Palace Capital (LSE:PCA) — Palace Capital Half Year Results Presentation

0:02 Good morning, ladies and gentlemen, and welcome to the PALACE CAPITAL PLC Half Year Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged, can be submitted at any time. Just simply use the Q and A tab on the right hand corner of your screen, type in your question and press send. The company may not be in a position to answer every question received during today's meeting. 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, and we will send you an email when they're ready for your review. I'd also like to remind you that this presentation is being recorded.

0:35 Before we begin, we'd like to submit the following poll. If you'd give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Richard Starr, Executive Director Matthew Simpson, CFO and Neil Sinclair, CEO from PALACE CAPITAL. Good morning to you all. So good morning, everybody. Well, thank you for attending this webinar. Just to say that PALACE CAPITAL have had a very strong first six months. We successfully negotiated the pandemic. You've all got a copy of the presentation. Looking at the front, the highlights for us are positive sales at Hudson Court to York, our flagship development near York Station, and very strong rent collection, which has enabled us to increase the dividend.

1:20 So we've actually sold 64 apartments. 62 are now completed. Two are completing tomorrow, making 64 altogether for a total of £21,000,000, with 800 offer to the value of £3,000,000. We also announced in the summer we were banking on a disposal program of noncore property in order to reinvest those monies in better quality assets. We announced that we were gonna sell £30,000,000 worth of property. We sold 12,000,000 by the end of the half year at 5% above value, and a further 6,900,000 has been exchanged since that time. So we're 18,900,000, and we have 8,000,000 under offer at the moment.

2:08 Hopefully, they'll be exchanged before the Christmas break, so we'll be going very close to 30,000,000. 90% of our rents due for the September quarter have been collected, a higher proportion than last year, and we expect this to increase to 95% when monthly payments for December are received. So that you understand most tenants pay quarterly, but because of the pandemic, we agreed that some of them could be could pay us monthly for cash flow reasons. We have reduced our LTV, loan to value, to 36% as at the September 30. This is a level at which we are comfortable. This is because we have sold most of the apartments at Hudson 0.25, and our development facility from Barclays Bank has been reduced to 1,600,000.

2:57 The exchanges and completions will enable us to repay that money by the end of this month well ahead of schedule.

3:05 You'll know that we've increased the interim dividend by 8.3 to three and a quarter p. It is very important. It's fully cash covered, which it is, and that is the minimum quarterly level going forward. 98% of our portfolio is compliant with energy performance certificates for 2023 regulations, which Richard will talk about a little bit later. There have been 29 lease events in the

3:32 first six months of the year, providing an additional income of £600,000 per annum at 3% premium to our estimated record value. So this is our flagship development at Hudson 0.25 York. And at this point, we'd like to show you a very short video, which gives you an illustration of the quality of the skin.

5:41 Thank you. We're very proud of this development. We've won two awards in Yorkshire, the Yorkshire Property Awards and the Insider Property Awards. It's our flagship scheme. You can see from that the quality of the scheme. You can see the courtyard there, which is like a back garden in the middle of York to all our residents there. It's gone down very well. 64 apartments I've told you have been sold, and included ones under offer with that is £24,000,000. And we estimate that we make an IRR of 15% on this scheme. As I said, the development loan is being repaid by the end of the month, and Richard will talk shortly, when we come on to the office building. This building comprises three residential blocks and one office block. And because of York's railway heritage, we were name named each block after a station. One's called Victoria, one's called Kings after Kings Cross, and one's called Waverley, which is Edinburgh Way.

6:44 Then we go to our disposal strategy. We've told you that we're selling £30,000,000 worth of buildings. What we've sold so far will enable us to reinvest £6,400,000 of equity. We expect to generate a further £10,000,000 altogether for reinvestments once this disposal program is completed. As I said, post half year, we sold a further three properties for £6,900,000, and these monies will be will be

7:16 used to purchase an additional property in order to make sure that we do not lose any income. ESG is forming an intrinsic part of our strategy for our existing portfolio and going forward. And we've incorporated the all aspects of this into our into our portfolio from the the e perspective, which is the environmental, the EPC targets are changing quite dramatically. And as we've kind of stated already, by March 2023, we will not be able to let a property if it has an f or a g rating. And that is is increasing between to a c rating in 2027 and a b rating in 2030.

