Good morning, ladies and gentlemen, and welcome to the Schroders European Real Estate Investment Trust half-year results. My name is James Lowe.

I work in the Schroders Capital Sales team, and very pleased to be joined in the studio here in London this morning by Jeff O'Dwyer, portfolio manager of the European REIT. Now, just before we get started and I hand you over to Jeff for the presentation, a couple of housekeeping pieces.

If you'd like to ask us a question as we go along, please do so via the Q&A tab that should be somewhere on your screen now. You can also now download a copy of the presentation if you want to follow along with us in more detail.

For even more detail, you can now download a copy of the half-year results. There's also a separate RNS that's been announced this morning that we'll talk to shortly.

With that, I'll hand you over to Jeff for the presentation.

Great. Thanks, James.

Good morning, everyone. Thanks for joining us this morning.

Jeff O'Dwyer. I'm the fund manager of the Schroder European Real Estate Investment Trust.

Here this morning to announce an important strategic change for the company, together with the half-year results for the period ending 31 March '26. Many of you would have picked up this morning that the board and the investment manager have announced our intention, subject to shareholder approval, to propose an orderly wind-down of the company and return capital to shareholders.

Let me start with a with a little bit of context. The portfolio itself has performed exceptionally well since our IPO in 2015.

We've delivered in excess of £80 million back to shareholders since that period. However, the company's relatively small size and limited liquidity has consistently weighed on the share price, resulting in a prolonged 40% discount to NAV.

Over recent years, it's become increasingly clear that investors have favored larger listed vehicles, particularly those vehicles that offer better diversification, better cost economies, and better liquidity. Against this backdrop and despite reviewing sort of multiple options with the board, and in particular with the new chairman, Phil Redding, the manager and the board believe that an orderly wind-down is in the best interest of shareholders.

We are very conscious of the market backdrop and the the challenges that we face, this will be an orderly phased process. We'll sell assets gradually, and in particular, we'll be focusing on the asset management initiatives in order to not only maximize price, but also liquidity for these assets.

We think we're really well-placed to to manage this process, particularly given we've got the teams on the ground and the specialization on the ground. We've got really strong contacts with not only the broking community, but also with occupiers, investors across our markets.

At this stage, we think the process will take up to three years to implement. Obviously, during the period, and we know that dividend is a a pretty key component for investors, we'll continue to pay a dividend throughout the process.

As we sell assets, those disposal proceeds will be used to repay debt and then return capital to shareholders. In terms of next steps, obviously, we'll be presenting a shareholder circular with a view to getting investors to vote on the change of the the strategy and the articles of association, and then we'll convene a general meeting, and that's likely to be for the middle of of August, but we'll update investors in in due due course.

I'll give a little bit more color throughout the present presentation around our asset management and around our the disposal approach as we as we go through the presentation. Obviously, as I touched on earlier, we're announcing together with this the the half-year results.

Just to sort of give you a little bit of color in terms of a summary around those those results, we're announcing the continuation of the quarterly dividend for this quarter, which is 1.48 euro cents per share, therefore giving 2.96 for the six months to that 31 March 2026. This is a dividend cover of 93%, which is pretty similar to that that we had at the same same time last year.

We've continued to maintain a very strong balance sheet, obviously retaining that that cash and then so and and then also having a modest LTV of around 27%. NAV total return for the period, 0.7%, mainly, and I'll come into a bit more detail in a minute, but mainly driven by not only the income side, but we've obviously lost a little bit of value, and I'll go into more detail, particularly around the office side where we've lost a a bit of bit of value.

Then the update on the French tax, we continue to dispute this with the French tax authorities. We continue to ring-fence this this capital, we're in a position to to deal with this if it wasn't to go our way.

Obviously, we continue to have external advice where we shouldn't provide for this amount, and we believe our our position is positive around this. Just running through the NAV bridge, we had to make a prior period adjustment.

This is to do with historical service charge and some CapEx. Then together with that sort of valuation adjustment that I touched on, we've had some positives in terms of some of the regearing that we've done, particularly in Rumilly and Stuttgart, where we've seen values increase on the back of that.

Equally, equally, we've had some negatives in terms of some vacancy that has occurred that has occurred in Alkmaar and Cannes. We've announced that in RNSs over the last few months, but that's balanced in order in terms of that positive and negative, resulting in a a fall of about €1.4 million.

