Charter Hall Group (CHC) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Charter Hall Group CHC Annual General Meeting. Please proceed.

Good afternoon, everyone. On behalf of the Board of Directors, it's my pleasure to welcome you all to the 2021 Annual General Meeting of your company, Charter Hall Group. My name is David Clarke, and I'm the Chair of the Charter Hall Group Board of Directors. It's now 2:30 p.m. and as the necessary quorum is present, I declare this meeting properly constituted and open. I'd like to commence today's presentation with an acknowledgment of country. Charter Hall is proud to work with our customers and communities to invest in, develop and create property assets on land across Australia and New Zealand. We pay our respects to the traditional owners, their elders past and present and value their care and custodialship of these lands. This afternoon, I'll provide a brief overview of our business and achievements during financial year 2021. Our Managing Director and CEO, David Harrison, will then provide an update on our business and key results as we look -- as we reconfirm our outlook for the financial year 2022. We'll then move to the formal business of the meeting and the resolutions for your consideration. There are 7 items of business and 6 resolutions for your consideration today. The first resolution involves the election of Jacqueline Chow as a director. When the time comes, I'll ask Jacqueline to say a few words and provide some personal background and reasons she believes she should be elected. 3 of the other resolutions relate to the approval of the remuneration report and the issue of service and performance rights to Managing Director and CEO, David Harrison. There is also a resolution regarding the issue of performance rights under the retention and outperformance plan we are introducing this year. And I will say more about this in my remarks. The last resolution is to increase the remuneration pool for nonexecutive directors. This will allow us to add additional directors to manage the process of Board renewal forward succession and allow for a small increase in directors' fees. There will also be an opportunity to ask questions to directors, and I will ensure there is adequate time to address issues security holders would like to raise. I would now like to introduce my fellow nonexecutive independent directors. Firstly, David Ross, who is Chair of the Remuneration and Human Resources Committee and a member of the Audit, Risk and Compliance Committee and the Investment Committee. Jacqueline Chow, who is a member of the Audit, Risk and Compliance Committee and as I've just mentioned, is standing for election today. Karen Moses, who is Chair of the Audit, Risk and Compliance Committee and is a member of the Remuneration, Human Resources Committee and the Nominations Committee. Greg Paramor, AO, who is a member of the Remuneration and Human Resources Committee and also the Investment Committee. And Phil Garling, Chair of the Investment Committee and a member of the Nominations Committee and Remuneration and Human Resources Committee. Phil is also stepping down from the Board today following nearly 9 years of service. And I'd like to take this opportunity to thank Phil for his wise counsel and contribution to the Board over these years. His contribution has been significant and it helped guide Charter Hall to the successful business it is today. He leaves us with our very best wishes for the future and thanks for his wonderful service to securityholders over many years. Finally, I'd introduce Managing Director and CEO, David Harrison. Also present today, and I welcome Mark Bryant, our Company Secretary; and [ Ewan Barron ] from our auditor, PricewaterhouseCoopers, who will be available to answer any questions about the audit of the financial statements from securityholders. Financial year 2021 saw continued challenges due to the COVID-19 pandemic. Despite some reprieve, much of the year saw disruptions from many businesses. While the pandemic itself is far from over, your Board was impressed to see our people working closely with our customers and communities to navigate the challenges and create positive outcomes. Against this backdrop, I'm delighted to report that Charter Hall achieved record growth, ending the year with $52.3 billion in funds under management, which now makes us the largest, sector-diversified commercial property portfolio in Australia. The resilience and success of the group through this challenging time is not an accident. We have worked hard over many years to diversify the group across asset classes, by equity sources and by tenant and investor customers. We've also looked to ensure our portfolios are invested in high-quality assets, leased to best-in-class tenants, ensuring stability of income and valuation growth through times of dislocation. Importantly, our model has also won a partnership. Throughout the year, we continue to partner with our customers across our sectors to meet their evolving property needs. Our focus on stability, growth and returns for our securityholders has also driven superior performance across our funds and continues to attract investor equity with $5.3 billion of gross equity flows for the year. Our property portfolio now comprises of 1,413 properties with a lettable area of 9.5 million square meters and delivers over $2.5 billion in net rental income per year. We've always said that long-term performance is the true test of success. We celebrate Charter Hall's 30th anniversary this year. Our current result is a further evidence of our ability to consistently deliver superior returns to our securityholders. Since listing in 2005, Charter Hall has delivered securityholders 18.2% compound annual return. Over 10 years, that number 28% compound annual return. Over 5 years, it's 30% compound annual rate of return. And over 3 years, it is 37.9% compound annual rate of return. And for the year, the financial year just passed 2021, was a total security return of 64%. As demonstrated by the consistency of returns since listing, this performance is not a one-off. While there have been significant tailwinds for the real estate sector and the funds management industry, these results are significantly better than most peers, all of whom have the same tailwinds and benefits. Instead, Charter Hall's performance is a result of talented, cohesive leadership and a depth strategic implementation. Good businesses show their worth in difficult times, and this was the case with Charter Hall with 3 upgrades of earnings during the year and a delivery of operating earnings of $0.61 per share, which was 19.6% higher than the original guidance for the year of $0.51 per share. Charter Hall has grown considerably over the course of 3 decades, both in size and complexity. We're now partnering with some of Australia's largest corporates, many of our engagements having involved -- evolved into multilevel and cross-sector relationships, driven largely by trust developed over the course of our partnerships. Our future success relies on the continued strength of our customer relationships as well as our ability to harness the talent within our business to continue delivering outstanding results for our customers, partners and investors. Charter Hall is a dynamic organization, which harnesses culture, capability and care into its employment proposition. Our culture universally has the customer, both investor and tenant, at the heart of our business. My own inquiries and board surveys record that. Capability shows in the results and the strategic positioning over the last 10 years. Care involves embracing our people in a