Kiwi Property Group Limited (KPG) Earnings Call Transcript & Summary

Well, good morning, everybody. Thank you for coming along. Welcome to the 2025 Annual Meeting of Shareholders for Kiwi Property. I'm pleased to welcome you all today, whether you're joining us here in person or online via the virtual meeting platform. My name is Simon Shakesheff, and it's my pleasure to open today's meeting. I can confirm that a quorum is present, and I now declare the meeting open. Before we start proceedings, I'll cover off on a few housekeeping matters. Firstly, please switch your mobile phone to silent. Restrooms are in the landing area near the rear entrance to the room where you came in. If a fire alarm goes off, please follow the venue staff in an orderly fashion down the stairs and congregate in the carpark at the front of the building. If you're joining us online and need assistance, please refer to the virtual meeting portal guide or call the helpline on 0800-200-220. And with that, we'll get things underway. I'll start today's meeting by introducing my colleagues on the Board. Firstly, I'll work from the end there. Kevin Kenrick. Kevin is an Auckland-based professional director who joined our Board in May 2024. He's currently a director of BNZ and the former CEO of TVNZ and House of Travel. He has significant experience leading the strategic transformation of prominent businesses across multiple sectors from travel to media. Kevin is the Chair of our People and Culture Committee. Secondly is Peter Alexander. Peter is an Auckland-based professional director who joined our Board in May 2023. He has extensive property experience and has held executive roles at several large listed New Zealand companies. Peter is a member of our People and Culture Committee. Next is Chris Aiken. Chris is an Auckland-based professional director who joined our Board in June 2021. He has significant property experience spanning both the public and private sectors. Chris is a member of our People and Culture Committee. To my right, Michele Embling. Michele is an Auckland-based professional director who joined our Board in May of this year and stands for election today. She has extensive leadership and governance experience across the public and private sectors, having worked in the insurance, energy and financial industries in New Zealand and Australia. Michele is the new Chair of our Audit, Risk and Sustainability Committee. And lastly, online is Carlie Eve. Carlie is an Auckland based professional director. She joined our Board in May 2023 following a successful finance and funds management career. Carlie is a member of our Audit, Risk and Sustainability Committee. Carlie had an unavoidable commitment and is not here in person today, but is available online for questions should any arise. In accordance with the NZX Listing Rules, the Board has determined that all directors are independent. The Notice of Meeting also contains further information on director independence. I would also like to recognize Mary Jane Daly's exceptional contribution as the Director of Kiwi Property for more than a decade. She was appointed to our Board in September 2014 and retires as of today's shareholder meeting. Mary Jane was the previous Chair of our Audit and Risk Committee, and her expertise was pivotal in navigating challenging business conditions and positioning the company for sustained growth. Also joining us today on the stage here are Clive Mackenzie, our Chief Executive Officer; and Steve Penney, our Chief Financial Officer. I warmly welcome the team from our registrar, MUFG Pension & Market Services. They will help to conduct the voting on the formal business later in the meeting and act as scrutineer. Finally, I'd like to welcome Andrew Boivin and Josh Burgess from Deloitte, our group's auditor for the 2025 financial year, who are here in the front. So moving to the agenda. I will start with a brief address and then invite Clive to provide an update on the company's financial performance for the year ended 31 March 2025 or we may refer to it as FY '25. After these presentations, we'll take questions and conduct the formal business for today. We have 2 resolutions: to elect Michele to the Board and to fix the auditor's remuneration. Moving to how to ask a written question. Shareholders present at today's meeting can ask questions as can those participating through the virtual meeting website. If you are online, you may submit a question at any time by clicking on the Ask a Question box at the top or bottom of the online portal, as shown here. We will answer general questions after the business update and performance overview and then specific questions relating to each resolution before voting on them. I encourage shareholders who are attending online to send their questions through as soon as possible. This will allow us to answer these questions at the appropriate point in the meeting. As this is a shareholders' meeting, only shareholders or appointed proxies can ask a question, so you'll be prompted to input your shareholder or proxy number before completing the online process. Moving now to my remarks. Reflecting on the 2025 financial year, kiwi Property has weathered the country's economic downturn well, combining operational resilience with fiscal discipline while steadily advancing our long-term retail-led mixed-use strategy. Early optimism for its swift economic rebound last year has since been tempered by a longer-term view of a slower recovery. Yet there are signals New Zealand is cautiously emerging from a difficult economic recession. This recession has affected the wider property and construction sectors with downward pressure on office tenancies, residential rentals and consumer propensity to spend on retail goods. Interest