Asset Plus Limited ($APL)

Thank you for standing by, and welcome to the Asset Plus Annual Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Mark Francis, CEO of Centuria New Zealand. Please go ahead.

Thanks very much. Good morning, everybody. Thanks for joining us for Asset Plus results to March '26. Look, obviously, a fairly short presentation. As usual, you'll hear a little intro from me, then I'll hand over to Simon Woollams to walk through the financials, and then Stephen Brown-Thomas will deal with more property-specific aspects, and then we can take questions as usual at the end. So by now, you've seen the result at a funds from operation level, [indiscernible] profit of $3.18 million, up from just over $0.5 million in the '25 year. That, of course, drops to $170,000 once we adjust for the $3 million of leasing incentives during the period, giving a total loss for the year net of tax of $3.16 million against a '25 loss of $5.7 million. The result is, of course, impacted by a $7.43 million write-down or unrealized revaluation loss similar to last year's at $7.15 million and the only other point of note in the results summary really is the lease commencing on the 1st of February. In terms of the key metrics, asset value down from $107 million to $105.5 million. You can see the occupancy ticked up a meaningful amount there from 65% to 75.6%, the WALE pushing out slightly as well. Still no bank debt and at an NTA level just under $0.31, down from $0.324 last year. So some leasing obviously has occurred during the year, which is pleasing. The lease, as I mentioned, which began in February. We expect some fit-out works on Level 6 and part of Level 2, which has come up really well, presents extremely well, and we're pretty confident that's certainly going to help deliver some traction with leasing on those spaces. And we also signed a small lease with Milk Orthodontics rather on the ground floor, which is what took that occupancy up from 74% to 75.6%. Stephen will talk to that in a little more detail on the leasing prognosis when we get. But I'll hand you over to Simon now to walk through the financials in a bit more detail.

Great. Thanks, Mark. Good morning, everyone. Again, pretty straightforward. So funds from operations up $2.65 million to just over to about $3.2 million. Obviously, the key drivers year-on-year is the sale of Graham Street. So obviously, lower OpEx, lower management fees and obviously no finance costs incurred. So those 3 things were the key drivers of that increase in funds from operations. As Mark touched on, a write-down of $7.43 million as we see out there on Page 7. The valuation dropped year-on-year by $1.5 million driven by a softening of the cap rate of 25 basis points. But obviously, there was circa $3 million incurred in respect to the Aderant lease. And as Mark touched on as well, we incurred $2.1 -- sorry, $2.2 million in respect to fit-outs on vacant space to hopefully facilitate future leasing. Another minor point is we recognized a deferred tax asset of $0.44 million. That is essentially looking forward the utilization over the next 2 financial years based just on committed leases. So obviously, the council and the lease and appended is some more detail on the FFO and FFO reconciliations and a waterfall of the year-on-year movements. In terms of net rental, pretty flat year-on-year. There's obviously a small impact of the Aderant lease commencing in February. In terms of administration and finance costs, I've touched on that, but a reduction in the management fee driven by the Graham Street sale and a lower -- slightly lower valuation of Munroe Lane and obviously, no finance costs incurred. In terms of the balance sheet, calling out, obviously, we incurred $4.8 million of CapEx for the year across the Aderant lease and the fit-outs on the vacant space. There's a bit more detail there in respect to the deferred tax asset. So after recognizing that asset in respect to utilization of near-term losses, we still have just under $10.6 million of losses that aren't currently recognized in any form. And obviously, as Mark touched on, there's a reduction in the NTA down to $0.307, again, primarily driven by the reduction in the fair value of investment. Just another call out, obviously, we don't typically report payout ratios. But in the NZX release, we've clearly indicated that FFO is the key metric the Board has adopted for distribution or dividend purposes. And the dividend for the year represents a 91% payout against FFO. FFO as we note, we're clearly holding sufficient cash reserves to fund obviously, the Aderant leasing incentive and cost, but also future leasing initiatives as well. So that's why the Board has adopted FFO from a dividend perspective. That's it from me. Obviously, happy to take any questions on the financial information at the end. And I'll now hand over to Stephen to talk you through Munroe Lane.

