Cromwell Property Group (CMW) Earnings Call Transcript & Summary

Good morning, everyone, securityholders and other attendees and welcome to the 2024 Annual General Meeting of Cromwell Property Group. I'm Gary Weiss, and I'm the Non-Executive Chair of Cromwell. I'm also the Chair of today's Annual General Meeting. I warmly welcome all Cromwell securityholders to the meeting, whether you are joining in person here at 308, Queen Street or through the online platform provided by our registry Link Market Services Limited. The Cromwell Board thanks all securityholders for their participation. Today's Annual General Meeting is held as a hybrid meeting. Cromwell believes the hybrid meeting format creates the most inclusive meeting environment for our very diverse securityholders 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 Yuggera and the Turrbal people, the traditional custodians of the lands on which we meet today and pay my respects to their elders, past and present. I would now like to introduce my fellow directors. Joining me here in Brisbane, we have Managing Director and Chief Executive Officer, Jonathan Callaghan; Rob Blain, Lisa, where Lisa is, at the end there, Lisa Scenna; Independent Non-Executive Deputy Chair and Senior Independent Director, Eng Peng Ooi, on my left; Independent Non-Executive Director, Joe Gersh AM; Independent Non-Executive Director, Tanya Cox; and Non-Executive Director, Jialei Tang. Our Company Secretary, Michael Foster, is here in Brisbane to coordinate the virtual component of our meeting. Nicholas Rozario is also present today. Nick is a partner of Deloitte Touche Tohmatsu, which is Cromwell's auditor. Later in the meeting, you will have the opportunity to ask Nick 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 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 Post Office Square. Please do not use the lifts. I would now 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 here in person and those who have dialed in today, let me say thank you and we welcome you to Cromwell Property Group's 2024 Annual General Meeting. I will begin by providing a brief introduction before handing over to Jonathan. Through the 2024 financial year, Cromwell has navigated global economic headwinds to achieve several key strategic milestones, resetting the business for growth initiatives through 2025 and beyond. During May 2024, Cromwell completed the sale of the Cromwell Polish Retail Fund, including the sale of a 50% share of the Ursynow joint venture asset. The sale was a key step in simplifying the business and proceeds were used for debt repayment. Further, at the end of May 2024, Cromwell announced the sale of its European platform for EUR 280 million or AUD 457 million, which includes the group's co-investment stakes in Cromwell European REIT and Cromwell Italy Urban Logistics Fund. We anticipate this transaction will close shortly with conditions precedent almost complete and we merely await a final regulatory approval in Luxembourg. This transaction will mark the culmination of a significant non-core asset sale program totaling approximately $1.6 billion executed to reduce Cromwell's net debt position and realign the business to focus on local core markets. Following the completion of the sale of the European platform, gearing is expected to be below our target range, under 30% based on 30 June 2024 asset valuations. Group net debt will be reduced to approximately $670 million compared to the position at 31 December 2021 when it was nearing $2 billion. We believe that this is a healthy position to be in at this point in the cycle with low group net debt and with capital to deploy when the timing is right. The next stage of Cromwell's growth will focus on diversifying the group's assets under management while remaining committed to traditional property sectors of office, retail and industrial. Office assets remain a core focus, initially looking to the immediate fringe of core CBD markets, considering users who have different needs to those central CBD occupants, including support services like medical offices. The retail sector continues to provide opportunities, especially in neighborhood convenience centers, often anchored by key supermarket tenants and large-format retail, typically occupied by hardware or furniture retailers. In the industrial space, we will focus on the smaller lot and value-add markets where location is key. We will also expand our capital relationships through the next stage of our growth. Retail investors have been very strong supporters of both the listed Cromwell Property Group and our unlisted platform will remain key. We will grow the depth of our wholesale investor base, including self-managed super funds and high net worth groups seeking income and value-add opportunities. Additionally, we will offer targeted opportunities for strategic institutional investors looking for an experienced local partner to co-invest alongside. I will now pass to Jonathan to update you further.

