GDI Property Group (GDI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Gina Anderson, and I probably should -- my name is Gina Anderson, as Chairman of GDI, I will chair the Annual General Meeting of GDI Property Group Limited. And I've also been appointed as GDI Funds Management Limited, the responsible entity for the GDI Property Trust, as the Chairman of GDI Property Trust's General Meeting today. These meetings will occur concurrently. Well, it's been a most unusual year, and I'll talk about COVID-19 in my address later in the AGM. However, what COVID has done is accelerate the need to adopt technology to assist how we do business. And so this year, for the very first time, we are holding this AGM as a hybrid meeting. To that end, I'm very pleased to welcome all securityholders, those participating online through GDI's first virtual meeting platform, and I'd especially like to thank those of you who are attending in person. There is talk of amending legislation to allow listed companies to conduct all AGMs virtually, but your Board feels strongly that the AGM is an important forum for you, our owners, and an opportunity to allow you to meet us in person and vice versa. Therefore, while the composition of your Board remains the same, we intend to continue to conduct our AGMs using the hybrid model from now on, combining both in-person and a virtual meeting. If there are glitches, please bear with us the first time. Unfortunately, COVID has meant that we can't offer anyone attending -- really shouldn't be offering anyone attending a cup of tea and biscuits, but please feel free to linger and ask any questions if you'd prefer to do so outside the formality of the AGM. Social distancing, of course. Securities holders using the online platform will be able to listen to the meetings in real time, view the presentation slides, submit votes and questions via the online platform during the meeting. The meetings of the 2 entities will be held concurrently today as detailed in the Notice of Meetings dated September 25, 2020 and sent to securityholders. As is now after 10:30 a.m. Sydney time, I'm advised -- and I'm advised the necessary quorum is present, I, therefore, have great pleasure in declaring open the Annual General Meeting of the members of GDI Property Group Limited and the General Meeting of the unitholders of GDI Property Trust, and may I welcome each of our securityholders in attendance and participating today. Before I proceed with the business of meetings, I'd like to introduce my fellow directors. For those participating online, their respective photos are on the screen now. Steve Gillard, our Managing Director; and our Independent Nonexecutive Director, John Tuxworth, far end, who's Chairman of our Nomination and Remuneration Committee; Giles Woodgate, who is Chairman of our Audit and Risk and Compliance Committee, and who is standing for reelection today, and the Board unanimously supports his reelection; and Stephen Burns, who's a member of the Audit Risk and Compliance Committee and the Nomination and Remuneration Committee. Also present today are Kate Malcolm, Joint Company Secretary; David Williams, Joint Company Secretary and our Chief Financial Officer; members of our senior leadership team and Mr. Sandeep Kumar from the company's external auditor, Hall Chadwick. Mr. Kumar will be provided a reasonable opportunity to answer questions you may have about the conduct of the audit and the preparation and conduct -- and content of the auditor's report. Securityholders will be given a reasonable opportunity to ask or submit any questions online during the meeting in relation to the company's business and management when considering the 2020 annual report. Before turning the meetings over to the Managing Director to give us a short presentation on the company's activities, I'd like to make a few comments. This is my second address to the AGM as Chairman of GDI. In my first year as Chairman, the findings of the Hayne Royal Commission into misconduct, into the banking, superannuation and financial services industry were dominating boardroom discussions. I mentioned last year that the banking Royal Commissioner Justice Hayne offered 6 fundamental principles for all Board directors, and they are. Obey the law, do not mislead or deceive, be fair, provide services at a fit for purpose, deliver services with a reasonable care and skill and when acting for another, always act in their best interest. As stated last year, everyone at GDI, the Board and staff, are expected to act in accordance with these fundamental principles whilst adhering to our core values: integrity, respect, performance, compliance and safety. This has placed us extremely well to deal with what has dominated my second year as Chairman, COVID-19. And