Asset Plus Limited (APL) Earnings Call Transcript & Summary

Good afternoon, everybody. I understand we've flicked all the right switches, and we've got the people online attending. So good afternoon to all of you, both those of you present and those of you with us online. My name is Bruce Cotterill, for those of you who don't know, and I'm the Chairman of Asset Plus Limited. On behalf of the Board, I'd like to thank you for attending the 2023 Annual Meeting of the company, which I now declare open. Before moving to the formal matters that we have before us today, I'd just like to firstly introduce my fellow directors who are present. So on my far right, your left, we have Carol Campbell, who's an Independent Director; and on my far left, your right, we have Allen Bollard, who's also an Independent Director. We have Paul Duffy as an apology. Paul is actually currently on a plane, traveling overseas, so wasn't able to join us. And then joining us from Sydney virtually is John McBain, who is a Non-Executive Director and is joining us via video conference from Sydney. So that comprises our Board and welcome to all of you. We also have the Centuria management team with us, Mark Francis, the CEO of Centuria New Zealand; Stephen Brown-Thomas here on my right, who's the Asset Plus fund manager who works with us on behalf of Centuria. And Stephen will be providing the presentation today following the Chairman's address and will speak in more detail about the performance of the business. We've got other members of the Centuria team as well, Simon Woollams and Luke Fitzgibbon, they're at the back of the room. So they'll be available to answer any questions you may have. Our auditors are present today, Grant Thornton, in case there are any questions on the financial accounts that they need to attend to. So welcome. It's a pleasure to welcome all shareholders who are with us today. As I said, both groups, those of you that are with us in person. I think for those of you online, we've got about 20 people in the room, and those of you that are online through our virtual platform provided by Link Market Services. To those of you online, if you encounter any issues, please refer to the virtual annual meeting online portal guide. That's a bit of a mouthful. The virtual annual meeting online portal guide. I'm sure somebody could come up with an acronym for that. And alternatively, you can phone the help line [ 1-800-200-220 ]. And those of you online, I would encourage you also to send in any questions you may have so as we can make sure those questions are in the pecking order and we can answer those at the appropriate time in the meeting. In opening the meeting, I can confirm that our share registrar has confirmed that the notice of meeting was duly sent to all shareholders and persons entitled to receive notice of it via the share registrar, Link, and a quorum for the meeting being at least 3 shareholders has been achieved. We have proxies of 52.6% of total votes have come in to us also. A copy of the presentation slides and the addresses will be posted to the website of Asset Plus Limited and has also been released to the NZX so that all shareholders have access to the presentation materials that are delivered today. Before we move to the agenda, I'd just like to remind shareholders of how to participate in the virtual meeting. In order to participate, you'll need to have inserted your shareholder number or CSN. And once you hit that -- once you've done that, you can click on the Ask a Question icon. There should be a slide coming up about here. Click on the Ask a Question icon. And -- or alternatively, when it comes time to vote virtually, click on the Get a Voting Card icon to submit your vote. As I mentioned, we'll address all the questions once the presentations have concluded, and shareholders are then free to submit their votes at any time until the conclusion of the resolutions. The agenda will be as follows. Shortly, there will be the Chairman's address, as I mentioned, followed by Stephen Brown-Thomas from Centuria speaking in further detail on the outlook on the performance of the business and the outlook for the year ahead. We'll then open the floor to any questions. The resolutions will then be voted on. And finally, we will open up for any general business of the company as brought to our attention by shareholders. The meeting will then conclude after any general business, and you'll be invited, to those of you who are here -- present with us today, we invite you to join us for refreshments at the conclusion of the meeting. So are there any questions about the process or the timetable or the agenda? If not, we'll proceed, and we'll proceed with the Chairman's address. You've been circulated the Annual Report, and there is a Chairman's address in there, which is similar to what I'm about to say. So in summary, the macroeconomic environment continues to prove challenging for businesses like Asset Plus. We've successfully navigated the impacts and ongoing effects of COVID-19 and have now arrived at an environment or a business market characterized by high inflation and increasing interest rates. Our focus throughout has remained on the successful completion of Munroe Lane, which I'm pleased to say has now occurred. We completed effective 17th of May of this year, and the Auckland Council lease has commenced. Munroe Lane development as a newly constructed, highly sustainable and well-located decentralized office building with a blue-chip tenant covenant being Auckland Council across just on 2/3 of the property. You can see it there on the screen. And I think it's fair to say that the leasing of the remaining space, we got about 1/3 of it left, has been challenging. But since the building has been completed, that leasing inquiry is increasing, and we remain confident that the fundamentals of the building, the location, the style, the construction will attract tenant commitment over time as that leasing market comes right. During the last year, you'll note that we've completed the successful sale of a number of properties, the Eastgate Shopping Centre, Springs Flat Road property in Kamo, near Whangarei; and #35 Graham Street, which is subject to a deferred settlement in either December 2023 or December 2024 at the purchaser's election, and there'll be more about that shortly. Subsequent to the end of the financial year, we've also successfully sold and settled our shopping center property at 22 Stoddard Road Mount Roskill, which leaves ultimately the new office building at Munroe Lane as the company's sole remaining asset. The Board is of the view that realizing these assets at or near NTA over the last 12 months has been a sensible way forward. It's enabled us to utilize sale proceeds to reduce debt and we feel it's a prudent capital management approach given the current macroeconomic climate. Despite the current challenging funding environment, the company's banking facilities were extended during the financial year from September '23 out to March 31, 2025. And the BNZ continue to remain supportive of the company and our strategy, which is evidenced by their agreement to extend our facility limit at the time when the arrangements were renewed. And post the balance date noncompletion of the Stoddard Road sale, the facility limit has been reduced back to $52 million. Given those challenging conditions in the market, we have seen a revaluation of our portfolio as at March 31, 2023, which resulted in a $13.2 million revaluation downwards or revaluation loss for the year. And as a result, our NTA reduced from $0.44 a share to [ $0.403 ] a share. The result, however, for the full year is in line with the expectations being a $700,000 loss on an AFFO basis, given the vacancy and unrecovered OpEx at Graham Street, which will continue until settlement occurs. The dividend, as you'll know, as you'll recall, was suspended in March '22 based on the forecast earnings for the company and is likely to remain on hold until Graham Street settles and the balance of Munroe Lane is leased. And at that point, the future of the company is determined. The company's key focus is now on leasing the balance of Munroe Lane, and I can tell you we've just come from a Board meeting this morning where that's topic #1 on our agenda each month. If we can lease that, firstly, obviously, our earnings will increase. Our WALE will improve, the value of the portfolio will improve, and we will be in a better position to look at the company going forward, and that building at Munroe Lane completed and fully leased will better enable us to position the company for whatever is next. Once leasing is near complete or complete and with the pending settlement of Graham Street, we anticipate that the company will be in a unique position of having 0 debt and in fact, a small or modest cash reserve available. And we will then look to sell Munroe Lane, putting the company in a position to consider all of our options, which will include a wind-up option, in other words, to wind up and return money to shareholders or alternatively to pivot in a new direction. And I should say at this point, and it is one of the questions that's come in, we haven't decided on a new direction. We don't have anything in mind, but we are open to looking at something if something comes along. We wish to emphasize that the current variables being the leasing of Munroe Lane and the final settlement of Graham Street and the market conditions at the time will all influence the timing and ultimate outcome of those decisions. And just to make things very clear, upon the completion of leasing and the completion of the sale of Graham Street, any steps to sell Munroe Lane or to subsequently wind up the company will require shareholder approval. So we will be coming back to shareholders at that point and making sure we take a clear direction from shareholders in terms of the appropriate steps forward, and we will be asking shareholders to vote on both decisions at the same time. In the meantime, the management team remains focused on the objectives that I've outlined, namely the leasing and making sure we get the Graham Street sale process completed. Finally, I thank you for your continued support and patience as shareholders in the company, and I look forward to communicating our progress over the next few months. That concludes the Chairman's presentation and we will take questions on that at the conclusion of the next presentation, which is coming from Stephen Brown-Thomas. As I mentioned, he's the asset manager from Centuria, who is responsible for looking after the Asset Plus portfolio and has been instrumental in the management of the development of the Munroe Lane building that you see before you. I think Stephen first walked on to that property when it was grass. And he's had many sleepless nights, I suspect, including right through COVID, trying to keep the construction project going. And so Stephen has been front and center for the company on that project over the last few years, and it's now my pleasure to introduce Stephen Brown-Thomas to you.

