Asset Plus Limited (APL.NZ) Earnings Call Transcript & Summary

Good afternoon everybody. I understand that we are live and that the systems are all ready to go right on the dot of 2:00. So that's good. Welcome. Welcome to you all. Those of you who are joining us in person in the room and to those of you who are online with us. My name is Bruce Cotterill. And as most of you will know, I'm the Chairman of Asset Plus. And on the behalf of the Board, I'd like to thank you all for attending the 2025 Annual Meeting of Asset Plus, which I now declare open. Before moving to the agenda, I'd like to introduce my fellow directors who are with us today. Starting at the far end, sort of almost in alphabetical order, Allen Bollard. Allen Bollard down the end; Carol Campbell, who's the Head of our Audit and Risk Committee; and Paul Duffy, to my left. We also have John McBain, Non-Executive Director and CEO of Centuria, who has joined us. He will be on a screen somewhere. So that's your Board. And of course, we also have with us Mark Francis, the CEO of Centuria; and Stephen Brown-Thomas, the Asset Manager from Centuria, who is responsible for the Asset Plus portfolio and a number of other Centuria executives with us who are available to answer your questions over the course of the discussion. So as I say, thank you for joining us. It's great to welcome you all, both the in-person and online participants, those of you who are here in person. Please be tolerant of our need to explain a few steps on the way through for the benefit of those that are listening online. To those of you who are listening online, through our virtual meeting platform, which is provided by our share registrar, MUFG Corporate Markets. To those online, if you encounter any issues, please refer to the virtual annual meeting guide that you have in front of you or you can phone the helpline 0800-200-220, that's 0800-200-220 for the help line. I'd encourage you to send through any questions you may have sooner rather than later so as we can get to those questions at the appropriate time of the meeting. In opening the meeting, I can confirm that our share registrar has confirmed the notice of the meeting was duly sent to all shareholders and persons entitled to receive it via the share registrar, MUFG Corporate Markets. I can confirm, as you can see around you, that a quorum has been achieved being at least 3 shareholders, and we're still waiting for the percentage of proxies. Luke, so do we have an update on the proxy percentage? 53.6% of the total votes have been received. Thank you. A copy of our presentation slides and addresses will be posted on the website of the company and has also been released to the NZX as we speak so that all shareholders have access to the presentation as delivered today. Before we move to the agenda, I'd like to remind shareholders of how they can participate in the virtual meeting. In order to participate, you'll need to have inserted your shareholder number or CSN. And once that's been done, you can click on the Ask a Question button to send your questions through. You can also click on get a voting card in order to submit your vote. And as I mentioned, we'll address all questions once the presentations have concluded. Shareholders are free to submit their votes at any time throughout the meeting until the conclusion of the resolutions. The agenda for the meeting is probably short and sweet, and it will run as follows. Firstly, I will share my address or my overview of the company's performance for the year. Then we'll have Stephen Brown-Thomas from Centuria, who will provide more in-depth detail on the past performance and the outlook. We'll then open up the floor to any questions for the management or the Board at that time. The resolutions will then be voted on. There's 3 resolutions, and there'll be an opportunity for specific questions as we approach each resolution. And finally, we'll open up for any general business at the conclusion of the meeting. The meeting will then conclude following any general business. And those of you who are here with us will be invited to join us for some light refreshments. So turning now to the Chairman's address. The year ended 31st of March has probably provided more stability than prior periods, softening monetary policy interest rate, enabling interest rates to decrease after an overly restrictive tightening cycle. However, the macroeconomic environment plays -- remains challenging with various global influences now at play. Against the backdrop of this economic uncertainty, we have made good progress during the year as the Asset Plus team. And in particular, we settled on the sale of 35 Graham Street on the 29th of November 2024. We utilized the sale proceeds from that transaction to repay all of our debt, reducing the LVR of the company to 0%. We also were left with some cash in the bank. We paid a special dividend of $0.05 a share in December, and we've retained sufficient working capital to fund leasing incentives and fit-out operations at Munroe Lane as we install new tenants in that property. We recorded an adjusted funds from operation or AFFO profit for the year of $530,000, which was in line with expectations and of course, was up from the $670,000 shortfall last year. The move to a profit position reflected the full year impact of the Auckland Council lease at Munroe Lane, although it was offset in part by the vacancy at 35 Graham Street prior to the sale. Unfortunately, the softer office leasing market and the ongoing vacancy at our Munroe Lane property has adversely affected the fair value assessment with our valuers reporting a $9.2 million reduction to the Munroe Lane valuation as at the 31st of March 2025. As many of you will know, when you look around the property market, that's been driven by softer market rental levels and increased assumed leasing period for the remaining vacant space. However, capitalization rates assumed remain largely static when compared to the previous year. As a result, the valuation decrease -- sorry, and the payment of the $0.05 per share special dividend in December results in NTA reducing from $0.389 per share at 31 March 2024 to $0.324 per share as at 31 March 2025. The good news, we are pleased to report that subsequent to the balance date, an agreement lease has been signed with a new tenant for half of Level 6 at Munroe Lane. That new lease is for a 10-year term, and the tenant is a company named Aderant. Aderant is a global industry leader specializing in business management software for law firms and other professional services organizations. They are headquartered in Atlanta. And our team and Stephen, in particular, has been back and forward with that -- with those headquarters, getting that lease finalized. The fit-out is being delivered by the landlord, that is us, and the lease will commence upon completion, and we expect that commencement date to be early in 2026. The lease will increase committed occupancy in the property from 65% up to 74%. So there is a bit of good news. It's hard going in this environment. Any of you who read Ann Gibson's piece in the Herald this morning will know that it's hard work out there in the property sector at the moment. We have made some progress. Outside of this now committed tenant, there remains a shortage really of potential occupiers of significant scale for property on the North Shore. Having said that, the -- the introductions or the people that we're dealing with has certainly improved over where it was a year ago. So we do have an improvement in inquiry. But there is an excess of supply, and we expect that further leasing will remain challenging in the short term, but we remain confident that our management team is leveraging every single opportunity that they can. And every opportunity is being chased extremely hard. And I can say that with the recent hindsight of this morning's Board meeting where there are a couple of leasing opportunities that the team are pushing as hard as they can push. The company's key focus obviously remains on leasing the balance of the space at Munroe Lane. Doing so will increase earnings, will increase our weighted average lease term and the value of the portfolio or the property will be in a better position as the company considers its options moving forward. Once Munroe Lane is sufficiently leased, as previously indicated, we will look to sell the property. As previously stated, any steps to sell Munroe Lane or to subsequently wind up the company will require shareholder approval. And so we would anticipate asking shareholders to vote on both of those decisions contemporaneously when that time comes. As most of you are aware, the Board declared a $0.02 per share dividend for the quarter ended 31 March 2025, and that was paid on the 13th of June. And a further cash dividend of $0.02 per share has now been declared for the quarter ended 30th of June 2025. All future dividends, as always, with this particular company remains subject to quarterly review. With the settlement of 35 Graham Street now behind us, the company is now generating sufficient operating profits, and we intend to fund any future leasing costs and incentives from available cash reserves. We anticipate that these decisions for the company, those decisions about the future of the business and the future of the property will likely occur sometime in the next 12 or 24 months. Ordinarily, you'd expect that to happen sooner. But in the market where at the moment, we are being cautious about promising any time lines. And it's obviously going to be subject to market conditions stabilizing and further leasing commitments being secured. Finally, thanks again for your continued support and patience as we continued with the various challenges that this business continues to throw up. Those issues that are external to the business do impact us. And we will continue to communicate to the best of our ability on the progress we make over time. Thank you. That concludes the Chairman's address. As I said earlier, we'll take questions with respect to both addresses at the conclusion of Stephen's presentation. So I'd now like to welcome Stephen to provide further detail on the portfolio and the outlook for the company. Thank you, Stephen.

