Regional REIT (LSE:RGL) Q2 2026 Earnings Call

0:00 Good afternoon and welcome to the regional REIT Limited investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team. Stephen, good afternoon, sir.

0:30 Thank you very much and good afternoon everyone and welcome to the presentation of the half-year results of Regional REIT for the period ending 30th of June 2026. It is my intention this afternoon to take you through the results for 2026 and then spend a bit more time updating you on what we are witnessing in the marketplace and our continued progress that has been made towards our strategic goals. As mentioned earlier, Q&A we'll deal with at the end and if you can submit your questions, we'll try and get through as many of them as possible. If I may now introduce this afternoon's team from Regional REITs, Manager ESR Elspim, I'm Stephen Inglis, Chief Executive Officer and also on the call this afternoon, Simon Marriott, Property Fund Manager and Adam Dickinson, Investor Relations Manager.

1:25 Well after another six months of political and economic change and instability, I think we are almost back to where we have been many times before over the course of the last few years. Thank you very much. Political turmoil in the UK with yet another new Prime Minister, six in ten years, and Europe-wide with disenfranchised voters and the rise of the far right. This background impacts the UK economy, either directly in the case of increased energy costs or more subtly, but also, as I said, impacting business confidence and the vital part of business confidence in growing the economy and creating jobs, which has in turn an impact on the requirement for physical space.

2:28 So a backdrop of uncertainty and continuing headwinds. However, against this backdrop, we are making steady progress in reducing the company's debt, selling non-performing, underperforming assets and leasing up space marginally ahead of the expiries and breaks being exercised. So despite all of this, I think the company is making good progress and has made good progress over the course of the past six months. Adam, you can take maybe the slide three, thank you. So a quick summary of the 2026 half year highlights. So as I mentioned in my opening remarks, whilst things are undoubtedly difficult and the leasing market remains slightly subdued, we have nonetheless undertaken 26 new lettings, delivering £1.9 million in new rental income and delivering a £700,000 annualised saving in reductions to void costs.

3:35 We're making good progress on sales with £21.5 million of sales completed in the period and these were on vacant or partly vacant assets and this has allowed us to reduce debt and reduce void costs so accretive to income. and we further reduced LTV which now sits at 38.5% through repayment from those sales proceeds and finally of course we've delivered a fully covered four pence dividend in line with our target of eight pence for the full year 2026. Slide four please Adam. So just looking at the key highlights, our strategy to reposition the portfolio continues.

4:23 We remain committed to creating a high quality income focused portfolio with targeted value add opportunities. The portfolio value currently stands at £526.7 million, down as a result of sales and a small 1.3% valuation reduction. EPRA occupancy is mainly down. This may look at first as counterintuitive given the leasing activity that I was just commenting on and the sale of vacant units. This is mainly due to the CAPEX projects completing and coming back into the EPRA numbers. So it's very much a timing issue. Actual occupancy has improved over 2% over the period.

5:11 CAPEX in the period at £1.4 million looks low. This is mainly as a result of the significant letting that we have undertaken in the period where we anticipated expending £5 million of CAPEX. However, as part of the deal, the tenant is now undertaking that. and we will obviously commit that capex elsewhere in the portfolio to improve the overall quality of the portfolio and consequently the income and you're on track to do 10 million pounds per annum which is our previously stated estimate. Earnings per share in line with our estimate allowing us to fully cover the four pence per share dividend for the half year. and LTV as mentioned in my opening remarks down.

6:02 Gross borrowings have decreased to £243.8 million just due to those sales and the pay down of debt. Slide five please Adam. The Strategic Sales Programme continues and the rationale obviously for sale to reduce debt in advance of the refinancing in December 27 and December 28 facilities a little bit more detail on which to follow and to reduce costs associated with non-core and non-performing assets so you're attempting to sell the non-performing non-income producing assets which we were successful in the first six months The sales programme continues with a further two sales completed post period end for £4.3 million and there are a further 11 assets either contracted into the last list of hands or in late sales negotiations i.e.

7:01 where we've agreed terms accounting for a further circa £32 million of potential proceeds. and total then assuming the sales complete before the year end, we could well be selling around 58 million pounds in line with our previous guidance of 50 to 60 million of sales for the full year. Slide six please, Adam. Thank you. So portfolio repositioning for long-term growth. If we look at the average rent, average rent continues to grow Yields, as you'll see on the right-hand side, have effectively remained static since June 25, so over the last three periods. That kind of suggests that the valuation market certainly has stabilised and that we may well be now at the bottom of the market, all things being equal.

