance sheets.

34:09 Yeah. Understood. Okay. Well, you mentioned a bit about the direct property investment. Certainly, you've done a couple very recently. The question is following the 33,000,000 investment in direct property, which I'd certainly know about the 20,000,000 recently. Is there an opportunity to develop or add further value as the trust has done in the past? Certainly, the one in Bistro, I think, is quite key for you, isn't it? Yeah. Absolutely. So the Bayswater sale was 33,000,000. And actually, that that coincided with the very large raise by Seagro. So we actually rotated the funds, into into the Seagro raise at £8.20 and then took, a load of profit off... Out of Seagro at £9, which was great. And that means it was a it was a, you know, one one, you know, opportunity that that that arose.

34:57 But the reinvestment... And I think the board and us want to see our physical portfolio, you know, back up to, you know, closer to to to to 10%, as it has been over over the long term. In the short run and the immediacy, we have got CapEx at Wandsworth. We are refurbishing, you know, we... I think, you know, that we will be you know, 3 to four, about 3,000,000 actually at at Wandsworth. And, again, at Vista, there is a whole program. Once we can get one or two of these units back, that will require tenants to move around or decide they should go somewhere else, because we are going to be, pushing rents upwards in Vista. And then, yeah, you... There's always the occasional tenant who says, actually, you know, I liked my super rundown unit.

35:50 I'm gonna go and find another sort of, you know, rundown building a cheap rent. If you wanna improve this asset, charge more rent, then it... It's not for me. So there there there will be a bit of that. And then at the same time, we are... We continue to be on the hunt for more assets. I mean, Vista was acquired by a defined... From a defined benefit pension scheme, which was selling its book to an insurer. And the insurer said, we don't want real estate as part of that. It's, you know, it's illiquid, difficult to price, etcetera. So that's a good example of a defined benefit pension scheme that was selling all of its real estate, most of which was super prime. And they just had this one estate, which we felt was, yeah, offered management opportunities, and that's why we bought it. So we're always on the hunt for for other deals.

36:43 Okay. Lovely. Right. Loads of questions coming in. I'm gonna try and merge two or three. First, I suppose, first of all, we'll we'll try and get a couple of minutes. Your views on regional REIT, do you have exposure to and what you've used on regional REITs? And also another question about London Metric, if you can ask... Answer both in one go. Right. Regional REIT, no. We've we've never owned it. We were very concerned,

37:10 for for a good number of years that the portfolio being entirely regional offices, were were likely to suffer collapse in in asset values and and and rents, because of the the, you know, the nature of the of the of the assets. The other issue you've got with a lot of small office buildings, of course, is they require... Particularly in regions where rents are relatively low compared to, say, the Southeast. You know, when you come and replace, a gas fired heating system or you put in double glazing or you you do everything you need to do to bring the op... That particular office up from an EPC rating of f and g up towards, b, which is where it, or certainly c now, but where it needs to be, by 2028 and then 2030.

37:58 You know, it costs the same whether your capital value. So you've got a... You're dealing with an asset where the rent is 15 a foot and the capital value of the building is £90 a foot. It's the same cost where where you've got a rent of of of 30 or £40 a foot and a capital value of £250 a foot. So you you are... You know, that is the problem as we see it. Plus then compounded in the case of regional REIT, by the constant demands by the board or desire by the board to to pay an uncovered dividend even though the balance sheet was thoroughly impaired, which then resulted ultimately in a need to do a deeply discounted capital raise and a refinancing, at 10p. So we we were... That was something that we we we we we avoided, avoid those. And in fact, it's a poster child of what to avoid, to be honest.

38:47 In terms of London Metric, we we are massive fans of this company. As you're aware, you've seen we're being a very... We're a very large holder. We like the fact that Andrew Jones is a consolidator. He obviously acquired CTPT, which we own 10% of for for for for paper. And then LXI where we had we had become LXI holders because we were very large holders of Secure Income REIT, which had the Nick Leslau, Mike Brown's vehicle, managed by PRESPRU, which had had had merged with with LXI. And we still... You know, we actually think that it's... You know, Andrew, as you you listen to his his webinars, you know, they're very interesting. I mean, he's very, very close to tenants, and that's what it's all about. You know, what's driving any business is not about just buying a market and hoping for a particular sector and hoping for yield compression. You gotta know your tenants, know what they want. And, you know, a lot of these tenants will... They will pay up. If you've got real estate that they want to operate from, then they they they will pay up because, actually, there has been very little rental growth or or inflation relative to every other cost that these companies are experiencing. So, you know, and it's no surprise that here in the West End Of London, you know, we're now seeing record rents.

