Londonmetric Property Stock

I'm delighted to be joined by Andrew Jones today, CEO of LondonMetric. Today, their full year results were released. Andrew, thank you for joining us today.

Delighted to be here.

Andrew, you've delivered strong growth in your net rental income in the year. What have been the key drivers for this growth? And how has the business been performing more widely?

Yes. So we've announced a record rental income for the period of GBP 455 million. It's an increase of 17% on this time last year. And the big driver of that has been the acquisition strategy that we executed. We took over 2 public companies in the period, Urban Logistics REIT and Highcroft properties. So that's helped propel our rents to record levels. And then that's flown through into an EPRA earnings of over GBP 305 million. That's an increase of 14%. And that has also then flowed through into an increased dividend. We've paid a dividend for the period of 12.45p per share, an increase of 3.8%, and that represents the 11th consecutive year of dividend progression. And we think that the activity, the strength of the portfolio will allow us to propel those numbers even further in the coming year.

With your increased scale, can you talk to us about how this is benefiting LondonMetric for the future?

Look, we live in pretty uncertain times. We have volatile financial markets. Without a doubt, scale equals liquidity. And we're using that scale for a number of advantages. We're certainly leveraging it to try and extract better financing terms on our debt book and also using it to access different forms of debt. We're quite active in the U.S. debt markets. And that gives us different sources of debt, but interestingly and more importantly, it gives us cheaper debt.

The scale is also means that we've been getting -- the asset base has got bigger, but the platform that operates it has stayed relatively stable. So when we add new properties or we add new companies, we've got huge economies of scale coming through because we're not having to add significantly more people to our efficient platform.

And the third element of the scale, I suppose, is it opens up bigger opportunities for us, opportunities that we would have maybe turned away from a few years back because they were just too big, they require too much capital. We're now able to look at. So we can compete with some of the big American private equity businesses for some of these interesting deals. There's no point, it's not fair that they get all the good deals just because they're so big. And now we can compete with them on a pretty level playing field. So scale has come to us with some terrific advantages, both in terms of the opportunities that flow, but also the cost of operation are much lower as you get bigger.

Now in terms of the property market, what are your thoughts on the wider sector?

Well, look, the property market is largely influenced by the financial markets, interest rates, bond yields are -- they are the yardstick by which all assets get measured against. And we, as I said earlier, live in quite a volatile market at the moment, elevated gilts, elevated 5-year swaps. So that's a difficult market to navigate. Cost of money has increased since the start of the Iran conflict, it's up probably 100 basis points. And that has to affect the real estate market.

I think for us, though, because we have this big focus on income and collecting and compounding it, we're slightly insulated against that. I mean -- and therefore, relatively, I think we're a strong outperformer. But without a doubt, volatile financial markets will affect liquidity.

Now we've managed to navigate that successfully over the past 12 months. We've sold over GBP 320 million worth of assets. And the reason we've been able to do that is because smaller asset sales have been less exposed to the volatility of the financial markets. And so we will continue to do that. We're very fortunate that we have a very diverse portfolio of assets that appeal to an even more diverse type of buyer.

We're selling to a lot of high net worth individuals. We're selling to a lot of owner-occupiers. And those are natural buyers that haven't really been in the market historically. And so we have to navigate this difficult period. But I think we're pretty well set up to do that. We have an incredible focus on income and compounding. And we often refer to our portfolio as all weather. So it can take the shocks that the financial markets might throw at us.

Let's be clear, LondonMetric has navigated Brexit. It's navigated the Ukraine war. It's navigated the trust budget. It's navigated COVID. I mean we've had a lot thrown at us, and we're still here, and we've just announced our 11th year of dividend progression. Also by operating -- when you operate it within volatile markets, that will create opportunities.

Our focus on investing in what we call structurally-supported sectors: logistics, entertainment and leisure, convenience, grocery, in particular, that will undoubtedly see more opportunities. I mean, this morning, we announced the acquisition of 4 new grocery stores anchored by Marks & Spencer. That is because some of the vendors are finding the financial markets more challenging, and therefore, they're looking for new sources of capital. And we are very happy to provide it in the right sectors and for the right quality of assets. So market uncertainty is the friend of the long-term investor. And I think we're well positioned to take advantage of that.

Andrew, as you look ahead, what are your aspirations for LondonMetric over the next year?

Look, we've built a great company. We're not here by accident. We're either the second or the third largest property listed property in the U.K. I think we have a fantastic platform. The foundation for further growth are there. And we remain alert and interested to take advantage of opportunities, whether or not it's further M&A, whether or not it's development fundings, whether or not it's sale and leasebacks or trying to take advantage of the structural changes taking place in the institutional pension market.

We're in a great position. We have record rents flowing with very high occupancy. Our debt book looks in great shape. We're 99.8% hedged against future interest rate volatility. Our dividends are growing. I think that we're just going to be able to allocate capital into the dislocation that's going to happen -- comes with volatility, that will give us the ability to grow our assets, increase our rents, progress our earnings and again deliver, hopefully, by this time next year, our 12th year of dividend increases. So the company is well set. And in some ways, having an all-weather portfolio is incredibly comforting in some of these volatile markets that we're operating in.

So Andrew, any final thoughts?

Well, thank you very much. It's been a very challenging year, but I think LondonMetric has come out stronger. We operate this company with an ownership culture. I often refer to my role at LondonMetric is as a shareholder first and as an employee second. And that avoids us doing silly things and make sure that we're always fully aligned with our shareholders. I think that without a doubt, market volatility will create new opportunity for us. And I have very little doubt that this time next year, our numbers will be even stronger.

Andrew, what a great set of results. Thank you for your time today.

You're very welcome and enjoy.

Good morning, ladies and gentlemen, and welcome to LondonMetric's full year results.

It's quite a long table just for Martin and I. But actually, I'm going to open up, we're congratulating Steve and all the other arsenal supporters in the room for what has been an incredibly long wait. So well done, Steve, right? I quite often take the mickey out of you, but today, I'm going to congratulate you. I'll stop tomorrow. .

Okay. So a quick overview on the last 12 months. So the company has continued its triple-net net income compounding model. We've grown the portfolio up 23%, courtesy of obviously external growth as well as internal growth, continue to invest in the right sectors, mission-critical assets. We added GBP 1.5 billion to our portfolio value, GBP 1.2 billion of which came from the acquisition of Urban Logistics and Highcroft . Come on and talk about that in a little bit more detail later on how that's going. Our income continues to flow and grow. Net rental income was up 17% in the year. And again, as you would expect from a budding dividend aristocrat, we have again increased our dividend for the 11th year in a row. It's now up actually -- it's up 3.8% in the year. It's actually up 78% since the creation of LondonMetric back in 2013 when I probably stood up in a room similar to this, taking questions on whether or not we're going to cut our dividend because we were over distributing like so many others in our sector.

That obviously has been reversed. The portfolio -- we added across the portfolio of GBP 16.6 million of additional income, 4.2% like-for-like growth. And I'll come on to talk about that. That's effectively a combination of rent use lease rules, asset management, at least 3 years and what have you, and I'll break that down in a bit more detail later. So as a result, our average uplift on rent reviews, lease renewals was 19%. Open market rent reviews delivered 33%. And the standout performer was again our open market rent reviews on our urban logistics portfolio, which was up 38%. And then as you can see, we still have more rent to collect over the next 2 years, GBP 38 million. So all in that, all that delivered a total property return of 7.1%, which is effectively again relatively flat cap rates.

I mean we all know we're living in a very volatile world at the moment. So to be able to actually predict cap rates, I think, for values at this moment in time is particularly difficult. I don't think it's easy in any market to predict what assets will trade at. But it's particularly difficult today when you've seen in the last 12 weeks, 100 basis movement in the 5-year swap, I mean it is very, very difficult. And even the valuations that companies are reporting at this moment for end of March, what do they look like at the end of May or the end of June, I mean, this is a fast-moving world. The great thing is why we focus on income is because it's real. As we say, valuations can be vanity, but income is sanity.

So the scale continues to give us some competitive advantages. Martin, Ritesh, and the finance team refinanced GBP 2.7 billion of debt in the period. And we've been doing that at opportune times, and we've got a graph to show that later is making take -- the volatility of this 5-year swap is amazing, absolutely amazing. And what you need to be is fleet of foot, and we need to be quick. And you'll see the timing of our financings has meant that we try to take advantage of the swap rates when they're closer to GBP 3.5 million and when they're closer to GBP 4.5 million. Our scale is giving us other opportunities to think about as we look to deploy capital, whether or not it's development fundings. We announced a small GBP 40 million trade today with a developer across some food stores, M&A, which you all know about, say the leasebacks, which is a sector that we continue to operate in, and obviously, portfolios as we see a shakeup in the wider pension fund sector.

The most important number on this slide is actually the bottom right. It actually shows that we paid out dividends last year to our shareholders that were 9x higher than our overheads, okay? That's against a sector average of about 4x. There are a few companies who are actually, I think, that are overheads are higher than their dividends, but we probably leave those for when we're not on the mic. But that is a very, very powerful number, and we hope to improve on it over the year as we leverage our platform further.

Turning to some numbers. I better do this briefly, Otherwise, Martin will be limited in what he can say. EPRA earnings were up 14% to GBP 305.3 million driven really by that increase in our net rental income which is now at a record GBP 455 million. I mean that is a lot of money to arrive in our bank account every day. As I said to somebody this morning, the great thing about this model is we're collecting rent when we sleep, right? It's a phenomenally comforting strategy. Our earnings per share is up at GBP 13.4 to GBP 13.45 per share, which has allowed us, as I say, to announce A final dividend of GBP 3.3 million today to bring our total dividend for the year at GBP 12.45. That's up 3.8% on the previous period.

We're also announcing this morning a Q1 dividend for the financial year '27 of 3.15p, which is up 3.3% on the Q1 last year. And as you see on the right-hand side, 11 years of dividend progression, just another 14 to go to get aristocracy. Portfolio value I've just touched on already. EPRA NTA is at 200.6p. That's helped drive a total accounting return of 6.9%. Excluding M&A costs and refinancing costs, whatever that would obviously be a bit higher at 7.7p. And so that's there's been a drag there, which we don't expect to be recurring. And as I've already indicated, the activity in the debt markets has allowed us to maintain an average cost of debt for the period of 4%, and that's courtesy of the GBP 2.7 billion of the refinancing that Martin and Ritesh did over the year.

