DEXUS (DXS) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for your attendance today. My name is David Yates, and I'm the Executive General Manager of Investor Relations, Communications and Sustainability at Dexus. The video you've just seen really brings to life our purpose. Even in the current environment, at Dexus, we're all about creating spaces where people thrive. In light of the current physical distancing guidelines, this year, our AGM is being run as a virtual event. We are using the Link Market Services online platform for the meeting, which enables security holders to view the meeting and vote while the meeting is underway as well as submit questions. If you are yet to get a voting card to vote on the resolutions for the meeting, you should click the Get a voting card button at the top of your screen. You will then be asked to register first, which will enable you to submit your vote at any time during the meeting. If you are a security holder, you will need your security holder number and post code to register your vote. If you are a proxyholder, please enter the proxy number issued to you by Link Market Services in the PROXY DETAILs section and click the SUBMIT DETAILS AND VOTE button. Voting will close 5 minutes after the close of the meeting today and will be released to the Australian Securities Exchange later today. If you have any questions to be put to the meeting, we suggest that you submit your questions with reference to what the question is about, whether it be general business or a specific resolution. And then these will be addressed at the appropriate time by the Chairman during the meeting. We will endeavor to answer all questions during the AGM. And for any that we do not address, we will ensure to get back to those investors separately. I will now hand you over to Dexus' Chairman, Richard Sheppard.