Thank you, Gary. Cromwell delivered FY '24 results, which reflected valuation pressures in the market with a statutory loss of $531.6 million. Underlying operating profit for the financial year was $136.7 million, equating to $0.0522 per security, which reflects a 13.8% decrease compared to FY '23. Cromwell's FY '24 net tangible assets per unit moved from $0.84 per security to $0.61 per security. The decline was primarily driven by asset valuation impacts, resulting in a reduction of $0.12 per security in Australia and revaluations related to the sale of the European platform and CPRF, which accounted for an additional decrease of $0.11 per security. Over the past year, Cromwell has remained focused on active asset management within the Australian investment portfolio, helping to support valuations. As at 30 June 2024, the portfolio includes 8 office assets valued at $2.2 billion. Key new leases and lease renewals of more than 40,000 square meters over the financial year maintained high occupancy at 94.1% by NLA and a strong WALE of 5.4 years. The funds management business remains robust, managing $2.3 billion of assets across a number of funds in Australia and New Zealand with similar valuation and operational pressures through the 2024 financial year. Key environmental initiatives across all Australian assets have improved the sustainability of our investment and fund portfolios, including building electrification and the addition of solar panels. These types of upgrades help tenants meet their environmental objectives, which is particularly important for the government sector and Qantas, who together account for more than 60% of our portfolio's income as at 30 June 2024. Tenant satisfaction remains high with an overall score of 88%, which is very positive. Cromwell has a sincere and continuing commitment to ESG goals with net zero targets on track for Scope 1, 2 and 3 by 2045, including tenant emissions and embodied carbon. The people within Cromwell will be key to the next phase of our journey. The strength of our business stems from the property skills and knowledge our team possess. At a group level, we have achieved 40/40/20 gender diversity targets in 4 out of 6 business levels in Australia and further reduced our gender pay gap year-on-year from 24% in FY '23 to 19% at FY '24 across all employment levels. We will continue to provide a diverse and positive working environment, enabling us to attract the highest quality employees to Cromwell. Moving forward, we will focus on Cromwell's transition to a capital-light fund management model, retaining the integrated business structure we currently operate under. Our investment approach will be guided by cyclical drivers, focusing on market timing, demographic demands, economic factors and investor requirements in office, retail and logistics, as Gary outlined. We will use our newly strengthened balance sheet to support growth, recycling capital to invest alongside our partners to meaningfully grow securityholder value and returns. I'll hand back to Gary now 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's securities are stapled, so meetings will be held concurrently. I will now address some meeting formalities. Shortly securityholders 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. First, securityholders and proxyholders who have registered to vote will have received a yellow voting card. You'll be asked to complete your voting card and they will be collected at the end of the meeting. Only securityholders or their duly appointed corporate representatives or attorneys and proxyholders are entitled to vote. Secondly, for proxyholders, the for, against and abstain boxes will only be used to record open or discretionary votes that you represent. Directed votes will be counted as per voting direction lodge. Thirdly, non-voting securityholders will have received a blue non-voting card. And finally, visitors will have received a white visitor card. Turning now to those attendees participating online. I make the following comments for your reference. Securityholders and any proxyholders 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 or proxyholder appointments to enable you to cast your vote. Proxies, 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 and 3. 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 is advisory only and you will not be able to cast a vote in respect of Resolution 1. Resolutions 2 and 3 relate to the company only. Resolutions 4 and 5 relate to both the company and the Cromwell Diversified Trust. Securityholders, proxyholders and securityholder representatives will be provided with an opportunity to ask questions or comment on the resolutions. For securityholders and proxyholders here at the Brisbane meeting location, please signal for the microphone. Before asking a question, please show your yellow voting card or blue non-voting card, state your name and, if applicable, the number of each securityholder you represent. For securityholders and proxyholders participating online, you can ask a question by clicking on the Ask a Question button within the online platform and typing your question or comment in the box provided. Securityholders and proxyholders can also ask questions verbally by phone. Information about asking a question by phone, including the number to dial to access the facility is contained in the virtual meeting online guide. 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 securityholders. I will take the Notice of Meeting and all resolutions proposed today as having been read. The minutes of the 2023 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 securityholders if required. I now turn to the first item of business, which is the consideration of reports. Cromwell's 2024 annual report has been made available to securityholders. It contains the financial report, directors' report and auditor's report for the year-ended 30 June 2024. This item of business for consideration by the meeting is intended to provide an opportunity for securityholders to raise questions on the report and on the performance of the group generally. There is no vote on this item. As I mentioned at the start of the meeting, Nick Rozario is present in Brisbane today and is available to respond to any questions that you may have in relation to the conduct of the audit, 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 auditor 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. I now invite discussion and questions in relation to Cromwell's 2024 annual report and any questions for Nick as the company's auditor in relation to any of the matters mentioned. So are there any questions here in the room in Brisbane?

