land securities debt refinancing september...

Land Securities debt refinancing September 2004

Francis Salway, Group Chief Executive Slide 1 – Debt refinancing Good morning ladies and gentlemen and thank you very much for coming to this

presentation at such short notice. We are webcasting the presentation and those

listening on the conference call will be able to register their questions, during the

session

Slide 2 – Introduction We announced this morning that we have launched an offer to our current bond

and debenture holders inviting them to swap their existing notes for new secured

bonds. Our proposals have been endorsed by a special committee of the ABI.

Slide 3 – Agenda Over the next half an hour, Martin Wood, Group Tax and Treasury Director, and

Andrew Macfarlane, Group Finance Director, will explain the proposals in more

detail, and we will then invite your questions.

Slide 4 – Important notice Before starting the presentation, I must draw your attention to the disclaimer at the

front of your packs which reminds you that the presentation is a very summarised

explanation of the transaction and noteholders should only make decisions on the

basis of the offer document, copies of which will be available from Citigroup later

today.

Slide 5 – Background to the proposals Since the early nineteen-nineties, Land Securities’ long-term debt has been

predominantly unsecured, and we confirmed this with the issue of £ 600m of new

bonds in early 2003, after which unsecured borrowings represented about 60% of

the book value of our debt. We were attracted to unsecured debt because of its

theoretical flexibility.

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However, we have recently become concerned that this funding policy could

constrain our medium term financing and business strategy. There are three main

reasons:

• firstly, we do not believe that the quality of the assets in our investment

portfolio is appropriately reflected in our credit rating. At the year-end, our

unmortgaged investment property assets were approximately 3.8 x our

unsecured debt but this still only gives us a weak single ‘a’ credit rating. This is

the key driver of the transaction – to ensure that we utilise the inherent credit

strength of our investment portfolio for the benefit of debt and equity investors

• a second point is that we have limited headroom within our current ‘A’ range

rating. The new structure will give us increased potential debt capacity and at

a lower cost of finance,

• and thirdly, in the current market environment, we think that we will

increasingly need the ability to use joint venture structures to grow the

business. But too much secured debt in joint ventures exposes our current

bonds to the risk of notching.

At the end of last year, we reviewed our debt structure and concluded that our

current strategy, while sustainable, was potentially capable of improvement. We

also concluded that traditional secured debt, including commercial mortgage

backed securities, would be too restrictive for our operational requirements. During

the last nine months, we have developed an alternative approach which is

designed to improve our operational and financial flexibility, while also improving

the position of our noteholders.

This is the structure that Martin and Andrew will explain to you shortly, and they

will, as is appropriate for a debt transaction, focus on detailed terms relevant to our

debt investors. You will also see from their presentations that this is a transaction

affecting some two-thirds of our business – not the whole of it.

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Before I hand over to martin, I must emphasise that these proposals to our

noteholders do not imply a change to the Group’s business strategy, nor will the

new structure change our day to day operation of the business. We are merely

adjusting our financing so that it can better support the business.

We do, however, have to be mindful of potential changes to our business

environment. We have therefore compared the position with our current debt

structure to our position under the proposed new structure against 20 or so

scenarios, including the possible introduction of REITS. We have concluded that in

no case are we worse off, and in many cases we will be better off.

Thank you, and now let me hand over to Martin Wood.

Martin Wood, Director of Tax and Treasury Slide 6 – Overview of proposal and transaction summary Thank you Francis and good morning.

Slide 7 – Overview We announced this morning that we are inviting holders of our existing mortgage

debentures and unsecured bonds, which have a nominal face value of £1.8bn to

swap these notes for new secured bonds with the same expected maturity dates.

These new bonds will be issued in higher nominal amounts and with coupons

reflecting current interest rates. This means that we will crystallise circa £557

million of mark-to-market loss on our existing debt and issue new bonds with a face

value of circa £2.36 billion. The precise numbers will be determined by a prevailing

interest rates at pricing. Because we are offering new, more attractive debt in

exchange for old, we will not incur the so-called Spens pre-payment on our existing

debt.

