Aew Uk REIT (LSE:AEWU) — Investor Presentation

0:00 Good morning, and welcome to the AEW UK REIT PLC Investor Presentation. Throughout recorded presentation, investors are being in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated in the right hand corner of your screen. To click Q and A, scroll to the bottom, type your question and press send. The The company may not be in a position to answer every question received during the meeting itself. I'll review all questions submitted and publish responses where appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Laura Elkin, portfolio manager. Good morning.

0:29 Thanks very much, Paul. As Paul says, I'm Laura Elkin. I'm the portfolio manager. I'm joined here today by George Elliott, who is the AEWU fund controller, and by Richard Dunlick, who is one of our asset managers. Those of you who are regulars to this call will note the absence of Henry today, who usually joins me on these calls. Henry is unfortunately unfortunately had surgery a short while ago, but he is recovering well and will be back online with us in a few weeks' time.

1:05 So to start the presentation, We're, of course, today talking about AEW UK REIT, a strategy that we've been running here for nine years, and we've been running the same strategy, that I'll I'll describe now. Regulars on this call will, of course, seen this slide many times before, but for the benefit of anyone, who's new. We are a value investment specialist, and we use value investment principles to identify mispriced assets for purchase. So that is those that are out of line with their long term value fundamentals, such as vacant possession value or alternative use value, or those that we think represent opportunity.

1:54 Once we buy an asset, we actively manage it to maximize its income stream. And as a company, we have paid out a dividend of 2p per share per quarter consistently now for the past thirty one quarters. We also actively managed to unlock capital upside, and that is shown in our annual annualized five year property total return of just under 10%, which is the highest total return, of any of the diversified REITs in the peer group over various time frames. At AEW, we are not sector constrained in our strategy. So we do not focus on just one sector, we seek value across all areas of the property market. And we think that's really important to delivering a value strategy.

2:43 It allows us to seek value in the most efficient way through various market cycles.

2:52 So moving on to this slide, which shows our high level statistics as at the June 30. We own 33 properties, have a 136 tenants. You'll see that the share price on this page is now just slightly out of line with the market having moved up somewhat in the past week due to some better than expected inflation figures. I'm also gonna pick out on this page the pie charts on the bottom right hand side, which show our sector weightings. And I think these demonstrate really well how our strategy allows us to nimbly make value shifts between sectors depending on where we find value and where we also see risk. Of course, that's something that sector specialist REITs cannot do. So we think that gives us a strong performance edge.

3:42 So just over a year ago, we had a much higher exposure to industrials at around 50% of our portfolio. We had a higher office exposure at around 20%, and today that sits at 8%. And our combined retail exposure, so those red and blue blocks together, combined only 25%, whereas today that's around 45%. And I'm just picking out those themes because that shows how in the last just over twelve months, we have taken profit from some of our industrial assets. We have found a lot of value in retail assets, and we have lowered our risk exposure to office assets.

4:24 Just a few themes to pick out from the portfolio here. So looking at where our book values sit today, we think that they still represent a significant value proposition. So our average capital value per square foot sits at £67 and very low passing rents still across the whole portfolio averaging just over £6 per square foot. The reversionary opportunity in the portfolio we think is significant, and the 8.7% reversionary yields being higher than our initial yield is independently assessed by our value in Knight Frank. A particular theme for us in the last quarter has been the resilience in our occupational domain. This has been something that, of course, we've been talking about for some time, but I think, over the past quarter, and you will perhaps have noticed this if you will have seen our NAV announcement that we, put out last week.

5:17 We have had a very busy quarter for asset management and really pleased to see that continuing. And quite a lot of those particular deals will be covered off by Richard today. In terms of risk on our gearing, we have got significant covenant, sorry, headroom to, to to all of our loan covenants. So our loan to value sits at just over 30% with the covenant being around 60%. And of course, a low cost of debt that we have in place for the next four years at just below 3%. The next slides touch on our performance, and I'm mainly going to hand over to George for these. But I'm just gonna cover off the first two myself, which look at earnings per share and our dividend cover. Of course, this is a subject which is very dear to our hearts, and I know to many of yours.