Thank you, Bruce, and good afternoon, everyone. Stephen Brown-Thomas from Centuria, the Asset Plus Fund Manager. As Bruce says, I've been the fund manager there for a number of years since 2018, since we took over the management rights for the company. And it's certainly been an interesting journey over the past 3 or 4 years delivering this Munroe Lane project through the challenges that we've had. Look, we'll move on to a brief overview. Bruce has touched on a lot of the items that I'm going to cover. So there will be a little bit of duplication here, sorry. The full year result was in line with expectations on an AFFO basis or adjusted funds from operation with a small loss there. As Bruce also touched on, given the increasing interest rate and cost of capital, capitalization rates have shifted to reflect that change in the cost of capital, which has ultimately resulted in the property valuations decreasing. That's led to $13 -- just over $13 million of revaluation and disposal losses. We're also taking into account the sales we've made through the year for a total loss of $13.05 million for the financial year. As Bruce also noted, subsequent to the fine -- March 31 financial year, we finished Munroe Lane effectively with the Auckland Council lease commencing on the 17th of May and practical completion under the construction contract subsequently occurring on the 13th of July. As Bruce indicated before, there are a raft of images throughout this presentation of that completed development, and I'm sure you'll agree that it does present extremely well and is an exceptional quality building now that it's complete. Let us quickly touch on some of the key metrics. As at March 31, you can see that there were 3 properties in the portfolio. Occupancy was 37% and a pretty low WALE reflecting the vacancy at 35 Graham Street and updated metrics as at August with the divestment of Stoddard Road subsequent to year-end and the Auckland Council lease commencing at Munroe Lane. You can see occupancy has increased, but still somewhat down given the full vacancy at Graham Street. The WALE has also increased to 6.3 years, reflecting the 15-year initial lease term over that building to Auckland Council. And you can see the loan-to-value ratio for the company. They're in a pretty healthy position. And as Bruce touched on, once 35 Graham Street settles, ultimately, all of that debt will be repaid. In terms of significant activity for the year. Look, yes, the sale of 35 Graham Street was one of the key actions that occurred early last year. More recently, obviously, the Munroe Lane completion has been a very big milestone for the company after a 4-year journey from acquiring that site through the practical completion lease commencement with Auckland Council. And we've also had the successful settlement of Eastgate. If you recall, that was on a deferred settlement basis that settled in August last year. We did have a slight hiccup with a title issue and a building covenant that we managed to navigate and circumvent that lead to settlement, albeit slightly delayed, which was a great result for the company. And we also successfully settled the bare land in Kamo, Whangarei as well. Sale proceeds from all of those divestments have largely been used to repay debt, given the cost of those facilities. And we also utilized some proceeds to bolster working capital for the company as well and provide some buffer. As Bruce noted, the loan facilities for the company were extended from September '23 out to 2025. And post year-end, as noted, Stoddard Road also set off. Moving on to Munroe Lane now. So as you can see, excellent quality building presents extremely well. We had Auckland Council lease commitment as at the 17th of May. They occupy 2/3 of the building. So a significant income stream coming in from that date, and practical completion was subsequently obtained on the 13th of July after some tenant led delays deferred debt. The building does set a new benchmark for quality in terms of office space available on the North Shore. There's nothing comparable in our opinion. And obviously, it's got the credentials to back it up as well in terms of the sustainability in terms of 5-star Green Star design rating and 5-star NABERS energy rating as well. Obviously, look, the project was delayed from the original target completion date of December last year as a result of the impacts of COVID-19. It certainly was pretty challenging for the entire project team to deliver a $100 million construction value projects through government-mandated lockdowns and regional lockdowns and obviously, all of the global supply chain issues that we faced and everyone was scrambling for toilet paper, and we're trying to get materials from all ends of the earth. So the team did a really good job to develop. They're building with the delays that we had were effectively 5 months on the base build with the next couple of months on top of that [indiscernible] So pretty good results in the end. We had an opening ceremony with the tenants, all the project stakeholders, [indiscernible] name upon the building [indiscernible]. And that was a very successful opening ceremony that we had at the end of July, which concluded the construction phase and occurred before Auckland Council commenced occupation. They're now largely in occupation. They've got circa 700 staff that are now occupying their building, and they'll continue to ramp up occupation moving forward as well as they're working from home mandates come to a complete end, hopefully, in the near future. We've also now bedded down the transition from the development phase into the management phase. Our [ FM ] team fully across everything. All the contracts there are now all in place and bedded down. And as Bruce has touched on and has touched on at the annual result as well, subject to securing some leasing commitments over the balance of the space, the company will look to sell that asset at some point in the future once that commitment is secured. In terms of the financial metrics for the developments as we touched on with the increasing interest rate environment. Capitalization rates have increased, which has in turn led to a decrease in the property's value. And that meant as at March 31, a $7 million loss was effectively crystallized as at the balance date. There was also a change in valuation methodology. We did change from holding at costs through the development phase to measuring at fair value given the development was effectively complete as at March 31, and we could then reliably measure it at that time. In terms of leasing, Auckland Council, as part of their company-wide cost-cutting measures, there's now a mayoral mandate to reduce their occupied footprint across the Auckland Council portfolio and Level 5 within Munroe Lane has fallen within that mandate. So they are actively trying to sublease that space on the market at present. There are quite a few challenges that we're going to face with that. It was obviously designed around their occupation over Level 3, 4 and 5 with an open air atrium. So there's some acoustic privacy, security and fire issues with them subleasing that to a separate tenant. And they've also got a few issues that there's 3 dedicated lifts that service Auckland Council floors that are behind a secure line. We need an access card to get through. So for them to open that up and share that with the sublease tenant is going to be very challenging and basically breach all of their security protocols. So we think that limits them to effectively subleasing to CCOs, council controlled organizations, or potentially some government departments that they may be able to colocate with and effectively share that space. So we think they're going to find that quite challenging. And what they'll probably end up doing is shuffling the [ dithers ] within the council portfolio. We think they'll more than likely be able to sublease space here in the CBD much easier than they will out at Albany and what they'll do is they'll just move people around based on the space that they can't get away. In terms of the rest of the space, we have signed an agreement to lease with a very reputable cafe operator for the kiosk on the ground floor. That really is the heart of the development on the ground floor there. It's going to provide great activation of that space. And look, we make no apologies for the challenges we've faced in terms of getting the remainder of the space away. COVID-19 obviously did have a pretty big impact on office occupation within New Zealand, but we are seeing the return to the workplace now occurring, which is great. Certainly, public transport vehicle movements are all increasing and continuing to increase and a number of your large corporates forcing people back into the office, which is great to see and people are now committing to leases and long-term leases as well, which is great to see. Look, when we signed the agreement to develop and lease with Auckland Council back in December 2019, there was basically no competing office space available on the North shore of this quality. Fast forward to today, and there's about 35,000 square meters of available space competing with us through both direct lease and sublease opportunities. So people like Vodafone in New Zealand, the insurance companies, they've all scaled back. Some of those mandates are starting to drop. Obviously, after the weather events earlier this year, the insurance companies are all of a sudden finding themselves back in the office with some work to do. But that is changing. And obviously, the economic climate we're now in as well is not helping in terms of tenants making decisions and committing CapEX to properties and leases as well. But look, we are very confident in the space and time, we will secure and attract that tenant commitment. Certainly, as we've neared completion and we can get people through the building without having to put hard hats and [indiscernible] it's a lot easier to get in there. They can now see the finished products rather than relying on renders and marketing images, we've now got the finished product to show them. And when you walk the top floor, it's 100 meters long undrafted space with excellent daylight and views for basically anywhere that really does sell itself. So that's certainly helping. And we're continuing with all the direct marketing initiatives that we've utilized to date, and we are confident that we will get that space away in due course. All the feedback has been very positive to date. Moving on to Graham Street now. So as noted, it has been unconditionally sold to Mansons for $65 million with settlement scheduled for 1st of December 2023. However, Mansons do have a right to defer that settlement date 12 months to 1 December 2024. They -- if they exercise that right, they need to notify us on or before the 1st of October of this year, and there will be $3 million of additional consideration or payment that has to be made and the deposit also increases to 20%. And when they give us that notice, they'll have to pay that additional $7.1 million. The initial $6.5 million deposit was utilized to repay debt for the company. And in the meantime, whilst the property is sitting there pending settlement, we are securing all short-term leasing opportunities that are available to us to partially offset some of the holding costs and operating expenses of that property. However, it is a bit challenging. As you may recall, we partially stripped out some of the fit-out ahead of the anticipated redevelopment or refurbishment of that property before we sold it. So it's not in an entirely occupiable state for an office tenant, for example, just to walk in and occupy it. And obviously, with the potential uncertainty around settlement date, there's also a bit of uncertainty for potential tenants going into that space without any certainty as to when we can give them tenure to. The other recent divestments we've already touched on, Eastgate that settled in Christchurch after we had the title issue that was rectified. Those sale proceeds were again largely utilized to repay debt facilities with the company. The Kamo property also sold, and the proceeds from that were applied towards the lockbox that was put in place as part of the new debt facilities. And Stoddard Road is sold and settled post balance date. That went through in a pretty quick process and settled on the 1st of May, and those proceeds were again utilized to repay debt for the company. So moving forward, Bruce has largely covered this as well in terms of our key focus. It is absolutely on leasing the residual space within Munroe Lane. You can see here this is a photo of Level 6 lobby presents extremely well, as you say, a new benchmark of quality for the North Shore. And we are confident that in time, we will get it away given the quality of that space and also the cost effectiveness of it. As Bruce also touched on, the dividend for the company does remain suspended until the future of the company is known. We will continue to be an operating loss position until 35 Graham Street settles and further leasing is secured at Munroe Lane. As just noted on 35 Graham Street, we all know the definitive settlement date for that property, whether it's December '23 or December '24 on the 1st of October this year, so not too far away. And subject to securing that leasing commitment at Munroe Lane, as we've noted, the company will look to sell that property. And as Bruce also touched on, once Graham Street settles, we'll be in a unique position of the company having 0 debt. And obviously, if Munroe Lane can be sold, the company would then be sitting on a large cash balance with a range of options available to consider in terms of the way forward. As Bruce has also noted, any decisions in relation to both of those matters will be subject to shareholder approval and a vote. Look, that now concludes the manager's presentation. Thank you again for being here, both virtually and in person. I'll pass back to Bruce, and he'll run through the questions. Thank you.