8:00 but we continue to see average rents creeping up. Offices, the vast majority of our portfolio almost 90% buy value and obviously the lettings there in terms of what we previously discussed but clearly the one big letting are all getting 1.1 million of income across two buildings in Nottingham. That's the annualised rent, that's not the income for 2026 given rent-free periods. But that was the annualised rent over the 10-year life of that letting. and average requirements in the market increasing so we are seeing some upscaling of several tenants to our benefit in some cases but obviously to our detriment in others where we have lost tenants where they have moved to bigger buildings and rent collection remains strong, 99.7% in the period to date. That will ultimately become 100%, those 0.3% is just an issue of timing and when those rents are collected.

9:06 You'll see the full year figure there at 100%.

9:11 Okay, slide seven, please.

9:14 Just looking at obviously the map of the UK showing our assets distributed across the main regions and major conurbations of the UK. One or two highlights there obviously one and two Newstead Court is the letting of the first six months almost 150,000 square feet on a 20-year lease with a 10-year break and producing over a million pounds of annualized rent. with the tenant undertaking, as I mentioned earlier, £5 million of CAPEX works that we had originally looked to undertake on their behalf, but a much better result for us not having to expend the capital, but still achieving a million pounds rent on a 10-year lease term certain.

10:01 Linford Wood Business Park again rents improving there previous rents at £18 up now to £22.50 Thorpe Park Leeds likewise we're seeing good rental growth now £24 a square foot on the latest letting there so progress being made across the portfolio and different regions next slide please So a quick look at the portfolio segmentation. Many of you remember we've actually locked the assets in in terms of the segmentation 18 months ago. Clearly assets do change in terms of where they should be and a classic example of that in the value add you'll see that building above which is one of the Newstead Court buildings clearly that is no longer value add we had looked to demolish these buildings to make way for high quality industrial clearly we've now done a letting and that will move effectively to core albeit to allow us to compare like for like the assets are frozen in each box We've made good inroads to the sales programme, so sales down to roughly 30 million by value, 5.6% of the portfolio.

11:17 Value-add there at 55 million, as I say, distorted slightly by that one asset, but we'll talk more on value-add later in the presentation. CapEx to Core and Encore. So if you like the buildings on the right, the value-added sales building we would look to sell in due course and the CapEx to Core and Encore, those assets we want to retain for further income growth. Next slide please. Now looking at the trends for regional offices in respect of the supply and demand. In this slide, the supply side. So supply remains constrained and is probably going to constrain further as time moves on.

12:02 When you look at the bottom right slide there or the bottom right box, construction start for regional offices at lowest level in over a decade. And that is indicative of the development market as a whole. The office market specifically, the costs of ground up construction these days are growing substantially as a consequence of which really, you know, unless it's pre-let to achieve rents of between £50 and £60, which is what you're required to achieve to justify development. As I say, I think we'll see very little in the way of new starts over the course of the next few years. on the right hand side there obviously is the supply we're seeing delivery of just under 1.5 million square feet in 2027 of schemes obviously commenced you know several years ago 2020 falls away dramatically and then when you look at 29 30 31 almost no new supply coming to the market at that point and I think that will constrain the market further as we continue to lose buildings to alternative uses and for demolition of non-core, poorer quality grade C, D and E buildings.

13:21 So I think we will continue to see supply very much constrained Okay slide 11 looking at demand then so that's the supply side we are going to see a constrained supply and indeed diminishing overall supply in the regional office markets so therefore what about demand well demand is holding up I talked about a subdued leasing market it is it's taking much longer to get deals over the line however there still are requirements out there from many many companies but decision making and determining timelines for when that initial interest becomes income i.e. the buildings are actually leased and then becoming increasingly difficult so there are requirements, there is demand but the time taken for that to flow through into actual lettings is quite considerable and because of that constrained supply and that continued demand we are continuing to see rental value growth so the data there UK offices saw rental value growth of 4.7% the year to June compared to Citi at 3.6%. Across our portfolio we're achieving on average 3% above ERV and of course ERV has been increased over the course of the last couple of years in line with the market.