very competitive market for talent. We recognize the breadth and depth of our leadership team serves as the basis to take the group to the next level. As Charter Hall has grown and enjoyed significant success, Our people have increasingly been sought out by other team to emulate our success. We respond with a focus on the successful culture and respect for our people, but we also need to respond with remuneration. As we look to the future, the Board is keen to retain the executive and leadership team that have delivered this growth to our securityholders. That's why this year, we made it a priority to reset our remuneration structure, introducing a retention and outperformance plan for our leadership team. The Board acknowledges that there are clearly a range of views on this important topic of remuneration. Importantly, the plan we put in place balances retention of key executives with delivery of ongoing performance. Plan was a result of consultation with investors where earlier this calendar year, we sounded out a small group of our security holders with the outline of a retention and outperformance plan. There was a unanimous agreement that retaining our key people was paramount to the continued success of the business and such a plan was supported. Resolution 6 outlines the conditions of that plan through the award to the CEO. The award is proposed to cover 27 other employees as well. The vesting conditions are acknowledged, has been challenging, and the term 7 years is considered to be appropriately long. The feedback we have received from investors, the issue is the quantum. The directors have considered this very carefully on behalf of the securityholders they represent. And using our experience and assessment of alignment, we have recommended the quantum proposed. Regardless of the outcome, please be assured we understand there's a wide divergence of opinion on this matter. Including on the matter of remuneration, I would ask those who see our proposed remunerations as being too high to look at the returns they and their clients have received over a long period of time and appreciate that these come from a rare combination of experience, insight and talent. The levels of remuneration will only be paid if performance continues to be strong. Our goal is to keep our talent together in the service of our securityholders in the years ahead. With change in the world, could make conditions challenging. It is just the time when you need experienced people to make crucial judgments. Each year, we go further in our commitment to our ESG objectives. In the wake of updated projections released by the international panel on climate change, delivering on our climate initiatives has never been more important. We continue to make significant progress each year and believe that by partnering with our tenants and customers, we can unlock further opportunities to drive meaningful change and secure a better future for all. We have actively aligned our climate resilience road map to the recommendations of the task force on climate-related financial disclosures to ensure meaningful steps from board level to meet our objectives. Pleasingly, we have made significant progress towards our pathway to net 0 by 2030, even accelerating that time line where possible. Our industrial and logistics portfolio has committed to achieving net 0 carbon in operations by 2022, for Scope 1 and Scope 2 related emissions. And our retail portfolio recently announced it will achieve net 0 carbon in operations by 2025. We have also begun proactively working with contractors and suppliers to reduce impacts across our supply chain and engage with our tenant customers to find solutions to mitigate their energy-related emissions. Currently, 54% of 41 megawatts of our installed solar supplies directly to our tenants. As businesses around the country continue to plan their return to the office, supporting healthier workplace assets is as important as ever. We have worked with the International WELL Building Institute to baseline human health and wellness, with a focus on measuring and improving the indoor environment and our workplace assets for our tenants. This year, we became one of the first groups globally to achieve a WELL portfolio score across 900,000 square meters of real estate. As a signatory to the United Nations Global Compact, we continue to engage and advance the sustainability development goals and embed its principles in our strategy and culture. We're proud this year to be recognized in the 2020 Principles of Responsible Investment Leaders group for our work in climate reporting. In line with our philosophy of mutual success, Charter Hall's plans also include building future success for our partners. We firmly believe that by investing in the value of place, we are creating better outcomes for the longer term. Our commitment to social investment in communities is driven largely through Pledge 1%. Through this philanthropic movement, Charter Hall has been investing in more than 100 charitable organizations to support communities in need. We donated $739,000 through our community partnerships and in a year where volunteering was impacted by COVID-19. Our people spent 1,200 hours in the community. We also donated over 41,000 square meters of space, valued at over $1.8 million for community use. We're passionate about building better futures for vulnerable youth within the community. And we've established partnerships with 4 state-based social enterprises, targeting 1,200 meaningful employment opportunities by 2030. Again, this is about taking actions that tackle employment impacts linked to COVID-19. For the first time, we used our supply chain to create social value. Contracting with an organization called Two Good to supply our office portfolio with soap. In turn, this creates employment outcomes for survivors of domestic violence and supplies meals and care packages to women and shelters across Australia. We now require all employees to complete training on modern slavery on an annual basis, in line with our obligations under the Modern Slavery Act. Our modern slavery and human rights working group monitors our modern slavery and human rights risk across our business and supply chain. We have also developed a Stage 1, Reflect, Reconciliation Action Plan, which has been conditionally endorsed by Reconciliation Australia. The Board is actively engaged in the business to ensure the continued execution of the group strategy. We remain focused on providing clear governance and oversight to assist management in continuing to deliver for our stakeholders. We have always understood that embedding a high standard of ethics into our business, creating trust in the institution and the people who manage your work is paramount. Our role as a Board is to serve you to maintain and build trust. While our results demonstrate our performance focus, front and center for us is our role of guardians of other people's capital over the very long term. That's why our purpose developed with the input from investors, tenants and employees is about achieving better futures and mutual success through bringing aspirations to life. 30 years on from when Charter Hall began, we are very proud of where we are as a company, and we continue to have ambitious goals for future. I would like to take this opportunity to thank tenants, investors and securityholders for your support. My fellow directors and the executive committee for your dedication and our people for their passion and commitment in delivering this year's record performance. It's now my pleasure to introduce the Managing Director and CEO, David Harrison, for his operational update.

