Palace Capital (LSE:PCA) — COVID-19 Update

0:06 Good morning, ladies and gentlemen, and welcome to the PALACE CAPITAL COVID-nineteen and Dividend Presentation. Before we begin, we would like to submit the following poll. This poll will close shortly. Also for your information and throughout the presentation, investors will be in listen only mode. Questions can be submitted at any time via the Q and A tab situated on the right hand corner of your screen.

0:31 Please note the company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard. Finally, we'd like to remind you that this presentation is being recorded. I'd now like to hand over to Neil Sinclair, CEO and Stephen Silvesta, CFO of PALACE CAPITAL. Good morning, everybody. Neil Sinclair here. I trust you're all safe and well. Thank you for joining us this morning and for participating in this PALACE CAPITAL presentation. If I can just take you through it, we are experts in regional property, and we focus on unlocking value to deliver attractive total returns.

1:24 Just to give you a quick one minute about PALACE CAPITAL, in case you're not aware, PALACE CAPITAL was originally another company called LEO Insurance, which was listed in 2005. We took board control in 2010. We bought 29.9%, and it was the smallest company on the London Stock Exchange with a huge market cap of 108,000. We were the smallest company on the LSC at that time, and we decided to use the vehicle in order to build up a regional portfolio. What had happened in 2010 is that London already was moving, but we took the view that there was scope in the regions which are always behind London.

2:11 And we thought this was a golden opportunity, which we took. So very quickly, we decided our strategy of buying in the region's number one. And the second, where we're different to our peer group, is that we have bought corporately. We have bought companies rather than properties. We have bought some single assets, but in the main, we have bought corporately. We bought a small company back in 2011, and then in 2013, we bought a subsidiary of Quintane

2:43 for just under £40,000,000. And to give you some idea why we're different and why we buy corporately, we paid nearly 40,000,000. If we had bought the properties, then there would have been a 5% stamp duty charge, which would have been £2,000,000. But because we bought the company, you only pay half percent on the share value, and the share value was only a million pounds. So we actually saved £2,000,000 in value. So we've built up our portfolio within the course of the last ten years, mainly corporately, and we have actually saved in terms of stamp duty over £10,000,000. And of course, before we became a REIT, this had particular benefits for us, particularly early on in terms of tax losses, etcetera.

3:31 So if I can take you through that, so we've got a deep knowledge of The UK regions, focusing on the office and industrial sectors.

3:38 We're not just income. We drive income and capital growth through refurbishment and redevelopment. The occupational market has been strong. Of course, we've had COVID nineteen now, but it's quite interesting. There have been some lettings announced in the last week or two. So in the good provincial cities, the letting market is still looking quite attractive. So we're we're delivering attractive returns at this time.

4:11 So we have to look at the COVID nineteen impact, and it is crucial that we look to our tenants and our colleagues and make sure that they're all safe and well, and at the same time, protecting the long term value of the company. We're supporting our occupiers. You've all seen the press about tenants finding it some tenants finding it difficult to pay, which we quite understand. That's particularly in the retail sector. We have very limited retail exposure. We've got a couple of retail warehouses, but the tenants are very strong and we've had our rents. But we've got two leisure centers, which comprise 14.5% of our portfolio, and there have been requests for rent deferrals, monthly payments, waivers, etcetera.

5:07 What we are doing there is that as soon as this lockdown started, our asset management and property team contacted every one of those tenants. We've got over 200 tenants, and we called rather than emailed every one of them. And we have been talking to them about how we can go forward to the next quarter. So the March 2020 rent quarter collection, as expected, is done on the same quarter last year. We have some tenants who are finding it difficult. We have got some tenants who've got the money, but they're just not paying. But Stephen will refer to some of the rent collection a little bit later. But we're quite happy with our rent collection, which we'll talk about.

5:53 We've had a prudent approach to preserving cash. We've decided it's uncertain times, certainly until the lockdown ends and until there's some sort of normality. So we decided purely as a matter of prudence to withdraw the q three dividend, but we have made no decision regarding the final dividend. As far as Hudson Quarter York is concerned, we're going to talk about that a little bit later. This is our flagship development. It came came to us as part of the Quintane portfolio. We got planning consent for 127 apartments and 39,000 feet of offices. We are on-site. We're about halfway through.