40:02 I mean, records being broken all the time as as tenants scrabble for you know, what is a very, very small supply of of best in class office space.

40:13 Thank you. Right. We have a very long term shareholder here. Chris has been in the trust for twenty years since Chris Turner's days, which you mentioned earlier. But his question is about self storage. A few years back, self storage was a promising subsector. Since then, it remains a fragmented market. Do you have any thoughts as to the future of self storage market and whether there could be some consolidation either within self storage players or through combinations with big diversified property companies? Yes. It's very good question. So I think to answer the last bit first, we don't see diversified propcos picking up, self storage portfolios. It's a very specialist, operationally focused, industry.

41:02 And if you listen to the management teams of of of Big Yellow or or or SafeStore, you know, they really emphasize that. And it's not, you know, the asset value, the... What what the value is apply to the to to the to the valuation is not really what we should focus on. It's all about earnings and and earnings growth. So, no, I don't think these are about to become

41:23 sort of parts of big diversified names. The second point about consolidation, you're absolutely right. It is a highly fragmented industry. And, you know, slowly, you you know, there have been the odd acquisition, obviously, with, with Big Yellow buying Armadillo. You know, SafeStore continue to pick up, small units, particularly in Paris, where they've they've been expanding and now in, in Spain.

41:48 But got a long way to go, but the but the honest answer is it's a very long tail of sites that are often in... You know, if you think about where... Wherever you are, you will know your your local operator out of a... An old converted building of some description. It won't be unlikely to be a purpose built, unit. And, you know, a lot of... There are a lot of self storage operators who own two, three, four, five, six, seven units. They're very, very small. So, I think that the the listed players will continue to, acquire and grow over time. In the very short term, they are all suffering from a a slowdown in commercial demand. Remember, you got your two two types of tenants. You've got your your your your private, occupier.

42:36 Yeah. He's moving house. He's downsizing. Yep. He... She... She's upsizing. They just need that excess space, for whatever reason. And then that seems to be relatively consistent. Then what we saw was a lot of small companies taking, you know, particularly, you know, pre and post, you know, around COVID, you know, inventory they needed to store, and we found a bit of a slowdown in that. So, and that share, you know, share prices, you know, stock market does tend to react quite dramatically if it sees the rate of growth growth slowing. And we saw it in the likes of Seagro going, you know, nine forty, seven seven twenty, and now seven fifty. But it's... You know, you should also... You've seen it very much, in the share price of the self storage name. So we are great advocates of these management teams. We think they do a very, very good job, And they... In a way, they have what we call an eyeball oligopoly.

43:27 I. E. If you're going to look for, a self storage space in your local area, you know, it's almost impossible to avoid, not getting a... You know, not not, you know, not not seeing an advert or a pitch from, from one of these big listed names. So you you know, they are very much, you know, great customer awareness. Just right now, there is this this slowdown they are trying to manage, you know, rate, versus occupancy. So it's a... You know, it's... But it's a... There's a long term trade, you know, very happy with it. Lovely. Moving to Europe. We've got a few questions on Europe. Bizarrely, someone's asked... Two people have asked about Italy, but let's let's merge it into one and ask, you don't have any exposure to real estate markets of Italy and Eastern Europe.

44:16 Why would that be, do you think?

44:18 Yeah. Well, there are no listed companies that are, that have a listing in, in Italy, but we do have significant exposure to, to Italy, through two shopping shopping center pan European shopping center owners, and that's Euro Commercial, which has about a third of its portfolio, in Northern Italian shopping centers, and Klepierre that has about 15, maybe... Yeah. Closer to 20% of its of its assets in in Northern Italian shopping centers. And for us, you know, Italy is very much a

44:53 country of two worlds. You know, Lombardy is the richest region of the whole of Europe. It's very difficult to get playing permission. Food... Retail sales, ex food and fuel, here in The UK, we're up to, you know, 33, 34% depending on which metric you use. Italy, they've only just broken into double digits. I... There's... You know, the whole infrastructure for home delivery is is is much more difficult and much less sophisticated. People still... Yeah. The majority of people will be buying all their Christmas presents through a shopping center in Northern Italy. As far as, office markets are concerned, Milan and Rome are really very small, and we have virtually no no exposure to those.