Then, obviously, some CapEx and primarily resulting with investment in Stuttgart to go with that lease regear that we that we did. Obviously, with EPRA earnings and the dividend canceling out that, we end up with a final NAV of 1.1 sorry, €151.3 million for the period ending 31.

That results to a to about a £1 €1.152 per share, which is around a a pound when you when you look at the the conversion today. In terms of summary of of income, as as comparing this to the same period 12 months ago, we've we sold the the Frankfurt asset.

We've also lost a bit of income with the Alkmaar tenancy, but notwithstanding, income remaining fairly robust, obviously benefiting from the inflationary impact, positive impact that we've had. Operating expenses have come down primarily due to some of the leasing that we've done in in Saint-Cloud.

Investment management fees, obviously, falling on the back of valuations falling. I guess the other sort of point here is where we've been dealing with sort of interest interest rate increases, it's not a surprise that the net financing financing costs have increased on the back of that.

Obviously, by moving the cash position and ring-fencing and putting in place that bank guarantee for the French tax, we've lost our ability to sort of earn sort of a sort of an interest rate on on that cash, hence the interest received has fallen as a result. Obviously, the net effect is that we have a dividend cover of around 93%, and that's primarily the fact that we're not at 100% is primarily due to the fact that we sold the Frankfurt asset and we've lost the Alkmaar income.

As we lease that up, we expect to to move that back to 100% cover. Continuation of the the quarterly dividend, and obviously, that's something that we've we've done since we adjusted that dividend back in 2023.

That that dividend, obviously, has remained flat. If you annualize that dividend relative to today's share price, you're getting north of an 8% dividend yield, and obviously, that 40% discount that that I touched on, given where the share price is today.

What have we done in terms of over the period, and and obviously, our focus has been in terms of how do we look at and and asset manage to to create shareholder returns? I touched on those two significant lease regears that we did: one in Germany with regearing the State of Baden-Württemberg in Stuttgart, and then also extending the lease with the Nestlé on on Rumilly.

Obviously, we've driven rents by between 18% and 20%, really positive. Obviously, we're moving our attention to how we're managing the vacancy and some of the regears that we have going forward.

The KPN situation, I've got a slide later that I'll go into a bit more detail, but we are continuing to work with the municipality about advancing planning, and that should flow through to a positive impact on on value and liquidity. We're still thinking through sustainability.

We did those sustainability audits a couple of years ago, and the initiatives that come out of that, we're looking to implement as we regear leases and make investments that that create a return against that capital that we we deploy. Obviously, I've spent a lot of time with the board, and particularly with Phil Redding that I touched on, where we've been reviewing lots of options of what do we do with the company.

At the end of the day, it's it's fallen on the fact that we believe that the best interest for shareholders is to move to that to that managed wind-down. Just on the portfolio, many of you have seen this slide before.

Obviously, that it's fairly diversified. It is 14 assets, but one of the real positives that we are in that sort of sub-€30 million lot size.

When we set our stall out, we we really focused on three key things. One was to be invested in cities that would grow faster than their domestic economies, and that's faster from a GDP and employment perspective and and a population perspective.

Obviously, some of the key cities here being sort of Hamburg, Stuttgart, and Paris, and then some really strong logistics exposure as well, and obviously, also the Berlin exposure that we have from a retail perspective. That's the diversification.

We've got 30 about 34% exposure to offices, roughly the same in industrial, and and circa sort of 12% in retail, and the rest in in all all alternatives. Just to to sort of add a little bit more flavor on the Apeldoorn position, and we've been running a dual strategy here.

Not only have we been trying to sort of find a replacement tenant for KPN, but we've also been working with the municipality. There's really strong interest from them to try and support how how we can look at alternate use.

You can see this photo here, obviously, it probably presents a little bit stronger, and without getting ahead of ourselves, that's a potential design. That's something in terms of we're trying to work with the municipality about getting this level of scale that would obviously have a positive impact in terms of value.

We're starting to get some some interest from developers to to take this site. It's a big site, it's 3.5 hectares.

It's currently valued by Savills, the independent values valuers, at around €10.8 million. That includes the remaining income of around €2.4 million.