6:39 We're slightly delayed because of what's occurred recently, but we're encouraged that in the financial crisis of two thousand and eight, prices in York did not fall. They plateaued, but didn't fall. So we're reasonably confident that this is gonna be a very successful scheme.

7:03 On our rent collection, our rent collection, as I said, is down, but as you can see, as of the April 1, we had collected 70% of our rents. Now we've adjusted that because from a cash flow point of view, tenants wanted to pay monthly rather than quarterly, which is standard practice in The United States. So we agreed to this basis. And as of the April 20, we have got this up to 80%, and we may even go slightly higher. We've got a strong collection of stacks across all the sectors given the closures. I'll now refer to Steve, who will talk about cash debt and covenants.

7:48 Thanks, Neil. Good morning, everyone. Yes, just to talk through, obviously, from a working capital point of view, as Neil said, we've had to manage that in these uncertain times. Maintaining liquidity is certainly a priority. And as you will be I'm sure won't be surprised, we've been speaking to our lenders throughout this process given that, for example, as Neil referred to in the previous slide, you know, the the two leisure schemes have been hardest hit by rent collection. You know, a lot of the tenants obviously having to shut up shop and and and are not able to trade. In particular, the the challenge has been then with our debt covenants around those two properties, so the Northampton Leisure Scheme and the Halifax Leisure Scheme, and we've been working with our our lenders.

8:47 Interestingly enough, obviously, Bank of England have come out and said to all lenders, you know, you've got to support your your borrowers at this time. And all of our conversations have been very positive,

9:01 and the banks have been along the lines of looking to waive any covenant breaches, you know, delay where where there's debt repayment structured into into facilities, looking to delay those if if need be. We have a milestone on our Barclays development debt along the pro along the way, which which obviously we've been ahead of milestones to date, but, you know, with delays, there may well be we we may fall behind a milestone. Again, the banks are looking to to waive any of these requirements. So very good support from banks, but obviously, we don't wanna take that for granted, and we are we are managing our our cash flow accordingly.

9:53 As you can see, in terms of our ICR covenants, this is interest cover. They range from 225% to 250%. And for the majority, I mean, our our business is cash generative. There there is a lot of cash thrown off in in from normal times, and and there's not really, well, the covenants there there is a is a lot of headroom on on the majority of covenants, but but obviously, have to manage that at at this time. On the loan to value covenants, they range across the various lenders between 57.561.7%. Again, there would need to be a fall of at least 20% before we need to start putting cash in to to pay down debt. So there's headroom on the covenants.

10:47 And and in terms of preserving our cash, we we have just under £20,000,000 of cash available, which which for the size of business we are is significant and and gives us gives us that comfort.

11:05 Neil, if I hand back to you. So we have a very diverse and sustainable portfolio. If you look there, they they make up a very good proportion of our rental income. We've taken our taken time to make sure that our tenants are quality. One or two of them are going to find it difficult in the next few months. But as far as we're concerned, you can see from there the level of rents that we're getting, who we've got. Most of them are sizable companies, and therefore, we think in this market, that's a very good thing to be. So regional returns have been outperforming London, obviously, because of a lower base.

11:55 And we've got regional offices. 48% of our portfolio is in regional offices. We're in all the good Northern cities, particularly. We're in Liverpool, Manchester, Leeds, York and Newcastle. These are strong cities that have seen particular growth, but we've also got holdings in the South, including Exeter and Southampton. The reduction in office supply in the regions has been particularly strong because if you take an example, Winchester, where we've got three properties, the permitted development, which allows offices to be changed to residential without planning, that's really caused the amount of office space available in some areas to be reduced to virtually zero.

12:44 And in consequence, rental growth in cities like Manchester have been particularly strong, and we have tended to focus on those cities where there's been limited development and where office stock has been reduced because of what we call limited development.

13:08 So what is now happening, obviously, you saw with the general election that the conservatives are very keen on this leveling up, which we think will definitely continue in the forthcoming months, mainly because the elections in 2024,

13:30 they've already got their eye on it. They want to meet the obligations that they made. You can as you know, they've given the notice to proceed on High Speed two. Now the benefits of High Speed two will not be felt in the short term, but it's a massive signal to the Midlands and the North that the government mean business. When the chancellor was announced his budget last month, he mentioned they're moving 22,000 civil servants out of Central London by 2030. They have done it before, and they're going to do it again. The Bank of England already confirmed they're going to do it. Goldman Sachs have had some requirements in the last year or two. They've got another requirement now for 60,000 feet. They had a requirement about eighteen months ago for Marcus, which is their retail bank. That went to Milton Keynes.