There was one online question.

Yes, Michael.

It's up on the screen. A question for the auditor. With the stock at $0.39 and the NTA at $0.61, the obvious question for the auditor is whether all those supporting the latest accounts are being realistic about office valuations given the rise of work from home post-COVID. Could the auditor detail the process that supported our $2.2 billion office valuation?

Thank you for the question. Nick, are you -- would you please provide your response?

So, thank you for the question. So, as part of our -- as part of the conduct of the audit, which is set out in our key audit matter, one of the key audit matters is around investment property. As it pertains to the question, in accordance with the accounting standards and in this case, AASB 136, which considers impairment of assets, we do consider as an indicator of impairment, the share price at year-end for the group, acknowledging that there is a discount between the share price and the net tangible assets. That is an indicator of impairment. What we primarily do in that instance is then consider the nature of the balance sheet in the context of Cromwell Group, the nature of the balance sheet at 30 June 2024 primarily comprises cash, the held-for-sale assets in relation to the sale of the European platform and the interest in CEREIT and the investment property. Those assets are primarily short term in nature in relation to cash or actually held at fair value in relation to the other 2 items. Specifically in regards to investment property, as outlined in the key audit matter, we, in conduct with our specialists at Deloitte around property valuations, consider the independent property valuations that the company has obtained -- the group has obtained as at 30 June 2024, consider key assumptions and judgments through the property valuations and are comfortable that those are concluded at fair value. So I'm happy to take any follow-up questions, but that's how we approach the property valuations and the consideration of the discount to NTA.

Thank you for that extensive answer, Nick. Any other questions? I'm sorry, sir. Sorry. Can we just give you a microphone? Sorry. Can you just identify yourself?

Yes, I'm unfortunately a holder from this penny stock. And I was wondering what you get the valuation from. It's going down always since the last 4 years. And last year, I heard that from you too, we're going down and down and down and the rest, everything goes up except your stock.

Yes. The valuations that form part of our accounts are based on independent valuations by independent property valuers. In terms of devaluations in the property sector, I think it's a fairly clear assessment of the situation that in an era that we have experienced significantly rising interest rates, that has resulted in an expansion of capitalization rates and extensive devaluations across the entire property sector and we are no different in that regard. Are there any other questions?

No other questions.

Thank you. Okay. So we'll now move to the second item of business, which relates to the reelection of Rob Blain as a Director of the company. Rob is an Independent Non-Executive Director, and the Notice of Meeting contains his biography. The resolution reads that Robert Blain, who retires by rotation in accordance with the constitution of Cromwell Corporation Limited and offers himself for reelection is reelected as a Director of Cromwell Corporation Limited. The proxies cast so far are displayed on the screen. I invite Rob now to speak to you in respect to this resolution.

