Abacus Group (ABG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Abacus Property Group FY '20 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Steven Sewell. Please go ahead, Steven.

Thank you, and good morning, ladies and gentlemen. Thank you for joining us this morning. I'm here with Cynthia Rouse, our Head of Investor Relations and Corporate Comms; as well as Rob Baulderstone, our CFO; and Evan and Reiner from the Finance team. Can I lead with just acknowledging everyone and anyone who has been directly impacted by the health crisis that's gripped us since March 2020, in particular, our friends, colleagues and business partners in Melbourne, who are suffering the harshest restrictions imaginable. And as a proud Victorian, I just want to say that we're with you and look forward to all Australians being back together, meeting our challenges head on. The Abacus business has come a long way in the last year or 2, and we believe is positioned extremely well to not only meet the present economic, social, health and human challenges but to thrive in the near to medium term. With some very deliberate and material transactions, we now have a portfolio largely made up of quality income-producing office and self storage assets and a very much more minor exposure to some legacy investments. As you can see from the results for financial year '20, with a solid balance sheet position, strong cash flow coverage, we're very confident in how the group is placed for the long-term benefit of our investors and partners. Turning to the highlights. As you would appreciate, the year is best portrayed in a 9-month and 3-month split. The first 9 months of the period saw us raise additional capital in July 2019 and monetize substantial equity invested in our noncore and some legacy asset and loan positions. We were successful in being able to largely redeploy this capital into quality office and self storage investments, our 2 key sectors. Our gross income positions, as you can see, accordingly, have grown markedly, and as you can see from the slide, with like-for-like growth, even including the impact of the last 3 months, flat year-on-year. And we continue to conservatively manage the group's balance sheet with below-average gearing, a strong liquidity position and most pleasingly, some expansionary support from our lender business partners, which Rob will touch on in his presentation. Turning to our response to the COVID-19 pandemic. From when the pandemic originally hit, we focused all our energy to reacting swiftly and decisively to provide agreed certainty for our business partners and tenants in the face of some of our enormous challenges. We believe, given the nature, scale and location of our portfolio's investments, we have a higher-than-usual concentration of customers that meet the government's mandated small to midsized enterprise code, and we applaud the governments across the country for this guidance. Obviously, this is a constantly evolving issue that we're dealing with. And our -- with the portfolio in Victoria, albeit small in the whole group's context, we still have active discussions and attention being applied. Our results from the July month saw a significant improvement in our retail assets from what you see there on the slide with close to 90% collection and only 10% of the rent rebated or deferred with 0 in collectibles. Our office portfolio for the month of July remained at similar to the quarter 4 statistics you see there at around 90% collected, quite an admirable performance. Of course, like all commercial property owners, we remain willing and able to support our tenant partners along with our team to ensure safety, health and well-being is the critical outcome at each location that we own. Turning to the balance sheet. Stable quality income-producing commercial office and self storage assets now represent 87% of our balance sheet. And if you include our small exposure to retail and industrial, our balance sheet now sits at around 94% in the core bucket. Whilst we don't have a targeted balance sheet allocation, we're extremely pleased and comfortable, as I mentioned, in the introduction with where we sit here at the end of financial year '20. Looking back only 2 to 3 years, as you can see from the next slide, it's fair to say we've made material progress in anchoring the group's balance sheet on quality income-producing investments in our core sectors, and we remain hyper vigilant and active in tirelessly working to monetize equity in the remaining legacy investments that we have in the areas of retail as well as residential loans and mortgages, as you can see there, with very strong compound annual growth of assets exposed to those key sectors of commercial office and self storage and the corresponding decline in our exposure to retail and residential loans and mortgages. I'll now turn over to Rob who can briefly talk you through the financial results in more detail.

