Latest / The Business Case - with Mark Wharrier and Phil Clark / The Business Case: Unlocking the £8 Billion Logistics Powerhouse, interview with CEO of Tritax Big Box, Colin Godfrey

Transcript

The Business Case: Unlocking the £8 Billion Logistics Powerhouse, interview with CEO of Tritax Big Box, Colin Godfrey · The Business Case - with Mark Wharrier and Phil Clark

• 0:16
  Speaker: Welcome to the Business Case in partnership with the leading investor presentation help engage investor.
• 0:22
  Speaker: This is the podcast where we dive deep into the stories behind the UK's leading companies.
• 0:27
  Speaker: I'm Mark Wharrier .
• 0:29
  Speaker 1: And I'm Phil Clark.
• 0:30
  Speaker 1: And in each episode, we'll be sitting down with top business leaders to uncover their career journeys, the challenges they faced, and the insights that have shaped their success.
• 0:43
  Speaker: We've spent our careers analyzing and investing in UK companies, meeting management to understand the business case.
• 0:50
  Speaker: And now we want to share those insights with you.
• 0:53
  Speaker: We will hear about the companies our guests lead and how they are positioned for the future.
• 0:58
  Speaker 1: But we also want to find out what makes these business leaders tick, the highs and the lows that they've experienced, and the lessons of management that might apply to your life.
• 1:10
  Speaker: Please remember that this podcast is not investment advice, and it's for informational and educational purposes only.
• 1:17
  Speaker: Well, this is a great discussion with Colin Godfrey, Chief Executive of TriTax Big Box REIT, the 3100 real estate investment company focused on logistics assets throughout the UK.
• 1:38
  Speaker: It's a wonderful discussion about how the company has grown over the last few years and where it sees the upside in its portfolio, both in terms of rental growth and the big development pipeline that it's got.
• 1:50
  Speaker: Anyway, hope you enjoy it.
• 1:52
  Speaker: Today we are delighted to welcome Colin Godfrey, Chief Executive of Tritac's Big Box REIT, the national property company focused on logistics warehouse assets in the UK.
• 2:03
  Speaker: Having grown from a standing start at IPO in 2013 to a portfolio valued at nearly £8 billion, the company has recently joined the FTSE 100.
• 2:12
  Speaker: And yet, as we will discuss, management believes the market is still underappreciating what the business can deliver over the next few years.
• 2:19
  Speaker: Colin, welcome to the Business Case Podcast.
• 2:21
  Speaker: Thank you very much, Mark, and uh great to be here with you guys.
• 2:24
  Speaker: Uh it's an honor to be here.
• 2:26
  Speaker: Great.
• 2:27
  Speaker: Well, for listeners less familiar with the company, can you give us a snapshot of the portfolio, tenant mix, and the longer-term strategy of the group?
• 2:35
  Speaker 2: Yes, of course.
• 2:36
  Speaker 2: So look, I think the first thing to say is that the business was founded on a principle of quality.
• 2:41
  Speaker 2: Uh, and that runs through the vein of everything we do and everything we are.
• 2:46
  Speaker 2: Um, 80% of our investment portfolio comprises very large logistics facilities.
• 2:51
  Speaker 2: Um now, these aren't you know the old warehouses that you might imagine.
• 2:54
  Speaker 2: These are uh state-of-the-art, uh, high-quality real estate.
• 2:59
  Speaker 2: Um, and we coined the phrase mission critical real estate really because these truly are, uh, and that's self-evident from you know the lease renewal rates that we've achieved over the years.
• 3:10
  Speaker 2: Um, but also that our clients occupy these buildings, you know, they're they're really high quality um businesses.
• 3:18
  Speaker 2: Um, and that's why we had 100% rent collection over a 10-year period, um, including the period during COVID.
• 3:26
  Speaker 2: So we had we had zero vacancy in our portfolio over that time.
• 3:31
  Speaker 2: And I think, you know, if when you think about the quality of our uh clients, they comprise some of the world's you know leading businesses, including Amazon, that comprise 13% of our rents.
• 3:42
  Speaker 2: Uh, and we are the largest landlord in Europe.
• 3:45
  Speaker 2: Um, the likes of you know the supermarkets such as Tesco, Morrison's, the co-op, Sainsbury's, MS, uh, and in uh food production, Kellogg's, um, staple home names such as BQ Next, uh, TK Maxx, Unilever, L'Oreal, Bosch, DHL.
• 4:03
  Speaker 2: I mean, I can go on and on.
• 4:04
  Speaker 2: So it's a real who's who of some of them, you know, the greatest businesses of our time.
• 4:09
  Speaker 2: Uh, and that gives me real confidence uh in the resilience of our dividend.
• 4:14
  Speaker 2: And then we supplement that with 20% of our portfolio now in urban small box, uh, and we can probably get into that a little bit later, and that's very, very exciting and producing great returns for us.
• 4:26
  Speaker 2: And then we also have the development and the data center piece, which we we can chat about a bit later.
• 4:31
  Speaker 2: But our strategy is really quite simple.
• 4:33
  Speaker 2: We enjoy uh that compounding of really high quality income.
• 4:39
  Speaker 2: Um, we sell assets that have maximized value in our hands, often where we've executed successfully on uh asset management initiatives, and we invest that into higher returning opportunities, um, either in uh logistics um investment assets, um, be that you know the the likes of something like the the UKCM transaction, uh logistics development, or or indeed uh data center pipeline.
• 5:03
  Speaker 2: Um and and underpinning all of that, uh, you know, really important.
• 5:06
  Speaker 2: This isn't just about me.
• 5:08
  Speaker 2: Uh I've got a best in class team that we've built over the course of the last uh 12 and a half years, and that team is tirelessly and passionately delivering returns for our shareholders.
• 5:17
  Speaker 2: The culture in our business uh I think is exceptional.
• 5:21
  Speaker 2: And uh the objective of for all of us is to be the best that we can be for our shareholders.
• 5:26
  unknown: Okay.
• 5:27
  Speaker: Well, a lot to unpack there.
• 5:28
  Speaker: Um, but before we drive into the um you know the drivers of Tri-Tax, you know, perhaps we'll sort of step back a little bit and you know, could you talk about your journey in real estate in terms of how your career has progressed and perhaps any notable milestones on that journey?
• 5:44
  Speaker 2: Well, um, I've been uh uh in Tritax for quite some time, so most of the milestones have bid been within Tri-Tax.
• 5:52
  Speaker 2: But I started my career in banking, didn't really much enjoy it, um, but got uh a small glimpse of real estate.
• 6:01
  Speaker 2: Um, realized I enjoyed the the bricks and mortar element of real estate.
• 6:06
  Speaker 2: Uh I think it's a really dynamic market, probably misunderstood in many ways, and and uh I've always really, really enjoyed uh my job in real estate.
• 6:16
  Speaker 2: So I think that's the first thing, uh having a passion.
• 6:19
  Speaker 2: Um and I did my training at Weatherall Green Smith uh after my first degree uh as a mature student, and um, so therefore I had to sort of accelerate from there.
• 6:30
  Speaker 2: Uh left in 2000 to to start an agency business with my colleague James Dunlop, and I was essentially the fund manager in that team.
• 6:39
  Speaker 2: Um working initially for Smith Score, the landed estate agency, and then um met uh a bunch of guys that were undertaking um tax-based commercial property investments.
• 6:53
  Speaker 2: Uh, and they had a much less snappy name, but one of their businesses was called Tri-Tax, and we used that as a platform to create um commercial property investments for the high net worth marketplace.
• 7:04
  Speaker 2: Um, that segued into the uh the ability for us to promote larger product to the uh institutional investment market, and that was really the sort of precursor to um the the the modern day formation of of TriTeX big box big big box read, which obviously we we we launched in late uh 20 2013, but that was after 12 months of wearing that shoe leather and off the back of you know some pretty negative sentiment in the city following the GFC, so so it wasn't um a slam dunk and it was pretty hard work in the early days.
• 7:39
  Speaker: Now one of the interesting things about um property entrepreneurs, property CEOs, is there are lots of ways to succeed.
• 7:46
  Speaker: You know, you could people who like doing deals, turnarounds, development, um, compounding.
• 7:53
  Speaker: You know, how would you describe your philosophy towards real estate?
• 7:56
  Speaker: And was there anything that influenced that?