rates have reduced from the highs seen last year and economic pressures are now easing. We believe Kiwi Property will be increasingly well positioned, with the exposure of our mixed-use assets to positive population, retail and rental trends continuing to underpin our strategy. Sylvia Park has proven to be the best proof point to date of the Kiwi Property retail-led mixed-use strategy, highlighting the benefits of taking a long-term approach, starting with strategic landholdings near transport and population growth nodes and adding quality retail, office and now residential to the community. The opening of Resido in June 2024 marked Kiwi Property's first residential development at Sylvia Park. Over the last few years, we've also opened 2 office buildings, ANZ Raranga and Geneva House as well as additional retail on the upper floor of the shopping center and the Sylvia Lane dining precinct. We believe Sylvia Park will continue going from strength to strength, supporting improved business performance and shareholder returns. As we continue to progress Sylvia Park, we'll focus on achieving the highest and best use for each square meter of our strategic landholding as we grow and diversify the revenue from the site and drive further valuation uplift. We've achieved considerable progress at Sylvia Park over recent years. And there's an exciting road ahead, including the scheduled opening of New Zealand's first IKEA store in late 2025. In August 2023, Kiwi Property completed the sale to IKEA of 3.2 hectares of land adjacent to Sylvia Park. The iconic Swedish retailer has now significantly progressed store development, which will be the first in New Zealand, and is about the same size as 3 rugby fields. We anticipate great interest in IKEA once it opens and expect it will drive retail tourism to Sylvia Park. Accordingly, we've made sure that accessing Sylvia Park shopping centre is as seamless as possible, with pedestrian connectivity progressing well in the form of a covered walkway between the 2 sites. We're cognizant of the impacts on traffic in the surrounding area and Kiwi Property is working closely with Auckland Transport to develop a traffic mitigation plan. Sylvia Park's connectivity to public transport will be key in mitigating traffic impacts, with the train station, motorway and bus linkages all providing access to the site. IKEA is likely to open around the Christmas trading period at the end of this year, and we look forward to the strength of their brand acting as a magnet to the Sylvia Park precinct. As I mentioned a couple of slides ago, the delivery of Resido is a key milestone in Sylvia Park's evolution into a world-class mixed-use precinct. Resido opened on 11th of June 2024 and the 295 apartment complex is the largest completed build-to-rent development in New Zealand. As of 30th of June, 266 of the apartments were leased, representing 90% of the total development. The lease-up performance to date is at the faster end of our 12- to 18-month lease-up target, demonstrating that the asset has been well received by prospective tenants. The strong leasing performance has occurred in a subdued residential rental market, where weaker net migration inflows and increased rental supply have impacted demand. A recent survey indicated that Resido residents each spend over $21,000 per year at Sylvia Park, which is equivalent to sales of more than $8 million based on 400 residents. This demonstrates the benefit to the wider Sylvia Park precinct of having residents living on site. Moving to Drury. Our large landholding at Drury will be a significant mixed-use development in the future. We completed Stage 1 earthworks at Drury in June 2024. Further capital spend at Drury, including civil works, can be broadly matched to the sales of large-format retail land. This allows us to progress further land development as sales are achieved while still maintaining a robust balance sheet. Kiwi Property's Drury project was also included in Schedule 2 of the Fast-track Approvals Act 2024. We submitted our application in March and pleasingly received notice that our application was accepted for processing earlier this month and will shortly be considered by the expert panel. Should the application be approved, this will further increase the consented land at Drury and allow for a commercial retail center as well as future residential activity. That's approximately 33,000 square meters of commercial space, 96,000 square meters of retail space and 10,000 square meters for community activities. We also achieved a major milestone at Drury with the unconditional sale of 1.2 hectares of large-format retail land to Foodstuffs in April 2025. Foodstuffs North Island will build a New World supermarket at Drury, bringing an essential amenity to the heart of this new metropolitan town center. The sale of this land represents approximately 5% of the total land intended for sale at Drury with a further 44% in advanced sale discussions with 3 separate parties. We can realize development profits on the portions of land that we sell at Drury, recognizing the value that we have added to the site. Residential land makes up around 37% of the total land intended for sale and we'll commence sales as residential market conditions improve. Our objective is to sell off the large-format retail and residential super lot sites and use the proceeds to fund the infrastructure for Drury Stage 2. We're already attracting a high degree of interest from potential tenants who recognize Drury's significant potential. We're looking forward to capitalizing on that interest and in the process, unlocking returns for the business and our shareholders. I'll now hand over to Clive to discuss our FY '25 business performance in some more detail.