Thank you, Steven. Good morning. As noted earlier, the group has delivered a slightly lower funds from operation profit of $124.6 million for the year. Some of the highlights of these results were the commercial property portfolio FFO increased by 18% to $70.2 million and the self storage FFO increased by 21% to $60.2 million. These increases largely reflect the delivery of the group's strategy to concentrate on these 2 asset classes. The distribution was maintained at $0.185 per security for the year. Net tangible assets per security was essentially maintained at $3.32. Our gearing increased slightly to 26.5%, which reflects the purchase of additional properties during the year. And the average cost of debt was 3%. Recently, as Steven mentioned, we have increased our bank facility limit by $247 million to now $1.36 billion. The additional facility is for 2 years and on terms below the current weighted average cost of debt. Valuations. The revaluation results for the year were mixed for Abacus. Self storage was up by $27.9 million, while the commercial portfolio was down by $69.1 million. The overall result was a fair value decrease of $41.2 million. These results reflect the resilience of self storage even in COVID times and demonstrate the attractiveness of self storage as an investment class for the group. The property portfolio is now valued at over $2.9 billion with a strong weighting to office and self storage. I will now hand back to Steven.

Thanks, Robert. Just turning to our operational performance. As you can appreciate, our portfolio now is dominated by a small number of higher value, higher-quality assets, most, we believe, with reversionary potential because of the major structural infrastructure amenity improvements that are underway nearby. Notably, 99 Walker Street, which was only bought onto the portfolio -- into the portfolio at the start of 2020 has a metro station being built several blocks away. And our investment into 201 Elizabeth Street with our partners has a metro station being built diagonally opposite. It's of note that our investment proportion in -- dollar value, sorry, in 201 Elizabeth Street will expand by the end of this week with our partners exercising to buy the balance of 25%, of which, in the total asset, our share is 32%. Both Sydney CBD and North Sydney CBD have towers that are benefiting from the infrastructure investment by the New South Wales government. Similarly in Melbourne and Brisbane, our properties are located and are benefiting from some of the adjacent infrastructure as well as minor improvements from local amenity. Looking at the leasing metrics for the portfolio. It's fair to say that we were tracking very briskly up until the end of the March quarter and like all sectors, after which it's been quite a quiet and static period. We did have several substantial deals that were in [ train ] just prior to the pandemic and these have been completed, including most pleasingly, a major tenant commitment from the federal government in Allara Street, Canberra, with the lease commencing just in June 2020. Fortunately to date, we've not seen much in the way of corona-related exits from our properties with a couple of notable exceptions being a fashion brand that went into receivership at the start of the pandemic and vacated their office tenancy in our building down in Alexandria and also an airline support business that vacated the Todd Road building in Port Melbourne. Although I do note that, that tenancy has since been re-leased with no loss of income or downtime. Turning to self storage. Self storage has been and will continue to be a strong focus for us at Abacus. We are very confident in the portfolio we've built up over many years, especially given the resilience of the underlying business, as notably demonstrated in the recent months. The geographic and demographic quality of the locations in which we're invested, including the fact that we have a major real estate footprint that we're gathering mostly in close proximity to the major population centers of our major cities, both here in Australia and notably in New Zealand, in Auckland. And as well for self storage as a sector, it has a substantial number of tailwinds that are continuing to support such as the dwelling structures of the locations, small business and e-commerce demand rising in select location, trades people utilizing the facilities. And this is not factoring in what we believe is the long-term alternative and adjacent uses that we believe might be possible at some of the locations, given their convenience and proximity to such a vast proportion of the Australian population. Our operating platform specialist partner, Storage King, has demonstrated across more than 22 years in good times and bad, an extremely responsive and strong focus on delivering results. Our New Zealand portfolio, in particular, is heavily skewed towards Auckland with 11 of our 15 assets in New Zealand being in the Auckland metropolitan area, including our biggest and most recent addition to the portfolio in Grey Lynn, just in February this year, Grey Lynn being a superior demographic catchment area in the Auckland metropolitan area. At the end of the day, Storage King and Abacus has a deep history and track record of investing in storage facilities that are effectively vast tracts of real estate in infill suburban and urban locations and now working in tandem with Storage King as our dedicated operator offering market-leading self storage products, services and solutions. And being one of the largest and longest-standing investors in the sector, alongside Storage King, we believe this provides enormous long-term optionality for Abacus. On the next slide, we've provided considerable detail, breaking it down by state, including New Zealand as well as our like-for-like stores on the performance of the portfolio across the months leading from January 2020 up until the end of July. We like all owners of all classes of real estate watched as the restrictions on movement of the entire Australian and New Zealand population placed a stress on the business never before seen or in any way could have been anticipated. Swiftly, I'll acknowledge our Storage King operating partners after that initial 3- to 4-week impact in March, early April made a strong tactical