• 7:59
  Speaker 2: Um, you used the word then, Mark, um, entrepreneur.
• 8:03
  Speaker 2: I think our business is really entrepreneurial.
• 8:06
  Speaker 2: We're fast moving, we're very lateral in our structure.
• 8:09
  Speaker 2: Um, yes, it is an externally managed framework, and we could talk about that in a moment.
• 8:13
  Speaker 2: I think you know that's really uh works brilliantly well for our business and for our shareholders.
• 8:18
  Speaker 2: But adaptation, uh you know, really identifying opportunities, which is what we did when we we coined the phrase big box and moved into that market, in some ways cornered the big box market at the time in 2013.
• 8:31
  Speaker 2: It was still quite fledgling, and people hadn't really realized how big these buildings were going to go to become going to become and why they were so important.
• 8:39
  Speaker 2: Um, and you know, you've seen us adapt uh the business direction in in the intervening period through uh through development, um, through uh urban assets and and more recently through data centers.
• 8:56
  Speaker 2: So I think all of those things are but but look, the core philosophy is building on that that high-quality core and you know adding alpha.
• 9:07
  Speaker 2: I I'm a great believer in that if you're going to maximize returns, particularly with a low-risk um strategy that we have, you have to maximize returns in every component part of your business.
• 9:21
  Speaker 2: And that's what we are looking to do.
• 9:24
  Speaker 2: So every component part that I've just mentioned there, we look to optimize, uh, but in a low-risk way.
• 9:29
  Speaker 2: And I do believe it's possible to create a low-risk, high return uh strategy in a business.
• 9:35
  Speaker: Well, I guess the clue is in the name big box in terms of you know the asset class you focused on.
• 9:40
  Speaker: You know, how important um is it, you know, getting those long-term uh trends right?
• 9:46
  Speaker: And uh you know, we live in an age of sort of constant disruption.
• 9:50
  Speaker: And you know, if you're on a train that's got the wrong destination, it's it's difficult to get off it.
• 9:55
  Speaker: But what gives you confidence that you know the um the distribution logistics big box trend is going to be you know ongoing over many years?
• 10:03
  Speaker 2: Well, look, firstly, we're a customer-led business, so we listen to our customers and and listen to what they want, um, and we look at how we can provide that to them.
• 10:11
  Speaker 2: We we um we pay really close attention to this to the sectors that are doing well and those that are doing less well, and of course that ebbs and flows over time.
• 10:20
  Speaker 2: Um we are uh we think there's a huge opportunity for growth in logistics in the UK, just listening to our customers, actually, many of whom have been sitting on their hands in recent times because of the backdrop of you know macroeconomic challenge and geopolitical risk.
• 10:36
  Speaker 2: Um, that's starting to unwind now.
• 10:38
  Speaker 2: But you know, when I sit back and think about the drivers, I mean, we we talk about these structural tailwinds that are driving uh logistics real estate.
• 10:47
  Speaker 2: And in fact, if you look at what's happened over recent times, I mean over the last few decades, when I started out of real estate, um offices and retail comprise both by way the far the largest part of uh commercial property holdings in in in uh institutions.
• 11:07
  Speaker 2: Uh industrials are probably something like 10%.
• 11:10
  Speaker 2: Yeah.
• 11:10
  Speaker 2: Now it's the biggest sector.
• 11:12
  Speaker 2: So I think that tells you something about the direction of travel, but it's quite diverse.
• 11:17
  Speaker 2: Um, you know, from manufacturing through to online retail.
• 11:20
  Speaker 2: Obviously, there's been a significant growth in online.
• 11:22
  Speaker 2: I think that's going to continue to rise.
• 11:24
  Speaker 2: Uh, you only have to look at the numbers to see that.
• 11:27
  Speaker 2: Um, these warehouses are becoming bigger, um, that they provide economies of scale, benefits, cost savings, efficiencies for our customers.
• 11:35
  Speaker 2: But what what we saw was the evolution of all of those factors with bigger buildings, but uh uh aligned with the the concept of globalization.
• 11:47
  Speaker 2: And and you know, if I go back before pre the launch of the REIT and you asked the man on the street um what supply chain was, most people probably wouldn't have known what you were talking about.
• 12:00
  Speaker 2: Everyone understands the term supply chain now.
• 12:03
  Speaker 2: I mean it it's on our screens, you know, with the with the the the straights of a move by web example.
• 12:08
  Speaker 2: So um, and it's a really sophisticated, complex framework now, which in some ways is unraveling because you had you know you had uh um product that was um being moved around the globe, being being comprised of many, many different uh uh pieces of the jigsaw.
• 12:26
  Speaker 2: I think people have uh grown a bit of a conscience in relation to to um sustainability and and and um issues relating to ESG.
• 12:36
  Speaker 2: I think that that's bringing product to some degree back to domestic markets, um trying to shorten those supply chains, making them simpler, uh less prone to risk.
• 12:47
  Speaker 2: And and in some ways, whilst we benefited from the globalization, we're also now benefiting effectively from deglobalization.
• 12:55
  Speaker 2: Um, and our own imported form of deglobalization in the form of Brexit, which is creating the need for domestic companies to hold more domestic inventory, and for, for instance, European companies that realise they can't move the product as quickly across across the channel as they did once before, to need to hold more inventory in the UK.
• 13:14
  Speaker 2: So there are many, many factors um that are that are driving increased demand for warehousing in the UK, and I think that that's going to continue for quite some time uh to come.
• 13:23
  Speaker: Yeah, I suppose the underlying dynamic here is complexity, and your business thrives on that.
• 13:28
  Speaker: And now we're going through a phase of building in more resilience to deal with some of those challenges.
• 13:32
  Speaker 2: And and it links in with um uh you know with with with AI and and the way that computing is being used.
• 13:40
  Speaker 2: I mean, we you know we're all used to barcodes now, but it wasn't that long ago where you know where retailers were were were keeping stock um numbers on pieces of paper and submitting them to head office.
• 13:50
  Speaker 2: I mean, it's amazing how quickly things move.
• 13:52
  Speaker 2: Understanding when your product is at any moment in time is crucial to to being able to deliver uh in an efficient manner to manner and deliver to your customers what they want when they want it.
• 14:02
  Speaker: Okay.
• 14:02
  Speaker: Um, you know, we'll talk about uh how the group has developed, but there have been some a couple of big acquisitions uh along the way, supplementing the organic growth UKCM, and more recently the the Blackstone portfolio, which been transformational.
• 14:15
  Speaker: You know, how important were those deals and you know what have you learned along the way about integrating acquisitions in terms of getting the cultural fit right?
• 14:26
  Speaker 2: Yeah, okay.
• 14:26
  Speaker 2: So look, the first thing is that that we're not um, you know, you know, the these elements uh or these opportunities are not mutually exclusive, and we we we look at everything from the point of view of risk of return.
• 14:39
  Speaker 2: So um we look at MA in the same way as we would uh direct property uh acquisitions, and we're and we're constantly assessing what is best for our business and what will be accretive to earnings.
• 14:53
  Speaker 2: And of course, it's really interesting.
• 14:54
  Speaker 2: We we are adopting much more, the market's now adopting much more of the sort of American style of uh running REITs and appraising um these businesses on the back of earnings and earnings growth as opposed to getting too hung up about nav.
• 15:10
  Speaker 2: Um, and I think that that should continue, by the way.
• 15:13
  Speaker 2: But but look, fundamentally, um the the reason we did the UK CM transaction was partly luck in some respects, but because they'd reached out to to to undertake a um an MA transaction themselves that fell over that pro that opened the door, we saw the opportunity, um and uh having appraised that we felt was particularly attractive and we went for it.
• 15:37
  Speaker 2: Um now MA is always subject to significant risk, it is subject to interloper risk.
• 15:43
  Speaker 2: Uh you're dealing with um uh uh another board of directors.
• 15:47
  Speaker 2: In that instance, we had a dissenting chairman um that that uh didn't help at all, uh, but it was fascinating.
• 15:55
  Speaker 2: I think it was the first time in the modern history that that's happened, according to the to the takeover panel.
• 15:59
  Speaker 2: Um, but it was our the the primary purpose of that was to capture this really high-quality uh urban logistics portfolio.
• 16:08
  Speaker 2: Now we we we'd started to move into urban with our first purchase in 2022, uh with the acquisition of a park in Birmingham.
