Picton Property Income (LSE:PCTN) — Half Year Results

0:00 Good afternoon, and welcome to the PCTN PROPERTY INCOME half year results investor presentation. Call PICTON ANSWER SESSION:]

0:27 to do so. Before Before we we begin, I would like to submit the following poll, and I would now like to hand you over to CEO Michael Morris. Good afternoon to you. Thank you, and good afternoon, everybody. My name is Michael Morris. I'm the chief executive of PICTN. I've been involved with the group since launch and

0:52 sit on the main board alongside Sarah. I'm Sarah Johnston. I joined PICTN in 2024, and prior to that, I've spent the last twenty years or so in the real estate sector in private equity and institutional fund management houses. So today, we are going to give you an overview of our half year results that were published this morning. We'll give our thoughts on The UK commercial property market. We'll talk in a bit of detail about what's been happening in the portfolio, the activity, and also the outlook looking forwards and and the pipeline. After that, we'll have the opportunity for q and a.

1:37 So the results today, I think, were really good, recognizing the underlying market conditions we're operating in. Our focus on shareholder value through our buyback program has seen positive results within the underlying portfolio. We've grown the the the rental value of our assets over the period. We've seen a positive total return, and we've taken more activity to reposition the portfolio with a view to reducing office exposure and at the same time growing earnings. And all of these areas we'll talk through in a bit more detail, but firstly, we'll look at the results themselves.

2:23 Thank you. So for the six months, we've delivered positive financial performance with increased profit and increased total return compared to the prior two comparative periods. From a profit after tax, we're reporting 15,100,000 for the six months and a total return of 3.4%. Our earnings per share were lower in the last quarter due to occupier break at Brushton, and we'll talk about that in a little bit more detail later. And earnings for the six month period were 2p per share. Alongside that, we paid dividends of 1.9p per share, and that's the back of an increased dividend in May this year of just under 3 percent. So our cover, we are pleased to see, remained comfortable at a 106% for the six months.

3:12 From a net asset or balance sheet perspective, we closed at a 102p per share, which was an increase of 2% over the six months. The next two slides talk to the movements and the bridge between the year end or prior comparative period. Firstly, on net asset value, and then I'll come to earnings. In terms of the movement, we've seen an increase of 2%, which is really driven by the moderate but continuing valuation increases alongside our accretive share buyback program. I've just talked through a couple of points of note on this chart. So firstly, we completed our London office disposal and proceeds of that just under 35,000,000 that came in during the period.

3:58 That was our Stanford office building. We've retained a lease for the 1st Floor at the building, and, really, that was the first step in recycling proceeds from lower yielding assets into high yielding assets, and we sold that to the valuation 1% higher than the end of March. Overall, there was a small loss in terms of that sale due to the costs associated with it. Otherwise, from a valuation perspective, we saw like for like portfolio increase of point 6%, and we're pleased to see that positive valuation over the last five quarters now. They've been moderate, but consistently positive valuation movements. We do see differences across the sectors that we invest in with our industrial sector just under 70% now of our assets are in the industrial sector with that contributing the largest amount to that valuation increase.

4:49 We've seen offices reduce in value, 1.6%, which is more in line with the market, and we'll come on to talk about that in a little bit more detail later. We are investing in our office assets, and we do believe there's a bit of a time lag between that investment and the impact on capital. And lastly, a point of note on our retail and leisure, largest percentage increase, it is our smallest sector weighting, and that was attributable to the least regear that we did at one of with one of our hotel occupiers at Carlisle. And as part of that regear, we received 2,400,000 cash payment, which was recognized in the period. In terms of our share buybacks, we bought just under 14,000,000 of shares back at an average price of 77p and a discount of 25%.

5:39 And that share buyback program has been accretive during the period and it attributes 0.7p per share on a per pence per share basis.