I've said before that I I feel pretty confident that we'll that we'll outperform, once we sell this asset, that that number, pretty pretty confident that we'll we'll we'll do better than that. Certainly, the shift here is has moved away from finding a replacement tenant to now actually looking at alternate use, given the discussions that we've had with the municipality.

In that regard, we're looking to work with an advisor to start marketing this this asset. Ideally, we'll get a little bit more planning support before we formally market this, and that would allow developers to really price an element of floorspace with a bit more certainty.

In terms of other asset management and what we're thinking about to sort of tie in with the strategy that we've come out with today, obviously, we've been successful with Stuttgart and and Rumilly, we need to finish off the works that we've committed to there. Obviously, Cannes, this is one where we've had Stellantis who are looking to depart in in September, but interestingly, there's an alternate alternate-use angle for this.

Again, when we think about some of these assets that we've the strategy that we have, we've we've really looked at not only about in-place income, but what do we do with these assets, investing in areas where there's competing demands for uses. Cannes is a very good example of that, and we're starting to get some interest here, not only from sort of showroom, car showroom operators, but also from grocery and all also from self-storage.

That's in terms of thinking about alternate alternate use, that's an angle that we're we're thinking through. Alkmaar, we continue to work on marketing that to find a new tenant.

Equally, we're we're starting to think through, are there owner-occupiers out there that may may take this? Then other regears that we have throughout the portfolio, obviously, to to a smaller extent, Utrecht, working with the main tenant TSC there about seeing how we can move them to full occupation, and then sort of longer term, thinking through the Nantes regear, trying to bring forward the the Rennes regear as well, although that's sort of expiry there is 2030, but trying to see how we can bring through some of these these items now where we can create better value and liquidity.

As as I touched on before earlier, using our teams on the ground where we have that strong local expertise and specialization to to create this this value. Just on without going in more detail, these are sort of the main leases that we're focused on at the moment.

This a a move or a graph in terms of some of those regears that we have going forward and how we're thinking as investment managers to bring those forward and de-risk this this expiry and try and, I guess, create some of that value now, and then sell with that longer-term income that plays in with a lot of investor demand at the moment. Just on investor demand, I think it's important to to sort of set the scene.

I know when I last spoke on this this seat back in December, we were very much more positive about the sector as to where where we were. We we had a lot more confidence around sentiment.

We started to see a little bit more investor demand. As like like a lot of investors, a lot of that positivity was taken away with the recent sort of Middle East impact.

For real estate, we really have had that momentum checked. You can see on the left-hand side that investment volumes have really fallen off, and for for Q1, we we're we're we're off circa 20% to 40% depending on which which which region, but relative to the same period of of last year.

Now, one of the positives is that what we're seeing is that the demand that is happening is at the smaller lot sizes. Thankfully, that's been our focus.

We've always really set our stall out to be focused on the sub-€30 million lot size. That is where most of the exposure or the transaction evidence is is happening.

For the last quarter, we basically 80% of the deals have been in that sort of sub- sub-€30 million lot size. Just trying to then flow that into how is our portfolio valued across the different sectors, and trying to give you a bit of the steer around where liquidity is at the moment.

If you think about the industrial side, it has always been a very, I guess, focused and really highly demanded sector across Europe. We've seen good rental growth.

That's coming off a a little bit, but notwithstanding, we're valued here off a a net initial yield of around 6%. That also actually has been diluted due to the Alkmaar vacancy.

That's still a very decent premium to where the 10-year risk-free rate is around if you take the average across the three jurisdictions, you're at about 3.4%. Interestingly, since I last spoke back in December, the risk-free rate has increased by about 70 basis points.

Overall, we've still got a a decent premium of around 3.7% relative to to that risk-free rate. If you take out the the Apeldoorn asset, which is a bit of an outlier given it's overvalued and the fact the lease is coming to an end, that premium to the risk-free rate is around 2.6%, which is still a a decent number.

On the office side, and I think this is probably the area where we're flagging there's been a bit of a shift in in terms of demand, and there's not a lot of transaction activity across Europe for offices, particularly for secondary offices. That's where the valuers are having a little bit more of a challenge to try and price that particular sector.

Hence, the the point around liquidity being a weak demand. I'll come on a bit later, and I'll talk a bit more detail about the three offices that we have.