8:03 And what we've been doing during the course of the financial year is we've removed all of those f and g ratings so that as at half year, only 2% of the portfolio is rated below an e. And we will have much more information that we'll be able to give at their full year results in June of next year. The s relates to social, and we're very charitable. We give money to, young children and homelessness charities and supporting those, we have that for a number of years. We also carry out a biannual tenant survey, which is currently underway, and we're reporting in the

8:39 annual report, the results of that. From an the g perspective, which is the governance, we've got an ESG committee in place. The whole board and all of the team are very much involved in it. The TCFD work screen, which is the task force for climate change financial disclosures, again, we'll we're collecting that data, and we will have a lot more information that we'll be providing in our full year results. In terms of, the impacts of EPCs on debt, Matt's got something to say about that. Yeah. I mean, speaking to our lenders, ESG criteria has become our most important, in terms of bank debt. Having spoken to our lenders over recent weeks and months, the EPC ratings in our portfolio are absolutely crucial. They're having a look at we put typically five years debt in place. And as Rich mentioned, by 2027, it's gonna be c EPC rating and 2030, a b rating. So if in five years, any of our properties don't meet those criteria, the potential is that could be unlettable space.

9:42 So they wanna see how much we need have to spend in terms of capital expenditure to get any of our builders to those criteria. But as Rich will touch on later, we we've got a disposal program, which is looking at disposal of those particular assets that might not make those EPC ratings or not viable for the accretive value for our portfolio. I think that the long term future will be that the advent of green loans and green mortgages will be that you start getting better rates on your debt if you're EPC compliant at the a and b level. So recovering the shared value for investors, we're very, conscious of our discount to net asset value.

10:31 It's on our agenda at every board meeting. The whole purpose is to close that gap. There's certain things that we can do to do that. One is to increase the earnings, and secondly is to sell the apartments at Hudson 0.25. You can see on the left what we've how we've done so far and what our target is in terms of completing the sales of Hudson 0.25. As you know, we've just said we've sold or got under offer 24,000,000 of apartments at Hudson 0.25, and the value of the remaining apartments is 28,000,000. We're then targeting the letting of the office building. We've got a 34,000 foot office building called HQ. We state there that we've got eleven thousand two eighty feet under offer, and Richard will mention in a minute we've just agreed to let some further space at HQ. So slowly but surely, it is letting, and people are returning to the office.

11:29 This disposal program, we see 30,000,000, including sales and under offer, we're around 26, so we're not very far off completing that by the end of the financial year. Now people can do the maths. We sell £28,000,000 of apartments. It's all our money. We have no bank debt to repay. So with that being reinvested and gearing at 50%, we would increase our income by £3,000,000 per annum over the next eighteen months to two years. As far as our progress in

12:01 the first half of year is concerned, we have already agreed to buy a property for circa £10,000,000, and Richard will talk about that a little later. Thanks, Neil. I'll just talk you through some of the key financial highlights of the year. As you can see from the metrics on slide, it's been a very positive, six months for the company as we come out of COVID and we start to execute our strategy. It's a return to to profit. As you can see, there's an IFRS profit of £8,000,000 and a basic EPS of 17.4 p. That's an increase of over 200% for a similar period this time last year. And the growth in our EPRA NAV and dividends resulted in a 5.2% total accounting return.

12:50 We've made significant progress on our net LTV. We've paid back $18,800,000 of the Hudson 0.25 development loan, which we expect to be fully repaid by the end of this month, reducing from 42% LTV to 36% and our net debt coming down 21% to 93,000,000. These positive financials have resulted in the board making the decision to increase our interim dividend to 3.25 p, which is an 8% increase.

13:25 Just having a look at the rent collections. We have maintained very strong rent collection for the six months, which is a continuation of the strong rent collection we had, during the COVID period. This is testament to the hard work of our asset management team, the relationships they've built with the tenants where they've worked tirelessly on every single tenant, during the last eighteen months and beyond. This has resulted in a 100% of the rents being secured to the top 20 tenants, which makes up 43% of our rent roll. Again, we've only given away a £100,000 of rent concessions for the six months. You compare that to 600,000 for the similar half year, last year and 1,100,000 for the entire last year.

14:14 Again, as Neil mentioned, that's given us a cash covered dividend, for the full year.

14:23 Just looking on this next slide. This slide will just give us a reconciliation between adjusted profit on the left hand side is what we use for reoccurring earnings to our IFRS profit on the right hand side, which as you can see, I mentioned earlier, is 200% up at £8,000,000. This has been driven mainly by, the trading profit, realized trading profit on Hudson quarter sales of 2,800,000. Also a return to a fair value revaluation gain on investment properties and profits on our side of the three noncore commercial assets in the six month period.