At the heart of the proposals is a new funding structure which we will create within

the Land Securities Group. It will grant the new debt investors security over £6.2bn

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of investment properties, representing some 78% of the investment portfolio, or

67% of total gross assets.

Barclays, Citigroup and Lloyds Bank have underwritten a new £1.5bn committed

and secured five-year bank facility within the structure.

About £3bn of the Group’s property assets will remain outside the security pool and

these will mainly comprise Land Securities Trillium’s properties, our joint venture

holdings and certain other assets.

We have discussed these proposals with a special committee of the ABI whose

members hold 37% of our listed bond debt and they have confirmed their

unanimous support for the offer.

Slide 8 - Proposed structure This slide shows the proposed internal structure of the Land Securities Group. On

the right hand side is the “secured group”, which will be segregated from what we

have termed the “non-restricted group” on the left hand side. The secured group

contains Land Securities PLC and 85 subsidiary companies holding 143 properties

with an approximate value of £6.2bn. The new bonds and bank debt will be

secured over this property pool by means of comprehensive fixed and floating

charges over all of the assets of the secured group. Unsecured lending to the

structure is still permitted, but restricted to the higher of £150m and 2% of the value

of the collateral pool.

On the left hand side, the non-restricted group contains Trillium, Telereal, our joint

ventures and certain other assets. This includes the industrial assets which it is

proposed be exchanged for Slough’s retail assets. This is a significant group in its

own right. The business of the non-restricted group will be funded either by loans

from the secured group or by third party borrowing. This enables us, for example,

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to raise debt in joint ventures without affecting the rating of the debt issued by the

secured group.

The non-restricted group of companies gives us enormous flexibility to undertake

projects which are not suited to the secured group and raise a variety of third party

borrowings. For example, if we acquired a large shopping centre we would have

the option to fund the purchase either in the secured group or in the non-restricted

group through say a CMBS type funding structure or using traditional property bank

lending.

As indicated on the slide, asset transfers and inter-company funding is permitted

between the non-restricted group and the secured group, although, as you would

expect, any transfer of value out of the secured group is regulated by the bond

documentation.

Our intention is that the secured group will be the core funding vehicle for Land

Securities going forward, and the structure has been designed to enable money

borrowed by the secured group to be lent to the non-restricted group if required.

Slide 9 – Terms Our offer to noteholders proposes the repurchase of all of our existing listed bonds

and debentures at a repurchase price specified for each series of notes, together

with an additional early submission payment for those investors who accept our

offer promptly.

Eligible noteholders will receive new bonds with the same expected maturity as the

existing debt, and will be positioned in our new structure as the most senior class

of notes. There is a limited cash alternative available for noteholders who are not

eligible to accept the offer for legal reasons. Domestic institutions are all eligible

noteholders – however, we are not able to offer the new bonds to holders resident

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in certain overseas countries, so they will receive the repurchase price in cash.

They remain eligible for the early submission payment.

The new bonds will all be issued at par and will have on-market coupons. The

actual interest rates and nominal amounts of the new bonds will be determined

near close. However, using the prices of the various reference gilts on 22

September as an illustration, the effect of the Exchange would be to replace

£1.8bn nominal with a current average coupon of 8.5% with £2.36bn nominal of

new debt with an average coupon of just 5.4%. The new debt has been assigned

preliminary credit ratings of double ‘A’ flat by Standard & Poor’s and Fitch. Copies

of their pre-sale reports will be available very shortly.

The new securities will contain different prepayment and modification provisions

from our existing debt. In particular, the traditional Spens formula is modified to

allow repayment at swaps flat, in line with the recommendations of the group of 26

investors and the ABI. In addition, there are special lower cost redemption

provisions if Land Securities wishes to become a REIT but is not able to adapt the

new debt structure in a way that protects the ratings of its debt, and there are also

provisions for early redemption at the company’s option and with bondholders

consent in the event of a two-notch rating downgrade. Details are set out in the

Offering Circular.