14:27 KPMG's pension arm is seeking offices in up to nine regional cities. Hiscox, who've got a major building in York as well as the city of London, has already stated very recently they're moving 300 jobs out of London. And Boris Johnson, Andy Burnham, the mayor of Manchester, are talking about an 80,000,000,000 northern infrastructure boost. Now the BBC, of course, made a massive move to Salford a few years ago, and they've already confirmed that within the next seven years, they intend to move two thirds of their people out of London to the North. York is an office market, remains tight. We are the only game in town as far as York is concerned. The great advantage of York is, firstly, it's a railway hub.

15:16 Secondly, we're right next to the station. And thirdly, it is the fastest journey to the North of any northern cities. It's an hour and fifty minutes on King's Cross. So we think that York is going to be particularly attractive for tenants to go there. As far as Liverpool is concerned, we bought a building there about eighteen months ago. Liverpool is behind Manchester, which is why we like it. Rents are already moving in Liverpool in the right direction. They've lost over 1,000,000 square feet in the last six years to residential and

15:55 student housing, and our view is that Liverpool is going to start to see the development that Manchester has seen. Now the increased connectivity is very important. You've all heard about the northern powerhouse. It's a word, two words, but we think it's gathering momentum. The government have already confirmed that they want to build the link between Leeds and Manchester as part of the start. They have to continue with it. They've given it every indication they're going to. The second very important thing in the regions is graduate retention is very high.

16:46 So whereas ten, twelve years ago, you were at Manchester University, you graduated, you went to London. That is not the case now. So graduate retention in Manchester, for example, is well over 50%.

16:58 Graduates stay in the city where they graduate. Firstly, because it's they like it. Secondly, it's cheaper. You can buy or rent much cheaper, and it's a good quality of life. And you're seeing that in all the major cities outside London. And we've tended to target properties in these particular cities. I've already referred to the high speed rail we've been giving the go ahead, which could only be positive for the North. Over to Steve.

17:27 Thank you, Neil. So for those who are familiar with with PALACE CAPITAL, you you'll obviously know our history in in terms of our our growth growth of our portfolio over time, number of equity raises in the past, and and how we've managed our debt. So I'm not gonna spend too much time on on this. It's obviously there as a reference. But I think the point really, to to to reiterate what Neil said, is we are focused on growing both income and capital. And, hopefully, you can see the the the results of that that strategy coming through in the financial track record. In terms of our balance sheet, we obviously, based on September values, we had a portfolio of 275,000,000, and our loan to value in terms of our debt was at 34%.

18:22 So we were conservatively geared. However, we expected this gearing level to increase as we progressed with our development up in York, which we which we will talk through more.

18:39 I guess key at this point in time is is debt. You know, what sort of pressure can the the banks put us under? I've talked about the conversations we've had, the support we we we've been we've been offered.

18:54 But just to give you, obviously, a bit of detail in terms of the the lenders, we've got facilities with Barclays, NatWest, Santander, Lloyds, and Scottish Widows, all, you know, the key high street lenders. And at this point in time, we're we're quite thankful that actually a lot of these facilities, they are nonrecourse. They're at an SPV level. They're specific to portfolios or or or single assets. We're not borrowing at the top PLC level. And the advantage, of course, is that it it doesn't all if there is a problem with an asset or with a facility, it's it's it's quarantined in that SPV. It's not it it doesn't obviously affect the rest of the group. We have control over that. So I think that's an important point to note.

19:50 But in terms of our our ratios,

19:53 we do fix some of our debt, but but but not all of it. And as at September, we had about 63% of our debt was fixed. As I said before, the loan to value is 34%, but we would we would expect that to increase gradually with the development over the next twelve months move towards completion.

20:16 And then just in terms of the the maturity, we we've got no debt due to expire in the next two years, and our average debt maturity is four and a half years. So there's obviously, in a time of crisis, you what you don't want is to suddenly have to start refinancing debt, especially if the debt markets become more difficult, which which they're expected to.

20:41 So, you know, our our debt structure is is manageable. It's it's in a strong position. We've got good support from our banks, but also we've we've we're managing our our working capital so that we can actually deal with issues if they do drop up.