Thank you, Simon, and kia ora, everyone. It's great to connect with our shareholders face-to-face, and thank you for joining us. And to everyone viewing this event online, we appreciate you logging on. As Simon mentioned, Kiwi Property's operating performance was resilient in FY '25, with our mixed-use assets, in particular, performing well in a tough trading condition. Let's take a look at some of our key financial and operating highlights from FY '25. Kiwi Property has delivered a strong overall rental performance this year with net rental income up 5% across our portfolio. Our mixed-use assets were particularly robust performers, which offset the slower office and retail leasing markets. Operating profit before tax was up 7.4% compared to the prior year. Although operating profit before tax was up, our adjusted funds from operations, or AFFO, was down by 7%. AFFO was lower than the prior year, primarily due to higher finance costs and higher current tax over the period. The tax increase was due to the removal of tax depreciation on commercial buildings, which began at the start of the financial year. We were pleased to hear that the government recently announced the investment boost, which will mitigate some of this additional tax impost. The relative resilience of our valuations compared to the prior year contributed to an improvement in our net profit after-tax performance with net profit of $57 million in FY '25 compared to a net loss after-tax of $2.1 million in FY '24. Sales across the portfolio were marginally lower over the year amidst a slowdown in the wider New Zealand retail sector. Total portfolio sales were $2.1 billion for FY '25, representing a small decline of 1.6% compared to the previous year. Positively, foot traffic continues to increase at Kiwi Property's assets, proving the attractiveness of our assets as destinations even at a time when many New Zealanders purse strings are being tightened. The total customer visits across all of our assets were 37.2 million over the year. The Sylvia Park precinct recorded sales of $887 million, down by 3.4% from the prior year. Pleasingly, down in Hamilton, The Base sales continued to increase, up by 3.1% to $547 million. While spending overall has been lower due to the current recessionary environment, we believe that our assets are well placed to recover strongly, particularly now that factors influencing retail spend have improved, including a reduction in both inflation and interest rates. Given the recessionary period New Zealand has experienced, we're pleased to have continued to maximize the day-to-day operational performance of our assets. As you can see on this slide, total rental growth from mixed-use office and retail leasing activity was up 4.3% for FY '25. Our leasing teams have achieved significant rental growth, both from new leases, which were up 6.1% and our existing tenants' rent reviews, which saw a 3.7% growth. The mixed-use portfolio, in particular, performed well with an 8.3% uplift in leasing spreads for new lease deals. This was led by The Base, up 11.7% and the Sylvia Park precinct up 9.5%, underscoring the strong tenant demand at these high-performing centers. There were also strong leasing spreads recorded at our office assets, which were up by 6.4%. We continue to focus on future-proofing the Kiwi Property business. Increasing efficiency and reducing overheads has been major areas of focus for the last 12 months, setting us up for success as we move into FY '26. These efforts have led to our employment and administration expenses reducing by $7.5 million, which is a 23% decrease from the prior year. We saved $4.3 million through people-related cost saving initiatives and, since March '24, have saved a further $3.1 million from a now embedded Yardi enterprise IT system. Workforce planning and people management saw our headcount reduced by 6% over the year. Pleasingly, we have also recorded a 5-year high engagement score of 75%, following a conscious effort to emphasize both culture, leadership and internal promotions. As part of our recently released sustainability report, we provided a new approach to reflect our commitment to sustainability, a cornerstone of our long-term strategy and a reflection of our responsibility to the communities we serve. Our sustainability approach is built on 5 key pillars. First, we are committed to managing investments for sustainability performance. This means embedding sustainability considerations into the investment decisions we make. We invest in sustainability initiatives at our assets to make them more desirable for our tenants, our customers and our investors. Secondly, we continue to focus on decarbonizing and reducing our greenhouse gas emissions from improving energy efficiency across our portfolio to managing waste. We are taking decisive action to support the transition to a low-carbon economy. Third, we aim to demonstrate resilience, not just in our assets, but in our operations and our planning. We're designing and managing our properties to mitigate the challenges of climate change and to remain vibrant, safe and functional for generations to come. Fourth, we are focused on building a future-fit workforce. This means equipping our people with the skills, the tools and mindset needed to lead in a rapidly evolving world. We believe that a sustainable business starts with empowered, engaged and forward-thinking people. And finally, we are determined to live up to our role in communities, whether it's through inclusive design, community partnerships or creating spaces where people can connect and thrive, and we're committed to making a positive impact where it matters most. Kiwi Property delivered a robust operating result in FY '25 and took important steps forward in the delivery of our strategy. Heading into the new financial year, we have 4 key priorities that we know will make an impact. First, we will efficiently manage the balance sheet and seek to free up additional investment capacity, including looking to divest nonstrategic assets. This will allow us to enhance our existing high-quality assets and progress other investment opportunities as market conditions allow, in line with our capital allocation framework. Second, we'll continue to drive rental growth with a focus on maximizing the operational performance of our high-quality assets. Third, we'll look to maintain strong discipline on costs following great progress made to date in this area. And finally, we'll look to sell further large-format retail sites at Drury following the first land sale made in April. The economic environment, both locally and globally, has meant transactions of this nature have taken longer than expected, but it's pleasing to see activity starting to return to the New Zealand property market. We expect to achieve further land sales over the coming year, and this will be a continued focus for this year. With a full year dividend of $0.054 per share, the dividend payout ratio for FY 2025 is 93%. As a business, our goal is to deliver sustainable earnings and dividend growth for shareholders. We are pleased to provide shareholders with a dividend guidance for FY '26 of $0.056 per share, which represents a 3.7% increase on the prior year. This dividend increase underscores our intention to continue to deliver dividend growth over time. We're very conscious of the current period of global economic volatility and will adopt a highly disciplined approach to the operation of our business in FY '26, delivering on strategy, driving asset performance and strictly managing our balance sheet. By focusing on these things, we will put ourselves in the best position to deliver sustainable earnings and dividend growth for shareholders as economic conditions improve. That concludes our overview of the company's activities for the 2025 financial year, and I'll hand back to Simon to take things from here. Thank you very much.