Thanks, David. And let me join David in welcoming everybody to our 2020 Annual General Meeting. Let me begin by acknowledging the Gadigal of the Eora nation, the traditional custodians of the land on which we are presenting from today. And we pay our respects to their elders past, present and emerging. And I would also like to extend that respect and welcome to any First Nations people who are joining our meeting today. On behalf of the Board, I appreciate your understanding of the changes we've made to the meeting format. It's pleasing to see that Australia has, compared to other countries, made great progress in containing the spread of the virus, and we have high hopes that next year, we'll be able to connect with you in person. It's really important to have person-to-person contact, and I'll be making a few points about that when I talk about offices a little later in the meeting. I formally table my appointment as Chair of today's meeting and formally open the meeting. I'm joined in the room here at Dexus Place in Sydney by Dexus' CEO and Executive Director, Darren Steinberg; and by our independent directors, Patrick Allaway, Peter St. George, Penny Bingham-Hall and Mark Ford. Due to travel restrictions that currently apply, joining us remotely from -- in Brisbane and Melbourne, respectively, are our independent directors, Tonianne Dwyer and Nicola Roxon. I'd also like to welcome our company secretaries and representatives from the Group Management Committee, along with Matthew Lunn from our auditors, PwC, and our legal advisers at King & Wood Mallesons. But also, at this point, I'd like to acknowledge John Conde, who retired from our Board in early September of this year. John served as a Non-Executive Director of Dexus for more than 11 years, joining the Board in April 2009. He brought a wealth of knowledge and experience in accounting, finance, people and remuneration matters and corporate governance to the Board and management. And on behalf of the Board, the Group Management Committee and our security holders, I would like to thank John for his dedication and contribution over the past decade. And I'm pleased to say that we look forward to his continuing involvement with Dexus, having just been appointed Chairman of the Dexus Wholesale Property Fund Board. Now on our agenda today, I'll commence with the meeting with my address, which will provide you with an overview of our COVID-19 response and some of the challenges we currently face. And then I'll hand over to our CEO, Darren Steinberg, who will cover some of our recent achievements. We will then turn to the formal aspects relating to the resolutions, which were outlined in the notice of meeting and explanatory memorandum sent out to unitholders in mid-September. As part of this, I formally call for a poll on all resolutions to be put to the meeting and declare that the polls are open so that unitholders can now start to lodge your votes. Let me start today's presentation by looking at the scale of our business. Dexus is one of Australia's leading real estate groups and is a leader in the Australian office market. We have $32 billion of properties under management, $16.5 billion of which is owned directly on our balance sheet, with the remainder invested in office, industrial, retail and health care properties that are managed on behalf of our third-party capital partners. We released our 2020 Annual Report in August, which is an integrated report and reinforces our focus on long-term value creation. This year, we highlighted how we are positioning for the recovery on the other side of the significant disruption caused by the global pandemic. I won't spend too much time today discussing the detail of the result because you can read the achievements in the Annual Report and the results presentation, all of which is available on our website. So let me reflect on our response first to the COVID-19 pandemic. As you would know, many of our small to medium-sized customers had their businesses severely impacted by the government restrictions, which affected their turnover and ability to pay rent. Our team was already proactively talking with our customers about supporting them ahead of the introduction of the government's Code of Conduct, which formalized the approach for the provision of rent relief by landlords to their most impacted tenants. The assistance we provided to our customers impacted our financial result for the year. To preserve capital, the management team implemented cost reduction initiatives across the group, including freezing recruitment and nonessential consultancy spend as well as temporary reductions in remuneration levels for the Board, the CEO and other executives over a 3-month period. The value of our portfolio has been reinforced during this period by asset recycling. And lastly, prior to the onset of COVID-19, our business was in strong shape, and we upgraded guidance for distribution per security growth earlier this year to around 5.5% growth on last year. However, due to the challenging operating environment which came with COVID-19 closedowns, we withdrew our fiscal year '20 distribution guidance, but we were subsequently able to provide revised guidance in June for a distribution that was consistent with fiscal year '19, and we delivered on that guidance. So we guided that we would pay unitholders $0.503 per security this year as we did last year. From a capital management perspective, as a Board, we have been very focused on ensuring that Dexus' financial strength is maintained to deal with the current environment. Since March, we have enhanced our liquidity and sourced $650 million in additional debt funding, $650 million of additional debt funding. Our pro forma gearing at 30th of June remained low at 24%, which is well below our target range of 30% to 40%. So in summary, Dexus is in a very strong financial position. Our financial strength provides us with the funding needed for committed projects in the development pipeline and also for future opportunities where we see an efficient use of our capital and the ability to drive higher returns. And again, our Annual Report talks at some length about our very considerable development pipeline. Let me just talk a little more detail about our COVID-19 operational response. When the pandemic took hold, our #1 priority was the health, safety and well-being of our people and the people in our buildings. When the government restrictions started to ease in July of 2020, our team ensured that the buildings we manage had detailed COVID-Safe plans in place in order to help people return to our buildings in a safe manner. We followed the government guidelines for our building operations and also engaged the services of independent consultants and health expert to review our processes for the common areas like food courts and end-of-trip bathrooms to ensure their safe operation. And on behalf of the Board and unitholders, I'd like to acknowledge the extraordinary effort by management and all of our Dexus employees involved in working with our customers, preparing our buildings and reducing the financial impact to the group. It really was a huge amount of work. Over the past 6 months, we've seen workforces globally forced to work from home and a lot of discussion about