15:09 The next slide just gives you, again, a bridge between where our EPRA NAV was at March 31 at $3.50, just under £3.50 to now, which is £3.62. Again, as you can see there, that's driven by the profits on disposal of the Hudson 0.25 sales, the fair value revaluation of our properties, and a small increase in profit and disposal of our non core assets.

15:41 Just finally to to wrap up on the financials, just an overview of our capital structure. We gear up we sort of have debts in place on the majority of the high street clearing banks. We we gear up at conservative levels. As touched on before, we've managed to reduce our LTV from 42% to 36%. This again, 42 was at the year end due to the development low, which was always good to be a temporary increase. We've now paid 18,800,000 and expect that to be fully repaid by the year end. And on that, the covenants, we've remained compliance on every one of our debt facilities within the period. We've got significant headroom, due to strong rent collection and a payment repayment of arrears and payment plans during the six month period.

16:35 Thank you very much, Matt. So just providing on page 15 an overview of where our portfolio is, and you can see the sector splits. Picking up on a couple of points here, we've obviously let some space during the course of the year, and I'll touch on that in a bit more detail going forward, but our net initial yield has increased over that period of time. And by having let making space, the like for like ERV of that metric has come down. You can see between March 21 and September 21 has come down to

17:07 now 12.1%. We've stated previously that we're focusing on office offices and industrial sectors, and you can see where that sector split is from the beginning of the financial year and where we're trying to get to. And that 70% is based on the fact that if we sell all the residential units and complete the disposal program without buying any other properties, that is where we'll be at by the year by the financial year end. This is a chart which shows the valuation changes during the course of the half year. And the two red blocks look like we've lost money, but, hopefully, it doesn't quite work like that. £14,000,000 refer relates to residential sales paying off the Barclays loan, and the nine point point nine is the book value of the sales that we've already completed.

17:56 But as Matt stated earlier, that was the book value, not the sale price, and we booked a £400,000 profit on those sales.

18:06 On page 17, we break down what we've done during the course of the financial year so far. So 29 lease events adding £600,000, and it's quite evenly spread between new leases, lease renewals, and rent reviews, but significantly, significantly, all of them are ahead of the RV. Post the half year announcement, we've completed a further eight lettings eight, sorry, eight lease events, which increases the annual income by a further £200,000, and we've got further to go during the course of this calendar financial year. So what is the impact of letting vacant space? Well, you can see where the contracted rent is as at the September 30 and where the ERV is.

18:51 And the majority of the spay the majority of that bridge comes from letting vacant space, including Hudson 0.25, which we've broken out. So office space in Hudson 0.25, there were 39,000 square feet at the beginning. We pre let four and a half thousand square feet to Knights. But as we've announced, we've got 11 and a half thousand square feet under offer. And, significantly, yesterday, we agreed a further letting of about three and a half thousand square feet. So by the end of the financial year, we expect to have let over half of the Hudson 0.25 office space. The other vacant space of $23,000,001,000,000 pounds of that is made up of Newcastle and Manchester vacancy. And we've done very well during the course of the year letting up the leisure the Baker leisure assets, and that has led us to only having £360,000 worth of rental to be gained by letting the remainder of the of the leisure and the retail assets.

19:48 So we're making significant strides towards being able to bridge the gap between our contracted rent and what the ERV is.

19:58 We've stated previously that we're focusing on the offices and industrial market, and this is just some information as to where that's coming from. We've returned to the office pretty much full time, and we're expecting that sentiment to continue throughout the whole of the regions and that working from home is more a compliment rather than replacement to the office. Why is that? Well, it's mainly because because collaborating over Zoom isn't as easy and as profitable as it is face to face. And that's being proved by Ewinson Young reporting the quarter three uptake in the big nine office locations across the country that take up has been the best in the last couple of years. And that's being driven by large corporate occupiers in the main taking brand new quality buildings. And the reason for them doing that is being is them focusing on their ESG agenda, which something is something that that we we relate relate to to very clearly in our portfolio.

20:53 And we expect that can to continue in the short to medium term. On the industrial side of things, there is still a lot of value to be gained on the ecommerce distribution sector. And we've all got used to receiving products within an hour now. We used to be three or four days, and now we want things immediately. And that is trend that trend is continuing, and the demand from customers is increasing the is is is increasing the amount of demand that is coming from distributors across the country. We see that continuing. We've we've stated that we're going to have equity that we want to reinvest. And what we're here is where that money is going to be going. So on the left hand side, the objectives are to recycle the money that we have lost from the disposal program, but also equity that we're getting from the self from the future sales of residential.