Retail, we've got the DIY asset in Berlin. Continue to be positive about that given the long-term income and the fact that we're sitting on four hectares of land in a capital city that is undersupplied from a a residential point of view.

The alternative asset is is the the KPN that I touched on where we're now moving to more of a land value approach. Then, obviously, the car showroom and the demand that we're starting to see across some multiple uses that gives us some confidence around being able to dispose of of all that.

The takeaway here is that we're really positive that we're sitting in sort of lot sizes that are that are sub-€30 million. There continues to be strong demand from an industrial, in the living sector, and in particular, select retail, and also across healthcare.

Then actually, offices, we're we're seeing much more polarization, and I don't think this will be any surprise to those on on this webinar, that we're seeing very much a two-tier approach here where prime continues to see really strong rental growth and and good demand, and it's actually the secondary offices where there really is a very much a a struggle to price that at the moment, particularly given the challenges around, well, how do you sort of price in occupier demand, how do you price where construction costs are going, and that sort of exit value given investors' appetite for offices at the moment is is relatively weak. Just a continuation on on the office side and and honing in, and that occupier comment that I made, we sort of compared here the the 12 months where we were last year, and sort of how you can see here where vacancy rates have changed in the the submarkets that that that we're invested.

If you think about the southern bend in Paris where our Saint-Cloud asset is, we're we're starting to see vacancy rates sort of increase now into into that sort of higher teens. Notwithstanding, we we're seeing good rental growth from a prime perspective, but certainly secondary is is suffering.

I've commented before about the office asset that we have, we leased off rents here of low €200 a meter. We invested in this asset because of the transport infrastructure that was that was going to be improved here.

That's been delayed now to 2030. We've we've had some good positivity in terms of leasing up this building, but notwithstanding, we're in a a submarket where vacancy is is increasing, so that's one of the challenges and the backdrop that we have in terms of managing this particular asset.

Thankfully, in Hamburg and Stuttgart, the the vacancy levels are are not to the same degree, and I've said before that that Stuttgart is one of the strongest office markets and has the record lowest level of vacancy in the whole of Europe, and that is testament, obviously, to how we've been able to regear the State of Baden-Württemberg and start to see some rental growth there. Equally in Hamburg, although vacancy is starting to creep up a little bit, rents are still relatively low.

Prime rents, obviously, increasing, and to put it into perspective, we leased off sort of rents of around €14 per square meter per month, still a a bit of a discount to where prime is, but notwithstanding, we we very much conscious that there there still is some occupier headwinds in terms of maintaining that full occupation that we have both in in Hamburg and and Stuttgart. I guess, overall, just how do the valuers reflect this risk and how does that flow through to how how values are are presented from a from a NAV perspective.

Obviously, across the the portfolio, we have the benefit in Europe here of of annual indexation. That's very different to the UK where it's typically five-yearly to market.

As we've seen sort of inflation starting to increase across the the regions, we're we're looking at sort of mid-twos over the next couple of years, the rents will continue to grow on on the back of that. We're trying to move leases, particularly in Germany where we've had this hurdle and had to wait for the end the compounding of of inflation before you get your increase.

We're trying to move leases, as we've done with the State of Baden-Württemberg, to annual indexation. That's a a key part of our asset management play to try and bring forward that that growth in a in a stronger fashion.

Just on debt, I know I commented that overall we've been a a modest user of of leverage across the the portfolio. At the moment, gearing levels are at around sort of 27%.

You see here that we do have some some refinancing to to do this month. Positive that we are in about to sign an extension with the existing lender.

This is on the the Berlin DIY asset, so that will extend that lease. That'll also, obviously, allow us to implement the new strategy that whether we have.

Given this asset is a long-term lease to one of Berlin's leading sorry, one of Germany's leading DIY specialists in Hornbach, we think there's going to be strong demand for this particular asset when we look to to sell that. Extending that debt for for just over a year ties in well with with that that strategy.

As I touched on, as we sell assets, well, we're looking to redeploy or deploy that capital into repaying that debt, and together with, obviously, making distributions back back to shareholders at at the right time. Obviously, that's this is all subject to getting investor approval when we go to the the general meeting.

Obviously, sort of priorities, and the shift is has really much been to this to this new strategy now. Obviously, we need to to to take that to to the shareholders in order to commence that that orderly wind-down.

