Land Securities Group plc

So, good morning, everyone, and a very warm welcome to our Half-Year Results Presentation. We talked about our direction of travel in May, and most of you attended our London-focused Capital Markets Day in September.

So, you know, we went into the year focused on progressing our development program, improving the mix at our retail destinations, further improving our sector-leading sustainability credentials and innovating in construction products and services. And we've done exactly that as you'll hear today.

Unsettled politics and a tough retail market have been our backdrop, but as you will have seen this morning, we've produced resilient results. This is due to the quality of our assets and our conservative capital structure with earnings up marginally and the effects of the decline in retail values on EPRA net assets limited by the diversification of our portfolio in recent years.

Before we get into the meat of the presentation, I just want to remind you of our portfolio breakdown both by sector and geography. As you know, we merged our operating units of London and retail during the first half as we're increasingly applying skills from across the business on all assets.

At our Capital Markets Day, Martin set out the re-segmentation of our reporting into Office Retail and Specialist assets along with a reconciliation to our previous reporting, which is also on our website. You can see the breakdown by classification and sub-sector here, and we will refer to these as we go through the presentation.

By geography, 67% of our portfolio is now in London, shown on the right-hand side of this slide. And this is set to grow, as we continue to work our way out of our remaining retail parks and a potential £2 billion of development costs to come in our pipeline over the next few years, which is all in London as you know.

As Marcus reported at our Capital Markets Day, the London office occupational market remains healthy, and we put lots of market data in the appendices to your packs. The flight to quality and convenience continues and our Office portfolio is well set up for this and growing.

The portfolio is pretty much full. Myo and Fitted, which most of you toured in September, have landed well with customers and are both well ahead of plan.

As to progress with our development program, just over 900,000 square feet was on site at 30th of September with over 100,000 square feet started since, and we expect to start a further 400,000 square feet by the time we report to you in May. This means, we should have 1.4 million square feet underway in the next six months of which 40% has been pre-let.

Delivery of this space is in 2021 and 2022 at a time when we think the supply of good-quality space will remain constrained. Our Specialist assets are holding up with leisure and hotel assets at virtually full occupancy.

Though the food and beverage sector is facing widely reported headwinds, our dominant destinations remain popular with the consumer and in demand from operators with UK cinema attendance significantly up year-on-year. Hotel revenues have held up.

And at Piccadilly Lights, our short-term leasing is going well with 90% of our target for the financial year already committed. The retail market is tough as we all know, but it's nuanced.

Outlets are holding up well as is London retail in the main, while regional shopping centers and retail parks remain difficult as we all adapt to structural change and a more cautious consumer. There were a number of high-profile CVAs and administrations during the period.

And limited demand combined with poor investor sentiment has impacted rental and capital values. Having said that, these two segments make up just 19% of our portfolio as a whole, and our performance against national benchmarks for footfall and sales is excellent.

Same-center sales, excluding the positive effect of automotive sales, were down by 0.7% on the first half but versus the benchmark, which was down 3.8%. Martin will take you through the numbers and a breakdown of valuation in a few minutes, and Colette will cover all of our activity throughout the portfolio in more detail after that.

I talked in May about our ambition to push on with our sustainability agenda. Caroline covered it in more detail at the Capital Markets Day and reinforced how it's integrated into pretty much every aspect of what we do.

We see this as a crucial part of having a license to do business with our communities, our customers and our partners; and in having the support of both our employees and increasingly our investors. We were really pleased to be recognized again in September as the sector leader ranking first in the U.K.

and Europe among our peer group by GRESB; and as European leader in the Dow Jones sustainability benchmark. As planned, we continue to push on.

Having been the first real estate company in the world to be recognized for our science-based carbon reduction targets, we have now raised our targets to reflect new climate science, which shows that the world must remain within 1.5 degrees of warming. We are committed to being a net zero carbon business by 2030.

And at Sumner Street, we'll be developing our first net zero carbon building. So now to our results and I'll hand over to Martin.

Thank you, Rob. Good morning, everyone.

Look as Rob said, our business has delivered a resilient performance for the first six months and we remain in a strong financial position. So let's go through the headline numbers.

Revenue profit for the six months was £225 million. That is up £1 million or 0.4% and that's despite the challenges that we see in the retail market.

Our valuation deficit was £368 million leading to a loss before tax of £147 million. Adjusted diluted earnings per share were up 0.3% to 30.4p.

