Schroder European Real Estate Investment Trust Stock

Good morning, ladies and gentlemen, and welcome to the Schroder European Real Estate Investment Trust Half Year Results. My name is James Lowe, I work in the Schroder Capital Sales team. I'm very pleased to be joined in the studio here in London this morning by Jeff O'Dwyer, Portfolio Manager of the European REIT.

Now just before we get started, and I'll hand you over to Jeff for the presentation. A couple of housekeeping pieces. If you'd like to ask us a question as we go along, please do so via the Q&A tab. That should be somewhere on your screen now. You can also now download a copy of the presentation if you want to follow along with us in more detail. And for even more detail, you can now download a copy of the half year results. There's also a separate RNS that's been announced this morning that we'll talk to you shortly.

But with that, I'll hand you over to Jeff for the presentation.

Great. Thanks, James, and good morning, everyone. Thanks for joining us this morning. Yes, Jeff O'Dwyer, I'm the Fund Manager of the Schroder European Real Estate Investment Trust, here this morning to announce an important strategic change for the company, together with the half year results for the period ending 31 March '26.

Many of you would have picked up this morning that the Board and the investment manager have announced our intention subject to shareholder approval to propose an orderly wind down of the company and return capital to shareholders.

Let me start with a little bit of context. The portfolio itself has performed exceptionally well since our IPO in 2015. We've delivered in excess of GBP 80 million back to shareholders since that period. However, the company's relatively small size and limited liquidity has consistently weighed on the share price, resulting in a prolonged 40% discount to NAV.

Over recent years, it's become increasingly clear that investors have favored larger listed vehicles, particularly those vehicles that offer better diversification, better cost economies and better liquidity. Against this backdrop and despite reviewing sort of multiple options with the Board and in particular, with the new Chairman, Phil Redding, the manager and the Board believe that an orderly wind down is in the best interest of shareholders.

We are very conscious of the market backdrop and the challenges that we face. So this will be an orderly phased process. We'll sell assets gradually. And in particular, we'll be focusing on the asset management initiatives in order to not only maximize price, but also liquidity for these assets. We think we're really well placed to manage this process, particularly given we've got the teams on the ground and the specialization on the ground. We've got really strong contacts with not only the broking community but also with occupiers, investors across our markets. And at this stage, we think the process will take up to 3 years to implement.

Obviously, during the period, and we know that dividend is a pretty key component for investors. We'll continue to pay dividend throughout the process. And as we sell assets, those disposal proceeds will be used to repay debt and then return capital to shareholders.

And in terms of next steps, Obviously, we'll be presenting a shareholder circular with a view to getting investors to vote on the change of the strategy and the Articles of Association, and then we'll convene a general meeting, and that's likely to be for in the middle of August, but we'll update investors in due course.

I'll give a little bit more color throughout the presentation around our asset management and around our disposal approach as we go through the presentation. And obviously, as I touched on earlier, we're announcing, together with this, the half year results. And just to sort of give you a little bit of color in terms of a summary around those results, we're announcing the continuation of the quarterly dividend for this quarter, which is EUR 0.0148 per share. So therefore, giving EUR 0.0296 for the 6 months to that 31 March 2026. This is a dividend cover of 93%, which is pretty similar to that, that we had at the same time last year.

We've continued to maintain a very strong balance sheet, obviously, retaining that cash and then also having a modest LTV of around 27%. NAV total return for the period, 0.7%, mainly, and I'll come in a bit more detail in a minute, but mainly driven by not only the income side, but we obviously lost a little bit of value, and I'll go into more detail, particularly around the office side where we've lost a bit of value.

And then the update on the French tax, we continue to dispute this with the French tax authorities. We continue to ring-fence this capital. So we're in a position to deal with this if it wasn't to go our way. But obviously, we continue to have external advice where we shouldn't provide for this amount, and we believe our position is positive around this.

Just running through the NAV bridge, we had to make a prior period adjustment. This has to do with historical service charge and some CapEx. And then together with that sort of valuation adjustment that I touched on, we've had some positives in terms of some of the regearing that we've done particularly in Rumilly and Stuttgart where we're seeing values increase on the back of that. But equally, we've had some negatives in terms of some vacancy that has occurred in Alkmaar and Cannes.

We've announced that in RNS over the last few months, but that's balanced in order in terms of that positive and negative, resulting in a fall of about EUR 1.4 million and then obviously, some CapEx, and primarily resulting with investment in Stuttgart to go with that lease regear that we did. And obviously, with EPRA earnings and the dividend cancelling out that, we end up with a final NAV of -- sorry, EUR 151.3 million for the period ending 31. That results to about EUR 1.152 per share, which is around GBP 1 when you look at the conversion today.

In terms of summary of income, as you know, comparing this to the same period 12 months ago, we sold the Frankfurt asset. We've also lost a bit of income with the Alkmaar tenancy, but notwithstanding income remaining fairly robust, obviously, benefiting from the inflationary impact, positive impact that we've had.

Operating expenses have come down primarily due to some of the leasing that we've done in Saint-Cloud. Investment management fees obviously falling on the back of valuations falling. And I guess the other sort of point here is where we've been dealing with sort of interest rate increases. It's not a surprise that the financing costs have increased on the back of that. And obviously, by moving the cash position and ring-fencing and putting in place that bank guarantee for the French tax, we've lost our ability to sort of earn sort of an interest rate on that cash. So hence, the interest that it has received has fallen as a result.

Obviously, the net effect is that we have a dividend cover of around 93%. And that's primarily -- the fact that we're not at 100% is primarily due to the fact that we sold the Frankfurt asset, and we've lost the Alkmaar income. And as we lease that up, we expect to move that back to 100% cover.

Continuation of the quarterly dividend. And obviously, that's something that we've done since we adjusted that dividend back in 2023. And that dividend obviously has remained flat, but if you annualize that dividend relative to today's share price, you're getting north of an 8% dividend yield and obviously, that 40% discount that I touched on, given where the share price is today.

So what have we done in terms of over the period? And obviously, our focus has been in terms of how do we look at and asset manage to create shareholder returns. I touched on those 2 significant lease regears that we did, one in Germany with regearing the State of State of Baden-Württemberg in Stuttgart, and then also extending the lease with the Nestlé on Rumilly. Obviously, we've driven rents by between 18% and 20%. So really positive. Obviously, we're moving our attention to how we're managing the vacancy and some of the regears that we have going forward.

The KPN situation. I've got a slide later that I'll go in a bit more detail, but we are continuing to work with the municipality about advancing planning, and that should flow through to a positive impact on value and liquidity. We're still thinking through sustainability. We did those sustainability audits a couple of years ago and the initiatives that come out of that, we're looking to implement as we regear leases and make investments that create a return against that capital that we deploy.

And obviously, we've spent a lot of time with the Board, and particularly, with Phil Redding that I touched on, where we've been reviewing lots of options of what do we do with the company. But at the end of the day, it's fallen on the fact that we believe that the best interest for shareholders is to move to that managed wind down.

Just on the portfolio. Many of you have seen this slide before. Obviously, that's fairly diversified. That is 14 assets, but one of the real positives that we are in that sort of sub EUR 30 million lot size. When we set our stall out, we really focused on 3 key things. One was to be invested in cities that would grow faster than their domestic economies. And that's faster from a GDP and employment perspective and a population perspective. Obviously, some of the key cities here being sort of Hamburg, Stuttgart and Paris, and then some really strong logistics exposure as well. And obviously, also the Berlin exposure that we have from a retail perspective. So that's the diversification. We've got about 34% exposure to offices, roughly the same in industrial, and circa sort of 12% in retail and the rest in alternatives.