45:39 And then, you know, if you're thinking further south, very difficult to get any sort of exposure in the Southern part of Italy. And to be quite frank at the moment, not where we want to be. The the... You know, these these regions are very much struggling on the periphery of Europe. In terms of Eastern Europe, yes, absolutely through a business called CTP, which is a huge logistics manufacturer, a manufacturer of logistics buildings. The stock... The the the size of the listing is quite small because the vast majority of that company is owned by The Netherlands' third richest man, and and he has... He continues to to dominate by owning over 75% of the equity of the company.

46:23 But that is... That has really been a massive beneficiary of a lot of the near shoring and onshoring, the desire to shorten supply chains and to, you know, put put... You know, stick stick the bits together,

46:38 you know, nearer to home, rather than, you know, rather than try and bring the finished product, you know, all the way across, across the high seas. Germany. German residential, especially Berlin, seems to be a long term opportunity. Has your view changed given the political stroke economic challenges? Yeah. Great question. I think, yes, the German economy is in is in a very, very difficult place. We all know the reasons why I'm not going to rehearse it, and Trump and tariffs, and electric cars are just obviously two of the the the the the low lights as it were. But at the end of the day, it's a very rich com... Country. There is a lot of savings, and everybody's gotta live somewhere. And the vast majority of the population are are able to live in in in rents... In in flats that are... Have regulated rents that are below market.

47:36 The key is that the, you know, the last effort to, essentially, fix rents and and, you know, and and essentially, nationalized property, was was rebutted, and that will never appear again. So for us, we're we are trying... We're we're trying to buy it in two markets. One, Berlin in particular, where we're invested through Phoenix, Spree, Deutschland, which has a very unique position in the fact that it has the right, which is no longer possible to get, but it's a historical, essentially, historical ruling. They can actually condominiumize that. So you take a block of flats, that's where somebody leaves who's been paying a regulated rent. You can refurbish the building, and then sell a nine nine nine year leasehold on that flat. And you then do that to all those flats, and that's where, you know, those... When they're able to do that, they're receiving about a 30% premium to the previous value.

48:35 The other... And then we'll continue to own that that company, and you can, you know, please follow Phoenix pretty closely because it's it's busy, doing that with some success. And then at the other end of the scale, the companies that the likes of, of Venovia, the very large largest listed property company in Europe and and and TAG and LEG where... Which got... You know, their yields got too low because when interest rates were were down at below one, and you could... You know, this stuff was trading at a yield of three, with... You know, which is guaranteed, indexed, rents, it looked incredibly cheap. Suddenly, money cost five, and three suddenly, we looked far too expensive. And we've seen a a a restructuring of, of NAVs or resetting rather of NAVs.

49:21 But now we're at a point where, particularly in the case of TAG, with its Polish operation, and LEG, which is which is being more fleet of foot than the very large Vanovia, we actually think these names are are quite attractive given how defensive the income stream is. I think that's the point to reinforce. You know, no one's gonna stop paying their rent. And to be quite honest, if you're laid off from your job, in Germany, you know, working at Volkswagen or wherever, the state will step in and pay your rent. So you, you know, you're not gonna get chucked out of your flat, your apartment, and the landlord, whichever one of those ones I've I've listed or or many others that are private, it will continue to receive that income. So it all comes back to this, you know, this beds idea where, you know, we're just... You know, we're looking for safe havens, but where we can still get rental growth, you know, through them. But... And the Mitch Spiegel does is a backward looking rent index.

50:18 So it is... And it is continuing to push on through it somewhere between 34% for the next couple of years at least. Berlin, separate case. We've talked about that. But really, I mean, if you can... Yeah. If you've got a flat that you can refurbish and let it open market value, you're you're,

50:34 you know, you're you're getting double the average, you know, the average regulated rent in a particular market. There's such a waiting list for, you know, what is a what is a great city and which is attracting a lot of, you know, immigration, educated immigration.

