Toby Courtauld, CEO - Well, to answer your second question first, the business is in very good shape, and we're very pleased with the year that we had last year in many ways. NAV was up strongly, as you know. The profits were up and earnings were up as well, about 11%. And a lot of that was to do with the way in which this business dealt with the difficulties of the downturn. We've been letting our space extremely well throughout the year. Yes, we've seen some of the rents fall during the early part of the year, but towards the end they've begun to rise. We've made some great acquisitions this year which have helped come through into NAV.

Timon Drakesmith, FD - Well, as you know it's been a pretty difficult last 12 months in the wider market. Despite that, we've posted adjusted profits up 31% to nearly £29 million. There are three reasons for that. Lower interest charges, because we've got reduced debt and we've taken actions to reduce our interest rate. Second, we've had a very good leasing year, which has helped the top line. Finally, we've kept overheads well under control, so administration and property costs are down nearly 6% year-on-year. So under the circumstances I think it's a pretty good result.

TC - Well, the deals range from investments with asset management angles in the City through to vacant development situations in the West End. In the City, which was our first deal, we bought a building on Queen Street for just under £50m where we had an extremely good running yield at about 8.2% we have a single tenant there who we feel likes the building very much and with whom we have the possibility to improve their home for them over time through lease regearings and restructurings. In the West End, we have bought into a very good value development opportunity, essentially in joint venture with the bank who had lent against the asset. Over the next two years we'll be redeveloping that property for completion in the summer of 2012, which we feel is a really interesting time in London's markets, particularly in the West End where the supply and demand dynamic seems to favour the landlord quite strongly. And we'll deliver that into what we hope will be a very strong market. It'll be a Grade A product in a great location right next door to Oxford Circus.

TC - Yes, we're delighted to announce a fresh joint venture, a new joint venture with Star wood Capital, the US property investment group. We have bought into one of their assets, a building called City Tower on Basinghall Street, so it's an absolute Grade A City location, but it's a building in need of a refresh, if you like, it needs some investment to bring it up to scratch. Interestingly, it's rented at something around £24 per square foot. In its heyday this exact same building would have attracted rents in the £70s a foot in the 1980s. So you get a sense of how much potential opportunity there is once we've invested in it. So we bought into a half share of City Tower.

TD - Well, I think the important thing to do is to remember about joint ventures in the context of the group. So joint ventures at year ended March 2010 represented 38% of our property portfolio. And we categorise our joint ventures into three different types. The most important type is access to new properties, that's where we get the opportunity to invest in exciting new properties; in fact that's the biggest type of joint venture. The next is about development risk sharing, and an example of that is our 100 Bishopsgate joint venture that we put together just before Easter this year. Finally, we have a category of joint ventures which is called bank workout. And the Eurohypo deal fits into that particular type. And looking forward, I'd anticipate that we'll see more bank JVs as the deleveraging process unfolds.

TD - I think it's important to recognise that during the course of this year banks with leverage issues in terms of their property portfolio have started to look for third party help. Now with our track record and very good bank relationships, I'd expect us to be seeing more and more of these deals. But it's worth remembering that they're always complex when you're doing bank workouts, so one has to be patient about the run rate looking forward.

TC - This is an important part of our business. Development is a part of the property company armoury, if you like, that you really want to be very short of when markets get difficult, because clearly it's one of the higher risk parts of our business. And then when markets turn the corner, in an ideal world you get your development business ramping up quite quickly, so that you can deliver new schemes into an improving market rather than late in the cycle. So we've always been keen on bringing our development business in early to the recovery, so we set about that thinking a couple of years ago.

TC - Interesting. It's very interesting debate, this. The City is generally more volatile than the West End. People generally think of Great Portland Estates as a West End player as opposed to a central London player. We've always said we're a central London player, and that we'll allocate capital between the two based upon an analysis of where opportunities are best at any given point in time. We won't dilute our West End exposure to the extent that we become a City player ahead of a West End player. But it is definitely the case that today we think there's better value in the City in most cases than in the West End. And that's why you've seen us doing the deals that we've been doing in the City. But we do have things under offer in the West End as well to buy.

TD - Well, substantial in the context of our Group. Remember at year end we had around about gearing level of 26% and cash and undrawn credit lines of about £470 million. So, looking forward, we'd anticipate investing hundreds of millions of pounds in our development programme and on acquisitions. So we're pretty excited about using this very strong balance sheet for the future.