decision to heavily promote the business on all forms of media. And as you can see from the charts, the benefit in occupancy was real, immediate and in the case of our Queensland business, in particular, very substantial, an extremely pleasing result. Similarly, our New Zealand portfolio, as I said, is worthy of mention because it is heavily skewed to the strongest market being Auckland, and we've seen a very pleasing recovery of occupancy and customer inquiry in that market. And just to note, in Victoria, whilst this is still a fluid situation with the lockdown stage 4, we are seeing -- sorry, we were seeing some lease-up of the recently expanded facilities such as at Hoppers Crossing and Thomastown, which explains on the chart the larger than other states' decline, of course, hit hard by the initial pandemic outbreak and then more recently, the draconian stage 4 conditions. While this is a key strategic investment, our focus remains clearly on the continued strong performance of our existing portfolio. It's business as usual for our business, our people and our customers, and July trading was strong with June trading after the major impact of the pandemic, delivering some of the strongest results the portfolio and business as a whole has seen for many years. We have a 3-pronged growth strategy for this key sector of storage at Abacus: further operating store acquisitions, both from within the Storage King existing businesses and also from external operators; we're substantially allocating capital, prioritizing capital on rebuilding and renovating our existing stores, where the commercial demand warrants; and indirectly, we saw deep value in the unit price of a listed self storage AREIT and have been able to amass a sizable position to date at a very attractive pricing. Turning to retail. Fortunately, for Abacus, this is a very minor exposure, although it is active enough, given the 3 locations in which we operate to give us a window into customer trends, e-commerce impacts as they play out and also fulfillment and logistics trends. In our 2 super convenience centers, Ashfield and Lutwyche, Ashfield in Sydney, Lutwyche in Brisbane, the formula that we put in place several years ago of affordable, well-located centers with a full range of nondiscretionary grocery offers, the 3 national brands, adjacent and complementary service offerings has weathered the last 3 or 4 months of the year quite okay. Clearly, consumers, retailers and the overall economic climate is still very volatile, and we're busy working with all of our retailers one-on-one to ensure their long-term viability and particularly safe and healthy conditions. You will know that we came within a whisker of selling our minority stake in the Oasis property up on the Gold Coast. However, this wasn't to be with the advent of the pandemic. So we now see this as more of a long-term, medium-term hold and similarly, working with our existing tenant partners as the Gold Coast market readies itself for the domestic tourism boost, hopefully, which will supplement it once the borders reopen. As I mentioned in the introductory comments, we still do have equity invested in some legacy loan and mortgage investments, albeit far reduced from 2 to 3 years ago and substantially de-risked. Our key objective is not to add additional projects, but rather extract maximum value from the assets and repatriate at the very least 100 cents in the dollar, using this ungeared equity to invest back into the key long-term sectors for the group, being commercial office and self storage. Just last week, we were excited to have exited and finished our last residential development project in Melbourne, being the Luminary project in Hawthorn. And we still remain committed to working with our 2 last remaining development partners here in New South Wales, where we can work with them to enhance the long-term value of these investments and realize that equity as soon as is practicable. At Abacus Property Group, sustainability means considering environmental, social and governance risks and opportunities right across our business operations. From our investment-making process, decision-making process, to asset management and development activities as well as any asset realizations. We have considerable work going across the portfolio in the area of energy, water and waste efficiencies. We've got digital and innovation working groups established to foster a culture of innovation and collaboration across the business and looking at opportunities where we can optimize building performance and sustainability or improving our own business processes and enhancing the customer experience. And so as we progress along our evolution at Abacus, we continue to research, review and look at opportunities as to how we can better deliver for our customers in those key sectors for the overall benefit of the team. Turning to the outlook. For all the reasons we've talked through today, we continue to be very confident in the strategic direction and as well the key sectors we've chosen as focus for Abacus, to be a high conviction owner and manager of commercial office and self storage assets. We remain extremely cautious and ready to respond in collaboration with our occupiers across all our assets to ensure safety and wellness and confident and trust in the locations in the face of the ever-evolving COVID-19 health crisis being confronted. We're also attuned to the wider Australian economic position and watch as the elevated levels of government stimulus, whether it be JobKeeper, JobSeeker from the federal government or local level, state level, state government level subsidies and supports, are gradually withdrawn and the population reestablishes itself. The clear focus of the team is to actively manage, preserve and enhance the incomes for long-term capital values of our investments, using our track record, market intelligence and capability of our team. We will remain conservative in our balance sheet management and deliver a distribution that is in keeping with the payout ratio of between 85% and 95% of funds from operation, constantly reviewed and deliberated actively by our Board. Thanks again for your attention. Good luck again to all our Victorian friends and partners. And now I'd like to open up the lines to your questions.

