Cromwell Property Group (CMW) Earnings Call Transcript & Summary

Good afternoon, security holders and attendees, and welcome to the 2023 Annual General Meeting of Cromwell Property Group. My name is Gary Weiss, and I'm the Non-Executive Chair of Cromwell Property Group. I'm also the Chair of today's Annual General Meeting. I warmly welcome all Cromwell security holders to the meeting, with your joining in person here at Cromwell's Brisbane office or through the online platform provided by our registry, Link Market Services Limited. The Cromwell Board thanks all security holders for their participation. Today's Annual General Meeting is held as a hybrid meeting. Cromwell is deeply committed to diversity and inclusion, and we believe the hybrid meeting format creates the most inclusive meeting environment for our very diverse security holders and stakeholders. To further promote engagement and transparency, we will upload an archived copy of the webcast to our website after the meeting. To begin, I acknowledge the traditional custodians of the lands on which we meet today, and pay my respects to their elders, past, present and emerging. Next, I would like to recognize my fellow directors. First, joining me here in Cromwell's Brisbane office. We have, starting from your left and my right, Independent Non-Executive Director Rob Blain, Independent Non-Executive Director Lisa Scenna, Independent Non-Executive Deputy Chair and Senior Independent Director Eng-Peng Ooi, Independent Nonexecutive Director, Joseph Gersh AM, Independent Non-Executive Director Tanya Cox, and Non-Executive Director, Jialei Tang. And via conference call, we have Managing Director and Chief Executive Officer, Jonathan Callaghan, who is joining us from London in the early hours of the morning in the U.K. Company Secretary, Michael Foster is here in Cromwell's Brisbane office to coordinate the virtual component of our meeting. David Rodgers is also present here today. David is a partner of Deloitte Touche Tohmatsu, which is Cromwell's Property Group's auditor. Later in the meeting, you will have the opportunity to ask David questions about the financial statements, and the independence of the auditor in relation to the conduct of the audit. As a matter of housekeeping for everyone here at the Brisbane meeting location, in the unlikely event that we need to evacuate the building, please follow the emergency exit signs and directions of staff to safely move down the stairs and towards our assembly area in the Brisbane Botanic Gardens. Please do not use the lifts. Now I'd like to formally open the meeting. I've been informed that a quorum for the meeting is present, and I declare the meeting open. To those in person and to those who have dialed in today, thank you, and we welcome you to Cromwell Property Group's 2023 Annual General Meeting. I will start with a brief introduction before handing over to Jonathan, who, as I said earlier, joins us today from London. It has been a challenging 12 months for Cromwell, and we appreciate that you, our investors, feel this impact acutely. Not only in terms of the current Cromwell security price, but also the more prudent approach to distributions, which the Board has adopted given the uncertainty around the progress of asset sales and the need to protect balance sheet liquidity in the current market. Cromwell has taken significant steps in continuing to simplify the business by moving back to key core fund and asset management capabilities. Good progress has been made selling noncore assets and applying sale proceeds to debt reduction over the financial year. While this has strengthened our position with continued volatility in markets globally, we have much more work to do in this space. We are committed to the simplification of the business in the near term to position Cromwell for future growth opportunities. We believe this strategy is the correct one for Cromwell, and we have confidence that the right team is in place to deliver this under Jonathan's leadership. I will now hand over to Jonathan to briefly speak more about this and the ongoing operations of the group.

Thank you, Gary. I hope this is on. I would like to start by echoing Gary's sentiment. The current inflationary environment and the geopolitical uncertainties have provided some hurdles and continue to hinder our gearing reduction efforts. This has meant we have had to make some prudent decisions such as lowering distributions and continuing our asset sale program to further reduce debt. We are conscious of the impact that this has on our investors, but these steps are necessary to reduce risk and we look to strengthen Cromwell's overall financial position. Cromwell's business manages assets in Australia and Europe totaling $11.5 billion. Our team of more than 350 people across 15 countries are an incredibly skilled group of people using local expertise to drive value for our security holders. A key focus for Cromwell has been the simplification of the business through the disposal of noncore assets and businesses. Since the start of this program in December 2021, Cromwell has completed noncore asset sales of more than $505 million with the vast majority of those sales at or above book value. So far in the 2024 financial year, we have completed the disposal of a 50% interest in the Cromwell Italy Urban Logistics Fund to our new joint venture partner, Value Partners, and also sold the 2 Station Street, Penrith, asset for $47.75 million. We have also recently reached an agreement to sell our 50% interest in the Ursynow shopping center to our joint venture partner, which would deliver net proceeds of approximately $67 million, which we expect to receive in February 2024. For the balance of the group's Polish Retail Fund portfolio, the sale process is ongoing, and we hope to have this finalized in the coming months. Cromwell's fund management platform faces a challenging operating environment. Despite this, progress is being made as we continue to invest in our existing nondiscretionary mandates in Europe with approximately a quarter deployed. In Australia, the proposed transaction between the Cromwell Direct Property Fund, and the Australian Unity Diversified Property Fund is regrettably not proceeding due to deteriorating market conditions. We remain committed to the ongoing growth and diversification of our funds management platform as and when opportunities present in the coming years. With our continued focus on ESG, we are proud that the Cromwell Direct Property Fund has moved up 2 spots in NABERS Sustainable Portfolio Index for 2023. Now ranked equal third for energy performance and equal seventh for water performance. Similarly, NABERS ranked our Australian investment portfolio, equal fourth in the Sustainable Portfolio Index for 2023 for energy performance, up from 14th in 2022 and equal eighth water performance. During 2023, we developed a sustainable finance framework, writing our first green loan in Australia for $130 million for the Cromwell Riverpark Trust. We plan to do more in this space in the future. ESG initiatives are key to future proofing our Australian investment portfolio assets, such as the full electrification of the McKell Building, decommissioning of the co-gen plant at HQ North and installation of solar plants where rooftop space allows. Our commitment to improving sustainability of our portfolio includes a recognition of the embodied carbon in our assets and the emissions involved in dealing with waste streams, and we are advancing practical decarbonization plans for all of our assets. A consistent being this reporting season has been the relatively strong demand of small to medium enterprises in the office leasing market, particularly in Sydney. While larger occupiers have been contracting in part in response to the normalization of hybrid working, smaller employers have been maintaining or increasing their footprint. Through positioning and repositioning our assets in Australia, we continue to meet the changing requirements of our tenants, including identifying new ways to use office space and to help employers attract employees back into the office. We firmly believe that office buildings will always have a place, and we continue to seek to ensure that our tenants can find the best use for their space to seat their workforce. Across global markets, real estate owners are being challenged by higher debt and operating costs, coupled with downward pressure on the value of office assets. Cromwell's asset values in Australia were down by 9.1% as at 30 June 2023, consistent with our peers. The Cromwell Polish Retail Fund was revalued down 21% at 30 June 2023, in line with our current offer for the remainder of the portfolio, which is in due diligence. I would like to recognize the impact, which is softening property valuations have had on Cromwell's NTA falling from $1.04 to $0.84 over the last financial year with our gearing outside our target gearing range at 42.6% as at 30 June 2023, despite progress on asset sales and substantial debt repayments. We believe that the key to navigating the current difficult environment will be to focus on protecting our balance sheet through ongoing prudent capital management, lower debt and strategic deployment of capital for growth initiatives at the appropriate time. I will now hand back to Gary to undertake the formal part of the meeting.