21:00 Final thing I just wanna say in terms of obviously, we became a REIT last year. It wasn't necessary when we when we first started out. As Neil said, we bought a lot of corporates and there was various tax advantages, tax losses inherited, and our tax bill was very low in those early years. And then, obviously, as we we built the portfolio up, we utilized losses. Our tax bill started increasing, and actually, it got to the point where REIT conversion was the right decision. So we carried that out last year,

21:36 and our first property in distribution, our first paid was paid December last year. We expect reconversion to support our business going forwards. It has eliminated almost a million pound of the year, which obviously enhances earnings per share to shareholders. We do believe that the REIT badge broadens our appeal and should ultimately help us to improve liquidity to our shareholders. Final thing I just wanted to pull out before I hand back to Neil is this the the capacity within our current portfolio to grow our income. And you can see our passing rent back in September was £16,300,000.

22:25 And there's various bits and pieces in this in this chart that demonstrate that there is the the ability for us to actually grow that rent as we let space. Over the last twelve, eighteen months, we've taken quite a lot of space back from tenants where we've looked to refurbish space, spent some money

22:47 capitalizing on growing incomes, as Neil said, cities like Liverpool and Manchester and Leeds up in the North where we're seeing rental growth. And actually, if we spend some money fitting out our space and improving the space, we can we can take advantage of those grow and rent. So you can see there's actually upside of almost 30% potential within our existing portfolio, which we think we can capture the majority over the next couple of years. And you can see, obviously, under development, our project up in York, once that's complete next year, there'll be almost a million pounds of of rental income accessible from that scheme. So lots of potential in terms of growing our income, that's obviously attractive to to particularly being a REIT where we don't pay tax on that rental income.

23:46 Neil, back to you. Right. So you see from the map here where our regional portfolio is situated. We're we're very regional. We're as far North as Newcastle and Southwestern Exeter and Plymouth. So we're widely spread. You see the sectors where our properties are. We've got 31 in offices, we've got 10 industrial, eight retail, two leisure, two retail warehouse and two under development. And you can see our geography, 30% of our property is in the Southeast, 19% in the Midlands, December two in the Northeast, 19% Northwest and 9.8% Southwest. So we're well covered. We have an active management strategy.

24:33 So we have three things. We have what we call core plus, which is generating strong income streams to support our dividend, and that's 54% of our portfolio. We then have our value add properties, which require capital expenditure for refurbishment in order to capitalize on rising rents in growth locations, and that makes up 31% of our portfolio. And then the balance of 15% is focused on what we call opportunistic developments, taking assets through the planning process to generate growth, one which we're doing now in York and one in a minute I will talk about, which we've got in Weybridge. So development in York is called Hudson 0.25. It's literally a minute from York Station.

25:20 You can see there that we've got 127 apartments and 39,000 feet of offices. When we bought it from Quintane as part of the portfolio, this was valued at 3,800,000 back in 2013. And when we bought it, it was 80 the building on the site was 80% empty. We went through the planning process. And when we started our scheme, it was valued at £16,000,000 We estimate that the gross development value on this will deliver £69,000,000 with a £10,000,000 surplus, but £20,000,000 cash on cash return from what we originally paid. Steve mentioned that we've got a facility with Barclays on this scheme.

26:07 We have, as of March 31, we have sold 28 apartments, that's exchange contracts. We have 17 under offer, which are valued at £4,700,000 We expect one or two of those to exchange possibly this week. I told you that York is a bit of a unique market because supply has always been tight. So in essence, we have 45 apartments sold or under offer totaling £12,250,000 The estimated date of completion is the end of January. But because of what's occurred, we've still got contractors on-site, but it has slowed down. So we estimate at the moment that our completion date is going to be possibly March or may even go into April.

26:58 We don't know yet, but that's the way it's looking. On one of the residential blocks, there's 4,500 feet of office space. We have pre let that to Knights, who are a quoted firm of lawyers, at a record rent of £25 a foot, and they will move well, they'll take possession of that in the spring of next year. And in case no one is aware, the Sunday Times do this series called Best Place to Live. And in 2018, York was voted Best Place to Live in The UK. So we talked about opportunistic developments and our pipeline to generate growth. Weybridge, we have consent for 28 departments, and we're looking on that one to starting possibly in 2021.