Just to sort of add a little bit more flavor on the Apeldoorn position, and we've been running a dual strategy here. And not only have we been trying to sort of find a replacement tenant for KPN, but we've also been working with the municipality. There's really strong interest from them to try and support how we can look at alternate use. And you can see this photo here, obviously, it probably presents a little bit stronger without getting ahead of ourselves. That's a potential design, and that's something in terms of we're trying to work with the municipality about getting this level of scale that would obviously have a positive impact in terms of value.

We're starting to get some interest from developers to take this site. It's a big site. It's 3.5 hectares. It's currently valued by Savills, the independent valuers at around EUR 10.8 million. That includes the remaining income of around EUR 2.4 million. I've said before that I feel pretty confident that we'll outperform once we sell this asset, that number. So pretty confident that we'll do better than that. But certainly, the shift here has moved away from finding a replacement tenant to now actually looking at alternate use given the discussions that we've had with the municipality. And in that regard, we're looking to work with an adviser to start marketing this asset. Ideally, we'll get a little bit more planning support before we formally market this, and that would allow developers to really price an element of floor space with a bit more certainty.

In terms of other asset management and what we're thinking about to sort of tie in with the strategy that we've come out with today. Obviously, we've been successful with Stuttgart and Rumilly. We need to finish off the works that we've committed to there. Obviously, Cannes, this is one where we've had Stellantis, who are looking to depart in September. But interestingly, there's an alternate use angle for this. And again, when we think about some of these assets that we've -- the strategy that we have, we've really looked at not only about in-place income, but what do we do with these assets and investing in areas where there's competing demands for users, and Cannes is a very good example of that. And we're starting to get some interest here not only from sort of showroom, car showroom operators, but also from grocery and also from self-storage. So that's in terms of thinking about alternative use, that's an angle that we're thinking through.

Alkmaar, we continue to work on marketing that to find a new tenant equally. We're starting to think through, are there owner occupiers out there that may take this. And then other regears that we have throughout the portfolio, obviously, to a smaller extent, Utrecht, working with the main tenant, TSC there, about seeing how we can move them to full occupation. And then sort of longer term, thinking through the [indiscernible] regear, trying to bring forward the Rennes regear as well, although that's sort of -- the expiry there is 2030. But trying to see how we can bring through some of these items now where we can create better value and liquidity. And obviously, as I touched on before earlier, using our teams on the ground where we have that strong local expertise and specialism to create this value.

Just on -- without going in more detail, these are sort of the main leases that we're focused on at the moment, and this is a move or a graph in terms of some of those regears that we have coming forward and how we're thinking as investment managers to bring those forward and derisk this expiry and trying, I guess, to create some of that value now and then sell with that longer-term income that plays in with a lot of investor demand at the moment.

Just on investor demand, I think it's important to sort of set the scene, and I know when I last spoke on this seat back in December, we were very much more positive about the sector as to where we were. We had a lot more confidence around sentiment, we started to see a little bit more investor demand. I mean as -- like a lot of investors, a lot of that positivity was taken away with the recent sort of Middle East impact. And for real estate, we really have had that momentum checked. And you can see on the left-hand side that investment volumes have really fallen off for Q1, we're off circa 20% to 40% depending on which region relative to the same period of last year.

Now one of the positives is that what we're seeing is that the demand that is happening is at the smaller lot sizes. And thankfully, that's been our focus. We've always really set our stall out to be focused on the sub EUR 30 million lot size, and that is where most of the exposure or the transaction evidence is happening for the last quarter with basically 80% of the deals have been in that sort of sub EUR 30 million lot size. Just trying to then flow that into how is our portfolio valued across the different sectors and trying to give you a bit of a steer around where liquidity is at the moment.

If you think about the industrial side, it has always been a very, I guess, focused and really highly demanded sector across Europe. We've seen good rental growth. That's coming off a little bit, but notwithstanding we're valued here of a net initial yield of around 6%. That also actually has been diluted due to the Alkmaar vacancy. But that's still a very decent premium to where the 10-year risk-free rate is and around -- if you take the average across the 3 jurisdictions, you're about 3.4%. And interestingly, since I last spoke back in December, the risk-free rate has increased by about 70 basis points. So overall, we've still got a decent premium of around 3.7% relative to that risk-free rate. If you take out the Apeldoorn asset, which is a bit of an outlier, given it's overvalued and the fact that lease is coming to an end, that premium to the risk-free rate is around 2.6%, which is still a decent number.

On the office side, and I think this is probably the area where we're flagging. There's been a bit of a shift in terms of demand, and there's not a lot of transaction activity across Europe for offices, particularly for secondary offices. And that's where the values are having a little bit more of a challenge to try and price that particular sector. And hence, the point around liquidity being a weak demand, and I'll come on a bit later, and I'll talk a bit more detail about the 3 offices that we have.

Retail, we've got the DIY asset in Berlin, continue to be positive about that, given the long-term income and the fact that we're sitting on 4 hectares of land in a capital city that is undersupplied from a residential point of view. The alternative asset is the KPN that I touched on where we're now moving to more of a land value approach and then obviously, the car showroom and the demand that we're starting to see across multiple uses that gives us some confidence around being able to dispose of all that.

So the takeaway here is that we're really positive that we're sitting in sort of lot sizes that are sub EUR 30 million. There continues to be strong demand from an industrial in the living sector and in particular, select retail and also across health care and then actually offices where we're seeing much more polarization. I don't think this will be any surprise to those on this webinar that we're seeing very much a 2-tier approach here where prime continues to see really strong rental growth and good demand. And that's actually the secondary offices where there really is very much a struggle to price that at the moment, particularly given the challenges around how do you sort of price and occupy demand, how do you price where construction costs are going and that sort of exit value given investors' appetite for offices at the moment is relatively weak.

So just a continuation on the office side and honing in, and that occupier comment that I made. We sort of compared here the 12 months where we were last year and sort of how you can see here where vacancy rates have changed in the submarkets that we're invested. So if you think about the Southern Bend in Paris, where our Saint-Cloud asset is. We're starting to see vacancy rates sort of increase now into that sort of higher teens. Notwithstanding, we're seeing good rental growth from a prime perspective, but certainly secondary is suffering. And I've commented before about the office asset that we have. We leased off rents here of low EUR 200 a meter.

We invested in this asset because of the transport infrastructure that was going to be improved here. That's been delayed now to 2030. We've had some good positivity in terms of leasing up this building, but notwithstanding we're in a submarket where vacancy is increasing. So that's one of the challenges and the backdrop that we have in terms of managing this particular asset.

Thankfully in Hamburg and Stuttgart, the vacancy levels are not to the same degree. And I've said before that Stuttgart is one of the strongest office markets and has the record lowest level of vacancy in the whole of Europe, and that is testament obviously to how we've been able to regear the state of Baden-Württemberg and start to see some rental growth there. And equally, in Hamburg, although vacancy is starting to creep up a little bit, rents are still relatively low. Prime rents obviously increasing. And to put it into perspective, we're leased off sort of rents of around EUR 14 per square meter per month. So still a bit of a discount to where prime is, but notwithstanding, we're very much conscious that there still is some occupier headwinds in terms of maintaining that full occupation that we have both in Hamburg and Stuttgart. And I guess, overall, just how do the valuers reflect this risk and how does that flow through to how values are presented from a NAV perspective.

Obviously, across the portfolio, we have the benefit in Europe here of annual indexation. That's very different to the U.K. where it's typically 5 yearly to market. And as we've seen sort of inflation starting to increase across the regions. So we're looking at sort of mid-2s over the next couple of years. The rents will continue to grow on the back of that. We're trying to move leases, particularly in Germany, where we've had this hurdle and had to wait for the compounding of inflation before you get your increase. We're trying to move leases as we've done with the State of Baden-Württemberg to annual indexation. So that's a key part of our asset management play to try and bring forward that growth in a stronger fashion.