Thank you, Jonathan. We now move to the formal part of the meeting. Cromwell Property Group is a stapled enterprise consisting of Cromwell Corporation Limited, which is referred to as the company and the Cromwell Diversified Property Trust, the responsible entity of which is Cromwell Property Securities Limited. Cromwell Property Group securities are staple, so meetings will be held concurrently. I will now address some meeting formalities. Shortly, security holders will be asked to vote on 4 ordinary resolutions to be put to the meetings. In accordance with the Corporations Act, voting on each resolution will be conducted by a poll. I appoint Rachel Teo of Link Market Services as the returning officer to conduct the polls. I address the following comments to attendees here at the Brisbane meeting location. One, security holders and proxy holders who have registered to vote will have received a yellow voting card. You will use those cards as ballot papers for each poll. You'll be asked to complete your voting card at the relevant time, and they will be collected at the end of the meeting. Only security holders or their duly appointed corporate representatives or attorneys and proxy holders are entitled to vote. If you registered to vote on your own securities, and as a proxy or representative for securities of one or more other security holders, you will have received 1 yellow voting card for your own holding and 1 separate yellow voting card for all other security holdings for which you are appointed as proxy or representative. If you are a proxy holder with a directed proxy that as you've been appointed as a proxy by a security holder who has instructed you how to vote on the relevant resolution on their proxy form. You just need to hand in the yellow voting card when they are collected. You'll be treated as having voted in accordance with those instructions. For proxy holders, the for and against boxes will only be used to record open or discretionary votes. That is you have been appointed as a proxy by a security holder who did not instruct you how to vote on the relevant resolution on their proxy form. Nonvoting security holders will have received a blue nonvoting card. Visitors will have received a white visitor card. Turning now to those attendees participating online. I make the following comments for your reference. Security holders and any proxy holders holding open proxies who registered to vote at today's meeting will need to click on the get a voting card button and follow the prompts to receive an electronic voting card for each of your holding proxy holder appointment to enable you to cast your vote. Proxy holders holding only directed proxies have no discretionary votes and will not have received an electronic voting card. The directed proxies are lodged in accordance with the security holders' direction. In line with statutory requirements, details of all proxies in respect of each resolution will be recorded in the minutes. Each non-executive director, who holds Cromwell Property Group Securities, has voted in favor of resolutions 2, 3 and 5. They have not voted on resolution 4 because they are excluded from doing so by the Corporations Act. As Chair of the meeting, I intend to vote undirected proxies in favor of each of the resolutions. The first item of business and resolutions 2, 3 and 4 relate to the company only. Resolution 5 relates to both the company and the trust. Cromwell's security holders, proxy holders and security holder representatives will be provided with an opportunity to ask questions or comment on the resolutions. For security holders and proxy holders here at the Brisbane meeting location, please use the microphone available. Before asking a question, please show your yellow voting card or blue nonvoting card and then state your name and, if applicable, the name of each security holder you represent. For security holders and proxy holders participating online, [Operator Instructions] Please note that you may not vote by phone. Visitors are not entitled to ask questions, make comments or vote. The business of today's meeting is described in the notice of meeting sent to security holders, and I will take the notice as having been read. The minutes of the 2022 Annual General Meeting of the company were approved by the Board and have been signed as a true and correct record. Those minutes are available for inspection by security holders if required. The first item on the agenda is the consideration of reports. Cromwell's 2023 annual report has been made available to security holders. It contains the financial report, directors' report and auditor's report for the year ended 30 June 2023. This item of business for consideration by the meeting is intended to provide an opportunity for security holders to raise questions on the report and on the performance of the company generally. There is no vote on this item. I now invite discussion and questions in relation to Cromwell's 2023 annual report. If you wish to ask a question or make a comment, please wait to be acknowledged and then give your name. All questions and comments should be directed to me in the first instance as Chair of the meeting. I will call on specific directors or senior management to respond to your question or comment as necessary.

Are there any questions or matters to raise in relation to the 2023 annual report? Yes, sir?