27:49 We have a small scheme in High Street Uxbridge, where we've applied for planning consent. We've got one in Beaconsfield, all quite small. But in Milton Keynes, we have a 45,000 foot office building about four minutes' walk from the station on Midsummer Boulevard. The position on development in Milton Keynes used to be that you couldn't build higher than the tallest tree. But, of course, Milton Keynes is 50 years old, and the trees are taller now. So in consequence, they've told us that we've got a three storey building, that we can go to at least eight and possibly more. And we're going through the pre application process now. Now because of what's occurred with COVID nineteen, we're not projecting this to start before 2023.

28:40 And 2023 is the year when Milton Keynes University opens. Hasn't got one at the moment. We've got the open university, but its main university is going to open in 2023. We've got a property in Leamington Spa. We have an acre and a half in Leamington Spa. It's a really good town, and we've a potential development there of 70,000 feet, but it's let at the moment, and it's let until the end of November twenty twenty two, so we've got time to deal with it. And then we've got Bolton House Manchester, which is about three or four minutes walk from Manchester Piccadilly. That is a 75,000 square foot building. It's multilet, and we're looking at getting possession of that in about four years' time. This is Weightbridge as it is now.

29:31 It's a 50 year old building, offices above shops, very old fashioned. As I said to you, we've got consent for 28 apartments and a small amount of retail. Because the apartments are only one or two bedrooms, we know even in this market there's going to be very strong demand, bearing in mind, Weybridge is a very strong commuter town, and that has a growth development value of £13,500,000 This is Bolton House in Manchester, which I referred to you. When we bought that, we paid 10,600,000 We've had considerable uplift on valuation, 44%, in fact, since we bought it. Just as an aside, we bought that opportunistically when most people went out of the market because David Cameron had announced the date of the referendum and everybody took fright.

30:24 Except us, we thought here's a great opportunity to buy in the center of Manchester, close to the station. It'll always pass the fundamentals. And we're very pleased we bought that, and that is a medium term development opportunity, but not scheduled to start if we do do it for at least four years. So this is Derby Square in Liverpool. We bought this for £14,000,000 about a year and a half ago. Average rent's £12 on purchase. We're now getting £17 in this building. It's nearly a 100% occupied. You can see the retail tenants. We've got Tesco and Pret a Manger. We've got Exchange Chambers, which is the biggest barristers' chambers in the North, and a broad range of occupiers. But as I said, Liverpool has seen very little office development, lost a lot of office stock, and in consequence, that's why we're seeing growth there.

31:19 This is our scheme in Northampton, our leisure scheme. It's 90% let. We did lettings to Sue Yoga. We did Gravity Fitness, who actually opened just before the close down. This is the amount of money, 226,000 we've added to the rent roll. Leisure is one of those where we are talking to tenants about how we can help them during the course of the next six months. Okay. So just in terms of value creation, we wanted to just summarize which well, where there's a number of assets that we believe we're gonna create some value, be it income or capital. We've obviously talked through York, Weybridge. There's a potential to to develop that next year.

32:08 And then also in terms of the asset management, we've talked through Manchester, Liverpool, and and Northampton. So but these are all within our portfolio where, you know, there is upside within the next two years. So it's it's I think it's important. We we've tried to highlight there's a development pipeline. There's opportunity further down the track. But actually, within the next eighteen months to two years, we will have opportunity to grow our in command capital. Just just as a sort of a a hypothetical projection, this is this next slide is really about trying to give you investors and potential investors an idea of, you know, where's growth gonna come from in terms of our business.

32:56 So York, as a development for us, is our flagship development. It's it's significant. It makes up a large chunk of our portfolio. I think it's as we said, development is around 15% of our portfolio. So this one asset makes up a a large part of that. It's now our biggest valued property in the portfolio. Once that completes, and obviously, there's there's a GDV there that we've put out of of just shy of £70,000,000, the Barclays development loan will get paid off once we've once we've completed and sold the residential flats. The office space is there which we're looking to hold, and that will generate income.

33:44 But there's a lot of surplus funds that will get released back into working capital that we can then obviously go and redeploy and and build our portfolio further. And this really is trying to give you an idea that, you know, in theory, you've completed the sales. You've sold all the residential. You've got at least £25,000,000 of cash. If you went and geared that at 50%, you've got 50 mil that you can go and deploy on further income enhancing acquisitions. And we've just put some sort of simple projections, buying properties yielding 6%, cost of debt of 3%. What what would that do to our portfolio over in a couple of years' time? And you can see, you know, there's growth in terms of the portfolio, but it it translates to rental income, obviously, keeping the same admin cost base. We're able to grow our earnings per share upwards of 40%.