[Operator Instructions] Your first question comes from Darren Leung of Macquarie.

Just 3 questions from me. First one just on NSR, the stake in your [ listed ] self storage peer. So looking at your substantial filings, your average acquisition price was around about $1.40 mark in March and April. Average in June was about $1.85. And so your Slide 16 indicates attractive pricing. So given the upper level of your acquisitions of this vehicle was at the $1.80s mark, what price does NSR not become attractive pricing?

That's for us to determine on a daily basis, Darren, really, with the market pricing, our capital availability and utilization. Our average price across the entire [ stake ], as we revealed in the most recent substantial filing, is in the $1.50 to mid-$1.50 range, which we consider to be attractive.

Okay. But surely, there's a point where you [ define ] those as no longer an attractive investment and you've realized your return. So even if you think about today, there's a pretty attractive return versus your average entry cost over that...

I think you're missing the point. The key for us is that we see this as being an opportunity to expand our exposure to the key sector for Abacus being self storage. And our intention is to be a long-term positive holder of that [ stake ].

Okay. So the focus is more long term, less so about valuation. Is that fair to conclude?

That's what we've included in the presentation, yes, Darren.

Understand. And second one is just on office letting. So on your Slide 13 and perhaps continuing with your statement, Steven, around the first 9 quarters versus the final 3 quarters of FY '20. Can you give us any split as to how many of your deals are completed in the first 3 quarters -- sorry, the first 9 quarters of the year versus the final quarter, please?

Let's -- just give us 1 minute. We'll see if we can give you that level of detail. So there's not been a lot of transactions completed in the last 3 months of the year. We've reached heads of agreement on some deals, but predominantly 75% of all deals in the first 9 months and 25% in the last -- that sounds a bit high. Why don't we come back -- we'll come back to you with that number, Darren, and we'll talk.

Okay. And then just the final one around the P&L. So you've given distribution guidance of 85% to 95% of FFO per share. I mean, historically, you look at your FY '20 divi, you're at 96%. It's a bit of a -- given your earnings are likely to go backwards on the back of your residential sales, assuming they progress, how do you think about, I suppose, income-focused investors, given that your historical distribution growth has been 2% to 3% per annum?

Yes. So obviously, like most REITs, we withdrew that guidance for growth in distributions, whilst we appreciate as an element of the investor base that demands that or values that. We think at the moment, given the uncertainty, and particularly when we look across the office market, and to a lesser degree, retail, given it's a far lesser contribution, I think the structural changes versus cyclical changes in leasing transactions, rental income, levels of incentive, it's just -- it's far too uncertain for us to put any guidance around our distribution. I suppose the other point I made in the comments is that we've literally had 6 months contribution from our biggest asset by a long stretch, being 99 Walker Street. So we are seeing positive momentum in income growth from the biggest assets. We're extremely pleased with the resilience of the storage business. As you can see from the COVID situation, the rental arrears -- the rental rebates, rather, was in the hundreds of thousands of dollars in -- across the storage business. And we're confident given the locations that, that will continue to drive income growth. But given we're in month 1 of the new financial year, we'd be hopeful at the half year at the next full year at the latest to be able to give much more guidance around the top line, but it's simply not possible at the moment.

Okay. That's fair. And sorry, just a final quick one. The accounting treatment for deferrals and waivers, are you recognizing them all as revenue and amortizing them? Or....