My name is David Midwood from the Australian Shareholders Association, along with my colleague here, Noel Ambler. A couple of queries and comments, if I may. With respect to -- could we ask for an update with respect to the Polish assets in -- with respect to the European assets generally.

Sure. Jonathan, perhaps you could take that question.

Thanks, Gary. Yes, the sale process continues, that we do have a preferred bidder in exclusivity that is conducting due diligence on the portfolio. That due diligence continues. And we're just letting that process play out. The hope is that we are in a position to sign a contract before Christmas, but nothing is guaranteed at this point.

Okay. I think Jonathan perhaps to add to your response that we did announce today in the course of your report about the agreement in respect of the SNL assets. So perhaps you might want to elaborate on that.

Yes, sure. So we divide the Polish assets up really that's what we call the CPRF portfolio, which is a portfolio of 100% owned assets. That is the portfolio that we marketed widely and which I was just referring. There is another asset in Poland that we own in a 50-50 joint venture with Unibail. And as part of -- and we have recently reached an agreement with Unibail, the outcome of which is that they have agreed to purchase our interest in the joint venture. The net proceeds in Australian dollars to us is about $67 million, which we expect to receive in February 2024.

Thank you.

Through the chair and unrelated question with respect to the Board's workload, notwithstanding the considerable work done with Cromwell, et cetera, and to the chair personally with your activities in other Boards, there must be at least 3 of you walking around identical ones in that respect. But feedback has been concerned about the Chairs workload being spread too thin.

Sure. That's -- thank you, a frequently asked question. Let me just say, as I do with all the roles that I do take on, I don't take on a role unless I believe I can apply the necessary commitment to ensuring that all aspects of the role that I take on are able to be fulfilled. I think it'd be fair to say I'm probably not your usual dialogue Chairman. I do take a very active role in all the companies that I Chair. And I've spent an enormous amount of time towards the affairs of Cromwell. Jonathan and I would speak probably once or twice a day. I'm intimately involved with all the transactions that -- and particularly the significant transactions that have already taken place to realize proceeds for the necessary debt reduction, which we all know needs to happen and is underway. I'm also in-charge, so to speak, of dealing with our owners with major holders in particular. As you appreciate, 30% of the register is held in 2 hands, and I spend a lot of time ensuring that we have a good working relationship with our owners and also around the Board table. I'm pleased to say that after a couple of years of what I felt was very unnecessary corporate warfare around the Cromwell register. You have a Board today that works very collaboratively and cohesively together. Are there any other questions?

There's none -- it looks like we do have.

Sorry, there's 1 question here.

Mike Horn, and I'm speaking on behalf of myself and my wife. Chair, in the debt reduction, there was a difference of about $187 million between the sale of the assets and the amount of the debt reduction. So was that $187 million used for operational purposes or what was it used for, would seem good practice to use 100% of the sale to debt reduction. So could you just explain that? And could I ask Jonathan, just to talk a little bit more the overall results this year have been frightening and disastrous. And Jonathan just talk a little bit more about the simplification or what other means you're using as well as debt reduction to try to address all the various figures that have come down so dramatically.

Sure. I might perhaps turn the questions around, take the second one first, Jonathan, perhaps if you could tackle that. I hope that came through.

Yes, it did.

And then second aspect perhaps ask Michael Wilde to identify the application of proceeds from asset realizations and the makeup or the breakup of where those proceeds have been applied.

Yes, sure. So thanks for the question. The performance has been disappointing of the business. But it is a mathematical function of 2 things really. So if I could break up the performance into the operating earnings and then into the NTA. In terms of the operating earnings, the fall in operating earnings that you are witnessing is driven virtually entirely by the sale of assets. So when you sell assets, you lose the income from it. And so -- and we were selling our higher-yielding assets at first. So the regional risky assets that we sort of have owned, they're the ones that we've been selling and also our interest in the LDK joint venture, which had a lot of risk associated with it. But -- and -- but it was sort of generating a 12% non-interest accruing amount of earnings. So in other words, it wasn't actually a cash return. So once you sell those assets, you lose those earnings. The other impact has really been the increase in interest costs. So our interest costs year-on-year have sort of gone up about 47%. So when you add those 2 impacts together, you get the fall in earnings that you see -- that have sort of come through. The issue has been sort of exacerbating that, that whilst we have been selling assets and paying down debt, the asset values at the same time have been falling. So basically, we're not making the headway into the gearing reduction that we would like to see. And so -- and then the other sort of disappointing impact or part of the performance this year has been the NTA decline. Now the NTA decline, again, is simply through valuation force. Now the Australian portfolio has held up reasonably well of the year, falling about 10% for the year, which is pretty standard. And the Australian portfolio is the vast majority of -- well, the sort of 75% of our investment portfolio. The other part of it is the Polish retail assets. They had fallen 21% in the period. That fell 21% because of -- well, they've fallen 21% from the independent value at June 2023. That is because we have agreed to put party into due diligence on those assets at that price, which represents a 20% -- 21% discount to the latest independent valuations. So it's really those 2 things, but there is a disproportionate contribution from the Polish retail portfolio to those -- to that poor outcome.

Michael, where is Michael? Michael, perhaps just talk about the application of the asset sale proceeds.

So the group has some ongoing commitments in relation particularly towards investment properties, by the way, of incentives to tenants that are locked in that we need to continue to provide to those tenants. But the main reason or difference would be that we continue to unload these noncore assets and some of those transactions have happened in the current financial year. So the proceeds won't yet be displayed in the accounts of the group, and that will be the larger component of the difference.