21:50 We're focusing on the offices in industrial, but historically, we've had too much emphasis on development and value add and not enough on that core income. And through Hudson 0.25, we're now obviously going to see the benefits of that. But we realign the portfolio to a much more core portfolio, not losing our entrepreneurial spirit of having value add and development opportunities coming through. And that will focus our attentions on buying 5 to £20,000,000 assets, focusing focusing the the office office and industrial, obviously, still keeping on with the university towns and city centers with an ESG focus, but more importantly, crystallizing the profits of our dispose crystallizing the profits of our business plans for each property. As Neil stated, we have agreed to buy a property, and this is an example of what we are looking to buy.

22:44 Right. Both one for offices and industrial, both around the £10,000,000 mark. And what is the impact on our company of buying these properties? We'll increase our net income by between four and four and a half percent. Our occupancy stats will go up, and our LTV will also go up slightly. But as Matt has already stated, it will stay within the parameters we set ourselves at mid 30%. And our admin cost ratio, obviously, will also decrease, and our sector focus will also be more, again, focused on more offices and industrial. We expect to complete one of these purchases during the course of the calendar year, the which means that while the lease events we've already carried out and buying this property, buying one of these properties, we will have replaced all the income that will be lost through the whole disposal program during the course of this financial year. That's earnings accretive going forward.

23:38 So the outlook is that in the summer, we stated in our annual results what we were going to do, and we are delivering on what we are doing in terms of our disposal program and in dispose and in respect to Hudson 0.25. The disposal strategy will continue. We're already in market certain properties next year for sale. That's one thing. Hudson 0.25, obviously, we're focusing on that. We've got 55 apartments left.

24:06 We've got interest in them. We are confident that all of those will be sold no later than the end of the next financial year. So you see the estimated annual value to be captured through letting the vacant space. That is a top priority for us. Two reasons. One, you get the rent and two, you don't pay empty rates. So you actually get a double whammy when you let space. So further sales from Hudson 0.25, which will generate equity for reinvestment,

24:36 We estimate we'll have over £50,000,000 of firepower for future acquisitions to grow earnings by March 2023 by about 3,000,000 per annum. So we are very confident about the future. We've come out of this in this pandemic in good shape. Not many of our peer group have got the opportunity of reinvesting monies from sales because normally, we've gotta pay the banks back. But in terms of Hudson Quarter, we would have paid the bank back, and all the money that comes from that will go into future acquisitions and therefore increase our earnings. So we're very confident about the year going forward.

25:18 Top priority is to close our discount. And doing what we said we're going to do, we think we'll go a long way to doing that. Thank you. That's great. Neil, Matthew, Richard, thank you so much for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab on the right hand corner of your screen. But just while the company take a few moments to review those investor questions submitted already, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via your investment company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, we'll redirect you for the opportunity to provide feedback in order that the company can really better understand your views and expectations. Neil, Richard, Matthew, sorry, I haven't given you a lot of time to look at the Q and A that's come in. But perhaps if I could hand back to you to read out the questions and give a response where it's appropriate to do so, and then I'll pick up from you at the end.

26:09 So the first question, have you seen any improvement in the availability of assets for sale that meet your investment criteria? So did you sort of just leave it on that? That's okay. So, yes, yes, we have seen an improvement in the availability of assets as improved by the fact that we've agreed to buy something. The the market is very strong at the moment, and we are very pro very proud of the fact we've been able to make very good progress on our disposal strategy.

26:40 And that's enabling us to be more in the market and be receiving more opportunities to buy. I could ex I mean, in terms of expanding on that, obviously, we're focusing on offices and industrial, and that's really where the key part part for us is. I I think think the important thing to know is because the there's so much money around, we're selling our buildings. We're selling into a very good market for sales, which is why our sales are above book value. Consequently, not that easy to buy, But we've got a really good network, and we are confident of securing the appropriate acquisitions. Next question. Is the target to sell 80 Hudson Court apartments in New York by the end of this year? No. We've got 55 apartments left to sell, and we anticipate they will be sold by the end of the next financial year, March 23. We hope it will be earlier, but you need to bear in mind that when you agree a sale, note, they're taking an average of two to three months to go through.