5:50 Moving to EPRA earnings. So EPRA earnings in the six months were impacted by a lease event at Rushton where we had our occupier exercise its break. And I'll come on to talk to a few points on the financials in respect of that. But if we exclude that tenant and that building, Rushton, and our disposals both in this period and the prior financial year, we actually saw underlying net property income increase of just around 2%. And that, again, was largely driven by the reversion and leasing activity in our industrial assets. From an office perspective, we had surrender income 800,000 during the period. And from a retail and leisure, that did offset some of those increases across the industrial and office assets as some of the over renting in those asset retail assets unwound during the period. We think that's largely come through now, and we'll talk to that in a little bit more detail in the sector slides later on.

6:50 The pie chart or doughnut at the bottom really just shows that our overweight industrial assets are contributing a larger element, and our move to reduce office assets. And and and our industrial overweight is really contributing to that to that growth. So we're seeing 61% of our underlying net property income from our industrial weighting. Coming on to Rushton. So you may have seen an RNS, which was issued last month. Our occupier Rushton exercised their break. And as a result of this, whilst the break is effective in October, we have written off the lease incentives in respect to that lease during the period. That is a one off. And looking forward, we will be recognizing part of the break penalty in the latter half of the year, and that equates to 800,000 of income in the latter half of the year. And so we've had a million pounds of one off costs during the six month period, but it looks quite different on a look forward basis.

7:53 Moving to a couple of points on capital structure, first debt, and then I'll move on to equity. As a reminder, we have a really strong balance sheet, a strong cash position following the sale of the Sanford Building, and a strong balance sheet generally with a significant amount of value in our long term fixed debt structure. That isn't shown in the $10.02 per share pence per share. That attributes another 4p onto that. So on EPRA, NDV is $10.06 per share at the end of September. We've reduced our loan to value over the course of the period as a result of the sale of Stanford building to 22%, and our weighted average interest rate is 3.7%, which is well below the current market financing rate. Our debt maturities are over six years, and so we've got really good visibility on our financing costs. We have no refinancing risk in the short to medium term, and that puts us in a really good place to position the business going forward.

8:51 One other point of note alongside our fixed term loans, we've also got a revolving credit facility. We refinanced that in May this year and extended its maturity. There's 50,000,000 available under that facility, which we think puts in a good position for operational flexibility, CapEx, and, also, to take advantage of accretive opportunities going forward. In terms of equity, we've continued with our share buyback program over the six month period. We think that that's a way of creating value for shareholders. I've shown that in terms of the NAV accretion over the period, and we've also seen that coming through on earnings with just under 0.1p per share accretion from an earnings perspective. We've deployed 10,500,000 into our buyback program over the six months at a weighted average price of 77p, a discount of 25%, and both of those have been accretive for our shareholders.

9:50 At the end of September, we had just under 12,000,000 outstanding, but committed to share buybacks, and that really was the residual amount of the 12,500,000 program, which we recommenced in September. Just by way of background and as a reminder, we paused our buyback program in August, and the chart at the bottom which shows the PICTON share price of the EPRA NAREIT shows in in August a slight impact on our rating. But since the buyback program has been recommenced, we've been pleased with the rating of our share performance relative to the index. As we stand today, we still have 9,500,000 of that program still to be deployed.

10:36 Final slide on capital. This is a bit more about how we see those proceeds from Stanford building being deployed across our capital sort of priorities. We've talked about this in in prior periods where we've had disposals, and this really sets out how we see an allocation of these, standard building proceeds across those four areas. I've mentioned the share buyback program, so we've committed 12,500,000 of the proceeds to that. And alongside that, we'll be looking to reinvest in our existing portfolio. We believe there's a lot of value wrapped up in our portfolio. There's a lot of reversion to unlock and investing into our assets, particularly in the office sector to unlock some of that reversion is key for us. And alongside that, we are also looking at investment opportunities.