We've got in 14 investments in some really strong parts of the European market, we're we're confident in the majority of the portfolio in our ability to to sell those. Obviously, we are conscious of the the market backdrop and the challenges that I've I've talked about, hence that sort of two to three-year period in order to allow us to implement the asset management initiatives that we have to to maximize that value and and liquidity.

Obviously, income continues to be the priority and regearing those leases that I I talked about earlier. Obviously, those proceeds will be used to to repay debt before we we make distributions, and and very much looking to The board is looking to continue paying a dividend to share shareholders, given how important, particularly for private investors and wealth managers, that are a key part of our our register, and obviously, maintain our investment trust status.

I think in terms of that sort of two to three years, and I know for some investors that may see seem a a longer period to be implementing this strategy, but I think we are conscious, and the board is conscious, of that market backdrop that we're working behind. Obviously, we're starting to see a little bit of positivity in some of the discussions around the Middle East.

Obviously, that's not completely certain, and it'll take a little bit of a period before that rolls through, and then also before investors start to think through redeploying capital. Obviously, we know where rates are and obviously recent increases across sort of from the ECB.

Really, once we start seeing rates to stabilize, that will give investors a little bit more confidence to come back and and enter the real estate sector and obviously to start to see investment volumes start to increase again, and and give valuers and us a bit more confidence around value and and liquidity. We'll we'll be making announcements and updating shareholders throughout the process, and obviously, the next point will be to to sort of get the circular out to you and the changes to to the articles in order to facilitate this change in strategy, and then convene that that general meeting, which at the moment will probably likely be for the the middle of August.

I'll stop there. There's probably a lot that to digest.

There's quite a bit of material that James touched on that we've we've announced that have that's been downloaded. There's probably some questions that are coming in, and and happy to answer those, James.

Thank you.

Brilliant. Thanks, Jeff.

Thank you, everyone, for sending in your questions. As Jeff said, we've had quite a few come in.

If you'd like to keep sending them in, please do. I'll ask Jeff as we go through.

Jeff, maybe just picking up on a couple of the key themes. One that's coming out is, and you've just mentioned it there, is the timeline for disposals.

I think two to three years generally is what you've guided to in the RNS. A couple of questions here about what influences that timeline.

Is that a set timeline that you're working towards, or could it be shorter, could it be longer? How are you thinking about it?

I think we've always been transparent, James, with investors and being realistic here, and sort of understanding the backdrop that we are disposing into. It's challenging.

Now, there's certain assets that we've got much more confidence that they're much more liquid and will sell at really strong pricing and relatively quickly. We're conscious that there's some assets that we have to do more asset management on that will not only improve or maintain value, but actually improve the liquidity.

I think you've probably picked up that the office side is probably the one sector that's not just what we're facing, but the whole sort of global sort of investor allocation to offices, that there is questions around, well, where values are, and valuers are sort of having difficulty because there's not that evidence in terms of transactions to give them a very clear view around value. There probably is, and there is, from an occupier point of view at the prime end, but if you think about sort of that secondary, it's a much harder, and valuers are really valuing on sentiment.

That's probably the area where we need to do more asset management and prepare those assets, those offices, for sale, and hence, why that sort of two to three-year period to implement. We're obviously conscious also we've got the French tax that we're managing as well, and that sort of gives us time to manage that and to not be put into a position where we need to be doing something there.

I think that's appropriate to set that timeline of two to three years to not be seen as a forced seller, and actually manage that asset management that we have in our mind.

Brilliant. The obvious follow-up question there is then what are the assets you think that you can sell more quickly and start returning capital to shareholders?

Appreciate you might not be able to give specifics here, it might be commercially sensitive information, but...

I think, as I said, we're very transparent in the information that we've given investors, and you can sort of think, well, actually, some of the asset management that we've already done, Berlin is a really good example where there's probably not a lot more that we can do there, where you've got long income to Hornbach, you're sitting on sort of four hectares in a capital city. I would like to think there's quite a number of investors that would want to be looking at that particular asset.

That's a good example. Rumilly is another one where we've done the lease regear with Nestlé.

We're just finishing off the works that we need to do there, so that's probably ripe for selling earlier. Similarly, we have a smaller logistics asset in the Netherlands in Houten.