Thank you, Bruce, and good afternoon, everyone. I'm going to see you all here again and welcome to those online participants as well. So I'm Stephen Brown-Thomas, the Fund Manager for Asset Plus from Centuria, and we're the external manager for the company. Look, Bruce has already given you a bit of a highlight reel. So I won't touch on this for too long, but the result for the year ending 31 March was in line with expectations at an operational level, with the adjusted funds from operations, profit of $530,000. As noted by Bruce capital markets do remain very challenging, and asset values are remaining subdued under pressure. As a result, we have those revaluation losses, leading to a total loss for the company for the year of $5.7 million. Key milestone for the year was settlement of 35 Graham Street in November, subsequent repayment of all of that external bank debt, bringing the LVR down to 0%. And then the special dividend that was paid out in December as well. So I'll just quickly touch on the key metrics for the portfolio. Obviously, we're now a portfolio of one asset post the sale of Graham Street. These are obviously a little bit out of date now, given there as at 31 March and with the subsequent announcement for the half level leasing of Level 6 at Munroe Lane on a look-through basis, those metrics in terms of occupancy and the weighted average lease expiry are going to improve. So as noted, the key activity for the year was Graham Street settlement, the repayment of the bank debt and the special dividend paid in December. And as noted by Bruce, we also retain sufficient working capital to fund any lease incentives and fit-out works at Munroe Lane. So we're very well positioned there. So we'll go into a bit more detail on Munroe Lane. So as noted by Bruce, we have had those revaluation losses, predominantly driven by the softer leasing market. with a lower market rental assessment adopted by the valuer and a longer lease-up period for the remaining vacancy assumed. So as a result of that, the valuation reduced down to $107 million from $116.2 million, and total revaluation losses to date have now been recognized of $24.2 million. So as Bruce noted, we also have some good news finally. We've got that unconditional agreement to lease to Aderant for approximately 1,400 square meters or just over half of Level 6 at Munroe Lane. 10 year lease term with them and that lease is expected to commence in early 2026 once the fit-out works are completed. And we've also just set out here the now currently committed leases at the property, which copy of this will be available online afterwards as well for all shareholders to get access to. So in terms of the balance of the space, as noted by Bruce, we are working hard to get the remainder of that space away but tenants of scale that we are targeting do remain limited on the North Shore. And as noted by Bruce, there remains in excess of supply as well. There's also 2 key competing stock where people can basically walk their businesses straight into without the need to complete fit out and the associated time impact. So we are continuing with that. And the Board has today approved some fit-out works to the balance of the premises to help assist in both marketing and being able to turn that space around to suit occupied demands as well. We've also got a lot of flexibility in the spaces that we do have remaining. The balance of Level 6 can be split into potentially 2 tenancies and Level 2 can be configured in a number of configurations, and we've also got the ability to tie that space into Level 1 space as well. So we've got a few options there that we can respond to occupy demands to meet the market. In terms of that vacant space, you can see there, we've put a bit of a range of potential rental for the remaining spaces there, which gives you an indication of what the potential fully leased income for the property looks like. In terms of outlook, look, not much has changed. Our key focus remains on getting the balance of the Munroe Lane vacancy space leased. That is our key priority. Beyond that, Key step is then potential sale of Munroe Lane and market conditions are also going to dictate when that occurs. And as noted by Bruce, any steps to sell Munroe Lane or wind up the company will be subject to a shareholder vote, and we anticipate that shareholders will be asked to vote on both of those decisions at the same time. As noted, we have also today announced a $0.02 per share dividend for the quarter ending 30th of June, and future dividends remain subject to quarterly review moving forward. So look, that was relatively short and sharp, but as noted by Bruce, we have filled any queries afterwards. That otherwise concludes the minutes presentation, and I'll hand back to Bruce to facilitate the remainder of proceedings. Thank you.