14:46 So rental growth is there which kind of supports my thesis that supply is restricted and demand continues and we expect to see that rental growth continue and indeed increase ahead of the 2030 date for EPC requirements A and B coming into force and the take-up figures there in the bottom right-hand corner.

15:13 Okay, slide 12 please.

15:15 So just looking at a couple of case studies, this is a brutalist architect building, but internally provides very, very good quality accommodation. So the majority of this building is led to Global Banking School. we have one vacant floor which we have agreed terms with Global Banking School to take in fact terms have been agreed for almost 15 months but for a number of reasons due to Global Banking School's internal requirements and indeed requirement from building warrant to change some of the fabric of the building to meet and satisfy their requirements for a single occupier this deal is now only now coming to fruition so We expect to announce the final letting here in the next few weeks, taking this building to 100% let and of investment grade.

16:08 Okay, next slide please. We talked earlier about value adds and potential change of use assets. We have undertaken 15 feasibility studies and taken many of these assets through first stage planning and for initiatives for change of use where the change of use values add value to the building compared to

16:33 Thank you very much.

17:01 support for PBSA, for residential to sell and residential to let on the whole, but other uses include hospitals, industrial and a host of others. Okay, next slide please. So the largest value add potential asset in the portfolio Central Park New Lane Leeds so this has been a long battle with the local authority this was originally safeguarded as part of the HS2 proposals and of course they were cancelled a couple of years ago so HS2 no longer happening therefore one would have imagined that this would have been released from safeguarding However, local authority and local MPs have managed to retain the safeguarding for potential mass transit, Leeds mass transit system.

18:01 We have been battling with the local authority and Department of Transport to say well that wasn't the intention of legislation for HS2, the safeguarding is in connection with HS2 only and should not apply in respect of the mass transit. Moving forward some good news the Department of Transport have now confirmed that this will not be required for the mass transit system and indeed there are arguments on safeguarding hold water and this will be released from safeguarding imminently so we are waiting for the documentation to be signed but the safeguarding will be released as part of that that has allowed us to agree a new long-term reversion at least with ASDA on the front portion of this site as they use the industrial unit for their national training center a very important part of their business with of course their headquarters across the road so that has been agreed a much higher rent and we'll kick on from the expiry in 2028 for a further period of 10 years so good news there again that that is in the process of being documented and that releases then the rear element of the site to go through the planning process for residential and we anticipate that that will be high density residential and of course south side of this of Leeds and the south bank has been

19:34 a part of showing significant improvement and significant development. We anticipate, as I say, achieving a high density scheme on the rear site at which time we will sell to residential developers. Okay, another change of view. So one to Newstead Core, obviously featuring a lot in this presentation, given the scale of letting, but clearly we're not going to be demolishing this for industrial anymore. It's now a core hold offering potentially 20 year income. So that just kind of is indicative of what's happening in the marketplace just now. I talked about constrained supply earlier. The constrained supply is forcing tenants to perhaps be a little bit more imaginative.

20:23 For example, in this case, the tenant Glenair, a US defence and electronics company, required to upscale. There was nothing in the region suitable for them, and therefore in terms of ready-made space, and therefore they had to be a little bit more imaginative and say, well, fine, we'll take who are fundamentally two good buildings in this business park and undertake the works to create the space that we require for our staff. So we've seen this on a few occasions over the course of the last 6-12 months where constrained markets are forcing tenants to look elsewhere, not necessarily in terms of geographic locations because they want to retain their existing staff, but more specifically on the types of buildings are prepared to occupy and upgrade.

21:13 So I think this will become a feature of the market moving forward. Thanks Adam. So ESG remains very very important in the minds of occupiers and of course us as responsible landlords. So we still are very much focused on ESG to deliver sustainability and cost savings. EPCs, the Energy Performance Certificates legislation is still not through but everybody expects that by 2030 the legislation will be that all buildings required to be EPC A or B and actually to a degree it doesn't really matter about the legislation because companies themselves are taking upon themselves as part of their own ESG requirements the vast majority of requirements barring several and other outliers are all for EPC A and B.

22:15 So vital that we provide that quality of space. We are, as you'll see, making good inroads. Just over 61% of our portfolio now conforms. of the rest you know 26% is EPCC with an identified route to upgrading and improving those buildings to EPC A or B and the vast majority of the D and Es and belows will be sold as part of the sales program moving forward. I think worth of note, I mean, we've mentioned this many times before, but the market hasn't responded as quickly as it should have done to creating EPC A and B. So it's currently only 19% of UK commercial buildings that includes industrial.