Thank you, Stephen. Just before we move on, I would just urge people to take a look at that photo. So that photo is of the atrium from the ground floor looking up in the new building at Munroe Lane. And as you can -- there's a cafeteria on that ground floor that the photo is taken from. And as you can see, it's a really nice finish. It's a lovely building internally. The interiors look terrific. And those floors, you can see the atrium -- the floors are open until you get to the top floor, which is glazed, and that's the Level 6 that we're looking to lease. So you can see why it might be difficult for the council to sublease Level 5 with that sort of degree of openness. But it is truly a special space inside. So thank you, Stephen. We now go to shareholder questions. So please feel free to fire any questions that you may have at us. And I'm going to kick off with the 2 questions that we've received in advance. For those of you online, you should have instructions appearing on your screen in terms of how to ask a question, please send that through and those questions will be relayed to me. But to the questions we've received in advance. Firstly, from Ivan Turk. Is the Board going to keep the promise it made when it took over the management rights of the company and make it profitable or just use it as a platform to make fees from? So thank you for that, Ivan. So, I guess, a couple of things to clarify. Firstly, the Board hasn't taken over the management rights. The management rights were purchased by Augusta, which is now Centuria, and that happened as a result of a shareholder vote. The directors of the Board are paid directors' fees. Three of us are totally independent, and all of that is fully disclosed in the annual reports of the company. The Board has actively tried to grow the company, directing the manager, which is Centuria, in the best interest of shareholders, and we have attempted to respond to the market conditions as they've changed. I think it's fair to say they've changed a lot in the last 4 or 5 years, and it hasn't been without its challenges. Centuria, who are the manager, are also the largest shareholder of the company. So their interests are very clearly and very firmly aligned with the interest of all shareholders. We think they've done their utmost. In fact, well, we think they've done a great job since taking over the management of the company to grow the company and make it profitable and to turn it around. The recent divestments we've made have been made to do everything we can to preserve the capital position of the company and in our opinion, do reflect the best interest of shareholders and the company at large. The managers -- just for your information, the managers under the terms of the contract do not receive a sale fee, a fee for selling a property. And the management fee, of course, decreases as properties are sold from the portfolio. So it's in their interest to grow the company just as it is in the interest of all of you. So Ivan, I hope that clears up the basis of your question. The second question I have is from Carl. And Carl says why is the management done from outside -- by outside people rather than internally? It's about the time this management is set as the shares are doing so poorly compared to other listed companies who property -- who manage their properties internally. Asset Plus should really be wound up and the money returned to shareholders. So Carl, a few answers to your question. You make a number of points in your question. So a few answers to that. Firstly, the management was externalized. And the main reason it was externalized when we voted on that with shareholders in 2018 was to get the cost lower. So the cost of running the business via an external third-party manager is certainly lower than having our own infrastructure in-house. And as noted in my response to the prior question, the manager is the largest shareholder in Asset Plus. And so we believe that the interests are well and truly aligned between their interests and those of all shareholders. As regarding the performance of Asset Plus, certainly, in the last 12 months, Forsyth Barr's latest report indicates that we've provided the second highest year-to-date total return across all of New Zealand's listed real estate investment trusts, and they've also rated Asset Plus has outperformed with a target price of $0.32. So notwithstanding the conditions, and we understand your reason for asking the questions, Carl, but we do think that there is -- that the Centuria team and the Board are doing the best that they can with the circumstances they've been dealt, subject -- and as noted in the presentation, subject to the leasing, the balance of Munroe Lane and successfully divesting that asset to your final point, Carl. One of the possible outcomes will be to wind up the company and return capital to shareholders, but that will be a decision that shareholders make. And the time for that will be probably -- the time for that discussion will probably be in the next 12 months, providing we've got some clarity around the settlement of Graham Street and we've made some progress on the leasing at Munroe Lane. So those are the 2 questions we've had in advance of the meeting, and those are my answers to them. So are there any more questions, please, from the room? Yes. Just for all of you pondering and asking a question, we do have microphones available, which although you might not need them in this room, they are primarily for the benefit of the people that are listening online. So yes.