Just on debt, I know I commented that, overall, we've been a modest user of leverage across the portfolio at the moment, gearing levels that are around sort of 27%. You see here that we do have some refinancing to do this month. Positive that we are about to sign an extension with the existing lender. This is on the Berlin DIY asset. So that will extend that lease. That will also obviously allow us to implement the new strategy whether we have. And given this asset is a long-term lease to one of Berlin's leading -- sorry, one of Germany's leading DIY specialists in Hornbach, we think there's going to be strong demand for this particular asset when we look to sell that, sort of extending that debt for just over a year ties in well with that strategy.

And as I touched on, as we sell assets, we'll be looking to redeploy or deploy that capital into repaying that debt. And together with obviously making distributions back to shareholders at the right time. Obviously, this is all subject to getting investor approval when we go to the general meeting.

It's obviously sort of priorities, and the shift has really much been to this new strategy now. And obviously, we need to take that to the shareholders in order to commence that orderly wind down. We've got 14 investments in some really strong parts of the European market. So we're confident in the majority of the portfolio in our ability to sell those. Obviously, we are conscious of the market backdrop and the challenges that I've talked about. Hence, that sort of 2- to 3-year period in order to allow us to implement the asset management initiatives that we have to maximize that value and liquidity. Obviously, income continues to be the priority and regearing those leases that I talked about earlier. Obviously, those proceeds will be used to repay debt before we make distributions and very much looking to the Board is looking to continue paying a dividend to shareholders given how important, particularly for private investors and wealth managers that are a key part of our register. And obviously, maintain our investment trust status.

But I think in terms of that sort of 2 to 3 years, and I know for some investors that may see a longer period to be implementing this strategy. But I think we are conscious and the Board is conscious of that market backdrop that we're working behind. Obviously, we're starting to see a little bit of positivity in some of the discussions around the Middle East. Obviously, that's not completely certain, and it will take a little bit of a period before that rolls through and then also before investors start to think through redeploying capital. Obviously, we know where rates are in obviously, recent increases across -- sort of from the ECB, and really once we start seeing rates to stabilize, that will give investors a little bit more confidence to come back and enter the real estate sector and obviously start to see investment volumes start to increase again and give valuers and us a bit more confidence around value and liquidity.

We'll be making announcements and updating shareholders throughout the process. And obviously, the next point will be to sort of get the circular out to you and the changes to the articles in order to facilitate this change in strategy and then convene that at general meeting which, at the moment, will probably likely be for the middle of August.

So I'll stop there. There's probably a lot that to digest. There's quite a bit of material that James touched on that we've announced that's been downloaded. There's probably some questions that are coming in, and happy to answer those, James. Thank you.

Brilliant. Thanks, Jeff, and thank you, everyone, for sending in your questions. As Jeff said, we've had quite a few come in. If you'd like to keep sending them, please do. I'll ask Jeff as we go through.

Jeff, maybe just picking up on a couple of the key themes. One that's coming out is, and you've just mentioned it there is the time line for disposals. I think 2 to 3 years, Jeff, is what you've guided to in the RNS.

A couple of questions here about what influences that time line? Is that a set time line that you're working towards? Or is that -- could it be shorter? Could it be longer? How are you thinking about it?

I think we've always been transparent, James, with investors and being realistic here and sort of understanding the backdrop that we are disposing into. It's challenging.

Now there are certain assets that we've got much more confidence that they're much more liquid and we'll sell at really strong pricing and relatively quickly. But we're conscious that there's some assets that we have to do more asset management on that will not only improve or maintain value, but actually improve the liquidity. And I think you've probably picked up that the office side is probably the one sector. That's not just what we're facing, but the whole sort of global sort of investor allocation to offices that there is questions around where values are, and values are sort of having difficulty because there's not that evidence in terms of transactions to give them a very clear view around value. There probably is and there is from an occupier point of view at the prime end. But if you think about sort of that secondary, it's a much harder and valuers are really valuing on sentiment.

So that's probably the area where we need to do more asset management and prepare those assets, those offices for sale and hence, why that sort of 2- to 3-year period to implement. We're obviously conscious also we've got the French tax that we're managing as well, and that sort of gives us time to manage that and to not be put into a position where we need to be doing something there. So I think that's appropriate to set that time line of 2 to 3 years to do not be seen as a force for seller and actually manage that asset management that we have in our mind.

Brilliant. And so the obvious follow-up question there is then what are the assets you think you can sell more quickly and start returning capital to shareholders? I appreciate you might not be able to give specifics here. It might be commercially sensitive information, but can you share any?

Yes. I mean I don't -- I mean I think we -- as I said, we're very transparent in the information that we've given investors. And you can sort of think, well, actually, some of the asset management that we've already done, Berlin is a really good example where there's probably not more -- not a lot more that we can do there, where you've got long income to Hornbach. You're sitting on sort of 4 hectares in a capital city. I would like to think there's quite a number of investors that would want to be looking at that particular asset. So that's a good example.

Rumilly is another one where we've done the lease regear with Nestlé. We're just finishing off the works that we need to do there. So there's -- that's probably right for selling earlier. Similarly, we have a smaller logistics asset in the Netherlands in Houten. Again, fantastic covenant in there, really strong location. That's one that certainly would expect to see demand.

So those sort of industrial, the alternatives, obviously, you talked about Apeldoorn as well. We continue to have the good discussions that we have within municipality towards the end of this year. And if we get the, obviously, the support from investors for this strategy, that's another one where I would actually expect that, that's an asset there that we could sell sort of sooner rather than later and tap into the demand that we're getting from developers.

And again, sort of another follow-up question here that's coming through around the disposal strategy. We've outlined here in the presentation and in the announcements around the intention to sell specific assets over time. The question refers to what -- did we also discuss whole portfolio sale? What's the pros and cons of both?

Yes, we did. We went through, and that's one of the options that I sort of talked about that I've been working with the Board and in particular, with Phil Redding. He's offered his experience and how relevant he is, given he's sort of come -- recently come from running Tritax Eurobox and being through this process. So yes, heavily debated. And one of those options was, well, look, is there an ability to sell the overall portfolio. And yes, there is, and there would be demand, but we think that the pricing in terms of the capital is there to take the portfolio is much more opportunistic private equity and their cost of capital at the moment is much higher. And therefore, the price would be not comparable to what we believe and the Board believes that we could achieve by selling individual assets or grouping a couple of assets together and going through an orderly managed wind-down over that 2- to 3-year period.

Makes sense. There's a question here, which I think we're probably not going to be able to give guidance on because it's specifics around whether you think that you'll be able to achieve NAV in these sales. And I don't think you're going to be forecasting potential NAV and distribution at this point, it's too early. But just maybe give a feel for how you're thinking about generating value and how shareholders should expect this process to look from the values that you achieved?

Yes. I mean I think the valuers are still getting their heads around the Middle East and backdrop that we're dealing with at the moment. So I think it's probably fair that some of these values will come out with June values soon that some of these values will, particularly for offices, will come off a bit. And that's probably the one sector, being a diversified investor, that's the one sector where there is that question mark just given there's not that evidence for the valuers to work on.