11:24 We set out at the beginning of the year, retention to recycle proceeds from lower yielding assets into higher yielding assets, and the remainder of the proceeds will be will be considering at pursuing that further. Moving on to the market update. Thank you. So I think we're all kind of broadly familiar with what's going on in the wider UK economy, and I think the headline really is against that backdrop. Property values have been pretty stable,

12:00 and you you can see there is a a positive growth in industrial and retail, but offices have still struggled a bit recognizing some of the sort of costs, demand characteristics. We're seeing rental growth across all sectors. Again, very clear. Industrial continues to lead that. Occupational demand, we think, has been pretty good. I mean, we've certainly got quite a good pipeline ourselves, but it does reinforce, in my view, the view that asset quality is absolutely key in terms of releasing in the current market. And we'll talk about the occupational markets in a little bit more detail on the next slide. So in terms of the headline, really, you know, measured by MSCI, which is really the only the only data that is out there, 29 of the 32 subsectors showing positive rental growth, and that reinforces that resilience points that I mentioned earlier. In industrial, occupancy is running at 90%.

13:14 Rental growth, as you can see from the chart, is positive across all subsectors, albeit a little bit of tail off in the latter half of of the period, but nevertheless still positive. In offices, this is where occupancy is lower overall running at about 75% occupancy. Interestingly, in many sort of historic cycles, that level of occupancy would have impacted rental growth. I suppose to some extent, it maybe is impacting rental growth, but nevertheless, rental growth is positive. And I think that ties back to the story about being able to improve your assets can improve rents, but there is a capital to cost to that, and we'll see that on the next slide. And then finally, on retail and leisure,

14:04 you could see that occupancy is reasonably high. May maybe the the sample size here is a little bit skewed towards some, what I call, convenience retail. But, nevertheless, you're starting to see an improving rental story in the retail and leisure sector despite some of the sort of challenges that are out there. In terms of the investment markets, well, really, the positive capital growth is primarily coming from industrial and retail and leisure sector. You can see that, quite evident in the in the slides. In terms of offices, that has been through a correction and kind of post COVID work from home sort of ESG cost upgrade being factored into valuations going forward. But you can see that rate of decline is is reducing, and I think our own sense is that that that has, largely, worked its course.

15:14 So now we'll just sort of show how that fits into, our own overall portfolio. With the disposals we've made in recent years, we're now running at nearly 70% in industrial warehouse and logistics assets. Our office exposure has has reduced, and retail and leisure broadly constant over that period. The other thing I think I just sort of noticed of our entire portfolio, around 60% of that is invested in the Southeast Of The UK, a little bit in London also with the balance spread pretty evenly across the rest of The UK. Very diverse occupier base, 300 occupiers.

16:00 That kind of underpins the cash flow that drives the business. And we can talk to occupancy in a bit more detail on the following slide. Oh, no. Sorry. My mistake. There's a slide here on portfolio overview and, you know, a lot of activity over the period, nearly 50 transactions. Key is that we've been able to grow the underlying rental value of the portfolio that came at the time when we went through a sort of valuer change as well. So really interesting to get two independent sets of eyes on the underlying portfolio values that are provided by our independent valuer. You can see in the blue boxes, the bar chart showing where the transactions overall have all been ahead of either the previous rent or against market ERVs, which I think is encouraging in terms of unlocking that reversion.

16:59 And and speaking of reversion, there are two key drivers from our portfolio at the minute. One is the rental and upside from vacancy, which is just over £5,000,000. So meaningful, but equally resetting rents to market levels. That's just under 5,000,000. So it's nearly split fifty fifty across the two. We'll try and provide a bit of a breakdown on that as we look forwards. So just talking about our our occupancy in a little bit more detail, we closed at 90% occupancy at the end of September that was lower than the year end. So we just sought to give a little bit more color in terms of what that makes up and also a bit more comfort actually that we were seeing that it was across the six months in all of those sectors.

17:47 So in terms of our occupancy, vacancy at the end of September, 81% of that was focused in in offices, and offices comprise the large component of the space surrendered. Space surrendered was where we'd received a surrender premium income, which gives us some buffer in terms of rental income. And, also, space returned was also concentrated in the office sector. In fact, it's two specific buildings, which we'll come and talk about on the next slide, but we think it's important to just recognize that this is an all nonstanding vacancy. Almost 50% of the vacancy at the end of September only arose in the six months period. Another point of note, we did sell, as I mentioned, stamped building that wasn't so fully occupied.