6:11 So a dividend of 2p per share per quarter has been paid since early twenty sixteen, so effectively all of the way through the life of this company. Although, our dividend has been uncovered somewhat by earnings for the past couple of years. The reason for this has mainly been due to the sale of two assets in particular to developers, which needed to be taken to vacancy in order to maximize their sale values, and then the subsequent fairly protracted reinvestment of those sale proceeds. We're in the process of building EPS back towards our target. And the chart below shows the significant progress that we've made in that over the last twelve months. As at today, we've still got 15,000,000 divested.

6:57 And also, we're waiting for income to kick in from agreement for leases that we've signed with a couple of significant tenants at our retail park in Coventry. So once the benefit of those further things kick in, we do expect earnings to continue to improve over coming quarters, but we're really happy with the progress that we've made so far. Now just speaking more generally and over the long term, in periods of underinvestment such as following a sale, we will of course expect earnings to dip below target. But for that reason, we're really pleased to see earnings trend upwards. It's in line with our expectations and throughout that period of dividend uncover. It's why the board continued to take the decision to keep paying out 2p per share per quarter to invest because they could see that earnings would at some point recover, which leads me nicely on to the following slide, which looks at our dividend cover since IPO.

8:01 Earnings from property income being the block in red. The net gain net capital gain on disposals, being that sort of floating blue piece, the 6% top up to to the dividends that we've used to make those 2p per share per quarter, payments. So our dividend cover from income since IPO has been at 94%. So a really strong level, eve even though our our dividend, period of dividend uncover has been rather persistent. Thanks. I'll hand over to George. He can talk through the next few slides. Thanks, Laura. So this first graph demonstrates the company's general approach to having three to five year business plan tenures on many of its properties.

8:57 One can see that in '27 and 2018, the plans put in place at that time are now coming to fruition, which has driven the outperformance from early twenty twenty until now. Most notably, some of our major business plans such as tasks with asset that many of you will be aware of have increased the degree of outperformance in the last six months or so. Next slide. And this is more numerically demonstrated on this slide. Although rather complicated, what it demonstrates is over all time periods. As at March 2023, we delivered the highest NAV total return. And also, as at June, our long term share price total return is also the best among our peers. Just to know the reason why this data for NAV total return is as of March is because it's not yet available for all our for all our peers. But this shows really, really encouraging performance and is consistent with prior quarters as well.

9:52 And this this next slide just purely focuses on our dividend yields. Again, we're among we're consistently among the highest dividend yield payers among the peer group. And and this is particularly encouraging given the fact that we've maintained one of the lowest share price discounts to NAV. And then subsequently, to further look at purely our total prop total property return, again, overall part overall time periods, we've outperformed the benchmark. Again, MSCI data for June will be available in the next few weeks, which is why this is displayed as at March.

10:29 And then finally, further good news is that for the twelve months to March 2023, we've outperformed the benchmark in all property sectors. This highlights benefits of us not only being not set set constrained, but as well as the fact that our strategy seeks countercyclical moves. I think particularly important to note here is that although the office sector has really struggled in recent times, although part chiefly driven by our Oxford asset, we've achieved we've achieved great performance, which is further testament to the success of our strategy. Thanks, George. I'll cover off some of the investment activity that we saw in the last quarter. So if you've kept up to date with some of our recent NAV announcements and communications, you would have seen us discuss a theme of recycling from lower yielding assets into assets in our pipeline, which are high yielding and of course then those transactions over the longer term will be accretive to the company's earnings.

11:29 So we continued that during the quarter with the sale of two assets here together. I'm talking about them in summary here, because they were sold in a single transaction to one purchaser. With the combined yield on sale being 6.2%, so comparing that to most of the assets in our pipeline, we've got a slide in this coming up, but you'll see that the average yield in our pipeline assets is, in excess of 8%. With some of our recent purchases having been as high as nine or higher. So, a significantly lower yield that we've achieved here. So, again, over the over the long term, the this transaction will be accretive to the company's earnings. Another reason for selling these assets is that we felt that the pricing of of both was was maximized at the current time. For example, at the Euro Way asset, we have avoided in in selling the asset significant capital expenditure if the tenant, were to have vacated.