Thank you, David. Turning to Slide 10. Financial year '21 continued to challenge global economies and businesses with the COVID-19 pandemic persisting as we closed out the year. Despite these challenges, Charter Hall generated record fund growth and equity inflows across the business. This was possible due to the support from our capital partners to have the courage to exploit this dislocation and invest to deliver growth for those investors. We continue to drive market-leading transaction volumes and outperformed respective benchmarks across most of our funds and partnerships in terms of total return. At the same time, we maintained a razor sharp focus on our customers as evidenced by continuing or continued leasing and pre-leasing of developments, results from our customer surveys and a leading volume of sale-leaseback transactions with corporate customers, both existing and new customers. Overall, funds under management grew by $11.7 billion or 29% for the year, deploying capital for our investors and generating FUM and earnings growth for our security holders. This year, we celebrated an important milestone. 30 years since the founding of Charter Hall and our 16th financial year as a publicly listed group. It was an incredible opportunity to connect with our people, past and present, tenant customers, partners and investors to reflect on the relationships that we've built, the impact that we've had and to show our gratitude to everyone who has played a role in our success. Our growth over 30 years has been built on a foundation of partnership and mutual success. That continues to drive us today. Since our listing in 2005, we've grown from $1 billion in funds under management to more than $54 billion. In FY '21 alone, we generated record gross equity flows of $5.3 billion, achieving $11.7 billion of FUM growth and delivered a 12-month total return for the group securityholders of 64%. It's important to reflect on where we came from, but I am most encouraged by where we are going. Our focus remains on delivering sustainable growth for securityholders, and replenishing capital within funds and partnerships as we continue to deploy capital through our develop-to-core strategies and selected acquisitions. With our curated portfolio of over 1,400 high-quality assets, we'll continue to make enhancements through asset diversification and long WALE strategies. And importantly, we continue to pick strategies in sectors that will outperform the return benchmarks expected by our investor customers. We remain well diversified by equity source, investor customers, tenant customers and by subsectors within property markets. The property funds management platform comprises over 1,400 properties and generates more than $2.5 billion of net annual rental income, rising with the considerable pre-lease development work in progress we have in logistics and offices whilst deployment capacity across the group has never been greater. The thematics we have espoused for a decade combining our Long WALE strategy with a focus on high-quality tenant customers in industries that are resilient continues to pay dividends in terms of occupancy at very high levels, rental growth and asset value growth. The capacity to secure long leases with attractive, contracted rental increases, both fixed and linked to inflation continues to screen Australian property market as very attractive to both domestic and global investors. We have deliberately grown our exposure to this Long WALE thematic, which is further evidenced by the $17.2 billion, 10.6-year WALE industrial and logistics portfolio and our sector-leading 5.5-year WALE office portfolio. We're one of the youngest average building age profiles of the major office portfolios in Australia. The record level of leasing volume across our office portfolio and continued cap rate compression evidenced by investment sales during '21 and our recently announced industrial valuations at 31 October provides us further conviction about the preeminent position that office will play in most diversified portfolios. Modern workplaces will continue to play a critical role for the majority of businesses and the economy -- and we have invested heavily in our people and technology to provide the most contemporary workplace solutions for our tenant customers. Weighted average cap rate -- capitalization rate across the $54 billion platform is currently 4.76%, reflecting the quality of our core portfolio. We expect to see continued cap rate compression for good quality [Audio Gap] shopping center portfolio, I'm expecting to see strong growth during the course of the next 12 months. I also point out that the relatively high valuation cap rates of around 6% for good, defensive, supermarket-anchored retail is simply not sustainable with the cap rate compression and sales evidence that we're seeing. Our diversity of equity sources continues to be well balanced with about 64% of the FUM or funds under management from our unlisted wholesale equity sources, both pooled and partnerships, 20% from our 3 listed REITs and 16.5% from our unlisted direct business. That has delivered over $1 billion of inflows per annum for the last 3 years in a row. Pleasingly, all segments of our equity sources continue to grow at similar growth rates, which have been very consistent over many years, growing scale and depth of investor relationships. We continue to replenish capacity to fund our growing $9 billion development pipeline, half of which is precommitted and under construction. In addition to our sector-leading WALEs, our resilience strategy is delivered via sector diversity, tenant industry diversity and geographic dispersion in our preferred markets. Lastly, I'll focus on a high proportion of government tenant customers and large corporates operating in essential industries provides security of income from our property portfolio. Slide 12 shows that FY '21 was a record year of FUM growth. FUM growth through a combination of significant transaction activity, positive revaluations and development CapEx. Our development pipeline continues to increase the volume of annual completions, escalating volume of precommitted developments in both office and industrial and logistics sectors whilst we continue to acquire further sites in logistics and office to replenish the uncommitted pipeline. The developments improve the returns within our FUMs by delivering enhanced yields and margins above cost compared to on completion independent valuations. Most importantly, many of our pre-leased developments are creating modern office and industrial assets that are simply not available or seldom available for acquisition in the open market. Financial year '22 has maintained the strong momentum of growth in FUM, which has grown by $3 billion to $55.3 billion in the last 4 months of the year. And there's good visibility to further potential growth with the proposed acquisition of the ALE Property Group scheduled for unitholder vote next month via our Board recommended scheme. The current Australian commercial real estate sector continues to offer an attractive relative investment return. We're seeing very strong domestic and offshore demand for real estate. And we expect that to continue throughout the course of financial year '22. Slide 13 and our transaction activity. Strong equity flows saw us active in deploying equity into developments, acquisitions and sale-leaseback transactions during financial year '21. And this has obviously continued in financial year '22. Notwithstanding the challenges presented by COVID-19, we're active across all sectors, and we're quick to seize on opportunities that presented themselves. Sale and leaseback transactions continue to drive much of our activity as we look to actively partner with our tenant customers to create mutually beneficial outcomes. Examples during FY '22 included the expansion of the BP partnership into New Zealand, the $280 million Telstra -- Telco exchange acquisition in Pitt Street in Sydney CBD, the logistics acquisition on the ALDI logistics portfolio on our sale leaseback in the logistics sector, multiple fundings lease transactions and the acquisition of the David Jones flagship store in Sydney CBD on 20-year NNN lease. Repeat customer transactions are a healthy sign of delivering on our customer-centric objectives, many of which reflect our capacity to deal with customers in multiple sectors. Turning to Slide 14. Equity, as can be seen from the total equity flows in financial '21 continue to be consistently strong relative to previous years. Financial '21 was marked by successful equity raisings from every one of our capital sources. Our strategy of accessing multiple sources and capital continues to deliver growth and resilience across our various equity segments. Our pooled funds continue to generate strong investor interest with CPIF having secured $2.6 billion of equity commitments in calendar 2020, and we're expecting that to be fully drawn and allotted early in the new year. We've also launched an equity raising for our flagship wholesale office fund, CPOF, which we're expecting to have a successful first close prior to Christmas. Our wholesale partnerships are also very active during financial year '21 with a newly created partnership with global sovereign wealth fund, GIC, that secured the Ampol portfolio, our hardware partnership investing or acquiring a $353 million portfolio of Bunnings leased assets and Dutch pension fund, PGGM, establishing a new logistics partnership with Charter Hall. Additionally, our Canadian pension fund partner QuadReal who had already previously invested with us in 201 Elizabeth Street extended their partnership with the acquisition of development site in North Quay in Brisbane. As I previously mentioned, our direct business also continues to enjoy strong support from investors and is continuing its growth and most importantly is continuing to provide distribution yields and distribution yield growth to the investors that commit to our various sector-specific and diversified funds in the direct business. In summary, we continue to enjoy the support of capital partners given our ability to successfully deploy capital in attractive acquisition and development opportunities. And importantly, investing alongside them as evidence of strong alignment of interest and generating healthy returns for both our investment partners, but also CHC security holders. That concludes my review of financial year '21 and our progress year-to-date in financial '22. I'd now like to also reaffirm our earnings outlook statement for FY '22. On the 1st of November 2022 -- '21, sorry, the group upgraded post-tax operating earnings per security to no less than $0.83 per security for financial year '22. This earnings guidance does not include any forecast transactional activity yet to become unconditional and is based upon no material efforts change in current market conditions. Financial year '22 distributions for security guidance remains unchanged and is for 6% growth over FY '21. In closing, I would like to thank our people based around Australia for their continued hard work and dedication towards achieving these results. And on behalf of our senior executive management team, I'd like to thank you, our securityholders, for your continued trust in us. We'd also like to thank as extensive of David Clarke's acknowledgment, the great contribution of Phil Garling to the Charter Hall Board over the last 9 years. I'll now hand back to our Chair, David Clarke, to conduct the formal part of the business -- the formal business of the meeting.