50:50 Thank you. Sticking on Europe because it obviously is a big exposure in the fund. I'm gonna merge two questions, and if we could just talk briefly to both. Please, could you elaborate on the comment you made about the potential impact of tariffs on real estate in Europe? And the other part of the question is from someone else. With political unrest in France and Germany and the corporation tax increases here, what are the impacts of those likely to have on the fund's investments? Right. So the the point about tariffs was merely that, you know, these companies... You know, Germany is a massive... I mean, Germany has been a powerhouse for, you know, a couple of decades driven by, its backbone of of of of medium sized companies that have been a massive exporter, of finished products to to the rest of the world, particularly to China and particularly to to to The US and helped by, certainly, the last decade, you know, cheap energy, for, you know, the likes of its chemicals business, industries, cheap energy from from Russia. That, of course, is no longer the case. It's backed by...

51:59 You know, very much buying on on the, on the world world stage, world markets. So it's got cost inflation there. But tariffs will be a problem because it'll just... Its goods will become more expensive. So it wasn't a it wasn't a particular... It wasn't related to a particular real estate company. But, ultimately, where where are, for for for for real estate landlords, this is gonna sound rather odd, but a a mild recession is is rarely bad news. You know, companies make less money, but they don't necessarily shut their facilities. Or they may they may grow more slowly, but they but they're... You know, generally, they still continue to exist. And then central banks reduce rates because it's... We're in a recession environment, and real estate picks up the benefit from, you know, the lower cost of debt. What hurts us severely, the sector is obviously a hard recession where companies where there's, you know, many more liquidations, companies go to the wall, particularly in the industrial space, you turn off these facilities, and it's just incredibly hard, to restart them or to have that, you know, when you when you when you come out of that particular recession to, you know, to rebuild the same is is very difficult. So that's that's what I mean by, you know, kind of if it's as though we have a gentle recession, then that... That'll be good. But I don't think, you know, the issue for us is we just don't know what, you know, Trump's

53:31 whether his behavior will will match how he behaved in in first, his first presidency, or whether he's gonna be very different. I mean, it is... Yeah. This is for for far cleverer people than me. But the fact is, yeah, he is a businessman, and and I think he... Yeah. There was a lot of negotiation here, drawing lines in the sand and then coming to a middle ground. So I'm... You know, I remain I remain hopeful. But, you know, a lot of this has been reflected in in share prices. You know, we we know we... And particularly where you've got, you know, company... The problem the problem for real estate is it is domestic. If you're a big hedge fund and you wanna just have a negative bet towards, you know, a particular economy, there's no point just, you know, attacking BASF because, of course, it sells... It sell... It's got sales all over the world. Whereas if you've got an actual owner of real estate, that's... That is a pure domestic, play.

54:24 So I hope that that answers, that question. Sorry, Pete, you may just need to remind me of the other Corporation tax in France. And Yes. Yes. Sorry. Corporation tax. Yes. This is this is very poor for for growing their their domestic economy. And, this is, you know, our our support in France is through, enlisted terms. Justina, which is as talked about, Paris CBD. Klepierre is listed in in France, but actually only has 30% of its assets are in shopping centers in France. The rest are, elsewhere. Same applies to to Unibail Rodamco that has a bunch of shopping centers in in in in in The US. So these... Just because these companies are listed in a particular market doesn't mean that's where they're they're exposed. And then our big play, is Argonne. So Argonne is a logistics developer.

55:20 It has a portfolio that's a 100% let. It's just announced another pre let. It's 50% owned by, the Lalol family. It's very well... Very conservatively run. And I have absolute confidence that they will continue to actually buy, you know, buy cheap sites. There may be some distress in the market. But, you know, these economies are not about to stop. They may grow more slowly and you certainly don't... You know, you wouldn't want to be owning, I think, you know, three star hotels, for example, which are, you know, very dependent on local leisure users who may well find that they have, you know, they've lost their jobs or or pay has been restricted, etcetera. So, know, you've got to you've got to pick your pick your battles. But just because, you know, the French economy is slowing doesn't mean it's... You should avoid the market in its totality.

56:18 And I think we're we're getting towards the hour now. So we'll just finish on one final question. There are lot more that I haven't got to, and we will answer them, and we'll post them on the investment company platform. But the final final question here is a total... Sorry. TRY Properties total return performance has been more or less in lockstep with the EPRA, EPRA, Dev Europe since TR PROPERTY's last peak in January 22. What conditions or catalysts do you think are necessary to break away from the benchmark?