Yes. That's right.

Yes. That's right.

Both waivers and deferrals.

That's right.

Your next question comes from Richard Jones of JPMorgan.

Just in relation to the abatements, have you negotiated all deals with all tenants? And is that recognized in your accounts in FY '20? I guess I reference -- you've had 300 million -- sorry, [ 300,000 ] of storage abatement from 607 tenants seeking abatement. I just wonder if you've worked through all of the negotiations. Or is this still going...

[ As of June ], they've all been done.

Okay. And you'll recognize this in the accounts?

Yes. That's right.

Okay. Just in terms of the storage operating metrics, you've outlined what's happened with occupancy in quite a bit of detail. Just in terms of rent, there's obviously been a pullback in the second half. Can you talk us through how -- has that been state biased? Or is that kind of across the board? And is that a sort of targeted strategy in response to COVID? And maybe kind of talk about what's happened with rents in July.

So as you would appreciate, the situation with storage is very much a dynamic between maintaining occupancy and driving rental rate growth. And at the outset of the pandemic -- well, sorry, in the lead up to the pandemic, we had seen positive momentum from November 2019 through to February 2020, where we had strong occupancy and the ability to drive rental rate growth. Obviously, the impact of the pandemic was initially seen with move-outs, and that's what you can see on those charts, move-outs at any price. There was no price that was going to remain -- those people would remain in their stores. That was when we triggered the marketing campaign, Storage King triggered the marketing campaign, which saw us restore the occupancy back to basically almost pre pandemic levels, now at the expense somewhat of driving rental rate growth. And in fact, our biggest markets, New South Wales and Queensland, in particular, we had marginally negative rental yield growth for the June 6 months. By comparison, in ACT, New Zealand, Victoria, and to a small degree -- sorry, ACT, New Zealand and Victoria, we had positive rental rate growth across those markets. So there was a bit of a difference between how the business reacted Queensland, New South Wales versus the rest of Australia and Auckland over in New Zealand.

Okay. And July, have we seen any positive or negative trend continue?

July was reasonably flat. As I said, we had a very strong June, which I think was pent-up demand from the period of restriction of traffic and so on. July did flatten out, and we've seen similar results where we've still got marginally negative rental growth, Queensland, although it's coming back. New South Wales is still negative, marginally negative. Victoria, we get to see -- but we think given that stage 4 didn't apply until early August, we fully expect that, that's going to come under some pressure. But certainly -- and similarly with Auckland, that's obviously gone under lockdown again, just in the last week. But we did have some positive momentum in New Zealand and ACT and Victoria in July, some of which we're fully expecting to have lost given the COVID situation, particularly Auckland and Victoria.

Okay. And then just in terms of the acquisition environment, how has COVID impacted, I guess, sellers' willingness to sell? And any impact on pricing?

Yes. So there's been very little impact on pricing. In fact, the cap rates particularly are still very tight for good quality assets. I suppose where we're just taking pause is on the income performance and momentum at the individual stores, particularly stores that are new to their [ attachment ] in a lease-up mode. Because we fully expect that previously where we might have been targeting 2 to 3 years to full occupancy or optimum occupancy, given the pandemic effect for 3 or 4, potentially 6 months, that will have delayed and extended that lease-up period. So we are watching acquisitions. There is still some demand and opportunities for us to acquire. We have been thwarted a little bit because of the FIRB changes. So you'll appreciate that Abacus is foreign, and the FIRB changes that dropped the threshold to $0 means that any purchase we make is subject to FIRB approval. We've been pretty pleased to have got FIRB approvals in a sort of 2- to 3-month time frame, but it is an extra step that we hadn't planned for, certainly, and that does factor into negotiations with sellers as well.

Yes. Okay. And then just on the -- I think you're calling out in your accounts, something like $300-odd million of nonstabilized, $309 million, I think it is, nonstabilized storage assets. Can you split that out in development and nondevelopment assets and touch on where occupancy is for the nondevelopment assets?