• 16:18
  Speaker 2: We had uh wanted to do that earlier, but uh you know, pre that time yields in urban were very, very tight.
• 16:26
  Speaker 2: And we did a back solve on the level of growth that you would have to achieve to justify that low yield.
• 16:33
  Speaker 2: It didn't make any sense to us when compared against big boxes, what what we knew we could deliver from big boxes.
• 16:39
  Speaker 2: So we decided to bide our time and wait for a um a correction point in the market.
• 16:44
  Speaker 2: That came, of course, when inflation spiked, interest rates rose off the back of that, uh capital values fell, and we then saw the opportunity.
• 16:54
  Speaker 2: Now that coincided to some degree with with um UK CM.
• 16:57
  Speaker 2: And what we saw there were two really important things.
• 16:59
  Speaker 2: Firstly, the ability to capture what we saw was an uh was an undermanaged portfolio where we we believed that we could deliver a significant amount of uh asset management um value uh improvement um uh and make a fairly big splash in terms of urban uh quite quickly.
• 17:19
  Speaker 2: Um secondly, and by the way, you wouldn't have been able to buy that full portfolio in the market in the direct market.
• 17:25
  Speaker 2: It just wasn't wasn't possible.
• 17:27
  Speaker 2: But it also was a 60-40 deal.
• 17:29
  Speaker 2: We used the power of our paper as a share-for-share transaction.
• 17:32
  Speaker 2: We were trading tighter than uh than UKCM.
• 17:36
  Speaker 2: Um that enabled us to buy the portfolio at an effective discount.
• 17:40
  Speaker 2: Um, and uh the 40% of the portfolio that we acquired that was non-logistics um was a bunch of other sectors, such as offices, retail, ledger, etc.
• 17:53
  Speaker 2: And we made it very clear that we were going to dispose of that portfolio over a 24-month time horizon, which is up this May, May 26th.
• 18:01
  Speaker 2: And we're absolutely bang on track with that in terms of the sales program.
• 18:04
  Speaker 2: So that's gone exceptionally well.
• 18:06
  Speaker 2: I think there were some skeptics, um, and they've been delighted at uh at the execution.
• 18:12
  Speaker 2: Um, what I would say is we're in double-digit returns in terms of um the effective in price on that uh non-core portfolio, and we're also in double-digit returns on the core portfolio as well.
• 18:24
  Speaker 2: Um, the uh disposal program on the non-core has helped to feed um our CapEx requirements in in our logistics portfolio, uh our logistics development pipeline, and also in into uh data centers.
• 18:40
  Speaker 2: And I think just the last thing I would mention is what we were really gunning for was this uh opportunity for significant income growth.
• 18:47
  Speaker 2: I mean that that portfolio was accretive from day one, but we've delivered 18% rental growth in 18 months on the UKCM portfolio, which I think is really, really strong when you think about the backdrop of of where rental growth is in the market more generally.
• 19:02
  unknown: Great.
• 19:03
  Speaker 1: Well, maybe we'll turn to picking up some of those uh themes there, uh Colin.
• 19:07
  Speaker 1: Interesting, you were talking about rent reversion.
• 19:10
  Speaker 1: That's certainly one of the topics I'd like to talk about.
• 19:12
  Speaker 1: But thinking about the detail, I mean, uh you've got this ambition to grow earnings growth by 50%, I think, between now and 2030.
• 19:20
  Speaker 1: Looks to us like there's three core drivers to how you get there, and you've obviously talked about that in some of your results announcements and stuff.
• 19:27
  Speaker 1: So we've got we've got rent rent reversion, got new new development, and then obviously the there's the data center opportunity.
• 19:33
  Speaker 1: I think we'd like to sort of unpick each of those uh one by one, and I'll start off with with rental reversion.
• 19:39
  Speaker 1: You guys talk about 28% embedded uh rental reversion opportunity in the portfolio, meaning that you've got you know a large amount of your rent roll sitting below current market rents, and you've talked about you know that and and vacancy could drive up to 100 million pounds of rental income.
• 19:56
  Speaker 1: All organic, all contracted, no acquisition required.
• 20:00
  Speaker 1: What is it you think that the market isn't quite appreciating about that as an as an opportunity?
• 20:05
  Speaker 1: Where do you think there's a or maybe maybe don't make is there a mismatch between how you've how you've laid that out and what the market's giving you credit for?
• 20:14
  Speaker 2: Look, I think I think the first thing to say is uh I think it's a state of mind.
• 20:18
  Speaker 2: I mean that the the the markets have been in in some form of disarray, certainly uh in in risk-off territory.
• 20:26
  Speaker 2: Um you know the the REIT sector has I suppose to some degree been out of favour with the generalist investor for some some while.
• 20:35
  Speaker 2: I do think that that will reverse.
• 20:37
  Speaker 2: Uh, I think that that we will gain favour again.
• 20:40
  Speaker 2: I think that during this period, uh a lot of companies have been sort of lumped into the same bucket in real estate.
• 20:48
  Speaker 2: Correct.
• 20:49
  Speaker 2: Um, and you know, that certainly uh the buy side um has has often not had the time uh to to to really focus and lift the bonnet on on these businesses to understand what's under underneath.
• 21:05
  Speaker 2: Um now we've been you know quietly getting on with our business and embedding value in the business.
• 21:12
  Speaker 2: Uh so so and that is really, really important because most of the value that you that you talk to there will unlock just through a flux of time.
• 21:23
  Speaker 2: We we just have to get our heads down and do our day job.
• 21:26
  Speaker 2: Yeah, um, it's not as though we're that there's a huge amount of risk attached to this in any way, shape, or form.
• 21:32
  Speaker 2: I mean, that the it it's it's really really exciting what we've got embedded within our business now.
• 21:37
  Speaker 2: So that comes from uh rent reviews, as you say.
• 21:40
  Speaker 2: It comes from lease expiraries.
• 21:43
  Speaker 2: Um, there's an element of uh value opportunity in the vacancy in our portfolio.
• 21:47
  Speaker 2: There's 5.6% uh vacancy.
• 21:50
  Speaker 2: Um uh a couple of percent of that is in is in um development assets, which we would naturally expect to to let up quite quickly.
• 21:58
  Speaker 2: Um, but we think we can we can tweak the Underlying portfolio of vacancy as well.
• 22:01
  Speaker 2: And most of that came from you know the smaller scale uh assets that we acquired through UKCM and Blackstone.
• 22:08
  Speaker 2: Uh a lot to do there.
• 22:10
  Speaker 2: Um when when when one sits back and looks at the market dynamics, uh I think it's important to recognize that you know we've got really healthy rental growth, despite the fact the vacancy rates in the market have have increased.
• 22:22
  Speaker 2: And when you look at the the dynamics, come on to development in the moment, um, in the market, they're actually looking very favorable.
• 22:28
  Speaker 2: So look, we're we're pretty confident of at delivering on that capture.
• 22:33
  Speaker 2: Um and obviously that's supplementing this really high quality core income, compounding income that I mentioned earlier, that that is in is is supporting our dividend.
• 22:42
  Speaker 2: The rest is if you if you like additional alpha.
• 22:44
  Speaker 2: And perhaps we can come on to talk about that through development.
• 22:47
  Speaker 1: Yeah, I mean, I guess if you think about your portfolio, 40% I think is RPI linked.
• 22:51
  Speaker 1: You've then got you've you've then got this under underventalized piece which gets unlocked over time, either through um lease expiry, um tenant, tenant mixed turnover.
• 23:01
  Speaker 1: Yeah.
• 23:01
  Speaker 1: What what what's the sort of steady state annual rental growth opportunity do you think for the group?
• 23:07
  Speaker 2: So you mentioned the 40%, that there are some hybrid rent reviews, uh, there are some fixed rent reviews, um, which are sort of three, four percent per annum.
• 23:16
  Speaker 2: Um the the the half of our portfolio, and by the way, we have weighted it towards uh open market rent reviews more recently because we see that as a as a stronger opportunity.
• 23:27
  Speaker 2: It's uncapped.
• 23:28
  Speaker 2: Yep.
• 23:28
  Speaker 2: Um and we've been achieving some great review outcomes um in recent times, um, you know, delivering sort of five, six, seven, eight percent per annum rental growth in some in some rent reviews.