23:02 So UK commercial buildings meets the requirement. In the office markets, they vary city to city, region to region. But if I take Leeds and Manchester as an example, those markets are roughly 25% conforming. Now if we look at that in the context of occupation, last occupier numbers are from December 24, we're awaiting the December 25 numbers to be confirmed, but roughly 81.6% of the regional office market was occupied at that point in time. 81.6% occupation with only 25% of buildings conforming. You can understand why we're enthused and indeed believe that we'll see rental growth for those better quality buildings. So more of the market chasing fewer buildings or small part of the market that's conforming.

23:54 So we expect to see substantial rental growth over the office market where it's offering greater accommodation and EPC A and B. Elsewhere on ESG, we're continuing the rollout of our 4D smart technology. This is effectively the smart technology for identifying energy usage and where we can find cost savings. We've installed this system across 45 sites so far. and that's producing £190,000 of savings to regional REIT over and above those savings that the tenants themselves are receiving. So those £190,000 of savings are direct savings to the REIT not to the occupiers.

24:43 Solar continues to be installed. Installation completed now at 17 sites, 14 of which are energy producing and roughly 180,000 kilowatt hours being produced from those 14 sites. We'll continue that rollout over the course of the coming years. Okay, just looking at the income overview. So this is the upper earnings H1 2025 versus H1 2026. So you're effectively running through the bridge. Looking at earnings, looking at rental property income, obviously down 5.7 million in terms of sales.

25:30 Most of that income from sales as well as expiries and lease breaks. Looking at costs, admin costs, financial income and finance expenses coming to the 6.8 million of EPRA earnings June 26. Next slide Adam please. and in evaluation obviously December 25 there's the disposals 20.8 million of net of cost disposals 21.5 gross acquisitions obviously none in the period the gain and loss of disposal properties 2.1 million capex 1.4 and evaluation change there that 1.3 percent reflecting 7.1 million due to Income Differentials, and then the current valuation of 526.7 million.

26:26 And then let's look at a balance sheet overview. So again, summarising effectively the two slides that we've just run through, looking at that NAV at 305.8 million in the far right-hand corner. Okay, so moving on to debt. So we have debt expiries in December 27 and December 28. If I can deal firstly with the Scottish Widows and Aviva debt in December 27, We are obviously very much focused on that and the majority of sales that have been undertaken in the first half and indeed will be undertaken in the second half are focused on that specific facility.

27:15 That will mean selling some income but that income is where we've identified further risks down the line for example we will be selling and indeed are under offer to sell a large building where we know the tenant will vacate in 15 months time the leasing market in that specific location is thin and therefore we're de-risking by selling now and we're selling to people say well why are you selling and who's buying but we're selling to an operator who holds various assets in the same location so there's an element of local knowledge and marriage value for them So that will be refied alongside the Scottish Widows facility in December 28.

28:02 So we're in discussions both with our incumbent debt providers and Scottish Widows are there to refinance both facilities and also with other lenders out with the Scottish Widows. We want some competitive tension but I think the answer will be if we can Refinance with Scottish Widows would be sensible to do so because they'll give us the benefit of the current pricing to the expiry of those facilities. So current pricing to December 27 in respect of that facility and indeed current pricing to December 28 on that element. With the sales, we expect to be refinancing at roughly a hundred million of debt. And that refinancing will, on current pricing, will be 3% above current levels. So just over 6% all in cost.

28:55 Whilst we're also looking at the RBS Bank of Scotland Santander facility that was a facility we entered into a year or so ago and it's a three-year facility with the option of two further one-year extensions. We've already made the application for the one-year extension from December 28 and that's currently at credit with the banks and we anticipate receiving that very shortly. So the Windows facility, if we refinance for them, is likely to be for seven years with an external party, maybe five years. But that would then allow us some breathing space in terms of the expiries out until the first one, June 29.

29:41 and the sales programme effectively will continue but only on non-core assets. So we will have dealt with the bank facilities, we'll have reduced LTV to somewhere around 35% by the year end on current sales and indeed we will have no banking facilities to deal with until Santa and June 29th. Okay, a reminder of our strategic priorities. So driving income, how do we do that? Well, we increase occupancy and rental growth across the portfolio. Strengthening the core portfolio and continuing to improve EPC ratings is vital in obtaining the tenants and the quality tenants that have requirements in the marketplace. They will, as I mentioned earlier, only commit to Grade A space and EPC ratings of A and B moving forward.