Good morning, everyone. My name is Rob Blain. I've been on the Board; I was invited on the Board 3 years ago. But before commenting on my journey since we've -- I've been on the Board; I've had 40 years' experience in the real estate and corporate sectors. The key being over the last 20 years, being based in Hong Kong, building the CBRE Asia Pacific platform. I was Chairman and Executive CEO for 10 years. I sat on the Global Operating Committee for 14 years. At the end of 2019, early 2020, my wife and I retired and moved back to our cattle farm in New South Wales at the Barrington Tops. Notwithstanding having the opportunity to be on the -- Director of the -- on the Board of the Cromwell Group, I also chair an agri high-end, high-profile consultancy business called LAWD, L-A-W-D, which is in the area of all the Tier 1 family, office, agri, cattle -- agri, broad farming, everything, et cetera, in Australia. I also sit on the non-for-profit in my spare time, which is called BackTrack in New South Wales, looking after and creating opportunities for 10- to 14-year-olds in regional New South Wales. I've had 30 years association in the Royal Flying Doctors. And getting back to my invitation to join Cromwell, the first thing I did notice is the -- which has been touched on today, 3 years ago, the balance sheet was hemorrhaging. And through my involvement with support of the senior management under Jonathan Callaghan and the Board, I was very on the front foot in relation to having a tactical disposition strategy of particular assets in Australia, which were decreasing in value as the leases were coming to an end. Capital would have -- have to be spent and invested in those assets and we weren't in a position to continue to spend money on assets which were secondary. These range from picture theaters in Albury to Geelong, which had nothing to do with the strategy of a properly run company. And I can assure you there's not one director here or any of the senior leadership team in Cromwell under Jonathan's guidance has had -- they've had many sleepless nights over the last 3 years. And I can assure you by this capital coming back to the Australian market where it should be, the heartache, which you had over many, many years, not just in the last 3 years, we've got an opportunity to be selective of how that capital is invested. And I can assure you we are ready to do that once that capital arrives back in Australia. So in short, we are ready to open our doors. We're already getting approached by numerous other capital partners because we have talented leadership, and we have talented people within Cromwell. And I can assure you, you've got my attention. Thank you.

Thank you, Rob. Are there any questions in the room? Any questions online, Michael?

No other questions.

Okay. Thank you. If there are no further questions, please cast your vote and mark your voting card now. The Cromwell directors unanimously recommend the securityholders vote in favor of the resolution and to note that Rob has abstained from voting on the recommendation. The next item relates to the reelection of Jialei as a Director of the company. Jialei is an Independent Non-Executive Director of Cromwell, and the Notice of Meeting contains her biography. The resolution reads that Ms. Jialei Tang, who retires by rotation in accordance with the constitution of Cromwell Corporation Limited and offers herself for reelection is reelected as a Director of Cromwell Corporation Limited. The proxies are displayed on the screen. I now invite Jialei to give some comments to the meeting.

Thank you, Gary. Good morning, everyone. My name is Jialei Tang. I'm honored to continue my service as a Board member should you so choose. Having received my master's in urban planning now from Harvard, I have a deeper understanding of governance and the built environment. I continue as Managing Director of my family office. And to date, I have extensive investment, executive and Board exposures in a diverse range of industries, including finance, real estate, hospitality, and more peripheral will be pharmaceuticals and technology across various geographies. Pertaining to real estate, I have been deeply involved in the investment, design, and development of numerous projects in the office, hotel and residential sectors with an aggregate value exceeding AUD 3 billion in the U.S. and Asia. I'm also on the Board of TauRx Pharmaceuticals, whose drug for therapeutic treatment of Alzheimer's disease completed its Phase III trials and I assist in the setup of the Greater China division in Hong Kong. As we navigate the geopolitical and economic landscape today, I hope my interdisciplinary and multicultural background can contribute to Cromwell's understanding and engagement of the evolving dynamics. Furthermore, I'm passionate about making better constructed environments for living, working and more through investment, design and/or development. And I shall champion such cause to optimize qualitatively and financially if elected as a Board member. Fundamentally, I'm also a shareholder of Cromwell and my interest is fully aligned with all of you. And I will prioritize our interests as shareholders should you allow me and I look forward to serving you. Thank you.

Thank you, Jialei. Are there any questions in the room for Jialei? Michael, any questions online? No. Thank you. If there are no more questions, please cast your vote. Again, the Cromwell directors unanimously recommend that securityholders vote in favor of this resolution. And to note, Jialei abstain from voting on that recommendation. Thank you. The next item for business relates to the adoption of Cromwell's remuneration report for the year-ended 30 June 2024. 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 2024 is adopted. The proxy votes cast so far are displayed on the screen. I remind securityholders 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 in the room relating to this resolution? Thank you. Michael, any questions online?