So on that note, I'll let Martin do a deeper dive into those numbers, and I'll come back to talk about the portfolio in a bit more detail. Thank you.

Steve, I'm glad you took the heat. Otherwise, It was going to be me. And he dealt with the timing of the [indiscernible]. So that was my best point, I thought he probably would.

So our focus this year has been on income and portfolio growth through significant further M&A activity and asset recycling. We've delivered a strong set of results increasing our EPRA earnings, growing our dividend and strengthening our balance sheet through significant financing activity as Andrew said.

I'm pleased to report that our net rental income is GBP 455.3 million. an increase of 16.6% over last year. We've included GBP 60 million of additional rent from the acquisition of Urban Logistics and Highcroft. That reflects 9 months of trading, we'll benefit from the full effect of the Urban Logistics and Highcroft acquisitions next year or the year we're currently in. We've included GBP 13 million of additional rent from other acquisitions, and these increases in rents have more than offset the rent loss through noncore disposals of GBP 23 million.

Rent collection remains exceptionally strong. We've collected 99.7% of rents during the year and our gross to net income leakage remains very low at 1.4%. Our administrative overhead for the year is GBP 30.2 million. That does reflect an increase from the scale of the business. The increase in overheads in the year primarily includes head count and remuneration costs. Our head count is now 54, up from 48 last year, which includes small number of former Urban Logistics employees and new recruits to ensure that we continue to have the right level of resource and the right skills for the enlarged business.

So despite the increase in our EPRA cost ratio -- despite these increases, our EPRA cost ratio continues to be sector-leading at 7.7%, a little better even than last year. Our net finance costs have increased to GBP 124 million compared to GBP 97 million last year. We've held higher debt balances in the enlarged group in the year. We acquired an additional GBP 464 million of debt through our corporate acquisitions, and we funded the cash consideration for the Urban Logistics acquisition of GBP 205 million. So our average drawn debt balance in the year has been GBP 500 million higher than it was last year.

Despite the increase in financing costs, our tight cost control on top of our rental income growth has driven our EPRA earnings of GBP 305.3 million, an increase of 13.9% and or 13.45 pence per share, an increase of 2.4% over last year. This supports the increase to our dividend for the year to 12.45 pence per share, providing very strong 108% dividend cover and full cash cover. The trading performance has been strong with the portfolio valuations increasing by GBP 68 million in the year, allowing us to report IFRS profits of GBP 295.7 million. This is after deducting exceptional acquisition costs of GBP 16.3 million, debt and hedging early repayment costs of GBP 16.9 million and a goodwill impairment write-off of GBP 9.6 million. These were incurred in the previous year, we would not expect them to recur going forward.

Turn to the balance sheet. The value of the portfolio is now GBP 7.6 billion, including GBP 1.23 billion of property assets acquired through the acquisitions of Urban Logistics and Highcroft. Whilst much of our focus continues to be on the disposal of noncore assets, the combination of other acquisitions, development expenditure and accretive capital expenditure has exceeded disposals by almost GBP 160 million. This, together with our valuation uplift of GBP 68 million has contributed to the increased portfolio value. Gross debt is now almost GBP 3 billion compared with just over GBP 2 billion last year, and the cash balance is GBP 143 million. Other net liabilities for the period end is GBP 113.6 million. That is -- the major component of that is rents paid in advance of GBP 63 million.

So in summary, our EPRA net tangible assets for the year was GBP 4.7 billion, an increase of 15.4% on last year or 200.6p per share, comprising surplus earnings and revaluation uplifts providing a 6.9% total accounting return or 7.7% if you exclude the exceptional items. This year, we've taken proactive measures to strengthen and diversify our financial position. Our objective has been to improve the balance of our debt stack between bond debt and bank borrowings. We've raised new debt facilities of GBP 1.2 billion, supported by our scale and our Fitch credit rating. New debt includes our inaugural GBP 500 million public bond rated A- with a weighted average maturity of 5.5 years and a coupon of 4.69%. If we're doing that today, I think that coupon would be more like 6%, and the GBP 150 million U.S. private placement at the tightest credit spread of any REIT globally over the last 3 years.

These new facilities allowed us to repay GBP 1.1 billion of existing debt, GBP 744 million of which was more expensive for Urban Logistics and LXI secured facilities. We have repaid Aviva debt at 6.2%.

Canada Life debt at 5.8%, and AIG debt at 5.3% or materially ahead of our cost of debt. The refinancing of GBP 1.5 billion of unsecured revolving credit facilities and term loans in March reduced the average margin by 49 basis points to 105% and average commitment fees by 19 basis points further diversifying our lender base and removing any material find refinancing risk until FY '30. So the right-hand side of this graph is a little busy, but it does show that our various refinancings through the year marked by the red diamonds have been well tied when the swap curve was near its lowest point and ahead of spikes in rates in May, August of 2025, in January of 2026.

We do not expect our finance costs to increase materially over the next 2 years as reduced fees attaching to repaid revolving credit facilities will offset the risk of increases to bank rates. Our debt metrics remain robust with debt maturity at 4.4 years or 5.2 years if I include the plus 1 options. With only GBP 200 million of debt expiring over the next 2 years, undrawn debt facilities amount to GBP 500 million, which taken together with our disposals program, provides significant headroom and flexibility to meet debt maturities over the next 3 years.

Our loan-to-value stands at 36.7%, and our net debt-to-EBITDA stands at 7.5x, comfortably within our EPRA target of 8.5x. We would expect both these numbers to reduce as we continue to divest noncore assets. Our interest cover ratio stands at 3.8x, ahead of our covenant limit at 1.25x and our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. Our drawn debt is now 99.8% hedged at the year-end, and we expect floating rate debt to remain substantially hedged until its maturity.

Our contracted rent roll at the year-end now stands at GBP 432.1 million, which includes GBP 75.1 million of annual the annualized benefits of the Urban Logistics and Highcroft acquisitions and other net investments in the year and GBP 16.6 million of additional rent driven by our active asset management. Looking further forward, we expect to add GBP 38.3 million of short-term reversion by 2028, which, together with GBP 11 million of additional rent from the letting of vacant assets will increase the rent roll to in excess of GBP 480 million. This significant earnings growth supports our confidence that we will continue to be able to grow our dividend. And as Andrew said, we've announced our intention to increase our quarterly dividend payment for Q1 2027 to 3.15p per share, an increase of 3% on Q1 FY '26.

Finally, a brief look back, which puts that in the increase in the rent roll, which into context and clearly demonstrates that in the last 12 years, we've been able to increase earnings per share by 3.13x and we own the 12th year of dividend progression, as I think Andrew might have mentioned, with excellent dividend cover. Our total property return is strong with a 12-year CAGR of 10% and our total shareholder return driven both by share price appreciation and significantly most recently by dividends, it comes to compound growth rate also in excess of 10%.

On that. I'll hand back to Andrew.

Okay. So as I already mentioned, I'm going to dive a bit further into the portfolio and also our thoughts about the market and the periods ahead. We continue to operate a true triple net income compounding model, a disciplined approach you can see there to delivering uninterrupted, predictable and growing rental streams. We have a relentless focus on our cash return, the quality, the quantity and its timing and obsessed around how much leakage comes out of a portfolio. Martin's already touched on our gross-to-net ratios, which were incredibly high. But for this model to work you need to limit income leakage from maintenance CapEx, operations, insurance, taxes. .

You also have to avoid vacancy, right? Vacancy is the dementor of the real estate sector, okay? Any joy of holding a building gets sucked out of you and it comes vacant because of the loss of income and the costs and the taxes that you inherit as the owner. And therefore, when we look to allocate capital, not only do we focus on those qualities and the timings and the quantity of income, but also we want to make sure that the future growth trajectory is positive.

And in order to then -- that's the income side of it, but then our operations, scaling up of our efficient platform is we have to leverage that. And that is not only about making sure that we operate a very efficient platform at LondonMetric, but also to minimize the cost of debt that is available to us through different sources which Martin has already taken you through. Income, see their gross to net income ratio of 98.6%. I mean there's still room for improvement. I mean, it's a wonderful number, but we could still do a little bit better. And we do want to let up the vacant space that Martin touched on in his previous slides.

Turning then to the portfolio. We continue to align them to the structurally supported sectors. Those of you who follow this business for the last 12, 13 years, will have seen us pivot in and out of all sectors into new sectors. Logistics, as you can see, there still dominates our capital allocation, portfolio there of GBP 4 billion. And the reason for that is we think it's due to deliver the highest forecast rental growth. I touched on what our open market Urban rent reviews were over the period. And as you can see there, we're forecasting rental growth over the next few years of just over 5% per annum.

We've continued to invest in our entertainment and leisure. Assets, we acquired 17 new Premier Inn hotels in the period, let of 30-year leases with guaranteed inflation-linked rent reviews between 1% and 4%. And also, we've continued as we made a small announcement this morning about further investment into the convenience grocery sector, and that is a market that we continue to look to allocate for the capital into given the evolving consumer behavior for convenience groceries. Time is a more valuable commodity today for the population than it was maybe 20 or 30 years ago. So as you can see at the bottom there, the numbers, it's a GBP 7.6 billion portfolio, a weighted average lease length of just under 17 years and have topped up net initial yield of 5.3%, heading to over 6. 5% That is due to deliver us an average forecast rental growth over the next couple of years of 4.3% per annum, which is largely slightly ahead of the like-for-like number that we've marginally ahead of the like-for-like number. And obviously, we will do our utmost to try and beat those forecasts.

So the acquisition activity in the period is focused on 4 key areas, and this hasn't changed for a number of years now. And we separate this out into the M&A and the listed markets where we've obviously been relatively active over the last few years, 4 deals in the last 3 years. Sale and leasebacks, I've already referenced the Whitbread deal, but there are others in the wings too. The shakeup in the pension fund market, which is going to happen, I mean it's happening a bit slower than maybe we would like and therefore, haven't allocated as much money to that -- those opportunities this year as we might have expected. But that pension fund, that big shift from defined benefit to defined contribution is taking place. I mean, there's a lot of money coming out of this. And I think that pension fund, that sector owns as many -- as much commercial real estate as the entire listed sector.