• 23:40
  Speaker 2: But the the general tone, if you look at our 2025 results, um we delivered a 4% light-for-light rental growth.
• 23:49
  Speaker 2: Um interestingly, uh our ERV growth, our the growth in our estimate, the estimate of rental value of our of our portfolio, i.e.
• 23:59
  Speaker 2: what we could let it for if it was all vacant to the market today, also grew by around 4%.
• 24:04
  Speaker 2: Um and indeed the broader market, the UK logistics, uh industrial logistics market, also grew by around by around 4%.
• 24:13
  Speaker 2: The reason that's important is that as we're capturing uh that reversion uh each year, it's being replenished by the market.
• 24:22
  Speaker 2: So the 28% you mentioned was 28% at the beginning of 2025, it was 28% at the end of 2025 as well.
• 24:28
  Speaker 2: It has.
• 24:30
  Speaker 2: And and that's really um exciting because it it means we've still got a lot to play for that's embedded within the business.
• 24:37
  Speaker 1: Just picking up on the um on the rent rent uh renegotiation piece, and you talked about moving a bit more to open market from a cap and collar structure, I guess, effectively.
• 24:46
  Speaker 1: If I'm the tenant, I mean how how much of that is a push versus pull?
• 24:50
  Speaker 1: Because if I'm the tenant, I probably would prefer to have visibility, transparency of what my annual inflation is going to be rather than leave it to open market.
• 25:00
  Speaker 1: So how how how active is that your decision versus it's a good point.
• 25:04
  Speaker 2: It's all about the point in time in the market cycle and who's got the negotiating strength.
• 25:09
  Speaker 2: I mean, there are some uh occupiers that that just will not countenance open market rent reviews, others will.
• 25:16
  Speaker 2: Um there is an inextricable link between uh the the fortunes of the economy uh and what tends to happen in in real estate rents, yeah.
• 25:27
  Speaker 2: Um albeit often with a lag.
• 25:30
  Speaker 2: Um but yes, there can be an element of dislocation.
• 25:33
  Speaker 2: It's not normally that severe.
• 25:35
  Speaker 2: Um and you're you're prime anyway, right?
• 25:38
  Speaker 2: And we're prime anyway, and it and it kind of evens out over time.
• 25:40
  Speaker 2: But but look, I think um we see a range uh uh of different sentiment, and um uh and and you you can't you can't change the the composition of your portfolio review uh um strategy overnight.
• 25:59
  Speaker 2: So you really got to set out your stall, you can tweak it a little bit, but you but you have to be confident that that it's it's it's right for all markets um and throughout this throughout the cycle.
• 26:10
  Speaker 1: And as you think about that four percent annualised or like for like figure, um how does the supply dynamics work?
• 26:17
  Speaker 1: Because I guess in logistics, the build cycle's quite short, 18 months, I guess, what once you've got planning permission.
• 26:25
  Speaker 2: But maybe that's an old number, but uh certainly back in the day, I thought that is that is uh the one of the gems of our sector.
• 26:33
  Speaker 2: Because when you think about you know building uh an office building in central London, by the way, for example, you might be three, four, five years before you've got a finished product.
• 26:41
  Speaker 2: You don't know what interest rate, what's gonna happen with interest rates, inflation in that time.
• 26:46
  Speaker 2: You don't know where rents are going to be, the out the outcome of that.
• 26:50
  Speaker 2: Um in logistics, you you these buildings can go up in you know, in a very simple building, six months, nine months, even a sophisticated sophisticated building 12 months.
• 27:00
  Speaker 2: Um, so you know exactly the market that you're delivering the product into, which takes out a huge amount of risk.
• 27:07
  Speaker 2: Um, and and all of our uh development is is uh on fixed price building contracts, so we know exactly what the cost's going to be, and and a large part of what we do is pre-net as well.
• 27:18
  Speaker 2: So we're fixing all of those components, so we know what our profit's gonna be when we go into it.
• 27:22
  Speaker 2: But you know, look, I think that that I don't want to do them down, but they are simple buildings, right?
• 27:29
  Speaker 2: You've got a you know, a steel portal frame, yeah, uh a skin, um, you you're putting in the services, you've got a uh, you know, a significant yard.
• 27:39
  Speaker 2: That's what we are leasing to to our customer, yes, with some, you know, some some shiny offices uh within it, but that they're putting in the kit.
• 27:49
  Speaker 2: Um and what I love about logistics buildings is when you think about that envelope, you have really, really low obsolescence.
• 27:57
  Speaker 2: I mean, unlike office buildings, which are being pretty well torn down every 20 years now, and they're meant to have an economic life of what 50, 60, 70 years, no way.
• 28:05
  Speaker 2: And I don't think that that is being appropriately uh factored into the risk framework.
• 28:12
  Speaker 2: Um, and then when you think about the the the planning uh uh elements here, planning is a barrier to entry, and and that uh creates a supply side constraint.
• 28:24
  Speaker 2: We've got, as I mentioned to you earlier, for all the reasons I mentioned to you earlier, we've got burgeoning demand.
• 28:28
  Speaker 2: So, and then when we're looking down the pipe at who's looking to build what in terms of speculative supply, et cetera, et cetera, we can see a really attractive continuation in uh supply-demand dynamics, which gives us confidence that we're gonna continue to see attractive levels of rental growth uh over the next few years.
• 28:47
  Speaker: Well, well, let's move on to that.
• 28:48
  Speaker: Uh, that's the really the the second driver, um, the land development uh platform.
• 28:53
  Speaker: Uh, I had a sort of double blink when I read the figure in your and your report, 33 million square feet of um you know potential development land.
• 29:01
  Speaker: It's an incredible um option uh within the business.
• 29:06
  Speaker: You know, talk us through how you built that platform and you know why is it difficult for competitors to uh replicate it?
• 29:14
  Speaker 2: Um, well, it it it's it's magic in some ways, uh, in that uh and we got look, we got lucky because when we acquired the large part of this uh land portfolio through the acquisition of of a business called DB Symmetry, and we timed our run perfectly in acquiring that.
• 29:32
  Speaker 2: Um I think uh any of our um skeptics uh have subsequently said that they thought it was a fantastic transaction.
• 29:41
  Speaker 2: Um, the reason why we got lucky is that the vast majority of the land in that by the way, we acquired the the team, a brilliant team that that is uh developing that for us day to day.
• 29:54
  Speaker 2: And the reason we got lucky is the vast majority of that land was controlled under option agreements.
• 29:59
  Speaker 2: So, what that what does that mean?
• 30:01
  Speaker 2: You you pay the the landowner, often a farmer, a small amount of money to allow you to um advance the planning process.
• 30:10
  Speaker 2: Um, and once you achieve planning, um you pay the landowner an enhanced uh price.
• 30:18
  Speaker 2: So the landowner is very happy.
• 30:21
  Speaker 2: Um you you you you discount all of the fees and costs that uh it's taken to get there, and you typically have a uh an embedded discount within the contract of something like 15-20%.
• 30:30
  Speaker 2: Overall, uh you know, the the the it can be a really attractive way we run the risk uh in that, but the costs are very low.
• 30:39
  Speaker 2: Um and the reason that's important is that we're not sitting on a significant amount of land on our balance sheet, it's not burning a hole in our pocket, um, and therefore it doesn't drag our earnings uh significantly.
• 30:50
  Speaker 2: We have it's highly flexible.
• 30:52
  Speaker 2: So we have the ability to turn that tap on or off, subject to what's happening in the market, and it means we can often sit back and and market the portfolio and wait for uh a pre-lease, which of course is uh a very low-risk way of creating significant value.
• 31:08
  Speaker 2: The the really attractive um uh uh reason why we do this, of course, is we get brand new buildings on long leases, typically 15, maybe 20 years, really high quality customers.
• 31:21
  Speaker 2: We are negotiating the lease terms.
• 31:23
  Speaker 2: Um and in turn, we are deliver we're delivering at the moment around about an 8% yield on cost.
• 31:30
  Speaker 2: Now that compares to two prime logistics yields of an up and leased building of around about five and a quarter today.
• 31:37
  Speaker 2: So, you know, we're not far off 300 basis points um in a positive arbitrage by by undertaking this process in a very low-risk way.
• 31:48
  Speaker: It means you don't have to scramble around and get into competitive auctions when the market is hot, right?
• 31:53
  Speaker: You can just draw down on those banks.