what the future holds. We believe that the office workplace plays a crucial role in driving business productivity and ultimately, the financial success of the business. Customer surveys have revealed that there are 3 key areas where the physical office can positively impact business performance: facilitating collaboration, fostering culture and providing learning and personal growth opportunities. It is clear that these activities are best done face to face in the office. And we've all seen media reports reflecting on surveys that many people have enjoyed working from home and would like to continue doing that. If I've done a survey, I probably would have said the same thing. But we've proven that we can all work from home, but that is not the point. We believe that the point is, notwithstanding the technology that we have today, that people are at their most productive in their workplaces. Clients get better service, people learn more, and things get done more effectively. And as a company director sitting on various boards, my personal experience is that boards work far more effectively when they meet in one room. That is one of the reasons why cities and urbanization have grown as they have over the last century. Those companies that are successful in getting their people back to their offices, as government restrictions are eased, will obtain a sustained competitive advantage in this environment. What are the consequences of not returning to CBDs? Governments around the world have responded to the COVID-19 crisis through a combination of health measures, business shutdowns and unprecedented fiscal stimulus. But there has been, to date, limited community discussion and understanding as to how we will all pay for this. We cannot indefinitely sustain large deficits and increased debt, and the cost will come eventually through a combination of reduced government services, higher taxes almost certainly on future generations, or if governments fund the deficits by printing money through higher inflation down the track, which also involves costs. And how is that all relevant to commercial real estate? The answer is that the longer the country takes to get back to normal levels of business, the higher these costs will be because business generates the taxes that pay for the government services. So it's important to reflect on the consequences of not having people and workforces return to CBDs. The major cities across Australia generate the majority of GDP in this country and support hundreds of thousands of businesses and millions of jobs. And that is in no way diminishes the contribution made to GDP from regional areas. The longer the delay in people returning to productive work, the greater will be the impact on people's lives, on career development, particularly for younger people, and on the government's ability to provide the services and support that people require. The impacts of September 11 were severe for Manhattan in 2001, and people thought they would never go -- again, go on a plane or enter a skycraper. That was not the case, and New York recovered and has thrived over the past 2 decades, at least until the recent impact of COVID-19. We are encouraged at Dexus by the recent government directives for its public sector employees to return to their office workplaces. This will assist in getting the economy going, and we have seen a steady rise in the physical occupancy of our buildings in line with these government directives. Let me now turn specifically to the year just past. And looking at our result for the year and despite the challenges caused by the pandemic having an adverse impact on our financial result and share price, notwithstanding the continuation of the distribution at the same level as last year, we continued to progress our strategic objectives and deliver some solid operational achievements for the year. Importantly, as I've just mentioned, we've delivered a full year distribution that was in line with last year. We strengthened our relationships with our funds management partners through office, industrial and health care property transactions and developments, delivering on their investment objectives and launching the first in a series of new unlisted opportunity funds. We've made great progress on our city-shaping development projects located in Sydney, Melbourne and Brisbane, some of which you'll see in a moment. And we improved the portfolio composition through selling noncore and lower-returning assets. Environmental, Social, Governance and/or ESG factors continue to be a key focus of general discussion about corporation's behavior and a key focus for us, with the expectation for businesses to demonstrate that they are being responsible global corporate citizens At Dexus, ESG is integral to our business operations. And despite the business -- the disruption during the year, we continued to perform strongly in this space. We spent an enormous amount of time working with our most impacted small to medium-sized customers, as I've mentioned, which included providing rent relief to them. As one of Australia's largest property owners and as a responsible business, we did not access the JobKeeper government subsidy. Our position as an employer of choice for gender equality was maintained for the second year running. And this year, we were recognized by the Dow Jones Sustainability Indices as the global industry leader across all real estate companies. Let me repeat that, the global industry leader across all real estate companies for sustainability. We have made solid progress from an environmental perspective, including our commitment to net zero emissions by 2030 as well as achieving our targets relating to energy and water use across our office portfolio. And further details of these achievements in these important areas are outlined in our Sustainability Report, which contains a great deal of information about this area and is available on our website. I'd like to finish my address by talking about distributions. We have a solid track record of delivering distributions and understand the importance of paying sustainable distributions to our investors. Remembering when I joined the Board in 2012, we paid about $0.32 per security. Last year was over $0.50. So in fiscal '20, our full year distribution was actually $0.503 per security. On Wednesday this week, we announced our fiscal '21 guidance, that is the year ended June 2021, as a result of the strength of rent collections and further clarity regarding the extensions related to the Code of Conduct, but this is subject to there being no reinstatement of any major lockdowns or unforeseen circumstances. So in fiscal '21, we expect a full year distribution per security amount that is consistent with fiscal '20. So in other words, we will be maintaining our distribution to unitholders. Before Darren provides his address, we have a short video that I'd like to show you on our newly completed developments at 80 Collins Street in Melbourne and The Annex at 12 Creek Street in Brisbane as well as footage of the redevelopment of the retail precinct that is underway at the MLC Centre in Sydney, not far from where we're having this meeting, and also our industrial development project at Ravenhall in Victoria. [Presentation]