Thank you, Stephen. We'll now move to questions. And we have questions coming from a variety of sources as online if people have submitted questions and obviously the people within the room. Before we do, I have been asked by a couple of shareholders who've asked me the same question over the last couple of weeks, and I thought it was better to address that upfront rather than wait for somebody here to ask it again. So -- and that question has to do with the size of our Board. Those people have asked the question he said, "Look, you're down to one property. It's pretty tight. It's pretty obvious what has to happen? Do you still need the Board that you have." And my answer to that question has been the same really from day. It's not a big board in the first place. There are only 4 independents and then 1 shareholder appointed Board member. And those for independents have all been together since 2018. And they provide a mix of skills that continues to be relevant, i.e. we have skills in property development in property finance and audit and an agency. And -- and coupled with the broad network of people that those incumbent directors have access to I would be very reluctant to walk away from that. Every director, I can say, hand on heart, provides a good level of input. Everybody is constructive, everybody is attentive everybody is responsive. And I can't say that about every public company meeting I've sat through where people are sleeping in the corner and that sort of stuff. We don't do that at sets, you'll be pleased to know. So we do have a very attentive and highly responsive team around the Board table, and they all understand the background of where we've been over the last 6 or 7 years. And so I'm keen to hold on to that group of people for the time being. So that's my answer to that question. If anybody would like me to elaborate on it shortly than we can. So let's turn to online questions. Luke, do you have any questions coming in from online?