EPRA NAV per share was £12.96. That is down 3.2% or 43p since March.

And finally, our dividend is 23.2p for the six months. That is up 2.7%.

So turning now to that £1 million increase in revenue profit. And I can safely say that this is by far the simplest slide that I have ever had to present, because as you can see revenue profit was up by £1 million due to a £1 million increase in net rental income while all other costs were flat.

So let's really get under the skin of that £1 million movement in net rental income. Look as I explained at the Capital Markets Day in September, we're one business and the London and Retail portfolio split is a thing of the past.

Our segmental reporting that now reflects the predominant use class of our assets grouped into Office, Retail and Specialist. And what this chart shows you is the changes in net rental income and what I've done is I've broken those down.

I've broken down the movement in like-for-like net rental income into those three use types. So overall net rental income increased by £1 million.

Like-for-like net rental income that was up £4 million with Office up £3 million. Retail declining by £2 million and Specialist up £3 million.

The £3 million increase in like-for-like Office that was due to £1 million from rent reviews, principally at new Street Square. And £2 million came from new lettings mainly at Nova and 10 Eastbourne Terrace last year, but also the new lettings at Myo this year.

Turning to Retail. And remember this is all retail including our London retail.

Like-for-like rental income declined by £2 million. The impact of voids re-lettings, rent reviews and surrender receipts those broadly balanced out.

We saw £1 million improvement in bad debt and lease incentive provisions compared with this time last year. Now over the past six months, there have been a few high profile administrations and CVAs, notably Arcadia and Debenhams, although we did take a provision against lease incentive balances for these two retailers at the end of last year.

Lost income from administrations and CVAs that totaled £3 million in the period. Taking into account the timing of store closures and changes to rent, I would expect the second half decline to be around a further £3 million, that is before taking into account any additional provisions for lease incentives that may be required.

Now there's more information as Rob said on CVAs in the appendices. On to Specialist, where like-for-like net rental income increased by £3 million, now £1 million comes from lower lease incentive provisions compared with the prior year, and £2 million was driven by increased short-term lettings at Piccadilly Lights where we are really pleased with the progress.

So back now to the remaining elements of the movement in net rental income. What I've done is I've combined proposed developments, the development program and completed developments into one.

And these saw £1 million reduction in net rental income as we began vacating Portland House prior to redevelopment next year. Income from Portland House will remain at around its current level in the second half.

Acquisitions had a £1 million negative impact due to empty rates at Lavington Street. And we also sold Livingston Retail Park last year which resulted in a £1 million lower net rental income in this period.

So let's now look at the valuation. Set out here is our combined portfolio of £13.4 billion split into various asset classes.

Overall, our assets reduced in value by 2.8%, but once again, there was a considerable variation in performance across the asset classes. Office, which makes up half of the combined portfolio by value that saw no overall movement in valuation.

Like-for-like rental values were up 1.9% and there was a 5 basis point outward movement in yields. Within the Office segment, like-for-like assets they were up 0.3% in value.

And that's primarily because of an increase in rental values in Victoria. Our office development program increased in value by 3.8% largely due to construction risk reducing at 21 Moorfields, while proposed developments declined by 8.1%.

And that reflects the valuation of Portland House now being done on a residual basis. Moving on to London retail.

That's the retail in Central London below our offices plus our suburban London retail assets. Well here that segment reduced in value by 3.5% due to a 2.7% reduction in like-for-like rental values and a 4 basis points outward movement in yields.

Regional retail so that's our shopping centers outside London, that was down 9.4%. And here like-for-like rental values fell by 3.7% and yields moved out on average by 36 basis points.

There was little difference in performance between any of the centers with the best performer being down 7.9% and the worst down 11.5%. Outlets while these continue to be the best-performing retail asset class with values up 0.6%, letting activity in the period resulted in a 1% increase in rental values, and Colette will talk about outlets a little more in a minute.

Retail parks were down 11.1% in value and that is largely due to a 58 basis points outward movement in yields. And our average equivalent yield on retail parks is now 6.7%.

And finally Specialist. The value of our leisure and hotel assets was down 3%.

Hotels were broadly flat, but the challenges facing the casual dining sector impacted our leisure assets. And the other category here is principally Piccadilly Lights where values were broadly unchanged.