34:47 And more importantly, that will enable us to demonstrate strong dividend cover, which as a result of deploying significant amounts of capital into York over the last couple of years, Our dividend cover has dropped below below a 100% for obvious reasons, but that will then obviously kick back back into full cover. So there's a lot of potential. We're very excited about the progress of York, and there's obviously a long way to go. Dealing with COVID nineteen on construction site is not easy, but they've done a a fantastic job so far. And as Neil says, they're still on-site, and that's still on target to complete next year.

35:33 So just to conclude, we believe we've got the the right assets in the right locations and in the right sectors where we can really add value both on an income and a capital. We've got plenty of income reversion within the portfolio which we can access, and we have been spending money refurbishing those assets to grow our income. And we've also got capital growth up with the £10,000,000 surplus at the York development, which that alone could impact NAV per share by 5%. Excuse me. And in addition, we have Weybridge as a development that that we could tap into next year, and there's other opportunities within the pipeline.

36:20 As we've said, we we converted to reach status last year, and we believe that will also support the business model. So we've got a well established platform. We've got a solid portfolio, well positioned to capitalize on the Boris bounce, on the government investment in the regions, and obviously managing our working capital throughout this period dealing with COVID-nineteen is a challenge for all businesses, but we believe we're well positioned to come out the other side and to continue to grow this business. And that concludes the presentation. Many thanks, Neil. Thank you, Stephen. Just wanted the company to take a few moments to review the investor questions submitted today through the Q and A tab on the top right hand of your screen. I'd like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard on the Investor Meet company platform.

37:22 Before I hand back to the PALACE CAPITAL team, I'd like to remind you that your feedback is important to the company. Immediately after this presentation has ended, you'll be redirected for the opportunity to provide your feedback in order that the company can better understand your views and expectations. Neil, Steven, I know you haven't had an awful long while, but I guess you've got a few questions, I guess, that you might Yes. We don't mind. We love questions. Okay. I'll hand over to you, sir. So the so the first question we've got is is will the delaying oh, sorry. Pardon me. Pardon me. No. This is the question of buying back our shares. We're trading at a 50% discount.

38:08 Should we be buying back our shares? We've always looked at that. We've always had it under review. But to be honest, we like to use our money for opportunities, and we we're not rushing to do that. You probably noticed none of our peer group have done it either. We've got cash. We want to keep our cash for the opportunities that we think are going to become available. On the question of Hudson 0.25, the question is, will it impact our timing when we get the surplus? It might do. So the estimated date of completion is the end of January. It is possible that this will complete before the end of our financial year.

38:55 The problem we've had on-site is that although the contractors have continued working and the government is 100% behind it, the builders' merchants have closed. And in consequence, there's been a total rundown of materials, and that's what's made it difficult for some sites to continue to operate. The good news we had yesterday is that the brick manufacturers are returning to work, and a number of builders' merchants are reopening. And we think that's under very strong pressure from the government because, obviously, what they're worried about is unemployment. And they think construction's gonna play a very big part in keeping the unemployment level as low as possible. In terms of question here Neil, if I could just jump in on that one as well. Yeah. I think, you know, initially, we were looking at a practical completion date end of January, which would mean that by the time the residential apartments went through legals and and and actually completed, people would be moving in.

40:03 The likely scenario would would be they would have been moving into their apartments, and and we'd be able to recognize profit on sale by the 03/31/2021. And I think it that that will be very challenging given the the potential delay. So so my my expectation is that auditors at March 31 would, you know it'd be about what has completed and who's moved in. And and if if that has been delayed and if that is into April or even May, then obviously that will come through into the next financial year. Yeah. We at the moment, we just don't know. We've got a really good contractor. Big contractors in the North have got great relationships with their subcontractors, and we've got a great relationship with them.

40:51 We just don't know yet. The next question is what's expected to envisage across our portfolio in medium to longer term? You've got office, industrial, and retail. Needless to say, we're not rushing to look at retail at the moment. But we may do, but not yet. It's totally the wrong time. Certainly office and certainly industrial. We'd like more office. There is talk with all this homeworking. Do we need as much office space as we need before? You'll probably find I found it last time when people thought computers were going to reduce office stock. In fact, it didn't. So we'll have to wait and and see on that. I'm a great believer in good office buildings in city centers.