Thank you, Richard, and good afternoon, everybody. As you can see, it's been a busy first quarter for the business. Despite the subdued economic conditions, it's pleasing to see signs of life and activity continuing in our core markets. Occupancy remained high across our office and industrial portfolios, where we have leased over 141,000 square meters of space across 88 transactions. Our team's focus on rent collections resulted in 94% of rents being collected, and we completed our office development at 180 Flinders Street in Melbourne, along with the remaining hotel component at 80 Collins Street, also in Melbourne. We also continued asset recycling, including progressing the sale of Grosvenor Place in Sydney, where a preferred bidder is currently in exclusive due diligence. Looking closely at our $16.5 billion property portfolio, our latest results show continued solid performance across the various metrics. Over the past few months, we've seen office leasing inquiry levels in Brisbane and Sydney continue to recover, with our portfolio occupancy remaining high versus the market at 95.4% for office and 94.8% for industrial. Across both our office and industrial portfolios, the weighted average lease expiry has increased slightly or been maintained. And for office leasing completed during the quarter, we've seen face rents holding across Sydney and Melbourne. Our funds management business continues to expand. It includes our flagship Dexus Wholesale Property Fund, which invests across the office, industrial and retail sectors; and the Healthcare Wholesale Property Fund, which we established a few years ago. More recently, we launched the first in a series of funds that will invest in opportunities where we can add value through leveraging our skills and expertise to enhance returns. This area of the business is one where we expect to continue to grow over the next few years. Office is an asset class that has proven to be resilient through the cycle. Once we are through this pandemic-induced recession, we expect demand for office space to continue to expand. Offices will always have a core role to play for business in the development of corporate culture, collaboration and innovation. Employment growth drives office markets. And over the past decade, around 5,000 white collar jobs were added to the Sydney CBD every year, with an additional 38,000 jobs created across broader Sydney. We expect this growth will resume post the recession, as business recovers and confidence returns to the market. In August, we set 5 immediate priorities which we have already progressed. We are helping our customers return to their workplaces safely, so they can drive their productivity and get the economy moving. We have progressed asset sales, enabling us to reinvest into opportunities that we believe will drive stronger investment returns over the long term. We've expanded our funds management business with the launch of a new fund. Together with our workplace consultancy business, we are at the forefront of the future of workspace and are working with our customers on their future needs. And we continue to progress planning for our city-shaping developments to make sure we can activate projects when the time is right. So to conclude, we continue to operate in an uncertain environment with no vaccine and the economy in recession, and we still face significant challenges over the coming year as a result of border closures and government restrictions. While the economy will inevitably recover, the timing of the recovery remains unknown. In this environment, we have a committed management team and Board that have a lot of experience in responding to and moving through previous downturns. We are focused on leasing and maintaining occupancy levels, which is supported by a high-quality portfolio and diverse customer base. We also have multiple income streams from our expanding Funds Management platform and trading profits. And our business is underpinned by our strong balance sheet. Before passing back to Richard, I'd like to thank my fellow directors and the Dexus team for their commitment and contribution over the past 12 months, and you, our investors, for your continued support. Thank you, and I'll hand you back to Richard.