We are not raising new money as part of this transaction, but subject to market

conditions, may seek to term out some bank debt within the next 12 months. The

increase in the nominal amount of the debt merely reflects the crystallisation of the

mark to market position and is not a 2004/05 cash outflow.

In summary, our terms offer improved credit ratings for bondholders, increased

transparency, security over charged properties and security for the current mark-to-

market position.

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Tier structure Francis explained that our review of debt strategy had concluded that CMBS or

other traditional forms of secured debt were not flexible enough for the group’s

operational requirements. We have therefore developed a secured debt structure

with a tiered covenant regime that will give the group the flexibility that it needs to

run its business, whilst increasing the protection available to debtholders if gearing

rises materially.

On the left hand side of this chart you will see that we have described Tiers 1 and 2

as the “normal operating environment” and initial Tier 3 and final Tier 3 as the

“protective regime” where our flexibility would be significantly reduced.

Tiers 1 and 2 provide the business with substantial operational flexibility to buy, sell

and develop assets with fairly broad discretion well within the Group’s current

requirements. This is a hybrid environment between an unsecured debt strategy

and a whole business securitisation.

The Tier 1 covenant regime applies when the loan-to-value ratio (LTV) is less than

55% and interest cover is more than 1.85 times. The covenant tiers set out the

operating regime for the security group and are distinct from the priority of debt

which I will describe in the next slide.

As LTV rises from 55% to 65%, and the Income Cover Ratio (ICR) falls towards

1.45 times, the amount of property disposals that we are allowed to make before

seeking agency confirmation of ratings is reduced from 30% to 20% and a liquidity

requirement is progressively introduced.

If LTV rises above 65%, or if interest cover falls below 1.45 times, we would enter

Tier 3. An LTV ratio of 65% is equivalent to net gearing (debt to equity) of 185%.

In this tier the restrictions increase significantly, and we would be required to set up

a sinking fund to amortise the debt. This is an operating environment which is

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similar to a traditional CMBS structure. A summary of the Tier 3 restrictions is

included at the back of your packs. The structure is designed so that we have a

commercial incentive to stay in the Tiers 1 and 2. If having entered Tier 3 we

improve our LTV and income coverage ratios, then we will revert to a lower Tier

and the covenants would relax accordingly.

Full details of the Tier structure and the covenant regime are set out in Chapter 4

of the Offering Circular.

Slide 11 – Debt tranching On the previous slide I took you through the tier structure which governs the

operating environment for the secured group. On this slide we are looking at the

priority ranking for the debt. As is common in structured transactions, we will have

the ability to issue different classes of debt with different priorities as to payments

and security. The structure contemplates priority 1 debt, priority 2 debt,

subordinated debt and unsecured debt. At the outset, our offer to noteholders

would see them all exchange existing notes for priority 1, AA-rated debt. We

understand that this AA rating for the new debt is independent of which tier we

operate in.

In order to provide a measure of protection for the rating of priority 1 debt, pure P1

debt may only be issued up to 45% LTV. Debt supported by the next 10% of LTV

must be in the form of switchable debt which can migrate between priority 1 and

priority 2 or senior/junior depending upon various financial tests. In our structure,

£750m out of our £1.5bn bank facility is switchable in this way. The idea is that if

asset values should fall causing priority 1 debt to be more than 55% of collateral

value, then part of the switchable component will automatically flip to priority 2

debt, with a small margin step up. This provides an additional measure of

protection for the priority 1 debt. In the event that there is insufficient switchable

debt to bring the remaining priority 1 debt below 55% of collateral value, then any

excess must be progressively collateralised.