So yes, we need to be actively and we are. If you take Saint-Cloud as a good example where we've reduced the vacancy there from sort of high teens to down to about 9%. So continuing to work with our local asset management teams on the ground and our advisers there, our relationships that we have with occupiers in that building to not only obviously maintain and sort of regear those leases, but try and move that vacancy down a bit more. Obviously, the slide earlier that I touched on is that the context of where that asset sits. It's in a submarket where vacancy is now 16%. So we're outperforming with vacancy here. But that's all going to flow through to, not necessarily value creation, but certainly, in our mind, improving the liquidity for the asset. And that's obviously our biggest asset in the portfolio. So I think that is one asset that will probably take a little bit longer to sell.

Equally, Stuttgart, we've done the regear with the State of Baden-Württemberg. There's another tenant in there that wants to commit. So we're in the process of regearing that lease to time with the State of Baden-Württemberg. So once we've done that, that's certainly an asset that we could sell sooner. Hamburg is fully leased. We'll be looking to regear that multi-tenanted structure that we have there and then look to sell that. But again, that's probably going to be sort of an 18-month to 2-year period. And really, the other assets is as we regear as we finish off some of the works that we want to do and present those assets in the best possible light for a sale.

I mean the smaller asset, this is an interesting debate, just to share with everyone that the asset that we have in [indiscernible] interesting at the moment is the device we're getting, there seems to be a bit of demand from investors to actually step in and take the leasing risk because of their view on where market rents can go. So actually, that may be one where we think, well, actually, let's not hang around and regear that lease in 18 months to 2 years' time. But actually, let's -- if we're getting the right pricing, we might actually think about selling that earlier.

So they are the things that we're weighing up, and I've been working with the teams and getting their input and we're all on board around how do we maximize value and liquidity to now implement this strategy. The Board has also been out to see the assets, have taken Phil to see all the -- nearly all of the assets. So he's got a really strong understanding of what we're looking to do here and the strategy that we're looking to implement to tie in with this managed wind-down.

And also another good question here around how you're thinking about managing CapEx versus distributions versus overall cash management during this wind-down period?

Yes. So I sort of opened up, and we've been, I guess, a manager of the sort of the corporate pretty prudently and we've retained sort of that capital, took a EUR 25 million. And obviously, as you sell assets, we'll use some of those proceeds if we need to be investing in the assets to manage that CapEx program.

To be honest, the CapEx program is not enormous. It's not as though we're going and doing a redevelopment of KPN to do a residential construction. We're not changing the use like we did many years ago, that successful repositioning that we did in Paris, where we took a EUR 40 million office building, invested EUR 30 million and sold it for EUR 100 million. We're not doing that. There's no other assets that are there to do this. I mean we may think about, so the asset that we have in Cannes whereby if we continue to see demand from a self-storage point of view, we may think about it could make sense to invest a couple of million to change the use of that, bring in an operator and sort of sell with that in place. But equally, we'll weigh that up with, actually, do we sell now to a potentially a self-storage specialist if we get the right pricing.

So they're the type of things that we will manage and obviously conscious of what capital that we have and that goes into our decision-making. But very much as we sell assets, we'll be conscious of what capital do we need. And if we don't need that, obviously, that will be used to repay or prepay debt or distribute back to shareholders.

Makes sense. We've answered quite a lot of questions here around the proposal around wind-down, which is obviously expected given that news coming out just this morning. If we haven't answered all your questions on that, please do bear with us. I'll come back to some of them if you think we have missed something, please do send it through, and I'll make sure I ask Jeff before we finish.

But there's just a couple of other areas that I just want to touch on because they are coming up, a couple of questions around French tax. Just is there anything that you could give to shareholders around the time line that you're expecting on that?

Yes. Look, it's before the French sort of early start of the litigation process. There's a -- and without sort of naming other listed vehicles that are facing the same challenge, there is another large listed company that is a lot further ahead than us whereby that could create some news. So we're waiting for what impact that has. I think the positive here is that we've ring-fenced the capital for that in the event that it wasn't to go our way. Obviously, all our advice is that we shouldn't be providing for this because we have a robust structure and we have abided to the [ SEC ] requirements from a tax perspective.

So I can't give any more color other than we continue to dispute this. But certainly, as we get more information, we'll advise the shareholders. But certainly, I would like to think over the 3 years that we'll be in a position to manage that.

Great. Thanks for the extra detail. Just a quick question from one of our listeners here on KPN and just around how income is going to be impacted when KPN vacates and potential dividend payments around that?

Yes. We've been very, very clear for some time about the KPN position i.e., they represent 20% of our income. So it was always going to have an impact on our dividend cover and potentially dividends. So certainly, the Board, and I've made a comment in here, the Board intention is to continue paying a dividend through this process. We're not sort of giving any direction on what that dividend is. And obviously, that dividend will change as we sort of return capital to shareholders over that period as well.

But what may happen is that the dividend cover losing KPN may fall if the Board were wanting to continue with the same dividend. And that's -- you don't have to be a genius to sort of work that out. But obviously, the position slightly changes where if you are selling assets, you can and you will have that capital to be able to pay a dividend going forward. Together with the income that we have from the remaining portfolio and obviously touch income being key and how we're regearing leases and obviously inflation benefits that we have that, that's sort of helping sort of grow our earnings as well. So I can't give any more specifics around what the dividend will be. But all I can say is that the dividend cover will naturally fall as a result of losing KPN.

Just one macro question that's come through here that's important to touch on because I think it takes back into sort of the conversation around making sales and disposals in the portfolio. The question actually refers to the slide you showed, volumes coming off around 20% to 40%, I think you said. What needs to happen for that to start to turn around again? Obviously, it has implications for the disposal strategy and values that can be achieved going forward? What's your general feeling and thoughts around what needs to happen?

Yes, I think, I mean, I think -- and we talk about, obviously, there's a lot within sort of real estate here and with our investment committee. And I think a lot of the institutional and a lot of investors are sort of sitting on their hands at the moment. And if you think about actually alternative risk-free returns are pretty positive. So on a risk-adjusted basis, it sort of makes sense for investors to be sitting in yields or appropriate sort of sovereign risk.

So naturally, if rates start to come back and fall again, the focus is then going to come back. Well, actually, real estate is looking attractive again. And you can see here the premium. And I'll talk about the 2.6% rather than 3.7% because that includes the KPN. But at 2.6%, that's still an attractive premium to where the risk-free rate is. And if we start to see that falling, and as you know, here, it's increased 70 basis points since I last sat on this sofa 6 months ago. So if that starts to fall again, that premium will head back to sort of 300 basis points.

Now historically, real estate is traditionally at the prime end being sort of around 200 basis points. So I think we are sort of valued at a reasonable premium. And I think what needs to happen, we start to see rates falling. We start to see growth coming back. Obviously, we need some of these geopolitical risks to abate to give investors a bit more confidence to come back into the real estate market.

So they are the sort of 3 or 4 things that we're thinking through that would have a positive impact. Obviously, we're at the smaller end in terms of encroaching on private investors, sort of family offices, propcos. Equally, there are probably vehicles that aren't heavily levered. So the interest rate point probably not to the same degree. So it probably lends itself more to all how do they think about sort of alternate use on some of these assets? How do they think about transport infrastructure changes or competing demands for users? Saint-Cloud is a really good point where the transport infrastructure won't come for until 2030 now. So we're selling to an investor that will benefit from that.

So they're the type of things that are much more micro related to that sort of asset that will probably have a bigger impact on value and liquidity as well. But I think from a macro point of view, those 3 or 4 points that I touched on being around just sort of general geopolitical risk impact on interest rates, obviously, where inflation goes and obviously, our leases provide a natural hedge for that, but also just general economic growth.

And also from an office point of view, how occupiers start to return back to offices, and we're starting to see sort of that slowly where businesses are appreciating and understanding well actually having teams in the office, it creates much more productivity. And that will sort of have a positive impact on the occupation markets for offices.