Thanks, Clive. Before moving to the formal business of the day, we'll happily answer questions. We ask that you limit your questions to the company's activities at this time. You'll be able to ask questions about the formal business shortly. As this is a shareholders' meeting, only shareholders or appointed proxies can ask a question or vote. When I call for questions, can shareholders present in the room please wait until a microphone is provided and then clearly state your name before asking the question. I'll take questions from those present in the meeting firstly before moving on to questions from shareholders online. Are there questions from shareholders in the room? The gentleman here?

I just had a question about -- sorry, [ Richard Carter ], I'm a shareholder. I just had a question about the government's investment boost and the depreciation. I was in the Argosy meeting recently, and they were going to benefit quite substantially because they had some commercial buildings that were going to come online and they'd be able to depreciate that quite quickly. I was wondering what effect that would have on your business and if there's anything that you can take advantage of and how that might look in the next financial year would help you.

Thank you for the question. I'll probably hand over to Clive for some comments on that.

Yes, it will have a definite impact on our business. And I think during our results presentation that we made earlier in May, we called out that it was -- I think we're looking at the amount of capital expenditure we had in the previous year, it was over $2 million of potential benefit. Obviously, as we go forward, we'll look to be able to take advantage of that investment boost. But it certainly will give a benefit to the business as we go forward here. Our CFO might be able to give a little bit more color on those numbers.

Yes, that's correct. it's about -- if you look at the prior year, it's just gone $25 million and what's eligible to be deducted under the investment boost, it's about $2 million to $2.5 million of additional income. So it's meaningful.

Thank you. The gentleman at the back.