30:39 We're committed to reducing debt through targeted disposals. That continues and we're well on our way to achieving our target by the year end. And committed to fully covered dividend. We are fully covered for the half year and will be at the full year. And pursue or produce to add value ahead of disposal. So that's the value add element of the portfolio. And again, making good progress with those assets. Next item please. So to sum up really, so we've now taken you through the H1 results of the company. We're very Hopeful that the insight and immediate outlook and longer term out in relation to the supply and demand dynamics also appeal to you.

31:33 But we do believe that the supply and demand dynamics over the short term offer the regional Office UK market a very opportune time to show rental growth and by showing rental growth, show value improvement. With interest rates stabilising, we don't expect to see huge growth in terms of value by yield compression. However, we can drive value by improving the quality and quantity of the rent. But yet again, we seem to be in a period of instability, but we can deal with what's in front of us, which is our portfolio and the UK markets.

32:20 So that brings us to the end of the formal part of the presentation. I'm now very happy to take any questions. That's great. Thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via our investor dashboard. and Adam if I could just hand back to you to read out the questions and give responses where appropriate to do so and I'll pick up from you at the end.

32:52 Thank you Lily, thank you Stephen. I may start with the first question that was submitted earlier today. Can you give an update on elite development please and what is the legal position and has that been settled?

33:05 Yeah, I think I probably touched on this in terms of the presentation. Clearly it is an important asset and I can understand why the question has come in. So I think I mentioned we have been in discussions with the Department of Transport who have responsibility for this site. So although it's Leeds City Council in terms of area, and Leeds City Council would normally be the planning authority. In the case where the site is effectively blighted, safeguarded, it's actually the Department of Transport that has the authority. So we have now had confirmation that they will release the site. It took a lot of negotiation and fighting we sat alongside ASDA, ASDA threatened to relocate from Leeds City Centre because their car park was also part of this exercise which has also been released so I'm pleased to say we will hopefully document that in the coming weeks we will be submitting first stage planning inquiries over the course of the next couple of weeks we're already were all ready to go with that and that will start the process in terms of planning. I also mentioned the ASDA situation, so ASDA are keen to continue to occupy the front area of this and will take a 10-year reversion release at an increased rent and again we'll hopefully announce that in the coming weeks.

34:34 All tied together obviously as part of the exercise.

34:39 Thank you Stephen. Question on the cash position of the company. So approximately 39 million of unrestricted cash reported at 30th June 2026. All that, how much represents service charge monies, tenant deposits, rent received in advance or other working capital amounts that cannot realistically be used for permanent debt repayment? What amount does management regard as genuinely surplus deployable cash? after allowing for operational liquidity in the committed capex.

35:12 Yeah, good question. Long question. Let me try and deal with it in component part. So in terms of server charge monies and tenant deposit zero, that clearly is not our money, that is the tenant's monies. So none of that is in the £39 million. Rent received in advance, yes, a small proportion. Clearly we accept or collect our rents quarterly in advance. But I guess the easiest way to deal with it is in cash terms. So we retain a cash buffer of £10 million. An element of restricted cash, 1.8 million currently and that's restricted by the banking facilities but will be released as and when we meet the requirements of each individual facility.

35:57 That sum varies substantially, it was almost zero in December 25 and June 25 I think we're at three or four million so that number varies substantially but that will be released and then the remainder really is committed and proposed capex projects and normal operating activities costs so all of the money has a purpose and is identified so true surplus i.e. where we don't have a purpose for it Very little and obviously the cash buffer of 10 million we retain as an insurance policy effectively for any unknown matters that crop up.

36:43 Thank you, Stephen. And then a couple of questions on occupancy. Firstly, core portfolio occupancy fell from 86% down in December 25 to 82% at June 26th. Well, overall occupancy is 74.3%. What caused the decline in core occupancy? What occupancy level does management expect for both the core and total portfolio at December 26 and 27? And then another one is more when you think you'll achieve occupancy at 80% plus level?