18:32 So that sale has also indirectly impacted our occupancy or vacancy numbers. And this chart really hopefully provides a bit more color as to that change in occupancy over the period. And I think the key if we if you think about looking at the chart from left to right, as we look at Parkbury and Radlett, which is industrial, Tower Of Bristol, which is offices, Easter Court and Warrington Industrial, moving all the way through, those are all where we have leased space during the period. So that's where where we've found occupiers, relets, as we've said through the previous slides. Those have been, you know, ahead of ERV.

19:19 And then at the far right of the chart, that this shows where we've had space come back. So Farrington, we've had an occupier leave, but that's interesting because some of you may recall we've got planning permission to add another floor to that building, which we got earlier in the year. So, actually, having a bit of void on the top floor isn't a bad thing because that will kind of practically help us unlock that. And Sarah mentioned previously in Chatham, another big office vacancy coming back, we've actually been paid to take that space back. So, that allows us to control the leasing. We decarbonize that assets about 20

20:07 well, may may may maybe in the last year, actually, we we did that. So that now means, you know, from an EPC perspective, meeting the needs of occupiers today, the building's in a good shape. We're gonna use a little bit of the money that we got given on the surrender to upgrade the reception. But after that, the building's ready to go and and be released. And just to give you a bit more flavor on what we're doing to reinvest in the portfolio, Michael mentioned that we think having quality assets is is really important, and we've been looking to upgrade our assets because we believe that is the best way of retaining and attracting occupiers. And we're particularly focused on that office vacancy, which we've talked about in the last couple of slides. So over the six months, we spent 6 at 4,000,000 across our portfolio, and we have a pipeline of just under 7,000,000 of live CapEx projects, which we expect to spend over the remainder of the financial year.

21:04 The chart at the bottom shows where those projects are and shows the spend expected of the full financial year. The pale sort of pink color is the amount that's committed over the remainder of the year. So really focused on offices, which are those sort of pale pale pink and burgundy being an area of focus, and we've seen that strategy work. We've talked about having quality assets and actually investing in Tower Wharf was something that we

21:31 did in the last financial year, and we've seen two lettings as a result of upgrading that space. We're now left with the final part of that work, which is decarbonizing the air conditioning. So that's something that we're bringing in as a next phase. And alongside that strategy is really the same kind of thesis for all of our office assets. It's trying to align the spend with leasing events to manage that return on on on cost and give us protection that when we're spending money on the assets that that's actually linked to improved occupier occupancy and occupier retention. The next slide just talks to the industrial part of the portfolio.

22:20 Say this is where nearly 70% of our assets are. At September, we're running at 98% occupancy. We've seen strong ERV growth. We've seen an increase in contracted rent. And, again, you can see on the blue table in gold, you know, the the premium rents that we've been achieving on rent review or lease renewal that are resetting those rents. If we turn to the office sector, we've spoken about the occupancy point, but we've again through our refurbishment and upgrading, seen an ERV increase across the portfolio as the space has improved. We've divested from our largest office assets. Sarah has mentioned that, and we've received over a million pounds in surrenders.

23:09 Again, you can see there, generally, rents, renewals ahead of previous rents. A couple of lettings we've done slightly, what I call, below market, but those are instances where either they were,

23:26 you know, taking space in its existing condition, for example, very short or or next to no incentives, and and that view in the current climate is, you know, a bird in the hand, and we're we're we're very pragmatic about getting space leased. In retail and leisure, running high occupancy, which I think is great. We've had leasing success. If you look online to the presentation, you you can see a few more examples in the appendices, but we've had some good leasing success. Again, we've seen ERVs grow less than the other two sectors, but nevertheless, growth there. And for the first time in a while, our ERV is ahead of the contracted rent.

24:12 Sarah mentioned about the premium that we'd received on this asset, but it is a meaningful number recognizing the overall portfolio value here is just over 80,000,000.