So moving on to development expenditure and I've set out here the potential cash expenditure on our 3.5 million square foot of development opportunities. As you can see that totals just over £2 billion.

Now if all of that cash cost was funded from debt without any disposals, which it won't be our LTV would rise to 37.6% assuming current values and no profit on any scheme. Over the six months, our adjusted net debt increased by £61 million.

And that together with the decline in the value of our assets was behind the increase in our LTV to 28.1%. Our weighted average cost of debt was marginally lower at 2.6%.

And we continue to have around £1.6 billion of firepower for investment opportunities and to backstop that committed CapEx on our development schemes. So let me summarize.

Despite, the market backdrop particularly in retail our income has proved resilient. Our balance sheet remained strong and we have plenty of firepower for acquisitions and our exciting development program.

Now let me hand over to Colette.

Good morning. We've continued to strengthen the portfolio, introducing new products, staying ahead of market trends and driving through new and better ways of working throughout the business.

This morning I'll bring you up to speed on the whole portfolio; how we're tackling market challenges; and as far as possible turning these into opportunities. Our office portfolio is virtually full.

The new products Fitted and Myo are both performing well and our development program is progressing at pace. As you saw at the Capital Markets Day, we're getting better and better at using technology and data to give customers more of what they need and want in both design and services; as well as to build faster more efficiently saving costs and reducing waste.

But as we all know Retail continues to be challenged by structural changes which are here to stay. Again, we're using data and market intelligence to understand the new reality of retail; and what we need to do to drive down occupancy costs drive up sales whilst protecting income.

Let me start by giving you some headline numbers. We're 98% let.

We've delivered £14 million of lettings with another £17 million in solicitors' hands and completed £16 million of office rent reviews at 10% above the passing rent. Our Office WAULT is almost nine years which is long for the sector.

Our Retail net rental income has held up, despite the challenging market decreasing by only £2 million compared to last year and looking to the future with a mixed-use development pipeline of 3.5 million square feet, all of which is in London and will be delivered from 2021 onwards. As our Capital Markets Day, was only a few weeks ago, my London update will be brief; however, full disclosures are in your appendices.

So the summary version: London continues to be a highly desirable location despite the political turmoil. It's an exciting vibrant city, where people want to live and work and invest.

The dynamics of the occupational market have altered little in the last year. The flight to quality continues to drive activity with Q3 takeup above the long-term average and 11% up on Q2, but as we've been saying for a while there's limited supply of new space.

And the vacancy rate is down to 4% compared to a 10-year average of 4.2%. There's approximately eight million square feet of speculative space under construction, but with an average takeup of 5.5 million square feet over the last 5 years, there's just under 18-month supply being built.

This gives us confidence for our own development pipeline which is delivering 3.5 million square feet between 2021 and 2027. And there are detailed charts in your appendices showing all this.

In the investment market volumes are down 59% on 2018 with overseas investors appearing to take a wait-and-see approach. We remain vigilant looking for the right London opportunities, but discipline is key.

Let me turn to our Office portfolio. I'm really pleased with the performance of all three of our Office products.

Starting with HQ, we're virtually full but have grown income through rent reviews and lettings. Fitted, our fitted-out solution launched in the spring, with two floors at 123 Victoria Street.

Both are let at a premium of -- 20% premium, to net effective rents. And as we roll out this offer, we'll be targeting a 5% to 15% premium.

Myo is also proving the benefits of careful market analysis, and greater customer understanding. We wanted a product that was truly differentiated, and could also be integrated into our portfolio.

By focusing on one-to-three-year leases, together with the ability to personalize the space, we have a real point of difference. And it's paid off.

We set an ambitious business plan. And six months in we're beating our targets with 60% of the space, occupied.

Interestingly, 30% of those customers are also HQ customers. And a further 20%, come from businesses that are in some way connected to them, helping us build stronger, more lasting relationships.

And of course, we fully expect that, some of those who start in Myo will go on. And move into our HQ buildings.

The strong early performances of both Fitted and Myo show there is demand for both. So we're now progressing, them at Dashwood House and through the development pipeline.

We spoke at length about our Office portfolio, in September. So I'll leave it there, and move on to what we now refer to, as the Specialist part of the business.

This covers our leisure properties, the hotel portfolio. And of course, Piccadilly Lights, which Martin rather unceremoniously, re-categorized as other in his redefining of the accounts.