No questions, Gary.

Thank you. So if there are no more questions, would you please cast your vote? The next item relates to the grant of performance rights to Jonathan. The Notice of Meeting contained commentary about this resolution. The resolution reads that approval is given for the acquisition by Mr. Jonathan Callaghan, Chief Executive Officer 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 of the financial year-ended 30 June 2025 on the terms of the Cromwell Property Group Performance Rights Plan and as otherwise set out in the explanatory memorandum that accompanies and forms part of this Notice of Meeting. The proxies are displayed on the screen. The Notice of Meeting contain 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. Are there any questions or comments on this resolution? Anyone in the room? Online, Michael, would you like to read out the question?

There is one question from [ Stephen Mayne ]. Thanks for disclosing the proxies early with the formal addresses and for receiving strong support on all resolutions, including this LTI grant. When disclosing the outcome of voting on all resolutions today, including this LTI grant, please advise the ASX how many shareholders voted for and against each item similar to with the scheme of arrangement. This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into the chronically low retail shareholder participation rate.

Thank you for the -- what's more a comment than a question, but we'll take that comment on notice. Yes. Thank you very much. Michael, are there any other questions?

No other questions on this resolution.

Okay. Thank you. If there are no more questions, please cast your vote. For shareholders and proxyholders participating online, please mark your electronic voting card and click on the Submit Vote button at the bottom of your card to lodge your votes. The Cromwell directors unanimously recommend that securityholders vote in favor of the resolution. Given online registration of voting opened 30 minutes before the meeting started, the poll will remain open now for a further 2 minutes. So, Michael, you're starting the clock. I should just add, for the benefit of everyone present, we'll just wait for the clock to run down to enable people to vote. But following this, we will open -- throw open the floor to any questions that anyone has, just generally about Cromwell, where we've come from, where we're going. So if you do have some matters that you wish to raise with us, you'll be given every opportunity to do so once we've completed the voting.

Thanks, Gary. Two minutes have elapsed.

Thank you very much. Okay. All right. So now that we've dealt with the specific business of the meeting, in accordance with the requirements of Section 250S of the Corporations Act, I would like to offer securityholders 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 was a question received in advance of the meeting, which I will address now. The question which we received reads, why is Cromwell performance so poor? The shares are not increasing in value for a long time, while the prospects that the value will be restored. The formal response, and we'll be very happy to elaborate further in discussion, is that since mid-2022, the Reserve Bank cash rate was increased in one of the sharpest interest rate tightening cycles in recent times to reduce significant inflation. Increased borrowing and interest costs and also increased capitalization rates have led to a decrease in property valuations. Prevailing market conditions have caused real estate investment trusts and property companies to sell off assets to reduce gearing and borrowing costs and many of them trade at significant discounts to net tangible assets. Cromwell is currently trading at a significant discount to its NTA as has been observed already. So that's the formal response, but I'm happy to take any questions that anyone may have, as I said, about the past, the present or indeed the future of Cromwell. Yes, sir. Sorry, we'll just get you a microphone.

[ Chris Nelson ], shareholder. We can go back a long way, Mr. Chairman. Basically, first question, you're talking about Australian assets. Do you plan on -- as the previous Board had, basically being Empire building, starting up things like the Gasworks project? Is that on your agenda? Or are you going to go back like it was when Cromwell first started off, basically buying B-grade buildings, improving them with a good tenant base, spending -- basically improving the assets, so increasing the value in the company? The next question, I've got a multitude, we won't go there. Do you plan on increasing the share base? So we've got a massive share base with a lot of people in here. I think basically, the shareholding in this company is controlled by -- 1/2 the shareholding in this company is controlled by 3 major corporations. I guess they also like to see an income. Basically, do you plan on increasing -- trying to increase the value of the shares? Or are you going to continue the shares being $1 share? As I said last year, the purchasing price that I put in this company and the value of which you could buy in this company when I invested in it now is basically, without putting it too crudely, basically, it's one step up being a basket case, even though it's -- what can you do with -- you've got a lot of headwinds, which you've inherited, not that you had any bit to do with them. And it hurts when you look back at the previous management and the way in which they ran the company. And as I said to Mr. Blain before, when you look back, and I said to Jonathan over here, when you look back in 2008, which I have a previous financial report, when you got someone like Mr. Weightman, who was earning $914,000 of total salary package in 2008. Thankfully, the Board these days, except Mr. Callaghan, you're all living to -- within the means of what we have today, if what I've said makes sense.