My name is [indiscernible]. I'm the shareholder. I have 2 questions here. First one is that do you think that the Drury sale, the land sale, is too cheap, especially at the current cycle when the land price is so low and just had a big real estate crash recently and recession. So I want to ask maybe the CEO and the whole Board, do you really think that, that was a good time and a good price to sell? And the second question is...

I'll just interrupt you there. We'll just answer that one, and then we'll come back to you for your second question.

No problem. Okay.

Thank you. So re Drury, we should probably all bear in mind, this is an asset that Kiwi shareholders have owned for over a decade, and it's quite a long path in terms of the different stages of the Drury development. In the longer term, we think Drury is a fantastically located project on the train line, on the motorway in the growth corridor to the south of the city, whereby in future, it will be a really core large-scale mixed-use led by retail asset for us. We've been engaged in the past, for a number of years now, about sequentially bringing the infrastructure to bear in that project. What we have done in the last couple of years is essentially divided it into 2 parts. There's the part closest to the train station, which will be the Future Town Centre, the park to the south of that, that is in 2 components, residential and large-format retail. We have decided not to sell the residential land at the moment. We're waiting for a better environment in which to do that. On the large-format retail, it's an important part of our funding package for the Drury project that we do start to sell pieces of that land for future settlement to enable us to essentially continue to invest in the project. We're pretty comfortable that the rates of sale that we are getting on a dollars per square meter basis are very competitive versus comparable sites in Auckland. And we actually think they stand up quite well versus historic numbers. But I acknowledge your concern. We're certainly aware that market conditions can vary a lot. We're hopeful that as interest rates have started to come down, the environment will start to improve a little bit, and we can take advantage of that improving market environment.

And the second question is regarding sustainability. And I can see, for example, Sylvia Park and the LynnMall, they seem to have quite a large area of roof that can collect a lot of rainwater. Do you think that can be used, for example, for maybe even flushing the toilet instead of flushing the drinkable expensive water from Watercare?

Excellent question. We do take sustainability seriously. We do have significant aspirations for what we want to achieve on the sustainability front. Several of our assets now have solar panels installed on the roof to help contribute to the decarbonization and contribute to the electricity use of the common areas of those assets. With regards to rainwater, I'm going to look to Clive to respond to that one.

I see Linda has got a hand up, but maybe I'll jump in and I can probably answer that, is that we do have rainwater harvesting at -- certainly at Sylvia Park, and I believe we also have it at LynnMall as well. And so we use that for the irrigation of the gardens and landscaping, et cetera, as well. So we do make sure we use the water that comes on site here.

And I'll probably just add, New Zealand doesn't have a recognized accreditation system for measuring the sustainability performance of shopping centers yet. So we did pioneer with Sylvia Park effectively applying an Australian rating tool. And Sylvia Park, I can't quite remember the outcome, but it was a very strong outcome that we received in that process.

Yes, it was a pilot rating, and we received a 5-star pilot rating from NABERS Australia on that. Sorry, 6-star, I'm being corrected, 6-star from on NABERS Australia, yes.

But we're certainly in favor of the New Zealand property industry bringing to bear a sustainability rating for shopping centers that we can use to compare our assets with others. Other questions in the room? Thank you.

Barbara O'Connor from the New Zealand Shareholders' Association. And firstly, the association would like to commend you for the improvement in the remuneration report, which makes it clearer for shareholders. We have 3 questions that I'd like to present to you. Firstly, in regards to the repositioning with the mixed retail, what is going to happen to your strategy once that's been completed?

Okay. So when we talk about mixed-use retail, what we're referring to is our view, which is quite a commonly adopted practice in a number of overseas markets, which basically says the more economic activity you can get in one location, the better it will be for everyone. That's essentially what drives the strategy, which is if you own assets that are well located from a transport perspective, and when we look at our key assets, The Base, Sylvia Park, eventually Drury, LynnMall, they're all located at the confluence of major road intersections with train stations. Sylvia Park is the best example where we've had a retail asset that's grown from being nothing really into New Zealand's leading shopping center. But alongside that, we have developed a range of other uses. So we now have 2 office buildings located on that site, and we completed the Resido residential development last year. I think your question is an interesting one. But we would say, when we look at our assets, we have years and years of opportunity still ahead of us. If you look at Drury at the moment, there really is -- it's years and years of development opportunity ahead of us. When we look at Sylvia Park, we have the capacity to add a number of towers on the existing site on the basis of current and future zoning there. When we look at The Base, we have a very large landholding where we can continue to add additional uses on there. So that's a really good question, but I would say it actually feels to us as though we're really at the early part of this sort of process rather than coming to the end.