56:54 I think that I need to double check on the, on the source of that data because, we are... You know, if you look at the one year... No. This isn't... This is November to November, but we, yeah, we obviously run March to March as our actual formal,

57:18 measurement program. And, you know, obviously, we're substantially ahead of the benchmark for the for the twelve months to March. And then, yeah, since then, we are... You know, it's been a tricky period in terms of, you know, we were... We're, you know, we're currently live year to date, so March 24 to to to now, we know we are, we're about a hundred and hundred and ten basis points ahead of the benchmark after after costs. So I think, I don't feel like we're in lockstep. I I suppose it's been... Yeah. There have been ebbs and flows. We... You know, what you're really asking is, you know, what bets have won and what bets have lost as it were. I think, you know, we we we feel strongly that that the outlook is positive, for all the reasons I've explained, more importantly, positive for our exposures, the way we are positioned. So this is not just blanket everywhere, but it's about best in class companies that have... That are exposed to the right sectors.

58:23 And and more importantly, you know, have the have the balance sheet capacity and muscle to to buy more of this, particularly from those, slightly... You you know, there are some over levered players out there who who, you know, who... Whose whose five year money deals are coming to an end or six or seven year money deals. So they they, you know, they need to refile or get out, and we see some opportunities for some of these companies, plus the m and a underpin. They're all the reasons to to... That we... That we've talked about. But, of course, the last couple of months, you know, we've seen, you know, very marked, pullback, which we think presents an opportunity. So, no, I don't... I'm, you know, happy to have an offline conversation about that, but it's, you you know, we we have probably run...

59:09 We don't tend to buy deep value, rather preferring, you know, high quality growth. So when you've had those periods, as we've come out of the, out of the downturn... Let's just go to... Yeah. Here. Yeah. As we've come out of this this, back in in in '22, we probably were underweight, you know, underweight those... Some of those names that bounced very, very aggressively. But as you can see from, you know, the middle of the the the latter half of twenty three, we, you know, we were beating the benchmark reasonably... Handsomely. And then in that pullback recently, it's been it's been tougher as we've talked about. But, yeah, I I would, yeah, I would just just just... I think picking out snapshots in time, we tend to look at it on the the year on year.

59:58 Lovely. Thanks. Okay. We'll close there. If I could just ask you for your final closing comments, Marcus, thirty seconds or so, then we'll pass back to the the team. Okay. Well, really, just to highlight, you know, everything that I've I've I've just said, you know, what are our underpins? Our underpins are we see earnings stability because of the the quality of the real estate that our businesses own and the quality of their balance sheets. We are fully cognizant of the slowdown across Europe, the headwinds that are presented either by change of administration in The US, geopolitical risk within France, Germany, you know, the issues, the almost stagflationary budget that we experienced in The UK, and that this will have an impact on on some of our some of our markets and therefore why why we're... Where we are hiding, but hiding in places where we can still see, rental growth.

1:00:55 And then at the end of the day, you know, looking more... On a more positive basis, you know, these businesses, the LTVs are low, and they can raise money. They can make accretive acquisitions, you know, and there has... We had just... You know, the the disease that affects real estate the most is overdevelopment. And we do have too many secondary offices. We do have too many, you know, subscale shopping centers. We do... You know, we we we do have, you know, other markets that we just don't wish to be exposed to, and we can avoid those. We don't need to be exposed to those ones. So, you know, that... That's the actual crucial point. And then the last leg of this is, you know, m and a, you know, will continue to drive activity, and it will and it it will... You know, as I said, you know, we've seen deals done recently, Starwood buying, BCPT, Brookfield buying, TRITAC's, Big Box, API, which decided to go down the wind up rather than merging with custodian REIT, which I think is a very shortsighted view by by shareholders, but that's... Those shareholders has end up being acquired in its totality by, you know, a brand new private REIT. So, you you know, there is there is lots and lots going on, and and we think this market at a 20 discount, still looks still looks very attractive.

1:02:12 Fantastic. Marcus, Peter, thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of TR PROPERTY INVESTMENT TRUST PLC, we'd like to thank you for attending today's presentation, and good morning to you all.