12:33 We were having discussions with that tenant about whether they wanted to stay on-site, and their business plan was, looking unsure. So when we received a, an attractive offer to acquire the asset, we we looked at the figures there and analyzed that a sale at this current time, which would be better. And of course, those combined sale prices exceeded the previous valuation by around 12% and the acquisition price of both of the assets by around 30%. And from both of these assets over their hold period, we have been receiving an income yield of around 8%. So two really strong performing assets for the company and looking forward to get getting the capital receipts from those sales reinvested into high yielding assets.

13:20 Over the course of the quarter, we also made a similar sale. So this was a sale of a vacant asset in Deeside, which was sold to a potential prospective tenant, who was also open minded to buying the building. Again, in selling that one, we avoided a capital expenditure of around £1,000,000 and again, looking forward to getting that capital reinvested into high yielding assets. During the quarter, we did of course make one purchase. This is very recent having completed only last week. At the moment, we are finding a lot of attractive pipeline assets in some really exciting locations, and and and this is one of them. So it's continuing a theme of some recent purchases for us at the same along the same vein as the asset in Central Bath that we bought at the end of last year and some further assets in our pipeline.

14:15 In some very, very strong locations and using those strong locations as an indicator of long term value. So here, acquired within the center of York within the city walls, so a location that's very land constrained. In terms of tenants here, we've got 75% of the assets let to NCP who are known to trade well. We bought the asset off an initial yield of 9.3 percent, but with inflation linked uplifts in NCP's lease, that will take the overall running yield from the asset to, a level of over 10% by 2027. In terms of capital value, the purchase price reflecting a £100 per square foot, so, supportive of redevelopment for alternative uses if that is needed over the long term. So an asset that we're pleased to have acquired recently.

15:13 And just touching on our pipeline here, similar themes here in in all of these assets to those which exist in the current portfolio and in our recent acquisitions. In terms of sectors, most of this falls within retail, and most of our recent purchases have been in retail or some exposure to leisure or mixed use. But we are always, when we're making those acquisitions, paying very close attention to the strength of our tenants' particular trade. Now in this pipeline, I'm showing you one office building. I would say that I'm doing that very selectively. I think it I've discussed before about how we have got some concerns generally about occupation holding up in the office sector. And I think it's fair to say that we wouldn't be wanting to include offices in our pipeline in a in a very extensive way, and we would be very selective about the locations in which we're requiring offices.

16:14 But this one here shown on our pipeline does look interesting based on the strength of its location and also its alternative use value. Thank you. I'll hand over to Richard now who will touch on some of our recent asset management gains. Thank you, Laura. So just picking out the first one in Commercial Road in Portsmouth. This saw a new letting complete to Specsavers, which completed last quarter in line with the valuers ERV. It's key letting, which now makes the block fully let, providing an income return of about 9.5%. The transaction demonstrates a change in strategy that we've seen from retailers to re relocate in town and cities to stronger or prime locations.

17:01 High street investment was strong in the first half of the year and use yields remain stable but are likely to repeat for the remainder of the year. So with Portsmouth in mind, we may consider our options with this asset going forward, given the asset management initiatives have now been completed. Picking up to further transactions again in the retail sector on the retail warehousing side, there's a key renewal with B and Q completed, which provided a nine year unexpired term at passing rent above ERV. A key fundamental of this transaction as well was it moved the EPC from a c to a b without any of the company's CapEx being spent, which fully funded by the tenant.

17:49 And a further transaction in the asset Truesbury

17:52 with Universal Consumer Products completing a three year lease above ERV and above passing rent. I think it just demonstrates the countercyclical nature of these assets against the rest of the portfolio, and both assets contributed to the nearly 2% increase in like for like valuation movement for the quarter. The fund remains a big fan of retail assets, particularly high yielding reversionary high street blocks and well located retail warehousing where we've got strong focus or where where we know tenants are trading well.