Thank you, Michael. Perhaps just on this part, I think arguably one of the most illustrative pages of the annual report to show the challenge that Cromwell has been experiencing and continues to experience is actually to be found on Page 11 of the annual report. That page sets out quite clearly, not only the on balance sheet stated gearing levels of Cromwell. But as relevantly the see-through gearing is the debt and underlying investments are also effectively acknowledged. So you need to understand that Cromwell's stated gearing ratio was to be between 30% to 40%. If you have a look at this graph, you'll see that the stated gearing has essentially been at or above 40% now for the last couple of years. The see-through gearing has gone pretty close have not exceeded 50%. So this is the challenge that we have had as a group since the new Board was constituted. We always knew the balance sheet was under pressure from the gearing levels. That much have been pointed out in the ARA materials as part of the ongoing campaign. And as Jonathan observed, as asset values have come down, the debt level does not come down. It stays the same, but your asset level comes down and your gearing goes up. I mean it is regrettably a rather galling acknowledgment I need to make. But even taking into account the Ursynow disposal, we don't have the proceeds as yet, but anticipate receiving those in February. This Board will have overseen the best part of $600 million of asset sales. And yet, gearing continues to be an ongoing issue and one which we are absolutely focused on in terms of reducing our gearing levels and within our balance sheet risk. The other thing, I think, which needs emphasis and I don't say this out of any matter of pride, but other than to essentially again deliver what -- this Board has a task of dealing with something in the region of $1.4 billion of security holder funds has been employed into Europe since 2014 or beginning of 2015. And as we have seen, particularly from the latest set of valuations, our core Australian portfolio has held up relatively well. The noncore asset sales that we've achieved in Australia had been pretty much at or above book value. Regrettably, a lot of the problems that we're encountering, arise out of the decision to expose so much of the balance sheet to Europe. So I hope that provides some context. It's -- believe me, it hurts us all around the Board table that we can't be delivering more robust results to you, but we need to get the balance sheet correct. We're proceeding in a very disciplined manner in terms of our asset sales. And I think the fact that, as I've indicated, $600 million of asset sales pretty much to date, at very close to overall book value would indicate that we're doing a reasonable job in disposing of these noncore assets, but we have a lot more to do to bring the balance sheet back to levels that we'll all be comfortable with. The other factor, and again, I don't mean to be the bearer of even more bad news. But there has been certainly a period where Cromwell was distributing more in distributions than it was bringing in. And clearly, that's a policy that we no longer would be prepared to entertain. So I hope that provides a more expansive response to your question. So are there any other questions at this stage? Sure. Thank you.

Your European benches that -- does Cromwell physically own it or you manage it?

Okay. It's a mix of various assets. So Jonathan, perhaps why don't you provide just a snapshot of where our assets are today in Europe.

Yes. So we -- towards to Gary's point, we do own assets in Europe. Our main ownership interest through the Polish portfolio that we've been talking about, they're sort of -- and then the other one is we have a smaller interest in an industrial joint venture in Italy. Those -- Michael Wilde, off the top of my head. I'm sorry, it's early in the morning here. I don't have the number, the values of that off the top of my head, currently due to some strange reason. But if Michael will just be fill in on the actual values of the portfolios we own and the assets we manage.

Has the portfolio -- sorry, portfolio performance -- it depends on the fluctuation of our dollar against the U.S. dollar?

Perhaps, Michael, can you give the breakdown and response to the last question?

So the Polish portfolio is currently worth about 650 -- sorry AUD 508 million. And the Italian portfolio is around about AUD 45 million. The Italian portfolio trades in the euro. And the Polish portfolio also fundamentally trades in euro-denominated currencies.

Any other questions? Michael?

No other questions online or by phone.

Okay. Thank you, everyone. As I mentioned at the start of the meeting, David Rodgers is present at the Brisbane meeting location today. And David is a partner of Deloitte Touche Tohmatsu, which was the auditor of the company for the 2023 financial year. Security holders have the opportunity to ask Mr. Rodger's questions that are relevant to the conduct of the audit of the company, the preparation and content of the auditor's report, the accounting policies adopted by the company in relation to the preparation of the financial statements or the independence of the audit in relation to the conduct of the audit of the company. I confirm that we did not receive any written questions on these matters prior to the meeting. Does any security holder have a question for the company's auditor in relation to any of the matters mentioned. Michael, any questions from the room? Mike?

We do have an online question from Stephen Mayne. We claim you have audited net assets of $2.2 billion, yet the market current capitalization is only $838 million. Could auditor David Rodgers from Deloitte commented on just how rigorous the property valuation process was in the full year audit. If the audited book value NTA remains $0.84 and the stock is only trading at $0.32, why aren't we taking bigger write-downs? I asked about this issue last year. And since then, the valuation differential has blown out to $1.35 billion. Is it because there are loan covenant issues if we do this?

Okay. Thank you again, Stephen. As always, we draw attention to our opinion on Page 138 of the annual report, which sets out the responsibilities of management of the Board and ourselves. Market capitalization is something we always consider during the audit and normal process is to look first to intangibles, such as goodwill and/or management rights. These types of assets do not exist on Cromwell's balance sheet, and the balance sheet is to a very large extent made up of investment property, which is recognized at fair value as per the policy in Note 8 and Page 95 of the annual report. 99% of the Australian investment property was subject to an external valuation by one of the major valuation firms this year, in line with valuation standards, and the write-downs as discussed by the CEO, were taken up on that basis. In addition, there is a specific disclosure of relevant critical accounting estimates covering the group's global investment property holdings on Page 94 of the annual report. We'd also like to draw attention to our disclosure of what we have done during our audit and our key audit matter disclosure on Page 139 of the annual report. And finally, to Stephen's last question, the valuation process performed by the independent valuers does not consider corporate loan covenants.