• 31:54
  Speaker: Exactly right.
• 31:56
  Speaker 2: And and the other question you asked about you know um the scale of that opportunity and why it is a barrier to entry for others is that that portfolio, when we acquired it, had had taken 12 years to curate.
• 32:11
  Speaker 2: Um, so it's not something that you can create overnight.
• 32:15
  Speaker 2: And as we have been developing buildings on that land, we've been replenishing it with new land.
• 32:21
  Speaker 2: And the the new land typically sort of sits at the end of the pipe again.
• 32:26
  Speaker 2: And so so we have sites that you know are maybe say eight years away from from fruition.
• 32:32
  Speaker 2: We have sites that um maybe uh a couple of years away.
• 32:37
  Speaker 2: Most of the options we we build in a sort of two planning cycle um opportunity.
• 32:43
  Speaker 2: So if we don't get planning through the first planning cycle, we have another uh go at it.
• 32:47
  Speaker 2: And it doesn't owe us much.
• 32:50
  Speaker 2: So even if we I mean our planning track record has been amazing, by the way.
• 32:54
  Speaker 2: Um, but look, ultimately, we we have got we're in for planning on some sites now.
• 32:58
  Speaker 2: We have some sites already with planning.
• 33:01
  Speaker 2: We typically don't need to pay for that site until we put put, for instance, put in the large curbstone, last curbstone, and we can draw that that that that land down often in tranches as well.
• 33:10
  Speaker 2: So it's highly flexible uh uh framework, but but it would take a very, very long time to replicate.
• 33:16
  Speaker 2: So you there's it's it's something you'd either build organically or you'd have to you know pay top dollar for to buy in.
• 33:22
  Speaker: And presumably, you you mentioned Amazon um as one of your tenants, and you know, you go through your top ten, it's kind of a list of blue chip companies, Iron Mountain, um, Marks and Spencer's, you know, some of the big big food retailers.
• 33:33
  Speaker: So presumably that this means you can have a proper long-term partnership with these companies in terms of you know managing their growth and planning it, yeah?
• 33:42
  Speaker 2: Yeah, absolutely.
• 33:43
  Speaker 2: We do.
• 33:43
  Speaker 2: And one of the things we do is we we we undertake uh a forensic uh examination of our customers' businesses and their supply chain networks.
• 33:54
  Speaker 2: So we know where all of their warehouses are, we know what products in those warehouses, we know how they interface with one another, we look at the drive time dynamics from each of those warehouses.
• 34:05
  Speaker 2: Um we we understand that the the population uh um densities around them.
• 34:11
  Speaker 2: Um we we look at where their existing warehouses may be overlapping into coverage and where there may be gaps in the in their portfolios.
• 34:19
  Speaker 2: I mean, one of our customers, by way of example, or who should remain nameless, were um having throughput issues with uh maximizing sales for um garden furniture in the summer.
• 34:34
  Speaker 2: They could have sold a lot more had they been able to flex their warehousing um seasonally to take advantage of it.
• 34:41
  Speaker 2: Um we saw this opportunity, we went to them and we said, look, we have planning consent on a site that will sit really well within your existing network.
• 34:49
  Speaker 2: We suggest you move product around, you you make space to be able to double the size of your uh um your seasonal output.
• 34:58
  Speaker 2: Um two weeks later they came back and said, Where do we sign?
• 35:00
  Speaker 2: They hadn't seen it themselves, it was a uh a brilliant proactive initiative.
• 35:05
  Speaker 2: Um and you know that that engenders really close relationships with your customers.
• 35:10
  Speaker 2: They know that you understand their business, that you're looking out for them, you're being proactive in helping them um maximize the uh the opportunity from their operations.
• 35:19
  Speaker 2: Interesting.
• 35:20
  Speaker 1: We'll we'll we'll work out who it is afterwards.
• 35:24
  Speaker 1: Uh, I mean the third driver we talked about was data centre, which I guess is the sort of the newest option or the newest sort of leg of the story.
• 35:31
  Speaker 1: Um, you've got the Mana Farm uh site down in Heathrow or by Heathrow, one of the prime European data centre locations.
• 35:41
  Speaker 1: You've talked about a pipeline that kind of across the UK that gets you up to a gigawatt of um potential capacity.
• 35:48
  Speaker 1: Yeah, all sounds pretty interesting.
• 35:49
  Speaker 1: So can you just talk us through the sort of the, I think you call it power first strategy?
• 35:54
  Speaker 1: And I think you know, power energy is obviously such a critical part of data centre.
• 36:00
  Speaker 1: It seems like you've kind of got ahead of the queue there.
• 36:02
  Speaker 1: So talk us maybe how how you're able to work that magic and how much of a sort of competitive moat that is.
• 36:08
  Speaker 2: Yes, uh well, look, um it's it's a fascinating area, and as you say, I mean, this is something we've been working on for five years, right?
• 36:18
  Speaker 2: Um, and but it it we still don't have uh a DC that's up and built and income producing, right?
• 36:25
  Speaker 2: So it just shows you how long it takes to 2020 to achieve that.
• 36:28
  Speaker 2: For that to be up and built.
• 36:30
  Speaker 2: Correct, absolutely right.
• 36:31
  Speaker 2: And um the the power first strategy is really important.
• 36:35
  Speaker 2: It it kind of uh describes what we're what we're trying to achieve here.
• 36:40
  Speaker 2: Power is portable, land isn't.
• 36:42
  Speaker 2: Um and data center planning consent is is B8, it's interchangeable with the logistics.
• 36:51
  Speaker 2: Um and and these buildings are the larger data center buildings, are you know that they're very similar to what we've produced in terms of logistics.
• 37:00
  Speaker 2: So there's a very close adjacency there.
• 37:02
  Speaker 2: When we're producing a really sophisticated building by Amazon like for Amazon Bowware, for example, it's got many of the similar attributes and and and again significant power requirements.
• 37:10
  Speaker 2: Right.
• 37:10
  Speaker 2: Um they are synergistic with logistics because data centers don't produce traffic, uh, which doesn't produce solute uh uh pollution, so you've got low traffic flows, but also they don't produce jobs.
• 37:22
  Speaker 2: That said, they they can produce significant uh income for for local authorities in in the form of of business rates.
• 37:29
  Speaker 2: So um they work very well uh alongside logistics.
• 37:33
  Speaker 2: Um the the one thing I would say about uh our you know our one gigawatt pipeline is what we've uh what we've disclosed.
• 37:40
  Speaker 2: Um we've also disclosed Manafarma and uh the Chelmsford uh scheme.
• 37:45
  Speaker 2: There has been um press coverage on the scheme that we're pursuing at Cotton.
• 37:51
  Speaker 2: And there's and there are further uh opportunities in the pipeline, um often surrounding uh general industry locations, um, a former general industry locations, power stations, that sort of thing.
• 38:02
  Speaker 2: We have some of the leading brains in power uh in the UK embedded in our business.
• 38:08
  Speaker 2: Um, and we have set up a joint venture with a major power generator that gives us a significant edge.
• 38:14
  Speaker 2: So we we don't step stand in the queue waiting for power to be delivered.
• 38:18
  Speaker 2: If you if you go to Park Royal today or in and around Heathrow Slow and you apply for power, you'll be waiting potentially 10 years.
• 38:24
  Speaker 2: Right.
• 38:25
  Speaker 2: We're not waiting 10 years.
• 38:26
  Speaker 2: We've got power delivery in 2027, 28, 29, 30, and 31 in different locations.
• 38:31
  Speaker 2: So very, very near-term power.
• 38:33
  Speaker 2: That is highly, highly valuable, um, particularly to hyperscalers where there's burgeoning demand and the and there's large-scale co-locators in the UK.
• 38:45
  Speaker 2: We are primarily we we will not be constructing a data center unless we have uh planning consent and a pre-let.
• 38:52
  Speaker 2: So it's a very low-risk approach.
• 38:54
  Speaker 2: Um, and the Heathrailware example, and where we can, we are pursuing uh a powered shell model, so we're not uh funding andor owning um a sophisticated um uh uh product that could be outdated quite quickly.
• 39:13
  Speaker 2: We know that our real estate has has significant longevity, and there's a there's a mismatch between those those two elements.
• 39:20
  Speaker 2: So we're sticking to annoting real estate, which is which is what we know, and we're delivering that at a really, really attractive yield on cost.