So that is an area of focus for us in the current year. And I've touched on development fundings already, and it tends to be either in the logistics or the grocery market where we're seeing the most success. And that is with existing customers who we have already enjoyed strong relationships with. So that will be a focus of attention for us over the next 12 months. Disposal activity. This is probably my favorite slide. Without a doubt, interest rates, were affecting liquidity in the market. And whilst we have elevated swap rates, that becomes difficult for people who are seeking liquidity and monetization of their assets, particularly for assets above GBP 20 million. You can see on the chart on the bottom left, we made 57 disposals in the year totaling GBP 318 million.

We've actually made another 12 million post period end, totaling GBP 49 million. That means we're selling one building every 4.5 working days, all right? We're in the market, but all of the tension is at the smaller end. Out of the 57 sales, 50 of them were assets of less than GBP 10 million, right? It just shows you where the demand-supply tension is. And then -- and we're dealing with every sector. You can see it there. Food stores, retail parks, discount stores, car parks, offices, garden centers, motor dealerships, children's nurseries, hotels, pub, you name it, we'll have sold something in those sectors, I tell you. I mean it is, it's a machine.

But what is really, really interesting is the type of buyer. 44% of our sales went to high net worth individuals and owner occupiers. Those buyers are not available when you're trying to sell an asset for more than GBP 20 million. They don't exist. They can't afford it. They don't have that sort of money. So fortunately, because we've got small average lot sizes, we're finding great liquidity. We've sold GBP 467 million of noncore assets that we've inherited through our various M&A transactions. We are proving liquidity. And that is -- and that actually takes place in an environment where you're seeing less activity from U.K. institutions or indeed U.S. private equity operators.

Asset management activity. I mean, this is, again, a terrific slide, partly because the numbers make it easy for me. As I said before, just under GBP 17 million of rent added in the year delivering a 4.2% like-for-like income growth, GBP 38 billion of reversion to collect over the next 2 years. Rent reviews, on average, I said, 19% up, open market urban at 38% up, 69 lettings and regears.

We don't actually have the opportunity to do lots of lettings because we don't any vacancy. So actually, most of that activity will have been regears that Mark and his team will have executed on average, 23% higher than previous passing rents. And we have a vacancy of about 1.2 million square feet. We're working hard on that. I mean we obsess about it. We have weekly meetings. I join them all, and a lot of that would has come from the assets we would have been acquired from Urban Logistics, and we're just working through it. We are chopping down a lot of wood here.

And then as all good portfolio managers, we always keep an eye on our income and our income granularity. And as you can see, through asset management activity, portfolio management activity, also growing the asset base, we've seen our exposure to our top 3 customers fall over the period. As I say, Travel lodges would have fallen quite a lot use of the amount of sales that we've made out of the hotel sector. And a lot of that money has been reinvested as you can see into, I talked about the same leaseback deal with Whitbread for Premier Inns, but also activity with Tesco's and Booker and also Marks & Spencers increasing materially. And that income granularity is something that we think about a lot, and it's something that we will continue to improve. And even over the last 12 months, it was quite a short period of time. Our top 3 occupiers now down from 27% of our rent roll to 22%.

There are a number of you in this room would have remembered when Primark was our biggest tenant, okay? I think at one time, they accounted for 11% of our rent roll, all right? Today, it's 1.4, all right? We know how to actively manage income graduality. Then if I look at the outlook, I've touched on a number of these themes already. Macro events continue to impact investor sentiment. Interest rates are the yardstick by which all investments should be obsessed, gilt rate, swap rates. They are influencing the market, pricing and liquidity. Political uncertainty is not helpful. However, I still believe U.K. consumer remains resilient, good employment, high savings ratios, wage growth still outpacing inflation, even better if you're in the public sector. But it's still above. It's 4.1%. It's 4.9% if you're in the public sector. It's not that at our place.

But our triple net income model is unbelievably resilient. It's helped us build an all-weather portfolio that's driving reliable, predictable and growing income. And consumer behavior continues to affect the sectors that we want to allocate money into. For those of you who've known me a long time, and I started my career in shopping malls. Doesn't work for me anymore. We'd rather be in sheds and beds. But in those sectors, you want to own the best assets. It allows you to be a price setter not a price taker. We want to avoid sectors and buildings that incur maintenance CapEx, OpEx, letting incentives. They all dilute returns. Everybody can talk about big headline numbers on ERV, this beat ERV that I did a letting at 6% above ERV. But why did your valuation only move to then. Well, I gave away 12 months rent free for every 5-year term certain.

I mean in some sectors, they're addicted to concessions, even in the very hot office market, which apparently there is in about 4 streets in London. And undoubtedly, market uncertainty creates opportunities for us. We think that there's a -- the consolidation out there in the listed space, and we'll allow to talk about that. We also think I've [indiscernible] earlier, the structural shift in the pension institutional pension fund market. And scale will continue to provide access to these deals, but also to cheaper and more diverse pools of debt.

So in summary, our income model is driving earnings and dividend. Our rent is flowing and growing to historic levels. Our disciplined capital allocation has created this all-weather portfolio. We continue to run our winners and we'll sell our losers. And our long-term compounding is what creates value. It is the essence of value creation. We will collect, compound and see our yields compress, and our ownership culture ensures full alignment of interest. It also ensures it stops us doing stupid stuff, right? We're not growing this but just to grow our AUM. There are so many companies out there that have made mistakes in the past by wanting to grow AUM just so that they can increase their management fees, okay?

And a full alignment of interest stops you doing that, right? We're shareholders first. We employees second. So thank you for that. And now I think we're going to open up -- if actually there's a large part of the audience actually can't ask questions because they're so offside. And I would like to say they've given me them in advance, but they haven't.So any questions in the room before I go to the screen. I said [indiscernible] Andrew?

Is that me?

Yes.

It's Andrew Saunders from Shore Capital. I wonder if you could just talk about your tenant retention rates, obviously, very impressive numbers on your rental uplifts on these reviews in logistics. But I just wonder, is there a risk that things could get unaffordable if you keep putting through the sort of rent increases?

Yes. I mean it varies around the U.K. I mean, we think London is a weaker than many other areas. It's hard to basically paint the whole U.K. with the same color. I mean, there are regional differences and that comes back down to demand and supply. London is tougher because of the massive rental increases that you've seen in London. The rest of the U.K., I couldn't give you a correlated pattern.

I mean we've just agreed, for example, we've got a warehouse up in Motherwell, which is somewhere in Scotland. And we've just retained the tenant XPO for another 5 years.

I mean we might have thought that might be a risk. But they're probably not building too many sheds in other well these days. But -- so it varies around the country. London would be our soft. It would be our biggest area of concern. We don't have a lot of money in London anyway, but that would be the one area where people can maybe move out from Zone 2 and just move out a bit further past the M25 and they can have their end. But you also to remember in logistics, rents just not a big proportion of the overhead. It's transport and wages are dominant. It's very different in in retail, for example, where your total occupation costs can hit sometimes 20%.

So it's not something we don't really talk about it. I mean, you'd see it through the vacancy if it was a big issue. I mean the amount of people, we have imminent breakthroughs is coming up, with some one going to issue breakthroughs, we think they might then they don't. We had a situation down in Waybridge recently with Tesla. We expected them to issue the breakthroughs they didn't, there'll be somewhere else in the portfolio where we didn't think they'd issue the breakthroughs, but they did. But you'll see it through the vacancy. And we're not really seeing that just yet.

This is going to be a technical one, Mark, so it's definitely coming to you.

It's high level. I think it's high level. Congratulations on the good results. Maybe a question on -- so there's obviously a lot of best practices that you can see in LondonMetric, and that's obviously contributed to the success of the growth. In relation to the balance sheet, very strong, really good financing. Just a question on net debt to EBITDA. If you look at the best practice in the U.S., it's about 5, maybe 6. Just any thoughts on that? Obviously, the U.K. market and European market is different. and I appreciate that.

I think it is different. Last year, I think we had net debt-to-EBITDA, Ritesh, at 6.8x and it's gone up to 7.5x as our LTV has also gone up. But the truth is I prefer it to have a 6x in front of it. And I think as we continue the disposal program, I'd hope that some of that will reduce that level of gearing. I don't have a problem with it. Look, the LTV is not going to 40%, net debt to EBITDA is not going into the 8s. If it was -- if it had a 6 in front of it, I'll be more comfortable.

Okay. Great. And maybe just a bigger picture question on -- you obviously have grown a lot and of some size now. How much more difficult does it get to do some of these acquisitions and effectively move the dial.

Yes. I mean, look, I mean, there's 2 questions there. I mean, how difficult? I mean some M&A acquisitions can be relatively straightforward and some of them can be cumbersome and that will depend a lot on management and the advisers. But in terms of moving the dial, I think we take the same approach as we do to our property portfolio. It's all about compounding. We -- I remember Valentine would have stood up here a few years back and said, we might be somebody you're doing small deals. But if you knock out singles instead of waiting for the 4 or the 6, by the time the 4 or 6 arrives, you might have 10 on the scoreboard. A lot of these companies we've acquired haven't -- you would have said, "Oh, why did you bother why did you bother?

When you add them all up, you get to a big number. And so we don't really think about it moving the dial, company bothers to do that or whatever. I mean, sometimes the smaller deals are harder than the bigger deals. But yes, we don't think about it. It's really -- is there value in there that we'll be able to extract for our shareholders from an earnings and a value basis. Of course, moving the earnings dial is more difficult, the value every little helps. Arguably, I look back, I mean, even things like the Highcroft, which was like, what was it, an GBP 80 million deal. I mean, it's been good. We've been surprised on it. So we'll keep doing that. But the opportunities aren't just in the listed sector. I mean the listed sector needed shaking out. And largely, he's been there's a few others that dealing with but there's other opportunities. I said in the pension fund market, I mean that is a market that is going to pop. And you just want to be ready.

Contracted rent slide that I put up. I think it's quite interesting because that includes everything that I think is within our control. And I used to say it doesn't hit any double some sorts. There's no sort of addition to that that comes out of an opportunity that we may not know about today, but it's opportunistic, and we take advantage of it. And I remember a time when we'd be celebrating taking that number over 100, we're now pretty close to 500 but there will be things that happen that aren't in that slide that will grow it further. .

One more for me. Just you mentioned the importance of occupancy and keeping portfolios full, and you've certainly got a lot of long-let assets in your portfolio. On the logistics side, in the urban logistics side, it's shorter, how do you think about that? And especially in the context of the dividend aspect?