Thanks, Bruce. We've got 2 questions so far. First question, in regards to the sale of Munroe Lane, is there a minimum level of lease occupancy that needs to be achieved before deciding to actively sell the property? If there is a level to be achieved, what is that anticipated to be?

We haven't made a decision around what that would look like. But the decision to sell Munroe Lane is going to be dictated by a number of things. Firstly, the occupancy; secondly, the status of the leases and the rental that we're then getting; and thirdly and most importantly, is going to be the state of the market and whether the market can tolerate or whether the market is likely to generate interest in a property of that nature, and that's all about the economic recovery. And it's a bit hard to pick that at the moment or to identify what that might be. But no, the answer to -- the short answer to the question is we haven't stipulated a specific percentage of leasing.

With there being no long-term debt on the company and there being sufficient funds and reserve to undertake future potential fit outs, what is preventing all the future ongoing surplus cash flow being dispersed as dividends?

Well, we have estimated the cash requirement as it relates to fulfilling our leasing obligations going forward. And -- and that market is constantly changing. The market is very soft. We know that. So that's a moving feast. And so the reserves -- the cash reserves that we are currently holding reflect our opinion as to what that level of obligation may be. The company is cash flow positive and profitable from here on in our current structure, and we will continue to make dividend decisions on a quarterly basis as we have done over the last couple of years and in particular, as we have been able to do since the November sale of Graham Street.

And one final question online at the moment for Centuria representatives. Would Centuria consider listing its funds if APL decided to delist?

We would have to ask Centuria that. I have no insight into that. Mark, are you able to answer that?

Yes. I mean I think, obviously, there's no sort of -- they're not linked in any way. As plus delisting is obviously no bearing on whether we would potentially list another asset class it's a possibility, of course, that we would list again. We've talked -- we've got an industrial fund, which we launched some years ago and indicated that we would potentially list one day. So that's still a possibility, but sort of asset plus delisting is no bearing on that at all.

Anything else?

What will be the cash holding after the completion of the upcoming Fed at?

Stephen or Simon? I'm guessing about $8 million, but confidentiality -- it's confident. We've got a confidentiality clause around that. Okay. We've got a confidentiality clause around the lease. So we can't stipulate what that might be, but I think I've just given you a hand by accident. Are there any other questions? Nothing else online, Luke? Okay. Let's go to the room, you see.

Simon Thode, shareholder. With the ground floor, it's suitable usually for like retail or like computers or a Chinese [indiscernible], something like that, which can have hundreds of tables. And if so, I mean, is that possible? And if so, what about parking? Because I know you've got, I think it was 48 parks or something like that and how many of those parks are available? And are they available at the appropriate time, maybe in the weekend?

So Stephen is dealing with the leasing inquiry. So I'll hand over to him.

Thanks. Look, the ground floor retail, food and beverage spaces demand for that is driven by the occupancy primarily in the building, given the occupancy status of the building at the moment, the cafe that we've already got there servicing the building is sufficient. As we get higher occupancy levels and more bodies in the building, that could well drive future inquiry and generation for those retail spaces. But at present, there is no demand. And there is enough kind of local food and beverage and other options within the Albany Basin, that currently service that. So right now, there isn't. But we have looked at a number of options and uses to try and activate that ground floor space and bring people into the building, but haven't successfully transacted anything as yet. And sorry, the second limit to that was the car parking. We are reserving those 48 car parks for the balance of upstairs office tenants, but there are off-site car parking options that we're working with parties on to. So next door, there is a vacant lot that Wilsons are currently operating. And then there's another site within close proximity as well that are leasing car parks on a monthly license basis. So we do have that ability to offer up to tenants for car parking.