Thank you. David. And today's meeting will be conducted online, and I'd like to ensure you are familiar with the way we will proceed. There are 7 items of business and 6 resolutions, which will come to you shortly. Securityholders may vote and submit questions about each item of business using the online platform, and all resolutions put to the meeting today will be decided by a poll. And I now declare the poll open. For those shareholders participating in the meeting via the online platform, you can cast your direct vote using the electronic voting card that you received when you validated your registration. If you've not received an electronic voting card, at the bottom of the web page, you should see that there are 3 boxes. Get a Voting Card, Ask A Question and Download. Register to vote, click on the get a voting card box at the top of the web page or below the videos. You will need to register by providing your details as either an individual or proxy. Once you have registered, your voting card will appear with today's resolutions to be voted on. Securityholders and proxies can either submit a full vote or a partial vote. You can move between the 2 tabs by clicking on full vote or partial vote at the top of the voting card. Once you have finished voting on the resolution, scroll to the bottom of the page, there is a box, and submit -- and click submit Vote button. If you want to ask a question, you will only be able to ask a question after you have registered to vote. If you would like to ask a question, click on the Ask a Question box either at the top or bottom of the web page. And if you would like to view the Notice of Annual General Meeting, click on the Downloads button. Those procedural matters out of the way, I'd now like to move to today's formal business. I now table the Notice of Meeting dated 11th of October 2021, which contains 7 items of business and 6 resolutions up for consideration today. A copy of the Notice of Meeting would have been made available to you by e-mail or, as previously mentioned, is available to you on the web page. I'll now take the Notice of Meeting as read and move to Item 1 in the notice of meeting to receive and consider the annual report. This item should now be displayed on your screen. Please note, there is no requirement for securityholders to approve these reports. I have [ Ewan Barron ] from the auditors, PwC, is here to take any questions relating to the preparation and content of the auditor's report and financial statements and conduct of the audit. We have one question online, submitted -- in respect of the auditor. And there's another question as well, which I'll answer in this more general session. The question is from Mr. [ Stephen Mayne ], and it goes as follows: the AFR reported this week that Australia's biggest auditor, PwC, has used dozens of unqualified workers on lower salaries and with less training and resources than their main office counterpart to complete audit work for the large-listed clients from an unbranded office in Western Sydney's Parramatta. Would PwC auditor, [ Ewan ], please comment on whether this is true and whether any Charter Hall auditing was done from his office and what is Charter Hall's reaction to this news. I would restrict the question to saying whether it's applicable to the Charter Hall audit, which I think our auditor is only qualified to answer.