18:32 Just taking a closer look at one of the assets in Coventry. We completed a cashless transaction with the freeholder, which saw the funds gain the freehold over part of the site in return for a future option for the freeholder to surrender site, effectively site b. The key fundamental of this transaction is that it removed the user and size restrictions on the now acquired freehold sites, which allows us to move forward with key lettings to the food warehouse and my dentist and also discuss regeas in terms of the downsides to two e. The fund will still maintain the income on-site being the medium term.

19:21 The likelihood is that by the time the surrender option is opted by the freeholder, which is anywhere between two and seven years, the income capital growth on the remainder of the cycle outcome will outweigh the income lost in site b. Since quarter end, we have also completed the lease with Audi, which provides a twenty year lease at £273,000 a year. And we've also, over this week, been given the green light on the change of use and extended delivery hours and application to the food warehouse. That effectively means that that deal will go unconditional and is now lined up to complete in November. I think this asset is is a good example of why, again, investing in retail warehouse is quite key for us. With this discretionary spend set to decline this year, fight flight to discounters consumers is likely to continue.

20:20 This will provide key competition between the likes of Audi, Lidl, B and M, and Poundland, thus driving demand for space. Due to the strength in the occupational market and hopefully stabilizing interest rates, there'll be the prospect of further yield compression in the sector. The commentary specifically, this may mean that once the asset management initiatives have been crystallized this year, that we may consider our options in the first half of next year as to a potential disposal. Just moving on to an asset an office asset in Bristol. So the Bristol office markets performed well fairly recently with full take up at the highest since 2017.

21:06 Whilst the well talked about flight to quality is prevalent in the British Bristol office market, comprehensive refurbishments to grade b is becoming extremely attractive to small TMT professional service businesses.

21:18 This is demonstrated by the letting in December 2022 to the marketing to a marketing services business at rent of £40 per square foot, which is only £2.50 per square foot lower than the top headline rents for grade a new build office developments in the city. This, in more recent months, has created sufficient evidence to provide a 32% uplift in annual rent for the three existing tenant rent views, which all crystallized last quarter. So the brisk the Bristol headline rents are now ahead of other major regional cities, including Birmingham and Manchester, could see further growth. It's a sector which we have low exposure within the funds, but it is a well liked asset class. Good high quality, high yielding reversionary offices in key regional locations similar to Bristol would be considered potential acquisitions in the future by the fund.

22:15 Thanks, Richard. I'll pick up now again to just cover off very quickly on with an update on our EPC ratings. I see that we've also had a question come in on this as well, which is exactly addressing exactly what I was going to talk about now. So I just wanted to cover this off. And apologies here. I've just realized in looking at this slide that the two colors between the dates of the bar charts here is not particularly differentiated, But I'll discuss that. So hopefully, it will become clear. And we included some narrative in our recent annual report on this as well. And so just really wanted to summarize where we've got to. And the darker blue lines show where we were before we started to, really undertake a very detailed review of the company's EPC ratings, which is, of course, our exposure to the minimum energy efficiency standards, some some time ago, and the sort of more turquoise turquoise blue lines show, the position as at today.

23:18 And you can see that, we have achieved significant gains in that. So

23:24 with the minimum standard currently being an e, We have no registered EPCs in f and g at the moment, although we do have an exposure to around 11 units, which are expected to be rated f and g, but where we have ongoing works at the moment, to improve the scores of those units. So I would say, at high level, we don't have significant concerns about our ability to comply with this legislation. And now on those 11 units, it perhaps sound more onerous than they are. They're split over two sites. So it's effectively one industrial park up in Wakefield, our asset at Diamond Business Park, where there is a small multi let office, which forms a very small part of the asset, with a number of small office units in in one of the units.