Thanks, Darren. Well, at this stage of the meeting, I'd like to pause and ask if unitholders have any questions they'd like to ask on the general business of the meeting that we dealt with so far. And by way of introduction to that subject, I have a number of questions which have been submitted prior to the meeting, so I intend to address those. Now there's quite a few questions. And what I'm going to try to do is -- some of them overlap on subject matter, so I'll deal with them at the same time. So the first set of questions from Ms. [ Brampton ], Mr. [ Bahrain ] and also Mr. [ Han Smith ] is along the lines of how has the virus affected our business and what is the company's direction post-COVID. In relation to how the virus has affected the business, I've substantially covered that in my Chairman's address. But the summary is that we've had -- a number of our smaller business tenants were not able to -- were in financial difficulty. That affected their ability to pay rent. We work very closely with them. That costs us some money in terms of rent waivers and rent for deferrals. And I suppose, the impact of that on shareholders is whereas we had originally hoped and guided towards a 5.5% increase in distributions for the year that was ultimately cut back to a flat distribution, but nevertheless, a pretty good result in all of the circumstances that we've been in. Now in terms of moving forward, again, we've talked about that. But our 5 key priorities are to: one, assist in returning Australian businesses safely to their workplaces, and we are working very hard on that, lots of health measures in our workplaces, in our buildings; optimize our property portfolio composition; accelerate opportunities to expand our Funds Management platforms, on which I've talked about in my address; continue working with our customers on the future of the workspace; and to progress our development pipeline at the appropriate time. And we've seen in the video that you just saw some examples of our development pipeline. So those are the first set of questions. The second set of questions really relate to the longer term. Again, Mr. [ Han Smith ], Mr. and Mrs. [ Kross ], Mr. and Mrs. [ Yu ] were asking how is the company to go and compensate for the drop in demand for office space? How will we deal with the potential drop in high-rise usage? And how will COVID affect the future office markets in CBD in Sydney, Melbourne, Brisbane and Perth? Now as we've said earlier, office, we're strongly confident that office buildings will continue to have a core role to play for business in the development of culture, collaboration, innovation, the sort of things I talked about. And while COVID is a serious short-term issue, we don't believe it's going to accelerate the long-term trends of the urbanization that have taken place around the world for those sorts of reasons. So we'll continue working with our customers to adapt workspace to their needs, including in the areas of technology development that have been taking place and accelerating under COVID, all the other things that I've talked about. We still live in a bit of an uncertain environment, particularly over the next 12 months, which the uncertain factors include the development of vaccine and so on. But as Darren said, we are confident about the long-term trends. So we feel that we're doing the right things. And I suppose the other thing that we have done, which I mentioned in my address, is that we have continued to strengthen our balance sheet. So we are in an extremely strong financial position to deal with whatever uncertainty arises as we work out -- our way out of the COVID-19 situation. Mr. [ Han Smith ] also asked, are our assets on the balance sheet subject to current valuations? The answer is yes, we have them independently valued every 6 months, and we announced the results of those valuations to the Australian Stock Exchange. We then have a question from Ms. [ Gupta ]. What risk mitigation is in place to protect us from declining revenues and changing landscape of commercial buildings? I think I probably answered that question. Just bear with me. I'm just trying to make sure I answer all the questions. We also have some resolution-related questions. Now we're dealing with the remuneration resolution in a moment, but let me deal with these. The questions really are related to why are we paying extra payments to executives in these very difficult times. Aren't their salaries more than enough incentive to do the job? I just make -- I'd make the point that our executive bonuses are down this year, not because of anything the executive has done wrong, quite the contrary, the executives have done an outstanding job, but because the way our short-term bonuses are structured. There's a formula linked to outcomes of some of our financial metrics, and they were down because of COVID. And as a result of that, certainly our senior level bonuses and therefore, remuneration was down about 40% on last year. And that, of course, isn't a year where we've been able to sustain distributions to shareholders at the same level. I'd also make the other point that our business is a complex business. As I mentioned before, we're -- Dexus presides over about $32 billion of properties across retail properties, office properties, industrial properties, more recently in health properties. We've got a big balance sheet. There's lots of things that we can do with options available to strategy, so the management team is doing an enormous amount of work, not only dealing with short-term crisis, but dealing with the long-term strategy. And as a management team, they have been extremely successful for unitholders in doing that over the past decade as Dexus' unit -- business has grown and the distributions to unitholders have grown with it. So we are only able to do that in Dexus if we have a great management team, and this is a competitive environment, so they are the sorts of things that guide our remuneration strategy. And I'll talk a bit more about that when we come to the remuneration resolution in a moment. Now we also have a number of questions from the Australian Shareholders' Association. And I met, as I usually do, with the CEO, John Cowling, and his colleagues in the lead up to our Annual General Meeting. We dealt with quite a lot of questions from the Australian Shareholders' Association, but they've submitted some of those questions again at the Annual General Meeting. So I'll just go through those. The first question is, has the Board stress-tested the current and planned operational base? And the answer to that is yes, we regularly stress the movement in our asset values and cap rates in relation to gearing. We do stress testing of all sorts of scenarios, including extremely adverse scenarios to make sure that we've got the financial capacity to deal with them. I've discussed the measures that we've taken to strengthen our financial position over time. So yes, we do stress testing, and we're confident we're well placed for whatever lies ahead. Second question is, have contingency plans being prepared for office towers if COVID is discovered in any tenant's office? The answer to that is yes. We have incident management plans in place for each building to communicate effectively with occupants. Our procedures and processes have been reviewed by an independent medical expert. We not only have contingency plans across for COVID-19, but we have contingency plans for all sorts of other incidents, such as terrorist incidents. And unfortunately, those plans had to be put in place some years ago when we had the Lindt Cafe terrorist incident in Sydney. And then the third question I have from the ASA, due to COVID and increases in customers working from home, how has Dexus plan to manage any potential reductions in revenue? I've partly dealt with that in terms of the measures that we took to support our smaller tenants who suffered financial difficulties, did cost us money, and that was reflected in the reduced guidance for the distribution, obviously, and the fact that we've maintained the absolute level of distribution. Many of -- as we all know, people have been forced to work from home, and customers are still working through their own policies on this. But as I've said, and Darren and I both said our addresses, we really think the office is going to survive very well and come back into its own in the future. Part of what's happened might see a reduction in densification in workplaces so there'll be more space required per employee, which might offset the technology changes that are happening. We have provided our priorities in our annual report in some detail and what we're focused on in the current environment. So I'd commend all unitholders to read the detail of that. Now I have -- so I think I've dealt now with the questions that -- most of the questions that I have in front of me, not every single question. I grouped some of them. But now I'll deal with any questions that are coming through during the course of the meeting.