Thank you, Chair, and thank you, Mr. [ Mayne ], for your question. The article referred to relates to one of a number of audit delivery centers, which the firm is set up. And this one in Parramatta has been in recent years. As noted by the head of our assurance practice in the article referred to the issues raised set around a number of matters, including office location and set out starting salaries for those team members and career progression of opportunities for our team. The issues raised did not, in any way, impact audit quality. And it's important to note that all of our audit work is overseen by qualified professionals with appropriate skills and experiences. Our firm first became aware of some of these matters earlier in 2021 and a full review was undertaken at that time. And there were definitely some learnings for us as a firm, and we implemented a number of measures prior to 30th of June of 2021. Again, I'd stress that no audit quality issues were identified in this review. In terms of the Charter Hall audit, our team did use the Parramatta team in -- referred to in the article. But I would say it was used in a very small area of the audit. And as I mentioned previously, all of the work performed by that team was overseen by qualified professionals with the right skills and experience. I want to thank you again for your question. If you do want to have a further understanding of what our firm is doing around audit quality, I'd certainly refer you to our transparency report, which was released quite recently to the market. Thank you.

Thanks, [ Ewan ]. There is another question for Mr. [ Mayne ], which I'll deal with now under this item because it goes through procedure of the meeting, is that -- did any of the 5 major proxy advisers in Australia, ACSI, Australian Shareholders Association [indiscernible], recommend a vote against today's resolutions, including the remuneration report. Has there been a material proxy protest vote against any of today's resolutions? Will you disclose the proxy votes before the debate on today's resolution, so shareholders can ask questions if there's been a protest vote? The short answer to that question is this, there was a -- first of all, the Australian Shareholders' Association does not publish a report in Charter Hall. So that's not included. There were 4 proxy advisers those that I named, they recommended against from memory, [indiscernible], 2 of the remuneration recommendations, including the recommendation report and another recommended against 1 of the remuneration matters. So the matter of showing the proxy votes during -- after the debate on each matter, we can show the proxy votes. And of course, there is still an opportunity to vote because it's a poll on all matters and the poll will not close until 5 minutes after the meeting is concluded. So there's ample time to vote. In respect to discussion on each matter, I would suggest that each shareholder should form their own view on the merits of a particular case or resolution and therefore, vote as they see fit on a manner. The purpose of having the proxy votes is to show where we are in the progress of the poll. It's not to then try to influence the vote in one way or the other. So we will continue with that practice, which is common practice across all the companies that I'm aware of. So those are the 2 matters there. There's other matters from Mr. [ Mayne ], some of which are relevant to this meeting, some of which are not. So while they're not on any particular resolution, I'll try to answer the appropriate questions or the relevant questions in roughly the appropriate manner -- appropriate time, but most of them will be dealt with under general business at the conclusion of the meeting -- at the conclusion of the resolutions before the conclusion of the meeting. So that is the annual report. And I'll just ask the telephone moderator whether there are any questions that have come in from the phone.

There are no questions at this time.

Thank you. I will now proceed to the formal resolution set out in the notice of meeting. Election of Director, Item #2. This is the resolution -- this resolution is an ordinary resolution, and as you can see, is displayed on the screen. I'd like to ask Jacqueline Chow to say a few words detailing her background and experience for the benefit of securityholders.

Thank you, Chairman. Good afternoon to securityholders and guests. Like you, I am a securityholder of Charter Hall Group as well as the resident of one of our iconic Sydney office properties. I am honored to be standing for election to the Board of Charter Hall Group. I take this responsibility very seriously. For over 20 years of working life, I have been preoccupied with understanding the customer, using data analytics and insights to discern their unmet needs and pain points. And then we've created the innovation and technology solutions to build customer loyalty. Charter Hall's competitive advantage is built on the culture of mutual reward and close relationships with our customers. With my experience as an Independent Board Director of Coles Group as well as my executive experience running consumer branded businesses such as Kellogg's, [indiscernible] and Fonterra, many of whom are our long-term tenants, I can bring a deep customer perspective. One lasting trend of this devastating pandemic has been the accelerated adoption of digital technologies across all facets of business. I can contribute my digital technology experience to generate commercial value to Charter Hall. From yielding productivity inefficiencies with robotic process automation, to harnessing personalized data of our tenant customers to co-create property environments that dynamically meet their changing needs. Finally, I have led several large-scale businesses end to end with my last executive role spanning 80 countries. Having the recently of hands on operational experience can be helpful context, for what it truly takes to deliver on our promises and to do so sustainably with a diverse array of constituencies, be that communities, business partners, governments or regulators. I understand the trust that is placed in Charter Hall by our investors, and I see the preservation of that trust as a primary responsibility. I would be honored to receive your support to serve the Director. Thank you.

Thank you, Jacqueline. I now pause to allow securityholders to ask any questions if they have any. There is one question online, again, from Mr. [ Stephen Mayne ]. So I'll read that out. Jacqueline currently sits on 3 major Boards and also continues to work as a management consultant at McKinsey. This is unusual for a professional director. Could you please provide more information about her McKinsey arrangement, including how conflicts are managed and how much time she's spending on McKinsey.

Thank you for your question, Mr. [ Mayne ]. I spent [indiscernible] month, supporting clients in various sectors, particularly the CEO and the executive team on their transformation, particularly digital transformations. McKinsey has very strict standards on real or perceived conflicts for all partners and their advisers. And there is a form of governance that's an approval process and it's all documented to assure that there is no conflict between clients and between sectors.

Thanks, Jacqueline. There are no other questions online in respect to this matter. I'll ask the moderator if there are any phone questions in respect to...

There are no questions, Chair.