Brilliant. So I'm taking you full circle now back towards the announcement around the wind-down. One of the questions that's just come through is around manager incentivization through that period, just particularly thinking about alignment of the manager to shareholders through the sales process. Can you give a bit of color on that?

Yes. So we've made a comment in the announcement that we are in discussions with the Board around changing our investment management to align us in a more appropriate way with this new strategy, and that includes aligning sort of senior management team as well. And that's something that will be detailed in the circular for investors to vote on.

Brilliant. So we'll keep an eye out for that. Maybe just chance for 2 final questions because we're coming up to time. If you have any other questions, send them in now and I can try and fit them in. This is actually just a more specific question around the Apeldoorn site. Just a point being made around the quality of the housing around the Apeldoorn site looks to be sort of maybe lower quality. So how are developers thinking about price, quality of the potential accommodation that could go in there?

Yes. I mean it's -- I don't think it's fair to say that it's low quality, I mean it's some fantastic new resi development sort of 500 meters away, across the street is some lower quality. It's medium density, lower quality, yes, but within the greater surrounds, there's some really nice across a range of low density, high density residential. It's actually a really nice neighborhood now.

Some of the master planning that the municipality has and this has actually come from that is there's a sort of waterway that they're really keen to try and develop from the city center towards where our site is to promote residential and high-density residential living and obviously, with that a cross-section of services as well.

So this is something that the municipality is very keen for this site to be rezoned to cater for this. And hence, why we've, I guess, flipped our focus to work with them, and we see better value in that now from an underlying land value perspective. So obviously, I think this photo probably present it in a really positive way. Whether we get to that or whether a developer gets to that, it's still subject to planning, but that sort of just gives you an indication of the potential scale that could go on this 3.5 hectares.

So yes, I don't think the comment to sort of say it's low quality residential is fair because there is so much sort of newer development, both from a single sort of residential through to medium-density housing within sort of 500 meters at the site.

Brilliant. And so maybe just a final question here, just a couple of similar questions coming through around when first capital distributions might be expected?

Yes, it's too early to give you any indication on that. And that's obviously going to be dependent on the sale process as well. So that's something, as I touched on, we will be updating shareholders as we go through the process. But it's a bit early for me to comment on that specifically.

Brilliant. Well, that's all the questions. So hopefully, we got through all of your individual questions. Thank you very much for sending those in. And that's all we've got time for this morning. So that just leads me to say thank you to Jeff for the presentation and answering the questions. And thank you very much to our listeners and shareholders who have dialed in this morning, and thank you very much for your input and questions. We really do appreciate your support for the trust and the questions this morning.

So please do keep an eye out on the announcements going forward, there's obviously going to be a circular. There's lots more detail to dive into in the annual report. But that leads me to say thank you for joining and speak again very soon, I'm sure. Goodbye.

Good morning. Thank you for joining us for the annual results for the Schroder European Real Estate Investment Trust for the period ending 30 September 2025. I'm Jeff O'Dwyer, I'm the Fund Manager. I'm joined by Rick Murphy, the finance manager. Just a little bit of housekeeping to start with. You should be able to download the annual results, including the annual report and this presentation on your screen. Secondly, we welcome questions. There's an opportunity for you to answer -- ask questions. We'll answer those at the end of the presentation. And then finally, we welcome any feedback, and there's an opportunity to give some feedback on the website.

Just dealing with a number of the points that we want to sort of touch on, I will address the key factors currently influencing the share price and also the market perception of the European REIT before I'll hand over to Rick to run through the financial results. My main aim is to outline the main issues affecting the business and to explain how we, as a team, are responding to protect and enhance shareholder value. Turning to the two sort of key points, one being KPN and the other 1 being the French tax. This week, we received verbal notice from KPN in terms of their intention to terminate the lease at the end of December 2026. That's in relation to the Apeldoorn mixed use data center. It's a risk that we previously highlighted and one that is likely to impact the current dividend.

I'll present later, our ongoing initiatives to mitigate the risk as we seek to either secure a replacement tenant or look at achieving sort of planning approval to maximize alternate use and value for the asset. In relation to the French tax, the claim continues to go. We continue to dispute that. We don't believe it's payable. However, we've made the prudent decision to ring fence approximately EUR 14.2 million and the bulk of that we've put into a bank guarantee. Obviously, this limits our ability to use that capital to look at new investments and really until that matter is resolved.

We're currently in a window of 6 months in terms of working or disputing with the French tax authority. If our claim is dismissed, we will continue to pursue this and that will then move into a court process, and that could take a couple of years to resolve. Moving through to some more positive news and obviously, things that we can control over the year, we're very much focused on the asset management side. Obviously, the backdrop in terms of market backdrop although it's improving, we can't control that. But positively, we've been able to sort of secure 10 new leases and regears covering just over EUR 2 million of annual rent.

And we've actually increased the unexpired lease term on that to 11 years. And the bulk of that is really to do with the Berlin, the Hornbach lease that we have there where we've extended that for 12 years. We're in advanced discussions on a number of other leases and I hope to come out with some really positive news over the next 3 months as we sign those, and I'll talk a bit more detail about those in a minute.

Post period end, we secured some further leasing success in the Paris asset, and we've moved occupancy to 97%. And through the year, we made a decision. And this is really once we achieve full asset management on an asset, we look at rotating and selling out, and we did that for the Frankfurt retail investment. So we've reduced our retail exposure. We've used those proceeds. We sold that at value. We've used those proceeds to reduce debt and to implement an accretive share buyback program.

I'll stop there for now in terms of the key points. I'll hand over to Rick to run through the financial results.

Thanks, Jeff, and good morning, everybody. So turning to the financial highlights for the year ended 30th of September 2025. And beginning, first of all, with the financial position of the company. We can see here that as of the end of September, the company held around EUR 28 million of cash on its balance sheet. And we feel that as we move towards 2026, this gives the company a strong foundation and flexibility, whether that be the French tax item that Jeff just spoken about or other matters as we move into next year.

From a gearing and debt perspective, the company has a modest LTV net of cash of around 25%, 29% gross of cash currently with 5 loans. The next refinancing is not until next summer. And then after that, not until the back end of 2027. From an earnings and dividend cover perspective, dividend cover of 94% for this financial year versus 103% for the prior financial year. And that reduction in part was due to a sale of an asset in Frankfurt back in the spring, back in April. But noting more widely that the earnings of the company continues to be underpinned by not only the inflation-linked income of the property portfolio and very strong rent collection rates, but also very high occupancy at 94% at the year-end and obviously ticked up since then with that leasing success, as Jeff just mentioned, post year-end.

From an IFRS profit perspective, pleasing to be able to say that's increased, so EUR 2.2 million for this financial year versus EUR 0.6 million for the prior financial year. And that in part fed into the performance. So again, pleasing to be able to say that NAV total return of 2%, up from 0.5% for the prior financial year.

Just a reminder that back in January 2025, the company initiated its first buyback program of its shares. During the financial year, we've invested EUR 1.8 million to acquire 2.3 million shares at an average price of EUR 0.66 that the company has acquired those shares back in at. And just as a comparison, the year-end NAV per share was EUR 1.04. And then just finally here, just a reminder again around the contingent French tax liability disclosure, EUR 12.2 million tax, EUR 2 million penalties and with post period end, EUR 12.2 million now being moved on to a French bank guarantee.