24:16 That is where 10 of those units sit, and the other unit is an industrial building down in Basildon. So effectively, we've got two assets here, where we are currently working to get them to levels that they comply with the MEES legislation. I'll start with Basildon. So we are in negotiation with that tenant at the moment to, make some improvements to the building that will see the asset, comply with me. Now if you've heard us talk before about an asset in Rotherham where we recently did some work connect in connection with a letting, we were able to improve the roof of the building using some dilapidations payments from an outgoing tenant and with some CapEx that we would expect to to have spent in the course of a normal letting.

25:06 So effectively, in the course of doing our usual business and letting an industrial building to a tenant, we achieved a significant means improvement to make that asset significantly more compliant. Now that was on an asset in Rotherham, and why I'm talking about that now is because it is exactly what we are currently trying to do with the tenant, same tenant in Basildon. Negotiations are currently underway, and, we hope to conclude those very soon. If there is CapEx that needs to be spent there, it will likely be that the tenant will potentially extend their lease. So it will be effectively a net gain on valuation to the company. Moving back to Wakefield, where there are 10 of these units, but concentrated within one small, office piece of the site.

25:57 This is very low cost that's needed to, improve the MEES ratings here. So effectively, we just need to go to the units and cap off a gas supply, which is currently not being used. That's under the way at the moment and is expected to be undertaken at very low cost.

26:17 So thanks very much all for joining us today. I know we've got some q and a coming up. But before we do that, I'll just conclude with some main themes that we would like you to take away today. We have, of course, seen continued improvement in our dividend cover over the past twelve months, and we're really pleased with that. But we've got a further 15,000,000 of cash to deploy, and, therefore, expect to see significant further improvements in our earnings from the company going forward. We've also see a lot of opportunity in the portfolio, a lot of opportunity to continue to improve income and values. And I think that's highlighted in the very busy quarter for asset management that we have seen. So, yeah, very, very excited to see that continue.

27:11 So I will turn now to some of the q and a, if that's okay, Paul? Absolutely. If you just wanna have a few moments just to review those, I'd just like to to remind those, online today that do please continue to submit your questions. And just while the team take a few moments to review those questions, I'd like to remind you that a recording of the presentation, along with a copy of the slides and the published Q and A, can be accessed via your investor dashboard. As you rightly say, we had a number of questions throughout today's presentation, Laura and the team, and we had a number of pre submitted questions as well. So perhaps if I could just hand back to you just to read out those questions where appropriate to do so, and I will pick up from you at the end. Thanks very much. So turning to some of the questions, somebody has asked, who are our other tenants beside NCP in York?

27:59 And what is the waltz for their leases and their reversion re yield? So we've got so in in York, of course, I said that 75% of the income from that asset was let to NCP. The four other tenants being very local tenants, you would you would not know them by name, but the overall Walt of the asset, is 8.2. The length of the income stream to NCP being nine. Therefore, those those, four other leases have a slightly shorter length, but they are not significantly shorter than the NCP income. And the reversion yield of in excess of 10 that we have talked about is the overall yield. So inclusive of of those other four units, those other four units are rack rented. So, they do not detract from that yield, and hence why we expect to see that overall yield from the asset increase from around 9.3 to in in excess of 10 come 2027 when we see that, rent review with NCP.

29:07 Another question is, how do we determine the split between income distribution and dividend? I'm just gonna hand over to George, to answer that question if that's okay. Of course, as fund controller for AEW, this is what he does every quarter. Thank you for the question. So you'll know that as a REIT, we're required to distribute at least 90% of our property income each quarter. You'll also note that on our announcements, we always use increments of naught point five. So you'll have three scenarios, either a two and nil split, a 1.5 and naught point five split, or a one and one split.

29:44 Using an increment of naught point five, inevitably means there's some inaccuracy in the fact that we may not completely distribute all the relevant property income. As a result, each quarter, I have to make an assessment that takes into account two key factors for what our PID and non PID split is. Firstly and most crucially, I must ensure that we have distributed at least 90% of property income on a cumulative state on a cumulative basis in order to maintain our restatus. And, also, I therefore aim to minimize each quarter what that over or under declaration of property income is. So those are the two key factors that I consider when making that calculation. And to date, obviously, we've maintained our REIT status and and our and our degree of accuracy has ended up being on a human basis consistently passed as audited by our external auditors.