You can ski, swim, play golf and pay to get locked in a room at our leisure parks. They're vibrant places, where experience is everything.

Their popularity has helped to sustain occupancy levels, at 97%. The cinema operators, who make up 26% of the portfolio, had a solid performance, with U.K.

admissions up 9%, as families flocked to see The Avengers. And the release of Star Wars nine this December, should ensure cinema outing, stays on the Christmas activity list.

Around 17% of the rent comes from casual dining. And the issues here are well publicized.

Older concepts are struggling. And others are carrying too much debt.

However, history tells us that, families keep going to leisure parks throughout cycles. Yes.

We'll need to refresh the line-up with new concepts. And yes, some operators may need to restructure.

But with the right line-up and our dominant cinemas, our destinations will continue to attract families, for days and nights out. Moving on to hotels, we really like our hotel portfolio, which has delivered 27% income growth over the last 10 years, in the budget and mid-market sectors.

They let on turnover-only deals which means, local factors count, whether it's major sporting events or airline administrations. Some sites are up.

And some are down. But overall the valuations and income were flat.

We also know there's a lot of potential in the underlying site values, which are well ahead of book value. On to Piccadilly Lights, brightening up the heart of London, activity is gaining momentum.

Three of the screens continue to be used by Coca-Cola, Samsung and Hyundai on two-to-three-year leases. And the other three screens are used on a short-term basis.

We're doing really well and already secured over 90% of our target income for the year, with strong momentum, in the run-up to Christmas. Selfridges, REISS, BT, Pandora, Nike and Uber, have all been lighting up the SoHo, Sky.

All this activity will start to provide evidence for future valuations. Moving on to Retail, we're constantly reading negative stories about retail.

And it's been a tough six months for CVAs and administrations with more likely to come. But I'd like to put this in the context of our portfolio.

As Martin explained, our net rental income is only down £2 million on last year. And importantly, that's less than 1% of our group rent.

The limited impact we see is due to the strength of our portfolio. Our occupancy rate has held up at 97%.

And our sales and footfall performance have exceeded the benchmarks. Our same-center sales were up 0.7% significantly ahead of the BRC benchmark.

This is despite a decline in footfall, indicating an increase in basket size at our centers. Where we've been hit by CVAs only 14% of our units have closed showing the popularity of our assets.

And where the units have closed, we've relet over half, including The Ivy Victoria which opens this morning in the old Jamie's Italian unit. That said, we know, we're operating in a retail reality with more challenges ahead, so let me tell you what we're doing to make sure our assets can meet these challenges.

I'll divide this into three: activity in the last six months across the different subsectors, how we plan to maximize our performance in the medium term, and what we believe are the longer-term trends and how we're going to stay ahead of the curve. So what we've done in the last six months starting with retail parks has been mixed.

Despite the wave of CVAs and administrations occupancy is high at 96% and we've protected rental income. However, values declined by 11% as yields moved out.

In light of this, I'm pleased we completed the sale of Poole for £45 million around 12% below the March book value. We said before that we don't see retail parks as core to our portfolio and expect to continue to make disposals.

Now to outlets, where we have a steady stream of lettings to 20 target brands, all our consumer research points to the fact that retail mix is key to our destinations success with nearly 70% of consumers giving retail mix as one of their top reasons to visit. So we're using data more and more, to help us create the best lineup for each location.

At Braintree Village, our research told us that Polo Ralph Lauren will improve performance and act as a drawer for both shoppers and brands. This has proven to be the case.

Polo opened their temporary store in November last year. In the three months after opening footfall increased by 6% and total sales by 15% and this has continued with an improvement in total sales of 3.7%.

Also as predicted, Polo has acted as a magnet for other brands. Our regional shopping centers have been more challenged, but we've been working hard to attract brands that resonate with changing consumer demands and the way people spend their time and money.

One trend is health and fitness. Peloton, which is all about cycling in your home have opened at Westgate and Bluewater along with Ribble Cycles who have taken space at Bluewater as part of their online-to-offline strategy.

We're also targeting categories like cosmetics working with brands that have an appetite to move from online to offline such as Clockface, who've opened at Trinity; and more established brands like L'Occitane and Rituals who've opened at Westgate and KIKO at Buchanan Galleries. And of course, we continue to hold events, but it's not all about new brands and fun days out.