24:27 So to talk to three key example transactions over here and just give a flavor of what we're doing across, you know you know, all all 50 or so of our assets. Bristol's been mentioned already, but, you know, when we spoke to investors in March, we were saying that we'd invested capital here, and, you know, we were hoping to lease the space. We now have leased that space, which is great. We've got one new external occupier into the building, and then we also had an existing occupier more than double the space requirement in the building, and they've moved. We get we get another unit back, but we have got a sort of tried and tested and indeed proven refurbishment program here. In our industrial portfolio, we've expanded an occupier in a building in East London.

25:20 Interestingly, they're a a data center occupier. There's been a lot of talk recently about data centers. You know, we're we're using, ultimately, more traditional industrial units up for data center uses, but the capital is being bought by our occupiers rather than PICTON. But interestingly there, we've expanded the unit as their their business has grown. They're now in three units rather than one, and the rent we got under undertaking that transaction was 40% higher than the the tenant that vacated. So really good to be able to get sort of units together to make that happen. We've also surrendered another unit on that state, light refurbishment going on. But, again, we're expecting some good rental uplifts relative to what outgoing occupiers were paying. And then we've I think we've already sort of spoken about this hotel in Carlisle.

26:13 But but but I think the key point here is, you know, it was a relatively short lease, and we were keen to really sort of reset this. And so what we've done is we've accepted a lower rent sort of looking forwards in lieu of an up some upfront fee now. We can use that money's reinvestment into other assets, into CapEx across the portfolio. But that sort of derisks the cash flow because, ultimately, we've embedded embedded value in the occupational lease, And I think that's attractive, on a number of accounts, but certainly for us sat here as landlord now, we know that there's a very secure cash flow associated with that hotel. And overall, we we did this restructure, received the money, and the underlying value of the asset really didn't move because because of that balance of risk.

27:11 Moving on to outlook. A key area of focus for us looking forward is really how we unlock the reversion in the existing portfolio. There's a significant amount of reversion, as Mike was mentioned, in terms of releasing that vacancy and also resetting rents to market levels to ERV. The net initial yield on the portfolio is 5.2%, and the reversion yield is over 7%. So that's nearly 20% increase in terms of that reversion. And so what we think about is, you know, how do we bridge the gap between that contract rent of 45,700,000 to just under 56,000,000 of ERV? And that comes down to the two component parts that we've talked about. But just to highlight here, in terms of that vacancy, you can see that vacancy bar being largely shaded in in burgundy, which really reflects the vacancy in our offices. And we've set out our sort of strategy of refurbishing and upgrading that office space to attract attract occupiers, and we're seeing that starting to work.

28:13 In terms of the reversion and resetting rents to ERVs, that's whether that's on rent reviews or breaks or expiries. That element is largely concentrated in in the green sector here, which is our industrial weighting. And that's a sector that we know well. We're certainly seeing that from the version come through in all of the leasing activity that we do, and the stats that we've presented to you really show evidence of that in the most recent six months. And when we think about that reversion, we think about how quickly can we unlock it and how quick can that upside come through in terms of rents and ultimately earnings. And the chart at the bottom shows a rough timing for where we see those lend lease events falling in. So you can see that in this financial year, f y twenty six, and the next financial year, we're heavily skewed to those lease events. So these are really big opportunities for us in our portfolio to unlock those. There will sometimes there will be a timing lag where we have space handed back, but that is something that we're actively managing and we think creates a huge opportunity for our portfolio.

29:23 And we'll come on the next slide to talk to that in a bit more detail with some live examples. Yeah. So so everything that we've said so far has really been about the period to September 30. This slide is just trying to look a little bit further forward because we have had some key lease events literally in the last two weeks. But if we just deal with sort of leasing progress since September and recognizing that this is in a sort of pre budget, you know, broadly business nervousness place. I think we're we we we've we've we've done well and are in a good place, and I'm I'm I'm quite encouraged by the activity that we're seeing at the minute. So we've done nearly £1,000,000 worth of lettings.

30:09 They're 5% ahead of ERV. They're across all all parts of the portfolio, office, retail, industrial. We've done lease renewals, you know, 47% ahead of the previous passing rent. It's only a small part of the portfolio, but it just shows some of the uplift that is coming through. And then we've got nearly £750,000 worth of lettings today under offer. So we've we've got terms of breed. We've got lawyers instructed. There's always with property transactions, a little way to go between agreeing terms and signing on the dotted line. But, again, the fact that in respect of that amount of space that we've got under offer today, the majority of that is in the office sector, I think, is a really interesting statistic.