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For illustration, on a proforma basis and adjusting for transaction costs, private

debenture redemptions and the cost of swap write offs we would have had £883m

of drawn bank debt on the 22 September. Had the deal taken place then, the initial

LTV would have been 52% and all of the secured group’s debt would have been

priority 1. However, approximately £450m of the bank facility would have been

drawn in switchable form because initial LTV would have exceeded 45%.

Slide 12 – Property covenants As you would expect, the bond documentation includes comprehensive financial,

property and operational covenants. These have been sized to ensure from a

practical perspective that the operational flexibility of the Group is unimpeded.

There are detailed LTV, ICR and headroom testing provisions, which must be

carried out on a routine scheduled basis and also before certain types of

transaction can be undertaken.

Property covenants require that full fixed and floating charges be granted over all

the assets within the secured group. The property covenants require us to follow

market practise and impose a general requirement to follow the principles of “good

estate management”.

The covenants also set limits on the sector and geographical concentration of the

secured group’s portfolio, and determine our maximum exposure to any single

tenant with a credit rating weaker than double A. Details on concentration

provisions are given in the Appendix in your packs.

The covenant package includes mechanisms to allow the inclusion of development

projects subject to specific development tests, and permits the inclusion of joint

venture and partnership assets, provided appropriate security can be given.

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Summary of covenants Covenants will also be put in place to ensure that the security group can incur

further financial indebtedness only if it has the capacity to do so as determined by

the covenant testing regime. There are prudential restrictions to prevent us

bunching the maturity of debt, and a limit on the amount of unsecured debt that the

secured group may incur. Similarly, the permitted business activities of the

secured group are defined and there are controls to prevent the leakage of value

from the secured group, particularly in Tier 3. Importantly, in Tier 3 only this would

impose certain restrictions on payments to Land Securities Group Plc and the rest

of the non-restricted sub-group.

There are also positive covenants requiring secured group members to be kept

under common control and requiring compliance with appropriate authorisations,

licences and the law. The documentation includes interest rate hedging and

insurance requirements.

Further, there are restrictions on the ability of the secured group to carry tax or

secondary tax liabilities in excess of certain thresholds unless these liabilities are

collateralised.

To protect investors, there are information covenants requiring the production of

annual and semi-annual investor reports. The information will relate specifically to

the security group. These are enduring information covenants and apply whether

or not Land Securities Group is a quoted entity.

Finally, I indicated that the Tier 3 regime was significantly more restrictive and

designed to protect debtholders. It is probably sufficiently uncomfortable that the

Group, were it to find itself in Tier 3, would have an incentive to adjust its affairs to

revert to a lower Tier. However, it would remain possible for the group to operate

its business in at least initial Tier 3. A summary of the additional Tier 3 protections

for bondholders is set out in an appendix slide in your packs.

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Thank you very much and now let me hand you over to Andrew who is going to talk

about the offer to noteholders and its impact on Land Securities.

Andrew Macfarlane, Group Finance Director Slide 14 – The Offer and its impact on Land Securities Thank you, Martin. Good morning.

Slide 15 – The Offer to bond and debenture holders The terms of our offer to noteholders are set out on this slide.

Looking across the chart, it may be helpful if I explain the various columns.

• The pricing reference is to the particular series of Gilts which has been used as

the benchmark for each bond or debenture

• The early submission percentage is the percentage of current nominal value

that will be paid in cash as an incentive to noteholders to accept our offer -

within 14 days in the case of the unsecured bonds, and 21 days in the case of

the debentures. Those that do not accept the offer within the timeframe will not

receive the payment, even if the requisite majority of their series subsequently

votes in favour.

• The repurchase spread is the price at which we are offering to buy in the

existing debt

• The new issue spread follows the double A yield curve and is applied to the

same reference gilts as the repurchase spread.