That's a good question. I mean, it was interesting a couple of years ago, I would have been standing up when we were just announcing or completing the takeover of LXI and LXI was predominantly a long income REIT and their #1 focus was long leases. We applaud that. But actually, it's not the only consideration. You have to think about the desirability of the underlying real estate. I'm just as happy to have a 5-year lease. So sometimes it's actually a 3-year lease on a wonderful building, where you've got the opportunity of resetting the rent to what we consider to be the new market levels.

When we have a number of buildings in our portfolio where we've got indexation on the leases, and we wish we didn't. We wish we had the opportunity to be able to mark to market those. And so if something happened at expiry before that, then that would be for us an opportunity. I think you have to think about the underlying. It's what I say, you run your winners and you sell your losers. I mean it's unfair because I've never been to Motherwell, but it's not somewhere we want to allocate money. I'm just not sure I'm going to get a lot of demand tension in the event that my tenant was to leave. So I want to be in places where the tenant leaves. I still feel like I'm a price setter and not a price taker.

Jonny Huber from Deutsche Bank. I'd just be interested to hear why you view convenience as attractive. I mean, it looks like lower forecast rental growth there

and also much lower index linked and fixed reviews. So what is about that market?

Well, if you think about consumer behavior, I mean I've been in the grocery sector for about 30 year -- real estate grocery sector for 30 years. In the old days, you used to buy your groceries out of 4 shops. It was Tesco, Sainsbury's, Aster Morrison. And today, as times become a more valuable commodity for the population, they want to be quick. You want convenience. And as M&S, if you can't do a grocery shop in 35 minutes, then you're inefficient. We think that this is a sector where rents are low. The average rent on our grocery assets is going to be around about maybe even just slightly less than GBP 20, maybe slightly around about GBP 20. In big box foods market, it's up at GBP 30.

So we think it looks cheap. We're buying these assets, certainly under the funding arrangements at north of 6%. So if you're getting CPI of, say, 3 then you feel pretty good that you're on track. Maybe you want to get 2.5% because of the way inflation moderates, but you're still getting an ungeared 8.5%. And you're doing it on long leases, brand-new buildings fit for purpose, but also with wonderful credits. I mean Marks & Spencer is a terrific business, incredibly well run. And therefore, it feels like a sector with where we're coming in at 6, we sold a grocery store recently in Weymouth for 5.2%. We think there's an arbitrage there.

Matt Norris from Gravis. On Slide 14, where you have the acquisition activity, you've got 4 buckets there. Can you sort of flesh it out in terms of the returns we should expect across the 4 different buckets, please?

The M&A is harder to work out because we don't know how greedy some shareholders are going to be, do we, Matt?. I just want to make it clear. I'm not on LinkedIn. Some people try to negotiate on LinkedIn. I am not going to play.

Everybody should be.

What was the question? I've had 4 coffees, well. So let's take sale and leasebacks. So on average there, depending on quality, lease length, credit, you're probably in around about a 5.5%. And again, actually, in reference to my earlier question, you're probably looking to add about close to 3% on it. So you're somewhere between 8% to 9%, probably probably near 8.5%, but Rockstar credit, 30-year leases, the sort of assets that if I had grandchildren, even though you couldn't mess it up.

You have to think about that correctly, but I've got another pack that Will's looking at the moment in the discount retail space, where the credit isn't as good, the lease lengths will be good. The geographies and the quality of the buildings, we would need -- we'd need 10 on that. We'd need a 7 starting, wouldn't we? And that would probably be the 3 on top. So that's going to give you a 10. I'm not even sure we're going to play on it. But we'll see. I won't make who it is.

Pension funds is difficult because we just haven't seen enough coming out of it. I mean, the assets that we bought there, the UPS, the hotels at Manchester Airport, the bookers, they're wonderful, unbelievably long leases. I mean I think that the UPS lease is 55 years. It was longer -- longer than that. I think the Clayton Hotel is actually 200 year leases, not -- so you accept the lower return on that.

Development fundings is very interesting because there, you are brand-new buildings, good customers, otherwise, you wouldn't do it. Long leases, 15, 20, 25. And there, you're looking for a margin of between 50 and 5 basis points between the development yield that you get the funding yield and the investment -- the completed investment yield. I mean they are wonderful, truly, truly wonderful. Grocery assets doing one at the moment from Marks & Spencer's. We're in at 6.2%. We think it's worth 5.5%. We might get lucky and get 5.25%. But that's your underwrite.

We just like to do more of them.

So what's the limiting factor?

Opportunity. Sorry, Tom?

Thomas Musson from Berenberg. You made good progress reducing your debt cost margin in the year. What is the average credit margin you're paying on your debt in total, if you know. And now with more scale, what's the debt cost saving opportunity for that credit margin to fall further as you move through financing more pieces of debt? I appreciate the total cost will move around.

So the GBP 1.5 billion refinancing we did in March. We took the margin down from 155 to 105. And I think that was terrific. And a number of the very generous bankers are in the room who did that for us. I think if you then look at the balance of the debt stack on a -- if you average it across, we're probably about 1.25% in terms of credit spread. Look, as we stand today, I don't think we're in the market for more debt, particularly. But without doubt, the banks would say this, I mean, credit spreads at the moment, they're not historic post, but they are very tight. And I And I sat in rooms with bankers and say, who are not here actually, but I'll say this. You say you've got to do this because the credit spread is unbelievably time, but the underlying cost of money isn't -- so you've got to look at the all-in cost of the debt, not just the credit spread. .

I've got a question here on the screen from Paul. [indiscernible], talking about what was our debt saving. I think our annualized debt saving is about GBP 10 million, GBP 10 million per annum, and we incurred arrangement breakage fees on existing facilities in the period of GBP 5 million.

Very interesting number. When we did the LXI transaction, we took on some Canada Life debt that was incredibly long. It went down to 2039. -- But it was expensive, it was 575 all in. And we thought about breaking it at the time, the break costs would have been GBP 20 million. The movement in the yield curve between then and whenever we did it in September meant that the break costs actually fell below GBP 1 million. And so you just do it when we've been watching the yield, waiting for an opportunity. And then you say that's great.

And then between the green deciding to do is and doing it we were worried that the yield curve move out again. So we put a hedge in. That meant that when we actually did the transaction, we did that for less than GBP 1 million, it would have cost us GBP 5 million if we hadn't put that hedge in. So the yield goes incredibly volatile, and you just have to wait. Opportunities will present themselves, and you just have to be ready to go when the opportunity does present itself.

I've got another good question here on the screen actually from Elliott, which is what is causing the difference between the like-for-like income growth at 4.2%. And versus the EPS growth at 2.4%.

That's a very good question, which I normally just go, it's all in the timing. I think probably -- and we'll come back maybe with a breakdown of this, but I think it's predominantly because your like-for-like is more of a contracted figure and your -- obviously, your earnings is a cash flow figure. It's the timing. And obviously, some of the timing of the M&A when it came in, when it didn't might affect those numbers as well. But we'll do a big detail that deep dive into it, but it's going to be like-for-like might be higher because you settle a rent review halfway through the year, but you only got half the cash.

Phew, that was was quite difficult, that one..

Yes. I think I'm right. I've got pass. I might not get an A, but I got passed. Are there any other questions? I've only got -- I think unless Paul -- I didn't answer his question correctly, -- he'll no doubt reach out if I didn't. No more in the room? Well, thank you so much. I mean we actually weren't predict -- given so many people are off site at the moment, we weren't predicting quite such a strong turnout, but that's great. Thank you so much for your support and your time.

Thank you so much for your support and on your time. Thank you.

I'm delighted to be joined today by Andrew Jones, who's the CEO of LondonMetric. And today, their half year results were announced. Andrew, thank you for joining us.

So, Andrew, you've delivered strong growth in net rental income and earnings in the half year period. What have been the drivers of this growth? And how is the business performing more widely?

We had a great period and it's been a strong half year. We've successfully acquired 2 public companies, and so we've been integrating those. So that's helped drive our net rental income up, as you say, we're up 15% at just over GBP 220 million (sic) [ GBP 221.2 million ]. But also -- as well as the external growth, we've also executed some internal growth through rent reviews, leasing and lease renewals.

Our rent reviews have delivered rental growth -- rental uplifts of about 18%, driven by open market rent reviews that were even higher, they were up at 24%. And then our leasing team have done a fantastic job in negotiating new lettings or indeed lease renewals. And again, they've secured rental uplifts across those various buildings of 24% higher than the previous passing rent. So it's been a combination of external and internal growth that's allowed us to print those numbers.

So Andrew, with your increased scale, can you talk about how this is benefiting LondonMetric and how you're positioning the business for the future?

Yes. I mean we think about scale in 2 ways. We think that it gives us increased access to new opportunities. I mean there's a number of transactions that we've executed on over the last 12 months, which I'm not sure would have been -- would have made themselves available if we've been a much smaller business. I mean our portfolio has grown over the last 2 years from GBP 3.2 billion to GBP 7.4 billion. So that's a big increase.

And it absolutely means that we can compete with some of the larger private equity players in the real estate market on much more equal footings. And so we've seen some transactions come through. We've done some sale and leaseback transactions. We've also done some development fundings. We bought some portfolios, which I'm not convinced would have become available to us if we were much smaller.

The other benefits of scale are cost. We operate a very efficient platform. I mean I would argue that we are the most efficient REIT in the U.K. sector. Our EPRA cost ratio is sector-leading at 7.7%, and that's down slightly on where it was at the start of this year, and we think it's probably got further to go. And also from a cost perspective is the cost of debt. I mean, without a doubt, the bigger you are, the more debt optionality you have. We're not beholden to bank debt. We don't -- we have unsecured facilities rather than secured facilities and unsecured is cheaper.

We access the U.S. private placement market, which gives us a debt duration that is longer than you get from U.K. lending banks. And we are actively pursuing the bond market for additional facilities, which we expect to work on over the next couple of months. So scale is giving us -- we talk about the scale of opportunities, but also the economies of scale that come through being bigger.

So Andrew, in terms of the property market, what are your wider thoughts on the sector?

Well, I think interest rates is the yardstick by which all investments should be assessed. We have -- we've been in a difficult market certainly over the last 6 months. Swap rates, the 5-year swap is a key indicator for us, which is linked heavily to the 10-year gilt. And that has moved around quite a lot. But it's operating at the moment at a level that makes liquidity tougher on bigger lot sizes. We're very, very fortunate that our average lot size is GBP 11 million. And the assets that we've been looking to come out of average is actually GBP 6 million. So we've still found liquidity for what we're trying to exit, which has been good.