well, it has been a challenging year, hasn't it? In particular, it's been a year in which the welfare of our people, our tenants and you, our investors and securityholders, have been at the forefront of our actions. I'm very proud of how your entire team, the Board and the staff, performed during the heart of the lockdown and subsequently as we take slow steps back to normality. Although we're Sydney-based, we have an excellent team of consultants, property managers and leasing agents who've been able to continue the asset management strategies of each of our assets, while the state waters remain closed. The GDI and all its service providers have systems in place to work remotely is a tribute to the GDI leadership team, and I thank them very much for that. I'm happy to report our properties are in good order. And while there -- I think there's only one outstanding tenant issue, the rest have been resolved. Our debt is low. Our balance sheet is robust. And our portfolio is weighted to the markets that we believe has the strongest fundamentals of the Australian CBD, and that is good. We believe our business will continue to perform well and that we will see some unique acquisition opportunities. COVID-19 has made us reflect on what we do and how we do it, particularly the role of CBD offices. Notwithstanding the impact of work from home and the consequent demand for workplace flexibility, we believe the office will continue to be an entity and culture, promote innovation and productivity improvement. Office properties as part of the build environment also have an important environmental role to play, social and governance, or ESG report. The report gives GDI a platform to explain the environmental and sustainability work that we already undertake. By creating accountabilities, particularly around our environmental performance, we are able to measure our goals and outcomes going forward. Following internal stakeholder engagement, we identified and have reported using the reporting principles and disclosures set out in the GRI, the Global Reporting Initiative standards. Preparation of the ESG report helped us identify further areas of improvement, and I look forward to reporting on new initiatives and policies and resulting benefits to you over coming years. The ESG report should be read in conjunction with the separately issued governance statement, also released with the financial report. In the interest of good corporate governance, GDI adopted the principles and recommendations outlined in the fourth edition of the corporate governance principles and recommendations for the entire reporting period. Finally, I would like to thank my fellow board members, John Tuxworth, Giles Woodgate and Stephen Burns for their proactive engagement and support throughout the year. Most importantly, I'd like to congratulate Steve Gillard and the whole GDI team for another successful, albeit demanding, testing and sometimes grueling year and thank them all for their efforts. Thank you very much. I will now hand over to the Managing Director, Steve Gillard, for his presentation.

I'm tall up here. All right. Let me just run through a couple of things. Our NTA is in the presentation here, and I'll talk about the staff and our achievements a little bit later on. Our NTA, $1.30 per security. And look, we believe and we're fairly confident we can improve on that NTA in the next year or 2, possibly even FY next year. We have FFO of $0.0822. We have a little bit of a hole in our income this year, but I'll talk about that a little bit later on. Distribution is $0.0775, which we'll maintain for this year. Total return 13.4%. Absolute total return since IPO of 14.9%. And we have gearing at about 16%, which we hope to lower through revaluations. However, we have a very strong CapEx program, and I'll talk about the new building, which we'll be building. We're heavily weighted towards Perth, where GDI have been able to, over many, many years, been able to pick markets. And we believe the East Coast was overpriced, and we pushed into Perth. And we've already achieved great results. The acquisition of Westralia Square, we purchased a couple of years ago for $216 million is now valued at around $330 million, and we believe that there's strong growth in that as well. You look at all of the statistics, all of the potential growth, the infrastructure projects, the business conditions, the office leasing inquiries, the forecast GDP growth, the forecast population growth, the forecast net absorption and the forecast rental growth, they're all weighted towards Perth. And our portfolio is strategically weighted, and we have buildings in the premier positions in Perth. We've had a solid start to '21. We've just leased a whole floor to cash