• The approximate nominal amounts and interest rates of the new debt are set

out in the right hand column of the chart purely for illustration, and are priced

using Gilt rates as of September 22, 2004, but assuming the transaction settles

on its expected settlement date of November 3, 2004”

The pricing of the reference gilts may change until the offer closes, which may in

turn change the nominal value and coupons of the new debt.

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In arriving at these terms, we have sought to preserve fairness between our

existing secured and unsecured holders and we have been grateful for the ABI

committee’s guidance. We have also sought to preserve fairness between debt

investors and equity investors and I’ll talk about this in a moment.

From a technical perspective, the repurchase levels were set at or about market

levels as we saw then on the date last week when the spreads were agreed with

the ABI committee. The new issue levels were set in consultation with our advisors

for each new bond by reference to other securities in the market which have

comparable features and/or ratings. The early submission incentive payment

increases with the maturity of the relevant bonds, varying from 0.5% of par for the

2007 Bonds to 2.30% for the 2030 debentures. On a bond-by-bond basis, the

early submission fee levels were set partly by reference to the relative ranking of

the debentures versus the unsecured bonds, and we also had regard to the pre-

launch trading levels of these securities.

We have, in addition, agreed terms for the cash settlement of £38m nominal of

private debentures.

Slide 16 – Impact of the transaction In order to help you understand the impact of the transaction on our finances, and

to give an indication of the value of the deal to noteholders and shareholders, we

have prepared some illustrative figures as if the deal had completed at the close of

business on Wednesday 22nd September.

The assumptions we have made are that all noteholders convert, so there is no

cash paid to non-eligible holders, and that all noteholders qualify for the early

submission payment. We have used IBOXX prices to compare our repurchase

offer to a market price. Individual investors may well use different sources to value

their holdings so, again, our figures are purely illustrative.

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The final outcome will be subject to the deal closing and any movements in the

pricing of the reference gilts will affect the eventual nominal amounts and coupon

rates of the new debt. The nominal amounts will also be reduced to the extent

cash is paid to non-eligible holders. The value of the deal to bondholders and

equity holders will also be influenced by the extent to which noteholders take-up

the early submission payments.

Slide 17 - Value of the Offer If all noteholders opt for the early submission payment, on the assumptions I’ve

outlined, the offer is currently worth £32m to bondholders. This is made up of a

£4m repurchase premium over IBOXX and the early submission payment itself,

which is worth up to £28m.

The NPV benefit of the transaction to the group is £57m and has three elements.

We’ve used our normal pre-tax WACC of 7.5%, or 5.3% post tax, for the

calculation.

• The first element comprises the cost of the early submission payments, which

will be £20m after tax, if all noteholders accept.

• The second component is the fees and costs of the exercise, including the

bank facility fees and the future running expenses of the structure. These have

a negative NPV of approximately £37m after tax.

• However, the group will get an NPV benefit from the changed profile of its cash

flows. The gain comes from the cash-flow advantage of deferring payments on

our bonds (lower annual interest in return for higher payments at maturity)

whilst accelerating tax relief. The increase in the nominal amount of the debt is

allowable for tax immediately, rather than when the bonds mature. The net

present value of this benefit, based on 22nd September prices is £114m, which

more than offsets the costs of the transaction.

The group will also benefit from lower interest rates on new debt. We estimate that

20 year money issued under the new structure will be some 30 basis points

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cheaper than the unsecured equivalent. Moreover, if credit spreads widen in the

future, we expect an additional relative benefit from our improved rating.

You will see that the value of the offer to bondholders and the benefit to the

company are not dissimilar. The value to bondholders will be realised immediately

and is largely fixed, whereas the value to equity comes over time and the precise

amount is, to an extent uncertain.

If interest rates rise before the deal closes, the NPV value of the reprofiled

cashflows will fall and vice versa. The timing of realisation and certainty of amount

of benefits reflects the relative risk positions of debt and equity in the financing of

the Group.