Thank you, Mr. Chairman. Just looking online, we have had a question from Ms. [ Hepburn ]. The question relates to cleaning being identified as one of the domestic sectors as highest risk of modern slavery. A risk that is acknowledged by Dexus in their annual reports. So the Australian Council of Superannuation Investors, Cbus and other investors have identified the Cleaning Accountability Framework as an effective compliance mechanism that is best place to allow property owners to mitigate and remedy their modern slavery risk. Will Dexus sign up to CAF and commit to certifying their portfolio?

Let me -- well, one, I don't know the answer about CAF. But certainly, what I can say is that Dexus has committed to dealing with modern slavery, and again, which is mentioned in our Sustainability Report. But Darren, are you able to answer that question?

[indiscernible] that to David. Yes, so, David?

Mr. Chairman, yes, I chair the internal Modern Slavery Working Group at Dexus. And we are obviously expanding our scope in terms of monitoring, not just our cleaning contractors, but our security contractors and any other high-risk areas in our business where modern slavery may exist. Now the Cleaning Accountability Framework, that has been a framework we have looked at. It has been a framework that has been assessed, but it has been at an individual asset level in the past. Now fortunately, we do have a meeting planned in the coming weeks with the team from CAF to discuss that because they have expanded their scope, and they're looking at rating portfolios, so -- and also expanding into the security space. So a very good question, and it's one that we are progressing internally in terms of discussions.

Thanks, David. So just for the information of unitholders, that was David Yates speaking.

There's another question here, Mr. Chairman. What steps has Dexus taken to revise cleaning contracts to meet cleaning requirements in line with new COVID-Safe plans to ensure tenants still secure and returning to office buildings and that cleaners are paid for additional hours required to work to meet their upgraded hygiene standards?

Would you like to deal with that as well?

Yes. So we actually have gone through a portfolio assessment, which was before COVID, and we adopt -- we actually contracted some new cleaning contractors. So we used to have quite a variety of contractors across our core business, and we now have new cleaning contractors in place, and they've been in place since late last year. They are [ CAF-certified ] cleaning contractors. And so we have been able to work with them closely in ensuring that they wear the appropriate PPE when they are cleaning office buildings, et cetera, and that they are trained appropriately, et cetera, and paid appropriately for extra hours. Now noting as well that office buildings have been low in occupancy, so we've been also working with our -- or talking to our cleaning contractors about making sure that those cleaners are not stood down, and they are available to put to use across our portfolio. And pleasingly, we have obviously seen a ramp-up in terms of occupancy. And so the cleaners are getting paid appropriately. So -- but again, going back to the last question from Ms. [ Hepburn ], we are, obviously, going down that path of ensuring that's done appropriately through our own auditing, monitoring process.

Thanks, David. Now we've got another question.

Yes. Another question has come through. What is the rent collection level in recent months?

Okay. I'll take that to the Managing Director.

Thanks, Richard. We're collecting around 94% to 95% of rent across the portfolio.

There's no further questions, Mr. Chair.