• 39:28
  Speaker 2: I mean, the buildings we're looking to deliver in in data centers are sort of 10% yield on cost, significant profit on cost of sort of potentially 50% plus.
• 39:39
  Speaker 1: Um and of course that's just the nature of the the where we are in the cycle at the moment, or or you think that's structural?
• 39:45
  Speaker 2: Uh I think that's structural.
• 39:46
  Speaker 2: Um if if you can acquire the land at the right pricing point, uh and we we are arbitraging additional value because of our power first strategy, um, because it's the power that's valuable.
• 39:57
  Speaker 2: And we can port that and apply that to any land.
• 39:59
  Speaker 2: Yeah, so uh that you know that's nearly 500 basis points over um the underlying up and led DC value.
• 40:09
  Speaker 2: So you know, this is a very, very lucrative uh field, and again, we're we're approaching it in a low-risk way in the same way as well with with uh logistics warehousing.
• 40:18
  Speaker 1: And if I take if I take what you were saying to Mark earlier about the optionality you've got within the development pipeline, and then what you just said a moment ago around the interchangeability between the um it can be a logistics centre or it can be a um a data center.
• 40:35
  Speaker 1: Should we think about some of those opportunities that build you to be on one gig comes from the pipeline you've got already, or or is that not the right way to think about it?
• 40:44
  Speaker 2: There can there could be opportunities on our existing logistics land platform, uh yes.
• 40:48
  Speaker 2: Um the in the main, however, the larger scale buildings um uh I mean most of our DC pipeline is focused on on you know the London availability zone, right?
• 41:02
  Speaker 2: The the key locations.
• 41:03
  Speaker 2: Okay.
• 41:03
  Speaker 2: Um there will be others where we can create potentially create new availability zones, but that but that's the the primary focus.
• 41:10
  Speaker 1: Got it.
• 41:10
  Speaker 1: And then how should I mean you've obviously just talked about 10% yield on cost?
• 41:14
  Speaker 1: This is a slightly more unknown sector.
• 41:17
  Speaker 1: I guess you've got a long track record of of big box logistics.
• 41:21
  Speaker 1: How how should investors think about sort of risk-adjusted returns profiles?
• 41:25
  Speaker 1: It's kind of quite taken by when you said every step of the way, you're obviously trying to optimize.
• 41:29
  Speaker 1: So it's a high return, low risk strategy.
• 41:31
  Speaker 1: But does that apply the same way to data center?
• 41:34
  Speaker 2: Yes, it does.
• 41:34
  Speaker 2: Um for the reasons I mentioned, we're not building uh without planning and without a prelate.
• 41:39
  Speaker 2: So, and look, the the the players in this market, the occupiers in this market are very high quality, big balance sheet businesses.
• 41:46
  Speaker 2: Um, so it it kind of talks to the the cornerstone quality piece that I mentioned to you earlier.
• 41:52
  Speaker 2: Um, and you know, there is a market for uh for for that that standing stock that that we could look to to move it on in the future.
• 42:01
  Speaker 2: I mean, there's a lot of capital, well worldwide capital now is focused on on data centers, and you only got to read the stats on where AI is going.
• 42:11
  Speaker 2: Question whether or not UK fulfills an AI model in terms of you know um uh large language model learning, but but but certainly there's significant growth in uh cloud services that we expect to continue in the UK.
• 42:24
  Speaker 1: Quick uh very good run through there of sort of three core levers that you're pulling.
• 42:28
  Speaker 1: I mean, uh your shares have obviously had quite a good run relatively recently.
• 42:31
  Speaker 1: I think you've closed most of your gap against um tangible book value or asset value.
• 42:36
  Speaker 1: But if if there was a gap sort of reappeared, are there other any other sort of levers that you'd think about pulling in terms of more active portfolio management?
• 42:45
  Speaker 1: You know, just thinking about capital allocation more broadly.
• 42:47
  Speaker 2: I think I think we're pulling buybacks or whatever it might be.
• 42:50
  Speaker 2: We're pulling them all already.
• 42:51
  Speaker 2: Fine.
• 42:51
  Speaker 2: No, I mean look, in terms of buybacks, I mean allocation of capital uh is something we we look at very, very carefully on a consistent basis and debate with our board.
• 43:00
  Speaker 2: Um, and we will always um make sure that we're we're doing the right thing for shareholders and whether but but buybacks is perhaps something for another day, but we do we do consider it very carefully.
• 43:11
  Speaker 2: But but with these uh very, very uh high quality uh and accretive opportunities uh within our business, um it would be the wrong thing to do to give money back and then ask for it again.
• 43:25
  Speaker 2: Um and you know, we we have shareholders telling us time and again that that they will back us on uh particularly on the DC pipeline because it's it's so attractive.
• 43:34
  Speaker 1: And just um talk me through the the logic of um loan to value of uh roughly a third.
• 43:40
  Speaker 1: What why is that why is that the optimal capital structure for the business?
• 43:44
  Speaker 2: Well, look, I think REITs uh ha have you know the the the type of investors invest in REITs typically look for a for a lower risk profile.
• 43:53
  Speaker 2: Um it's very different than than private equity, where um you know you've got LT Up in the 60s, 70s.
• 44:02
  Speaker 2: I think the market has can have quite short-term memory.
• 44:07
  Speaker 2: And I've been around long enough to see the pain and live through the pain of uh L L T V defaults and repossessions by banks.
• 44:18
  Speaker 2: So and I every couple of years I make myself sit down and watch the big short.
• 44:25
  Speaker 2: Not just because it's it's a great movie, but but also it just reminds me how the market is capable of slicing, dicing, repackaging something.
• 44:35
  Speaker 2: And it also reminds me about this, you know, I always use the expression lift the bonnet.
• 44:41
  Speaker 2: You know, I think a lot of investors don't really understand what they're investing in.
• 44:45
  Speaker 2: They might be told one thing, you know, don't believe it.
• 44:49
  Speaker 2: Look at it.
• 44:50
  Speaker 2: When you're being told that, you know, that a portfolio's got a great group, got great covenants.
• 44:55
  Speaker 2: Um, has it really?
• 44:57
  Speaker 2: Um, look deeply at it.
• 44:59
  Speaker 2: Um, you know, we've got uh a 10-year weighted average unexpired lease term.
• 45:04
  Speaker 2: We we at one time we have much, much longer uh lease terms.
• 45:08
  Speaker 2: What's important is the relationship between the quality and the lease term.
• 45:13
  Speaker 2: You know, if you you can buy a 20-year lease, if it's got a flaky covenant that's gonna last two years and not much longer than the rent-free, then then it's a waste of time.
• 45:22
  Speaker 1: No, not worth anything, yeah.
• 45:23
  Speaker: Well, well, let's talk about life as a quoted um company, because um, you know, one of the reasons Phil and I are doing this podcast is to show how important the stock exchange is and how it can be um, you know, as a broader multiplier in the economy.
• 45:36
  Speaker: And I would say Tri-Tax is a company that that's used the stock market for what it's for, right?
• 45:41
  Speaker: In terms of providing a quote, um, you know, the ability to issue shares, do transactions.
• 45:47
  Speaker: Um, but I mean, it's it's really uh apparent to all that our stock market is not in a good place at the moment.
• 45:54
  Speaker: And um, you know, but as an active participant, as a chief executive of a listed company, you know, what would you like to see, um, whether it's the LSE or government policy, to try and regenerate our domestic stock market?
• 46:07
  Speaker 2: But I'd like to see more support from the government um uh for uh uh the listed markets in the UK.
• 46:15
  Speaker 2: Um there's an element of taxation to that, um, there's an element of of promotion.
• 46:22
  Speaker 2: Um look uh in a nutshell, we're not ambitious enough in the UK.
• 46:27
  Speaker 2: Um and I think that's a bit of a cultural thing.
• 46:30
  Speaker 2: Um I I take my cue from the USA to some degree.
• 46:34
  Speaker 2: Um you know that there uh there needs to be um you know real ambition.
• 46:42
  Speaker 2: Um you also need to be smart about how you're utilising the markets you're operating in and understanding the markets open and close.
• 46:52
  Speaker 2: And when they're open, um you you need to be able to uh demonstrate to the market that you have the right opportunity and you can you can execute it on it.