Again, fantastic covenant in there, really strong location. That's one that certainly would expect to see demand.

Those sort of industrial, the alternatives, obviously, I talked about Apeldoorn as well, if we continue to have the good discussions that we are with the municipality towards the end of this year, and if we get, obviously, the support from investors for this strategy, that's another one where I would actually expect that that's an asset there that we could sell sort of sooner rather than later, and tap into the demand that we're getting from developers.

Again, sort of another follow-up question here that's coming through around the disposal strategy. We've outlined here in the presentation and in the announcements around the intention to sell specific assets over time.

The question refers to did we also discuss a whole portfolio sale? What's the pros and cons of both?

We did. We went through, and that's one of the options that I sort of talked about, that I've been working with the board and in particular with Phil Redding, who's offered his experience and how relevant is he given he's sort of recently come from running Tritax EuroBox and being through this process.

Heavily debated, and one of those options was, well, look, is there an ability to sell the overall portfolio? Yes, there is, and there would be demand, but we think that the pricing in terms of the capital that's there to take the portfolio is much more opportunistic, private equity, and their cost of capital at the moment is much higher, and therefore the price would be not comparable to what we believe and the board believes that we could achieve by selling individual assets or grouping a couple of assets together and going through an orderly managed wind-down over that two to three-year period.

Makes sense. There's a question here, which I think we're probably not going to be able to give guidance on because it's specifics around whether you think that you'll be able to achieve at NAV in these sales, and I don't think you're going to be forecasting potential NAV and distributions at this point.

It's too early. Just maybe give a feel for how you're thinking about generating value and how shareholders should expect this process to look from the values that you achieve.

I think that the valuers are still getting their heads around the Middle East and backdrop that we're dealing with at the moment, I think it's probably fair that some of these values will, and we'll come out with June values soon, but some of these values will, particularly for offices, will come off a bit, and that's probably the one sector, being a diversified investor, that's the one sector where there is that question mark, just given there's not that evidence for the valuers to work on. Yes, we need to be actively, and we are, and you take Saint-Cloud as a good example where we've reduced the vacancy there from sort of high teens down to about 9%.

Continuing to work with our local asset management teams on the ground and our advisors there, our relationships that we have with occupiers in that building to not only, obviously, maintain and sort of regear those leases, but try and move that vacancy down a bit more. Obviously, the slide earlier that I touched on is that the context of where that asset sits, it's in a submarket where vacancy is now 16%, we're outperforming where vacancy is.

That's all going to flow through to not necessarily value creation, but certainly in our mind, improving the liquidity for the asset, and that's obviously our biggest asset in the portfolio. I think that is one asset that will probably take a little bit longer to sell.

Equally, Stuttgart, we've done the regear with the State of Baden-Württemberg. There's another tenant in there that wants to commit, we're in the process of regearing that lease to tie in with the State of Baden-Württemberg, once we've done that, that's certainly an asset that we could sell sooner.

Hamburg is fully leased. We've been looking to regear that multi-tenanted structure that we have there, and then look to sell that.

Again, that's probably going to be sort of an 18-month, two-year period. Really, the other assets is as we regear, as we finish off some of the works that we want to do and present those assets in the best possible light for a sale.

The smaller assets, this is an interesting debate, just to share with everyone that the asset that we have in Nantes, interestingly, at the moment, there's the advice we're getting, there seems to be a bit of demand from investors to actually step in and take the leasing risk because of their view on where market rents can go. Actually, that may be one where we think, well, actually, let's not hang around and regear that lease in 18 months, two years' time, but actually, let's, if we're getting the right pricing, we might actually think about selling that earlier.

They're the things that we're weighing up, and I've been working with the teams and getting their input, and we're all on board around, well, how do we maximize value and liquidity to now implement this strategy. The board has also been out to see the assets.

I've taken Phil to see nearly all of the assets, he's got a really strong understanding of what we're looking to do here and the strategy that we're looking to implement to tie in with this managed wind-down. Also

another good question here around how you're thinking about managing CapEx versus distributions versus doing overall cash management during this wind-down period.

Yeah. I sort of opened up, and we've been, I guess, a manager of the sort of the corporate pretty prudently, and we've retained sort of that capital of circa €25 million.