Thank you, David. Michael, that's it? Okay. We'll move to item #2. This resolution relating to the reelection of Mr. Eng-Peng Ooi as a Director of the company. Mr. Ooi is Cromwell's Independent Non-Executive Deputy Chair and the Notice of Meeting contains Eng's biographical details. The resolution reads that Eng-Peng Ooi is eligible and having offered himself for election, is elected as a Director of Cromwell Corporation Limited. The proxies are displayed on the screen. I now invite Eng to give some comments to the meeting.

Thank you, Gary. Good afternoon, and thank you all for joining us at AGM today. My name is Eng Ooi. I joined the Cromwell Board in March 2021. I'm currently the Chair of the Audit Committee and is a member of the ESG and Risk Committee. I'm also on the Board of Cromwell European REIT, which is listed in the Singapore Stock Exchange. As you know, Cromwell Group is the manager and sponsor of the REIT. I have over 10 years of board experience after having spent over 30 years of full-time executive career in the property industry, both in Australia and overseas. Since my appointment in 2021, I've been working very closely with my fellow Board members and management to lend my experience and perspective in our effort to review, reset and execute Cromwell's strategy through this difficult time, as outlined by our Chair and our CEO earlier. In this uncertain and volatile times, I believe my years of experience across various geographies, disciplines, sectors and having worked through a few property cycles myself, provides an important business knowledge to support our current company strategic initiatives. It is also a privilege to be working with this hardworking and [indiscernible] Board, which brings extensive experience and knowledge to the Board. As Chair said, the Board remains very focused on deleveraging our balance sheet while trying to preserve security holders value during this difficult time. For myself, I will continue to give my best, work hard and diligently for all stakeholders, and I look forward to your continued support. Thank you.

Thank you, Eng. Are there any questions or comments on the resolution? Michael?

No questions on this particular resolution. There are some for general business that I'll leave till later in the meeting.

Thank you. In accordance with the Corporations Act voting on this resolution will be conducted by a poll. So now I put the resolution to a poll. For security holders and proxy holders here at the Brisbane meeting location and online, please note your votes on your respective voting cards for this resolution. The Cromwell directors unanimously recommend that security holders vote in favor of the resolution. Mr. Ooi has abstained from voting on the recommendation. Can you please mark your voting card now. [Voting]

Thank you. So we'll move to Item 3. This resolution relates to the reelection of Ms. Tanya Cox as a Director of the company. Tanya is an independent Non-Executive Director of Cromwell and the Notice of Meeting contains her biographical details. The resolution reads that Ms. Tanya Cox retires by rotation in accordance with the constitution of Cromwell Corporation Limited and offers herself for reelection, is reelected as the Director of Cromwell Corporation Limited. The proxies are displayed on the screen, and I now invite Tanya to give some comments to the meeting.

Thank you, Gary. I've seen many of you before. I joined the Cromwell Board in November 2019. So I've been with you for some years. I think I've mentioned before that my career as an executive with some largely and initially in the finance sector. So I've spent 10 years or longer, working for banks such as Bankers Trust, Bank of New Zealand, Rothschild and Deutsche Bank. I moved on to spent a decade working with Dexus Property Group. So one of Cromwell's large competitors. I was Chief Operating Officer for more than a decade. And for the last 10 years, I've actually spent my time as a Non-Executive Director. So I worked on a number of listed and unlisted Boards in their property sector. I've worked with architects firms, I worked with property technology companies, and I also worked with property sustainability companies. I'm sure I've mentioned before that I was previously the Chair of the Green Building Council in Australia and Chair of the World Green Building Council for many years. The work I do at Cromwell includes a number of committees in addition to the Board. So I actually sit on the Audit Committee. I'm also a member of the risk -- I think we're calling an ESG and Risk Committee just at the moment. I currently Chair what we're calling the Nomination, People and Culture Committee, and I Chair Cromwell's retail funds management business, which a number of you might be investors in. With regard to my other credentials, I'm a fellow of the Australian Institute of Company Directors. I'm also a fellow of the Governance Institute of Australia. I'm a member of Chief Executive Women, and a member of this James Ethics Centre. And as I've said before, I'd like to bring those credentials and the experience that I have to work with this Board to serve you if you so choose. Thank you.

Any questions or comments? Michael?

No other questions on this resolution.

Thank you. In accordance with the Corporations Act voting on this resolution will be conducted by a poll. And so now I put the resolution to a poll. To security holders and proxy holders here at the Brisbane meeting location and online, please note your votes on your respective voting cards for this resolution. The Cromwell Directors unanimously recommend that security holders vote in favor of the resolution. Ms. Cox abstained from voting on the recommendation. Please mark your voting card now. [Voting]

Thank you. We'll now move on to Item 4. This next resolution relates to the adoption of Cromwell's remuneration report for the year ended 30 June 2023. The Notice of Meeting contains commentary about the resolution. The resolution reads that the remuneration report of Cromwell Corporation Limited for the financial year ended 30 June 2023 is adopted. The proxies are displayed on the screen. I remind security holders that this vote is advisory only and does not bind the directors of the company or the company itself. The Notice of Meeting contains details of the Corporations Act requirements in relation to voting on this resolution. Voting exclusions apply for this resolution, and those exclusions are stated in the Notice of Meeting. I've taken the Notice as having been read. Are there any questions or comments? None in the room, Michael?

None, Chair.