Yes?

My name [indiscernible], the shareholder. First of all, Carol question. On Page 31, I noticed that the operating expenses rise from about $2.6 million to nearly $4.1 million. So that's about up of 50%. And on Page 30, what are going to be the future plan of that about $11 million cash? Will they be investing to something much better return compared to setting their earnings, how do they any return? This is Carol question. And then I also have a question, the Centuria question...

[indiscernible] perhaps and we could get the answer to those 2 questions from Carol, and then we'll come back to you for your third question. Thank you.

Going to the second question first, the $10 million that you started about. That's money that we're keeping for running the business and also for lease incentives and for any of the fit out. So that was what Stephen covered. So that's what we've kept as our reserve back. So we're not going to invest that in the building at all that's in our kitty for actually just operating the company in for lease incentives and things like that.

It has been interest-bearing at the moment.

Yes. So it's not just sitting on a get a normal bank and we are earning interest on it. But it's not -- we're not investing it in a building, okay? And then I'm going to suggest the increase in operating expenses will be the management fees and things like that were looking to Simon.

The increase from $2.6 million to $4.1 million in operating expenses. I imagine that includes the commission on the sale of Graham Street. Simon?

I think you're referring to the cash flow statement, which is not -- which is obviously driven by timing and the working capital movements. But the actual operating cost only went up about $250,000, $300,000, which is essentially the impact of Munroe Lane, a full year impact of Munroe Lane.

Yes.

Yes. So we go to Note 6 has got the detail of the actual expenses as close to the cash.

Did you have another question?

Yes, sure. And I also e-mail Centuria in March, and I haven't got any reply a general routine or procedure that Centuria doesn't reply e-mail because I find that e-mail to be quite relevant. What I'm thinking is given that the vacancy within Munroe Lane and also Centuria has office too. So my idea was that what is Centuria, for example, use the office in Munroe Lane instead of having to spend on existing offices who would cost the company much less. That's what I'm thinking. Yes.

Well, that's probably a decision for Centuria. They don't own Asset Plus. They are a shareholder in asset plus and they own 19.9% of the shares in Asset Plus. So they are no more beholden to us than that, and we are no more beholden to them than that. So I would imagine that Centuria has an existing lease for their existing premises that will take some time to run out. And at the end of that lease period, Centuria will decide where they want to occupy. But it's probably not our decision. It's probably a decision for them.

Sure. But I didn't get any reply from my e-mail. And I was told last year that the manager tried to drive around offshore to convince people to run those offices there. But then if Centuria doesn't use the vacancy utilize the vacancy of the Munroe Lane, why should other people become Vince...

Well, you're probably aware, Centuria have a number of other properties and they probably have vacancies and a few of them as well. Coming back to the comment about people driving around the North Shore talking to tenants. We're certainly doing that. And we're certainly doing everything we can to generate interest in the property from incumbent tenants, and we'll continue to do that.

Yes. But my -- but I ask... .

I get your point about getting a response.

Why doesn't Centuria even want to use the recon processes?

Yes. So that's not our decision. That's not Asset Plus' decision.

As Bruce alluded to, we are currently committed in the space not far from here. So we can't move for another 6 years. But just to come back to your point about not receiving a response, that's certainly not customary for us to not respond to e-mail. So perhaps at the end of the meeting, just and I have a quick chat about where you e-mailed -- how you e-mailed and work out how -- why and how you didn't get a response.

Thank you. Yes?

Yes, [indiscernible], a shareholder. Just now talking about renting out the space, I have an idea because you have how many for still vacant?

1.5.

1.5. Yes, then I think it's suitable for holding a small conference meeting because you just need some chairs and chairs not so expensive. And because the Sky City convention center because of the fire problem, they still cannot rank debt for meetings. And then this will be of a smaller scale meeting like several hundred people and then maybe those customers when they look at the building, maybe they like because like some rich people like I think the name is James -- James Cameron, he and his wife like the original design and bought a lot of that sort of thing, and this is somewhat of more design and maybe some rich American like to pay a lot of money to buying your premise. And so just to let it out for renting out for meetings, we can earn some extra money. And at the same time, maybe we'll be able to extract to attract new customer like that in Alabama, if Alabama...