Moving on to the next slide. Here, we can see the NAV bridge. So we opened up at EUR 164.1 million or EUR 122.7 per share. And we closed up at EUR 156.7 million or EUR 119.2 per share. And just starting off from that top block, we can see unrealized valuation losses of EUR 2.3 million in the financial year. So assets such as Venray, Rumilly, Houten, Utrecht on the industrial side have done well with positive increases. That's been offset in part by the mixed-use office assets in Apeldoorn, Netherlands as well as some of the office assets in Saint-Cloud, Paris and Hamburg.

With regard to transaction costs, small amounts invested with regards to disposal of Frankfurt of EUR 0.2 million, EUR 0.8 million was invested with regard to CapEx across the portfolio in the financial year. A small amount has come through for Paris BB of EUR 0.2 million. This was a historic sale back a few years ago, and there remains a maximum of EUR 0.4 million of post-tax profit to potentially come through in 2026. EPRA earnings of EUR 6.7 million, noncash capital items of EUR 1.2 million. That's largely capital taxes, deferred taxes, taxes paid on the Frankfurt sale as well as movements in interest rate caps as the Euribor rates has trended down over the financial year.

Just with regards to the share buyback, here, we can see that EUR 1.9 million invested. And in that percentage column, we can see how that's really contributed to performance. So 0.4% of that 2% NAV total return coming through that line. And then just finally, dividends paid of EUR 7.9 million, all at EUR 1.48 per share in the financial year.

Moving to the next slide, we can see EPRA earnings pre-exceptional items. These were EUR 8.2 million for last year and EUR 7.3 million this year. And just moving through some of those larger movements, we can see that rental income has fallen post the disposal of the Frankfurt assets back in April. And property operating expenses have ticked up a little bit in part due to service charges and in part due to noncapital repairs and maintenance invested during the financial year.

Good to see that the fund costs in the rounds have fallen, but these have been offset by a fall in bank interest start of the year, Euribor rate was 3.3% and finished at around about 2%. So all in all, we can see that 94% dividend cover for financial year 2025. And we just built it out at the bottom of the footnote what some of the exceptions are with regard to historic service charge and tax items as well as professional advice in France with regard to the ongoing discussions with the French tax authority.

And then just moving to the dividends. We often share this slide with regard to the last few financial years. We can see that dividend cover was 89% for year ended 2023. That was post the sale of Paris BB as some of those proceeds were then reinvested. And we can then see that fully covered dividend of 103% last year and then the 94% dividend cover for this year, as I say, mainly driven by the disposal of that Frankfurt asset back in the spring.

And with that, I'll pass back to Jeff to go through the property portfolio.

Thanks, Rick. Just touching on -- many of you have seen this slide before. I won't go through in detail each asset, but just to sort of show the diversification that we have, we've got about 35% allocation to the industrial sector, 35% to offices, around 15% to retail, circa 9% in alternatives and the rest in cash. You may recall that the strategy has always been to focus on growth cities. So from a macro point of view, picking those cities that will grow faster from there from a GDP or population or an employment perspective relative to their domestic economies. And then from a micro point of view, using our teams on the ground to identify submarkets that will benefit from transport infrastructure changes where there's competing demands for users and fundamentally just buying buildings leased off affordable rents.

And you'll see that later, particularly on the office side, where we have focused on office buildings that are in really strong locations and affordability is key. So they're accessible locations, particularly given the Stuttgart asset and the Hamburg asset that are leased off affordable rents. Just to sort of do a bit more of a deep dive into the Apeldoorn asset and KPN. So KPN have verbally given their indication that they will terminate at the end of 2026. It was always a risk that we had flagged. The positives around this particular asset is that it sits on 3.5 hectares of land. It's a mixed-use data center and office building. You can see in the photo there that it is quite a large investment. it's quite unique. It's not going to suit every particular occupier. It is over-rented. So the current rent that KPM paid today is about EUR 3.2 million. Market rents vary in terms of from EUR 1.8 million to early EUR 2 million.

I mean our view is slightly stronger than that EUR 1.8 million. As I said, the lease expires at the end of next year. So we've got just over 12 months to seek either an alternative tenant or look at other angles. Just from a valuation perspective, and I think this is a really important point that the valuers are valuing this prudently, and they're saying, okay, we're going to take the remaining income, so circa a year and 3 months. So the latest valuation is at the end of September. So you've got 3 months of this year plus next year. So that's roughly EUR 4 million in income and then the residual land value. So that's why they're getting to a value of around EUR 11.8 million.

We think that's a prudent way to value this, particularly given the news that KPM have come out with. It's been a good performer, obviously, being a very strong income generator for the trust. It's an asset that's unlevered, and that's helpful, particularly given the opportunity that if we do sell this asset that we can actually lever that up and redeploy. So what are we doing now as a management team? We're doing and managing 2 streams here. One is to seek an alternative user. And in that regard, we are having some discussions with some tenants. And there's actually an inspection happening in January. That's the -- probably the preferred strategy is trying to find an alternative occupier to step in and take the space.

One of the things that we are working around that is power is quite key, particularly for a data center. So we're trying to sort of get access and be a party to the power agreement there. At the moment, it sits with KPN. But that's key for us in terms of being able to seek another data center operator and do a lease there. So that's what we're working on, on that side. And then the other side is really working with the municipality. They're very keen to see this site rezoned and move to accommodate residential planning. They've given us a letter of comfort and support to do that. So that's helpful in terms of if we were to go down the route of selling to a developer. So we're trying to advance at the moment and work up a scheme from a residential point of view that a developer could price.

We're starting to get some interest from developers, which is positive. And obviously, if we were to go down that route, it creates an opportunity for us to then use those proceeds, gear those proceeds up given the fund gearing is at 25% and then redeploy that capital and then move earnings that way. So they're the 2 angles that we're working on. I appreciate that it's going to take time to do that. And hence, why we have flagged that the dividend is likely to be impacted. And it really -- as to the magnitude of that impact, it depends on, one, the rent that a new tenant may pay or secondly, if we were to sell the asset, the value that we would sell that for and then how quickly we can redeploy that capital.

Just dealing with a little bit on the market side of things. And obviously, we're starting to see a little bit more demand and a little bit more positivity on the investment volume side of things and in particular, around the lot sizes that we have focused on, and that's the sub EUR 30 million lot size. You've seen here that most of the activity really centers on that. So circa 60% of volumes are in that sub EUR 30 million bracket. And I think there is a bit more positive that we'll see for Q4 numbers when they come through where we are now seeing vendors meeting the market, reducing their expectations around pricing. And therefore, we're seeing volumes improve. Obviously, the backdrop in terms of lending environment has improved as well, where rates have come down and margins have come down, that's helping to sort of facilitate a little bit stronger sentiment on the investor side.

And then the backdrop in terms of economically, there is sort of positivity in terms of growth for '26, '27, particularly in Germany and the Netherlands that is also creating more attraction on the investment side. How does that flow through to value in terms of how the portfolio is valued? And I've broken down the values here across the different sectors. You can see here that the industrial sector is valued at a net initial yield of 6.3%. Obviously, we can get debt against the portfolio. You think about the swap rate at the moment, the 5-year swap, the Euribor is around 2.3%. And if you're adding in a margin that can sort of be anywhere from 1% to 2%, your debt is still highly accretive when you're coming in off of these sort of yields. Our office exposure is valued at a net initial yield of around 6%.

And again, the allocations that we have there is in Hamburg, Stuttgart and Paris. Retail is the Berlin asset where we've just regeared that lease. So we feel really comfortable around that asset value being valued off a 5.5% net initial yield. The data center that I talked about being KPN and then obviously, the car showroom in Cannes. If you strip out the data center, the yield premium that you see here, that 4% above the average 10-year risk-free rate falls to 3%. So it's still an attractive level of cover above that risk -- the average risk-free rate of 3%.