Okay. In accordance with the Corporations Act, voting on this resolution will be conducted by a poll. And so now I put the resolution to a poll. For security holders and proxy holders here at the Brisbane meeting location and online, please note your votes on your respective voting cards for this resolution. Item 5 is the next resolution, and it relates to the grant of performance rights to the Managing Director and CEO. The Notice of Meeting contains commentary about the resolution. The resolution reads that approval is given for the acquisition by Jonathan Callaghan, CEO of Performance Rights under the Cromwell Property Group Performance Rights Plan and Cromwell Property Group Stapled Securities on the exercise of some or all of those performance rights. In respect to the financial year ended 30 June 2024, on the terms of the Cromwell Property Group Performance Rights plan and as otherwise -- so I set out the explanatory memorandum that accompanies and forms part of this Notice of Meeting. The proxies are displayed on the screen. The Notice of Meeting contains details of the Corporation's Act requirements in relation to voting on this resolution. Voting exclusions apply for this resolution, and those exclusions are stated in the Notice of Meeting. I've taken the notice as having been read. Are there any questions on this resolution?

No other questions.

No questions. Okay. In accordance with the Corporations Act, Voting on this resolution will be conducted by a poll. And so now I put the resolution to a poll. For security holders or proxy holders here at the Brisbane meeting location and online. Please note your votes on your respective voting cards for this resolution. Cromwell Directors unanimously recommend that security holders vote in favor of the resolution. All security holders and proxy holders, please mark your voting card now. For security holders and proxy holders participating online, please ensure you click on the submit vote button to submit your electronic voting card through the online platform. Given online registration and voting open 30 minutes before the meeting started, the poll will remain open now for a further 2 minutes. [Voting]

Thanks, Gary, 2 minutes have elapsed.

Thank you, Michael. I declare the poll for the resolutions closed. For security holders and proxy holders here at the Brisbane meeting location, please place your completed yellow voting cards and directed proxies in one of the ballot boxes being circulated by Link Market Services representatives. For security holders and proxy holders here at the Brisbane meeting location, has everyone has a yellow voting card completed and handed in the card? If not, please raise your hand and do so now. All right. Now that we have dealt with the specific business of the meeting, in accordance with the requirements of Section 250S of the Corporations Act, I'd like to offer security holders the opportunity to ask questions about or make comments on the management of the company in addition to the questions and comments already made on the items of business earlier in the meetings. There were questions received in advance of the meeting, and I will address these now. There were some varied questions relating to performance, and these have been paraphrased for the sake of simplicity and brevity. First question, why is the Cromwell share price or security price dropped approximately 45% this year from 1 January 2023? Over the last 18 months, Central Banks around the world have embarked on one of the fastest and sharpest interest rate tightening cycles in recent times to battle significant inflation. This has increased the cost of borrowing and corresponding interest costs, as we've heard earlier, and also reverse capitalization rates leading to a decrease in property valuations. The prevailing market conditions, of course, real estate investment trust and property companies generally to sell off assets to reduce gearing and borrowing costs and trade at discounts to net tangible assets. Cromwell is currently trading at an approximate 55% discount to its NTA. More recently, instability in the financial sector has caused further volatility in the market. Due to the nature of the trading of listed securities on the ASX, Cromwell does not have control of the trading of its securities at a significant discount to net tangible assets. The other point I would just make in relation to that last point is having regard to the comments on the annual report as emphasized by us today, our primary focus is on debt reduction. The first call on asset sale proceeds must inevitably be towards debt reduction. As I keep repeating, we do need to ensure the strength of Cromwell's balance sheet. And that then precludes the ability, which many of us would, in principle, support of the potential to be buying back our own securities at such a marked discount to net tangible assets, but that is not a course that we're able to embark on just at the moment. Second question, who was responsible for the CPRF purchase? And are they still employed by Cromwell? What due diligence was performed for the purchase? What is the current return? The Cromwell Polish Retail Fund portfolio of assets was acquired in November 2019 with the intention of launching a new fund comprised of these assets. Standard and appropriate diligence was undertaken upon acquisition and the Cromwell Board and management at the time were familiar with these assets, with Cromwell having managed them for quite some time prior to acquisition. Shortly after the onset of COVID-19, led to global request to stay home. So foot traffic and activity fell significantly, reflected a decreased valuations. The refreshed Cromwell Board undertook a review of the CPRF portfolio and agreed that the portfolio of assets was deemed to be noncore and that a disposal was appropriate. Shortly after this, regrettably, Russia invaded Ukraine, which, of course, is a neighboring country to Poland and the ensuing geopolitical uncertainty in the region led to a stalled transaction market. If Cromwell exits the CPRF portfolio at 31 December 2023, this will represent a levered internal rate of return of approximately negative 11.34%. The next question, why are you proposing to grant performance rights to the CEO when security holder value has been lost? When Cromwell appointed Jonathan as our new CEO in 2021, we took the opportunity to reset our executive remuneration, both by reducing fixed base remuneration and lengthening our short-term incentive and long-term incentive key performance indicators to increase alignment with security holder outcomes. Total CEO fixed remuneration was reduced to a more competitive level. In addition, LTI hurdles, long-term incentive hurdles were reset to be 50% based on a 3% margin over the 10-year bond rate and 50% based on relative total shareholder return. STI hurdles also included 40% based on the progress of board approved strategic initiatives essential to strengthening the group's balance sheet. Cromwell also employs a financial gateway below, which no STI award will be paid. More detail is outlined on Page 52 of Cromwell's 2023 annual report. The last question we received reads as follows. Why wasn't the market updated to the significant drop in asset values and profit generated? Why has no forward guidance provided or warning given on decline of asset values and profit and loss? Cromwell does not have a practice of providing earnings guidance and any significant drop in asset values is announced in accordance with the Cromwell market disclosure policy. So those are the questions that we received in advance. So Michael, I'll defer to you to provide any further questions you may have received.