All right. If there are no further questions, let me now turn to the formal business of the meeting. Today's meeting is being convened in accordance with the constitution of each fund and the Corporations Act, and I have been informed by the registry, Link Market Services, that a quorum is present to enable the formal resolutions, the subject of the meeting to be considered and passed. I would also like to now table the 2020 Annual Report, which includes the director's report, financial report and independent auditors' report for the financial year ended 30th of June 2020. In accordance with the notice of meeting and voting form, for instances where I, as Chair, have been appointed as a proxy, but not directed how to vote, I will vote in favor of all resolutions. The way that we will run the meeting at this stage is that we will go to a poll on all resolutions and look at each resolution and the proxies received individually, at which time you'll have the opportunity to ask questions or make comments about each resolution. Unitholders would have received the Notice of Meeting which sets out the resolutions and the accompanying explanatory memorandum, which provides security holders with information to assess the merits of the resolutions. The first resolution relates to the adoption of the remuneration report. So let me make some additional comments on that subject. The key to -- as I mentioned earlier, the key to our ongoing success lies in retaining and attracting high-performing people. Our remuneration framework supports our through-the-cycle business strategy, where market performance and security holder returns are paramount. The Board sets performance targets for the short-term and long-term incentive to manage executives alignment to our strategy. Our mix of financial and nonfinancial measures encourages responsible decisions that benefit both the short and long term. Our executive team has delivered for security holders over many years, as I've mentioned before. This year, executives received 40% lower short-term incentive payments compared to last year as well as agreeing to temporary reductions in fixed remuneration, showing alignment to our security holders and customers' experience. The government restrictions relating -- related to the COVID-19 pandemic impacted our financial result, which meant that the adjusted funds from operations or AFO -- AFFO per security goal was not achieved. However, Dexus achieved very good performance, including excellent ESG outcomes across all other measures, with the executive team delivering a solid result for security holders. The Board decided not to exercise upward or downward discretion on the short-term incentive outcomes and paid them out consistent with our existing remuneration framework, which is 75% in cash and 25% in deferred equity. I should also say that the Board consults widely on remuneration matters and recommends that security holders support the remuneration-related resolutions today. So let me turn then to, formally, Resolution 1. Resolution 1 is an ordinary resolution and concerns the adoption of the remuneration report for the year ended 30th of June 2020. The proxies received are detailed on the screen and represent around 74% of our issued capital. We've also broken down the number of security holders voting for each resolution by intention. Are there any questions in relation to Resolution 1, other than the ones that were submitted and which I dealt with a little earlier? Okay. I'm being advised that there are no questions submitted at this time. And again, as I said before, the polls are open for voting. Resolution 2 is an ordinary resolution and relates to the grant of 2020 long-term incentive performance rights to the Chief Executive Officer. We are not legally required to seek security holder approval for the grant of performance rights as we buy the Dexus securities on market. But in line with market practice by sector peers, we have continued this practice for this year. These performance rights have been earned pursuant to an existing scheme that has been approved in previous years and are subject to meeting Board approved hurdles over 3- and 4-year periods. The proxies received are detailed on the screen and, again, represent around 74% of issued capital. Are there any questions in relation to Resolution 2? Okay. I'm advised there are no resolutions (sic) [ questions ] related to question 2 (sic) [ Resolution 2 ]. So let me now turn to Resolution 3. Resolution 3.1 is, again, an ordinary resolution, seeks the initial appointment of Patrick Allaway as an Independent Director. Patrick was appointed to the Board during the year. The proxies received, again, are detailed on the screen and represent 74% of issued capital. But before we turn to questions relating to this resolution, I will ask Patrick to present to the meeting.

Thank you, Richard, and good afternoon to our shareholders, and thank you to our shareholders for your support of Dexus. It's a great honor to have been appointed to the Dexus Board in February of this year, and I'm excited about being part of this great company. I have extensive senior executive and non-executive and corporate advisory experience across financial services, property, media and the retail sector. My executive career was in financial services with Citibank and Swiss Bank Corporation, working in Sydney, New York, Zurich and London. I have served as a Non-Executive Director over the last 15 years and was formerly on the Board of Macquarie Goodman, now Goodman Group; Metcash Limited; Fairfax Media; and Woolworths South Africa, which is a large southern hemisphere retailer which owns David Jones and Country Road Group in Australia. I currently serve as the Chairman of the Board of the Bank of Queensland and as a Non-Executive Director of Nine Entertainment Group and Allianz Australia. As Richard and Darren have mentioned, we're in a period of considerable economic dislocation and a highly uncertain economic operating environment. I'm committed to using my commercial sector and advisory experience to constructively challenge, make a difference and support Dexus in managing through this challenging period. I stand for election with appreciation of the privilege and considerable responsibility bestowed on me and will take accountability for working with management and my colleagues to continue to achieve improved outcomes for all stakeholders. Thank you.

Thank you, Patrick. Are there any questions in relation to Resolution 3? Okay. Well, there are no questions relating to this resolution. So let me now move to Resolution 3.2, and Resolution 3.2 concerns my continued appointment as an Independent Director. So I will ask Mark Ford as Chair of the Audit Committee to take the chair and talk to that resolution.

Thank you, Richard, and good afternoon, ladies and gentlemen. Resolution 3.2 is an ordinary resolution and seeks approval of Independent Director, Richard Sheppard. The proxies received are on the screen and again represent around 74% of issued capital. Are they on the screen? Yes. Before we turn to questions relating to this resolution, I will ask Richard to present to the meeting.