Thank you. As there are no questions I will now display the proxies. The result of the proxies received on this resolution should now be displayed on your screen. I'll remind everyone that poll is still open, you can still vote and it won't close until 5 minutes after the conclusion of this meeting. We'll now move to item #3, which is the adoption of the remuneration report. Resolution 3 is an ordinary resolution of Charter Hall Limited and relates to the adoption of the remuneration report included in the annual report for the year ended 30 June 2020. It's not a binding vote. Instead, it is characterized as advisory in nature. However, it provides important feedback to directors on how securityholders feel on a range of matters, including remuneration. I'll now pause to allow securityholders to ask any questions if they have. There are no questions that I can see relevant to this online. I did touch on this when I answered the general question from Mr. [Stephen Mayne ]. Moderator, are there any questions on the phone?

There are no questions.

As there are no questions, I'll now display the proxies. And note the proxies received are now displayed on the screen. But this is in respect to the remuneration report. Item #4 is issue of service rights. So the fourth resolution is proposed as an ordinary resolution of both Charter Hall Limited and Charter Hall Property Trust and relates to the issue of service rights to our CEO and Managing Director, David Harrison. Each year, 1/3 of Mr. Harrison's short-term incentive is deferred into service rights, which is effectively equity into the company for a period between 1 and 2 years. As a Director of Charter Hall, an issue of securities to Mr. Harrison generally requires securityholder approval. Accordingly, this resolution that relates to that deferral of incentive into equity in Charter Hall. The text of the resolution is on the screen. I'll now pause to allow securityholders to ask questions if they have any. There are no questions on this particular item online. Moderator, are there any questions on the phone?

There are no questions at this time.

Thank you. There's no questions. We'll now display the proxy votes on the screen. The next item is item #5, which is the issue of performance rights. The fifth resolution is again proposed as an ordinary resolution of both Charter Hall Limited and Charter Hall Property Trust and relates to the issue of performance rights to Mr. Harrison. Each year, David has awarded performance rights in Charter Hall as part of its annual remuneration. These performance rights vest at the end of 4 years, but only if performance hurdles are met. Again, as the scheme involves the issue of securities to Mr. Harrison and securityholders' approval is generally required. The text of the resolution is on the screen. There is one question online, again, from Mr. [ Mayne ]. The CEO earns 1.413 million ordinary shares with 26.7 million based on the current share price. We've done extremely well for shareholders. Is he concerned about shareholders' opposition to his long-term incentive and how important this grant is to keep him motivated? I will answer that. The -- I think it's a little early in the proceedings to say whether his LTI has been supported or not supported. And Therefore, I think the presumption behind the question really doesn't make a lot of sense. However, I think -- the point I would make is that the CEO has led a very successfully -- has very successfully led a very high-performing and successful organization. As a consequence, being employed with Charter Hall since 2005, he has a very significant shareholding. And I'm sure that the growth in that shareholding and the growth and the value of that shareholding has been one of many things that motivates him. So I'll leave it there. I'll now ask -- there don't appear to be any more questions online on this particular item. Moderator, are there any questions on the phone? Moderator, are there any questions on the phone?

There are no questions at this time.

Okay. Thank you. I do have a question here from -- again from Mr. [ Mayne ], which I'll answer it. Again, what specifically did the proxy adviser say was the problem with these LTI grants. The proxy opposition was substantial. Are they going to change the structure? The answer is no. We're not going to change the structure. And there was not as proposed in the question, substantial opposition to the LTI grants. The questioning of our remuneration by the proxy advisers was in respect of our retention and our performance plan, which we're about to come to in the next item, and I'm happy to discuss that the -- if that's something of interest. But there was no real opposition to the LTI. The LTI has been in place in its current form for many years. I can't remember how many, but many. And so therefore, it was not part of the general discussion in the papers presented by their proxy advisers. As there's no further questions, I put the proxy results on the screen. Thank you. We now move to Item #6, which is the issue of the -- as I mentioned, the issue of the retention and outperformance plan. The sixth resolution is again proposed as an ordinary resolution of both Charter Hall Group Limited and Charter Hall Property Trust and relates to the issue of performance rights to Mr. Harrison under the retention and outperformance plan. And I made a comment in my opening remarks about this award, and I'll reiterate that -- and hopefully, Mr. [ Mayne ] this partly answers your question. I will reiterate that we have an outstanding executive team at Charter Hall, produced sector-leading performance over a very long time. Giving the team at Charter Hall and focused on leading the sector in results over the medium term has been the motivation behind asking securityholders to approve Mr. Harrison's participation in this scheme. We have a strong, highly rated company with a talented and experienced team. As others seek to emulate our success, we want to keep our team in place working for you. So the text of the resolution is on the screen, and I'll now ask -- now pause to allow securityholders to ask a question that they have. So I'm interpreting Mr. -- a couple of Mr. [ Mayne's ] questions here, one being about proxy advisers and while the other being about the recommendations in respect of our remuneration matters. Of the 4 proxy advises -- well, let me start this way. There are a number of key elements that go into the making up of our retention and our performance plan. There is the structure of it. The structure and then we call it the coverage that is the number of executives it covers. It covers 27 additional executives to David Harrison or proxy advisers thought that was a very, very good attribute. The next point would be they look at the term of it. So it is for 5 years and with a 2-year holding lock after that. So it's effectively over 7 years. All proxy advisers thought that, that was a very good thing. Let me come to the 2 remaining items that go into the composition of a scheme like ours. One is the performance hurdles and the other is the actual quantum. 3 of the 4 proxy advisers felt the performance hurdles were sufficiently stretching to warrant such a scheme. So they felt fit it into the scheme. One didn't on the basis that the company had such an extraordinary performance history that they would be relatively easy to achieve. That proxy adviser have failed to understand the composition of our earnings and the contribution in recent years that performance fees have made to our results and the fact that performance fees don't occur every year. The 1 -- the fourth and final item, which the proxy advisers queried and in one case -- well, I'll come back to that, query was the quantum. They offered no reasoning or rationale for why the quantum was inappropriate or what an appropriate quantum should be. Instead, it was just said to be in excess of what they would expect. One proxy adviser did say that given the performance record of the company, that shareholders may even wish to ignore their advice but in favor of it. So there is a summary of what the proxy holders said. I think, as I said earlier, we had sounded this out our security holders prior to implementing it. The concept of such a scheme, and there was agreement. In talking post our results after the announcement on the detail of the scheme with our major securityholders, we found endorsement at a portfolio level -- at a portfolio manager level of the scheme. In fact, they considered it to be very long with the performance hurdles very high, and they were very pleased that the Board had done something to ensure stability of the team in a very, very competitive market for talent. I'm not sure there's much more I can add to it. So I'll leave it there. I don't see any further questions in respect to this matter online. And I'll now go to the moderator and see if there are any questions on the phone.