Yes. Thank you. Look, I appreciate the question. I'm going to ask Jonathan to talk about where we're going to be investing. But let me just set the scene from where we've come from. And let me just say that all of us at the Board table have considerable empathy for the position that a lot of our securityholders find themselves in today and the loss of value that has occurred. We understand that. But let me put this loss in the context. And as you -- and I appreciate your acknowledgment that this newly constituted Board, which was put in place a couple of years ago, we're not responsible for a lot of the past actions, which have led us to where we are today. So let me, as a first port of call, take you to the financial strength of Cromwell. And I invite securityholders to turn to Page 11 of the annual report because that is the starting point. As I mentioned in my opening remarks, we inherited a group that had $2 billion of debt. So that was $2 billion of debt before we had to endure a decrease and significant decrease in property valuations. Gearing is wonderful in a rising market, but is deadly, indeed can be fatal in a market where valuations decline. So if you have a look at Page 11, this group had a stated policy of gearing being between 30% to 40%. If you go and have a look at Page 11, you will see that gearing was at the very top of that range, indeed exceeded it. And then if you look through the group, you had gearing of over 50%. In the absence, I asked the team over the last few days to run a case of what would have happened to Cromwell if we would not have embarked on the asset sale program that we did. Leaving aside the fact that gearing today would probably be close to 60%, and we would have been in breach of all of our debt covenants, in order to have addressed that situation, we would have needed to have raised equity of approximately $800 million of new capital. And on our numbers, that only would have got us to the top of the gearing range so that any further devaluations would have only exacerbated the gearing position. As you can see, with what we have done, and I appreciate that this has been a very difficult exercise for securityholders, we have significantly derisked the financial position of this group. And assuming the completion of the sale of the European platform, our gearing will reduce to below 30% and we will be in excellent position to deploy capital back into the sorts of assets that you have mentioned. As I said, Jonathan will talk about the areas that we will target. But I think, as I said, it is -- we fully appreciate and understand that where we are today is far from pleasant for securityholders. But if we hadn't done what we did, we would be in a far more parlous state than we are today. The other point I want to mention, and I would -- I believe that there would be a lot of support for this contention in the room and from securityholders. Assuming the completion of the European platform, we will completely come out of any involvement or investment in Europe. To put it bluntly, the investments in Europe that Cromwell undertook have not returned any value to this group. What started off as a relatively modest investment in 2015 of AUD 208 million, largely made with borrowed money, ended up with Cromwell's -- ended up at the end of 2019 with $1.4 billion of balance sheet exposure and investment into Europe. So we've made the strategic decision that we don't believe Cromwell had a competitive position in Europe, that the future of our securityholders' investment will be far better served coming back to the Australian market and concentrating on those areas where Cromwell was very successful, particularly before the European expansion reared its head. So, as I said, these are 2 very significant elements that I did want to presage before Jonathan's remarks, but I hope that that helps to set the scene for some of the background as to where we are today.

Well, Mr. Chairman, the biggest thing that you, as I said, you inherited this.

Sorry, would you like to use the microphone? Sorry.