Thank you, Mark. Well, I joined the Dexus Board in January of 2012 and prior to that, had a long career at Macquarie Group, retiring in 2011 as Managing Director and Chief Executive Officer of Macquarie Bank. Certainly seemed a long time. The day I walked in, there were 30 employees. The day I walked out, there were 15,000, and lots of things happened in between. During my time at Macquarie, I chaired a number of Macquarie's listed property and infrastructure funds, including Macquarie Airports. I currently sit on 2 other boards, the Star Entertainment Group and Snowy Hydro, both of which are involved in very substantial and well-known development projects, including the $3 billion Queens Wharf Casino in Brisbane and the $5 billion Snowy 2.0 pump hydro project done in the Snowy Mountains. During my time at Dexus, the group has grown from $14 billion of assets owned and under management and produced consistent and growing returns for security holders. Let me say that Dexus does have an outstanding Board and management team, and it is a privilege to act as the Chair of the company. And as I've said before, I really strongly believe that Dexus will emerge from the COVID-19 crisis in a strong position. Thanks.

Thanks again, Richard. Do we have any questions related to resolutions 3.2? No. In that case, I will hand back to Richard for the following meeting. Thank you.

I forgot to mention, too, that I'm Chairman of the -- not Chairman, Treasurer of the Bradman Museum. And as I do on these meetings, I always commend that unitholders go and visit the Bradman Museum if they want to know something about cricket in [ barrel ]. Let me now move to Resolution 3.3. Resolution 3.3 is an ordinary resolution that seeks the initial appointment of Peter St. George -- well, not the initial point, but the ongoing appointment of Peter St. George as an Independent Director. Let me provide just some comments in relation to this resolution. It was originally intended that Peter would step down from the Board at this Annual General Meeting, having served more than 11 years as a Director and making an outstanding contribution to the Board over that time, including in recent years as Chair of the Audit Committee. Both the Board and I felt that while we're in the middle of the economic challenges that we are now dealing with that it would be in the best interest of Dexus and its unitholders that Peter remains a Director until next year to give us the continuity and the benefit of his experience. Accordingly, the Board asked Peter to stand for reelection and delay his departure from the Board until the first half of next year. And I therefore strongly commend this resolution to security holders. The proxies received are detailed on the screen again and represent 74% of the issued capital. Before -- again, before we turn to questions relating to this resolution, I will ask Peter to present to the meeting.

Thank you, Richard, and good afternoon, shareholders. There are 2 things I did not expect to happen when we were together at the last Annual General Meeting. The first was to be standing for reelection, and the second was to be attending a virtual AGM. The 2, however, have a common thread, COVID-19. That we're meeting virtually is unfortunately now the norm. The proposal that I stand again, albeit for a shorter period than customary, was against the background as Richard has explained of restrictions on travel and physical meetings, which meant that it's been harder to engage with the prospective directors. Additionally, my fellow Board members saw benefits in some continuity as we transition through an uncertain environment. I've been on the Board since 2009. And in that time, I saw the business at the tail end of the challenging period brought about by the GFC. Following this, we spent some time resetting our strategy and reinvigorating our management team. As a result, I've also experienced a number of outstanding years which have been very rewarding for all security holders. Although I'm only standing now for a shorter period than normal, my enthusiasm and commitment to Dexus is unchanged. If reelected, I look forward to serving your company to best of my ability as we work our way through this period of change and position Dexus for the future, about which I'm optimistic. Thank you.

Thanks, Peter. Are there any questions in relation to Resolution 3.3? Let me just mention one of the questions that did come up when we had our meeting with Australian Shareholders' Association ahead of the meeting was, was the Board planning on longer-term direct Board succession? And the answer is, yes, we are working very hard on that ahead of Peter's departure from the Board next year. If there are no questions relating to this resolution, let me just address other issues. Looking at the proxy votes which we displayed for each of the resolutions, I'm pleased to say that we have sufficient proxies that show that all resolutions will pass. And once your votes are collected and counted today, we will announce the final poll results for each resolution to the ASX and have them available on our website after the meeting. Are there any other questions at all on any subject? If not, before I close the meeting, I ask that unitholders complete your voting form now, including me, if you haven't done so already, and remind you that the voting system will close 5 minutes after I formally closed the meeting. [Voting]

Now before I close the meeting, is there anything I should do, but -- all right. Well, because once I close the meeting, the clock starts ticking on the 5 minutes, obviously. All right. Well, that ends the formal part of today's meeting. I'd like to thank you, our security holders for your continued support. And let me say, I do miss your questions, receiving them in person, and hopefully, that will happen next year. So we look forward to meeting you in person through our 2021 Annual General Meeting. I now formally close the meeting, and thank everybody.