I think that we -- when bond rates come in and the 5-year swap drops below 350 basis points, then I think we start to see a significant pickup in liquidity for some of the bigger lot sizes. I think if we look at the wider real estate market then is what's performing and what isn't, we absolutely -- our thematic is basically around being in sectors that are going to be a beneficiary of evolving consumer behavior. The 2 key things we think about is time is a valuable commodity and experience over essentials.

And so our investment in logistics is around the fact that retailers need efficient logistics infrastructure in order to deliver to a consumer who is increasingly demanding on delivery. We talk about instant gratification quite a lot. So that is about -- we don't want to wait 3 or 4 days for the parcel to arrive. There are things that we order now that we would expect to receive by the end of the day. And similarly, our investment in convenience retail is around convenience. And as its name suggests, that is -- it's about maybe shopping for your weekly groceries and doing that in 30 minutes. And therefore, we want to be in convenience retail rather than experiential retail. And that's why our retail investments are around -- focused around grocers like Aldi, Lidl, Waitrose, Marks & Spencer, Home Bargains. It's -- time is an important commodity.

And then our investments in budget hotels and theme parks is essentially predicated on an increasing divergence of spending from essentials to experiences. And therefore, whether or not I want -- I don't need to do the shopping center. I'm not going in -- I remember on a Saturday, I'd go in with my friends to the town center and would wander up and down the shopping centers. People now want to spend time with their friends in a restaurant or a pub or at a concert or a sports match or a weekend break or whatever it might be. And so we lean into that. And so for us, it's about working out the macro trends and then which parts of the real estate market will play to those and making sure that we're out of the sectors that we think are most exposed to those evolving consumer habits.

Finally, as you look ahead to 2026, what are your aspirations for LondonMetric over the next year?

So for us, I mean -- and I think I said it in my statement that we want to run our winners and sell our losers. We've done a lot of M&A activity over the last 2 years. We've inherited some wonderful assets that are delivering for us, but it's also included some assets that don't quite meet our requirements.

And we've been busy trimming the portfolio to come out of some smaller assets, some asset classes that we don't want to be invested in or indeed some geographies that don't meet our requirements. So we want to keep trimming the portfolio, and we want to then reinvest that money into our existing assets or into new opportunities in our favorite sectors.

So for us, I think it's going to be a bit more of what we did in the first half. Our earnings are looking great for the second half as well. So we're on track to meet consensus. And it's making sure that the opportunities in our favorite areas present themselves and we can uncover them with our excellent team of people. So I believe that if we can only control the controllables, we would obviously like a more favorable macro environment. And if that happens, then that's great and the wind will blow even harder at our back. But in the meantime, we've got a lot of internal opportunities that we need to execute on.

Andrew, great set of results. Thanks for your time today.

You're very welcome. Thank you.

Great. Good morning, ladies and gentlemen, and welcome to LondonMetric's half year results presentation. It's very rare that we're in such salubrious accommodation as this. I hope it's rent-free. It's an office building, it must be. Sorry, cheap shot. Okay, that's the tick-tick, dirt went off. Right. Go down the list in a minute.

Right. So normal lineup this morning. I'm going to give you a quick overview. I'm going to hog all the good numbers, pass over to Martin. He'll do a deep dive for you. And then I'll come back to talk about our activity and the makeup of the portfolio and our outlook for the periods ahead. And then we'll open it up to Q&A. And we have our team in the front row, which actually now includes Carl, which is good. So any really difficult questions are going his way. And then hopefully, we'll be all wrapped up by about 11.

So -- okay. So we retain our position, in our opinion, as the U.K.'s triple or leading triple net income REIT. Our objective is to continue to own mission-critical assets across the winning sectors of real estate. I come on to talk about this a little bit later because it is a theme throughout the presentation. We want to be -- we want to make the right macro calls. Logistics is our strongest exposure, partly because it gives us the best rental growth. So that's back up at 54%. And then we have our hospitality and entertainment, which is dominated by our hotels and our theme parks at just under 18% and then our convenience retail assets at 14%. So those are our 3 key areas with health care making up the fourth.

As a result, our objective must be to grow our income. That's what we are. We are a triple net income compounding business. And our net rental income, as you can see in front of you, is up 15%. Again, we'll come on to talk about that in a little bit more detail, and that has obviously allowed us to progress our dividend. We announced this morning a Q2 dividend of 3.05p, which gives us 6.1p for the period, which is up 7% on where it was last year. And obviously, we expect that to continue. We are well on track for our 11th year of dividend growth.

We also operate the lowest cost platform in the sector with a sector-leading EPRA cost ratio, down from, I think, 7.8% at the full year to 7.7%. And despite Martin's objections, we obviously think that, that should fall lower in the coming periods. The portfolio is focused on reliable, repetitive and growing income. It's a strap line that we've now used for many, many years. It doesn't need to change. And that is supported by, again, 5.2% like-for-like annualized rental growth, and that's largely driven by 2 things. Uplift on rent review. You can see there, 18% is our average uplift. Open market was at 24%. Our open market logistics was 27%.

And then our leasing and regears delivered another 24% above previous passing. So that's what -- you put all those together, that's how we deliver that 5.2% annualized income growth. In the period, this translated into GBP 10 million of additional rental income. And again, we'll come on and talk about -- we've got a good slide on this later on in the presentation. We have a further GBP 28 million that we expect to collect over the next 18 months from rent reviews and lease renewals. We expect that and hope that will be higher because it doesn't include asset management initiatives, and it doesn't include the leasing up of vacant space that we currently have in the portfolio.

The total property return, you see it there at 3.3%. We come on to talk about that in a little bit more detail later on in my second stint. So turning then to the financial highlights. EPRA earnings were up at GBP 148.6 million. That's driven by a 15% increase in our net rental income. You see there on the right-hand side. That has driven an increase in our earnings per share at 6.7p, up slightly on where it was this time last year. But equally important, it's 28% higher than where it was in September '23. So we've seen a 28% increase over the last 2 years in our EPRA earnings. And that has allowed us, as I touched on, on the earlier slide, to increase our half year dividend to 6.1p. Again, that's up 7% in the year. It's actually up 27% over the 2 years.

Total accounting return for the period, 4.1% if I exclude the huge banking fees that we paid for the -- in our various M&A transactions. If you strip those out, it's at 3.3%. Portfolio value is up 22% to GBP 7.4 billion. Relatively flat EPRA NTA, up on where it was a year ago, flat on where it was in March at 199.5p. And our LTV is up marginally at 35%, and that reflects the GBP 200 million cash component of the Urban Logistics acquisition that we completed on earlier in the summer. And we feel pretty comfortable with that. It may go up, it may go down. That will be dependent upon opportunities that we see in the -- by and large, in the investment market.

And then just again, to steal one of Martin's slides, the dividend, I should say, is -- you can see there, 111% covered with a full cash cover as well. So on that note, I'll pass over to Martin, and then I'll come back to take you through the portfolio.

Okay. So good morning. So there's nothing here he hasn't covered. So I'm going to do it anyway. So look, following an intense period of M&A activity and asset recycling, we've delivered very significant earnings growth and dividend progression. Pleased to report net rental income is GBP 221.2 million, an increase of 14.6% over last year. The acquisitions of Highcroft and Urban Logistics, which contributed only for 4 and 3 months, respectively, and other acquisitions during the period have added GBP 27.6 million of additional rent. We've also added GBP 6.6 million of additional rent from our existing properties and developments.

We lost GBP 12.2 million of rent from asset disposals during the period. Our rent collection remains exceptionally strong. We've collected 99.5% of rents due. Our gross to net income leakage remains very low at 1.5%. Our administrative overhead for the period is GBP 14.6 million. And our EPRA cost ratio continues to be sector-leading at 7.7%, I think, reflecting operational synergies and the culture of cost control. The increase in overheads in the period is almost exclusively headcount and remuneration costs. Our headcount is now 54, up from 48 at the year-end. That's a combination of former Urban Logistics employees, but also new recruits that we've made to ensure that we have the right level of resource and the right skills for the enlarged business.

Our net finance costs have increased to GBP 59.7 million compared to GBP 45.4 million last year. That's an increase of 31.5%. This was due to the additional GBP 484 million of debt from our corporate acquisitions that came in at an average cost of 4.26%, which compared to LMP's cost of debt at that time of 4%. We've also run a higher drawn debt balance during the period. So despite the increase in financing costs, that tight cost control on top of revenue growth, income growth has driven our EPRA earnings to GBP 148.6 million or 6.7p per share, an increase of 9.7% over last year and supports the increase to the dividend, which I think Andrew only mentioned actually 3x for the period to 6.1p per share, providing very strong 100% dividend cover and importantly, full cash cover.

So our trading performance has been strong with the portfolio valuations increasing by GBP 29.1 million, allowing us to report IFRS profits of GBP 130.3 million. This actually reflects a reduction on IFRS profits compared to last year, but it does include the full impact of M&A acquisition costs and goodwill impairment in the period. So there's been further significant change to the balance sheet this period as it reflects our most recent M&A. The acquisition of Highcroft added GBP 81 million of investment properties to the balance sheet and the acquisition of Urban Logistics a further GBP 1.14 billion to bring the total value of the portfolio to GBP 7.4 billion.

In addition to our M&A activity, our active asset recycling has delivered GBP 125 million of other acquisition, development and capital expenditure, partly offsetting the divestment of GBP 155 million of noncore assets. This, together with our revaluation uplift of GBP 29.1 million, has contributed to the increased portfolio value. Gross debt, which I'll come on to in a moment, is GBP 2.8 billion, and the cash balance is GBP 206 million. The other net liability position at the period is GBP 116 million, rent paid in advance accounting for GBP 78 million worth of that amount. In summary, therefore, our EPRA net tangible assets at the year-end were GBP 4.67 billion or 199.5p per share, providing -- producing a 4.1% total accounting return after adjusting for those M&A costs and goodwill impairment. So as I've said, our gross debt balance is now GBP 2.8 billion. The increase is partly a result of our M&A activity through which we acquired GBP 484 million of new secured debt facilities and also other new facilities entered into during the period, which I'll come on to on the next slide.

Our debt maturity now stands at 4.2 years compared with 4.7 years at the year-end. We expect to maintain that level of debt maturity by the year-end despite the passing of a further 6 months, as we launch into our public bond program. Our average cost of debt is 4.1% compared to 4% at the year-end, and we do not expect our finance cost to increase materially, as we manage debt maturities over the next 3 years. Our net debt-to-EBITDA stands at 6.9x, which is trending downwards as our earnings increase and is comfortably within our upper limit of 8.5x.