Obviously, as you sell assets, we'll use some of those proceeds if we need to to be investing in the assets to manage that CapEx program. To be honest, the CapEx program is not enormous.

It's not as though we're going and doing a redevelopment of KPN to do a residential construction. We're not changing the use like we did many years ago, that successful repositioning that we did in Paris, where we took a €40 million office building, invested 30, and sold for 100.

We're not doing that. There's no other assets that are there to do this.

We may think about, say, the asset that we have in Cannes, whereby if we continue to see demand from a self-storage point of view, we may think about it could make sense to invest a couple of million to change the use of that, bring in an operator, and sort of sell with that in place. Equally, we'll weigh that up with actually do we sell now to a potentially a self-storage specialist if we get the right pricing.

They're the type of things that we will manage, and obviously conscious of what capital that we have, and that goes into our decision-making. Very much as we sell assets, we'll be conscious of, well, what capital do we need?

If we don't need that, obviously, that will be used to repay debt or distribute back to shareholders.

Makes sense. We've answered quite a lot of questions here around the proposal around wind-down, which is obviously expected given that news coming out just this morning.

If we haven't answered all your questions on that, please do bear with us. I'll come back to some of them.

If you think we have missed something, please do send it through, and I'll make sure I'll ask Jeff before we finish. There's just a couple of other areas that I just want to touch on because they are coming up: a couple of questions around French tax.

Just is there anything that you could give to shareholders around the timeline that you're expecting on that?

Look, it's before the French sort of early start of the litigation process. Without sort of naming other listed vehicles that are facing the same challenge, there is another larger listed company that is a lot further ahead than us, whereby that could create some news.

We're waiting for what impact that has. I think the positive here is that we've ring-fenced the capital for that in the event that it wasn't to go our way.

Obviously, all our advice is that we shouldn't be providing for this because we have a robust structure and we have abided to the SIIC requirements from a tax perspective. I can't give any more color other than we continue to dispute this.

Certainly, as we get more information, we'll advise the shareholders. Certainly, I would like to think over the three years that we'll be in a position to manage that.

Brilliant. Thanks for the extra detail.

Just a quick question from one of our listeners here on KPN, and just around how income is going to be impacted when KPN vacates and potential dividend payments around that.

We've been very very clear for some time about the KPN position, i.e., they represent 20% of our income. It was always going to have an impact on our dividend cover and potentially dividend.

Certainly, the board, and I've made a comment in here, the board intention is to continue paying a dividend through this process. We're not sort of giving any direction on what that dividend is, and obviously, that dividend will change as we sort of return capital to shareholders over that period as well.

What may happen is that the dividend cover, losing KPN, may fall if the board were wanting to continue with the same dividend, and you don't have to be a genius to sort of work that out. Obviously, the position slightly changes where if you are selling assets, you can and you will have that capital to be able to pay a dividend going forward, together with the income that we have from the remaining portfolio.

Obviously, touched income being key and how we're regearing leases, and obviously, the inflation benefits that we have that's sort of helping sort of grow our earnings as well. I can't give any more specifics around what the dividend will be, but other than what I can say is that the dividend cover will naturally fall as a result of losing KPN.

Thank you for that color. Just one macro question that's come through here that's important to touch on, because I think it takes us back into sort of the conversation around making sales and disposals in the portfolio.

Question actually refers to the slide you showed volumes coming off around 20% to 40%, I think you said. What needs to happen for that to start to turn around again?

Obviously, it has implications for the disposal strategy and values that can be achieved going forward. What's your general feeling and thoughts around what needs to happen?

I

think, and we talk about, obviously, this a lot within sort of real estate here and with our investment committee. I think a lot of the institutional and a lot of investors are sort of sitting on their hands at the moment.

If you think about, well, actually, alternative risk-free returns are pretty positive, on a risk-adjusted basis, it sort of makes sense for investors to be sitting in gilts or appropriate sort of sovereign risk. Naturally, if rates start to come back and fall again, the focus is then going to come back, 'Well, actually, real estate is looking attractive again.'

You can see here the premium, and I'll talk about the 2.6% rather than 3.7% because that includes the KPN, but at 2.6%, that's still an attractive premium to where the risk-free rate is. If we start to see that falling, and as you know here, it's increased 70 basis points since I last sat on this sofa six months ago.