30:59 And, you know, recognizing that we do have quite a lot of vacancy at the minute in the office sector to actually be seeing that pipeline, you know, sort of reducing as a result of the refurbishment and upgrading activity we've done, I I think it's really, really good. There are, however, two key deals that I think are are absolutely key. And, actually, from an industrial perspective, the biggest sort of upside potential as we look forwards. We put out stock exchange announcement, I think, last week or the week before on Rushton. Rushton is in Northampton Shear. It's close to the A 1. It's close to the M 1. It's close to the A 14.

31:47 So a strategically very well located distribution warehouse unit. An occupier actioned a break clause. That's what they're entitled to. It was a lease that we signed up during COVID, 10 with a break at five. They've actioned that break clause. Sarah mentioned the accounting treatment of that earlier on, but the headline is that the lease we'd structured with some penalty payments. So the headline is that they've paid us 2,500,000. We've got effectively 1,700,000 that we could use for upgrading the building itself, and the balance is sort of an income penalty payment as well. Like I say, the building came back at the very end of last month.

32:36 Yesterday, we had an agent launch day for about 30 agents. We do have some occupational interest in it. We haven't agreed terms with anyone, but the fact, you know, literally days after getting the space back to be even in a place where we can say we have some occupational interest, I think, is is encouraging, you know, and more on that to follow, I'm sure, as we go through the financial year. In Radlet, for those who don't know, Radlet is on the M 25 and very close to where the M 1 intersects with the M 25. That's our largest asset. We've got multiple units on this estate. I mentioned earlier that we just set a record rent at Radlett on one of the smaller units.

33:24 This is the bigger unit there, a pre agreed surrender from about two years ago. But, again, it was structured where we would be getting a capital receipt, including money for dilapidations, but money to offset, you know, and defray income costs. This is quite interesting, subtly different to Russian and that we do think we we might be able to extend the unit here. And if we can extend the unit, we could enhance the the the rental income. And if we can enhance the income, we can enhance the value. And so, really, this is I mean, this unit came back on Sunday, so this is how fresh and live this is. But we are clearly going to seek to attract occupiers with it as is. But if we can twin track that with planning and or an extension of the unit, you know, as another means of unlocking value, then I think that that's quite interesting too.

34:23 And even on a base case, ERV. Finally, just as as a summary, in terms of the property market, we've mentioned, you know, it's it's not, firing at necessary sale, all cylinders, but but I think the headline is that we are seeing rental growth. For the right assets, we are seeing, values rise. Occupancy is broadly stable, but in the right parts of the market, supply is quite tight. And this word resilient demand, I think, is absolutely key. And if we think on a valuation basis, the fact that values are below replacement cost, I mean, that was really last the case back in twenty twenty twelve, you know, as we're coming out of the GFC. But if you think about the cost of construction, it's only risen. I mean, that's undoubtedly gonna be a dampening factor on supply and constraining demand, which is why the rental growth story is just absolutely key looking forwards.

35:36 Our own capital structure is really strong. I mean, I think we have, you know, one of the lowest LTVs of of many of the REITs. Our buybacks have been effective. We've still got firepower to use that looking forwards. We've got an undrawn debt facility. If we think interest rates coming down next year, then that's gonna look more attractive to use. And we do have monies available from the bill the sale of this building over and above identified investments. And we've got we've got got an opportunity that we're looking at at the minute. You know, with due diligence in it, you know, it remains to be seen if we you know, it ticks all the boxes and we go through with it, but but early stages look good.

36:26 And, you know, that's in retail and leisure, but it would be, you know, relative to the sort of 4.6% yield that we sold this building for. It would be sort of highly accretive from a re reinvestment perspective, a much higher income profile going forwards. So in terms of our existing portfolio, we're seeing rental value growth that ties in with my comments above about the property market. And not only do we think values will continue to nudge forward with the asset upgrading that we'll do, but also we think capital value should move forward also as we improve occupancy and improve income.