So we have $740-odd million of the established portfolio, 57 sites that have been owned for the full 24 months. We've got $200-odd million of mature facilities that we've -- they're the ones that we've acquired in the last 24 months. $65 million in build-up mode, so they're new sites that we've -- like Brookvale, expansions of existing sites like the Hoppers Crossing, Thomastown, I mentioned. So they're in and we'll get -- I'll get you separately, the percentage of the occupancy for those. They are the ones that we've seen extended periods. So Brookvale, for example, we fully expect that will take an extended time to get to optimum occupancy. And then we've got further development sites, 5, in particular, which are either existing nonstorage buildings to be converted or rebuilt or blocks of land, $35 million worth there.

Yes. Sorry, I was referring to the mature acquisitions of $200 million just in terms of the operating metrics on those.

Yes. So that's dominated by $50-odd million of the Grey Lynn portfolio and that occupancy was tracking in the high -- the mid-90s, sort of 93%, 94%. Let me get back to you on the balance of that $150-odd million because it is about 10 stores, actually, 10 or 11 other stores.

Your final phone question comes from Suraj Nebhani of Citigroup.

Just on the cap rate side, I think the presentation mentioned cap rates were down, but the asset values have also fallen despite cap rates compressing. So can you talk about the movement in rent and incentive assumptions there?

So the issue there, Suraj, is the introduction or the adding of the low cap rate, high-value asset, particularly 99 Walker Street, to a lesser degree, 201 Elizabeth Street. So that's -- it's not a like-for-like pool, if you like, of assets. And that saw -- whilst the dollars have come off predominantly driven by the expensing of acquisition costs, we saw the average cap rate of the portfolio drop, principally because of the 5% cap rate applicable to the 99 Walker Street asset.

And I think just more broadly, there were some devaluations across the commercial portfolio. So just wondering if you can talk about the assumptions that may have changed that?

Probably the biggest drivers were properties where we had some lease expiry, particularly the Adelaide property. We only own a single building, 50% interest in the 91 King William Street building in Adelaide. That's had a major rotation, if you like, of some government tenancies out. So we've got considerable vacancy sitting in that asset today. And the other part, as I mentioned, the 99 Walker Street acquisition costs were considerable. If you back out acquisition costs from our valuation movement, the valuation movement for the office portfolio is in the 2.8% range, 2.7%, 2.8%, attributable to income and cap rates, on top of which the write-off of those acquisition costs takes it to about 4.1% for the dollar figure you see there on the chart.

Okay. Makes sense. And I think you were making some comments in relation to one of the questions earlier about this being an uncertain environment, structural versus cyclical on office. So just wondering if you can provide some more thoughts on that, how you're seeing the office market at this point?

Well, I think -- as we've mentioned in the portfolio in the presentation, I think the nature, size and average dollar value of rent of our portfolio is what we believe positions us relatively well when you look at the thematic of consolidation or decentralization of office locations from inner-city high-rent locations. So we are interested observer -- participant at the margin, if you like, at big tenant users, big office users that are making decisions around density of their office locations, centralized locations versus a hub-and-spoke mentality. And as I said, we've had very few exits from our portfolio. In fact, very few discussions with tenants about exiting because we're not in that upper league as far as dollars rents charged for the space, nor in most cases do we have enormous tenancies leased to one particular tenant. So we think there is changes afoot in the market. It's obviously very early days. But I'm just making the point that we remain vigilant and cautious on where that goes, whether it be on dollars rent, at rents applicable, whether it be on levels of incentive or even more broadly, configuration, size and fit-out of those office locations.

You raised an interesting point, Steven. Are you seeing any tenants actually changing their configuration location -- configuration within your portfolio?

Probably the one to call out is a tenant that had advised us of a plan to relocate to a new building. And they made the decision during the pandemic to not do that, to remain in situ for the short to medium term and reconsider their position. So I think, to my point, on average rent, when we look at average of $530 across the portfolio, split between $670 for CBD and $350 to $400 in the fringe markets that we're invested, we remain quite comfortable with that exposure. But -- and certainly, we've not had a vast proportion of tenants talking to us about subleasing or walking away from space or giving up locations, which is comforting.

I just wanted to clarify couple of other things. So firstly, on the abatements, did I hear it correctly that both waivers and deferrals have been accounted for in the current period income?

That's right.