Slide 18 – Interest rate hedges We have a net £600m of general interest rate swaps, which fix LIBOR. These

hedges were £40m out of the money on 22 September, but this number is quite

volatile – a 1 basis point move in rates across the curve changes the mark to

market by around £0.7m

Some of the existing swap counterparties don’t meet the minimum credit ratings for

the new structure and £400m nominal of swaps, which we have had for some time,

have bank options to break written into them. These no longer meet our

requirements.

We will either migrate the swaps into the new structure, changing counterparty

where necessary and perhaps re-profiling some of them, or close out the existing

swaps and replace them with new ones at current rates, and perhaps with shorter

maturities.

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Either way, the effect is likely to be the crystallisation in our second half P&L of

most or all of the mark to market losses as an exceptional interest cost. The loss

will reduce the tax charge.

However, because we will be replacing the existing hedges with new ones, there

will be a limited economic, as opposed to accounting, impact.

Slide 19 – Accounting for the transaction The effect of the transaction is that the group is very likely to report a headline loss

for the current financial year. Using 22 September prices, the deal will reduce year

end net asset value by 99p per share, but triple net asset value by only 7p per

share.

The principal reason for this is that the exchange will crystallise the FRS13 mark-

to-market on our old debt when the deal closes. The face value of the debt in our

balance sheet will increase by approximately £557m based on last week’s interest

rates and we will also bear the cost of the early submission payment, the write off

of existing un-amortised FRS4 costs and swap write off costs. These items total

£598m and will be charged to the profit and loss account as exceptional interest.

The loss will be fully allowable for tax.

The estimated transaction costs including bank facility fees will be £30m in 2004/5

and a further £3m was incurred last year. £21m will be charged to the profit and

loss account as an exceptional item this year and the balance will be amortised

over the life of the new debt. There will also be the some incremental annual costs

to run the new structure. Costs will be allowable for tax as they hit the P&L.

• The full year interest charge will fall from £153m per annum on the old debt to

an estimated £128m per annum on the new bonds, saving £25m a year pre-

tax. This is principally the trade off for the higher maturity value of the new

debt.

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• As mentioned, we also expect that we will crystallise the mark to market on our

general interest rate swap portfolio in the second half. This will give rise to an

exceptional interest charge of £40m, based on 22 September prices. It will

result in a release of existing deferred tax provisions.

• Tax losses are likely to exceed our 2004/5 profits and any losses not relieved

this year will be carried forward for relief in later years. Any surplus losses will

be recognised as a deferred tax asset at the year end.

The figures quoted on the slide all reflect pricing as of Wednesday 22nd

September. The final figures will be determined by interest rates when the

Exchange actually occurs. The mark to market figures could therefore be quite

different from those quoted.

Slide 20 – Proforma Impact – for illustrative purposes only To help those of you who need to model our P&L, this slide shows the pro forma

impact of the transaction. The 2004 column shows last year’s results for reference.

We have split the adjustments between recurring and non-recurring items. The

recurring benefits are for a 12 month period and will need to be pro-rated for 04/05

to reflect the actual date when the deal closes. In terms of revenue profits, the

exchange will enhance earnings per share. The exceptional loss will have no

impact on our dividend for this year.

Finally, a reminder that the deal will reduce the Group’s average cost of debt which

you will need to take into account when forecasting capitalised interest. That is not

reflected in the figures on the slide because capitalised interest varies from year to

year.

Slide 21 – Effect of debt refinancing This slide summarises the effect of the transaction. £1.8bn of unrated or A/A-

paper with an average coupon of 8.51% will become £2.36bn of AA rated bonds

with an average coupon of 5.44%.

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Our existing bank facilities expire over the next 18 months. Drawings at Exchange

will be refinanced under a new £1.5bn 5-year committed facility, within the

structure.