Our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. We acquired GBP 140 million of interest rate swaps through the Urban Logistics acquisition at an average cost of 3.2%. We continue to be well protected against adverse movements in interest rates. And at the period end, our drawn debt was 94% hedged. As a result of the GBP 205 million cash component to the acquisition of Urban Logistics, our LTV is now at 35.1% compared to 32.7% at the year-end.

Looking further forward, we'll continue to manage our debt arrangements to ensure that refinancing risk is mitigated and that we are able to take advantage of our increased scale and credit rating to diversify our funding sources. We strengthened our financial position in the period by completing 2 new unsecured revolving credit facilities totaling GBP 350 million with new lenders at margins below our existing comparable facilities. We completed a new 3-year unsecured term loan of GBP 180 million at an even tighter margin. And we entered into a new GBP 150 million U.S. private placement, as a credit spread ahead of any other private placement by any European REIT in the last 3 years. That amount was drawn post period end.

And since that period end, we've entered into a further facility for GBP 50 million with a new lender at a margin of 125 basis points. Crucially, I think this new well-priced liquidity has allowed us to repay on maturity facilities post period end with AIG, L&G and Canada Life, which bought fixed rate pricing materially more expensive than our new debt facilities and was therefore, earnings enhancing. Additionally, we repaid the most expensive tranche of the Urban Logistics debt of GBP 57.3 million, which was costing us 6.17%.

As I said in the summer, our successful credit rating now allows us to plan for possible future debt capital markets activity in the form of a public bond issue to cover debt maturities in financial years 2027, 2028 and 2029. We are preparing for such an issue and expect to be active imminently. Our contracted rent roll at the period end now stands at GBP 421.1 million with the inclusion of rent on the Highcroft and Urban Logistics acquisitions. Additional rent of GBP 9.8 million in the period was generated from active asset management, rent reviews and regears.

Looking further forward, reversion within the LMP portfolio and the newly acquired Urban Logistics portfolio is expected to add GBP 28 million of contracted rent. The rent roll will increase as a result to GBP 450 million. This is, I think, a conservative view of growth post period end, as it takes no account of that active asset management initiatives and initiatives not yet executed and the letting of vacant properties. This generation of significant earnings growth supports our confidence that we will continue to be able to grow our earnings and our well-covered dividend.

With this in mind, we've increased our quarterly dividend payment, as Andrew said, for HY '26 to 3.05p per quarter, an increase of 7% on HY '25. And then finally, just that look back at the last 11 years now, during which we've been able to increase earnings per share more than threefold. We're in our 11th year of dividend progression with excellent dividend cover and significantly ahead of the growth in CPI. Our total property return is strong, an 11-year CAGR of 10%, a very material outperformance against the MSCI or Properties Index. Our total shareholder return driven both by share price appreciation and dividend progression equates to a compound annual growth rate of 10%. On that note, I'll hand back to Andrew.

Okay. Thanks, Martin. Right. So this is a look at how the portfolio sits today, GBP 7.4 billion split really against those 4 key sectors that I touched on in my opening remarks. Logistics now up from 46% to 54%. Our largest investment, as you can see there, about GBP 4 billion, and that is driving and delivering the strongest rental growth, and we see that continuing over the next few years through rent reviews and lease renewals.

Hotels and Leisure remain a key beneficiary of the shift in discretionary spending. And in the period, we've continued to add new Premier Inn investments through a sale and leaseback transaction with Whitbread and hopefully, we have more to come. Our convenience investments is very much around the grocery sector. It is -- we're Aldi, we're Lidl, we're M&S, we're Waitrose, we're Home Bargains, a bit of B&M sort of thing. We're not the big supermarkets. And that we see it delivers great, great solid income with around about 3% rental growth to come. In health care, we're working with Ramsay to -- on initiatives that will improve the profitability and the desirability of our private hospitals and -- both from their perspective and for ours, and we're hopeful that we'll be able to talk about that shortly.

But overall, as you can see from the numbers there on the right-hand side, it remains reversionary and on track, as Martin showed you on his last but one slide to deliver further increases in rent over the coming years. That 3.3% number that you see there at the bottom of the column is the -- effectively is the CAGR of the 18% on the rent reviews and the lease renewals that I touched on in our opening slide. We actually see that accelerating a little bit over the next couple of years. And that will be as much around reversions as around how many reviews are coming through and where they sit.

So investment activity, the macro environment remains uncertain. We still believe that interest rates are the yardstick by which all investments need to be assessed. Current swap rates, they move around. I mean -- I think they peaked this year at 412. And I think about this time last week, they were down at 357, which is very exciting. And then all of a sudden, we're up about 15. I think we're 373 today. I mean, just it creates uncertainty and without a doubt, impacts on liquidity, particularly on the larger lot sizes.

I mean we put in here -- GBP 20 million is a number. I mean we could bring it down a little bit. We could move it up a bit. But GBP 20 million is what we think above that, we think that it gets more difficult because it does require some debt buyers. However, we are enjoying much, much more success, greater liquidity in the smaller lot sizes. We've sold year-to-date GBP 212 million of assets, average lot size of GBP 6 million. So that's an awful lot of transactions. I think it's 36 transactions in the period. And we are dealing with a completely different array of buyers.

It is -- there's a lot of owner-occupiers, family offices, small property companies, local authority pension funds. And we are transacting in a wide range of assets. Pubs, hotels, garden centers, children's nurseries, food stores, DIY stores, warehouses, waste disposal facilities, I mean, we've got them all. We have got them all. So we are seeing an unbelievably wide church of buyers and probably as wide a type of buyer that I've witnessed in a long time. I mean I made a comment the other day at the Board meeting. I think we've done and transacted on more sales to owner occupiers in the last 3 years than I've done in my previous 30, okay? So it's a different market.

And the small lot sizes that we have is a massive strength for us. On the acquisition side, obviously, that GBP 1.4 billion that we've done year-to-date has been in the winning sectors that are going to deliver us the best income growth. It's obviously been dominated, as Martin has touched on earlier with the 2 M&A transactions. And not surprisingly, it is about reinforcing our logistics, our hotel, our convenience retail and roadside, which are continuing to offer up, we think, superior rental growth prospects. And then the opportunities are coming from really 4 or 5. We cut this -- we changed how we cut this really.

It is sale and leasebacks. I referenced the Whitbread transaction that we did earlier in the year. Development fundings, we enjoy development fundings. A lot of developers are short of money, and we're only too happy to help them, providing it's in our winning sectors, and it's predominantly been logistics and grocery food, as we continue to strengthen our partnership with some of our key operators like Marks & Spencer. And then the pension fund industry is going through a dramatic shift, moving from DB to DC. That is throwing up portfolios.

A lot of corporate pension funds are coming out of direct real estate, and that is throwing up an awful lot. And it's not hardly a week goes by that you might read something in one of the papers or -- sorry, one of the sites [indiscernible] or whoever, suggesting that so and so selling their properties and either in whole or in part. I mean, Santander recently has been in the news. St. James's Place has been in the news. And we're seeing opportunities from that. I mean we announced on Tuesday the acquisition of 2 assets from a Columbia Threadneedle portfolio. That was probably sparked either through expiry or redemptions.

And so we hunt there pretty aggressively. And obviously -- the fourth one, which obviously I can't talk about is opportunities that we see, obviously, in the -- other opportunities that we might see in the listed sector through additional M&A. So our M&A activity. So we've done 4 public takeovers over the last 2 years that has added GBP 4.4 billion worth of assets. But more importantly, it's added GBP 267 million worth of new rental income, and it's been a source. It's obviously given us great scale, but it's also given us a great improvement to our earnings.

We have, as we regularly update the market on is, successfully exited a lot of the noncore and some of the weaker assets. I mean, over those 2 years, we've sold GBP 372 million worth of these assets. That's 8% of the assets that we've actually acquired by value, largely in line with our acquisition prices. Some are up, some are down, but I think we're virtually bang on at the moment. And I'd like to say that, that was an incredible skill. I suspect there's a bit of luck in there as well.

As you can see, out of the 465 assets that we've acquired, we've actually sold the smaller ones, which is we sold out of 89 of those. I mean I'm not going to go through the individual companies that we've acquired and the progress we made because it's there for you to read just as well. But the fact of the matter is the core assets that attracted us to these businesses in the first place are delivering for us. Rental uplift is GBP 12 million since acquisition. And again, this goes into that GBP 28 million I talked about over the next 18 months. GBP 17 million of it is arguably coming -- is going to come through from some of the acquisitions that we've made over the last 2 years.

So that's the rub of why we like these companies, okay? We see them being pregnant with rental growth and maybe the property market or indeed the equity market hasn't valued that potential growth maybe as accurately as maybe we think we might have done. So we run an occupier-led business model. It helps frame our buy, hold and sell decisions. But as well as buying -- choosing the right sectors and buying the best assets in those sectors, we also actively manage our income granularity.

Over the last 6 months, we -- our top 10 occupiers are down from 38% to 33%. Our top 3 occupiers are down from 27% to 22%. We obviously want to own the right space, and we want to let on the right terms in the right location. But one of our key things under this occupier-led business model is occupier contentment, okay? We're very close to our customers. We want to do more deals with them. We want them to be happy. Our test is that we -- and particularly at the operational side of the businesses, so things like the theme parks, the hospitals and the hotels, we are targeting a rent EBITDA ratio of 2x, okay? And that's a magic number because that then ensures not only contentment, but it also gives us much better asset liquidity.

And we see -- I should say, pub market, the pubs as well, by the way, would fall into that as well. And that gives us the comfort of income durability. So we look at something like -- so that 2x test, and we expect all of our investments to hit that. And if they don't hit that, we will look -- we will have looked or have executed or are looking at exits. So if I look at there -- if I take Merlin as an example, that's a business that will hit our targets in the U.K. It's a business that has strong sponsor support. It was a take private for those of you old enough to remember it for about GBP 6 billion by the Lego family or KIRKBI which is its name, the Kristiansen family, Blackstone, CPPIB of Canada and the Wellcome Trust.