Great. Thank you, Simon. Good morning, everyone where we're at. So yes, we've got Aderant lease commenced in February, which is great. They took just over half of Level 6, and that's bumped the annual net rental up to $5.2 million after unrecovered outgoings on the remaining vacant space. Once the property is fully occupied, we're expecting a net rental range of $7.1 million to $7.2 million. That's predicated on the market valuations that Bayleys have adopted on the 31 March valuation for the balance of the vacant spaces. Simon and Mark have already touched on the valuation. It is quite unfortunate that despite the leasing that we have done and some of the fit-out that we've delivered at that space that the value hasn't necessarily fully accounted for that in the valuation. But as Simon intimated, we are very positive that completion of those fit-outs are going to have some positive impacts in terms of leasing activity and all the feedback has been fantastic to date. So where we're at, we've got 65.6% occupancy now that we've secured the Aderant and the Milk Orthodontic leases, and we've still got 3,552 square meters of space available across the balance of the building. So in terms of those new leases that we've secured, we've got Aderant on a 10-year term from the 1st of February across half of Level 6. That bumped occupancy up to 74.3%, and we've also secured Milk Orthodontic through a 12-year lease over the ground floor tenancy. Fit-out is underway at the moment, and we're expecting that lease to commence in the next few months. That's definitely going to activate the ground floor lobby space further in conjunction with the Littlefields cafe that we've got there. And as noted, that bumps the occupancy up to 75.6%. In terms of the vacant space that we've got remaining, we've still got 239 square meters on Level 1, and then we have put in a staircase that connects up to the office space on Level 2 above. We've got 1,935 square meters there across a variety of configurations so we can adapt to any tenant requirements. And then over Level 6, we've got 1,378 square meters, and that can also be configured into 2 separate tenancies, again, to meet market demand. On the slide there, you can see some of the photographs of the speculative fit-out that we have done on that Level 6 vacant tenancy, which has presented really well and the inspections that we have had from prospective tenants has been fantastic. And we are confident that, that is going to better place us against some of the competing stock on the market. And it also gives us the ability to have a tenant move in straight away, which is positive and it means that we can compete against some of that sublease space available in the market. All of our marketing initiatives remain ongoing despite that, it does remain a fairly challenging market. According to CBRE's research, the Albany vacancy rate increased from 9.5% in June last year, up to 11.7% at year-end, but there does appear to be some positive leasing inquiry and activity in the first few months of 2026 despite some of the market challenges that we have had. So we're quietly confident that this fit-out work that we have done will lead to some more inquiry and hopefully some leasing traction. Again, happy to take any specific questions relating to those vacancies and marketing initiatives once we close out. Otherwise, I'll hand back to Mark to wrap up with the outlook.

Yes, Stephen. Yes, look, the outlook remains as it has been for some time, and that is to get this building leased and then look to sell it. So no change there, but obviously, some progress throughout the year is encouraging. We just see more of that into the new year. A sale of the asset will obviously go hand-in-hand with a wind up of the entity, which we've indicated in the past, and we would look to put both of those decisions in front of shareholders at the same time. Until then, the dividend remains reviewed quarterly with the March quarter of $0.02 being declared with the payment scheduled for the 11th of June. That is all as far as the presentation is concerned, but the 3 of us obviously can take questions now if you have any.

[Operator Instructions] Your first question comes from Rohan Koreman-Smit with Forsyth Barr.

Just a couple of questions from me. Given the fit-out done on levels on the remaining kind of office space, are you anticipating much of an incentive to be paid if you were to lease that space?

Very minimal, Rohan, if they take all the space that's been fitted out. There are still parts of those tenancies that haven't been fitted out. So there are potentially costs and incentives attributable to those areas. But for those spaces that have been fitted out, very minimal.

Okay. Cool. And there's tax losses in the vehicle. Obviously, you'll need an operating asset to utilize those. But do you think the vehicle itself, if this asset is fully leased. I know wind up is one option, has value to another owner?

Yes, we do think, Rohan, that that's an option. Yes.

Excellent. And then the last one on the dividend. You've held it at $0.02 per share. You've got Aderant and you've got a ground floor tenant that would suggest to me your quarterly FFO will be a little bit higher going forward. Is that dividend likely to be 90% payout kind of ratio on a quarterly basis?

We can't probably say too much about that. But to your point, Aderant is definitely going to have a positive impact on earnings going forward. But as the Board has noted, the dividend will be assessed on a quarterly basis.

[Operator Instructions] There are no further questions at this time. I'll now hand back for any closing remarks.

Thank you. Look, thanks for those of you that joined us. Rohan, thanks for the questions. As always, you know find us if there's any follow-up questions. We appreciate your time this morning. That's all from us.

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