We also recognize the importance of working with the larger brands to ensure our destinations have the best mix. Bluewater is a great example of this, where footfall is up 2.5% and sales are up over 1%.

Such a movement is never down to one thing in isolation, but the result of is making sure we have the best retail mix and the right size. Neither Apple or Tesla are new to Bluewater, but the launch of the iPhone 11 and the rollout of the Tesla Model 3 have drawn people to the center, but so has the opening of Primark.

We identified a pent-up demand for Primark at Bluewater and worked hard to make the space for them. Using consumer cart data, we can see that in the 15 weeks after opening Primark customers visited Bluewater twice as often as non-Primark customers.

They spend over 50% more in total and they spend in more stores than non-Primark customers. They may come for Primark, but while there they visit more stores more often.

So in the medium-term performance in retail is about convenience in good locations with the right mix and environment. Customers then have a great experience and come again and spend more.

And it's not just about having the right brands, how much space they have matters too. And when a brand is really popular like Zara, bigger is better.

Our research shows Zara customers have a longer dwell time, spend nearly half as much again as the average customer and 17% more on F&B. They visit and spend in more than twice as many stores compared to the non-Zara shopper.

So upsizing Zara at Bluewater from 19,000 to 37,000 square feet, and we're curating space at St David's to deliver a 36,000 square foot unit to bring them into the center for the first time. And at Trinity Leeds, we're upsizing another key anchor H&M from 25,000 square feet to 39,000 square feet so they can bring their full range of fashion, kids and home ware to the heart of Leeds.

This sounds straightforward, but it isn't. It's like a Rubik's Cube.

We had to move six retailers to create the space for the two Zaras and H&M. They all needed the right location and the right-sized unit to create the best mix, a lot of negotiations.

I talked earlier about the importance of working closely with our customers to help their businesses remain sustainable. One way are we -- one way we're doing that is to look at how we can reduce service charges to improve affordability and protect rental income.

So what of the future? There needs to be a fundamental change in the retail sector.

As I said, the right retail of the right size in the right location performs well, but it will take data insights to find these sweet spots and the reality is there will be less of them. That's because there is too much retail in the UK and poor sentiment is challenging liquidity, so some of it has to go.

This creates opportunities for us. We're looking at alternative uses particularly residential across our whole portfolio.

We've talked to you about O2, W12 and Lewisham. And since the Capital Markets Day, we've added Wandsworth to the list.

At W12 and O2, we anticipate that we'll see retail and leisure shift from 100% to only 11% with the opportunity for offices and around 1,700 homes helping to underpin values. At Lewisham, we're master planning.

And at Wandsworth our new entrants, we think there is potential for a residential tower, so we started work to see the art of the possible. This leads me nicely to the rest of our development program.

All is going well and we could have 1.4 million square feet on site by April 2020. Again, I'm not going to go through this in detail, but we'll give you the highlights from the last couple of months.

At 21 Moorfields, we finished piling the hardest part of the program technically and 12% of the steel frame is now complete. At Lucent behind Piccadilly Lights, demolition is 90% complete.

And foundation and basement works are underway with 70% of the piles installed. At Nova East, piling has begun on the 165,000 square foot scheme.

This will bring much needed prime space to Victoria and completes our pedestrian routes through Nova into Cardinal Place. We're already responding to requests from prospective customers for presentations for both Lucent and Nova East.

At Sumner Street, we submitted a revised planning application to improve buildability and demolition has started. We'll be applying automated methods of construction, a new technology to reduce construction time, waste and costs.

Also this will be our first net zero carbon development. At Portland, we received planning consent in September to add a 14-storey extension to the existing floor play giving us 394,000 square feet of new and refurbished space.

The new Portland House will be home to all our products HQ, Fitted and Myo; as well as a focus on wellness and leisure. Vacant possession is planned for March 2020.

And at Red Lion Court, we're doing short-term letting to maintain income while we progress our plans which along with Lavington Street gives us the potential of over 600,000 square feet of offices in Southwark. So it's been busy.

The Office portfolio is full and performing well. Fitted and Myo are ahead of their business plans.

Piccadilly Lights is exceeding expectations. Retail is challenged, but we continue to outperform on sales and footfall.

We're using customer data across all sectors to inform our decisions. Technology and new ways of working are leading us to build better and more efficiently.