The increase in the face value of our debt will increase proforma gearing last

March by 15 percentage points, and reduce headline and triple net NAV by 99p

and 7p respectively. The 99p reduction in NAV arises because we will be

recognising the mark to market on our debt and swaps. These are already a

component of NNNAV, which will only fall by 7p per share, representing the cost of

the transaction.

On a full year basis the debt exchange will enhance adjusted earnings per share

by up to 3.65p per share, depending upon the level of capitalised interest. For

example, in 2003/04 the lower average cost of debt would have reduced

capitalised interest by about £10m, resulting in a pro-forma net increase in Eps of

2.15p for that year.

Slide 22 – Timetable Our proposals need to be voted on by each series of bonds and debentures

separately. We are asking the trustees to convene these meetings for the 22

October.

Settlement date and the creation of the new structure is expected on 3 November,

although adjournment of any of the noteholder meetings could extend the process.

The transaction requires an affirmative vote by each class of debt, but we do have

the right to waive this condition, at our option. It would still be possible for us to

close the deal with some bonds outstanding.

Assuming the proposals are approved at the initial meetings, we expect Exchange

to occur in early November. The transaction will therefore have no impact on our

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first half results for this year, beyond recognition of costs incurred to date, which

will be around £15m.

Thank you very much. Now let me hand back to Francis.

Francis Salway, Group Chief Executive Slide 23 – Benefits THANK YOU ANDREW.

AS YOU HAVE HEARD, OUR PROPOSAL CREATES A DEBT STRUCTURE

WHICH IS MORE EFFICIENT FOR BOTH DEBT AND EQUITY INVESTORS.

THIS IS WHY WE SEE SO MANY BENEFITS LISTED ON EITHER SIDE OF THIS

SLIDE – AND WHY A NUMBER OF THE INDIVIDUAL FEATURES REPRESENTS

A BENEFIT FOR BOTH DEBT AND EQUITY INVESTORS ALIKE. WE ARE

USING MORE EFFICIENT STRUCTURING TO CREATE A POSITIVE OUTCOME

FOR BOTH DEBT AND EQUITY INVESTORS.

IN PURE FINANCIAL TERMS, THE BENEFITS TO BONDHOLDERS ARE

IMMEDIATE AND, AS IS PERHAPS APPROPRIATE, SOME OF THE FINANCIAL

BENEFITS FOR EQUITY INVESTORS ARE SLIGHTLY LESS CERTAIN AND

SPREAD OVER A LONGER PERIOD OF TIME.

FOR EQUITY INVESTORS IN THE PROPERTY SECTOR, WE ARE SEEING AN

INCREASING FOCUS ON THE METRICS OF EARNINGS AND TRIPLE NET

NAV. THIS TRANSACTION WILL BE BROADLY NEUTRAL IN TERMS OF

TRIPLE NET NAV, BUT EARNINGS ACCRETIVE.

THAT CONCLUDES THE PRESENTATION AND WE WILL NOW TAKE

QUESTIONS. AS MENTIONED AT THE BEGINNING OF THE PRESENTATION,

THOSE LISTENING IN TO THE CONFERENCE CALL WILL ALSO BE ABLE TO

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ASK QUESTIONS. PLEASE FOLLOW THE INSTRUCTIONS GIVEN BY THE

OPERATOR. TO ALLOW TIME FOR THOSE QUESTIONS TO BE QUEUED,

WE’D LIKE TO START BY TAKING ANY QUESTIONS IN THE ROOM. FOR

THOSE ON THE CONFERENCE CALL, IF YOUR QUESTION IS ASKED BY

SOMEONE IN THE ROOM AND SATISFACTORILY ANSWERED, PLEASE

WITHDRAW THE QUESTION, AS EXPLAINED BY THE TELECONFERENCE

OPERATOR.

AS USUAL, I WOULD BE GRATEFUL IF YOU WOULD STATE YOUR NAME AND

COMPANY WHEN ASKING A QUESTION. A MICROPHONE WILL BE

BROUGHT TO YOU.

THANK YOU.

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