Okay. Thank you. The other question I'd like to ask is about the occupancy. We note that it's gone from 99% and it's decreased from that. So can you give us a reason why that occupancy has fallen?

Sure. Good question. When we compare our numbers as at balance date this year with 1 year ago, there's sort of 2 essential differences. The first one is that the Resido residential building is included in this year's numbers, but it wasn't last year because it wasn't finished at that stage. As we mentioned, as at balance date, Resido was, I think, 84-ish percent?

82%.

82% occupied at balance date. It's now increased to 90%. And obviously, we're aiming to move that as close to full occupancy as we can in the next few months. So that's one of the impacts that reduced the occupancy, just that building coming on stream, whereas it wasn't last year. And the other meaningful vacancy in the portfolio is at the Vero Centre, we had a tenant vacated 5 floors. We have -- we're in the process of re-leasing that building. I believe 2.5 of those floors have now been relet.

We're down to 2,300 square meters of vacant space in the Vero building. So we've made really great progress of leasing up that building. The other one I'd add in there, Simon, is we had an industrial site adjacent to Sylvia Park that was vacant at the time of the year-end, and we've now subsequently leased that along with some other vacancy. So in fact, at the moment, we're sitting at 97.7%. So we've improved that vacancy level by 1%.

Thank you. The gentleman here?

[ McCann ], shareholder. I have one question as regards the Vero building in Shortland Street. Now we know the sale fell through with the interest in Hong Kong. Is the intention of the Board still to sell that building?

I beg your pardon, is there still...

Are you still going to sell that building?

Okay. Yes, a year or so ago, we were engaged in the sale process on Vero. It did not complete. As we've highlighted, we believe the future of Kiwi Property is in developing our mixed-use retail-oriented assets. So again, investing in Sylvia Park, investing in Drury, investing in The Base, for instance. And we have identified a number of assets as noncore. Vero is a strongly performing, well-positioned asset. We feel in no rush to sell that asset, but we have identified a couple of our assets as being noncore over time. In the last 2 years, it's actually been a pretty difficult environment in which to transact on asset sales. And so the way you sell assets in that environment is essentially, you have to discount them. So our stance has been we would prefer to wait for interest rates to decline, wait for economic recovery to -- or economic activity to start to recover, at which point we feel that assets might be better placed for the noncore assets better placed for sale. So at the moment, on Vero, it's a well-performing asset. We're very happy owners of it. It's not formally for sale, but it is one of those assets that over time, we would look to move on to reinvest in the existing higher-performing mixed-use assets. Thank you. The gentleman in the middle here.

Mr. Chairman, my name is [indiscernible]. A general sort of question. There are 3 major companies, property companies, listed on the stock exchange, Goodman, Precinct and yourselves. If you look at the share prices of the first 2, they sell at a discount of about 3% or 4% to asset backing. If you look at Kiwi, they sell at a discount of about 22% to asset backing. So 2 questions from that. Why do you think that is? And why do you think the investment community does not consider the asset backing as quoted should be closer to the share price? And what do you intend to do about it?