There are no questions at this time.

Thank you. I'll now display the proxies on the screen. Thank you. And we'll now move to item #7, which is the remuneration of the nonexecutive directors. This is the seventh and final resolution for today's meeting, and it's an ordinary resolution of Charter Hall Limited and it relates to an increase in the remuneration pool for nonexecutive directors. The role of the director has become more demanding and complex. It's also anticipated that there may be an expansion of the Board by one director or possibly another too, as we deal with succession planning over the next few years. The last increase in the director fee pool was in 2017. And I confirm that the proposed increase in the fee pool has been determined by having regard to an independent benchmarking study that was undertaken and conducted by EY. So the text of the resolution is on the screen. I'll now pause and allow securityholders to ask any questions that they have any. And I think there is. The first question, again, this is from Mr.[ Stephen Mayne ], what is the actual intention in terms of Board fees once this item is approved? Don't be afraid to give yourself pay rise given the performance has been so strong. Well, thank you, Stephen. It's very much appreciated. We will take into consideration. I would reiterate that this is a fee cap, and this is not something that is automatically paid out each year. It's the poll which requires shareholders, securityholders to agree. I'm just looking through the questions now. The question is when disclosing the outcome of all resolutions, including this fee cap rise for the nonexecutive directors, would the Chair agree to publicly disclose how many shareholders voted for and against each item, similar to what happens in the scheme of arrangement. This will provide a better gauge of retail shareholder sentiment on all resolutions and other disclosure initiative was recently adopted by [indiscernible] Southern Cross Media and after their AGM. Well, thank you, Stephen. I have to say I'm not particularly in favor of that, but we can discuss it as a Board. We do not have a large retail share base. What I would say is we will disclose proxy results as well as the votes cast at the meeting. And there will be a webcast made available, but we don't propose to issue a transcript. I would have thought the proxy results or the votes that are displayed on the screen, irrespective of whether they are retail or wholesale and institutional investors show the sentiment of our securityholders. And one group of securityholders doesn't have an additional set of rights over and above another group of securityholders. So I don't see the reason in a company like ours particularly to disclose it. But as I said, we can discuss it as a Board. So thank you. I didn't get any other questions on this item. So I'll go to the phone, the operator and ask if there is any items on the phone.

There are no questions at this time, Chair.