We do have some further online questions. The first one is from Stephen Mayne. If the directors really believe Cromwell shares are worth the NTA of $0.84, not the market price of $0.32, why are they buying more shares on market? Could all the candidates address this question along with the Chair, who clearly has the capacity to increase his current $55,000 shareholding, given that he owns more than $30 million in shares in Ariadne, another Brisbane-based company, where he serves in a leadership position, why personally back Ariadne and failed to invest in Cromwell? And there's a similar question from John Sablok, perhaps the members of the Board could demonstrate their confidence in Cromwell by purchasing units on market?

Sure. I think I've already dealt with the first part of Stephen's question. The short answer to repeat is that, frankly, we are not in a position where we have the excess funds available to be acquiring back our own securities. Should events unfold that do put us in a position where we have that financial flexibility, then I believe that, that is the course that the Board will very carefully examine. In respect of my own shareholding, Stephen described a $55,000 value to it. It was rather worth more than that when I acquired my initial holding. I'm in the same position as indeed many of my colleagues around the Board table, where we have been precluded from acquiring further securities in Cromwell because certainly for a considerable period of time, the trading window at Cromwell securities has been closed to the directors and key management personnel as we are involved or have knowledge of transactions. Many of them potentially significant, which could have an impact on the Cromwell security price. And it's not that myself or any other director does not wish to acquire securities in Cromwell, the position is that we have precluded through our security trading policy from doing so because we are in possession of information from time to time that may have a material impact on the security price. Any other questions, Michael?

Another question from Stephen Mayne. Cromwell is effectively controlled by combined holdings of ESR and the Tang family. Could the ESR and Tang family representatives on the Board, please clarify the history of their relationship if there is one. Also, given we have debt worries, why haven't our 2 biggest Board represented shareholders agreed to back a fair pro rata capital raising, which will reduce debt and stabilize our balance sheet.

Well, I can't talk about any relationship between ESR, ARA and the Tang family, if any. I think it's been fairly well documented that in terms of my involvement with Cromwell. It arose from a historical position that I occupied as a Board member of the Straits Trading Company Limited, which at one time was the largest security holder in ARA, and it's as a result of that association that I've gotten to be ARA, now ESR's representative on the Board of Cromwell. As to a capital raising, I think Stephen, you'd be the first one to acknowledge that a potential capital raising at these levels would be a highly dilutive one for all security holders. That is not, of course, that we have in contemplation, our focus as I keep reminding everyone has been on repair of the balance sheet and focusing on debt reduction. Jonathan has provided an update in terms of where we are in terms of the potential disposal of the balance of our Polish portfolio. Again, I would encourage security holders to turn to Page 11 of the annual report. And there you can see that we highlight 2 pro forma balance sheets that are given -- or 2 pro forma positions of gearing. The assumptions for each one is set out on Page 11, which would show that if we are able to complete, particularly the Polish transaction, which is under discussion at the moment that our balance sheet gearing falls well within the target range that Cromwell has publicly stated. Any other questions, Michael?

Another question from Stephen Mayne. Please ask his last, I'm done. Thank you for offering shareholders a hybrid AGM this year, and will you commit to keep doing this in future years to maximize shareholder participation? Thank you for also continuing to publish the archive of last year's 90-minute AGM webcast. Please keep up that good practice. Next year, could you please disclose the proxy position to the ASX along with the formal addresses, and could you also disclose today's voting outcomes based on shares and shareholders like with the scheme of arrangement.

Thank you. As far as I'm concerned that this Board will be at all times, open and transparent to its owners. And I see no reason why we would depart from this format for annual general meetings or indeed any other meeting of Cromwell security holders. In terms of the other matters, we'll take that on Board. I'm not aware of the position in terms of advising the ASX of proxy votes in advance of voting actually concluding, but all matters that Stephen has noted, we will take under consideration and determine accordingly.

One final question from John Sablok, and I think we've touched on this previously. The NTA per unit from the annual report is $0.84, while the market is currently valuing units at $0.32. Which one is correct and what concrete actions will the Board take to reduce the discount applied by the market?

Thank you for the question. I think actually, both answers are correct. The stated net tangible asset backing of Cromwell based on our accounts at 30 June 2023 is $0.84. And I'm not aware of the current trading price of Cromwell Securities, but let's take $0.32 as being indicative. They are both correct. What concrete actions will we take? What we need to do, and I keep repeating this, we need to get our balance sheet into a position and back within the target gearing range that the Board had set out. We've already indicated that we've taken significant steps, as I said, I think for security holders to acknowledge that under the current Board, taking into account the potential disposal of the Ursynow asset that Jonathan talked about earlier in the meeting. Asset sales under this Board completed will be of the order of $600 million. But clearly, that has not been enough to address our gearing. We have the Polish asset sale, which we have talked about. If we're able to achieve that, as I said, that will do take considerable debt off our balance sheet and restore our gearing ratio to the range that the Board aspires to. And I think as we continue to execute on tightening up the balance sheet, rationalizing the portfolio, hopefully, that will be seen as positive signs by the market. And again, as I have indicated, subject to our own financial flexibility at Cromwell, if the situation continues to prevail, I do believe the Board would give serious consideration to activating a security buyback. Are there any other questions, Michael?

No other questions.

All right. Thank you, everybody. Look -- sorry, please. Yes. Yes. As many as you'd like.

I can't talk, Chairman, whatever. I hear all what you're saying, and it all sounds pretty agreeing up to a point. I happen to heard the [ sold-off ] or how you're going to -- you're working how to get out of it, but how long do you estimate this to be/1 week, 2 weeks, a year, 2 years, do we -- are we going to see our shares drop more before it gets better? The simple things that my brain needs to know.