So therefore, giving us comfort that from a valuation sense, we feel comfortable in terms of our ability to achieve those values should we need to offer those to the market. Just on expiries and some of the positive things that we're doing here, I touched on these are things that we can control and how we are advancing discussions, particularly with a number of the leases that are expiring over 2026. There's roughly just under 20% of leases that we're in advanced discussions on regearing, and that's centered on Stellantis, on the State of Badenwürttemberg in Stuttgart, on Hachette in Nantes and then on Nestle, which is Cereal Partners in the Rumilly asset.

So hopeful in the next 3 months, we have to come out with an RNS around this. I won't give any detail on where rents are, just given where we are, the confidentiality and how key the period is in our negotiations. But what I can say is there will be some positive rental increases that we will be able to drive forward. We're going to invest in some of these assets as well. So that's helping us to move the rents on as well and try and improve the quality of the portfolio, and that's something I've talked about in the past.

And again, that will enhance the liquidity of the assets and value going forward. Just a little bit on office markets. We are continuing to see a real sort of polarization in terms of the performance of office markets in the cities that we have exposure. If you think about Paris, we're seeing really strong rental growth in the city center and vacancy rates really tight. Secondary markets Paris are different, and that's a common theme across most European cities. So vacancy rates are starting to increase for secondary locations. Now we are in the southern bend of Paris here. Positively, we are seeing some really strong tenancy demand. The vacancy rate for the asset that we have is about 11%. So we're actually outperforming the submarket there.

The other positive is, and I touched on before about buying assets that are leased off affordable rents, the rent in Paris for us is around EUR 200 a meter. Now it's not the primest asset, but it is affordable and it's accessible. And the reason we bought that asset is also because of the transport infrastructure changes that are coming through, there will be a new train station at the end of 2030. So we expect to see rents and demand grow on the back of that. Now we're seeing prime rents in Central Paris grow extensively. And you can see here that over the year, those prime buildings have increased rents of around 20%. So some phenomenal rental growth for the city center.

Similarly, in Hamburg, I mean, we're located one stop from the city center. We're in the city submarket. Prime rents there are around EUR 22 a meter, where to put that into perspective, we're leased off around EUR 14, so a real discount to where prime is. It's a B-grade building. It's a fully leased building. We've had some strong success in delivering rental growth there. And equally, in Stuttgart, we're now seeing sort of prime rents. We're located in the city center, prime rents there of around EUR 37. We're leased off rents of around EUR 15.50. Again, it's a C- grade building. We've got the State of Badenwürttemberg in there. We're in advanced discussions about securing a new long-term lease with them and moving the rents on accordingly.

So just gives you a bit of a flavor of the submarkets that we've been working on and some of the success that we've had on the office side. Obviously, Rick touched on in terms of the strength and as a diversifier, European leases are very different to the U.K. Obviously, we do get the annual indexation coming through. Germany is slightly different where you'd have to wait for a hurdle. Typically, it's once the compounding of inflation. And once you get to that 10%, you can then implement the full indexation. But it is a real benefit for growth and particularly for the French and the Dutch leases where they are annually indexed. We're trying to move some of the German leases to annual indexation as well, and that's something they're working with. As an example, the State of Badenwürttemberg, we're moving that lease to annual indexation.

And looking forward, if you think about sort of where sort of forecast, we're using Oxford Economics here, but their forecast roughly for '26 and '27 for indexation to move around 2% for each of the markets. Just on the debt, I mean, I feel really positive about where we are and why we actually made a disciplined decision probably 18 months, 2 years ago to be prudent and run a balance sheet that was -- had very, very low LTV. It's putting us in a really strong position to deal with some of the headwinds that I've touched on. The next debt or expiry that we have to deal with is in Berlin, and that's the middle of next year. At the moment, that lease -- that asset is geared to 30%. So I feel really comfortable about that position and finding -- and refinancing that.

We've already had some offers come in from lenders to refinance and deal with that risk. Obviously, the cost of debt across the portfolio blended is about 3.8%, and we've got a duration of around 2.3 years. And if we extend the Berlin asset, obviously, you'll see that increase. So just sort of dealing with the priorities as a management team now going forward, heavily focused on delivering and securing those sort of 4 leases that I touched on, that represents about 20% of the income. And as I said, over the next 3 months, we hope to sign those and we'll come out with an RNS and being able to sort of show how we're driving rents on as a management team.

KPN equally spent a lot of time with our Dutch team around how we're going to derisk that. And I talked to you through the 2 sort of strands that we're working on and trying to drive that. It could go either way. It could go, i.e., we have success and we find an alternative tenant and we replace that income or if we don't go down that route and we continue to get planning approval, we'll go down the route of a sale and then redeploying capital. The French tax will continue to monitor and challenge. And as we get some news from the French tax authorities, we'll advise the market.

Last week, you may have picked up that we announced the appointment of Phil Redding to the Board. Phil will work alongside the current Chairman, sir Julian Berney, until the Annual General Meeting in March. Phil brings significant and relevant experience to the role, having recently served as the CEO of Tritax Eurobox Plc. Phil also has an extensive career at SEGRO and a very strong industrial background as well. So I'm looking forward to working with Phil. We're going to give him some time to understand the portfolio to go and see the key shareholders, and then we can sort of look at reshaping the strategy for this vehicle.

Equally, really I would like to thank Julian for his time and obviously, his significant contribution over the last 10 years since the IPO. And Julian will obviously stay on through to the AGM in March of next year. And this is something on the investor side, this is something we continually to sort of work through and try and broaden the investor base. It's become very much more of a retail focus and some of the wealth managers that we're working with, we've had some sort of positive and some new entrants into the register. And that's certainly a focus that we have in here with the marketing teams around trying to sort of broaden and really bring on and target the retail investor to going forward.

I won't go through this in detail, but I do fundamentally believe that where the shares are priced today, I mean, looking at share price this morning, we're at sort of EUR 0.63, EUR 0.64. That's giving an investor a dividend yield of around 8.2%. It's a discount to NAV of around 35%. I do think that, that discount and that yield profile reflects the risks that we have around what may happen to the dividend. And then it certainly doesn't reflect the positivity that we have in terms of our management expertise, the assets that we have on the ground, the cities that we have exposure to and the growth that we believe that we can deliver, not only in terms of shoring up income, but also value in terms of some of these regears and repositioning of the assets and really driving shareholder returns going forward.

So I'll stop there. I think that's quite timely in terms of just being under 30 minutes, and happy to answer any questions if any next come through, Rick.

Yes. Thanks, Jeff, and thanks, everyone, for your questions that you submitted so far. We'll do our best to get through these in the remaining time. So thank you for those. Jeff, you opened up around some of those 2 big items currently facing the company, we've got a question here around Apeldoorn and just maybe a bit more on the timings. So you talked through some of the options, the optionality moving to 2026, but maybe a bit more around the timings and maybe decision-making for next year.

Yes, happy to. I mean the 2 strands -- we should get the slide up, the 2 strands, I mean the first strand is if we can secure a replacement tenant in an ideal world. Obviously, we've got 12 months, gives us time for the new tenant to step in. Obviously, KPN will leave at the end of '26. And best case is that we would have a replacement tenant to start early '27. I think that's probably a low probability, but that's certainly what we're working towards. At the same time, we're working with the municipality about seeking rezoning and getting further support from them for alternate use, and that will strengthen the underlying value and marketability and liquidity of this asset.