41:40 The one thing we don't do, we don't buy office buildings outside city centers. We think they will slowly decline because of truck particularly transport problems and also the fact that there's no coffee shops and pubs and gyms attached to business parks. So we think it's going to be city center. The next one, question here, we've asked about our background to our shareholding in Circle property. We think in the next well, we thought even last year that there's going to be some sort of consolidation within our sector. Circle is a very small company, and we took the view that in time, there will be a possibility of a transaction there.

42:28 We did actually speak to Circle, but that must be six, nine months ago as to whether they would like to join forces with us. We had some preliminary discussions. They weren't really in the mood, but that may change. So we have our 5.5% shareholding, which we've got at the moment, and, of course, we'll keep that under review. Any more you want to say on that, Steve? No. I mean, I think the the as you said, there's there's there's quite a number of listed property companies, but as as every management team will say, they we've all got our own strategy and style and and business model. I think the interesting thing about COVID nineteen is that it will create pressure in in some places.

43:19 And, you know, I I think the listed real estate sector has been across the board very conservatively geared this time around. You know, you go back to the financial crisis and people people had serious issues and and a lot of the even the largest REITs, they were issuing equity to resolve some of their debt issues. That that I don't believe is the case this time around in terms of the listed sector. However, I think there is a private there is there is gonna be stress and and challenges for privately owned property companies who have geared well beyond what what we have. And and there may be opportunities.

44:09 And and, you know, to be honest, we that that is how we have built our company over the last ten years is through corporate acquisitions. And we believe there's there's gonna be plenty of opportunities, you know, as we as we deal with this crisis and come out the other side. I think just to add to that, private property companies, 100%, we were looking at one or two just before all this broke, and one in particular had a loan to value of over 60%. That is looking dangerous as far as they're concerned with a bank that is very well known to us, and they will be very concerned about that. We think this crisis will make private companies, as Steve said, more receptive to listening to proposals.

44:59 And the fact we're listed, I think, is going to help us considerably. The next question is here, when are we looking to acquire any company in the next twelve months? Yes. We've always been on the lookout for corporate acquisitions. We see no reason for that not to continue, and our view is that opportunities will present themselves. I'm gonna allow Stephen to answer the next question. Yeah. So the q three dividend, well, as far as paying a dividend relating to that quarter, that's obviously been pulled. I can't give you details in terms of timing for year end results yet. As you you'll be aware, across the market, there's been there was actually a requirement for people who had December year ends not to announce results when they were originally planning, so they they were delayed.

45:59 Our usual timing in terms of results is we will announce early June, and then the final dividend would be proposed at that point and then approved at the AGM usually held in July. Well, we're looking at potentially, we may we may defer our results announcement depend on on what obviously, the outcome over the next month in terms of going back to work and and lockdown being resolved. So that that's gonna be watched in brief. The impact, of course, is we want to make sure our working capital is is managed effectively before we start paying out dividends.

46:46 But it q three is is obviously is lost, but q four and final dividend is certainly not, and and that will be reviewed at the appropriate time. Yep. I think that's very fair. Sorry. Just to just there's a second, Jonathan, for a question you've asked just in terms of the absence of the dividend impact on REIT status. It it it does and in fact, when you when you convert to REIT status, you get a you get an individual from HMRC who becomes your best friend and and looks after you. And they have sent a lot of advice and effectively offering help if to all REITs if if we as you would have noticed, a lot of the REITs have pulled their dividend whilst managing through this crisis.

47:44 And what what you you may not be aware of is when you pay dividends as a rate, you've got to pay 90% of your of your rental business profits. But what you do have is you've got a twelve month window to pay those dividends. So, for example, the year ended 03/31/2020, we then have a full twelve months through to 03/31/2021 with which to pay our requirement. So HMRC have have have sent messages out to all the REITs to basically say, if there's a problem with paying your 90%, please get in touch. We don't envisage a problem, but as as hopefully I've explained, we've got a full twelve months with which to pay our requirement anyway.