Thank you. So the first point to note is probably we are as disappointed as you are that our discount to NTA is not smaller than it currently is. I think to an extent, our performance in recent years probably goes back a bit in COVID times, retail properties were quite meaningfully impacted by lockdowns and the environment where we were effectively supporting retailers through that fairly troubled period. In the last couple of years, our share price performance has started to improve. When we look versus the index and our peers over 1, 2, 3 years, our share price performance has been fairly competitive. But I would also acknowledge that we're not happy with the discount to NTA as it currently stands. From our perspective, we can't impact the share price directly. All we can do is try to manage the organization and its prospects and its outlook as well as we can do. And hence, our approach has been to minimize costs to get our dividend payout ratio in a position that's sustainable to grow our dividends over time. And hopefully, the share price will start to respond to that. Other questions? We might go to questions online. And if there's any other questions in the room, we can come back. So there's a question from [ Alan Williams ], and I'll read the question out. What is the status of The Plaza, a very small part of your business, away from core locations and previously marked for sale, little mention in this year's report; valued at $126 million funds, which would help towards the Drury development and put Kiwi in a stronger position as seller of land at Drury. So again, that is a good question. The Plaza over the last year or 2, we've really been involved in 2 discrete processes there. One is we've been doing some seismic remediation around the car park and part of the center. And so we're sort of perhaps 80% of our way through that process. It's about a $20 million spend to seismically strengthen the car park and part of the food court area. And the second thing that we've been doing is working on extending the leases of the key tenants, the key anchor tenants in that asset. Again, my comments about the environment for asset sales in the last couple of years stand with respect to The Plaza as well. And that is, in an environment where interest rates are high and economic activity is slow and confidence is low, the only way you sell assets is at a big discount. So our stance on the Plaza, it is a noncore asset. We would like to sell that asset over time to redirect our funds towards assets like Sylvia and Drury, but we're waiting for those couple of processes to continue, but also to wait for what we feel will be a more opportune time to test the market on that asset. Another question, how sustainable are the rental rent increases to the businesses involved given retail profits are under pressure? So we look at retail rents, the sort of commonly used measure refers to occupancy cost ratio, and that's the cost of the retailers' rent and outgoings as a percentage of their sales. So really, it measures how expensive their occupancy is relative to the sales turnover that the store is doing. When we look at our occupancy cost ratio, it's moved up a bit in the last year or 2. We're up to about 15%.

That's correct.

Our view, when we look at our peers in New Zealand and our peers in Australia, it's not uncommon for retailers, specialty retailers to operate at occupancy cost ratios of up to 17%. So our view is we have been getting rental growth through an environment where sales are soft. We acknowledge that. But I would also say the retail scene has changed a lot in recent years. The good retailers now recognize that they need to be both online and also have a physical store presence, and they want their physical store presence to be in the best assets. So we would argue, for instance, at Sylvia and The Base, they are the best assets. The retailers need to be there. And so we have been getting rental growth in a softer environment because they need to be there. Again, they always have the option of not being in those locations if they don't want to be. So we feel at the moment, our rents are sustainable, and we feel relative to our peers, there's probably a bit more upside on that front. Can I ask are there any other questions in the room at this stage? It appears to be no. Okay. Thank you, everyone. So we might go to the formal business, so if we consider the formal resolutions of this meeting. Voting on each resolution will be by poll. Each person voting at the annual meeting and each shareholder who has cast a vote by proxy has one vote for each share held. These resolutions are ordinary resolutions and are required to be passed by a simple majority of the votes of those shareholders who are entitled to vote and are voting on the resolution. I will put each resolution to the meeting and provide an opportunity for you to ask questions concerning that resolution. I ask you to keep the questions strictly to the resolution. In respect to proxies received, if, as Chair of the meeting, I've been appointed to act as proxy and are not directed on how to vote in respect of the resolution, I will vote in favor of all resolutions. For shareholders joining us here today, you should have had a voting card given to you when you're registered. Please raise your hand now if you do not have a voting card and someone will assist you.

I've been given 2.

Okay. Right. I will ask someone from MUFG to assist you with that one. So please mark your voting intention for each resolution, and the voting cards will be collected after the meeting. So shareholders joining online can vote using the electronic voting card received once online registration is validated. To vote, you will need to click, get voting card, within the online meeting platform. You'll be asked to enter your shareholder or proxy number to validate. Please then mark your voting card in the way you wish to vote by clicking for, against or abstain on the voting card. Once you've made your selection, please click Submit Vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting guide or use the help line specified if you require assistance. Note that voting power will remain open until 5 minutes after the conclusion of the meeting. The results of the votes will be declared and announced via the NZX. So moving to Resolution 1, which again, is an ordinary resolution. In accordance with the company's constitution and the NZX Listing Rules, Michele Embling retires at this meeting and offers herself for election to the Board. The Board has determined that Michele Embling will be an independent director for the purposes of the NZX Listing Rules, if elected. I will now ask Michele to provide a brief bio and some comments supporting her election.