Well, firstly, we're happy to attract all rich Americans that you can come up with. So we're certainly up for that. In terms of the space being used for meetings, we have introduced the space to people in meetings planners people running shared office facilities that are -- whose business is that type of thing. So the property has been well canvassed amongst that market. There is quite a strong market around that activity at one of our competing properties, which is the Smiles Farm facilities. And we haven't been able to land any of those tenants yet. But they were tenants that we went out after early on. Thank you. So we have -- sorry, did you want to add?

To that as well. Sort of Sky City conventions, that's due for completion shortly. So that's very near to and that that's going to be available and take a lot of that demand. And then secondly, just looking around the room, you can see the amount of equipment that needs to go into hosting conference and meeting spaces. It's not just the case of opening the doors and putting some cheese. There's a significant cost and capital that will be required to set it up for that. So that's also a barrier to making that word. But thank you for the suggestion.

Are there any other questions? Yes, a couple over here.

My name is Jaggat Dave. I'm a shareholder. So I see that sale of Insane property is $54 million...

Sorry, say that again.

Sale of investment properties, $54 million.

Yes.

But when I go to the financial position side, I see that the reduction in the investment property is only $9 million. So obviously, something has been bought there?

Simon, do you care to respond to that? Thank you.

Okay. A couple of points there. The $54 million actually relates to the net proceeds when Graham Street was sold to $68 million. We received a deposit of approximately just under $14 million. So $68 million, less $14 million is $54 million. And then the $9 million you referred to, I believe, is the fair value movement in the investment property.

So is like...

Do you understand that?

No, sorry, actually...

Is it the fair value component that you don't understand?

No, I will convert, I understand very well -- so that is not an issue. My understanding is, let's say, if I -- because I think -- for example, I just -- I'm new to this business. So I was just thinking, okay, something has been sold, which is about $54 million. But like if somebody wants to know whether the company is buying something, where is that because of a...

The company hasn't bought anything.

Yes, because not -- #11 is not explaining anything. There's no specific mention of any particular property. So it is -- the company is not buying anything, right?

The company hasn't purchased anything in the last 12 months. We have sold 35 Graham Street, for $68 million. The deposit was received earlier and the on settlement, the settlement receipts were $54 million after the deposit.

Yes. So obviously, my next question is, when you are saying that you are you want to propose that you also want to wind up this company and delist the company?

No, we're not proposing that. But we are saying we will look to sell the Munroe Lane property, our last remaining asset. We will look to sell that when leasing is near completion and market conditions, assuming market conditions are appropriate for the sale of the property. And at that time, we will come back to shareholders. and discuss with shareholders, firstly, whether or not we sell the property. And secondly, if -- and secondly, whether we wind up the company at that point. So that is not a decision that's been made. And that decision won't be made without the input of our shareholders.

Okay. So my last question is, so when the company has made operating loss, almost like a very small loss. So what was the need for distributing $18 million dividend distributions made to shareholders.

The dividends -- the majority of the dividend came out of the proceeds from the sale of 35 Graham Street. So at the time that we settled that sale, the Board decided it was appropriate to declare a dividend of $0.05 per share. And that is what that $18 million, Simon, Am I right? That's what that $18 million refers to and that dividend was declared in December.

Okay. Sorry because I'm going line blind, so this should be my last question. So how do you think the prospects of this business in the next 3 years is like do you expect growth or stagnant or downside?

Well, the challenge the business has is that it lacks the scale that it would ideally need to be a serious player at the top end of the property market. And our intention, let's say, 5 years ago was try to return it to some form of scale, but a combination of events over that period as we sold down assets that we didn't think were good long-term assets to hold. And as covered it and basically made quite a big impact at the time on the demand for office space. And then we've come out the other end of that and into a recession and an economy that's struggling to get back on its feet. All of those, I guess, events have made it very, very difficult for us to identify a way to get assets to a level of scale that would make it a competitive and frankly, a business that shareholders had an appropriate level of interest. So that's the background to the decisions. But no decisions have been made, and they won't be made without shareholder input. Sorry, over here. I think you had another one.