Okay. So can you just clarify, like are they, like, call it, on a straight-line basis over the remaining term of the lease? Or like is that...

Yes. Straight line as per the accounting standards.

Okay. Can you quantify the impact from that? Like obviously -- it was obviously 10% of the office income and then [ offset ] from storage and retail. Can you quantify what the impact will be to this year's income statement from those adjustments?

About $4 million of rent concessions in total, on average split 60-40 between waivers and deferral, $0.7 million straight-lined to the P&L for the 3 months to June. I think that's the answer you're looking for.

Perfect. And just finally on 201 Elizabeth, and you made some comments in your prepared remarks, like that is due to settle next week. Is it?

20 August, I believe, this week.

Your next question comes from Caleb Wheatley of Macquarie Group.

Just one additional one for me. Just having a look at Slide 33 on the commercial leases, 8% now defined as short-term leases. I was just wondering if there's any changes here, especially given COVID, but just some detail around, I guess, lease length or any other structures that might be in that 8% number?

No. I think, Caleb, probably the most impactful is we've got 2 or 3 properties, the most notable being 201 Elizabeth, with development opportunities. And that's deliberations current probably for the rest of this calendar year on the feasibility, risk and return of expansion and reconfiguration, redevelopment of the buildings. So 201 Elizabeth Street, as we talked about, in the acquisition has unused FSR on the site. There is some potential, we think, to add to the floor plate on the lower levels, potentially 8 to 10 levels. Charter Hall's development team is working through that. And we're very excited about that. We think in that location to add and create floor plates that are in the 2,000 to 3,000 square meter range at the rent that we're talking about directly opposite the metro would be a very attractive investment proposition. Similarly, in Melbourne, and obviously, with a pause because of COVID, we've got discussions, detailed discussions underway at 464 St Kilda Road, whether we redevelop, whether we knock it over, whether we refurb what we've got. So we've got that building winding down to a very low lease expiry. And similarly, at 464 -- [ sorry ], Johnston Street in Abbotsford, the Computershare building, we're getting down to the last couple of years of their tenancy. I think they're a August '23 expiry. And we've got some good discussions with our tenant about a reconfiguration, resetting the tenancy. So there's a number of those opportunities that we think for the long term, set us up with some contemporary brand-new, well-positioned buildings. And that's what, if you like, boosting that nearer-term lease expiry in the office portfolio, but it's done for effect, really.

Yes. So as it stands and relating to those sorts of assets, it's kind of -- is it a rolling lease term at the moment? I know previously, you pointed to monthly leases. Is that sort of the structure until those developments or changes can come through?

Yes, probably not so much monthly, probably 3 to 4 monthly. And again, we're wanting to make decisions promptly about the future so we can instruct our leasing resources accordingly. But there's some big decisions to be made there, as you could appreciate, particularly at 201.

There are no further phone questions at this time. I'll hand back for questions from the webcast.

So I think we've changed operators, and we have a series of submitted questions. I just wanted to touch on -- there's one question in respect of our relationship with Storage King and their market-leading position. And the strategic rationale for the investment in another REIT. I think for the -- as I mentioned in the presentation, we see that as a long-term hold. It was opportunistic, given we had elevated levels of liquidity, and we saw the pricing as being very attractive compared to where that REIT has traded in the last 12 and 24 months. Another question came in, in respect to COVID and working from home. As I mentioned, I think we have a portfolio that is a nice blend of inner-city CBD locations and some attractive fringe locations, so Surry Hills, for example, Alexandria, down in Melbourne, St Kilda Road, Port Melbourne as well as the new building we're building with Tarascio, Salta -- Tarascio family in Salta, in Church Street and Abbotsford. So working from home, I think from an Abacus perspective, for our office, we saw our ability to pivot to working from home as a very successful operation, have proved that we could do it. However, do I think it's a long-term forever? No. Obviously, the key is flexibility and responding to the needs of the team but importantly, keeping an idea as to what best suits the organization and delivers for the long-term strategic benefit of the organization. That's about all we had on the system. So if there's no other questions, I'll thank you all for listening in and wish you a safe and prosperous rest of the week. Thank you.

Thank you. And that does conclude our conference for today. Thank you for participating. You may now disconnect.