It's also a business that has significant freehold properties. I think 50% of the earnings that Merlin report worldwide comes from freehold assets. And so therefore, it has -- it is what we consider to be an asset-backed -- it's an asset-backed business model. They recently sold 29 of their Lego Discovery centers back to the Kristiansen family for GBP 200 million. So they have these various levers when they need to raise money. U.K. profitability is running ahead of -- in '25 is running ahead of '24, and we have the added comfort in this business that we have the top operating company.

And let's remember, we are talking here about a worldwide business that is the second largest entertainment firm in the world after Disney. I think there might be other people who claim to be that, but we think they're the second. So asset management, I think, I probably touched on most of these key numbers, like-for-like income growth, high occupancy. 67% of the income enjoys contractual rental growth, which gives us great comfort and -- to support the numbers that Martin had in his slide, the GBP 28 million that we've already touched on.

And then interesting, I think in some ways, if you said to me, you've got one slide to take away, this is my favorite slide because this is -- it's what it's all about. This is what proves whether or not we've made the right investments in the right sectors and bought the right buildings. Rent reviews over the period gave us an uplift of 18%. Our urban reviews are up 22%. Urban open market was up 27%, which is what I referred to before. And then lettings and regears, again, this is the ultimate test of the desirability of your buildings. In fact, you're able -- tenant occupy content and people don't regear buildings, if they don't want to be in them and if they're not happy. And on average, those regears have been struck at 24% above previous passing rent. We have some vacancy. We inherited a little bit of vacancy under the Urban Logistics acquisition, and we're working through that either through leasing or through disposals.

But that obviously -- we're at 98.1%. Personally, I think that's a little bit low. We need to be targeting 99% plus. Ideally, I'd have 100%, quite frankly, or maybe just under. So the asset management team have certainly contributed and helped drive that annualized like-for-like income growth of over 5%. So when I think about the outlook, I'm not actually sure, but I'm pretty comfortable -- confident that this slide actually might have been exactly the same 6 months ago. So it just shows that the world I'm really moved on, as it really.

So macro events will continue to dominate investor sentiment. I've talked about the gilt and the swap rates always influencing the property investment markets. I say always, it wasn't always the case, but it certainly feels like it's been the case for the last few years. However, we do think the consumer is in good shape. Savings ratios are good, employment is good, wage growth is good. And interest rate cuts and a decelerating rate of inflation that we got yesterday -- was it, I think maybe the day before, I can't remember. We'll continue to improve confidence. We'd just be nice if we got a little bit more confidence coming out of 11, Downing Street.

And I think -- but we are in quite good shape. There are times when I probably stood up here and I've taken questions on credit card debt or unemployment rates or low wage growth. I don't think those apply here today. And by the way, I think we're in a very different situation to America. And I'll expand on that later, if anybody is interested. But in the real estate sector, I think there are structural cracks between the winners and losers. I think for us, we're looking for organic rental growth, contractual rental growth without CapEx, okay? There are lots of sectors that are talking about high headline rents, but those have been bought through improved building qualities and facilities, tenant incentives.

I'm talking about organic rental growth here. That's what you get in a rent review. That's what's great about a rent review. Lots of people talk about ERVs, but ERV doesn't pay the dividend, okay? Cash does. Rental growth does. And we're seeing why we want to be in logistics because we're still collecting that in-built reversions, okay? It's coming through. It's like a helicopter chucking cash at you. I mean it's just a wonderful, wonderful feeling. And we think that our scale, as Martin and I have already touched on, continues to improve our efficiencies and supports our triple net income strategy.

We expect to see further consolidation in listed markets with or without us. We think it will take place. Without a doubt, the structural shift in the institutional pension fund market is throwing up opportunities, and we would be disappointed if we weren't a beneficiary of that over the coming period. And that we expect -- as a result of all of that, we expect further income growth, we expect further earnings growth, and we expect further dividend progression. We are well on our way to our objective for dividend aristocracy, only another 14 years, okay? And I expect to be here for it.

So on that note, thank you very much for the last 33 minutes of listening to us. And obviously, questions either in the room or -- oh gosh, that was quick, or on the phones would be very welcome.

Ladies first, Vanessa.

Vanessa Guy from JPMorgan. I'm having a look at your Slide 13, where you show your 4 main core subsectors in real estate. It's been a moving target in terms of your buy, hold and sell strategy. And my question is, over the next 6 to 12 months, is there anything that there that stands out that you want to streamline probably and grow in another subsector, anything that you have as an internal target? And are there any other sectors that are not there that you're interested in and possibly trying to build up?

Okay. So the first thing is I never give the guys and girls targets because they have a habit of hitting them, and they hit them quickly. So our logistics has moved up to over 50%. If it went to 60%, that because we found some great opportunities. If it went to 50%, it's because we found some opportunities to sell at amazing prices to people who coveted our assets more than us. Entertainment and Leisure at 18%, that's down from 21% at the beginning of the year. I could see us buying some more -- we like the budget hotel market.

We've been selling out of some of the smaller Travelodges. It's a market we actually understand pretty well. We have brilliant relationships with both Travelodge and Whitbread. We'd like to maybe add a little bit more into the -- into that bucket. Convenience retail is great, but our ambitions there are only hampered by the lack of opportunities. Most of the investments we make there are fundings or our own developments.

I mean, I think we're on site at the moment with 4 or 5 M&S Simply Foods across the portfolio. And obviously, that will nibble up that -- push that percentage up a little bit.

And health care, Martin has repaid the debt -- the secured debt on the hospital assets. We're working through some asset management, work with Ramsay, let's say, we have a fantastic relationship with them. That might improve liquidity and desirability. We'll have to see. It seems to be a hot topic at the moment in that sector. But we don't have any targets. And just in terms of new sectors that you touched on there, Vanessa, what these -- we try to keep -- I'm color-blind, so we can't do very -- many more colors.

But within these sectors, there are subsectors. So in logistics, there's mega, regional and urban. Entertainment and leisure, there's the theme parks and there are the hotels. In convenience, there is the discounters, the drive-through restaurants. I mean we own 77 drive-through restaurants. The chances are one of you is shopping or buying goods in one of our drive-throughs all the time, okay? But that's in convenience as well as our Aldi, Lidls, M&Ss and Waitrose.

Health care is essentially the hospitals. So there are nuances. And actually, some of those subsectors move at slightly different paces. We're getting good rental growth, for example. We get better rental growth arguably out of DIY at the moment than we might be getting out of GM. We're getting better rental growth maybe in urban than we might be getting out of regional. So even within those colors, the subsectors move at different speeds.

Ana?

Ana Escalante from Morgan Stanley. So my question is regarding logistics market rental growth. It's true that we're coming from very strong years and that market rental growth has decelerated a bit. Do you think that, that's just the normal digestion of those previous super strong years? Or do you think we are starting to see some affordability issues here and there? Or another way to ask the question is, at what point we can start seeing rents being too high or resulting affordable for some? Or shall we expect that Urban Logistics rental growth to reaccelerate next year?

Great question. Again, it goes back to the answer I gave before around different parts of that logistics market moving at different speeds. We certainly see urban the strongest, and that is simply a demand-supply issue, except in London. Come on to talk about that because I think that was your second part of one of your first question. So urban feels good. And that's -- for us, obviously, urban is defined by geography, but we also define it by size. So we'd be 100,000 square feet down. We feel okay.

Regional, we define as 100 and a bit -- up to about 350-ish, give or take. That market definitely has supply that's being delivered on a spec basis. I mean there are people out there that do spec developments, which I don't understand, but anyway, they do. And also maybe a pullback on demand of capital commitments and whatever with an uncertain economic environment going forward. Mega is fine as well because mega tends to be pre-let and build-to-suit. So there's not a lot of -- I mean there are some people who I admire enormously, who go off and build 1 million square feet spec. I mean you've got -- I mean, that is ballsy. But good luck to them, and I hope they do well.

So I think it's okay, but there is a bit in the middle where I think net absorption needs to increase. What I would say, and this applies not just to logistics but it also applies to, we're seeing it very, very directly in our convenience retailers as well. We can't get the developments to stack up. It's really difficult to get developments to stack up. And that suggests rents have to push up, but that might take a little -- that might take a year or 2 to fall through, whilst the net absorption.

I mean, I think we had the biggest take-up, didn't we guys, in the last -- a big take-up in the last 6 months. London is tougher for us. Even in urban, it's tougher. I think there's more of an affordability issue in London than there is anywhere else, but it's had dramatic rental growth. So it's not surprising. If you -- I take the view that most things revert to the mean over a period of time, and that's what I suspect London is doing. London will still enjoy a great supply side dynamic, but maybe the demand side at the current rents is a bit soft. I mean -- I think our flagship sale probably still when it was about a year -- 9 months ago, 10 months ago.

We sold a warehouse that we bought in Parsons Green, which for those of you who know Fulham's -- not a lot of warehouses in Parsons Green. And we ended up -- we were going to let it originally to a dark kitchen. I thought getting planning for the dark kitchen was going to be a bit tricky as little mopeds going up and down the street, was not going to be overly popular with the finite residents of Fulham. And we ended up letting it to a leisure operator, who put in a fantastic facility for both adults and children alike and did an incredible fit out.

And we ended up selling it, I think, for just over GBP 1,000 a foot -- I think it's about GBP 1,060 a foot, which is probably about what this building is worth. But that rent was GBP 50. So that would be trickier, yes. Sorry. Max. Max, behind you.

It's Max Nimmo from Deutsche Numis. Just a higher-level question kind of related, speaking to Martin before about kind of economies of scale versus opportunities of scale. And just in terms of cost efficiencies on one side, as you said, about the 7.7% EPRA cost ratio, but also the ability to kind of move the needle at the other end. And I guess my question is around if you're still doing deals around that sort of GBP 6 million lot size...

We're buying GBP 6 million.

Okay. But if the lot size still remain relatively small, are you not effectively working the team harder and everyone having to run faster to kind of keep going at the same pace?

Definitely. We're not a charity. No, look, our average lot size on acquisitions would be significantly higher than that. In fact, you would actually argue today a very strong case that the arbitrage available in the direct market is to sell the smaller assets at GBP 6 million for very good pricing and reinvest them at GBP 50 million where the price -- where the air is a bit thinner and the competition is less, and therefore, you get a slightly better deal.

But don't forget, what we're buying is not high operational assets. I mean, Will bought a portfolio of Premier Inns a few months back, let on 30-year leases. I mean he'll probably be the only one who's seen them. I have no intention of -- I don't have to worry about them. I mean they're going to compound beautifully over the next 5, 10, 15 years. It's going to be wonderful. But that doesn't need a huge amount of skill. I mean the rent comes in from our key tenants pretty easily.