On the June 30, 2023, there was a transfer of asset class shares from Centuria Capital to Centuria Platform Investments, some 72,500 million shares, sorry. As a shareholder of both Asset Plus and of Centuria, can you please explain the reasoning behind the transfer and the implications for both Asset Plus and Centuria shareholders?

Sure. So that's probably something that one of the Centuria executives, Luke, is that your department to answer that?

It's just an internal restructures. You're all ultimately owned by Centuria Capital and so the registered holders change. That's why it's been disclosed. There's no implications for either company. It's just a change from one company and the group holding it to another.

Second question, if I've still got the mic.

You've still got the microphone so far ahead.

Asset Plus is now a single asset company. So I'm questioning the need for the number of directors on board. And in state of, say, reelecting shareholders -- sorry, directors, why are we not looking at reducing the number of directors and in turn, reducing the total cost of directors' fees to Asset Plus?

Sure. Thank you. We only have 4 directors -- or sorry, we only have 4 directors who are not bound to Centuria. We have 1 director who's not independent, which is John McBain representing Centuria. One of our directors is not technically independent yet because he was formerly the Chairman of Augusta. And my understanding is that he needs a 3-year down -- stand-down period between stepping away from the shareholder. And then we have 3 directors who are independent, one of which is me. So that's -- in terms of answering your question, that's the makeup of our directors. Of the -- if you accept that Centuria has to have a director, they have a right to have a director. Of the other 4, it's not a big Board, and everybody does bring different skills. Paul Duffy is probably known to many of you for his property expertise. And Paul, I believe, doesn't come up for reelection until next year or possibly the year after. But he is there for his property skills. Carol, who is due to be voted on today, is the Head of our Audit and Risk Committee, and I have to say does an outstanding job of that. And Allen provides a combination of technical property and technical financial skills, which have been useful -- highly useful considering what the company has been through in the last 4 or 5 years. So at 4 -- and then there's me, and you can form your view on me as you see fit. But given the nature of the business and where it's come from, I don't think 4 directors is necessarily a lot. We -- the director pool or the director fee pool hasn't changed for a long, long time, long before Allen, Paul, John and I became involved. So the ceiling on directors' fees, as I recall, is $300,000, and it's been that for at least 5 years and quite probably longer than that. So that's the basis of our reasoning. I don't know what the process would be to reduce the number of directors. I expect you'd have to put a motion to our shareholders' meeting such as this for such a change to be made, but that's where we're at, at the moment.