If that starts to fall again, that premium will head back to sort of 300 basis points. Now, historically, real estate has traditionally, at the prime end, been sort of around 200 basis points.

I think we are sort of valued at a reasonable premium. I think what needs to happen, we start to see rates falling, we start to see growth coming back.

Obviously, we need some of these geopolitical risks to abate to give investors a bit more confidence to come back into the real estate market. They're the sort of three or four things that we're thinking through that would have a positive impact.

Obviously, we're at the smaller end in terms of encroaching on private investors, sort of family offices, propcos. Equally, they're probably vehicles that aren't heavily levered, the interest rate point probably not to the same degree, it probably lends itself more to, well, how do they think about sort of alternate use on some of these assets?

How do they think about transport infrastructure changes or competing demands for uses? Saint-Cloud is a really good point where the transport infrastructure won't come till 2030 now, we're selling to an investor that will benefit from that.

They're the type of things that are much more micro-related to that sort of asset that will probably have a bigger impact on value and liquidity as well. I think from a macro point of view, those three or four points that I touched on being around just sort of general geopolitical risk, impact on interest rates, obviously where inflation goes, and obviously, our leases provide a natural hedge for that, but also just general economic growth.

Also, from an office point of view, how occupiers start to return back to offices. We're starting to see sort of that slowly, where businesses are appreciating and understanding, well, actually, having teams in the office, it creates much more productivity, and that will sort of have a positive impact on the occupation markets for offices.

Brilliant. I'm taking you full circle now back towards the announcement around the wind-down.

One of the questions that's just come through is around manager incentivization through that period, just particularly in thinking about alignment of the manager to shareholders through the sales process. Can you give a bit of color on that?

Yeah. We've made a comment in the announcement that we are in discussions with the board around changing our investment management to align us in a more appropriate way with this new strategy, and that includes aligning sort of senior management team as well.

That's something that will be detailed in the circular for investors to vote on.

Brilliant. We'll keep an eye out for that.

Maybe just chance for two final questions, because we're coming up to time. If you have any other questions, send them in now and I can try and fit them in.

This is actually just a more specific question around the Apeldoorn site, just a point being made around the quality of the housing around the Apeldoorn site looks to be sort of maybe lower quality, how are developers thinking about price, quality of the potential accommodation that could go in there?

I don't think it's fair to say that it's low quality. There's some fantastic new resi development sort of 500 meters away.

Across the street is some lower quality. It's medium-density, lower quality, yes, but within the greater surrounds, there's some really nice, across a range of low-density to high-density residential.

It's actually a really nice neighborhood. Now, some of the master planning that the municipality has, and this has actually come from that, is there's this sort of waterway that they're really keen to try and develop from the city center out towards where our site is to promote residential and high-density residential living, and obviously with that, a cross section of services as well.

This is something that the municipality is very keen for this site to be rezoned to cater for this, and hence why we've, I guess, flipped our focus to work with them, and we see better value in that now from an underlying land value perspective. Obviously, I think this photo probably presents it in a really positive way.

Whether we get to that or whether a developer gets to that, it's still subject to planning, but that sort of just gives you an indication of the potential scale that could go on this 3.5 hectares. I don't think the comment to sort of say it's low-quality residential is fair, because there is some much sort of newer development, both from a single sort of residential through to medium-density housing within sort of 500 meters of the site.

Brilliant. Maybe just the final question here, a couple of similar questions coming through around when first capital distributions might be expected.

Clearly, we have to have the shareholder vote first,

but... It's too early to give any indication on that, and that's obviously going to be dependent on the sale process as well.

That's something, as I touched on, we will be updating shareholders as we go through the process, but it's a bit early for me to comment on that specifically.

Brilliant. That's all the questions.

Hopefully we got through all of your individual questions, and thank you very much for sending those in. That's all we've got time for this morning.

That just leaves me to say thank you to Jeff for the presentation and answering the questions. Thank you very much to our listeners and shareholders who have dialed in this morning, and thank you very much for your input and questions.

We really do appreciate your support for the trust and the questions this morning. Please do keep an eye out on the announcements going forwards.

There's obviously going to be a circular. There's much more detail to dive into in the annual report.

That leaves me to say thank you for joining, and speak again very soon, I'm sure. Goodbye.