30:33 So, yes, those are the two key factors. Thank you. Another question is going forward, how do we see the balance changing in the composition between inner city mixed use sites and out of town industrial use sites? I'm assuming that question is in relation to our investment pipeline. So in a pipeline, we analyze it very much on the basis of asset led. Each asset is analyzed based on their merit. Our approach is generally sector agnostic, but we look across all market sectors to see where we best find value at that time. We will therefore be led by where we see value in the future. But at the moment, we are seeing, greater opportunity in in city centers, I think.

31:23 And and as I've talked about some of the exciting locations that we have been able to acquire in the center of York and the center of Bath and other exciting locations in our pipeline are, I would say, at the moment more focused on inner city centers as compared to where they have been in the past when particularly we were buying a lot of industrial locations. I think that sort of coincides with us for some time now having not found a lot of value in in the industrial markets. So we'll continue to be asset led going forward, but would expect to see, yes, a continuing trend of of any city locations or certainly urban locations. Another question is, what what effect has high inflation had on our business so far?

32:10 I think in reality, and of course, this is sort of spoken sort of of course, we're not we're not sort of through this period of high inflation, and it's something that that our business as well as all businesses will need to continue to monitor. But so far, I I feel that we have fed very well compared to how how perhaps we could have done. Starting with a number of factors, our our cost of debt has been protected from quite early on in this period of high inflation. That is, of course, set at a level of just under 3%, and that was set in May 2022 for a five year period. So we have another just under four years left to run on that fixed period. I think another major impact is is, of course, the impacts on our tenants and on their trading businesses and and on their financial positions and their ability to pay rent and and meet their financial obligations.

33:07 And that's something that we continue to monitor very carefully indeed. I think what what I would say so far, through this period of high inflation, which, of course, we're not yet out of is is what what we have seen is that I think a lot of our tenants have been surviving much better in this sort of difficult periods than we saw during perhaps during COVID, particularly, to pick a sector in the retail sector. During that time, of course, we saw a lot of tenant CVAs and a lot of tenants going through significant struggle, and we are seeing less of that now. And I think perhaps that is because of those tenants that are remaining, they are perhaps the better capitalized tenants having already been through that that difficult period.

33:57 And, of course, there are strains on their business. And I think that's perhaps an example of that is is during the current quarter. In our NAV announcement last week, we talked about a provision that we had to make in the accounts for concerns around the Wilco covenant, who are one of our tenants at Union Street in Bristol. Now, of course, their struggles as a business have been widely publicized, and their plans going forward are currently not yet clear. They are, of course, an example of a tenant who has faced difficulty because of the current current time. So we we continue to monitor that very carefully, but so far, I think we have fared very well. Another question is, what is the company doing to narrow the discount and bolster the share price?

34:51 I'd say at high level that, of course, a reminder, we we at AEW, our shares trade at one of the narrowest discounts of of our peers. And and and in that group, I'm referring to the diversified REIT peer group. We have consistently traded at at one of the narrowest discounts. Not not that we're content to to sit there and sort of take that for granted. We would, of course, like our share price over the long term to reflect the value that we as a company see in our assets. So what can we do to to try and counter that? Of course, the the share price is is very much a factor of the market, so there's not that much we can do, but we will be continuing to, to keep the company's news flow, out there and and informing the market of any, positive actions that we've taken in any positive performance.

35:43 I think the fact that the company's performance has been very strong compared to its peers is perhaps one of the reasons why our discount between our our NAV and our share price has been so consistently low. From time to time, we do analyze the prospect of share buyback, and when it's something that we have undertaken in, a fairly limited way in the past, and we will analyze that on an ongoing basis going forward. And if we feel that there is a need to take action, then we, of course, will. A question has been asked. Is the peer group performance table available to investors? So yes. All of the slides that we have just presented to you, will be available to download, excuse me, through the Investor Meet company website after this presentation has taken place.