Thank you. I now display the proxies. You should be able to see those on your screen. Thank you. I think the final item to vote on and if you have not already done so, I would encourage you to submit your vote now. I'm actually going to -- now there's no other business to be considered, I declare the formal business of the meeting first. As I said, the poll will remain open for a further 5 minutes and securityholders who have not already voted may lodge their online votes during the time. The results of the poll will be made available to the ASX and put up on our website later today. Now we go to the section of the meeting, which has general questions. And again, there are a number of general questions already there. If there are further questions, please type them in or use the telephone. I'll now progressively work through the general questions. The next one is also for Mr. [ Stephen Mayne ]. This one, I have to say I was asked yesterday or I think the day before at one of our listed REIT meetings. So the question is, in my mind is whether it's particularly relevant to this meeting, but I'll go through the question and give an answer to it. Charter Hall branded listed entities have raised billions of dollars through multiple equity raisings over the past decade. Why have you never done a -- or it's called a pro rata accelerated institutional announceable tradable [indiscernible] because I find it difficult to pronounce, [indiscernible] I'm sorry. Capital raising, which treats all shareholders equally and compensates nonparticipants. The biggest losers in Australia is anything goes capital raising system is the retail shareholder who fails to respond to an offer. This is usually a majority of retail investors even when an offer is in the money. Please embrace [indiscernible] to stop these retail shareholder rip offs. Well, thanks again for the question. Charter Hall itself as the stapled entity has not raised capital, I think, since 2017. So I think this is a meeting of the Charter Hall entity and the Charter Hall board. In respect of the more general question, there is each Board -- each independent Board that oversees those Charter Hall entities that you referred to, Stephen, consider the matter on each capital raising. With -- from my memory, with most of them, there is a share purchase plan associated with an institutional raising, which typically overcompensates the allocation to retail investors, vis-a-vis institutional investors. As opposed to -- so that's the answer to that part of the question. In respect of rights that are tradable. It is becoming unusual to have tradable rights for various reasons, which I'm sure you're aware of. And I have to say that it is important in the growth of these businesses for people to be aware. And it's my understanding that most of our shareholders are actively -- particularly our retail shareholders are actively engaged in those entities. And so the idea that they would not take up an issue or not take or not make a considered opinion about it, I think, is some perhaps doing our securityholders in those REITs service. Thank you, for the -- question again, which was raised, Stephen, that was raised at one of our previous meetings. I'm thinking it was the Charter Hall Retail REIT. And I believe it was answered there, but I will also answer it here. So why is -- so the question is as follows: Why is Charter Hall moving so aggressively into gambling with the proposed acquisition of the ALE Group, Australia's biggest owner of pubs with addictive poker machines. Are you prepared to get involved to drive more responsible practices such as not allowing the Victorian venues to stay open to maximum 20 -- I mean -- I assume that means 20 hours a day. Nothing good will be happening at these, you call them Charter Hall Pokes Pubs at 3:00 a.m. Let me start in answering this in a strategic and general way and then moving down into the specific What I will -- at Charter Hall gets institutional funds from some of Australia's leading super funds and institutional fund managers. We also get that from a very significant number of international institutions from all around the world, sovereign funds included. So they come from Europe, Scandinavia, Middle East, Singapore, Japan and North America. All of those funds look at the fund mangers they invest with, provide a screen and checklist over their practices, whether it be how they manage funds or how they invest funds, the type of investments they make. So all of those check lists include a very rigorous and deep investigation into the practices, the environmental, social and governance practices of the fund manager. And it's to our credit that we have the relationships and the fund flow coming from those institutions, both in Australia and around the world. So they have reviewed our ESG practices. And I mentioned that because the gaming issue you raise is typically one that comes up in an ESG context. If I go to the specifics of the ALE transaction. First of all, that has not proceeded yet, it needs to be voted on by the shareholders of ALE at a general meeting. So deal has not yet gone. What I might add is firstly, that it is one of our partner institutions Hostplus who is partnering with one of our listed retail vehicles being the Charter Hall CLW, Charter Hall Long WALE [indiscernible]. The nature of that acquisition is what's known as a triple net lease. Triple net lease is one where we, as the -- in this case Hostplus and CLW as the owner of those pubs have a very long lease, to in this case, the Endeavour Group, which is the operator, the licensed operator of all those pubs. But also bear in mind, there are other outlets as well. It's not just pubs. There are [indiscernible] assets as well. So you're focused in on one small part of the revenue of those entities. So as landlord -- sorry, as the tenant, Endeavor are responsible for all matters associated with that piece of land and the building. They're responsible for the insurances, the licenses, the regulations, the building maintenance, rates, everything that you can think of. And Charter Hall is -- Charter Hall manages on behalf of Hostplus and CLW the lease and property. So I would also say that in the context of our $3.5 billion assets, I believe it's $1.5 billion of assets. So the amount and investment is [indiscernible] $1.5 billion of the assets we manage, $1.5 billion assets we own. Is there any other questions there? Again from Mr. [ Mayne ]. This one [indiscernible] Managing Director and CEO, David Harrison. I'm a local government counselor. This is Mr. Mayne talking, city of Melbourne, council at the City of Melbourne, and Melbourne [indiscernible] Melbourne East and Southeast [indiscernible] commercial and managing their own $1 billion for property portfolios and are reluctant to partner with major property players and the CEO said examples of councils across Australia, which have a sensible [indiscernible] of arrangements, which have delivered outcomes for all stakeholders.

Mr. Mayne, Charter Hall owns the head office of Brisbane City Council in Brisbane. We also own a bus depots that are leased to Brisbane City Council on a 20-year lease. There's just a couple of examples where we've been a partner with local government. And we have, frankly, similar arrangements at all levels of government where we're a landlord and we partnered with the [indiscernible] government, state government and local government on various assets and in various sectors.

Thank you, David. I have got one more question for you from Mr. Mayne. In February 2010, we bought that is Charter Hall bought a private Australian property platform. The benefit of hindsight with this most important value accretive deal we've done as a listed company. [indiscernible] of Charter Hall Group. I think that means they have a 10% shareholding in Charter Hall as part of the deal. When did they sell out and was the exit profitable for [ Macquarie ]. For the latter part of the question, you'll have to ask [ Macquarie ]. And I -- it was a very important transaction in scaling Charter Hall, which allowed it to create a platform for the growth that we're -- growth that we're all the beneficiaries of [indiscernible]. But I wouldn't call it one the most accretive deal. I'm not sure where it ramps in accretion, but it was certainly -- it was most important from a strategic point of view in terms of the growth and the strategic growth of Charter Hall Group. So in hindsight, we were very, very pleased that we did it.

It's a win-win. It was a very good transaction for us and [ Macquarie ] doubled their money and sold out 3 years later after they issued total stock in 2010. But as you recall, most people who bought stock in 2010 did pretty well for the next few years.

Thank you, David. Just a final question here in the discussion today across a range of topics today because the Chair undertake to make an [indiscernible] the webcast that's a full transcript of proceedings available on the company's website. AGM transcripts have recently provided by other major companies like ASX [indiscernible] given the attention around discussion in particular [indiscernible] access to full transcript. What I would say to this one is certainly the webcast will be made available, but we're not proposing to publish a transcript. Particularly [indiscernible] of the retention plan, the retention and outperformance plan, if you go to our website, there is a summary on our website, quite an extensive summary that deals with many of the issues -- actually all of the issues that were raised by proxy advisers in respect of that plan. And so that's been up on our website for the last, I think, 2 weeks. So I think that will give you a very good understanding of the rationale and we've touched on most of those points today, but there may have been some that I missed. Now I just ask the moderator, if there are any questions -- sorry, there's one more question. There's no -- apologies. I'll just ask the moderator, if there's any questions on the phone.

There are no questions, Chair.

Thank you very much. So well, all of those on the line today, thank you very much for your attendance and your ongoing support of Charter Hall. And I would now declare the meeting formally closed. Thank you very much for your attendance and support.