Surely, we voted against the appointment of the current director [indiscernible].

Sorry?

Surely, we voted against appointing the current director, that will reduce the number of directors on the Board.

Well, it would reduce the number of directors on the Board. So as I understand it, the remaining directors on the Board would then have the opportunity to decide whether or not they chose to replace that person. And is that right, Luke?

Technically, yes.

But you could make a start. If that was what you choose to do, yes. Yes.

Mr. Chairman, I don't think anybody is questioning the competency of the directors or what they bring to the company. But a company with 1 -- essentially 1 asset doesn't warrant 5 directors, in my view, and I think other shareholders feel the same.

Okay. Thank you. Just wait for the mic right behind you.

I've got a bit mouth. Gord Wallace. Could you tell us why you sold Stoddard Road? That's all. It seemed to be running okay. Or what was the reason behind that?

It was running okay. I guess a number of things. Retail is getting harder and harder. We had a major part of the exposure with that property, I guess, was the warehouse lease and the warehouse tenancy that lease had from memory, Stephen, less than 2 years to run. We made various attempts to renew that lease with the warehouse, and we couldn't get them to the table to have those discussions. And given the fact that we were still finishing the development of Munroe Lane and the increasing interest rate costs attached to the development funding, we did the analysis or the finance guys did the analysis, and it became very clear that getting rid of some of that debt was the best possible outcome for the foreseeable term. So there was some short-term risk around the asset itself. And so overlaying that short-term risk with decisions around debt levels and rapidly increasing interest rates, we made the decision that selling Stoddard Road gave us the flexibility to make sure we got through the period, which will see us -- worst-case scenario will see us waiting for another year to settle Graham Street and leasing Munroe Lane. So that was the logic behind it. Do you want to add anything?

Add to that, perhaps, Bruce. So look, ultimately, Stoddard Road was returning us circa 7%, and our cost of debt was 8.5%, which has now increased to 9%. So ultimately, we were getting less than what was costing us the whole, and that was the main driver for divesting.

Any other questions?

It's Hayley Cheng, a shareholder. Yes, also I say I think when you sell desperately, you never get a good price. Yes, please remember that. And I think all of you are not good negotiators because all of are born rich, so don't know how to deal with money, frankly speaking. And I wish to inquire when you sell the 99 Albert Street for how much? And does it include CapEx as well, the 99 Albert Street several years ago? Certainly, your Board of Directors or Mark can tell me how much? $50-odd million. Is that correct?

Can somebody give me the accurate number of the sale price of 99 Albert Street. It was about 3 years ago. $47 million, or thereabouts.

Does it include car parks as well?

Yes. Yes, it didn't have a lot of car parks, but it did have some.

Yes. Then because why I ask this question. You said recently, I have read the article in the Business Herald. And open council of those building now, the AA building Albert Street with the car parks. Guess what? They have a valuation of more than $200 million. And that surprised me why you sold AA building for $40-something million. Please give me the answer.

Are we talking about [indiscernible]?

I think it's hard to know exactly what you're referring to, but there's absolutely no way we're talking apples-for-apples comparison between $47 and $200, so.

I think it may well be that the...

[indiscernible]

Okay. That's okay. Whenever you get the time, send me that article, and I'll have a look at it. But I think you're referring to 2 different assets.

I think the building you're referring to is the Auckland Council building on Albert Street, which is the old ASP.

Yes. It's the old ASP building. It's a different building to the one that we had. But send me the article and we're happy to respond.

[indiscernible]

It's a different building.

It will be the same street that was sold to...

Right, to pay. Yes, I think it's definitely not the same building. I don't know which one you're referring to, but it's not the one that we sold.

What happens to this deal, to the real owner of this building now [indiscernible]?

I don't know.

We sold to Sky City. I don't know that they've done anything with it today. Do they? No, it's...

So it was Sky City.

Yes. And they've just put office, occupying it as office, which is what it was when we owned it.

And remember, it was only a number of levels, not the entire building.

For only $47 million.

For $47 million, yes.

How many times?

I don't recall. So it was a few years ago. Now do you remember? I don't know.

Can I suggest, Luke, that just -- once we get an understanding of the property being referred to, we'll put the answer to that up on our website so people, so you can see what the answer to your question is.

My final advice is that when you sell the Munroe building, be a good negotiator. Yes.

All right. We might get you in to help us. Do you think?

Sorry, I'm too busy because I own about 50 different shares in New Zealand and about 20 shares in 20 different companies in Australia.

Okay. So we'll get back to do the negotiation because he's not as busy as you are. So that sounds like a plan. Thank you.

It seems like you are busy with your beautiful new wife.

Are there any other questions?

Yes, sir. My name is Richard. I'm a shareholder. I've been a shareholder of this company for many years. In 2018, it was called NPT. It owned about 6 properties, paid a dividend of $0.036 and the share price was $0.70 or thereabouts. So how do we get from there to here? That's question one. Question two, why would you sell this asset if it's a brilliant building and it's got a blue chip tenant? Question three, when you say the shareholders will decide, effectively, that means Centuria will decide. Is that correct?

No, no. There are 5 -- Centuria are the majority shareholder. They hold 19%. So there are 5 shareholders who comprise from memory, 51% or 52%. So -- and those shareholders include the excellent Compensation Corporation, salt funds, et cetera, et cetera. So that's the answer to the third party of your question.

Right. So the first 2.