48:32 Right. So has asked, as people are working from home, how would this affect the office property market? My view is it may do. My experience has been in the past that everyone said it is going to affect it. It might affect the flexible office market. That might get affected in some form. But I think the other market, it is very, very too soon to say, in my view. The next question for Michael is about Bolton House. What are we looking to do there? Bolton House is situated in an area which Manchester City Council intend to regenerate over the next ten years.

49:18 So we're in the right place. We're only 50 yards from Portland Street and about three minutes from Manchester Piccadilly. There's a huge scheme planned for Manchester Piccadilly Station. Our scheme will probably be offices, but it's four years' time. So we'll have to review it. The good thing about our site is we've got 75,000 feet on it at the moment, but it's very capable of taking twice that amount. We've got a very big open car park next to our property, which is hardly used in Manchester. It's empty most of the time. So we've got good potential to do a particularly attractive scheme, but not for four years. We're getting the place up and let.

50:04 When we bought it, the rents were between 12 and £13. We're now getting £19. So the good thing about regional property is you start from a lower base, and you therefore got much more chance, unlike London, of getting a really good percentage increase in terms of growth. So that's our view on Bolton House. I will revert to Steve to answer the next question from David. Okay. So David has asked, can you talk about the measures the company has taken to reduce costs in the current environment and specifically, what percentage salary reductions the company's employees are taking. So if I just take the first point, in terms of reducing costs, it's obviously it's early days in terms of managing our rent collections and understanding how our tenants are going to fare through this process. But as we explained earlier, rent collection stats for ourselves for for March quarter have been pretty strong in the circumstances.

51:09 June quarter, I think our our internally, expectation is it's gonna be tougher than March, so we're prepared for that. However, you're right to be flagging how we're reducing costs, what are we doing to you know, are there any variable costs that we have? We're we're we're part of the BPF, British Property Federation, and through them, we are lobbying the government specifically to deal with empty rates. So where we've got property that has empty space, as a landlord, you're required to pay the rates on that space. And it it was never meant to be that way.

51:56 It was it was it was instigated in order to actually encourage people to go out and let their property. And clearly, in this environment, you cannot let space to people who can't take occupation. But so that is one area where we are lobbying the the government to say that this is an area that you need to support landlords specifically, but but but, obviously, all owners of property where they're having to pay rates on empty space. We've talked about working capital. We we had a number of properties where we were looking to spend some money, CapEx, which was discretionary. So we've pulled all all non essentials for now. So that's a watch in brief. And then in terms of admin costs, I mean, for those of you who don't know us well, we are we're a 12 person strong team.

52:51 So we're we're a pretty lean, main fighting machine. And there's obviously, there's not real there's not really scope to furlough staff. I don't believe or we don't believe the furlough scheme was set up for for for companies like ourselves. Certainly don't want to abuse that. And in terms of are are there any salary reductions? It has been discussed at a board level whether it would be appropriate. Certainly, no decision made at this point in time. But, no, it it I guess the majority of our administrative costs are fixed. We've got rent on our office and rates, etcetera. We've got all the all the costs that come with with being a public company, which you cannot just turn the tap off.

53:43 But hopefully, that's given you a bit of scope to understand, you know, we are looking at it across the board in terms of our property costs, our admin costs, and, you know, it is a process that a lot of companies will will have gone through and and it's a challenge to to to keep your costs down. But but it has to it has to be a focus and a priority if if your income is is under pressure. Thanks for that, Steven. Thank you, Neil. I know we've got a whole host of questions, but I'm also just mindful of time. Is there any particular ones that you'd like just to wrap up with? Well, I can talk about the residential opportunities. They are in a you've asked about interesting residential opportunities featuring prominently in our development pipeline, where York was a residential development, but we're not keeping it. We're selling the flats.

54:41 And the only other one we've got particularly is in Weybridge. And in Weybridge, they will be built for sale as well. So we've got absolutely no plans to retain residential assets for income. Perfect. Well, thank you, Neil. Thank you, Steve. And obviously, we've got a number of valid questions. And of course, with the ability to review all of these afterwards, And obviously, for the audience, for the attendees, all the questions and the responses will be available via your Investor Meet company dashboard as soon as it's practical to do so. Thank you, Neil and Steven, once again. Thank you. That now concludes today's presentation. But as we mentioned earlier, please do not close this session. Your feedback is important to the company, and you will now be automatically redirected for the opportunity to provide your feedback.

55:33 Thank you once again. Thank you. Thank you.