36:34 So apologize. I know that on some of these slides, the fonts are rather small, so that may help with viewing them. And the question was asked, how well placed is the portfolio in respect of CapEx required to comply with MEES? I believe I have already fully answered that question, on on the EPC slide. So hopefully, that that is an answer to your question. Another question, is all of our debt fixed at 2.95% for four years? I believe it's 2.96. But yes, all of our a 100% of our debt, is fixed for the next just under four years, and that's up until May 2027. Sorry. I'm just reading through a couple of these other questions.

37:32 Somebody has asked, can we please comment on the potential for consolidation in The UK REIT sector, particularly amongst smaller REITs? Yes. I'm I so we have talked a number of times about how we would very much like to grow the company. I think a number of reasons, for that are, to have the ability to access a greater amount of our pipeline. Often, we have, a really great pipeline that we've built for the company, which only have the ability to access a small part of it, which in some ways can feel frustrating. But, of course, that's that's the way things are. In addition, though, I I think it would help to perhaps sort of dilute some of the bumps that we tend to see in in things like earnings and performance when, as at the current time, we are uncovered for a period, through our dividend, perhaps being through not fully invested having just made a sale.

38:31 I think if we were slightly larger, it would help to dilute periods like that and perhaps provide just a little more consistency to investors. But I think to say that the number one focus is certainly on our performance going forward. The reason for talking about that ambition to to to grow in some way is that we do analyze all opportunities open to the company, whether that's doing a capital raise in the traditional way through the market and issuing new shares or looking at corporate opportunities. It's fair to say that we're together with our broker and our board, we do that consistently.

39:16 If we feel that it's in the best interest of our shareholders, we would look to take something like that forward. But, of course, it would have to be in the best interest of our shareholders. I think just time for for one more question. Somebody has asked how competitive has it been in this higher rate environment to bid for assets? Yeah. It's certainly been a really interesting time in investment markets over the past twelve months really, whilst we've seen quite a lot of volatility going through property values, driven both by ongoing, political activities and economic activities.

40:09 And during that time, we have seen a lot actually, lot less competition for assets. So we have seen investment volumes, and I'm talking here about the sort of property investment market, commercial property investment market as a whole. Volumes as in the amount of of property that's traded have been significantly lower over the past twelve months than their long term average. So there are far less people competing in the commercial property market than there is on average over the long term. Now we see that as a benefit. It means that there is perhaps less pricing transparency, which increases the ability for assets to be bought, we believe, at that that that we believe are mispriced. So if there are less people in the market, less transparency on pricing, vendors can perhaps be less sure of of the values that they're selling their assets for, and we can we can try to be more opportunistic during that period on the assets that we're buying and the prices that we're paying for them. And I think that's really reflected in some of the really excellent assets that we have bought in the past twelve months and the very strong pricing that we've been able to achieve there. And hopefully, with further purchases that we expect to make over coming weeks, that that will again be proven.

41:28 So we have seen less competition, so far during that period, of high interest rates. Back to you, Paul. That's fantastic. Thank you indeed, for covering the first questions you can from investors. Of course, the team will review all questions submitted today and we'll publish responses appropriate to do so on the Investor Meet company platform. And Laura, know you have concluded and summed up, but perhaps just a few final comments just before we redirect the attendees to give you some feedback. Yeah. Thanks very much. I think, yeah, very excited to see what the next couple of weeks will bring as we continue to deploy our remaining capital for investment. And I think I've I've already demonstrated, but the impact that that will have on our earnings going forward. We yeah. Very pleased, hopefully, to see our income levels from the company continue to grow over coming periods.

42:23 That's, fantastic. Thank you indeed, and, thank you to you and the team for updating investors today. Can I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order the team can better understand your views and expectations? This will only take a moment to complete and is greatly valued by the company. On behalf of the management team of AEW UK REIT PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good morning to you all. Thank you very much.