Yes. Question is, we're looking at forecasting, what's the forecast? I know there's been a loss do what is the forecast for property valuations? Is it further losses? Or is it flattening out? Or is it increasing?

You'll have to talk to the valuation fraternity about that. Look, I would like to think -- and this is just a personal opinion, so -- but I would like to think that as interest rates come down and confidence is restored. The valuation formulas that are applied to property assets across the board will be reconsidered by the valuation fraternity. They certainly -- that valuation sector certainly sort of rewrote their views on property 2 to 3 years ago and rightly so given the environment that was out there. And as we lease up this property and hopefully become a participant in a recovering economy, and we see some -- the levels of investment interest return. I'd like to think that valuers would reconsider those valuation multiples. But I'm not a valuer and it's a bit risky talking for them, but that is what I would personally assume will happen or expect to happen. Yes?

My name is Kevin [indiscernible]. I'd like to compliment the Chairman on his health this year. I've got a couple of questions just on Page 39.

I presume the financial questions because you're looking at the finance people.

Yes. Yes. Okay. The portfolio value last year was $171 million, a reduced $107 million when Graham Street was set. So sorry? No, I'm just telling you effect that you're going to ask you a question.

This is the background page...

Just so you know what I'm saying it reduced to $107 million. So if you look at the 12-month period, the management fee was 33% at $107 million and 66% at $171 million. The management fee in '24 was $990,000 and have reduced $175,000, which is $115,000 difference. Do you expect the management fee to drop dramatically this year because you're holding -- you're managing one property at $107 million, which is a brand-new property which should have no defects or hassles with it. That's my first question.

Would you like to answer that? Simon, do you want to answer that? So the management fee is the fee that we paid to Centuria. It does go up and down because the -- for instance, they get a fee for leasing, for example. So it doesn't just sit static. But Simon, you could elaborate on that.

Okay. So I think there's a couple of points here. The first one is that fee was payable on Graham Street. Now that was held for best of 8 months of the year up until the 29th of November. So that needs to be factored into your calculation. You don't just take the beginning and the end point. And the second point is Munroe Lane was written down by about $9 million in March. So the impact that occurred in March. So I suppose the key point is it's not the 2 staffing endpoints that we calculate the fee is charged quarterly. So you need to look at the balance sheet across the financial period. And the second time to your second question, the fair value of Munroe Lane at the moment is $107 million. The fee is approximately 50 basis points or 0.5% of $107 million, which is $535,000. That is the base fee. Obviously, as Bruce alluded to, there are additional fees such as leasing, but they're only triggered on an event basis and there was a small amount of property management fees at Munroe Lane as well.

So there's only a small component to Centuria for the management of the property. You're telling me that the bulk of it is made up of leasing fees. Is that correct?

The base management fees for managing the whole company.

So just for clarity, I think you know this, but I'll -- we don't have any staff at all in assets. We just have a management contract with Centuria, which was put in place and Centuria's management agreement with us has a number of components that they are responsible for and the fees attached to that. The base fee, which Simon refers to as a fee based on the net asset value being managed. And that in -- and that fee is now based on $107 million, and that was struck when the valuation was accepted, which was at the end of the financial year. So the running rate on that fee, if you like, wasn't running off $107 million throughout the year, although it will be running off $107 million in this financial year because it was struck on the 31st of March.

I understand that. That's why I said at the time, 66% of the time, it was running at $171 million. Yes. That's it. So that we should see a reduction in the management fee across this year? Will mainly be dependent on the leasing fee that...

The fluctuations will be around leasing and associated activities, yes.

And there's also if a real estate agent is involved, there is no leasing fee payable to Centuria. We only get a leasing fee if it's a direct deal like Auckland Council loss. So there's a few carve-outs as well for some of those fees.

Okay. My second question is the other administration costs on that same [ 39 ]. If 2024 was $215,000, if '25 was $344,000, can you just let me know why there was a big difference in that?

Admin cost of about $100,000 movement.

It's administration costs, other administration costs...

So I'm going to [indiscernible] fingertips.

I believe...

We're getting into the detail. I know but...