37:19 Okay, so the main reason for that fall in core occupancy is we have sold some income. Now, we clearly want to target the non-performing assets and the assets where we have substantial hold costs, i.e. the vacant assets. And we've done a good job in the first six months of doing that. I mentioned earlier, £700,000 of savings, which comes from those sales. However, we have sold some income so that is really the main part along with some lease expiries not renewing and some breaks being exercised in normal course of events. We gained 1.9 million of rent but lost 1.8 million of rent from those lease expiries and breaks being exercised.

38:07 So that's the main reason for the the fall in that core element. In terms of occupancy levels by the year end and by the end of 2026, we are looking at 84% occupancy Thank you for watching. So we are keen to progress with the leasing up activity. We have over 200,000 square feet of space that hasn't been refurbished where there is strong interest, but converting that interest, like I mentioned earlier, subdued.

39:05 Converting that interest to actual lettings and income has taken some, or does take some time. And we're not the only company witnessing that. It seems to be across all markets, not just offices.

39:18 Thank you. And then a couple of questions on the debt position. Bear in mind the £240 million we currently have in debt. The £103 million of Scottish widows in a FIVA facility matures in December 2017. and currently has an LTV of 47%. What level of debt and LTV does management expect immediately before refinancing? What refinancing interest rate or range is currently being expected or assumed?

39:48 Yeah, again, I think I probably covered this in the presentation. So level of debt, we expect it to be 100 million between the two Scottish Widows facilities. So that's combining the December 27 expiry and the December 28 expiry. 45% is the figure that Widows requires to get to. When we've been speaking to other banks, it ranges between 40 and 45. 45 seems a relatively comfortable figure for most of the banks. and therefore clearly we need to get the current LTV of 47.3 down, that's the sales. So 100 million, 45% LTV and the cost will be almost certainly 3% above where we are currently, so early 6%.

40:36 We have seen a lot of movement over the course of the last couple of weeks just in terms of the the five-year rate on which debt is priced so I guess it will depend where rates sit when it comes to finalising the loan documentation. We are anticipating that will be in place by the end of Q1 and the rationale for that is clearly the audit will be undertaken at that point as part of the full year results exercise and we don't want a material uncertainty clause in our accounts given that that debt will then be within 12 months or expire within 12 months. So I think that's the long and short of it. I think it's highly likely that we will refinance with Scottish Widows.

41:27 and a similar question on the debt. What LTV are we actually targeting?

41:34 Yeah, I mean, we've indicated levels of debt previously as to be mid 30%, i.e. 35%. We'll be at 35% by the year end, assuming the sales that we have contracted and anticipate will complete happen. So that 35% level the board seemed relatively comfortable with. There's various thoughts in terms of should we be targeting 30%? Should we be targeting lower? Certainly it will naturally come down if we improve the quality and value of the portfolio. and indeed as we continue to sell non-performing assets you'd expect that 35% to drift down but at the moment the board seemed comfortable and the company seems comfortable at 35% LTV.

42:25 Thanks Stephen and then more of a general question on the management structure. I realise that you have to paint the picture as rosy but the markets don't seem to recognise that as long as the long-term investors have suffered high management charges Thank you very much.

42:55 Yeah, I mean the management fees have reduced substantially as well. Management fees obviously were originally just based on NAV and rental, so as that NAV came down and rents came down, management fees also have been reduced substantially. The board did renegotiate the management contract a year or so ago, which obviously announced to the market which then split the investment management fee between NAV and share price so very much aligning the interests of the manager alongside the interests of the shareholders. That alignment is probably right and proper but reduces fee income even further for managers. So are they high costs? Well, high in proportion to what?

43:45 Clearly it's a complicated portfolio to run. So I would argue that the management fees are not particularly high when you look at internalised costs and certainly salary levels of our company are far substantially below those of internalised PLCs. So we continue to fight hard. I also have a large shareholder, as most people know. So my interests are aligned both as a manager and as a shareholder. And we continue to drive forward our programme We haven't been in complete control of our own destiny given falling values and pressure from banks. I think that will be far released come 2027 when we have refied, we have reduced debt to a far more comfortable level and we begin to see some meaningful inroads into the Net income position, i.e. getting rid of some of those void costs.

44:46 So the managed management continue to work hard day by day. Is the market tough? Of course it is. It has been really since COVID. But actually, I'm seeing light at the end of this tunnel. Sales program going well, reducing overall indebtedness, giving us control of our own destiny back. And we will see that growth come through in terms of supply demand. So as long as demand holds, it doesn't have to improve, as long as it holds and supply continues to contract, then you'll see our portfolio continue to increase occupancy.