Yes. I can't give you a time frame for anything. And as Yogi Berra, the former catcher of the New York Yankees put it so well, "It's difficult to make predictions, particularly about the future." Look, we're working away. Jonathan has given you an update on the Polish situation. Obviously, I think that transaction is well underway. I can't give you any guarantee or assurance that, hey, it will complete or if it does complete on those terms. But we are actively continuing to look at, as I said, strengthening the balance sheet. In my view, and that's purely a personal view. I believe that the market would welcome a transaction of the nature, for example, of a disposal of the Polish portfolio. It would certainly move some way to addressing our gearing. As I said, I keep reminding security holders take a close look at Page 11 of the annual report. And all I can tell you is that we're working assiduously to try and achieve these outcomes. I think too, one needs to also accept that, yes, we're living in very uncertain times. And that's -- as I explained at a question in relation to Poland, Vladimir Putin certainly wasn't thinking of Cromwell when he decided to embark on the Ukrainian adventure. But these are the sorts of events that we're seeing. Playing out globally. We clearly have a significant exposure in Europe. We clearly like lots of players in the market have exposure to gyrations in financial markets are extremely volatile. These are very uncertain times. Yes, sir?

This is Graham, a shareholder. Could you give us any guide as to what we might expect by way of a dividend for the balance of the financial year, assuming that the Polish asset sale goes through and so forth.

Look, we don't make any predictions. Each quarter, we do provide some indication of what the distribution level for the quarter will be, and that will continue to be our practice. But as I said, we intend to take a prudent approach to distributions until such time as we believe that our gearing ratios are well back within our target gearing range.

Chris Nielsen, shareholder, Chair. When this building was bought, I was led to believe in half of 1% of this building. Now purchasing power, which I have is basically zilch with the company shares. What is the core asset now that you're working on with Cromwell? What are you planning on going to? You've got all these business -- all these different businesses that the previous Board bought around the world for you? What is your plan basically, as you said, lowering your debt reduction. What is your plan -- future plan? I mean this would have been a core asset. You said no longer a core asset. What core -- are you selling your core assets, you basically value things to lower your debt level, while you covered in the world with a lot of assets in the other part of the world, which you people did not acquire?

Yes. I appreciate the question. Look, our goal has been to simplify this business and to reduce debt. That's been our clear focus. Moving forward, and I do hope and believe that there will be a good future for Cromwell. We have a refreshed management team. Jonathan, by any independent assessment would be viewed as one of the most outstanding property executives in Australia and has assembled an excellent team. But bluntly, Cromwell will be focusing at home. We again -- in Australia, we believe we have a competitive position. I can't nor can this Board unfold events from 2014, which -- or end of 2014, beginning of 2015 when Cromwell embarked on its foray into Europe. But this Board is very committed to hopefully utilizing what we believe to be Cromwell's strong competitive position in the Australian market.

If I may ask another question. As you've said, you have 2 biggest owners of the company, i.e., not very small peasants down the bottom. What have you any -- and you said you cannot answer where they come from, but are they going to dictate to what the company does through the Board, the larger shareholders.

Let me just say this Board operates according to what it believes to be the best interest of all Cromwell security holders. We enjoy the full support of our 2 largest shareholders, indeed, I represent the interest of ESR, Jialei and her family as the second largest shareholder. And Jialei is represented around the Board table and contributes. As I said, this Board works very cohesively and collectively together with a common purpose of sorting out our current position and then hopefully moving forward with a very clear position with a focus back on Australia. And let me just say, too, that modest as your security holding may appear to you. This Board takes a view that this group is owned by its security holders. Each security holder is important for us and as I said, we do encourage openness and transparency at any time of any security holder, large, small or medium ever wishes to get clarity within the -- our legal bounds of disclosure, please reach out. We're here for our owners.

I might say, one thing, when it reach [indiscernible] I didn't want to get the shares. I don't see any value on paper. This affects board [indiscernible] consensus of opinion dictated that all the [indiscernible] I have shares and I bet this company grow coming years. I invested in this company for my retirement [indiscernible] at the stage now where it was [indiscernible]

Yes. And yes, we take very seriously those comments that there are a lot of -- particularly our mom and dad security holders, those with exposure to Cromwell through their superannuation funds or other forms of retirement savings. We know this period has been very trying for you, particularly for those who have been depending on distributions and so on for -- to meet their expenses and so on. We really do get the position. We can't unfortunately unwind where we were and where this Board came to in terms of the makeup of Cromwell's position. We are doing our level best to correct the balance sheet, as I keep emphasizing, and our goal is to improve the value of your investment. And that is something that we're certainly striving to achieve. Any other questions? So I'd like to thank you all very much for your attendance here today and your interest in Cromwell. I repeat, we are here as your representatives to try and deliver much better outcomes for you. We fully feel the financial pain and anguish that many are suffering. But we do hope that we'll be able to navigate through some very troubled waters and that, hopefully, the future will present a much better position for everyone. So thank you. Any questions or whatever at any time, please reach out to us, and we will do our best to respond. So thank you all once again. Sorry. Yes.

[indiscernible] Australian market and like properties [indiscernible] within Australia?

I'm sorry, could you...

Are you going to and the Board going to unload any property within Australia? Because I live in Canberra because most of the properties that -- so I know that in Sydney, mostly the assets around -- sorry, Canberra and New South Wales. So any thought of selling at this point in time?

The Board still does have some assets that are not considered core to Cromwell. So depending on circumstances, we may review our position in respect of those assets. But certainly, our current intention is to keep ownership of our key assets within Australia. Many of which, as you will know, are underpinned by government tenancies or tenant like Qantas. Now these are excellent assets.

It's a very excellent answer.

And as I said, we've tried to be judicious in terms of debt reduction by selling noncore assets and not moving to look at dealing with our core asset position. But we will -- as I said, we -- we're very focused on repairing the balance sheet. Let us all hope that Jonathan and team will be successful in terms of the Polish asset, and then let's see where we go to from there. Thank you.