converters. We've now got the vacation -- vacated floors of the government in Westralia Square, the upper floors. And we've recently refurbished those properties and bring those back to base build. We have a short list and number of inquiries on Westralia Square. And we've lost a couple of tenants in Mill Green, one of them, a big one for Scentre Group. Obviously, they're moving back into their west field, but we've got strong leasing inquiry over there, and we've done a number of deals. We've done a whole floor in 197 St Georges Terrace. We've got strong inquiry and signed new leases in 50 Cavil Avenue and we've obviously got some potential and there's a number of various things happening in our funds management. We've got strong inquiry in Townsville. We had to have that fully leased in the medium term. We've got -- the inquiry levels in Perth are good. Obviously, you've got all the business conditions in our favor. In April, we had -- the momentum was coming and then COVID hit and has put us back a few months. But we're now seeing strong inspections. It's taking a while for people to actually execute leases. But we've executed a number of leases and heads of agreement in the last few weeks. So we're -- it's coming, it's coming, the momentum is coming. And there's a number of projects which have been delayed. There's obviously the border closures, and it's hard to get staff flying in from other states. If you look here for the WS 2, the building which we're going to build, the beautiful thing with this building, we don't have to escalate. We've got the land for free, and we're building on top of the site. It will be the first 6-star Green Star building in WA. It will be a very cheap construction, and we can build this building at a lower cost than the recent purchase, which was announced yesterday by Andrew Forrest. We looked at -- so we'll speak to that building. It's in premier position. You look where it is, it's in front of BHP tower, overlooking the water in a magnificent spot. We've lodged the DA for 1 Mill Street, we're going to demolish that building. Now we've got a strong inquiry for pre commitment, but we won't be building that unless we get a pre commitment. But we think we're a bit show in town, we're in a premier location, we're close to rail, we've got activity around that area and we've got a very, very strong chance of getting some strong pre commitment there. And so we're very excited about that. We've been working very closely with Lend Lease, and we have a number of arms in the fire. Look, the reality is we have got a bit of vacancy. We're exposed to Perth. We're in the best location. It's days GDI talking the talk, we're going to walk the talk. And we've got to show our investors that we -- our commitment to Perth is right and we've got to do a number of leasing deals. We've got leasing opportunities in 1 Adelaide Terrace, 180 Hay Street, Westralia Square and Townsville. All we are confident of achieving those goals. The capital markets, we're looking for opportunities to acquire property. We can't see value on the East Coast, and we're not going to probably buy anything else in Perth where there's vacancy. We're just aimer at really -- what we're going to do is we've got a lot of things to achieve, we're building new buildings, leasing up. And with that, we can significantly add value to our shareholders as well. We're trying to accelerate the sell-down of 251 Adelaide Terrace and 10 Market Street. We have significant opportunities in our funds management, and there is significant value in a lot of our funds management funds which we hope to reveal in the future. So we're doing a lot of work. There's a lot of CapEx. There's a lot of development work. Potentially, we could sell some properties and reduce our debt on our balance sheet. We confirm we're going to pay the distribution. We will look to the future, and I'm sure we're going to achieve significant leasing results to improve our cash flow. The -- a magnificent by our team. We have written off 1% of our gross rent during the COVID. I'm sure that's the lowest of any other property trust in Australia, potentially in the world. Yes, what a great achievement. We worked with our tenants. We hit the tenants hard. We've renewed leases. We've done a lot of effort in that regard. And I'm very proud of our team and the whole of GDI and the Board of Directors, the commitment we've had during COVID. Everyone back at work, everyone seizing the day and the opportunity. Where COVID hit, in GDI, we do excel in markets which are vulnerable because we take advantage of the opportunities which are ours. So I'd like to congratulate all the staff, and I thank all of our investors for supporting us. There's no doubt in the world we will achieve our goals. Thank you.