You inherited what you've got. So we can't take it back -- we can't -- you people have stuck with the mess that you -- everyone in the Tang family and the others have purchased. The biggest trouble that the company has is that basically, it goes all the way back to basically when the Commonwealth government brought in the superannuation rules, where the superannuation companies have basically been trying to find out where they can hide their money and that's probably the wrong way. But they're looking for quality investments. Cromwell basically ended up with an awful lot of money from people buying shares. You've got -- now got a massive shareholding. Basically, how do you put value into that shareholding when you've got such a large shareholding? When, as you said, the European investment, which, as you said, a lot of the other investments, the health, the retirement villages, and the various other things that Cromwell were going into, which I shook my head at. And 10 years ago, I made exactly the same comment at the Annual General Meeting where I said, can you afford to be going into this, just spending money that seemingly is continuing to turn up. And with superannuation funds, they seem to have the money just coming in, they just can't work out where to spend it. And basically, it was coming in here, as I said before, with Mr. Weightman's director fees, with all the other fees, they just seemed to have money to burn. And now we, the bottom feeders in the pond, are the ones that, as I said last year, I mean, the investment we put in good faith many years ago and you people have got -- been landed the hot little property of trying to work out how do you go, especially with a large share base on here, to put money back into there, but also give the people a return on invested capital they can feel comfortable with, and I don't envy the job.

So look, and I appreciate your remarks, we started this asset sale program a lot earlier than other property groups in Australia. And indeed, we managed to get $500 million of assets, including the retirement village, which I could talk at length about, but it doesn't really help to serve purposes. We got $500 million of property out the door at or above book values before we saw the cycle turn and significant decreases in property valuations come through. So we've been ahead of the curve, I believe, and we needed to be. As I said before, when we looked at the balance sheet that we inherited, we knew that the immediate imperative was to reduce financial risk by reducing gearing. So as I said, we are essentially at the end of that program. And we now have, I think, a very genuine opportunity to rebuild securityholder value. And Jonathan, perhaps you might share with us your views as to the property sectors, the sorts of property assets that you and the team will be focused on in terms of deploying capital following the completion of the European sale.

Yes, sure. Thanks, Gary. I mean, basically, what I can emphasize is that Cromwell is going back to its -- the way it used to be in terms of business operations. It will be an Australian-only business, focus on domestic markets.

Is it there or Empire building like the previous Board on where the things like the Gasworks project and the various ones that they had where they've got -- they started off and nothing and done the development work. Well, that's -- or you went back to things like Mary Street, where they're buying a B-grade building with a good tenant base, they improved the building and that way you had an asset that they are increasing the value of the asset plus they had the tenant base to get a good tenant return on invested capital.

Yes. That's where I see the niche for this business. It is a core plus value-add developer -- I mean, investor. That's not to say that we won't do development. We will do development, but it will be done in a very measured way. Typically, only when a building is pre-committed to a strong tenant, we'll absolutely pursue development opportunities in that sense because obviously development does deliver a better return than simply investing in core real estate. We absolutely are focused on that more core plus value-add style development investment space, not just using our money though. And that's probably the one big difference. We really want to use our balance sheet to invest alongside third-party clients. So we do have exposure to the real estate in terms of our co-investment in that fund or that particular asset. But we will also be generating fees, development fees, project management fees, investment management fees, property management fees. That's where we see the niche that Cromwell will operate. And really, it is what the business used to be back in really just prior to it bought the European platform.

Good. Yes. Sorry, we'll just get a microphone over to you.

Good morning. My name is David from the Australian Shareholders' Association, along here with my colleague, Noel. Just building on what Dr. Weiss's answer previously, I think it's well understood that the turnaround and rebuild is a multiyear plan until we see the light at the end of the tunnel. How many years before we see the light at the end of the tunnel?