TD - We've previously talked about a gearing range that we're comfortable with, which is broadly 50% to 70%. So if you work from a balance sheet position at March 2010, the 26% gearing I mentioned, and using constant property values, we could invest £400 million in new development capital expenditure or acquisitions and still remain within that range. So that gives us a substantial ability to expand the business in a sensible way as the markets take a forward direction.

TD - Yes, and that's worked for our advantage. We terminated some of our fixed rate interest rate derivatives last summer. That was quite an interesting call, but it's worked out. So at March year end we had 40% of our debt which is floating, and with interest rates being at historic low levels, that's really benefiting our earnings capacity going forward.

TC - I think we absolutely have a strong enough team to deliver the opportunities. You just have to look at what the team delivered last year in the round, and they delivered in spades. It was a difficult year. If you go back to the beginning of the year when the occupational markets were challenging, we set out our stall that we would be looking to lease aggressively where we had the potential for tenants to leave us and we were going to be looking to keep them as best we could. And in the 12 months to March 2010, we retained 71% of all tenants who could have left us. By the time we got to March 2010, of the half a million or so square feet that could have become vacant, we were left with about 6% - and much of that came back to us at the end of the period. So the team did a phenomenal job. There are no other ways of looking at it, it was a phenomenal job. So they are up to that challenge, absolutely.

TC - Can I answer that by just going back in time a little bit? Because I think it's important to get the context of where we've come from first of all. If you were to go back to the depths of the downturn, we were looking at demand for office space in these two core markets that were at an all-time low. So if you look at the West End, for example, it fell to something beneath 1 million square feet of what we call active demand. In other words, people actively looking to hire space and have people in situ within 12 months. And that's a really low number, when you consider that the market overall in the West End is something around 80 million to 100 million square feet. So we've come from all-time lows. Today we think that the active demand in the West End, so the same measure, is something around 2 million square feet. So we have seen a very significant increase in percentage terms. But even 2 million feet is not high by comparison to some of the stronger markets, say, of the late 1980s or of the era round the dot com boom. But, nonetheless, a strong recovery.

TC - I think you're right to phrase it in that way, insofar as the compulsory purchase of 18-19 Hanover Square from our portfolio was done at a level that we dispute, and we'll dispute quite aggressively, because it's clearly some way below our own market valuations. We're going to pursue that through the normal channels of a claim for the balance and we expect that we'll get a good recovery of that. But insofar as we're looking at the redevelopment of one of London's most important sites, I think Cross Rail is a huge tick for Great Portland, and indeed for London, because we need it and it's going to be a huge bringer of economic growth to this particular area of London. And we happen to have one of the sites that will benefit most from the development of Cross Rail in the medium to longer term. So overall we are in a great position.

TC - Very. And I think this is one of the strengths of GPE's market positioning at the moment. We have one of the lowest leverage ratios of any property company in Europe. We have one of the strongest development pipelines of any property company in our sector, but we have flexibility over timing so we can turn it on if we so choose to. And, in the meantime, we've got a good income coming from all of these properties. We're in one of Europe's strongest markets. I think there is a really strong differentiation between London at the moment and the rest of the UK, which is still suffering rather more than London has been, and indeed price rises in London are miles ahead of what's been happening elsewhere in the country. The supply demand dynamic in London is very strongly favouring the landlord two or three years out. We've got buckets of financial capacity. Our rents are very low. We're mainly in the middle of town, and we've got a fantastic team working strongly together. So you add all that up, and I think the story for GPE relative is as strong as I can remember it.

TC - Given what I've just said, I think the outlook is a very positive outlook. But we mustn't forget there remain a number of key caveats relating to the economy, relating to the way in which the political arrangements that we now have play out, and the way in which they interact with markets. And clearly everything depends upon how businesses from here choose to expand or contract. If they choose to expand over a three-year view, we're in a great place. We have the capacity to expand and to take advantage of that and to develop into that. If they choose to contract then interestingly we're also in a relatively good place - low leverage, were values to come under pressure, low development exposure, low void rate (our void rate today is 2.7%. It was 7.8% 12 months ago), so relatively again we're in a very good position. So the outlook from here I think is positive, but with some sensible caveats.