Thank you, Steve. We now come to the more formal consideration of matters for the meetings today. The Notice of Meeting signed at 25th of September 2020 was circulated to securityholders, and I'll take the Notice of Meeting as being read. Right. Bear with me while we go through the meetings and voting procedures because we need to do it for both in the room and those online. So before moving on to the resolution to be considered, I'll now briefly outline the procedures for the meeting and the voting procedures for today's meeting. In accordance with the company's constitution, as Chairman, I have determined the voting on each of the resolutions will be conducted by poll. The poll for each of these resolutions will open at the beginning of the first item of business. And the poll will close 5 minutes after the close of business of the meeting. The purposes of conducting the poll for the purposes of conducting the poll as link market services limited to conduct the poll. As Chairman of the meetings and having been appointed as proxy for a securityholder entitled to vote, as detailed in the notice of meetings, I will vote where authorized all undirected proxies in favor of each resolution. The results of the poll will be released on the ASX market announcement platform and will be available on the company website as soon as possible after the meeting. Also in accordance with the company's constitution, directors have determined that each securityholder who is entitled to attend and vote at the meeting is entitled to direct -- to a direct vote on a resolution. If you are attending in person, when you registered your attendance this morning, you would have been issued with an attendance card. Yellow indicates a voting securityholder or proxy holder for the meeting, and blue indicates a non voting securityholder. You must lodge your voting paper for your votes to be counted, which I have asked you to do at the conclusion of the meeting. If you need to leave early, please put your completed voting paper in the box provided by Link Market Services staff immediately outside the room. If you're attending online, you can cast your direct vote using the electronic voting card that you received when you registered via the online platform. You'll be able to vote between the commencement of the meetings and the closure of the voting as announced during the meetings. If you have any questions about casting your vote online, please refer to the virtual meeting or call link on the numbers set out in the guide or on the screen in front of you. We will display the number of proxy votes received for each -- of each proposed resolution ahead of voting on each resolution. Securityholder questions. For those attending in person, at the time of each resolution is proposed, I'll invite any questions specific to that resolution. For attending online, please ensure that you registered through the webcast as a securityholder and not as guest, as only securityholders, their attorneys, proxies and authorized company representatives are entitled to ask questions. If you wish to ask a question online, please submit questions by registering as a securityholder or proxy holder and selecting the 'ask question' tab. You can submit questions now or any time prior to the vote on a relevant resolution, and they'll be dealt with at the appropriate time. If you have a question already prepared, please submit it now for as many questions as possible may be answered. All online questions will go through to David Williams, our Joint Company Secretary. David will identify each person who asked the questions, send them to me and ask me to read them out. Is that right? Yes. And I'll either answer the question or pass it to the most appropriate person to answer. We reserve the right to rule out any questions not relating to the meetings or are out of order. All questions, whether from the floor or online, must relate to the relevant item of business. There will, however, be an opportunity to ask general questions towards the end of the meeting. I ask that you keep your question short and to the point, so that as many securityholders as possible have the chance to ask a question. Each securityholder should restrict themselves to not more than 2 questions and we'll endeavor to answer all questions in the allotted time today. Resolution 1, the remuneration report, is an advisory resolution. The remaining resolutions being considered today -- at today's meetings are ordinary resolutions requiring a simple majority of votes cast by securityholders present and entitled to vote on the resolutions to be approved. Are there any questions relating to the procedures of the meetings? Any questions? Great. There are no further -- no questions, I'll move to the business of the meeting. Consideration of the reports. The reports to be received and considered by the meetings are those for GDI Property Limited and its controlled entities for the year ended 30th of June 2020 and for the GDI Property Trust for the same period. The reports consists of the financial statements, the Director's report and the Independent Auditor's report. This is not a resolution. A copy of the 2020 Annual Report was made available on the company's website, the ASX website, and was sent to those securityholders who requested it. The financial statements for the year ended 30th of June have been approved by directors and audited by Hall Chadwick New South Wales. I will take the report as read. Whilst we don't put this item to a vote, I would like to invite securityholders to ask questions or make comments about these reports. You may also ask a question to the auditor relevant to the conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted in preparing financial statements and the auditor's independence. Are there any questions? None online. Thank you. If there are no -- it appears there are no questions, so I'll move on to the resolutions. Resolution 1 is the remuneration report. The resolution remaining is the adoption of the remuneration report. Resolution is set out behind me. It was contained in the director's -- the rem report was contained in the 2020 Director's Report in the annual report which is available, as I said, on the website. I will take the remuneration report as read. But it does detail the policy, the remuneration policy of GDI Property Group, reports and remuneration arrangements for key management personnel, explain forward policies in relation to the nature and value of remuneration paid to our key management personnel and discusses the relationship between the remuneration policy and the company performance. Further details about resolution 1 are contained in the explanatory memorandum that accompanied the Notice of Meetings. The vote is in advisory only and is not binding on directors of the company. Before putting resolution 1 for the meetings, I'd like to invite security holders that GDI Property Limited will disregard any votes state in the voting exclusion statement related to resolution 1 as set out in the notice of meetings. In the interest of governance, the Board does not make a recommendation to securityholders in relation to this resolution. Are there any questions on the remuneration report? It appears there are no questions, so I'll move on to the proxies received for this resolution. On the screen are details of the proxy. Relations. On either your yellow attendance card or your electronic voting card, please now select for, against or abstain next to resolution 1. Thank you. I'll now move on to Resolution 2, the reelection of Giles Woodgate as a director. The next resolution of the meeting is the reelection of Giles Woodgate as a Director of the company. The resolution is set out on the screen behind me. I'd like to invite Giles Woodgate to provide -- to come up and provide some details of his background and experience.