And we continue to deliver all our activities in a market-leading sustainable and responsible way. Our development program is gearing up and we could have 1.4 million square feet on site by April next year.

London remains a vibrant city and we're making the most of what it has to offer now and in the future. Now let me hand you back to Rob.

Thanks very much, Colette. So to conclude, our direction of travel is clear.

We are well placed to create buildings for our customers and value for our shareholders, despite the continuing uncertainty. Customer demand for the right space will continue.

London is supported by demographic and behavioral trends and has more than proven its resilience since the referendum. The market dynamics remain healthy for most uses.

And customers are demanding quality space great service and robust building performance; and this will provide opportunity for us. We have a good development pipeline entirely located in the capital.

We have a strong track record in delivery, but we are taking it further. We're applying innovative approaches to design and construction.

And, of course, we're delighted to be delivering our first net zero carbon building at Sumner Street. We said in May that Retail will be mixed.

It has been. We see continued rental growth in our outlets, as Colette has explained.

Shopping centers and retail parks will remain tough in the near term, although, as I said these segments make up less than 20% of our business. We see continued demand in our leisure parks and our hotels are more than underwritten by site value, as you know.

Overall, we've created a high-quality and versatile portfolio with opportunities for short, medium and long term. Looking ahead, we're positioning our portfolio for the future, so its shape is set to change, with a potential £2 billion of expenditures to come in our existing development pipeline in London and the continued workout of our retail parks.

Given the unsettled environment, I'm pleased, we're in strong financial shape and are in a position to press on with the developments and seize opportunities when we see them. Let's see what December brings to all of us.

Anyway, for now we're going to hand over to questions. There should be some microphones hanging around.

There is one microphone hanging around. We've been kicked out of the theater by Vodafone today, so we're -- we'll be hand-to-mouth.

So one microphone coming around. And please, if you would raise your hand so I can get to you and you will be spotted.

If we can have your name and company for the record for the playback on the [indiscernible]. Thank you very much.

Marc Mozzi from Bank of America. I just wanted to follow up on the press speculation about potential disposals, you're targeting in some areas of your retail leisure space.

Can you give us a bit of more color or size of what we should expect in H2 or in the future in term of capital allocation? Thank you.

So, thanks, Marc. I mean, the only guidance we've given on disposals is that we will continue to work out of our retail warehouse portfolio.

I mean, we're down now to 10 locations, down from about 30 I think a decade ago. And it's now 4% of our business.

We will continue to work out of -- our best advantage over time. Otherwise, as we always say, no asset is sacrosanct, but I've got nothing to say to you this morning about potential sales.

Sam here from Barclays. A couple questions from me please.

First one, on your London retail ERVs. They came down.

Is that -- was that actual letting activity? Or is it just the valuers taking a slightly more cautious stance?

And your second question?

The second question would be on, just the overall retail valuations. And given that you're with one of the lowest gearings in the sector and have positioned the portfolio pretty much where you want it to be, why are you not taking a slightly more aggressive stance towards the -- to the retail values?

And why are you not basically writing them down to a level where you think it is appropriate or where we see over the next 12 or 18 months it will be better? And then very lastly, are you seeing anything on WeWork at the moment?

Do you think that has any impact, especially as the rest of the London letting market continues to be pretty strong...

So that's three questions, yes but I'm going to ask Martin to cover retail ERVs, if I may. Colette, can you cover WeWork?

And if we can do Martin then Colette, but I'll first of all start off with gearing and valuations. So our capital structure is where it is through design.

We've been on this route for a few years. As you know, we're trading at the bottom end of our capital structure range -- our LTV range.

We're really comfortable with that. As for values, I can very safely tell you that the retail values and all capital values are at the whim of CBRE not us.

We are independently valued twice a year, so best thing to do is speak to them, but there is no doubt that there is difficulty in the retail market. It's very, very difficult for them to put valuations on retail at the moment.

I will say that of the two segments retail warehouses and shopping centers, retail warehouses is somewhat easier. There has been quite a bit of trade over the last six months.

So there is a sort of clearing price today that they can put their finger on. Shopping centers is more difficult.

As you've seen there's been very, very little evidence in the market. Return in terms of values.

Yes. So just to give you a little bit of color on retail in London.