So the first 2, how did we get from there to here? When we took over the or when -- sorry, I'll rephrase it. When Augusta took a shareholding in the business, there was a move, and this is before I got involved. There was a move to change the -- to externalize the management of the business and to get the cost of running the business down. And as part of that, part of the focus was to sell down some of the properties that were nonperforming. And for one of the ones I recall was a little industrial property in Christchurch that hadn't had a tenant for 2 or 3, or maybe even longer than that, I think, before the earthquakes took place, and that was just an asset that wasn't adding any value. 99 Albert Street, notwithstanding the earlier comments, was a very difficult asset. We didn't own 100% of it. And so over time, the decision was made to reposition the company to focus the company on assets that were assets that we could add value to that were primarily north of Taupo to move away from Christchurch with the exception of Eastgate that took a little longer and to focus on developing assets in and around Auckland, where there was an opportunity to add value. The Munroe Lane example is an example of having done that. What got in the way was trying to reposition a property company at the peak of the property market was very difficult because everything we wanted to do was expensive. And then over time, the changes we've seen over the last 3 years, we -- to be honest, we haven't been able to take a trip. The bounce of the ball just didn't come our way. And so now we're in a position -- we bought 35 Graham Street. We had a fantastic scheme on that. The -- we bought that at a time when you couldn't lease space on [indiscernible] Street Ridge. And COVID hit, everybody sent their staff home. And all of a sudden, there's floors and floors of office space in [ Fanshawe ] Street available for lease. And our aspirations to develop that site evaporated pretty quickly, and we had to turn around and sell it. Fortunately, we sold it for more than we bought it for. But nevertheless, the dream for the site didn't happen. And we've had a few of those. It's not an excuse. It's just the way it seems to have happened. To the second part of your question, if you've got a building like that, why sell it? If we see a future for the company beyond 1 asset, we will come to you as shareholders and try to sell you on that future. And that building is a wonderful cornerstone to whatever that future might look like. So we're not saying we will definitely sell it. What we have said is we'll look to sell it, and that will depend on the circumstances at the time, one of which will be the state of the economy, one of which will be the mood of shareholders. So we are not saying absolutely that, that building will be sold. What we are saying is that, that is one of the possibilities. But you're right, it's a beautiful building, and it is something that shareholders, one perhaps little thing out of that long and arduous quest as an Asset plus shareholders that I think we can be proud of. We've got a couple over here.

Like a couple of the -- is that on?

Yes.

Like a couple of the previous questions or commenters. My name is [ Tom Watson ]. I'm a Director of Triton Industries. We're a shareholder, long-time shareholder. I've my friend [ Aaron Lee ] on the other side. My question really would be that you -- each year, you pay to get valuations done. And each year, the valuations, according to history, have been tracking downwards. And not only are the valuations tracking downwards, but every time you sell them, almost every time you sell a property, you make a loss. Now I would express total dissatisfaction with the competency of the Board. The people on that side of the table always say they think they've done a good job. I'm telling you, you haven't. To take your share price from [ $0.706 in 2018, down to $0.567, $0.448, $0.44 and now $0.40 ] and yet the market says, we might sell them for $0.25. I would think, one, Centuria is very disappointed on the $4.5 million they paid to run this company. Two, they'd be very disappointed in the capital value they've lost and selling buildings because the rental rate is suspect to a cure Stoddard Road is factual. But to take a loss from your valuation of 43.5 to sell it for 36.8% inside a 12-month period is not good going. Why are you selling them so much different from the valuations?

We would just -- thank you. We weren't having trouble with rental rates with Stoddard Road. Just to be clear, the challenge was in terms of the weighted average lease term and the impact of the warehouse tenancy on that. That's what I was referring to earlier. But just...

It's being reflected in the valuation you've got.

It is reflected in the valuation. But with Stoddard Road, just for clarity, we took that to an open market process that was run by Colliers or Colliers and one -- Colliers and Bayley's jointly. And that process was run -- resulted in, from memory, 3 bids. And the bid that we sold the property for was the best that we can get. And bear in mind, please that it was at a time when we're still running development funding on Munroe Lane, and the goal was to get the balance sheet into the sort of order that we now have with debt trending downwards. So we've been -- our focus was on getting a chunk of debt out of the way. But we did go through an open process to sell that property, and that was the best that we could get. And Mark, I think we had 5 or 6 indications of interest from memory. And -- but we only had 3 parties commit to an offer.

And there was a very close spread on those 3.

Yes.

That's right. And so Tom, just to be clear, the debt $43 number was the valuation of the plant. Is that what you're saying?

That's March '22.

'22, yes. And we sold the place. And the simple reason for that is that asset and every other asset in the entire world has tracked down since March '22 in value, every single one, with the exception of those that have had some sort of value added to them by whatever means. But any yielding property asset in the world due to the tripling of the cost of debt over that period is now worth less than it was in March of '22. That's just a fact of life. And that's not a problem exclusive to [ CBD ] -- to Asset Plus, that you look at the valuation trajectory of every single listed property trust in the world, you will see the exact same trajectory. And the other thing I would say, too, is the assets that we have sold, and this is a little bit speculative just to make the statement. But I could almost guarantee that every single one of those assets that we have sold, if we were trying to sell them today, they'll be worth less than what we sold them for.

Not quite. I would argue that what is Heinz is worth a lot more than you sold it for.

Why would you argue that?

Because somebody else was smart enough to syndicate it.

And a higher number.

And Centuria, who's got a long history of syndication, didn't.

That doesn't mean it was worth more. And I'll tell you the reason we didn't syndicate it because it was a related -- it would have been a related party transaction. So it was too difficult for us to do that. Believe me, we would have loved to have syndicated it, but we couldn't. We had to put it to the open market and it got syndicated by somebody else. So it doesn't mean the asset is worth more today. The asset sales that we have done, as I say, I'm trying to think of one that we would have -- that we would -- if you could look back now and say that we undersold relative to today's value, I don't think you could name one. Graham Street, there's no way we would get the same money for that today. What else have we sold?

AA Centre.

AA certainly is not worth any more than what we sold before, trying to sell that twice, both failed contracts. They're up to their eyeballs indeed on that. They'll get less than what they paid us. So we didn't take those decisions lightly. But I can tell you every single one of those sales was the right decision with the benefit of hindsight now. They're all worth lease and what we sold them for.