Thank you, Gina. I don't think I could have got a better stage. Good morning, all. As you can see, I have a lot of experience. And if you'd like to know more about my financial skills, I invite you to Google me. What I'd like to do is to say thank you to the Board for demonstrating its confidence in me. At times I've wondered if I've been carrying my share of responsibility as a director of the company, pulling my weight, and on occasion, I get a note from one of my colleagues or more, which is rather reassuring. I enjoy working with you, guys and girls. And what gives me comfort is that I know that you're diligent in what you do and you're confident in what you're doing. And I'd also like to say thank you to you, the securityholders, for supporting me in regard to my contributions to GDI. Your Board, including myself, is ambitious for GDI and its securityholders. Collectively, the Board and staff are doing a better and better job. That's especially in the areas of reporting, risk management, strategic positioning and execution. And I have great confidence in the members of the Board and staff and look forward to GDI's future performance. Back to Gina. Thank you.

Thank you, Giles. The directors, with Giles Woodgate abstaining, unanimously recommends securityholders vote in favor of the reelection of Giles Woodgate as a Director of GDI Property Limited. His attention to detail and his knowledge, particularly as an insolvency expert of the financials, risk and compliance, has added real value to GDI's operations. I'll now just -- are there any questions regarding for Giles or regarding his reelection? It appears there are no questions, so I'll move on into the proxies received for this resolution. On screen now are the details of the proxies received in relation to resolution. Resolution 2 is an ordinary resolution requiring a simple majority of votes cast by securityholders present and entitled to vote on the resolution. Again, on either your yellow attendance card or your electronic voting card, please now select for, against or abstain next to Resolution 2. I'll now move on to Resolution 3. Issue of Performance Rights under the GDI Property Group Performance Rights Plan to Mr. Steve Gillard, our Managing Director. The resolution is set out on the screen behind me. Before putting the resolution to the meetings, I would like to advise securityholders that GDI Group will disregard any votes as stated in the voting exclusion statement related to Resolution 3 as set out in the notice of meetings. As described in your notice of meetings, the Board intends to grant 927,056 performance rights to Mr. Gillard in accordance with the provisions set out in the explanatory memorandum, which is attached to your notice of meetings. The details of the grant, including performance conditions, are detailed in your notice of meetings. The directors, with Steve Gillard abstaining, unanimously recommend that securityholders vote in favor of the Issue of Performance Rights under the GDI Property Group Performance Rights Plan. Are there any questions regarding the Performance Rights for Steve Gillard? It appears there are no questions, so I'll move on to the proxies received for this resolution. On screen, there are now details of the proxies. On either of your yellow attendance card or your electronic voting card, please now select for, abstain or against Resolution 3. That concludes the formal business for today's meeting. And I'll now ask are there any general questions for the Board or indeed Steve?

It appears, there are no questions. Ladies and gentlemen, that concludes the voting on the resolutions for the meeting. Could I just thank -- I believe there are some 23 people online, thank you very much for joining us online for the first time. And thank you to our -- we have some securityholders in attendance, and we're very grateful for you here as well. We do have a question. Yes, please. One second, so we can record it, so everyone can hear you.

This is directed towards Steve. I'm a shareholder. Just firstly, congratulations on a wonderful year to you and your team. You've done a wonderful job. I think the share price has done very well out of this whole time. Just one small question. Your discount to NTA at the moment, I see the share price has been rising lately, but do you have any ideas you may look at addressing that discount to the current NTA?