So from a valuation perspective -- I know you asked about rental values, but from a valuation perspective, a couple of the suburban London retail sites, the shopping centers where we have the build-to-rent prospects, the closest built-to-rent prospects, those wouldn't have moved in value much. Those were underpinned by value.

The other portfolios did move out, not quite as much as regional shopping centers, but they did move out as the valuers moved out equivalent yields there. In terms of your question specifically on rental values, we have -- that is a combination of experience on rents.

So let me give you an example. And remember, there's quite a lot of retail in London retail, but for example on Victoria Street rental values will have fallen.

And that is from experience of lettings we've done. So it's a combination of both anticipation on rent as well as some evidence from the deals that we've done.

And then you asked the question about the WeWork impact. And what I would say to that is that we're really clear from the conversations we're having with our own customers and also the success of Myo and Fitted.

It's that the flexible model is very much part of business planning now. So the issue really I think becomes who actually provides it.

WeWork have come in as a sort of disruptor to the sector. And there's been a lot of responses from landlords the likes of ours.

I think what you also have to think about with WeWork there are sort of two questions really. One is that we don't know what space is available within their own units.

That's -- I mean we've highlighted that before. That's always been an issue in terms of sort of vacancy and availability, but equally if you look at the profile of occupiers they have those business still need to be housed.

So I think the point becomes whilst there's a lot of sort of speculation around WeWork, I think the model is here to stay, but it's who actually provides the space that probably will change quite a bit.

Hi. Chris Fremantle from Morgan Stanley.

Just wanted to ask you a probably slightly awkward question about politics, which has clearly been a barrier to investment and sentiment over the last few years. How do you think your business and your markets are likely to be impacted by the various political outcomes in the forthcoming election?

And is it likely to change your behavior either in terms of your developments or what you're doing to your capital structure? Is it likely that there is an outcome that could make you move from the rather defensive positioning that you have adopted over recent years?

Thank you.

So thanks, Chris. I think the -- I mean politics is very fluid and moving.

And I don't think anyone in this room will be able to predict the exact outcome of the general election on the 12th of December; or indeed whether we're going to be in or out of Europe; whether it's going to be hard soft or medium; and when that's going to be; and how long it's going to take to negotiate; et cetera. So as things stand, we are very happy with the developments that we've got committed.

And we are very happy to be moving forward to get to the point of commitment on the developments we haven't started yet, based on the outlook that we see, which is there is a tide of demand and not very much supply. Now in the event that that tide of demand gets switched off then we may well change our view.

Obviously, we can't change the view on stuff that we're committed to but of the stuff we are committed to 60% is pre-let. So we're pretty relaxed about that.

And the other two buildings are in amazing locations where there is -- at the moment, we're already having conversations with people about whether they want to take pre-lets in these buildings that are 2.5 years out. So we're fairly relaxed but we've positioned the business for a reason.

The outlook is uncertain and we have to make sure that we can cope with that which we can.

It's Rob Jones from Deutsche Bank. A couple of questions.

Just firstly Rob on Sumner Street on Page 5. This was touched on the Capital Markets Day as well, but can you give us a bit more detail in terms of what you do differently to develop a net zero carbon building?

Secondly Colette, interesting to see the stat on the Central London vacancy. Are you able to split out the figures for vacancy rates on new/substantially refurbished space versus second-hand space in the market today?

Thirdly, just thinking in terms of success around timing of disposals. Obviously, you mentioned Poole as a recent transaction 12% below March 2019 book value.

Can you give us an idea or willing to disclose the figure in terms of what discount that that was sold at versus its peak valuation during your ownership? And then a final question, yes: Colette you said obviously, casual dining we know has still got challenges at present.

I appreciate it's only 17% of your leisure rents but can you give us a figure in terms of quantifying how bad are there or has been over the last six months or how you expect it to develop going forwards? Thanks.

So let me deal with Poole and net carbon. And perhaps you can deal with new versus second-hand space and the fourth one.

The Poole peak valuation I'm afraid I can't tell you. Unless been asked and I cannot tell you what the peak evaluation is.

What I can tell you is that over the last -- since the peak of the market in 2015 and 2016 our retail warehouse parks have come down in value by 26%. That is up to September.

On net zero carbon. So to get to a net zero carbon building there are sort of three work streams that one needs to undertake.

First of all is to design and build your -- design and build your building as efficiently as possible to reduce waste. Secondly is to procure your ingredients for building from the best sources and in the best way.