• 47:01
  Speaker 2: I mean you know we had 12 equity raises um in the course of 10 years.
• 47:05
  Speaker 2: I mean at one point I think we we we we were doing one equity raise a year, but every single time you go back to the market, if you're raising equity, you you're only as good as the last equity raise uh that you've done.
• 47:19
  Speaker 2: And and the market will quite rightly um hold you to account in terms of what you said you'd do, have you delivered on it?
• 47:27
  Speaker 2: Are you delivering the returns that you promised?
• 47:30
  Speaker 2: Um, if you don't do that, if you don't prove yourself time and time and time again, um, then you will not be supported the next time around.
• 47:37
  Speaker 2: Um and and it I think there's only one occasion where we fell slightly short of our target every other time we've been significantly uh um oversubscribed in our uptierises.
• 47:48
  Speaker 2: Um but look, it's not growth for growth's sakes, and and you know, one has to look at this in the context of what is the right thing to do at the right time.
• 47:56
  Speaker 2: We have more recently uh undertaken significant sales program from our investment portfolio to support our CapEx programs in development and DCs.
• 48:06
  Speaker 2: Um we've sold as a business uh around 800 million pounds in the last three years, um, over 300 million last year, uh very successfully, all in aggregate you know above the last uh valuation point.
• 48:20
  Speaker 2: So I think that program has been proven very successful as well.
• 48:23
  Speaker 2: But you have to be adaptable.
• 48:24
  Speaker 2: Uh and and your your strategy, your business plan, and your portfolio needs to be adaptable in in order for you to take advantage.
• 48:33
  Speaker: Well, it's interesting that Blackstone uh took a stake in the business as part of the transaction.
• 48:38
  Speaker: So they're happy about earning shares in um you know company listed on our market.
• 48:43
  Speaker: Do you think that's going to be an increasing trend of you know US investors, overseas investors taking stakes in UK REITs?
• 48:50
  Speaker 2: Well, well, I think the first thing is that they weren't they didn't take shares in anyone else.
• 48:55
  Speaker 2: Um and I think that they took a very, very good look at our uh business, and and I think that that's a real endorsement to what I was saying earlier in terms of quality.
• 49:03
  Speaker 2: Um they also could see uh the unrecognized value in our logistics development platform um and the way we go about our business, but they are smart macro investors, they really understand these things uh well, and and they could also see the value in what we're delivering in data centers.
• 49:26
  Speaker 2: So um look, to have an endorsement from you know the the world's largest and probably most respected real estate investor uh is a true accolade for our business.
• 49:38
  Speaker 2: Um and they've been incredibly supportive.
• 49:41
  Speaker 2: Um so look, our our job now I think is to uh and we look, we're doing we're doing very similar things with the Blackstone portfolio than we did with UKCM.
• 49:51
  Speaker 2: Um again, it was enhancing our urban logistics pipeline.
• 49:55
  Speaker 2: It's a really high quality portfolio.
• 49:57
  Speaker 2: Um, and there's a lot of asset management uh to be undertaken there.
• 50:01
  Speaker 2: And Blackstone could see that we we'd executed um very successfully on the UK CM portfolio uh active management as well.
• 50:08
  Speaker 2: So I think these are the reasons why they why they've why they backed us as a business.
• 50:12
  Speaker 1: And is that a broader relationship or could become a broader relationship?
• 50:15
  Speaker 1: Obviously, as you said, a massive investor in real estate.
• 50:18
  Speaker 1: Are there other options or optionality that you could explore with them?
• 50:22
  Speaker 1: I mean, I get sorry, and the other part of the question, I guess just thinking about it, is that some of our other guests have talked about being private equity owned versus public market and just a very diverse sort of almost stark contrast in terms of how the board thinks about value creation, and probably UK PLC spends 90% of its time thinking about governance and US listed businesses or private equity businesses think about value creation for 90% of the time.
• 50:48
  Speaker 1: I mean, does the Blackstone dynamic change things for you?
• 50:53
  Speaker 2: Well, look, uh I mean it's great to have them on board.
• 50:56
  Speaker 2: Um there may be opportunities to to do other things together in the future.
• 51:00
  Speaker 2: There's nothing in the uh contemplation right now.
• 51:03
  Speaker 2: Um, but but look, you you're right.
• 51:05
  Speaker 2: I think that the the list is space in the UK is over-regulated.
• 51:09
  Speaker 2: Um what I would say is that um you know we've never allowed the that to stifle the entrepreneurialism uh in our business.
• 51:21
  Speaker 2: I think that that is you know um a key part of the external management uh offer.
• 51:27
  Speaker 2: Um you know, the things that we've done that you just wouldn't have done if we had been internalized.
• 51:32
  Speaker 2: Um and uh and I think Blackstone could see that.
• 51:36
  Speaker 2: I mean that they're they're great supporters of our external management structure.
• 51:40
  Speaker 2: They could see we're entrepreneurial, they could see we're front-footed in terms of of seeing and take advantage of opportunities uh before others uh have by way of example.
• 51:50
  Speaker 2: And and look, uh I'm a great believer in if you look back over history, you know, big conglomerates, um if they sit on their hands uh and rest on their laurels, they die over time.
• 52:03
  Speaker 2: So I think you have to continue to challenge yourself.
• 52:06
  Speaker 2: Are we being the best that we can be?
• 52:09
  Speaker 2: Um, how can we utilize our skill sets and our knowledge?
• 52:12
  Speaker 2: And our and we are the look, we're the biggest investor in UK logistics.
• 52:15
  Speaker 2: We we've we control the UK's largest logistics-focused development platform.
• 52:20
  Speaker 2: That we are therefore the biggest player in UK logistics.
• 52:22
  Speaker 2: It gives us an edge.
• 52:23
  Speaker 2: We have deeper seated um research understanding, we have deeper relationships, and we've got the ability to do uh more interesting transactions.
• 52:33
  Speaker 2: So all of those things contribute, I think, to if you like on the one hand, whilst we are listed acting more like a uh um uh uh a more entrepreneurial uh uh um fleet of foot business.
• 52:48
  Speaker: Yeah, but the the the UK REIT sector is consolidating, and I suppose if you talk to most institutions and private wealth managers, you know, they want liquidity and they want tight discounts.
• 52:57
  Speaker: And certainly, you know, you've got the scale in terms of um you know the the first point, but it sounds like you push back strongly on you know the the kind of critique that because you are externally managed, that's a bit of a um a drag on the um on the discount.
• 53:13
  Speaker 2: Well, look, uh I think in this day and age, bigger is better.
• 53:16
  Speaker 2: I mean that that's the message that the world is is giving.
• 53:18
  Speaker 2: And I think the there are good reasons for that.
• 53:21
  Speaker 2: Um you know high quality management teams that are proven to be successful are being backed, and those that haven't been should probably quite rightly fall by the wayside.
• 53:35
  Speaker 2: So consolidation scale are critical.
• 53:38
  Speaker 2: But look, I think there are you know good and bad examples of of both internally and externally managed businesses over time.
• 53:46
  Speaker 2: Um I I always say um, look, don't judge a book by its cover.
• 53:52
  Speaker 2: I mean, think about how the management team has performed.
• 53:55
  Speaker 2: And our shareholders say to me time and again, um, look, Colin, we we look at how you have performed.
• 54:04
  Speaker 2: We know that you've looked after the best interest of shareholders, we know that in the way that you've acted, there's there's been true alignment.
• 54:11
  Speaker 2: And look, remember, when when there was a correction in navs, um our fees went down.
• 54:16
  Speaker 2: None of the internalized management teams took pay cuts, right?
• 54:22
  Speaker 2: So we were absolutely aligned with shareholders in that regard, and these things are often overlooked.
• 54:27
  Speaker 2: So um look, I think that there are there are pros and cons.
• 54:32
  Speaker 2: And uh what I would say is judge each management team um on its merits, in what it has delivered, um uh from time to time, uh, and don't get too too bogged down in in in you know in titles.
• 54:46
  Speaker 1: Yeah, just maybe a final question for me, Colin.
• 54:49
  Speaker 1: Um, what's been a great discussion so far.
• 54:51
  Speaker 1: Government policy is allegedly about growth, growth agenda.
• 54:55
  Speaker 1: You're probably sitting at a kind of key epicenter of where growth could come from in terms of infrastructure, logistics, data centers.