45:24 Stephen, on a similar vein, in terms of supply and demand in the market of office stock, how long is it likely to take for the excess office stock supply to be absorbed?

45:37 Yeah, excess office supply is mostly of buildings that are no longer fit for purpose and need a lot of construction, a lot of refurb costs. And refurb and new build is difficult given the construction market. I talked about the development market earlier. With values effectively flatlining and costs increasing, then it makes development and indeed refurbishment increasingly difficult to justify. you know a bit of a double-edged sword our valuations have been hit very very hard over the course of the last few years post-COVID as the occupier market you know shrunk and now is increasing again as companies who downsized substantially post-COVID are now increasing the amount of space that they require to bring people back into the office so I think you know looking ahead The surplus stock that's out there, i.e. that 20% of unoccupied space, is mostly of grade C, D, E buildings, so not fit for purpose.

46:43 Many of the buildings occupied will fall into the same category as tenancies come to an end or tenants are able to exercise break options, they will look to upgrade space. and the answer to that is that there's very little grade A accommodation conforming to EPC A and B available which will drive rents but it also will mean that hopefully our renewal rates will remain stronger as tenants won't have options to relocate so I'm hoping of a double-edged approach for us one in terms of leasing up the space that we've refurbished and secondly in respect of retaining tenants in their existing accommodations. So I think renewal rates will increase as well as new lettings.

47:30 Thanks, Stephen. And more of a general question in terms of the strategy. Value ads come at the bottom of the strategic list, selling assets at the top roughly. Is this an opportunity? And I suppose, when do we see that the selling going to stop?

47:48 The sales for Refang will stop at the end of this year. So there on forward, there'll be good rational reasoning why we're selling. We'll be selling because we don't see a future in a specific asset. We don't think it will perform in terms of rental growth because it may be wrong type of asset, wrong location and or risks to us in terms of refurb costs going forward. So we'll be back to selling for strategic reasons post the year end. And selling will stop? No, because as assets become are vacant, we may well sell for the reason that we get an offer that's substantially ahead of current holding value.

48:38 And it makes sense to do that. And that's what we've always done. We've always turned the portfolio where there's a profit to take or to minimise forthcoming risks. And that will continue. But in terms of sales for refi, that part will complete at the end of this year.

48:55 Thank you. And I think the last question, which was sent by a couple of people, in terms of the revised bank facilities go up across the board, what impact will that have on the dividends?

49:12 Well, the intention is to hold a dividend at similar levels in the next year or so. And the reason for that is showing a small increase in terms of broker's forecasts, consensus forecasts for 27. So the 8.2p or so. And the reason for that is we recognise the increased costs. So to put it in context, if you are to refi that 100 million at a 3% higher rate, then it's 3 million per annum additional interest cost. Now, we need to offset that cost by increasing the sales of vacant properties and therefore reducing our void costs. And obviously we've done 700,000 in the first six months of this year. and also by letting up space of currently vacant accommodation and for those that have listened to me many times before for every £1 of rent it's £1.80 to £2 to the bottom line given those very high vacancy void costs of service charge, insurance and of course the interest charges so we have a plan will offset those costs.

50:24 We'll try and hold the dividend as best we can. And we can do that within the existing parameters of where we are. So will it have an impact on dividend? No, we're hoping not. We should still be able to make our 8p plus dividend.

50:44 Thank you, Stephen. I think that's all the questions today. I'll hand back to Lily now. That's great. Thank you for answering those questions you can from investors. And of course, the company can review all questions submitted today and will publish those responses on the InvestorMeet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Stephen, could I please just ask you for a few closing comments?

51:06 Yeah, I think we've covered quite a lot over this afternoon. This is really just a six-month update, as all half-year results are. We'll provide more detail with the full year as to where we sit. We anticipate making all of our strategic targets, which will allow us to continue to pay that dividend, and then hopefully, as markets begin to improve and as we drive income forward, we can then look to increased that dividend year on year post next year, so 20 onwards. So thank you all for attending. I think we have made very good inroads. We're getting towards the end of that strategic repositioning of the portfolio and therefore I'm pleased that we're at this stage.

51:57 We'll get there hopefully by the year end and then drive the company forward into 27, 28 and beyond. Thank you very much for paying attention today. That's great. Thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and I'm sure be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation and good afternoon to you all.