And those two things combined will reduce your embodied carbon or embedded carbon at the time of practical completion by as far as you can possibly go. The third element is then to offset what is the remainder.

It is simply impossible to dig into and out of the ground and build a building and produce a carbon zero building. It has to be a net carbon zero building.

So offsetting, as far as we're concerned is a market that is going to grow very rapidly over the next decade. At the moment, we are only interested in offsetting schemes which are gold standard recognized by the United Nations.

And just to give you a little bit of guidance on Sumner Street, where we have designed the building using digital twin technology to make sure that there is very, very little waste where it's a manufacturer for assembly building, so it's being component built. Indeed some of the processes are being done automated.

It's very efficient in terms of the way it's designed to run operationally going forwards. And the offsetting that we will have to pay to make that a net zero carbon building at the point of delivery is less than one quarter of 1% of construction costs.

The way we see this going is that pretty well every business is going to have to be net carbon zero at some point in the next decade or so. Otherwise, simply society will not give you a license to trade.

So we have to get on it and we're doing it well. And we're doing it efficiently and we're doing it sensibly but we're doing it as fast as we can.

And in terms of the second-hand space versus the grade A. I can't actually split out the vacancy rate for you but what I will say is that the themes that we've been seeing and been talking about are still very consistent.

So we're still seeing a lot of take-up of the grade A space, what's very interesting in markets like the West end and much more speculative pre-letting activity than historically. Also the quantum of grade A space, hasn't impacted on rental values.

And I think this is also why we're now starting to see people ask about Lucent and Nova East now very, very early on is because people are looking for that type of space rather than going for the second-hand space that sort of is available. I think it also brings into question the flexible because what we're seeing is that people are sort of taking the grade A space and then for the overflow space, they're flexible.

So what the future of the second-hand space potentially becomes I think is -- has a question mark over it. Casual dining, it's very difficult to actually say what is going to happen there.

The conversations that we're having are very much around the actual specifics of an offer. So there are certain offers that come within the casual dining sector that seem to be doing pretty well and then there are others that are really not and where we've got customers who are providing multiple offers in various different locations in one area this is going really well.

Somewhere else actually could we come out? So until we start to get a real sense of which of their offers are going to work versus not it's quite hard to predict what the future is going to be, but I think we're going to see a lot more of it over the next six months.

Jonathan?

Jonathan Kownator, Goldman Sachs. Just coming back to Page 11 and the rent reviews on the retail side, I just wanted to understand, did you have a period with limited rent reviews?

Or you mentioned surrender premiums as well. I mean obviously it was flat, but perhaps also if you can comment on your relettings versus previous passing rents here that would be helpful?

Thank you.

Jonathan, we don't comment on letting versus previous passing or versus ERV. What I would say is that there isn't any great surrender premium that nets-off against downs in this.

This is just basically, it's a 0. It's a combination of very small amounts.

And I'd just lump them together not because there's anything in -- the amount of rent reviews yes is relatively limited. All the pressure in retail comes from your vacant space.

That's where most of it is. Space that we had back from CVAs and the like which will appear in the administrations column that has been let at just under -- and this will vary very much but in the six months, it's let being let at just under 20% below the most recent rent.

So I'm trying to give you an idea of where we are on letting, but not through the rent review process actually through the empty space that we've had back...

[Indiscernible].

Gosh we -- so just our void stats are fairly flat there's -- if you look at voids and admins together. We don't count temporary lettings as let.

So we count those as voids so it's not in the numbers.

Alan?

Alan Carter with Stifel. It's fairly minor but can you just explain how you -- within the retail sector your priority is to protect income, but how you reduce occupier service charge without that being detrimental to non-tax income.

Yes this is something we're really focused on at the moment. And this is very much about the service element of what we're actually providing and as distinct from the rent.

And clearly the two reinforce each other because if we can get the service charges down it helps reduce the overall occupancy costs. And there is no silver bullet.

It's about tackling all aspects of how we run the centers. We're looking very much more at digitizing things working out with a dialogue with the retailers what are the important things that they really want to keep going.

I was talking to someone earlier. Security is really important, but as much things like marketing if we can use digital platforms -- so it's tackling everything and it will be done in phases.

So we expect to have some impact for the next service charge round and we will keep working on that.

So there are no hands up and there are no questions on line so thank you very much for coming. And we will see you next time.