27:45 If they need a mortgage, that takes time, and also lawyers appear to be overworked at the moment. So transactions to sell the apartments are taking two to three months, but we anticipate they'll all be sold by the end of the next financial year. You previously talked about the potential for selling the reigning residential units at Hudson 0.25 to an institutional buyer. Can you provide an update on this, please? We did have interest early in the year from one or two people that wanted to buy a block of a block of apartments. It wasn't in our interest. They wanted heavily discounted. They didn't want all of them, which meant we would have been in competition with them, and we didn't see any points. We were coming out of lockdown.

28:31 We were confident within six to nine months, we would sell enough apartments to be able to repay Barclays, and that, in fact, is what's occurred. Where are you seeing the best opportunities? Well, being focused on offices and industrial, those opportunities are we're seeing a lot of opportunity, but actually, we're really quite specific about what we want to buy. So it's focusing on the office market, in universities, housing, city centers. That's really where we're seeing growth, and it's coming from those locations where infrastructure is being in in input. So that's what we're focusing on, the top nine cities in the country unless there's a specific reason to invest in anywhere else.

29:18 Where was the divestment in Circle probably, the 3,200,000 capital redeployed? That is going that is going into the the pot and is forming part of the cash being paid for this acquisition of £10,000,000 worth which which you referred. Next question. Hold on. Pardon me. Great progress. Well done. Would you look to create your own WeWork style offering at Hudson 0.25 given the great location? Perhaps that may appeal to smaller businesses. So in Hudson 0.25, the answer is no. We've we've we've managed to agree, as we've said, a couple of lettings there, which which means we haven't we won't need to do that. But what we are doing in other buildings in Manchester, Southampton, and probably maybe also in Newcastle as well with and in Leeds, we've done it, is we've actually created smaller suites, fitted it out with furniture, and we're providing that flexible of that flexible lease term for potential tenants.

30:20 We've always stated that our office needs needs to be connectable, adaptable, and flexible. And we put connectivity into all of our buildings so that new tenants can come in and plug and play effectively really quickly without having a huge amount of distractions in their businesses. The flexibility comes in the lease term. The adaptability comes in being able to make space in different different ways because I think people are, as a result of COVID and working from home, probably worth looking at different ways in which they can work in their space. So by creating that space already in our buildings, we think we'll be able to attract space attract attract tenants, and we have been successful in agreeing leases in both Leeds and Manchester to date.

31:09 Could you give an update on the search for the new chairman? Yes. We can. We appointed a recruitment company in the summer who we used before to recruit two of our nonexecs. We have a shortlist at the moment. We're down to two people. We're interviewing them again at the moment, and we expect to make a decision on this within the course of the next two or three weeks. How how would an increase in the interest rate affect the company? I mean, good question. I think it's it's a problem at the moment in terms of where inflation's heading. I think the view is inflation will hit 5%, come April next year. I think for us, we analyze things on an ongoing basis. We have over 50% of our debt fixed.

31:58 We just we're refinancing a Santander loan that's up for maturity in August next year, which we are already agreed terms at competitive levels. I think, really, from the Bank of England, we're expecting modest rises interest rates over the over the next year. It's not gonna go to pre GFC levels of interest rates, but I think what we can expect is a lot of the inflationary rises are temporary in nature, but we'll see where wage inflation will go over the next few months, the ending of, the furlough, but it's something we will look at all level on a continual basis and address address that where we see we see fit. Next one, Matt.

32:45 What is the view on Evergrande and but it's split over to The UK. I don't think so. Evergrande has debt of $300,000,000,000 or sterling, whatever the case may be. It's it's in huge it's I don't think there's anything comparable that I can think of in The UK. You then say, have your time frame in mind for the exiting of the leisure sector, please. The position there is very clear. We've done some good letting in our leisure. Obviously, a year ago, was all looking not very good. But at Halifax, we're 97% net, and Northampton were nine 95% net. They have very strong cash flows. We have very good tenants in them. We intend to exit them, but we don't think the timing is right at the moment. We see an improvement coming in that sector.

33:38 And when it's improved to a level at which we're happy, then we'll consider exiting. But we do expect to do so within the next two years. I think it's worth adding to that that, obviously, they do produce together over 3,000,000 pounds of our ring our annual income, and we need to make sure that when we do exit them, we have something worth buying because otherwise, we might put ourselves under a bit of pressure with that cup of dividend. Can you what's that? Can you expand a little more on office demand in the regions? What has happened to rates, for example, HQ? Richard will speak about this in a minute, but what we definitely noticed, which we weren't seeing here a month ago, is some of the old inquiries around that people were kicking down the road.