• 55:02
  Speaker 1: You've got a large amount of um square footage of planning applications kind of waiting for approval.
• 55:09
  Speaker 1: Is the system working?
• 55:11
  Speaker 1: I mean, obviously, there's been a lot of talk more on the rese on the residential side about kind of just freeing up planning planning processes, but how's it working on the logistics side of things?
• 55:24
  Speaker 2: Well, look, that there's been a lot talked about this over uh uh decades um in terms of of uh improving the planning system.
• 55:32
  Speaker 2: I mean we have to recognize that that planning is devolved from central to local government.
• 55:38
  Speaker 2: Um and whilst central government can make noises about uh improving the planning system, and I think they absolutely have the right uh uh approach here uh and the right desires, implementing it is is is another thing.
• 55:57
  Speaker 2: Um so time time will tell.
• 56:00
  Speaker 2: There's certainly uh desire and and and the right rhetoric is coming out from central government, and particularly in relation to to D DCs, where the government has said that you know data centers are critical national infrastructure and they're going to help to accelerate that planning uh process.
• 56:19
  Speaker 2: I think it will improve, um, but but all of these things take time.
• 56:23
  Speaker 2: Look, in the meantime, we're not we're not um relying on that.
• 56:27
  Speaker 2: We we we are you know we know that we can deliver value through where we are today.
• 56:32
  Speaker 2: If things improve, then then then all the better.
• 56:34
  Speaker 1: I mean it feels I was conscious of what you were talking about earlier, but it feels like we're quite unclear as a as a country about whether we've got a real clear AI strategy about a national AI strategy.
• 56:45
  Speaker 1: But on the data center side, would you say that's a more clear-cut government policy approach?
• 56:49
  Speaker 1: I think look, I think it's a very infrastructure perspective.
• 56:53
  Speaker 2: Yeah, there's a very, very clear demand for for DCs, particularly in cloud services.
• 56:56
  Speaker 2: But I mean it's interesting.
• 56:58
  Speaker 2: Uh uh I I attended uh CBRE away day um yesterday, and Roger Boetle um stood up and gave some slides.
• 57:08
  Speaker 2: Um, and they he was talking about the net beneficiaries of AI in terms of the world stage, and the UK ranks very, very highly on that scale.
• 57:18
  Speaker 2: So I do think the government is is um is along the right track there.
• 57:23
  unknown: Great.
• 57:24
  Speaker: Well, Colin, it's been a great discussion, and I think it's very clear um from what we've been talking about, you've created quite a differentiated platform in the UK real estate market, income compounding, organic rental growth, uh, with a lot of development optionality.
• 57:40
  Speaker: But you know, if there's one thing you could leave our listeners with uh where perhaps the market isn't underestimating you on a kind of consistent basis, uh what would it be?
• 57:49
  Speaker 2: Well, we covered quite a few of the areas.
• 57:52
  Speaker 2: I mean, I suppose look, you know, very simply, uh as an investor, what am I looking for?
• 57:58
  Speaker 2: Um, you know, I I want to have resilience.
• 58:04
  Speaker 2: I don't want my money to disappear.
• 58:06
  Speaker 2: Um, I I want to to be able to rely on my dividend.
• 58:10
  Speaker 2: Um, but I also want my the management people that are managing my uh my capital to be entrepreneurial, have the ability to really add alpha.
• 58:23
  Speaker 2: Um so I've got confidence in the baseline position and I've got upside potential.
• 58:28
  Speaker 2: And I think that's exactly what we've got in our business.
• 58:30
  Speaker 2: If you think about it, you know, prime yields are five and a quarter percent, rental growth four.
• 58:35
  Speaker 2: That takes us to nine and a half, uh, with a bit of asset management thrown in.
• 58:39
  Speaker 2: We've got you know the excitement of of development on top of that, given the arbitrage that I mentioned to you, that probably adds another uh you know, percentage point.
• 58:48
  Speaker 2: And then we've got DCs, which have the capacity to probably add another one and a half percent.
• 58:52
  Speaker 2: So you're uh you're willing to double-digit the territory, but the quality that underpins that is is absolutely crucial.
• 58:59
  Speaker 2: So for me, that's really exciting.
• 59:02
  Speaker 2: Um, I uh for me that sounds like a really compelling investment.
• 59:05
  Speaker 2: And I would just uh well, I'll just encourage investors to, as I said at the start, lift a bonnet.
• 59:11
  Speaker: Colin, thanks for joining us on the business case.
• 59:14
  Speaker 2: Pleasure to be here, and thanks for your time.
• 59:16
  Speaker 1: So, Mark, uh another real estate uh chief executive on the podcast today, uh Colin Godfrey.
• 59:23
  Speaker 1: I thought that was a very interesting conversation and um a few key takeaways for me.
• 59:28
  Speaker 1: I mean, this is the second uh banker turned CEO that we've had as a guest on the podcast.
• 59:34
  Speaker 1: We had uh Kathleen Rowe from Farros.
• 59:36
  Speaker 1: I thought there was quite a quite an element of similarities between them two.
• 59:41
  Speaker 1: I thought Colin had a real clear articulation of the value drivers of his business.
• 59:46
  Speaker 1: He was clearly very sort of capital markets aware.
• 59:50
  Speaker 1: Um, and I think he he made a nice clear pitch of uh the of the investment case in terms of visibility, consistency of earnings, and then talked about that kind of entrepreneurial alpha generation optionality that uh you obviously talked about with him on the on the development uh platform.
• 1:00:07
  Speaker 1: What were some of your uh key takeaways, Mark?
• 1:00:10
  Speaker: Yeah, uh it was an interesting conversation, uh, firstly, because just there's so much going on in this company in terms of development, the data center or optionality, uh and just being in an asset class logistics where there are more tailwinds than headwinds.
• 1:00:26
  Speaker: Um, so the rental growth and the rental events that that take place um, you know, are um you know are are generally positive.
• 1:00:34
  Speaker: I suppose the other thing is just a reminder of what the stock market is for, right?
• 1:00:39
  Speaker: It's there to provide capital for growing businesses.
• 1:00:42
  Speaker: Um, you know, this company is contributing to GDP growth.
• 1:00:46
  Speaker: And I suppose it's sort of frustrating that um that's sometimes lost in the political debate and the stock market is just something that sits over there.
• 1:00:56
  Speaker: But um, you know, if we're looking at our national problems and the lack of growth in our economy, you know, we really need to be supporting and removing barriers to entrepreneurial companies like this that can you know generate a lot of prosperity.
• 1:01:09
  Speaker 1: Yeah, I thought I was really struck by the fact that um I think Colin, more than a number of our guests, is in a is in a real growth sector.
• 1:01:19
  Speaker 1: Um, you know, logistics, warehousing.
• 1:01:22
  Speaker 1: Um, as much as we've had a very strong run of some of the sort of structural tailwinds around online retail, it doesn't feel like there's any shortage of demand for logistics.
• 1:01:33
  Speaker 1: And this this data center opportunity sounds really quite interesting, and and that's obviously we're at the very, very early stages of development of that as a as a potential asset class.
• 1:01:43
  Speaker 1: I was quite encouraged to hear him say that the government policy seems to be a little bit more front-footed, a little bit more joined up, um, certainly less clear on AI from my point of view.
• 1:01:55
  Speaker 1: Whether the energy piece of the puzzle is going to be a very significant challenge in the UK or not, more broadly just around costs, will be quite interesting.
• 1:02:04
  Speaker 1: But um yeah, I thought it was great, and it was quite interesting the conversation we had about kind of globalisation, deglobalization.
• 1:02:11
  Speaker 1: It kind of made me think a little bit about the Lindsay Ruth uh conversation we had.
• 1:02:15
  Speaker 1: And I do I do worry from a macro point of view that we're just building in duplication from kind of this near-assuring benefit.
• 1:02:23
  Speaker 1: Clearly, for Colin and his business, it's another tailwind.
• 1:02:27
  Speaker 1: Yeah, but from a kind of UK economic perspective, um, I do I do that just raises sort of some question marks for me.
• 1:02:36
  Speaker: Yeah.
• 1:02:36
  Speaker: Well, I hope you enjoyed that discussion.
• 1:02:38
  Speaker: Uh lots more interesting guests in the in the coming months.
• 1:02:40
  Speaker: If you do have any feedback or any guest suggestions, do get in touch with us on LinkedIn.