37:12 Sarah's mentioned about the sort of reversionary upside, coming from two strands, primarily coming from, industrial and, office across the portfolio where we're undoubtedly seeing success with the pipeline that we've got at the minute. And that's a meaningful amount of money relative to the sort of dividend, across the portfolio that we pay out, which is in the order of about £20,000,000 a year for memory. So it's a meaningful number. We've got a lot to work for, and, you know, we're we're encouraged by, you know, the feedback that we're receiving in the market and and very definitely hope that we can report positively as we move forward to the final six months of the year.

38:01 So I might end there, and I think it's question time. Is that how it works, Alex? That's great. Yeah. That's correct, Michael, Sarah. Thank you very much indeed for your presentation. I will now turn on your camera for the q and a. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. I'll let the company take a few moments to view those questions submitted today. I would 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 our investor dashboard. Michael, Sarah, as you can see, we have received several questions from investors. And if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up on you both at the end. Thank you.

38:47 Okay. So we've had a number of questions. I'll I'll I'll summarize them, and then we can work out who can answer them. But, the first question actually is asking about, business rates, and, maybe this ties in, you know, to to government intervention and thinking about budgets and and other things. But there there have been suggestions around trying to reduce business rates in the retail, leisure, hospitality sectors at the expense of other sectors and particularly in respect of larger units. And we've seen, certainly, the supermarkets come out quite recently recently because they they clearly are larger units. There's plenty of large units across across The UK, you know, saying, well, this is inflationary and cost inflationary.

39:46 So what does it mean for PICTON? Mean, we have a whole range of occupiers across the portfolio. Clearly, the larger units we have would be caught by that sort of larger rates increase. I think at the minute, though, the detail of what's proposed is is is is scarce or or or or not even scarce, not available. So we don't quite know how those things will pay out. I I mean, I think our own view is that the occupiers, you know, take into account business rates, but it's not a key driver in in decision making. It probably helps more in in in leisure hospitality sectors, which is why this is is planned, But I don't think it'll have a material impact on on our portfolio. And from memory, I think it's where our reasonable values are over 500,000 million pounds per annum, which which, you know, might affect maybe a quarter of that portfolio, but the remaining 75% is the is the other side of the line. So I I don't my own view is I don't think it will be material, but but as ever, with sort of government proposals, you need to see the detail, and it's not there.

41:01 Should I maybe cover the one there's a question on reversionary income and how much do you expect to unlock in the next twelve to eighteen months? I think on slide 28, we set out that reversion and the income profile. And just to give a bit more context to that and the case studies that Michael talked through, the two most recent industrial units that we've had back alone account for about 20% of that reversionary income in the industrial sector. So that's about a million of that reversion, and that's in the absence of doing anything else across the portfolio. So, hopefully, that gives you a bit of a flavor about timings. We're certainly expecting that to be to be sort of front ended in this financial year and next financial year, recognizing that ultimately there is, you know, there is some uncertainty about timings and relettings, but that's that's the board a board for the board. Yeah. And there's a follow-up question which sort of ties into that, which relates to the vacant space and offices and what what's the time frame. I mean, I think the reality is that the the the really interesting years are gonna be, you know, what this financial year clearly goes to March 26.

42:23 How much of that reversion will we have leased and the income producing by March 26? I think that's a big ask. But, actually, in March 27 and March 28, you know, that's when I think, you know, a lot of those projects, you know, will be not only finished, because I think they'll be finished before that, but our own expectation is that we will see, you know, leasing success thereafter. And and maybe to just sort of tie into another point, you know, we completed our refurbishment in Colchester at the start of this calendar year. And, you know, when I mentioned that we got no point 7,000,000 under offer, a significant proportion of that is in Colchester Colchester offices.