34:29 I think some of them realized that unless they make a decision about space, they'll be too late. And in fact, the space we agreed to let last night in York, there were two companies after it. We haven't seen that for two years. We know that's happening in London as well. So there's a definite return to the office. We're very confident about the regional office. Obviously, we've got the government's leveling up agenda. There's loads of attractions for the regions. Bear in mind that ten years ago, graduates went to London to get a job. That's no longer the case. Graduate retention in the major cities around the country is high. In consequence, we expect regional demand to be very good, and supply has fallen because so many buildings have been converted to residential.

35:20 Any other comment? No? Nothing. No. Will dividend payments get back to 2019 level? If so, what is the time scale? Yeah. I think the intention of the the company and the board will be to grow the the dividend payments in line with a sustainable level in line as we grow the income. So as we've talked about before, it's recycling those disposal proceeds from the commercial properties and the sales of HQ into accretive investments, and our intention will be fully to grow that dividend in line as we reinvest. At HQ, are the buyers mainly owner occupiers or buy to let are the more expensive public selling, well, and our asking price is being met.

36:08 So the it's a bit of both, really. We've had a lot of owner occupiers. We mentioned in our statement that we've sold two apartments, one for 1,000,000 and 50 and one for 1,200,000. The reason we stated that is that two years ago, we took a number of fund managers to York and Newcastle, and some of them were really surprised that you could get these sort of prices in North Of England. So we thought it was quite important we should mention it. They are selling well. Both the both of those apartments were both bought by occupiers. In terms of investors, what is happening there is the rental market is very strong in York. Generally speaking, people who have apartments in Hudson 0.25 have let them within twenty four hours.

36:58 So we're finding some people are buying their second or third apartment in Hudson 0.25 because they're getting more rent than they thought they might get. In terms of asking prices, we are getting within 1% of what we've been receiving from the beginning. Have you made any progress in reducing corporate admin costs? We have. I know Max is here, but FD left us at the end of last month who's not been replaced. So in consequence, that automatically reduces our cost. The percentage of our admin cost was higher than we would like, mainly because Hudson 0.25 at that time wasn't producing anything.

37:47 So if we increase our earnings by, as we said, 3,000,000 a year from the sale of the apartments, then, of course, the percentage relating to admin costs will reduce. As we reach the near the end of Hudson 0.25, I'm encouraged or otherwise to try and repeat the exercise. We think it was the right we still think it was the right thing to do. Some people say we should have sold the site when we got planning consent. We didn't think so because we think that we're gonna make more money by developing it. And that is actually what we're doing because we're gonna reinvest the money. There's no one else in our peer group who's got 28,000,000 coming forward in cash to reinvest without doing an equity raise. So would we repeat it?

38:41 We would just look at it at the time, but we have no development in mind for the properties we've got for probably two or three years yet. That's great. Neil, I might just jump in seeing as you've answered every single question submitted by investors today. So firstly, you to everybody that's taken the time to submit questions this morning. Neil, if any more questions do come in, obviously, we'll make these available to you after today's meeting. I know investor feedback is important to the company, and I'll shortly redirect investors to provide you with their thoughts and expectations. But perhaps before doing so, Neil, I could just ask you for a few closing comments to wrap up. Yes. So just to say, firstly, thank you all for attending this meeting. Just to say that the management team and the board are very confident about the future. We're delivering on what we said we'd do.

39:28 Our priority is to close a discount to our NAV, and the reason for that, it will enable us to start looking again at corporate acquisitions. That is our USP, very early on in our in our development. We bought a subsidiary of Quintain. We bought several corporate entities. That's what we like doing using our shares. We can't do that at the moment because of the price, but we think we will close the gap. And when we close the gap, we'll be able to do so. We're also looking to increase the dividend once we sell the apartments to Hudson Quarter and increase the income. As we say, 3,000,000 a year, that will enable us to increase the dividend. So we are very confident about the future. We've negotiated the pandemic. We come out the other side, and we're looking forward to the next twelve months. Thank you. That's great. Neil, Richard, Matthew, thank you so much for updating investors this morning. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations.

40:32 It will only take a few moments to complete, but I'm sure we'll be greatly valued by the company. On behalf of the management team of PALACE CAPITAL PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and good morning to you all.