Thank you, Simon. Good morning, everybody. My name is Michele Embling, and I was appointed to the Kiwi Property Board in May of this year. And as has already been stated, I'm standing for election today. I have worked in the insurance, energy and financial services industries in New Zealand and Australia, and I bring that extensive leadership and governance experience across the public and the private sectors. I was previously the Chair of PwC New Zealand, and I'm currently Chair of Transpower and the Independent Crown Entity, the XRB, or the External Reporting Board. In addition to Kiwi Property, I am a Non-Executive Director of IAG Insurance and AIA New Zealand. I also sit on the Boards of Toitu Tahua, the Centre for Sustainable Finance and the Financial Reporting Council in Australia. I'm excited about helping the Kiwi Property to deliver on its strategic aspirations, and I would be honored to continue on the Kiwi Property Board. If elected, I look forward to contributing to the company's ambitious vision for retail-led mixed-use communities and leveraging my experience to support Kiwi Properties growth and innovation in this space. Thank you very much for your support, and I'll now hand back to Simon.

Thanks, Michele. Our Board is committed to ensuring it possesses the appropriate mix of skills, knowledge, experience and diversity to discharge its role and responsibilities. The Board supports the election of Michele as it considers she has the expertise to contribute to the overall skill set required by the Board. The Board, other than Michele, in respect to her own position, recommends you vote in favor of the resolution. I'll now read Resolution 1 that Michele Embling be elected as a Director of the company. Are there any questions from shareholders on the resolution?

I was just wondering if she lives in New Zealand or Australia.

I live in New Zealand.

Any other questions? Okay. Are there any questions from shareholders online? Looks like we're no on that one. Thank you. I will now put the motion. Please now select either for, against or abstain for Resolution 1 on the voting card. [Voting]

And now we'll move to the second resolution. This resolution is sought to authorize the directors to fix the remuneration of Deloitte Limited as the group's auditor under Section 207SA of the Companies Act 1993. During FY '25, Deloitte was paid $460,000 for audit and assurance-related services. The Board recommends that you vote in favor of this ordinary resolution. I'll now read resolution 2, that the directors of the company be authorized to fix the auditor's remuneration. Are there any questions from shareholders on this resolution? No. And it looks as though we don't have any from shareholders online at this stage. So thank you. I'll now put the motion. Please now select either for, against or abstain for resolution 2 on the voting card. [Voting]

Thank you, everyone. That completes voting on the resolutions. At this time, I'd like to advise the outcome of the proxy votes that were lodged for each resolution. I'm not going to read those, but they're now shown on the screen. The registrar will now move through the room to collect your voting cards. For those shareholders online, you can now submit your vote. Voting will be open until 5 minutes after the conclusion of this meeting. The registrar will count all votes and complete their duties as scrutineer for the poll. We will announce the voting results to the NZX once this process has been completed. I'll just wait a moment for the polls to be collected. Thanks, everyone. We just have another question, which we're a little out of order here, but we will just respond to that one. What is the company's plan regarding the BTR at New Lynn? So LynnMall, like a number of our other mixed-use assets, has the capacity to be densified in that location. So there is a concept that involves a build-to-rent tower at the LynnMall Shopping Centre. However, at the moment, we have no commitment and no current plans to proceed with that. Having just completed Resido at Sylvia Park, we want to see, firstly, how that asset performs. It is relatively, well, very much a new product to the market here. We've only been in operation for a year there. We are interested in seeing, firstly, how that leased up, which we are happy with our progress there. We want to see what the tenant retention rate is once we roll past the first annual anniversary of the leasing. We want to see how the rental growth performs. And over time, we are potentially interested in co-investing with a capital partner in that and potentially other assets. But at the moment, we don't have any plans to proceed with other build-to-rent in the near term, given we are managing our balance sheet, and we want to see how Resido at Sylvia Park performs. So thank you for the question. I believe that now concludes the formal proceedings today. As you've heard, Kiwi Property delivered a solid underlying operational result in FY '25, and we've made good progress on several of our major strategic initiatives. While we're operating in a challenging market, as always, we remain committed to driving the performance of the business and delivering returns for our shareholders. Thank you for your attendance, your participation today and your support of Kiwi Property. I now draw the meeting to a close. A copy of this presentation and our speeches are available on our website and the NZX. For those of you here in person, please enjoy some refreshments at the back of the room. And again, I thank you for your participation and for your support of Kiwi on an ongoing basis. Thank you.