43:19 And, you know, if you if you extrapolate that, you know, it's probably taken us, you know, nine probably by the time we've done legal, nine to twelve months to find good quality occupiers to take that space at the right sort of rent. So if you sort of extrapolate that onto some of our other vacancies at the minute, but Sarah has mentioned about Tower Wharf. Well, that's only a small unit there, but we're upgrading the M And E. That should complete in this financial year. Chatham, that literally only came back, you know, a month or two ago. We've already upgraded the m and E, but we're gonna upgrade the space. So all of these things, to my mind, point that it's really, you know, f y twenty seven. Hopefully, a lot of it in f y twenty seven, but in if not in f y twenty eight. But I I I would think it's around that period, but knowing quite when the leasing's land relative to the calendar year end is is a is a big ask, but, you know, rest assured that we're you know, the team is on this and and definitely sees the the upside. And and the example I just gave of of Colchester, I think, is really or should be reassuring to investors because you can see what we've done and assuming what we've agreed transact.

44:39 You know, there's very clear evidence of of doing something and the positive impact and indeed the future impact on earnings. There's a question about, you know, would we look at strategic partnerships or other forms of corporate activity to unlock value? I mean, I think, you know, at the end of the day, as a business, we're we're always looking at how we can unlock value. And, you know, the the real estate sector, the REIT sector as a whole, generally today trades at at discounts to to NAV. You know, we have been very clear that we wanted to use surplus proceeds to take advantage of that discount through the buyback process, but we're very alive to, you know, the activity, the m and a activity in the sector that have been, you quite a number of REITs, you know, smaller than us, even bigger than us, that that have either consolidated in the year. And I think we're we're open minded, but, you know, shareholder value is absolutely key.

45:55 And, you know, like I say, I think our share buyback program is very definitely step in that direction. And there are, you know, ways of of considering, you know, joint ventures, strategic partnerships, you know, that that for the right partner is something that we could definitely consider. There's another question about industrial exposure. You know, do we have too much industrial exposure in the portfolio? Is it too much of a risk? Well, I think from my perspective, you know, we like that sector and and continue to do so, not only because of the sort of strong rental characteristics that you can clearly see coming through our in our numbers.

46:48 But as a sector and as an asset class, generally, there's less depreciation than in other sectors. There's definitely less capital expenditure. We've just given some good examples on the preceding slides of the recovery and dilapidations from outgoing industrial occupiers compared with offices, for example, at the minute. That's a key factor in overall and pretty much every company's office performance at the minute. So we like the sector, and I I you know, that might change at a point in future, but but I don't think at the minute that there's any reason to to to change that positive view. But I think the thing about PCTN is we can invest across other asset classes. So it doesn't mean that if we have a a contrary view, we can't pivot, adjust, adapt.

47:41 And I think I mentioned when we were looking at new opportunities, actually, you know, what we have been looking at and we and we look across all sectors insofar as opportunity is concerned, but the things that we've been running on most recently have been effectively repriced retail and leisure assets. And, you know, we think in any portfolio, it's good to have a balance, a mix. I totally get you don't want all your eggs in one basket, and I think our structure allows that to do us. So we're very positive on industrials. We wouldn't know so much if we didn't, but that doesn't mean to say there are opportunities elsewhere. And I think it's incumbent on us to look at opportunities across a a diverse range of assets for that very reason.

48:32 That's great, Michael. Sarah, thank you very much for addressing all those questions for investors today. And, of course, the company can review your questions submitted today, and we will publish those responses on the investment company platform. But, Michael, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I please ask you for a few closing comments? Yes. Well, thank you thank you, IMC, for hosting. Thank you to everyone for listening. We've got these slides available on our website. If you want to sort of follow in a bit more detail what we're up to, there's quite a bit of information that we post on LinkedIn in respect of smaller transactions, but that's a good way of staying connected.

49:20 I I mean, PCTN is twenty years I've said twenty years young this year. You know, we we we launched at a point before REITs were invented. You know, we've been through the GFC, various other challenges, but I think the business is in good shape today. There's a lot of opportunity going forwards. We hope you can see the opportunity that we can see. And, yeah, thank you very much for your time. Fantastic. Michael, Sarah, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of PCTN PROPERTY INCOME, we would like to thank you for attending today's presentation, and good afternoon to you all.