Right. My second question really is that we're in all the communication to shareholders, was there a highlight on the fact that Asset Plus was really changing direction. You say you pivoted, but where was it that you said that you were changing pivot to become a property development company? We bought into a property ownership company. There is a lot difference in being a landlord and messaging tenants and looking after rents to one that turns into a property development company, Graham Street, Munroe Lane, the one up North, blank piece of land, they were all developments, but there is nothing in the past annual reports that says we are now going to be a development company.

Tom, do you mind if I take that?

No issues. Sure, you got it.

There was a key moment when that decision was made and shareholders were consulted, and that was and then you guys can help me with the dates. But when we -- when it was rebranded to Asset Plus and the management was externalized, that was the turning point for the company. And if you recall, we essentially built for control of this company against Kiwi. Kiwi Property also put up a proposal. Both of those essentially were put to shareholders, and ours was selected as the best and voted through. And at that time, we said to shareholders the problem with -- it's very simple, the problem with this company and the reason that is languished for so many years, is that it is too small. It has always been too small. It still is too small. And at the time that we took control, we said the only way this company has a future is if you find a way to grow it. And just going out and buying, yielding stock and issuing equity, when a company is trading at below its asset backing, which is what this company is and has always done, is incredibly difficult, right? The economics don't stack up. You raise equity at a discount and gone by at a 30% discount to asset backing and buying asset at 100% of value, that maths doesn't work. So the only way it had a future was for us to get creative and go out and actually do add value projects. And look at Munroe Lane as an amazing example of that, right? We bought a bare piece of land and now sits on a $150 million asset leased to the council. So you -- that's been commented today as being a wonderful asset, which it is. And to Bruce's point before, there's probably 3 things, 2 key things that have stopped us achieving what we wanted to achieve. One of them was COVID. Now our strategy for what we were doing was working brilliantly. We had that deal underway. We bought Graham Street. We had a tonne of interest in leasing Graham Street and refurbishing that project. COVID has changed the office landscape globally to the extent that no one's ever seen, probably, and no one knows how long that's going to last, right? Office will come back. Of course, it will. But currently, every office market in the world is massively depressed. Some cities in order sitting at 30% vacancy in office. So COVID has had a huge impact. And then the other thing is, of course, the cost of debt, right? And that's not just affected Asset Plus. That's affected every property owner in the world. So against that backdrop, it has been very, very difficult because you've then had a depressed share price, which is trading -- to your point, trading at $0.27 against an asset backing of $0.40, it is impossible to grow a company when you can't issue equity because your shares are so cheap. So that has led us to the decision that we made as a Board to basically sell assets. Because if we can sell assets as close to full NTA, which is what we have done, despite them being at below value, they've been at 95% of value, whereas the stock is trading at 60% of value, that's smart business, right? We've paid down debt. We've done everything we can to get the share price back to NTA, and that would give the company options -- or that will give the company options as to what you do next. But I can tell you having been through this in '08 with [indiscernible] which many of you will remember, which was our listed fund that we had in Augusta. Same problem, too small. She is trading at a big discount, and it leaves you nowhere to go. So there is in a nutshell why we are where we are, and it all comes down to being too small and then against a very difficult economic backdrop.

[indiscernible]

Well, the future, at least if we go to cash, we have options, and that is the message we've sent to people. You have options there. At the moment, we have very few options.

We're after [indiscernible] we think about it just the cost of test was going to [indiscernible] and nobody knows, we are number have a [indiscernible] being around the world have been through a few of these total system place, we were not there to build. So I think you're doing the right thing, having been original national property trust on behalf of our registered society.

Thank you. Do we have a question here? Yes. That's all right. No. That's okay.

I'm [ Bruce Michael ] Shareholder Association. Should the Board the company in new directions, would the extent skill set of your manager limit your options to other property?

Well, as I said earlier, we don't have anything in front of us at the moment. We have had options bought to us over the last few years that are not strictly property. They're property attached to them, but they're not strictly property. But given the circumstances around the country -- company at the time, that wasn't something that we could pursue. But I think, look, we don't have any preconceived ideas, but I think we've just got to see what position we get to. As I said, the 2 big priorities. We've got to firm up on that settlement date with Graham Street. That will give us some clarity. We've got to get the leasing completed at Munroe Lane, that gives us some clarity. Then we're actually in a position to look at what the options might be. But we don't have any preconceived ideas about what those options might be. Are there any other questions? Has anything else come in, Luke?

Yes, we have 12 questions online.

Twelve. We're popular today. Let's go.

So far, Asset Plus is not the best investment I have made. How does the Board believe it can move Asset Plus up the ranks amongst my investments?

Well, our first priority is to get to NTA. And if we get the company to cash or as close to cash as we can or alternatively, we get the Graham Street component of our investment to cash and Munroe Lane as a building, let's say, we don't sell it and we hold it, we are then back in a position where we are cash flow positive and we can perhaps reinstitute a dividend. And at that point, we suspect that we'll be able to get the share price back to NTA or thereabouts.

What are the implications of the buyer of 35 Graham Street defaults?

So the buyer -- is the buyer public? It's not public. So the largest private developer in New Zealand, but not public, okay. So the buyer for those of you who just aren't familiar with it, there are 2 potential settlement dates, one of which is the 1st of December this year, the second one is the 1st of December next year. In the -- by the first of October of this year, they have to advise us which of those dates they will choose to settle. In the event that they push it out a year to December '24, they will be required to pay an extra $3 million in purchase price and an extra $7.1 million deposit. So those are broadly the terms of that deal. Everything that we have seen to date would indicate that they are able to settle and want to settle. They've had tenants on the property recently and designers. We don't know who the tenants are, but they have had people on the property. They are acting in a manner consistent with expecting them to settle in the ordinary course, and that's about all we can say.

In the event that the Graham Street settlement is delayed by 12 months, will the additional deposit be used to reduce debt or be paid out as a dividend?

At this stage, it will be used to reduce debt.

If Graham Street settlement is delayed, will the sale process of Munroe Lane commence before the delayed settlement of Graham Street?

There are probably separate discussions. The process around Munroe Lane will depend entirely around the leasing progress that's made.

What is your minimum rental occupancy target for Munroe Lane, if not 100% to consider selling it or resume dividends?

Well, we want to get the leasing as complete as we possibly can because that will maximize the outcome for shareholders. I think if we're into the 90th percentile or thereabouts, then depending on any obligations around underwriting the shortfall, that would potentially be something that we would look at. But ideally, we'll pursue 100% lease.