The answer is yes. I mean, I clearly don't have an answer. Recovery in valuations are going to be, I think -- and no great insight into this, highly dependent on the trajectory of interest rates in Australia. We have seen in other jurisdictions that central banks have started to cut. That hasn't obviously occurred in Australia and indeed, plenty of chatter from the Reserve Bank governor about the potential for further increases in rates. But where we have seen in those jurisdictions where rates have been starting to reduce, we've seen more buoyancy back in real estate markets. But I think that's the bellwether for the property sector in Australia that we really do need to see at least a belief and a certainty that interest rates have peaked and then potentially coming down. But, as I said, we thankfully are in the position post the European sale that we don't need to sell assets. There are groups out there, as you know, who have no choice but to sell and it is still a tough market. Just as an aside, I thought it was an interesting deal that I read about yesterday in Sydney, property in Pyrmont, occupied by Domain, the spinout of Fairfax Group. So a good tenant, prime fringe in Pyrmont, an asset bought by Dexus 7 years ago for $327.5 million, just sold for $230 million at a cap rate of between 8% to 8.5%. So you can see, and I don't think anyone would suggest that Dexus was anything other than an excellent property group, but these are -- you can see these are examples still of some of the pain that is being endured out there in the property sector in Australia. Are there any other questions? So, Michael, we -- questions online.

Gary, one final online question from [ Stephen Mayne ]. Gary Weiss remains arguably the busiest professional director in Australia. Could he comment on how long he plans to remain Chair of Cromwell? Also, he chairs 3 Queensland-based companies in Cromwell, Coast Entertainment and Ariadne. What is his particular history with Queensland? Does he live in Brisbane? And amidst various other commitments, how does he also find time to be the Lead Independent Director and Deputy Chair of Melbourne-based Myer, given all that is happening at the retailer?

Thank you. It's a fairly standard question I get from [ Stephen ] at every Annual General Meeting I attend. And my standard response is, I don't play golf. But look, I've had a long association with Queensland. I was very much involved in the rehabilitation of Ariadne, which at one stage was one of Australia's top 25 companies by market capitalization and after the 1987 crash became one of its smallest. So I've had a long involvement. Ariadne was headquartered in Brisbane. And along the way, I've had significant involvement with various groups and institutions in Queensland, including a stint for about 5 years as a Director of Pacific Sports Entertainment which owned the Brisbane Broncos. Pleased to say, superb performance by the Broncos during that period. Nothing to do with me, but rather thanks to Wayne Bennett. But in all seriousness, I don't take on directorships without taking into account the commitment that's required. And I believe I more than adequately discharge the obligations that are imposed upon me as a director or indeed as Chair of any company. And yes, I do have a busy dance card, but I do immerse myself significantly in the affairs of the companies on whose boards I sit and believe I make and will continue to make a contribution to the success of those organizations. Michael, any other questions? No other questions. All right. Well, ladies and gentlemen, I think we've pretty much exhausted all the topics. Let me also just say before we conclude, this group is owned by you. You are part owners of this business. At any time you've got any questions, issues or concerns, please do reach out to us. We'll do our very best to address or respond to any questions that you may have. To conclude, I just wanted to say thank you for your attendance and to again repeat that we -- this Board knows full well and empathizes with the position that many of you find yourselves in. Let me just say that I do hope that when we meet again in 12 months' time, we will have a more positive outcome, a more positive future for you as we look to rebuild securityholder value and hopefully regain your trust in us to appropriately manage and look after your investments. So -- all right. So thank you very much. Sorry. Yes, yes, absolutely.

The Insight Magazine that you put out, which is basically on the shareholder information, in the previous -- what would you say, the previous regime had a very good, what would say, self-justification operation from the CEO there was busy telling us what he went to and what he was going through. Basically I realize, the way it's going at the moment, it's a bit hard. You can be electronically switched on. I don't have the Internet access where I get, I don't even get a mobile phone signal. I probably could have all of the above, but a little bit of an input from you perhaps and Mr. Callaghan just to say which way the company is going probably would not hurt if that's where I come from. It's nice to know the way the company is going, how you're going and what you -- you can't give away the secrets of the Board as to where you're going but would be interested to know just what the assets of the company are, where we are and what we can look at and where we can go. At least it gives us an idea of where we're going and what we've got, if that's not an unreasonable question to ask.

Not unreasonable at all. We'll look into that for sure.

All right. So once again, thank you very much, and please join us for coffee, drinks and -- et cetera, outside. And as I said, we look forward to seeing you in 12 months' time with hopefully a more rosy position and future in front of you all. So thank you all for your attendance today.