That makes sense. And maybe just kind of a follow-up. You talked about the sort of 4 to 5 opportunities that you have. In fact, there are 4 that are on the screen there. Maybe if we park M&A to one side, given there aren't as many businesses left for that now, but I guess, just the opportunity set, how would you kind of rank them? It sounds like there's a lot that could come out of these sort of pension funds, but there's perhaps a bit of a learning situation needed for them in terms of what their NAVs are and how that kind of unlocks. So maybe just if you could kind of rank them in terms of your -- how you're thinking about them.

Well, 1 and 2 are amazing. So sale and leasebacks and development fundings are amazing because those are the -- those opportunities effectively, you've got brand-new leases. And those are very often scenarios or situations where you can influence the lease, not just the rent, but the rent review clauses and the term. So those are fantastic. We like those, but we're obviously not in control of how many of those opportunities will present themselves.

I mean we're working on a big sale leaseback at the moment. We're working on a development funding at the moment with one of our key customers. And we are absolutely -- we want -- in development funding, we want to be the occupier's partner of choice or even -- we want the occupier to say to the developer, can you fund this through another metric? I mean that's really what we want them to say. And we had an example of that in the period. Fund expiries and pension liquidations, Darren deals with this, they're coming.

There is a value issue to your point, but -- and there's also a timing issue, when are they coming. Managers are not -- they seem to be more willing to drip things out and keep the feet train running for a bit longer than literally come up against a hard deadline. But look, you've got to be in it. We're buying tickets. We're doing a lot of talking on it. We've executed those assets that we announced on Tuesday from Well, and we've got a few others that we're working through. But it is coming.

I mean you've seen -- I think Lone Star did the St. James's Place portfolio, didn't they last week. And then -- so -- and it's either the -- and then also the strategies that these managers employ is different. Sometimes it's being -- most often, it's being led by the investors putting in redemption notices so -- if you might have a reluctant manager. And then it's whether or not they do the whole lot or whether or not they chop it up into sectors to try and get maybe a slightly better price.

Again, you're not in -- I mean, the whole thing about real estate is you're never in control. We don't sit there go press a screen. We want to -- I know what we want to buy. It just -- it's not on the screen. It's got to -- it doesn't appear on the screen like it might do in the equity markets. And so I think -- look, I would -- I mean, I do love 1 and 2. I mean, I do love 1 and 2 and 3 is going to be pricing dependent and 4, we won't talk about.

Matt?

It's Matt Saperia from Peel Hunt. Martin, you're looking like you need a question so...

Maybe don't.

Are you sure? I think you talked about -- or you showed earlier on the debt maturity profile. You've obviously got a current cost of debt that's below the market rate. Yes, I think you also mentioned that you don't expect your financing costs to go up. So can you just talk us through how you get to that conclusion, given the maturity profile and the cost?

Yes, absolutely. So we have a series of refinancings coming at us. And when you look at our debt stack, it's too weighted in favor of our relationship banks, and there's not enough bond debt on it. We did -- we've done various private placements. We've never done a public bond. When we got our credit rating earlier in the year, that was the precursor to a public bond. We will do a series of those coming up.

When you then look at what happens to our financing costs, you stop paying commitment fees on undrawn RCFs and you stop paying the fair value amortization on the debt we've acquired through M&A, and that is a lot. So if your interest rate may nudge up or your amortization of your cost of putting debt in place may nudge up, but the compensating fact that you don't have those other 2 components of your finance charge means it is almost exactly flat going forward over the next 3 or 4 years. So our cost of debt could go from 4.1% to 4.3%, but the number you see in the income statement for finance costs won't change.

You're just saying that the lending banks have just been robbing us. Steve, you up?

You weren't going to get away with it.

It's Suraj Goyal from Green Street. Just a quick question on sort of e-commerce. So just wanted to understand what your sort of base case forecast is for 2030 and beyond and how that sort of reconciles for -- reconciles with the recent normalization that we've seen, also with sort of return policy changes for a lot of e-commerce players, et cetera. And then what that would look like in terms of long-term rental growth.

I stand up here just in case my mic is not working. Look, we form -- our strategy and sector investments is based of evolving consumer behavior. U.K. penetration into online shopping is excellent. I mean we're world-class, but it doesn't stop. I mean it's a bit like when retailers say to me or retail owners, you say, we've rebased the rents. It's as if it stops. But there is an ongoing generation that they actually enjoy the delivery of online shopping rather than the destinations that maybe my parents might have enjoyed more so.

So we still think it will continue. We think that it will -- that it needs to get more efficient, and we're seeing operators increasingly putting more money into automation in order to make that work because it has to -- no point having it, it has to be profitable. I'm not convinced that, that influences our investments in Urban Logistics as much as it might in mega. But we still think it's a trend that as we move through generations and my children become the key shopper, the idea for them of wanting to go to St. David's or wherever it might be, whichever shopping center it is, it just doesn't exist. They want to buy online.

So I think it's an attractive tail. You might argue that the bigger jumps are behind us, but we still think we still expect it to grow. I think food is different. I think food is different. And that is probably -- I mean, it obviously jumped from about 7 to 15 during COVID, and then it's come back. I think it settled about 11, depending on which grocery you talk to. And that's different. But we are absolutely seeing those operators investing in their facilities, particularly cold. So we're building a cold facility for M&S down in Avonmouth in Bristol.

So we think it will continue to grow. We think it's supportive. But also what we also expect is that the occupiers will want more efficient facilities. Their network needs to get more efficient, if they're going to be able to drive -- use that to drive profitability. It wasn't that long ago when I could have stood up here and people talk about online shopping, but nobody makes any money doing it. Actually I haven't had that question for a while because I used to just redirect them to the next report and accounts actually to see how profitable it actually was.

Eleanor Frew from Barclays. The exposure to your largest tenants has been coming down, partly as a result of your acquisition activity elsewhere. Are you happy with the current top 3 concentration? I see it's below 2019 levels. Or if not, are you looking to accelerate reduction or happy to carry on diluting over time?

Thanks, Eleanor. Look, I was asked actually on a call -- a press call earlier about what are your tests on tenant exposure. So the hard deck was always 10, although we did take that up to about 11 and a bit a few years back when we -- when Primark was our largest customer. And then we ended up selling one of the big facilities and bringing it back down again. So 10 is a hard deck.

I think we would like to improve -- I would like us to improve our granularity so that nobody is more than 5, and we will look to do that over the coming years. But this is what happens, isn't it? When you buy portfolios or you buy companies, sometimes it's not all perfect because if it was, somebody else probably would have taken them out before you. But again -- so therefore, there will be a sell-down, and we're already making progress on that. So it's a combination of that.

Obviously, as we've improved, it increased the size of the business, that has brought some of the concentrations down a bit as well. But income granularity, as I said on this, is an important part of our business model, but understand an occupier contentment overrides all of this. So yes, I'd definitely expect it to stretch a bit. When we announced the -- about what is it -- about 20 months ago now that we announced the deal with LXI, we were going to be the proud owners of 146 Travelodges and that really bothered me. And I now think we have 63 Travelodges. So there are levers that we will pull.

It's Tom Musson on Berenberg. And actually just following up on Max's earlier point on the opportunity set. If we think about Europe, you might argue that you can access a lower cost of capital in some European countries. And now with your scale and with the triple net lease business model, that could be value accretive for the right opportunity. I just wonder how outwardly looking you now are when it comes to what's next?

Good question. I think that -- look, we would look at Europe as not a country. We would look at Europe as a combination. And so if we are to look at investing outside of the United Kingdom -- I mean, we have a facility at the moment. We have Heide Park in Germany. We would probably identify 2 or 3 countries that -- where we could predict and have a clear view of consumer behavior. Also, we would want -- obviously, it would be -- we feel more comfortable, if we were to go into another country with an existing customer. I'm not going to name any names.

So it would -- there would be a few tests first, Tom, but I wouldn't say that we're actively looking. We get European opportunities put through to us. I mean the big opportunity in some ways from an equity perspective is that there isn't really a triple net champion in the European markets. So that's the equity opportunity for us, which we're quite aware of. And we do get a lot of incoming from some investors, as to why don't you do it because then it would give us that European triple net exposure.

But the lease structures, the REIT regimes in these countries has to be friendly to us as well. Like I said, we're obviously learning a little bit more about Germany now than we would have done 5 years ago, but I wouldn't expect an announcement that we're just about to make a big acquisition in Germany.

If you go back your 20 months when we acquired LXI, we would undoubtedly have said that we will sell Heide, the German theme park. But the truth is Heide throws off great income. We put some euro debt against it, there's a natural hedge and it's cheap and in your view could evolve. It's a terrific asset and perhaps the market is not right to sell it into today. So we don't.

I did use to say that Europe was for holidays. Stop saying that. Any other questions?

Okay. So we've got a question from the webcast today from Andrew Saunders from Shore Capital. Now you've been able to get under the hood of the ULR asset. What are your thoughts? And what are your plans for the Melton Mowbray?

Thank you, Andrew. Look, I think Urban was a well-run REIT, okay? Let's say that. It was a well-run company. We're very pleased with what we've inherited. There are undoubtedly assets that we wouldn't have bought, but I've no doubt if the situations have been reversed, they might have thought that there are assets that we bought that they wouldn't, but they don't particularly like. So that happens. It's what we call beauty is in the eye of the beholder. Otherwise, we'd all be wearing gray [indiscernible] and light blue shirts.

Look, Melton Mowbray is a difficult one at lots of levels. We're on it. We fortunately allocated a price on the way in that would allow us to get out without losing our shirt and trousers. But yes, I mean, the acquisition price was elevated. The tenant, obviously, longevity was not what was probably originally anticipated. But we'll deal with it and we'll move on and the money we reinvested. I mean, at the moment, it's not in any of our forecasts. So if we do either let it or sell it, that will be money or income that comes in that isn't in our GBP 28 million that we're hoping to collect over the next 18 months. So that would be on top of that. But listen, all portfolios have some problem children like families.

Thank you for that. And that's all the time we've got for questions. So I'll hand back to you, Andrew, for closing remarks.

Thanks. Well, okay, that's great. We are literally just the right side of an hour. So thank you ever so much for your questions, your time and your comments. So thanks. Have a great day.