In today's presentation, it was stated that the construction cost was $100 million. However, the financial stayed at $133 million. Which is correct?

Stephen?

So the physical construction costs are $100 million, and there's additional project costs in terms of the land acquisition, incentives, consultant fees, consent costs, et cetera, but then take the totals up to that higher number.

So the total development cost is $133 million, did you say? The construction cost is $100 million.

What would it cost to build at Munroe Lane now against what it cost to date? .

I'd expect at least 25% to 30% higher than the current environment.

Approximately, what order of magnitude is our monthly surplus overall, if there is one? And how is it being deployed?

On a monthly basis at the moment, we're effectively breakeven or slightly losing money monthly, and that will change once Graham Street has settled or once we get capital in place to cope with that.

The delta between end-of-year NTA and current share prices comparable to other NZX property companies like Argosy and Kiwi Property Group. Being a single asset company much more than other NZX property companies that are more likely to close that delta, is there any need for Asset Plus to continue operating?

Well, as we've said, that's one of the considerations that we will be giving once we've progressed the 2 remaining assets.

What is the likely value of Munroe Lane when it is fully leased? How will it affect NTA?

Well, I'd like to think of it when it's fully leased, the NTA will bounce back -- or sorry, the value will bounce back. And what was the other part of that question?

What is the likely impact on NTA?

The likely impact on NTA, if you got at fingertips?

Look, as at March 31, the valuation was done under 2 scenarios: on the committed basis with just the Auckland Council lease in place and then also a fully leased basis. The value accretion on the fully leased basis, when you net it off, the cost of incentives was circa $2 million uplift in the value. That was the impact as at 31 March. We can't ascertain the impact is at right now if the property was fully leased, but we will have that valuation advice at the time of the next valuation. In terms of NTA, $2 million across the shares issued as a very minor amount, I'd say point something of a cent.

Do you think that if Asset Plus canceled its plans to build Munroe Lane back in 2019 when the first capital raise was aborted because of the first lockdown and kept its portfolio as it was in 2019 and focused on leasing that portfolio, would the company still be paying dividends with a higher valuation? In other words, was building Munroe Lane a good idea because of the COVID crisis?

Well, none of us predicted COVID. So I don't know what I would have thought in 2019 about that decision in front of us. We made the decisions we made. We have to stand by them. There's no going back in time, I'm afraid. So...

And finally, we have 2 comments from shareholders on other questions and comments raised by shareholders in the room, one from a shareholder says in response to the questions by Triton about Stoddard Road, I looked at purchasing this probably in my personal capacity and in no way did I see the property selling for as much as it did take into account the issue with the warehouse lease, it may not have sold for the full net tangible asset value. However, having looked at it myself, this property was never going to sell for anywhere near that book value. Therefore, I feel the decision to sell Stoddard Road was prudent and timely taking into account current interest rates. And one further comment from another shareholder. As a holder of 2 million asset plus shares, I can confirm that the Board did communicate fully the change to a development company and did state that's a work while that needed to be around $500 million in size. I agree that this has been key -- the key reason for the lack of traction. I think Centuria has done a proper and good job.

Thank you. Are there any other questions? Okay. Well, thank you to the shareholders. I think that's the most questions we've ever had. So we appreciate your levels of engagement. We now move to consider the formal resolutions of the meeting. There are 2 resolutions to be voted on. They are ordinary resolutions requiring a 50% majority of the votes cast. So we will move now to resolution 1, which is the reelection of Carol Campbell. This resolution has the unanimous support of the Board. And I will now invite Carol to say a few words about her reelection.

Thank you, Bruce, and good afternoon, everyone. Well, we've certainly had an engaged session, which has been great. I think most of you know me, and my bio is in the Notice of Meeting. I am a charted accountant and fulfill the role of Chair of the Audit and Risk Committee. You've heard from Bruce and Stephen about the state of the company and where we are at now and what we have planned and the decisions we have to make in the future. In my role as Director of Asset Plus, I will continue to work in the best interest of both the company and all of the shareholders. And I hope you will support my reelection even though we've had discussions about reducing the number of shareholders. And I hope that you see the value that I add as a Director of Asset Plus to the company in that vote. Thank you.

Thank you, Carol. Are there any comments or questions for Carol? If there are no questions, we will move on to the second resolution, which is in respect of auditor's fees. That resolution should be on the screen. That the Board be -- it reads as follows: that the Board be authorized to fix the auditor's fees and expenses from time to time. This resolution, as most of you will know, is a requirement under the Companies Act. Are there any questions or comments in respect of the resolution? If not, thank you. I then thereby formally ask you to vote on the resolutions either on your papers that you have or for those of you online via the online portal that our share registrar has organized. So that would ask you to go to the -- go to the Get a Voting Card option online and complete the process. So could you all just complete your voting process and then we'll get the people from Link to come through the room here and collect the votes. And for the online participants, please follow the directions on screen. The results once collected and tabulated will be published on our company website on the Asset Plus website and also announced to the stock exchange this afternoon as soon as they are available. [Voting]

Okay. We've just finishing up the collection of the voting papers. So we will move now to general business. Does anybody have any items of general business that they would like to raise or share? Luke, have you got any coming in online? Any general business to anybody? In that case, we'll move to close the meeting. And I'd just like to conclude by extending my personal thanks to the Board, the Asset Plus Board and the team at Centuria for their work during the year. And again, just make special note that the completion of the Munroe Lane development has been a significant milestone for the company. And I can tell you that this fellow on my right looked 100 years younger when that project started and I think is a testament to his fortitude to a degree. So thank you, Stephen, for your -- for the role you've...

[indiscernible]

No, no. There is if you stand where I am. So to the shareholders in attendance, those of you online and in the room, I -- on behalf of the Board, we respect that your funds can be applied to any company or any investment in the country or overseas. And so we continue to remain grateful for your support and for your sticking bias. And equally, we appreciate you taking the time to be with us today. So thank you to all of our shareholders, and we look forward to talking to you more in the year ahead as some of those items become a little bit clearer in terms of the way forward. I now formally declare the meeting closed and invite you to join us for afternoon tea, which I suspect is out in the lobby somewhere. So thank you very much.