So if we were to go down that route, I think if we were to look at a sale, I'd like to try and keep the income at the moment from KPN. I think that's helpful for us in terms of particularly the desire and what we know that investors want. So any sale would probably happen towards the latter part of next year. And then obviously, using those proceeds and regearing or gearing up those proceeds to look at investments. And I think for now, we probably focus on the Netherlands in terms of industrial, where we're seeing some opportunities and potentially in Germany, just given the growth story that we think will come from there, particularly given some of the stimulus package that's starting to flow through the economy.

So that's in terms of timing, I think redeploying capital would be likely in '27. But certainly, the preferred strategy would be to try and find a new tenant to replace KPN. And it is a difficult one to sort of give any clear view as to what may happen to the dividend, but it's sort of very much dependent on one, finding a new tenant and what rent they would pay. And then secondly, if we were to go down the sale route, what price we would achieve and then regearing that. But I am quite confident that we'll be able to achieve an exit value north of what it's valued at today.

Yes. That's great. Thank you, Jeff. We got another question about what the Apeldoorn site might be worth if it had residential use approximately at the moment.

Yes, it's -- I mean it's one of those things that we need to work up that planning. But certainly, the initial master plan allows for some very high density on this site. I mean surrounding this site is a mixed-use residential. And that's one of the things of the attraction and what we look at in terms of -- I touched on it when we looked at the portfolio, but one of those angles that we look at is, what are the alternate uses when we do an acquisition. And this was one of the attractions here where you got 3.5 hectares and you've got that ability to possibly look at a rezoning. Now there is the capacity to put on over 100,000 square meters of residential space.

It's pretty bold sort of development pipeline and would take a long time, but that is the opportunity. And there's certainly a number of developers out there who are keen to sort of acquire this and manage out that, that amount of space. So I don't want to give any specific numbers in terms of where we think the value is, but I do -- if you sort of think the way the valuers are valuing on a residual basis, they're saying, okay, you've got EUR 4 million of income. It's currently valued at EUR 11.8 million. It's going to be high single-digit millions in terms of residual land value. I think we'll do better than that.

Yes. Great. Thank you, Jeff. We've got another question on -- just on the French tax, just with regard to timing. So maybe I'll take that one.

So around approximate timescales, I think Jeff was just sort of setting out that as things currently stand, we're in a 6-month window. We continue to work constructively with the French tax authorities. We take advice from professional service firms on the ground. Depending on how that 6 month goes, if it does go to more of a court process, the advice we've received for the company is that might take up to 2 years.

And just to recap more widely, we got the French tax authority notification through last -- back end of last summer. So we've now been working constructively on the company with the French tax authorities now for 15 months. So not a quick process, 15 months in. We're now in a 6-month window, depending on the outcome of that, we then move into the next stage, which could be up to as much as 2 years.

Jeff, just with regard to the share buyback. So we saw on the presentation that is accretive and good for performance we're coming out of a close period. Is that something that the investment manager or the company would continue to rereview as we move into next year?

Look, I think the buyback was definitely a good use of capital. We did a small amount, and we deliberately obviously sold out of the Frankfurt asset at carrying value to then buy the shares at a 35% discount. So mathematically, it made sense. Where it's, I guess, difficult to justify is when you're running a small vehicle, you're getting smaller.

And I think that's given one of the challenges that this trust have is that it's been penalized for being small in terms of investors saying, okay, we want you to be larger. So you're sort of, I guess, undoing some of your own, I guess, strengths by doing that, but notwithstanding what was the best use of capital. I think for now, we won't extend the share buyback or the Board won't extend the share buyback, but it's certainly something that continually gets looked at and discussed in terms of every Board call. So yes, the buyback has been paused.

Great. Thank you, Jeff. Just a question on the refinancing. You touched upon next summer and obviously then the sort of back end of 2027. Just a question around -- I think you touched upon what the current swap rates are, but maybe just sort of recapping for attendees around what the current rate is and what that might move to with regard to that debt to be refinanced?

Yes. So the Berlin loan, as I said, was -- is 30% LTV. We did enter into that loan 7 years ago. So when swap rates were close to 0. So the all-in cost of that debt, I think, is about 1.3%. So that will increase. But obviously, the cost of that is relatively small given that it's not a huge loan. And obviously, we've got sort of the indexation coming through in terms of existing leases that will help sort of cover that.

In saying that, we entered into some loans, particularly, say, the Dutch loan 18 months ago, where the swap rate on that was slightly higher. So we're in -- sorry, we're out of the money on that. So if we were to refinance that, we'd see the cost of debt fall. So I guess you can't get everything right, and that's why you have some in terms of diversification across your expiry of loans, as you can see on this slide. And obviously, depending on where swap rates are, we make a decision as to whether we go variable or take fixed. But certainly, yes, the Berlin loan will see a small increase in quantum of interest expense.

Great. Thank you, Jeff. A bit more of a sort of holistic question. So we're aware, obviously, that the company has been trading at a discount like many others for a while, quite I think sort of saying 35%. With regard to sort of future strategies, a question here around sort of strategic review type questions and maybe what the investment manager of the company is thinking as we move into 2026, not least with that discount and when assets like Frankfurt were sold for book value as an example. So maybe just some thoughts around that future strategy, as we move ahead to next year?

Yes. I mean the Board is highly aware and obviously disappointed in terms of where the share price is and constantly looking at how do we sort of change or pivot this vehicle and obviously us as a management team are equally concerned and working with the Board around that. Obviously, touched on Phil Redding joining the Board and taking the Chair role from the AGM next year. And I think it's only fair to give Phil time to sort of understand the company, meet with key shareholders and help formulate a decision and work with myself and the team to reshape this.

Now at the moment, there are certain investors out there that obviously love the dividend and love the attraction of what we've been able to deliver and the diversification that we do have. And the Board has always said that they're here to work in the interest of all shareholders. And obviously, us as a management team are exactly the same. So I think we just allow Phil and the Board to take the temperature after this with the investors and then reconvene and relook at this.

But it definitely is a pressure and a question there that the Board is highly conscious of. And as you rightly said, there is a number of other vehicles that have elected to go down the wind down route. But I would say that the discussions we've had with key investors to date have been highly positive in terms of how this trust has worked and some of the difficulties that we've managed, the teams that we have on the ground in terms of our asset management capability and the returns that we've delivered.

So that's all been positive. But I guess the bigger question is, well, can we get this vehicle to a point where we can raise equity to grow it? Obviously, we need a pretty big shift in terms of market to close that 35% discount. And at the moment, we're being penalized because obviously, institutional investors are not looking at smaller vehicles and sort of punishing smaller vehicles at the moment.

Great. And just a quick follow-up question on the French tax around that 6-month window and if that was successful, would that then mean that the company could move forward in that sense. So I think the answer to that one is that, that would be a very best case scenario. As mentioned, we've been working now constructively for 15 months with the French tax authorities. We are in that window. If that is positive or successful, that would then mean that it would fall away. At the moment, we wait and see, as I say, with the French advice we receive how that moves into 2026. So that would be very much a best case scenario.

And just on that, I mean, we've got EUR 14 million that is ring-fenced. We could lever that, allows us to go and buy an asset between EUR 25 million and EUR 30 million of a 6% yield that gives us income of between EUR 1.5 million to EUR 1.6 million. So that is definitely one way that we can help reposition this vehicle to dovetail into the earlier question around strategy. But we have highlighted that, obviously, we're having this cash ring-fenced, it does sort of limit our ability to utilize and grow earnings in terms of new acquisitions and diversify the portfolio.

Yes. Thank you, Jeff. Thank you, everyone, again for the questions, and I think that's all with them.

Okay. Well, I think we'll wrap up there. It's about 40 minutes. So I appreciate everyone joining and also for your questions. I'm always available if there's any other questions that come up post this presentation. But thank you for your time. Have a great Christmas, and we'll speak later. Thank you.